Agreement - HEADWATERS INC - 1-13-1997

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					AGREEMENT BETWEEN ALABAMA POWER COMPANY AND COVOL TECHNOLOGIES, INC. FOR THE SALE AND PURCHASE OF COAL TABLE OF CONTENTS PAGE 1.01 MUTUAL OBLIGATIONS......................................... 2.01 DEFINITIONS................................................ 3.01 TERM OF AGREEMENT.......................................... 4.01 BASE PRICE PER TON OF CCP (BASE TONNAGE)................... 4.02 BASE PRICE PER TON OF CCP (OPTION TONNAGE)................. 4.03 ADJUSTMENTS - GENERAL...................................... 4.04 GOVERNMENTAL IMPOSITIONS................................... 4.05 CALORIFIC VALUE ADJUSTMENT................................. 4.06 EXCESS ASH ADJUSTMENT...................................... 4.07 EXCESS MOISTURE ADJUSTMENT................................. 5.01 BILLING AND PAYMENT........................................ 6.01 SHIPMENT: TRUCK............................................ 6.02 SHIPMENT: BARGE............................................ 6.03 FREIGHT CHARGES. TITLE AND RISK OF LOSS - BARGE DELIVERIES. 6.04 FREIGHT CHARGES. TITLE AND RISK OF LOSS - TRUCK DELIVERIES. 7.01 QUANTITY REQUIREMENTS (BASE TONNAGE)....................... 7.02 QUANTITY REQUIREMENTS (OPTION TONNAGE)..................... 8.01 WEIGHING................................................... 1 1 2 2 2 2 2 2 3 4 4 5 6 7 7 7 7 8

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9.01 GUARANTEED SPECIFICATIONS.................................. 9.02 TERMINATION OF AGREEMENT BY BUYER FOR OPERATIONAL PROBLEMS........................................................

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10.01 SAMPLING AND ANALYSIS..................................... 10 11.01 REJECTION OF CCP FOR CCP QUALITY DEFICIENCIES............. 10 11.02 SUSPENSION OF SHIPMENTS FOR DEFICIENCIES.................. 11 11.03 TERMINATION OF AGREEMENT FOR DEFICIENCIES................. 13 11.04 CANCELLATION.............................................. 13 12.01 BUYOUT OPTION............................................. 14 13.01 CANCELLATION FOR UNREMEDIED BREACH........................ 14 13.02 START UP REQUIREMENTS..................................... 14 14.01 FORCE MAJEURE............................................. 15 15.01 CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS............. 17 16.01 WARRANTIES................................................ 20 17.01 INDEPENDENT CONTRACTOR.................................... 20 18.01 BINDING EFFECT............................................ 21 19.01 ASSIGNMENTS............................................... 20 20.01 ACCOUNTING AND AUDIT...................................... 21 21.01 SITE VISITS; COAL PROPERTY................................ 21 22.01 WAIVER.................................................... 22 23.01 REMEDIES FOR BREACH....................................... 22 24.01 REMEDIES CUMULATIVE....................................... 22 25.01 NOTICES................................................... 22

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26.01 AGENT FOR PURCHASER....................................... 23 27.01 CAPTIONS.................................................. 23 28.01 APPLICABLE LAW............................................ 24 29.01 COMPLIANCE WITH LAWS AND REGULATIONS...................... 24 30.01 ENTIRE AGREEMENT.......................................... 24 31.01 CONFIDENTIAL AND PROPRIETARY INFORMATION.................. 24 32.01 CONTRACT TERMS BINDING ON PARTIES' EMPLOYEES' SUPPLIERS AND SUB-CONTRACTORS............................................. 25

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AGREEMENT BETWEEN ALABAMA POWER COMPANY AND COVOL TECHNOLOGIES, INC. FOR THE SALE AND PURCHASE OF COAL This Agreement is made and entered into this _ day of ___________ 1996 by and between ALABAMA POWER COMPANY, a corporation organized and existing under the laws of the State of Alabama, and having its principal office in the City of Birmingham, Alabama ("PURCHASER") and COVOL TECHNOLOGIES, INC., a corporation organized and existing under the laws of the State of Delaware, ("SELLER"). WHEREAS, PURCHASER, an electric public utility, owns and operates power generating stations which require large quantities of coal; and WHEREAS, SELLER owns or otherwise controls the COVOL Process (as hereinafter defined) from which SELLER desires to process and sell coal to PURCHASER. NOW, THEREFORE, in consideration of the premises and covenants herein. PURCHASER and SELLER agree as follows: 1.01 MUTUAL OBLIGATIONS. SELLER agrees to process coal into the Covol Coal Product (CCP) and sell such Covol Coal Product to PURCHASER and PURCHASER agrees to buy Covol Coal Product from SELLER on the terms and conditions and in the quantities and quality set forth herein. 2.01 DEFINITIONS. The following definitions shall apply in this Agreement: a. "Contract Year" shall mean each calendar year during the term of this Agreement. b. "Ton" or "ton" shall mean two thousand pounds avoirdupois weight. c. "Base Price" is the price calculated as provided in Section 4.01 and 4.02 herein. d. "Billing Price" is the Base Price as adjusted pursuant to Section 4.03 and 4.05. e. "COVOL Coal Product" (CCP) is a coal briquette produced from coal fines utilizing the Covol Process. 1

f. "COVOL Coal Process "is a proprietary process developed and patented by Covol whereby coal fines are converted into a synthetic fuel in the form of a high quality briquette. g. A "Shipment" shall occur when SELLER delivers CCP in sufficient quantities into a barge or truck. 3.01 TERM OF AGREEMENT. The term of this Agreement shall be for a period of five contract years commencing on January 1, 1997 and shall continue in full force and effect during the five years unless earlier terminated or extended according to the provisions of this Agreement. PURCHASER shall have the unilateral right to extend this Agreement for two additional five (5) year consecutive periods by giving Seller l80 days notice prior to the end of the then current term. Purchaser must exercise the first five year option in order to have the right to the second five year term. 4.01 BASE PRICE PER TON OF CCP (BASE TONNAGE). The Base Price per Ton of CCP, effective January l, 1997 is 1) $22.00 per ton plus the freight charges (to be mutually agreed upon by November 30, 1996) f.o.b. Plant for CCP delivered by truck to any of PURCHASER's Plants or Transloading Facilities, or 2) $23.00 per ton f.o.b. barge for CCP loaded in the Port Birmingham area. The Base Price is subject to adjustment as provided for herein. It is understood that the Base Price includes all costs for mining, processing, marketing or quality control work necessary to meet the quantity or quality specifications hereof. 4.02 BASE PRICE PER TON OF CCP (OPTION TONNAGE). The Base Price per Ton of CCP for option tonnage as described in Section 7.02 shall be mutually agreed upon. 4.03 ADJUSTMENTS - GENERAL. The Billing Price shall be adjusted January 1 of each calendar year using a fixed escalation rate of one percent (1%) annually for the first five (5) year period, with the initial adjustment to be effective January 1, 1998. Such adjustment shall be calculated by applying a multiplier of 1.01 to the prior year's Billing Price. The annual escalation rate 2

applicable to each five (5) year option shall be mutually agreed upon by the parties. 4.04 GOVERNMENTAL IMPOSITIONS. The parties agree that the cost of any and all Government Impositions will be the sole responsibility of SELLER. 4.05 CALORIFIC VALUE ADJUSTMENT. The amount to be paid by PURCHASER for the CCP delivered under this Agreement shall be adjusted on the basis of the actual "as received" Calorific value of the CCP as determined from the samples taken and analyzed in accordance with Section 10.01 and Annex D hereof. The Calorific Value Adjusted Price for CCP shipped from SELLER and accepted by PURCHASER during any calendar month shall be determined as follows: The monthly weighted average "as received" Calorific value of all CCP received by PURCHASER hereunder during the calendar month shall be divided by the Minimum Calorific Value Specification of 12,000 Btu/lb, as set forth in Section 9.01. The resulting quotient shall be multiplied by the then-current Billing Price determined by PURCHASER. The resulting product shall then be added to or subtracted from the then-current Billing Price. PURCHASER shall submit to SELLER analyses of CCP received and computations of the Calorific value adjustments to substantiate such adjustments. The Calorific value adjustment mechanism is further detailed and illustrated in Annex A, and such adjustments shall be made in accordance with Annex A. 4.06 EXCESS ASH ADJUSTMENT. In addition to other adjustments, the price per Ton to be paid by PURCHASER for CCP delivered under this Agreement shall be adjusted downward in proportion to the ash content in excess of 14%. This adjustment shall be subtracted from the Calorific Value Adjusted Price of such CCP and shall be based upon the "as received" ash content of CCP shipped each month. The amount per Ton of this excess ash adjustment shall be calculated according to the following formula: 3

The adjustment shall be $0.25 per Ton multiplied by the portion of a percent by which the "as received" ash content of CCP supplied hereunder exceeds 14% by an amount up to 0.99%. The adjustment shall be $0.45 per Ton multiplied by the number of percentage points (or portions thereof) by which the "as received" ash content of CCP supplied hereunder exceeds 14% by an amount of 1.00% or more. No adjustment shall be made if the "as received" ash content is less than 14%. The excess ash adjustment is further detailed and illustrated in Annex B and such adjustments shall be made in accordance with Annex B. This adjustment in price is in addition to any other remedies provided under this Agreement or at law. 4.07 EXCESS MOISTURE ADJUSTMENT. In addition to other adjustments, the price per Ton to be paid by PURCHASER for CCP delivered under this Agreement shall be adjusted downward in proportion to the moisture content as described below. This adjustment shall be subtracted from the Calorific Value Adjusted Price of such CCP and shall be based upon the "as received" moisture content for the CCP each month. The amount per Ton of this excess moisture adjustment shall be calculated according to the following formula: The adjustment shall be $0.25 per Ton multiplied by the number of percentage points (or portions thereof by which the "as received" moisture content of CCP supplied hereunder exceeds 8%. No adjustment shall be made if the "as received" moisture content is less than 8%. The excess moisture adjustment is further detailed and illustrated in Annex C and such adjustments shall be made in accordance with Annex C. This adjustment in price is in addition to any other remedies provided under this Agreement or at law. 5.01 BILLING AND PAYMENT. For all CCP delivered by barge, SELLER shall provide PURCHASER with a multiple copy shipping notice form that accurately describes each Shipment. Such form shall be prepared by SELLER to incorporate SELLER's name, shipment date, destination point, origin, PURCHASER's transportation contract identification, barges by number, purchase 4

order number, weight and any other applicable data which may be reasonably required. One copy of such form shall be retained by SELLER, and the remaining copies shall be transmitted to the carrier at the time the barges are moved. Upon delivery, the carrier shall forward such form to PURCHASER's destination plant. In addition, promptly after loading each barge Shipment, SELLER shall fax PURCHASER a notice of shipment which shall include SELLER'S name, barge numbers, tonnage shipped, date of shipment, and other such information as pertinent and required by PURCHASER from time to time. For CCP delivered by truck, SELLER will provide properly completed shipping notices with each truck delivery on forms furnished by PURCHASER. Payment at the then current Billing Price for CCP delivered during the periods consisting of the first fourteen ( 14) days of each month and from the fifteenth day through the end of the month will be made within ten (10) days after the close of the period. Within fifteen (15) days after the close of each calendar month, a report shall be submitted by PURCHASER to SELLER showing the computation of adjustments required to determine the Billing Price to be paid for CCP received during the preceding month, and in the event of any underpayment or overpayment, the difference shall be applied to SELLER's account. 6.01 SHIPMENT: TRUCK. Where delivery of CCP is by truck, Seller will arrange for the proper dump trucks or dump trailers to transport the CCP to the delivery point specified in the Purchase Order. Such dump trucks and dump trailers shall not have cross beams installed in the cargo area that could damage the sampling auger and all trucks will be required to have in-cab tailgate releases. Additionally, all trailers will be required to have a RF (Radio Frequency) tag attached. All trucks and trailers operated on properties of Purchaser shall comply with all applicable federal and state safety standards. If required by Purchaser, each vehicle shall be furnished an identity number, which must be affixed to the vehicle, to gain admittance to the 5

designated delivery point. Seller will employ or utilize only competent commercially licensed truck drivers and will be responsible for compliance by such drivers with PURCHASER's rules and requirements, including speed limits and weight limits on roads within PURCHASER's properties. Such drivers shall comply with the requirements for loading, transporting, weighing, sampling and unloading of CCP delivered hereunder, in the manner and at locations on PURCHASER's properties as given by the manager of the designated delivery point or his representative, and such drivers will cooperate with PURCHASER's CCP-receiving employees and other suppliers in a manner so as not to interfere with any of PURCHASER's operations. CCP may be delivered to the designated delivery point according to the then current operating schedule for CCP receipts in effect at the delivery point. It shall be SELLER's responsibility to determine the schedule in effect and comply therewith in all respects. The operation of vehicles which are excessively heavy in weight has an adverse effect on roads within PURCHASER's properties. CCP shall be delivered on PURCHASER's properties in dump trucks or dump trailers having gross vehicle weights including cargo not exceeding 44,000 pounds for two axles, 66,000 pounds for three axles, 82,500 pounds for four axles, 88,000 pounds for five axles and 92,400 pounds for six axles. Any truck shipment exceeding the applicable gross vehicle weight may be rejected. PURCHASER at its option may accept overweight trucks but in such case PURCHASER will only be obligated to pay for the cargo amount which combined with the vehicle weight equals the gross load limit as outlined herein. 6.02 SHIPMENT: BARGE. At any time during the term of this agreement PURCHASER may require SELLER, upon thirty (30) days notice, to deliver all or a portion of the CCP sold hereunder by barge from the barge loading facility in the Port Birmingham area to PURCHASER'S other facilities or other destinations within the Southern electric system as specified by PURCHASER. Shipment and receipt of CCP under this Agreement shall be made in accordance with the PURCHASER barge contracts. If any applicable barge contract is amended supplemented or replaced, 6

subsequent shipments and receipts shall be made in accordance with the terms of the applicable barge contract, as amended, supplemented or replaced. Shipping schedules shall be coordinated by PURCHASER'S and SELLER'S Transportation Coordinators in accordance with monthly quantities of CCP to be delivered under this Agreement. SELLER shall load the equipment in a timely and appropriate manner that coincides with the loading times specified in the applicable barge contract. 6.03 FREIGHT CHARGES, TITLE AND RISK OF LOSS - BARGE DELIVERIES. PURCHASER shall pay all freight and other charges imposed by the Barge Carrier applicable to the destination of the shipment. Title to and risk of loss of the CCP shall pass to PURCHASER at the time the CCP is loaded into barges in the Port Birmingham area. 6.04 FREIGHT CHARGES, TITLE AND RISK OF LOSS - TRUCK DELIVERIES. SELLER shall pay all freight and other charges imposed by the trucking company delivering the CCP to PURCHASER'S designated plant. SELLER shall bear the risk of loss of each shipment until each shipment has been properly unloaded at PURCHASER'S designated plant and title shall remain with SELLER until each shipment is properly unloaded at PURCHASER'S designated plant. 7.01 QUANTITY REQUIREMENTS (BASE TONNAGE). For the period January 1, 1997 through December 31, 1999, PURCHASER will purchase 250,000 tons per year (20,833 tons per month). In addition, PURCHASER shall have the right to purchase monthly nominations up to an additional 20,833 tons per month for each six (6) month period beginning in January and July during this period by notifying SELLER sixty (60) days in advance of each six (6) month period. For the period January 1, 2000 through December 31, 2001, PURCHASER shall have the right to purchase up to 41,667 tons per month for each six (6) month period during this period by notifying SELLER sixty (60) days in advance of each six (6) month period. 7

In the event that PURCHASER desires to buy spot coal, at any time during the term of this Agreement, SELLER shall have the right of first refusal on the amount of tons between the monthly nomination and 41,667 tons per month. 7.02 QUANTITY REQUIREMENTS (OPTION TONNAGE). SELLER shall give PURCHASER right of first refusal on option tonnage between 41,667 and 83,333 tons per month. Otherwise, option tonnage may be supplied by SELLER and purchased by PURCHASER by mutual agreement. Option tonnage pricing will be described in Section 4.02. 8.01 WEIGHING. For CCP loaded in the Port Birmingham area weighing will be done in the Port Birmingham area by Combustion Testing & Engineering, Inc. For CCP delivered to PURCHASER by truck, the weight of CCP delivered and sold hereunder shall be determined by PURCHASER at the destination on truck scales, certified in accordance with the procedures and requirements of the State of Alabama Division of Weights and Measures. Said trucks shall be weighed loaded and empty and the difference shall be the net weight of the CCP delivered. 9.01 GUARANTEED SPECIFICATIONS. The CCP sold by SELLER hereunder shall be three inches and under in size (3 " x 0") as defined in the then-current ASTM Designation D-43 1 Standard for Designating Size of CCP; shall not contain greater than twenty percent (20%) particles less than one quarter (1/4) inch in size (if, in PURCHASER'S sole judgment, handling problems occur at the destination because of size consistency, SELLER agrees to take reasonable corrective action acceptable to PURCHASER); shall be substantially free of bone, slate, shale, rock, dirt, and clay, and substantially free of extraneous material, including, but not limited to, plastic, rubber, iron, wood and other waste materials; and shall conform to the following on an "as received" basis: 8

As Received Guaranteed Specifications Per Shipment Max. % Moisture (total) Max. % Ash Max. Sulfur lbs/MMBtu Min. % Volatile Matter Min. Ash Fusion Temp. Softening (H=W Reduc. Atmos.) Min. Grindability Min. Calorific Value (Btu/lb) 8.0 14.0 0.60 30 2400(degrees)F

50 12,000

9.02 TERMINATION OF AGREEMENT BY BUYER FOR OPERATIONAL PROBLEMS. PURCHASER and SELLER acknowledge that as of the date of this Agreement, CCP is a new product which has not been commercially used as a fuel for electric generating plants and that certain operational problems may arise in the future with respect to the handling or use of CCP at one or more of the Plants. If, in PURCHASER's sole judgment exercised in good faith, the handling or use of CCP causes or creates any problem in the operation of any Plant, then PURCHASER may terminate this Agreement by notifying SELLER, as provided in Section 23.01, at least thirty days prior to the effective date of termination. Upon such termination, PURCHASER shall have no further obligation to SELLER under this Agreement, except with respect to payments for Shipments made prior to such termination. Notwithstanding any other provision of this Agreement, PURCHASER shall not be required to operate or maintain any Plant outside of normal operating procedures in order to handle or use CCP at such Plant, nor shall PURCHASER be required to make any capital modifications or additions to such Plant in order to accommodate the handling or use of CCP at such Plant. If, in PURCHASER's sole judgment exercised in good faith. the quality or characteristics of 9

CCP are incompatible with other coal purchased for use at any Plant, then PURCHASER may terminate this Agreement pursuant to this Section 9.02. 10.01 SAMPLING AND ANALYSIS. PURCHASER shall collect representative samples at the unloading site of each shipment of CCP shipped by truck; in addition, SELLER shall collect representative samples for CCP loaded in barges at the Port Birmingham loading facility. Samples shall be collected in accordance with procedures and methods which are based on ASTM standards and mutually acceptable to PURCHASER and SELLER. PURCHASER shall analyze all samples of CCP collected by PURCHASER and SELLER in accordance with procedures set forth in the attached Annex D. PURCHASER shall have the right at its option, however, to contract with an independent, qualified, commercial testing laboratory to perform the analyses of the samples referred to above. SELLER may observe any sampling, sample preparation, and/or analysis performed by PURCHASER or its designated commercial laboratory. PURCHASER may observe any sampling and/or sample preparation performed by SELLER for samples taken in the Port Birmingham area. If in PURCHASER's sole opinion operational problems occur, with the sampling, sample preparation, and/or procedure. the parties will discuss steps to resolve the operational problem including modifications to the COVOL Coal Process. All samples collected shall be divided by PURCHASER into at least two (2) parts and put in suitable airtight containers, the first container in each case to be used for analysis by PURCHASER, or its designated commercial laboratory, and the second container in each case to be held available by PURCHASER for a period of thirty (30) days from actual date of receipt of CCP by PURCHASER, properly sealed and labeled, to be analyzed if a dispute arises between PURCHASER and SELLER. 11.01 REJECTION OF CCP FOR CCP QUALITY DEFICIENCIES. In addition to and not as a limitation upon other rights of PURCHASER hereunder, PURCHASER shall have the right to refuse and reject any Shipment of CCP under any one or 10

more of the following circumstances: (a) the Shipment fails by analysis (including in-transit analysis as provided for in Section 11.01) to comply with any one or more of the Guaranteed Specifications set forth in Section 9.01; (b) the Shipment fails in any manner to comply with the CCP size specified in Section 9.01; (c) the Shipment is delivered in equipment other than as specified herein; (d) the Shipment contains extraneous material; or (e) the Shipment fails to comply with the loading requirements set forth in Sections 6.01 and 6.02. PURCHASER shall give prompt notice to SELLER of any such rejection of Shipments. After receipt of such notification, SELLER shall not resume Shipments until CCP quality or other condition causing rejection has been corrected to PURCHASER'S satisfaction. In the event that PURCHASER rejects any Shipment, SELLER shall immediately remove, at SELLER's expense, such Shipment from PURCHASER'S facilities or from transportation equipment and shall reimburse PURCHASER for all costs and expenses, including (but not limited to) transportation costs, incurred by PURCHASER in connection with such Shipment. PURCHASER may deduct all such costs and expenses from any sum owed by PURCHASER to SELLER. The foregoing notwithstanding, it shall be the responsibility of SELLER to ensure that the sulfur content of CCP delivered does not exceed the Guaranteed Specification for sulfur provided in Section 9.01 and failure to do so shall constitute a material breach of SELLER's obligation and guarantee. SELLER acknowledges that the delivery of CCP exceeding the guaranteed sulfur content may cause PURCHASER to incur substantial damages and have fines or penalties assessed against it by regulatory agencies, and SELLER further acknowledges that in the event of such breach, PURCHASER may pursue any and all remedies available at law and under this Agreement. In addition to the provisions set forth in Section 10.01 regarding sampling, PURCHASER shall have the right to take samples of Shipments while they are in transit and to analyze such samples, for the purpose of determining whether to accept or to reject any such Shipments for failure to comply with the Guaranteed Specifications set forth in Section 9.01 or other terms and conditions 11

of this Agreement. If any of such Shipments are accepted, the samples taken in transit and results of such analyses shall not be used for other purposes and shall not affect PURCHASER's right to collect samples of such shipment(s) at the unloading facility. 11.02 SUSPENSION OF SHIPMENTS FOR DEFICIENCIES. In addition to and not in limitation of the rights set forth above in Section 11.01, PURCHASER shall have the right to suspend Shipments immediately, by giving verbal or written notice to SELLER, under any one or more of the following circumstances: (a) any Shipment fails to comply with any one or more of the Guaranteed Specifications set forth in Section 9.01 (b) any Shipment contains extraneous material; (c) any Shipment fails to comply with the CCP size requirements specified in Section 9.01, or (d) any Shipment fails to comply with the loading requirements set forth in Sections 6.01 and 6.02. Shipments in transit at the time of notification of suspension may be accepted, at PURCHASER's sole option. After notice of any such suspension, PURCHASER may terminate this Agreement unless SELLER gives reasonable assurance within fifteen (15) days after receipt of said notice that it will and can comply with the Guaranteed Specifications stated in Section 9.01 and the other requirements of this Agreement. Four (4) or more suspensions in any 90-day period shall be deemed a material breach of this Agreement, for which PURCHASER shall have the unilateral right, exercised in its sole discretion, to immediately terminate this Agreement by giving notice of the termination to SELLER as provided in Section 25.01. Assurance by SELLER that it can comply may, at PURCHASER's option, be provided by means of a complying test Shipment scheduled and sampled by such method as shall be acceptable to PURCHASER or by other means acceptable to PURCHASER. All special handling costs, including (but not limited to) stockpile segregation, transportation routing etc., associated with the test Shipment shall be borne by SELLER. If analysis by PURCHASER shows the test Shipment to be in compliance with each of the requirements set forth herein, deliveries shall be permitted to resume. PURCHASER shall have the sole right to determine if SELLER shall be allowed to 12

make up any tonnage not delivered during the period Shipments were suspended. The price to be paid for any such make-up tonnage is the price that would have been in effect at the time the CCP was originally scheduled to be delivered under the terms of this Agreement. For purposes of this Section 11.02, the make-up of tonnage not delivered during any suspension shall be made up on a pro-rata, monthly basis as specified by PURCHASER in writing to SELLER. If PURCHASER does not receive, within fifteen (15) days of the date of the notice of suspension provided in this Section 11.02, adequate assurance of SELLER's ability to deliver CCP which complies with the requirements set forth herein or if the test Shipment fails to comply with such requirements, PURCHASER shall so notify SELLER of such failure and may, at PURCHASER's option, terminate this Agreement immediately by giving notice of the termination to SELLER as provided in Section 25.01. In the event of rejection of any Shipment followed by termination of this Agreement, SELLER shall reimburse PURCHASER for any and all transportation costs associated with rejected Shipments and/or termination which may be incurred by PURCHASER and shall promptly remove all such rejected Shipments at SELLER's expense. PURCHASER's rights of rejection, suspension and termination set forth in this Agreement are in addition to any other remedies provided by this Agreement or at law for SELLER's failure to deliver CCP in compliance with this Agreement. 11.03 TERMINATION OF AGREEMENT FOR DEFICIENCIES. In addition to and not as a limitation upon other rights of PURCHASER, if twenty percent (20%) of Shipments delivered during a thirty (30) consecutive day period, following notice of deficiency to SELLER given pursuant to Sections 11.01 and 11.02, fails to comply with any one or more of the Guaranteed Specifications set forth in Section 9.01, then such failure shall constitute a material breach of this Agreement; and PURCHASER shall have the right to terminate this Agreement immediately by giving notice of the termination to SELLER as provided in Section 25.01. 13

In the event PURCHASER terminates this Agreement under this Section 11.03 or Section 11.02 or suspends Shipments pursuant to the provisions of Section 11.02, and in addition to PURCHASER's other rights and remedies under this Agreement or as provided at law, SELLER shall be liable to PURCHASER for breach of this Agreement and shall reimburse PURCHASER for any and all costs incurred by PURCHASER under this Agreement and other contracts with transportation contractors which result from such termination or suspension of Shipments. 11.04 CANCELLATION. In addition to and not in limitation of the rights set forth above in Sections 11.01, 11.02, and 11.03 and the rights and remedies available at law and under other provisions of this Agreement, PURCHASER shall have the right to cancel the remaining Shipments to be delivered under this Agreement immediately by giving written notice to SELLER, as provided in Section 25.01, under any one or more of the following circumstances: (a) thirty percent (30%) of Shipments of CCP delivered by SELLER fail to comply with any one (1) or more of the Guaranteed Specifications set forth in Section 9.01 averaged over two (2) consecutive calendar months; or (b) SELLER engages in any fraudulent or illegal conduct in connection with its performance under this Agreement. 12.01 BUYOUT OPTION. At any time during the term of this Agreement, PURCHASER may terminate this Agreement by giving SELLER 180 days' notice thereof as provided in Section 25.01; and within 180 days of giving such notice, PURCHASER shall pay SELLER an amount equal to ten percent ( 10%) of the initial Base Price per ton effective January 1, 1997 multiplied by the remaining Tons scheduled to be delivered under this Agreement. Upon SELLER's receipt of such payment, this Agreement shall terminate without any further liability to either party hereunder, except with respect to CCP delivered prior to such termination. 13.01 CANCELLATION FOR UNREMEDIED BREACH. In the event of the failure of either party to comply in good faith with any or all of its respective obligations as set forth in this 14

Agreement, the party not in default shall have the right to cancel this Agreement at any time by giving notice of its intention to do so to the other party as provided in Section 25.01, which notice shall specify the default. At the expiration of thirty (30) days after the date of such notice, unless the party in default shall have cured such default, the party not in default shall have the right, at its sole election, to cancel this Agreement immediately with no liability therefor. In addition to and not as a limitation upon other rights of PURCHASER or SELLER hereunder, either party may elect, at its sole option, to forego its right to terminate this Agreement upon the other party's default under this Agreement, as provided in this Section 13.01, and may require, in lieu of cancellation, the other party to perform its obligations according to the terms and conditions of this Agreement. 13.02 START UP REQUIREMENTS. If SELLER fails to meet Section 29 of IRS code requirements by January 1, 1997 or to meet either the quantity or quality requirements by April 1, 1997, PURCHASER may terminate this agreement in its entirety from written notice to SELLER pursuant to Section 25.01. 14.01 FORCE MAJEURE. "SELLER's Force Majeure" as used herein shall mean a cause reasonably beyond the control of SELLER which, wholly or in substantial part, prevents the mining, processing, loading or delivery of CCP. "PURCHASER's Force Majeure" as used herein shall mean a cause reasonably beyond the control of PURCHASER which, wholly or in substantial part, directly or indirectly prevents or restricts the unloading, storing or burning of CCP by PURCHASER at PURCHASER's facilities. Examples (without limitation) of force majeure are the following: acts of God; acts of the public enemy; insurrections; riots; strikes; labor disputes; work stoppages; fires; explosions; floods; electric power failures; breakdowns of or damage to generating or preparation plants; interruptions to or contingencies of transportation, including (but not limited to) force majeure as defined in the applicable tariff rail contract; embargoes; and orders or acts of civil or military 15

authority (including, without limitation, a city or county ordinance, an act of a state legislature, or an act of the United States Congress); provided, however, for the purposes of this Agreement, force majeure shall not include, and neither party hereto shall be excused from performance because of, the development or existence of economic conditions which may adversely affect the anticipated profitability of such party's activities hereunder, acts or omissions of such party which constitute mismanagement or fraud on the part of such party, or reduced productivity of labor employed by such party in its activity hereunder. If, because of PURCHASER's Force Majeure, PURCHASER is unable to carry out its obligations under this Agreement, and if PURCHASER gives SELLER notice of such force majeure as provided in Section 25.01, the obligations and liabilities of PURCHASER and the corresponding obligations of SELLER shall be suspended to the extent made necessary by and during the continuance of such force majeure; provided, however, that the disabling effects of such force majeure shall be eliminated as soon as and to the extent possible (except that either party may settle any of its own labor disputes, strikes, or terminate any of its own lockouts in its sole discretion). If, because of SELLER's Force Majeure, SELLER is unable to carry out its obligations under this Agreement, and if SELLER gives PURCHASER notice of such force majeure as provided in Section 25.01, the obligations and liabilities of SELLER and the corresponding obligations of PURCHASER shall be suspended to the extent made necessary by and during the continuance of such force majeure; provided, however, that the disabling effects of such force majeure shall be eliminated as soon as and to the extent possible (except that either party may settle any of its own labor disputes, strikes, or terminate any of its own lockouts in its own sole discretion). Any deficiencies in the production, sale or purchase of CCP hereunder caused by force majeure shall be made up at PURCHASER's sole option. If PURCHASER desires, the term of this Agreement may be extended to make up any such force majeure deficiencies. 16

It is agreed that in the event that any valid act, law, ordinance, rule or regulation of a municipality, county, state or the United States government, or final judicial decision, judgment or order, is adopted or passed after January 1, 1995, which either (a) directly prohibits the processing contemplated hereunder or (b) directly or indirectly imposes significant burdens or restrictions upon the burning or use of such CCP by PURCHASER to the extent that PURCHASER is unable or would not be allowed to utilize such CCP feasibly and economically in PURCHASER's sole discretion at any of its electric generating plants or would be allowed to utilize such CCP only after the installation or substantial renovation of plant equipment, then the existence and implementation of such act, law, ordinance, rule, regulation, decision, judgment or order shall constitute an event of permanent force majeure whereupon this Agreement may be terminated by the party so affected upon notice to the other party. Notwithstanding the provisions of this Section 14.01, a party not claiming force majeure may terminate this Agreement upon notice to the other party and without liability to the other party whenever all of the following circumstances exist: (a) a condition of force majeure occurs which causes the mutual obligations to be suspended as provided above with respect to the total quantity of CCP to be supplied; (b) such condition (alone or extended by other conditions of force majeure) continues so that the mutual obligations remain suspended for a period of six (6) consecutive months; and (c) at the end of said six (6) consecutive months or at any time thereafter, the party not claiming force majeure, in the exercise of reasonable judgment, concludes that there is little likelihood of ending the condition(s) in the immediate future. The party not claiming force majeure may exercise such right of termination by giving ninety (90) days' notice, as provided in Section 25.01, of its intention to terminate to the other party. 15.01 CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS. The term "environmental related requirement," as used in this Agreement, means the 17

following: (a) any prohibition, restriction, or limitation related to the quality of CCP which PURCHASER may burn, including any constituent specification, at any or all of its electric generating plants, or to the type or amount of emissions from any or all such plants; (b) any rule or requirement affecting the permissible means for complying with any such prohibition, restriction or limitation; or (c) any imposition of a cost, fee, tax or other economic burden on PURCHASER relating to (i) the production of electricity (generally or by means of CCP-fired steam electric generation), (ii) the quantity of CCP purchased and/or burned by PURCHASER, (iii) any constituent specification of CCP purchased by PURCHASER, or (iv) the type or amount of emissions from PURCHASER's electric generating plants. The term shall also be deemed to include PURCHASER's strategy for compliance with environmental related requirements. A change in environmental related requirements shall be deemed to have occurred in any one or more of the following circumstances: (a) there is any increase or decrease in existing environmental related requirements; (b) PURCHASER, in the exercise of its sole judgment. decides to change its strategy for compliance with any existing environmental related requirements; or (c) a new environmental related requirement is imposed on PURCHASER as a result of any federal or state statute, local ordinance, administrative regulation or ruling, court order, or any revision in any interpretation or implementation thereof. It is recognized that a change in environmental related requirements upon PURCHASER may occur even though stated as a restriction or limitation on, or requirement of, PURCHASER and its affiliates or some other group of utilities. It is further recognized that any change in environmental related requirements may affect PURCHASER in a general way and may not be directed at specific plants, fuels, fuel supplies or other operating conditions. In the event of a change in environmental related requirements, PURCHASER shall, in its sole judgment, determine how to comply with such change and whether PURCHASER's use of the CCP to be supplied hereunder has been adversely impacted. The provisions of this Section 15.01 are intended to provide rights in addition to the rights provided in Section 14.01. 18

The price, specifications, quantity and destination of CCP purchased hereunder are predicated on environmental related requirements in effect as of the effective date hereof. In the event and whenever after the effective date hereof, there is a change in environmental related requirements, PURCHASER shall determine whether such change has had or may have an adverse impact on its use of the CCP purchased hereunder. It is agreed that any change in environmental related requirements which has one or more of the following effects shall be deemed to have an adverse impact on PURCHASER's use of the CCP purchased hereunder, even though the statute, regulation, ruling or ordinance may allow PURCHASER a choice of options for complying with such changed environmental related requirements (which choice may include the payment of a fee or tax in lieu of the installation of equipment, or utilization of CCP of different constituent specifications, the reduction in the overall use of CCP by PURCHASER or the acquiring of an emission allowance or credit): (a) the change imposes a fee, tax, or other economic burden on PURCHASER relating to the constituent specifications of CCP purchased or burned by it or on the type or amount of emissions from PURCHASER's electric generating plants; (b) the change directly or indirectly prevents or restricts PURCHASER from utilizing the CCP purchased hereunder in one or more of its electric generating plants; (c) the change requires PURCHASER to install equipment (such as flue gas desulfurization equipment or particulate removal equipment) at one or more of its electric generating plants in order to comply with such change; or (d) the change requires or permits PURCHASER to utilize CCP of a quality (including, but not limited to, sulfur) different from that specified in Section 9.01 or requires the use of a fuel other than CCP. If PURCHASER determines that a change in environmental related requirements has had or may at a future date have an adverse impact on its use of the CCP purchased hereunder, PURCHASER shall so notify SELLER as provided in Section 25.01. Upon receipt of such notice, SELLER shall have the right, at its option, to propose within thirty (30) days after receipt of such 19

notice, any steps available to SELLER in its processing of the CCP, in the supply of substitute CCP, in the change in the price of the CCP, or other measure which would result in as low a delivered cost of fuel at PURCHASER's electric generating plant as PURCHASER could achieve by purchasing reasonably available substitute fuel, taking into consideration any fees, taxes, costs, or other economic burdens imposed on the use of CCP by PURCHASER. In the event PURCHASER, in its sole judgment, determines that SELLER cannot achieve this result, then PURCHASER may terminate this Agreement upon ninety (90) days' notice thereof as provided in Section 25.01. PURCHASER shall have the right to give such notice of termination at a time chosen by PURCHASER either before or after the effect of a change in environmental related requirements. The parties hereto acknowledge that this Agreement is based on the assumption that the CCP to be delivered hereunder will enable PURCHASER to comply with the provisions of the Clean Air Act Amendments of 1990, judicial and administrative interpretations thereof, and regulations promulgated thereunder which exist as of January 1, 1995. If, at any time during the term of this Agreement, PURCHASER determines, in its sole judgment, that any operational or environmental compliance problem will result from the components or characteristics of SELLER's CCP or the products of its combustion (including, but not limited to, nitrogen oxide emissions) or any other constituent or property of the CCP not otherwise specified herein, SELLER and PURCHASER shall immediately enter into discussions in a good faith effort to resolve the problem. If such discussions fail to resolve such problem in a manner which, in PURCHASER's sole judgment, is reasonable and would not impose an unreasonable additional expense to PURCHASER, then PURCHASER shall have the right to terminate this Agreement by giving SELLER 30 days notice of PURCHASER's intention to do so as provided in Section 25.01. No expense contemplated by this Section 15.01 shall be deemed reasonable if it would result in a delivered price of CCP hereunder in excess of the delivered price of competitive fuels or sources then available to PURCHASER. 20

16.01 WARRANTIES. SELLER warrants that it has title or control of CCP in sufficient quantity and quality to satisfy the requirements of this Agreement, including without limitation the Guaranteed Specifications of Section 9.01. SELLER warrants that no outside sales to others will diminish the production of CCP to be supplied under this Agreement. 17.01 INDEPENDENT CONTRACTOR. This Agreement is a contract for the sale and purchase of CCP. The parties recognize and agree that SELLER is not an agent or employee of PURCHASER nor any affiliate of PURCHASER and that SELLER is independent of any managerial or other control or direction by PURCHASER and is free to perform, by such means and in such manner as SELLER may choose, all work in pursuance of commitments hereunder. 18.01 BINDING EFFECT. This Agreement shall bind and inure to the benefit of the parties and their successors and assigns, as permitted under Section 19.01. 19.01 ASSIGNMENTS. Neither party may assign its rights under this Agreement without the non-assigning party's prior written approval. However, notwithstanding the above, PURCHASER may assign its rights, duties, obligations and interests in and to this Agreement to a subsidiary, affiliate or sister corporation; provided, however, that PURCHASER shall not be thereby relieved of its responsibilities or obligations hereunder. Furthermore, notwithstanding the above, SELLER may assign its rights, duties, obligations and interests in and to this Agreement to a parent, subsidiary, affiliate or sister corporation, provided, however, that SELLER shall not be thereby relieved of its responsibilities or obligations hereunder. This Agreement shall likewise apply to any successor of either PURCHASER or SELLER. IA addition to the above rights, PURCHASER may exercise its right to divert Shipments to other destinations under Section 6.01 or 6.02 without SELLER's consent or approval. 20.01 ACCOUNTING AND AUDIT. SELLER shall keep full and complete books and records of its costs and expenses relating to the sale and delivery of CCP under this Agreement in accordance 20

with sound and generally accepted accounting principles and shall retain such books and records for at least three (3) years after this Agreement is terminated or expires. SELLER shall also preserve in an orderly manner the records supporting all charges and adjustments to the Billing Price hereunder and shall make such records available to PURCHASER, its accountants, auditors or other authorized representatives, who shall, after giving adequate notice, be afforded access to and be permitted to examine such records at all reasonable times during normal business hours. In the event, upon audit, it is determined that claims made by SELLER for adjustments in price which were allowed to go into effect by PURCHASER were not properly calculated, adjustments shall be made promptly In billings hereunder for current CCP deliveries to reflect proper amounts of such adjustments; or if no billings are then due, payments reflecting the difference between the proper amounts determined by audit and the amounts paid shall be made. It is expressly understood and agreed that the provisions of this Section 20.01 shall survive the termination or expiration of this Agreement. 21.01 SITE VISITS; CCP PROPERTY. PURCHASER or its designated agent shall have the right at all times, at its sole risk and expense, to enter upon the SELLER's property and/or other appropriate locations, whether such entry is announced or unannounced, for any of the following purposes: (a) to observe and examine the method, equipment and manner of mining, producing, storing, washing, blending, crushing, loading, unloading, transporting, sampling, weighing, analyzing, and other handling of CCP to be sold and delivered under this Agreement; (b) to take samples of CCP for PURCHASER's analyses; or (c) in connection with any accounting, audit, or examination of SELLER's records. PURCHASER's representative shall check in with the appropriate personnel at the entrance to SELLER's facility prior to entering onto SELLER's property. No observation or examination by PURCHASER shall be deemed as a waiver of any of PURCHASER's rights or relieve SELLER of any obligation of this Agreement. 22.01 WAIVER. The failure of either party to insist on strict performance of any provision of this Agreement, or to take advantage of any right hereunder, shall not be construed as a waiver of such provision or right. Time is of the essence of this Agreement. 21

23.01 REMEDIES FOR BREACH. In the event of a breach for which PURCHASER terminates this Agreement or a breach resulting from SELLER's failure to deliver the amount of CCP required under this Agreement, SELLER shall be liable to PURCHASER for the difference between the market price of coal available at the time of such breach and the price provided for hereunder with regard to all conforming CCP not delivered under this Agreement. The market price of such replacement coal shall be determined conclusively to be the highest incremental cost to PURCHASER for coal of similar quality purchased during the three (3) months following breach by SELLER, whether or not such incremental coal v;as for the exact quantities, quality and delivery periods for CCP remaining to be delivered hereunder. This remedy shall be in addition to other remedies for breach available to PURCHASER under this Agreement or at law. 24.01 REMEDIES CUMULATIVE. Except as otherwise provided herein, remedies provided under this Agreement shall be cumulative and in addition to other remedies provided at law or in equity. 25.01 NOTICES. With the exception of SELLER's invoices or shipping notices as required by Section 5.01, any notice, request, protest, consent, demand, report or statement given by one party to the other shall be in writing and deemed duly received seventy-two (72) hours after it is deposited in the United States mail, by certified mail, postage prepaid, and properly addressed as follows: (1) If the notice is to PURCHASER, to:

Vice President, Fuel Services Southern Company Services, Inc. P. O. Box 2625 14N-8163 Birmingham, AL 35202 22

With copy to: Alabama Power Company P. O.Box 2641 Birmingham, AL 35291-0480 Attention: Manager - Fuel Services (or to such other person or addresses as PURCHASER shall have designated in writing to SELLER). NOTE: Escalation notices should not be copied to Alabama Power Company. (2) If the notice is to SELLER, to: (or to such other person or address as SELLER shall have designated in writing to PURCHASER). 26.01 AGENT FOR PURCHASER. Southern Company Services, Inc., an Alabama corporation, is agent for PURCHASER and is designated to act for and on behalf of PURCHASER for the purpose of giving or receiving any notice, demand or request required or authorized by this Agreement, for the purpose of designating the quantity, size, destination and routing of Shipments to be made from time to time to PURCHASER hereunder, and for such other purposes as may Tom time to time be designated by PURCHASER. PURCHASER may change agent by giving notice thereof to SELLER as provided in Section 25.01. 27.01 CAPTIONS. The captions to sections hereof are for convenience only and shall not be considered in construing the intent of the parties. 28.01 APPLICABLE 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 Alabama and not just the Alabama laws regarding conflicts of laws. 29.01 COMPLIANCE WITH LAWS AND REGULATIONS. In connection with the 23

performance of this Agreement, SELLER agrees to comply in all material respects with governmental laws and regulations, including (but not limited) to those set forth in Annex E attached hereto. SELLER agrees and warrants that it or its agent will acquire and maintain, in a timely manner, all licenses and permits required by governmental authorities to engage in the mining, processing, and selling of CCP and to otherwise perform its obligations under this Agreement. 30.01 ENTIRE AGREEMENT. This instrument contains the entire Agreement between the parties; and there are no representations, understandings or agreements, oral or written, which are not included herein. This Agreement cannot be changed except by duly authorized representatives of both parties in writing. 31.01 CONFIDENTIAL AND PROPRIETARY INFORMATION. The terms and conditions (including, but not limited to prices) set forth in this Agreement are considered by both PURCHASER and SELLER to be confidential and proprietary information. Neither party shall disclose any such information to any third party without advance written consent of the other (which consent shall not be unreasonably withheld) except where such disclosure may be required by law, regulation or regulatory agencies having jurisdiction over SELLER or PURCHASER or is required in connection with the assertion of a claim or defense in judicial or administrative proceedings involving the parties hereto, in which event the party intending to make such disclosure shall advise the other in advance and cooperate to the extent practicable to minimize the disclosure of any such information. For purposes of this Section 31.01, the term "third party" shall not include a parent, subsidiary, affiliate or sister corporation of either party hereto. 32.01 CONTRACT TERMS BINDING ON PARTIES' EMPLOYEES' SUPPLIERS AND SUBCONTRACTORS. Each party shall require each of its employees, suppliers, and sub-contractors performing obligations under the Agreement or having access to the Agreement in the performance of duties for such party to be bound by the terms and conditions of the Agreement, including without 24

limitation the terms containing obligations and responsibilities respecting CCP Property and confidentiality of information. 24

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers duly authorized "hereunto. ATTEST: PURCHASER
/s/ Shirley A. Thomas Assistant Secretary Ben M. Gutten Its: Executive Vice President Date Executed April 15, 1996

ATTEST:

SELLER

/s/ Michael S. Bodon Secretary

/s/ Kirby Cochran Its: President Date Executed April 16, 1996

04/11/96 8:30:52AM

25

Annex A Reference to Section 4.05 COMPUTATION OF CALORIFIC VALUE ADJUSTMENT TO THE BILLING PRICE This adjustment is to adjust the amount per ton to be paid by PURCHASER for CCP delivered in each month as a result of the extent by which the Calorific value of such is greater than or is less than 12,000 Btu's per pound of coal. Determination of the Calorific Value Adjustment is made as follows: (X) (Y) (Z)
Base Factor At the Specification Calorific Value of 12 000 Btu/lb Hypothetical Months At a Month's Calorific Value of 12 200 Btu/lb At a Month's Calorific Value of 11.800 Btu/lb

ITEM
1. Per ton FOB Price (Billing Price) Calorific Btu Value Per Pound Calorific Adjustment Fraction Calorific Adjustment Factor

$ 22.00

$ 22.00

$ 22.00

2.

12,000

12,200 12,200 12,000

11,800 11,800 12,000

3.

4.

1.017

.983

1

Continued Annex A Reference to Section 4.05 COMPUTATION OF CALORIFIC VALUE ADJUSTMENT TO THE BILLING PRICE
(X) Base Factor At the Specification Calorific Value of 12.000 Btu/lb ITEM 5. Adjusted Basis 22.37 21.63 (Y) Hypothetical Months At a Month's Calorific Value of 12.200 Btu/lb (Z)

At a Month's Calorific Value of 11.800 Btu/lb

Figures used in Columns (x), (y) and (z) of Items 1 through 6 are purely hypothetical and are used for illustrative purposes only. 2

Annex B Reference to Section 4.06 COMPUTATION OF EXCESS ASH ADJUSTMENT The adjustment to the Billing Price to be paid by PURCHASER on a per ton basis for coal for which the actual "as received" ash content that exceeds 14.00% is calculated as follows: Assume that the following Shipments are received:
Actual Per Train "As Received" Ash Content 13.50% 15.50% 14.50%

Month No. 1 No. 2 No. 3

Examples of Calculations (a) Adjustment for Shipment No. 1 No adjustment because the "as received" ash content is less than 14.00% (b) Adjustment for Shipment No. 2 $.45 x (15.50 - 14.00) = $.68 per ton (c) Adjustment for Shipment No. 3 $.25 x (14.50 - 14.00) = $.13 per ton 3

Annex C Reference to Section 4.07 COMPUTATION OF EXCESS MOISTURE ADJUSTMENT The adjustment to the Billing Price to be paid by PURCHASER on a per ton basis for coal for which the actual "as received" moisture content that exceeds 8.00% is calculated as follows: Assume that the following Shipments are received:
Actual Per Train "As Received" Moisture Content 7.50% 9.50%

Month No. 1 No. 2 Examples of Calculations

(a)Adjustment for Shipment No. 1 No adjustment because the "as received" moisture content is less than 8.00% (b) Adjustment for Shipment No. 2 (9.50 - 8.00) x $.25 = $.375 per ton 4

Annex D Reference to Section 10.01, 4.05 COAL SAMPLE PREPARATION AND ANALYSIS LABORATORY PROCEDURES Procedures utilized by Alabama Power Company for coal sample preparation and analysis will be performed manually or by utilization automated equipment which conforms with the referenced ASTM Standards:
1. Total Moisture in Coal - (Air drying will be continued for predetermined time necessary to achieve a loss in weight or no more than 0.1 percent per hour). Preparing Coal Samples for Analysis Moisture in the Analysis Sample of Coal Ash in the Analysis Sample of Coal Gross Calorific Value of Coal by the Adiabatic Bomb Calorimeter or Gross Calorific Value of Coal by the Isoperibol Bomb Calorimeter Total Sulfur in the Analysis Sample of Coal Using High Temperature Tube Furnace Combustion Method Volatile Matter in the Analysis Sample of Coal Fusibility of Coal Ash Grindability of Coal by The Hardgrove Grindability Machine Method (No. 8 coal samples will be used for this analysis) Fixed Carbon is a calculated value. Fixed Carbon is the resultant of the summation of percentage moisture, ash and volatile matter subtracted from 100. All percentages used in the calculation must be on the same moisture basis.

ASTM D-2013 ASTM D-2013 ASTM D-3173 ASTM D-3174 ASTM D-2015 ASTM D-3286

2. 3. 4. 5.

6.

ASTM D-4239

7. 8. 9.

ASTM D-3175 ASTM D-1857 ASTM D-409

10.

ASTM D-5142 or ASTM D-3172

5

Continued Annex D Reference to Section 10.01, 4.05 COAL SAMPLE PREPARATION AND ANALYSIS LABORATORY PROCEDURES 11. Nitrogen in Me Analysis Sample of Coal ASTM D-5373 or ASTM D-3179 12. Calculating Coal Analyses from As-Determined ASTM D-3180 to Different Basis 6

Annex E AGREEMENT AND CERTIFICATION OF COMPLIANCE WITH FEDERAL LAWS AND REGULATIONS Alabama Power Company is a government contractor under an Area-Wide Utilities Service Contract with the General Services Administration of the United States Government. The Seller agrees that the provisions referred to below shall, as if set forth herein in full text, be incorporated into and form a part of every contract or purchase order as may be entered into between the Seller and Alabama Power Company after the date set out below if the amount and circumstances of each such contract or purchase order meet the criteria set out in each of the provisions referred to below for incorporation of the provision into contracts or purchase orders between Alabama Power Company and others. (1) 52.219-8 Utilization of Small Business Concerns and Small Disadvantaged Business Concerns (2) 52.219-8 Small Business and Small Disadvantaged Business Subcontracting Plan (3) 52.220 3 Utilization of Labor Surplus Area Concerns (4) 52.220-4 Labor Surplus Area Subcontracting Program (5) 52.222 4 Contract Work Hours and Safety Standards Act - Overtime Compensation - General (6) 52.222-26 Equal Opportunity (7) 52.222-35 Affirmative Action for Special Disabled and Vietnam Era Veterans (8) 52.222-36 Affirmative Action for Handicapped Workers (9) 52.223-2 Clean Air and Water This Agreement shall remain in effect and binding upon the Seller. Upon the Seller's request, Alabama Power Company will provide the full text of any of the above provisions of clauses incorporated herein by reference. Name of Contractor:____________________________________(Firm) By:__________________________________________________(Individual's Name) Its:__________________________________________________(Title) Date:_________________________________________________ 8

EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT ("Agreement") is made effective as of June 1, 1996 between COVOL Technologies, Inc., a Delaware corporation (the "Company) and Brent M. Cook (the "Executive"). WHEREAS, the Executive is leaving employment with PacifiCorp to become employed by the Company as its Executive Vice President and Chief Financial Officer effective June 1, 1996; and WHEREAS, the Company and the Executive wish to record their agreement with respect to the employment of Executive by Company, including the incentives which the Company will provide to the Executive to induce him to accept such employment. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and with knowledge that each party hereto intends to rely hereon, the Company and the Executive agree as follows: 1.Base Salary. During the first twelve months of this Agreement, the Executive's regular salary, before all customary and proper payroll deductions, shall be $6,667.00 per month payable bi-weekly. During the second twelve months of this Agreement, the Executive's regular salary, before all customary and proper payroll deductions, shall be $8,334.00 per month payable bi-weekly. During the last twelve months of this Agreement, the Executive's regular salary, before all customary and proper payroll deductions, shall be $9,167.00 per month payable bi-weekly.

2. General Bonuses and Benefits. The Executive shall be entitled to participate in and receive the benefits bonus plans and other benefit plans generally available to other Company employees. 3. Expense Reimbursement. The Executive shall be entitled to prompt reimbursement for reasonable expenses incurred by the Executive in performing services for the Company. 4. Grant of Options. The Company shall grant to the Executive, in accordance with the terms of the Stock Option Agreement attached hereto as Exhibit A, the right and option to purchase all or any part of 100,000 shares of the Company's Common Stock at a purchase price of $1.50. Alternatively, upon mutual agreement of the Company and the Executive, the Company shall pay to the Executive, in lieu of the grant of stock options, a sum equal to the market price of 100,000 shares of the Company's Common Stock on June 1, 1996, less $150,000.00. 5. Medical Insurance. The Company shall pay the premium for and provide medical insurance benefits for the Executive and his family which are comparable to the medical insurance benefits Executive received from PacifiCorp. Said medical insurance shall be provided with no lapse in coverage between the time Executive's medical insurance benefits from PacifiCorp terminate and the time Executive's medical insurance benefits from the Company begin. 6. Personal Time Off. The Executive shall be entitled to at least six (6) weeks paid personal time off each year. Personal time off may be carried over from year to year. At the end of the term of this Agreement, the Executive shall be entitled to be paid for the prorated portion of the accrued salary attributable to unused personal time off.

7. Leave of Absence. The Executive shall be provided a paid leave of absence for the purpose of serving as an organ donor for his brother. 8. Automobile Expense. The Company will provide the Executive with a monthly auto allowance. This allowance is to compensate the Executive for the use of his personal automobile for travel related to the business of the Company. 9. Death. If the Executive dies during the term of this Agreement, his personal representative or designated survivor shall be entitled to receive all of the salary and benefits provided hereunder for the remaining term of this Agreement. 10. Dental Expense. The Company will provide the Executive with an annual dental allowance in the amount of $4,500.00 or provide comparable coverage. 11. Term. This Agreement shall commence on June 1, 1996 and shall terminate on May 31, 1999. 12. Severance Pay. If the Executive does not continue in the employ of the Company after the termination of this Agreement, whether or not the Executive is offered continued employment by the Company, Company shall pay to the Executive, no later than July 1, 1999, the sum of one years annual wages. The Executive shall not be required to mitigate the amount of the payment provided for in this section by seeking other employment or otherwise; nor shall the amount of the payment be reduced by any compensation earned by the Executive as the result of employment by another employer after termination or otherwise.

13. Indemnification. The Company shall release, indemnify and hold harmless the Executive against and from any and all loss, claims, actions or Suits, including costs and attorney's fees, both at trial and on appeal, resulting from, or arising out of or in any way connected with the Executive's acts as an employee of the Company. 14. Miscellaneous. (a) This Agreement shall be governed by and construed under the laws of the state of Utah, exclusive of choice of law rules. If any provision or provisions of this Agreement are found to be unenforceable, the remaining provisions shall nevertheless be enforceable and shall be construed as if the unenforceable provisions were deleted. (b) This Agreement may be amended or modified only by written consent of the Company and the Executive. IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate as of the date written above.
Company: COVOL TECHNOLOGIES, INC. a Delaware Corporation By: /s/ Mike Midgley Its: Chairman Executive: /s/ Brent M. Cook

EXHIBIT A STOCK OPTION AGREEMENT This STOCK OPTION AGREEMENT is made between COVOL TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and Brent M. Cook (the "Optionee"). The Company and the Optionee agree as follows: 1. Option Grant. The Company hereby grants to the Optionee the right and the option (the "Option") to purchase all or any part of 100,000 shares of the Company's Common Stock at a purchase price of $1.50 per share. 2. Grant Date. This Option shall become effective on June 1, 1996 and shall continue in effect until June 1, 2006, unless earlier terminated upon the mutual written agreement of the Executive and the Company as provided in section 4 of the Employment Agreement between the Company and the Executive. 3. Time of Exercise of Option. Subject to the provisions of section 2 of this Agreement, the Option for the entire 100,000 shares shall become exercisable on _____________. IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate as of the date written above.
COVOLTECHNOLOGIES, INC. By: /s/ Mike Midley Title: President OPTIONEE /s/ Brent M. Cook

[LETTERHEAD] COVOL TECHNOLOGIES, INC. March 6, 1996 Mr. Richard Visovsky AGTC, Inc. 7 Oakwood Way Robbinsville NJ 08691 Dear Rick, The purpose of this letter is to memorialize our agreement concerning terms under which Covol Technologies, Inc. ("Covol") will utilize the services of AGTC, Inc. - Rick Visovsky, Alpine Coal Company, Inc. - Mark Rodak and E.J. Hodder and Associates, Inc. - Edwin Hodder, Jr. (hereafter referred to as "AGTC"). All of the work that will be performed by AGTC is subject to the approval of Covol Technologies, Inc. ("Covol"). AGTC intends to use its best efforts to investigate, identify and participate in the selection of project sites for the construction of suitable coal extrusion manufacturing facilities (the "Project"). Each Project (capacity 1,000,000 tons per year) will be identified based on an economic evaluation of centralized locations, which minimize transportation costs, maximize the quantity of available coal and coal fines and consider the interests of potential end users, Covol and CoBon or other qualified purchasers. AGTC will negotiate relating to contractual arrangements with respect to the use of the selected sites for purposes of constructing the Project. AGTC will assist with the acquisition of all necessary mining, air quality, water discharge and property use permits which must be secured for each Project site. AGTC intends to investigate, identify and participate in the selection of suitable coal fines reserves or supply sources for purposes of furnishing the Project with a source of raw materials. AGTC will negotiate relating to contractual arrangements with respect to the supply of coal resources for the Project. AGTC will assist with all necessary mining, air quality, water discharge and property use permits which must be secured for each Project site. AGTC intends to investigate, identify and participate in the selection of suitable end users or consumers of the coal product produced. AGTC will assist with negotiations relating to contractual arrangements with respect to the sale of the coal product produced by the Project. As compensation for services, AGTC will receive a combination of the following four items: 1. A monthly retainer of $35,000 to be paid on the first of each month. Payment is to be made by wire transfer to the account of AGTC, Inc. 2. Reimbursement for all direct expenses which are defined as airfare, lodging, car rental and meals incurred in conjunction with project development. 3. The retainer and reimbursement for expenses (Items 1 and 2) will remain in place until the Project is placed into commercial operation. At the time the Project is placed into commercial operation, the product sales commission, as defined hereafter, will become effective and the monthly retainer and reimbursement for expenses (Item 1 and 2) and will no longer be paid. The product sales commission for all coal sold will be on a graduated incentive scale for all coal contracted for FOB plant as follows: [LETTERHEAD]3280 NO. FRONTAGE ROAD, LEHI, UT 84043 801-768-4481 FAX 801-768-4483 1

(a) Sales price less than $23.49 per ton: Product Sales Commission = $1.00 per ton. (b) Sales price greater than $23.50 and less than $26.00 per ton:

Commission = $1.50 per ton. (c) Sales price greater than $27.00 and less than $30.99 per ton:

Commission = $2.00 per ton. (d) Sales price greater than $31.00 and less than $49.99 per ton:

Commission = $2.50 per ton. (e) Sales price greater than $50.00 per ton:

Commission = 10% per ton. 4. At the time and date of closing for the monetizing or sale of any Project, a commission of each percent (8%) of the gross sales or monetized price of the Project shall be paid to AGTC. After the time and date of closing, AGTC will no longer be entitled to Items 1, 2 and 3 above. RESPONSIBILITIES OF COVOL. Covol will use its best efforts in connection with the following responsibilities: License to Use Coal Technology. Covol agrees to license its proprietary Coal Technology, as defined in Exhibit "A" (to be furnished by Covol), to operating companies to be established hereafter by the parties. The operating companies will be entitled to commercially exploit Covol's Coal Technology and related binding agents by means of the production, marketing and sale of coal briquette products and related goods and services. Covol at its sole discretion shall grant the operating companies a license to use the trademarks, trade names and service marks used by Covol and pertaining to the Coal Technology. Use of Proprietary Binder. Covol shall sell and supply to the operating companies all of their needs, and the operating companies shall exclusively buy from Covol all of their respective requirements, for the proprietary binding agents. Construction Services. Covol shall be responsible to coordinate all construction services incident to the manufacturing facilities, including the execution of such documents of assignment or otherwise as may be necessary to insure the operating companies qualify for Section 29 Tax Credits as contemplated herein (i.e., all necessary assignments of existing binding contracts under IRC Section 29).

Section 29 Tax Credits. Covol's Coal Technology was approved under a Private Letter Ruling by the IRS for Section 29 Tax Credits. Covol cannot warrant or guarantee the continuation of the Private Letter Ruling or the application of the Private Letter Ruling to the operating entities in the future. Financing. Covol shall utilize its best efforts to coordinate and acquire the necessary financing for the manufacturing facilities to be constructed by Covol. MISCELLANEOUS PROVISIONS. Covol and AGTC agree to the following additional provisions: Confidentiality and Nondisclosure. Information of a confidential and proprietary nature ("Confidential Information") will be shared between the parties as commercially necessary for the purposes hereof AGTC agrees to and shall strictly maintain during the term hereof and for three years afterwards the Confidential Information of Covol, including specifically the "Coal Technology" and all proprietary manufacturing processes incident thereto. The parties acknowledge that the Confidential Information has not been disclosed, published or disseminated to third parties so as to have become public knowledge or to be found in the public domain, and that they have required, or will be required hereafter, all persons to whom Confidential Information has been, or will be, disclosed to execute a written agreement containing commercially reasonable confidentiality provisions against unauthorized disclosure. Governing Law. This agreement shall be governed by Utah law. Arbitration. Any and all disputes which may arise between the parties shall be finally resolved and settled exclusively by arbitration to be held in Salt Lake City, Utah before a panel of three (3) arbitrators under the American Arbitration Association's Commercial Arbitration Rules. Progress Reports and Standing Meeting Schedule. To insure that open and direct communication is maintained between the parties, a standing meeting schedule shall be established whereby written progress reports shall be exchanged between the parties and discussed at no shorter intervals than every week. Critical Path. A critical path shall be established to facilitate performance hereunder. This critical path shall be reviewed at each weekly standing meeting. Modification and Integration. This agreement shall constitute the entire agreement of the parties with respect to the subject matter hereof and no modification hereof will be legally recognized unless executed in writing by both parties. Term. This agreement will automatically renew annually until such time that the Project is sold or monetized and AGTC is paid the commission for each Project they presented. At the end of four (4) months AGTC shall have presented to Covol at least two (2) Projects ready to be financed for construction and then placed into commercial operation. If less than two (2) Projects are presented and accepted then the retainer shall be renegotiated or canceled and the agreement may be canceled. Acceptance of the Projects presented by AGTC shall be with

the sole discretion of Covol based on its own analysis of the economic viability of any such Projects. If this agreement is terminated, the terms of this agreement will continue to apply to any Projects that have been presented by AGTC at the time of termination and which are accepted and constructed by Covol, until the time of monetizing or sale of such Projects. If this letter of intent accurately sets forth your understanding of our intentions and agreements, please execute both copies of this letter in the space provided below and return one copy to us.
Sincerely, AGTC, Inc. Inc. Alpine Coal Company, Inc. E.J. Hodder & Associates,

/s/ Rick Visovsky By: Its: President

/s/ Mark Rodak By: Its: President

/s/ Edwin Hodder, Jr. By: Its: President

Acknowledgment Duly authorized, agreed to and accepted this 6th day of March, 1996. Covol Technologies, Inc.
/s/Kirby Cochran By: Its:

July 19, 1996 VIA FAX TRANSMISSION TO: Rick Visovsky Mark Rodak AGTC, Inc. Alpine Coal Company, Inc. 7 Oakwood Way Fax: (717)7309416 Robbinsville, NJ 08691 Fax: (609)275-0779 Edwin J. Hodder E.J. Hodder & Assoc. 2700 Powhatan Street Mulga, AL 35118 Fax: (205)436-4099 SUBJECT: CANCELLATION OF SITE IDENTIFICATION AGREEMENT Gentlemen: In accord with the provisions relating to the term of the agreement entered into by COVOL TECHNOLOGIES, INC. ("COVOL"), AGTC, Inc., ALPINE COAL COMPANY, INC., and E.J. HODDER & ASSOCIATES, on March 6, 1996, whereby COVOL has the right to cancel if less than two projects are presented and accepted at the end of four months, COVOL hereby cancels the agreement. Sincerely,
/s/Michael Q. Midgley Michael Q. Midgley President

[LETTERHEAD] COVOL TECHNOLOGIES, INC. August 22, 1996 Byrleen Hansen 45 South 1300 East Pleasant Grove, UT 84062 RE: TERMS FOR PURCHASE OF OFFICE BUILDING Dear Byrleen: Following are the modified terms of purchase for the 401 North Carbonville Road, Price, Utah, office building. The insurance and title companies are gearing up to close around September 1, 1996. This is a follow up to our discussion on Wednesday on the terms of the purchase of the office building in Price. As we discussed, we will arrange with a title company for the closing. Relevant provisions from the Lease Agreement regarding default, insurance, utilities and notices, will continue to apply to the purchase. The terms outlined in the Lease Agreement, and in our discussions, will be as follows:
Purchase Price: Credit for rental payments Balance: Cash to be paid: Loan to be carried by the owner: Terms: 120 months at 9% per annum. Monthly payment: Timing: $150,000 (48,800) 101,200 1,200 100,000

1,266.76 for the month of

first payment will be due October 1 September.

Annuity arrangement:

Prepayment will not be permitted. If for any reason we sell the building before 10 years, we will escrow sufficient money to guarantee that you continue receiving the same payments for the remainder of the 10 years, without adverse tax consequences. $10 for each day after the first of the you actually receive our payment. month that

Late payment penalty:

Covol will not use the building as collateral for any loan. [LETTERHEAD]3280 NO. FRONTAGE ROAD, LEHI, UT 84043 801-768-4481 FAX:801-768-4483

Encumbrances:

Taxes:

Covol pays escrowed.

taxes

for

1996.

Future

taxes will be

Insurance:

The replacement policy will be in effect by September 1, 1996. Insurance agent will be instructed to notify you if the coverage lapses during the term of this agreement. You will pay half the cost of obtaining insurance, up to $320 (half of $640). title

Title insurance:

Default:

If Covol defaults on she purchase or Lease Agreement, and you take back the building, Covol must return it in its original condition, minus ordinary wear.

Again, Byrleen, if there are any questions with the above, call me so we can clear them up before closing. Sincerely,
/s/Asael T. Sorensen Asael T. Sorensen General Counsel

PRIMARY AGREEMENT This Primary Agreement ("Agreement") is made and entered into at Salt Lake City, Utah this 6th day of November 1996 by and between Covol Technologies Inc., a Delaware corporation ("Covol") and Savage Industries Inc., a Utah corporation ("Savage"). RECITALS: A. Covol has approached Savage about the possibility of Covol and Savage entering into a business relationship and Savage is interested in pursuing the possibility of a business relationship with Covol. B. Covol has developed a process to bind coal fines (the "Covol Process") and produce usable coal briquettes (the "Briquettes") and usable coal extrusions (the "Extrusions") using a binder (the "Covol Binder") developed by Covol. C. Covol has applied for and received multiple United States patents (the "Patents") covering the Covol Process using the Covol Binder. D. Covol has received a private letter ruling (the "Covol Private Letter Ruling") from the Internal Revenue Service (the "IRS") dated September 8, 1995 to the effect that (i) Covol, using the Covol Process with the Covol Binder, is able to produce a "qualified fuel" within the meaning of Section 29(c)(1)(C) of the United States tax code (the "Code"), and (ii) the sale of the "qualified fuel" will qualify for energy tax credits in the year of the sale (the "Tax Credits") pursuant to Section 29(a) of the Code. E. As a part of their business relationship, Covol and Savage, or a third party entity formed by them, intends to enter into not to exceed two (2) written contracts (the "Contract(s)") with a qualified third party contractor or contractors (the "Contractor(s)") whereby the Contractor will agree to design, construct' start-up and certify up to two (2) separate coal fines agglomeration facilities (collectively, the "Facilities", with each such facility referred to herein as the "Facility") using the Covol Process and the Covol Binder to produce Extrusions.

AGREEMENT AND UNDERSTANDING: 1. Representations and Covenants 1.1 Covol represents to and covenants with Savage as follows:
a. Environmental Technologies Group International, a Nevada corporation, merged with Covol with Covol being the surviving corporation. Covol is qualified and in good standing to do business in the State of Utah; Covol is the lawful holder of the Patents and the Patents are valid, in good standing and enforceable pursuant to the United States patent laws and regulations. Copies of the Patents received to date by Covol have been provided by Covol to Savage; The Covol Private Letter Ruling has not been modified or rescinded and Covol has no reason to believe that such a modification or rescission will occur. A copy of the Covol Private Letter Ruling has been provided by COVOL to Savage; To the best knowledge and understanding of Covol, the Covol Private Letter Ruling (i) will, with respect to Covol, apply to (a) each of the Facilities to be constructed by the Contractor, (b) the Extrusions produced by each of the Facilities, and (c) the sale of the Extrusions produced by each of the Facilities and (ii) will result in (x) the Extrusions produced by each of the Facilities being a "qualified fuel" pursuant to Section 29(c)(1)(C) of the Code and (y) will result in the sale of Extrusions produced by each of the Facilities qualifying, in the year of such sale, for Tax Credits pursuant to Section 29(a) of the Code; Covol has the expertise, personnel and financial ability to perform as required by the terms and provisions of this Contract and all other documents contemplated herein; To the best knowledge and understanding of Covol, the Tax Credits will be available to any third party who obtains an interest in the production and sale of Extrusions produced, using the Covol Process and Covol Binder, by either of the Facilities constructed by the Contractor pursuant to any of the Contracts; and 2

b.

c.

d.

e.

f.

g. The execution and delivery of this Agreement and the documents contemplated herein (i) have been or will be duly executed by Covol, (ii) when executed, will be valid, binding and enforceable against Covol pursuant to the terms thereof, (iii) and the performance of Covol hereunder, will not violate or constitute an event of default under the terms and provisions of any agreement to which Covol is a party and (iv) do not require the consent of any third party (except as otherwise provided in this Agreement) or any governmental entity. 1.2 Savage represents to and covenants with Covol as follows: a. Savage is a Utah Corporation, qualified and in good standing in the State of Utah; b. Savage has the expertise, personnel and financial ability to perform as required by the terms and provisions of this Agreement and all other documents contemplated herein; and c. The execution and delivery of this Agreement and the documents contemplated herein (i) have been or will be duly executed by Savage, (ii) when executed, will be valid, binding and enforceable against Savage pursuant to the terms thereof, (iii) and the performance of Savage hereunder, will not violate or constitute an event of default under the terms and provisions of any agreement to which Savage is a party and (iv) do not require the consent of any third party (except as otherwise provided in this Agreement) or any governmental entity. 2. Conditions Precedent 2.1 The parties will jointly work together in clarifying the criteria and other factors for the design, component parts, layout and production capabilities of each of the Facilities to be constructed by the Contractor. 2.2 The parties will jointly work together in obtaining an informal position of the IRS as to (i) whether or not the Tax Credits would be available to Savage and/or a limited liability company (the "LLC") established by Savage in conjunction with Covol with respect to the sale of Extrusions produced, using the Covol Process and Covol Binder, by the Facility or Facilities constructed by the Contractor and (ii) whether or not the Contracts will qualify for the "binding contract rule" of Section 29(g)(i)(A) of the Code. 3

*** Missing information may be available upon request to the Company 2.3 Subject to receiving a positive informal position from the IRS pursuant to Section 2.2, the parties will jointly work together in obtaining a private letter ruling from the IRS (the "Savage Private Letter Ruling") to the effect that the Tax Credits (i) will be available in accordance with the informal position obtained from the IRS and (ii) will be equally applicable to the sale of Extrusions produced, using the Covol Process and Covol Binder, by the Facility and/or the Facilities. 2.4 If, at any time, either party is not satisfied, in its sole discretion, with the results, progress or the timing of any of the matters above set forth in Sections 2.1 through 2.3, such party (the "Giving Party") may give written notice to the other party (the "Receiving Party") of such dissatisfaction and in such event, the Receiving Party shall either elect (i) to terminate this Agreement or (ii) solely proceed with the remaining terms and provisions of this Agreement hereinafter commencing with Article 3. 2.5 If the Receiving Party elects to terminate this Agreement pursuant to Section 2.4(i), then neither party shall have any further rights, claims, duties or obligations to the other party on account of this Agreement. 2.6 If the Receiving Party elects to proceed with this Agreement pursuant to Section 2.4(ii), then the Receiving Party shall (i) reimburse the Giving Party for the actual out of pocket expenses incurred by the Giving Party in its performance of the matters above set forth in Sections 2.1 through 2.4, (ii) be entitled to receive all technological information concerning the Covol Binder and the Covol Process, all test results, studies, and information received, gained and/or possessed by the Giving Party, (iii) defend, indemnify and hold the Giving Party harmless on account of this Agreement and all of the matters set forth herein or contemplated hereby, (iv) be entitled to proceed as provided in Section 2.4(ii) with the cooperation, but not at the expense, of the Giving Party, and (v) if the Giving Party is Covol, be entitled to receive from Covol (a) *** to the Receiving Party a license to use the Covol Process, Covol Binder and Patents and (b) receive from Covol, the Covol Binder required to produce Extrusions from the Facilities at *** cost to the Receiving Party equal to *** (10%) to produce the Covol Binder and at *** to deliver the Covol Binder to the Facilities. 2.7 Until such time as notice is given or received pursuant to Section 2.4, the parties shall continue to exert all reasonable efforts to timely perform as required by Sections 2.1 through 2.3. 4

*** Missing informaiton may be available upon request to the Company 2.8 The parties shall not commence performance of the remaining terms and provisions of this Agreement, commencing with Article 3, unless the parties (i) are satisfied with each of the matters contemplated by Sections 2.1 through 2.3, or (ii) have waived the right to be satisfied with any of the matters contemplated by Section 2.4(i) and (iii) in any event, have agreed in writing to proceed with such remaining terms and provisions (the "Proceed Notice"). 2.9 Each of the parties shall be responsible for its own out of pockets associated with their individual performances pursuant to Article 2. 3. Duties, Rights and Obligations 3.1 The parties shall form up to two (2) LLC(s) to be owned *** by Savage and *** by Covol, which LLC shall have the right to own up to a *** percent (100%) interest in one or both of the Contracts.
3.2 All costs and profits or losses of the LLC, to the extent associated with Contracts and the Facilities constructed by the Contractor shall be borne, distributed and/or allocated

*** to Savage and *** to Covol. 3.3 Savage shall have the right, but not the duty to operate (i) either or both of the Facilities, upon terms and conditions, reasonably and in good faith, acceptable to each of the parties and (ii) to provide transportation of (a) raw coal materials to either of both of the Facilities and (b) Extrusions produced by the either of both of the Facilities. 3.4 Covol, ***, will license the use of the Covol Process, Covol Binder and Patents with respect to the Facilities. 3.5 Covol will provide the Covol Binder required to produce Extrusions from the Facilities at *** to produce the Covol Binder and *** to deliver the Covol Binder to the Facilities. 3.6 The parties contemplate that each will have the right to sell to third parties any or all of its interest in either or both of the L.L.C.'s. 5

4. Time of the Essence 4.1 Time is of the essence for all matters set forth in this Agreement and subject to the terms and conditions hereof, each party agrees to proceed with dispatch and exert all reasonable efforts to perform as herein required. 5. Applicable Law 5.1 This Agreement shall be construed and interpreted pursuant to the laws of the State of Utah. 5.2 The parties agree to resort only to (i) the Utah state district court or the United States district court sitting in Salt Lake City, Utah, or (ii) such other entity or mechanism as the parties may mutually agree, to decide any controversy arising hereunder between the parties. 6. Initial Agreement 6.1 The Initial Agreement between the parties dated March 19, 1996 is terminated and neither party shall have any right, claim, duty or obligation to the other on account thereof. 7. Mohave Agreement 7.1 Concurrently with the execution of this Agreement, the parties have executed a written agreement (the "Mohave Agreement"). 8. Miscellaneous Provisions 8.1 Each of the parties, and their respective counsel, have participated in the negotiation and preparation of this Agreement. 8.2 This Agreement contains the entire understanding and agreement between the parties concerning the subject matter set forth herein and supersedes all prior communications, understandings and agreements of the parties. 8.3 No part of this Agreement shall be amended except in writing signed by each of the parties. 6

Executed in duplicate as of the date first above set forth. Covol Technologies Inc.
/s/ Brent M. Cook Its CEO & President Savage Industries, Inc.

/s/ H. Benson Lewis Its Executive Vice President

7

MOHAVE AGREEMENT This Mohave Agreement is made and entered into this 6th day of November 1996 by and between Covol Technologies Inc., a Delaware corporation ("Covol") and Savage Industries Inc., a Utah corporation ("Savage"). RECITALS: A. On March 19, 1996, the parties executed a written agreement (the "Initial Agreement"). B. On May 17, 1985, Flyash Haulers, Inc., an Arizona corporation ("Flyash") and Southern California Edison Company, a California utility ("Cal Edison") entered into a written agreement (the "Mohave Underflow Sales Contract") which provides Flyash with the right to purchase and remove coal fines underflow (the "Coal Fines") from impoundment ponds 1 and 5 at Cal Edison's Mohave Generating Station near Laughlin, Nevada (the "Station"). C. In conjunction with this Mohave Agreement, Savage and Flyash intend to execute a written agreement (the "Business Agreement") (i) to form a Utah limited liability company ("Mohave"), (ii) to upgrade an existing facility (the "Facility") and place the Facility into operation at the Station, and (iii) to produce and sell a "Qualified Fuel" pursuant to Section 29(c)(1)(C) of the Internal Revenue Code (the "Code") which will result in "Tax Credits" for Mohave pursuant to Section 29 of the Code. D. Savage and Flyash intend for Mohave to execute a written agreement with Flyash (the "Management Agreement") for Flyash to manage and operate the Facility in the production of a Qualified Fuel. E. Covol is willing to license to Mohave, the "Covol Process" using the "Patents" and the "Covol Binder" as described in the Initial Agreement. AGREEMENT: 1. Term. The term of this Mohave Agreement is effective as of the date hereof and shall continue until December 31, 2009. 2. License Agreement. At Savage's request, Covol will execute a written license agreement with Mohave (the "License Agreement") which will (i) allow Mohave to use the Covol Process in conjunction with the Patents in return for a monthly license fee (the "License Fee") to be paid by Mohave to Covol for each ton (2,000 lbs.) of Qualified Fuel produced from the Coal Fines by Flyash at the Facility and sold by Mohave to a third party purchaser during each calendar quarter calculated on the basis of *** for each BTU contained within the

*** Missing information may be available upon request to the Company Qualified Fuel [for example, one (1) ton of Qualified Fuel containing *** BTU's will generate a License Fee of ***. 3. Covol Binder ***. At Mohave's request, Covol shall provide to Mohave for use with the Coal Fines, at ***, such quantities of the Covol Binder as required by the Facility to produce Qualified Fuel. 4. Technical Assistance. Covol agrees to provide technical assistance and field support to Mohave as may be reasonably necessary and as may be requested by Mohave from time-to-time in the production of Qualified Fuel by the Facility. Mohave agrees to reimburse Covol for its reasonable out-of-pocket expenses incurred in providing such technical assistance and field support. 5. Reimbursement Fee. To induce Savage to participate in the formation of and to invest capital in Mohave, Covol agrees that it will reimburse (the "Reimbursement Fee") Savage from the License Fees received by Covol from Mohave, an amount equal to *** of the cash capital required to (i) initially upgrade and place the Facility into operation at *** and (ii) to thereafter upgrade the Facility from time-to-time as determined by Mohave to efficiently and economically produced a Qualified Fuel. The basis for the Reimbursement Fee shall be documented. At Savage's request, Covol agrees to request and authorize Mohave to deduct from the License Fees due to Covol and pay directly to Savage, the amount thus deducted which will be treated as a credit against the Reimbursement Fee owing by Covol to Savage. 6. Secure Performance. To secure Covol's performance in the event of a failure on the part of Covol to produce and deliver the Covol Binder to Mohave pursuant to the License Agreement, Covol agrees to place in escrow at Zions First National Bank, Main Office in Salt Lake City, Utah (the "Escrow Holder"), all documents, written specifications and instructions necessary and required for Mohave or a third party designated by Mohave to formulate, mix, prepare and produce the Covol Binder as required by the terms and provisions of this Mohave Agreement. Covol agrees to cooperate with Mohave and the Escrow Holder, in the preparation and execution of appropriate escrow instructions concerning the documents to be placed in escrow and how, when and for what purposes the documents may be released to Mohave or its designee. 7. Other Documents. Savage and Covol each agree to execute such documents and take such action as is reasonably required and appropriate to carry out the intent of this Mohave Agreement. 8. Entire Understanding. This Mohave Agreement has been negotiated and prepared with the assistance and participation of each of the parties and their respective counsel and contains the entire understanding and agreement between the parties with respect to the subject matter set forth herein. 2

Executed in duplicate as of the date first above set forth. Savage Industries Inc.
By: /s/ H. Benson Lewis Executive Vice President Covol Technologies Inc. By: Brent M. Cook President

3

RELEASE OF ALL CLAIMS FOR AND IN CONSIDERATION of the issuance to MAYNARD MOE, an individual, by Covol Technologies, Inc., ("Covol"), (formerly Environmental Technologies Group International, formerly Enviro-Fuels, Inc.), of 30,000 shares of Covol restricted common stock, the undersigned, MAYNARD MOE, and his successors, and any other party in privity with the undersigned, do HEREBY RELEASE AND FOREVER DISCHARGE Covol and their agents, employees, employers, principals, partners, and all others in privity with said Releases (agreeing parties) of and from any and all claims, demands, rights, liens, damages, injuries, losses, contracts, covenants, suits, causes of action, expenses, judgments, orders and liabilities of any kind and nature, whether now known or unknown, suspected or unsuspected, foreseen or unforeseen, and whether or not concealed and hidden, which may have existed or may not have existed, or which can, may or shall hereafter exist or which have accrued or may hereafter accrue, on account of, or in any way relating to the services, purchases, sales, loans and all other transactions between the undersigned (including any party related to or in privity with the undersigned) and Covol (including any of Covol's predecessors). The undersigned does hereby state that this is a full and final Release in accord with its terms, applying to all unknown, unanticipated and unsuspected injuries, damages claims and expenses as set forth above, arising out of the above incidents, as well as to those now known or disclosed. It is understood and agreed, and the undersigned does hereby state that reliance is placed wholly upon his and his attorney's judgment, belief and knowledge as to the nature, cause, extent, and duration of any injuries and damages; and that no statement with regard thereto made by the Releases has in any way influenced the making of this compromise settlement and the execution of this Release. It is understood and agreed that this offer and/or compromise shall not be deemed or construed as an admission of liability as to any of the agreeing parties. Having read and understood the terms of this Release of All Claims, and in witness whereof, the undersigned has hereunto set his hand this 13th day of September, 1996.
/s/ Maynard Moe MAYNARD MOE SUBSCRIBED AND SWORN TO before me this 13th day of September, 1996.

/s/ Asael T. Sorensen NOTARY PUBLIC Residing in: Utah County

My Commission Expires: 2/09/00

Letter of Understanding This agreement is made and entered into this 13th day of September, 1996 by and between Covol Technologies, Inc., a Delaware Corporation ("Covol") and E.J. Hodder & Associates, Inc. ("Hodder"), a __________ corporation. RECITALS Whereas, "Hodder" owns an assignable land lease and equipment company commonly referred to as Port Hodder (2700 Powhatan Street, Mulga, AL.) which is a barge loading facility servicing the Warrior River. Whereas, "Hodder" warrants that it owns title to all the equipment and facilities currently located on Port Hodder site. Whereas, "Hodder" desires to sell the Port Hodder facility, and "Covol" desires to purchase said facility. BE IT THEREFORE AGREED AS FOLLOWS: Hodder" agrees to sell and convey unencumbered title to the Port Hodder facility to "Covol", "Hodder" warrants and represents that there are no liens or encumbrances and that any claims against the Port Hodder facility have been disclosed to "Covol". "Covol" agrees to pay to "Hodder" the following sums for the Port Hodder facility: (1) A Sum of $125,000 U.S. Dollars to be paid at commencement of construction or by August 15, 1996 whichever is sooner. (2) An additional sum of $125,000 U.S. Dollars to be paid on or before September 15, 1996. (3) An additional sum of $100,000 U.S. Dollars to be paid on or before October 15, 1996. (4) 71,800 Shares of Covol Stock (CVOL) (Estimated value, based on 6/27/96 closing price $700,000. Both parties agree to cooperate and work jointly at operating the Port Hodder facility. Both parties further agree that if the efforts to acquire Concord Coal Recovery Ltd. Partnership (K-Lee Processing) are unsuccessful the quantity of shares identified in (3) above shall be reduced to 60,000 shares of Covol Stock (CVOL) (estimated value based on 6/27/96 closing price $585,000).

It is further agreed that if the efforts to acquire Concord Coal Recovery Ltd. Partnership (K-Lee Processing) is successful, the payment identified in (3) above shall be reduced to $50,000 U.S. Dollars. Both parties agree that Ed Hodder shall have the right to load and utilize the Port facility for business purposes, upon condition that any such activity shall not interfere with any present or future business activities of Covol Technologies, Inc. Both parties further agree that E.J. Hodder & Associates, Inc. shall provide consulting services to Covol Technologies, Inc. and will assist with operation of the port facility and future plant operations, and will also aid in acquiring fines and other feedstock material and in developing finished product markets in Coal, Coke and iron rich material an in other market development and industry efforts which Covol is undertaking. Compensation and consideration for such consulting services shall be as follows: (deleted) Agreed to this day 13th of September 1996.
Covol Technologies, Inc. E.J. Hodder Associates, Inc.

/s/ Ken Young By: Ken Young Title: CEO

/s/ Edwin J. Hodder By: Edwin J. Hodder Title: President

STATE OF ALABAMA ) ) SUBLEASE COUNTY OF JEFFERSON ) THIS SUBLEASE is made and executed on the 9th day of September, 1996 and between PARKER TOWING COMPANY, INC., an Alabama corporation having its principal office in the City of Tuscaloosa, Tuscaloosa County, Alabama, herein referred to as "Parker"; and COVOL TECHNOLOGIES, INC., a Delaware corporation having its principal office in the City of Lehi, Utah, herein referred to as "Covol." WITNESSETH WHEREAS, Parker is the Lessee under a certain Lease Agreement dated May 24, 1988, with AmSouth Bank N.A., Birmingham, Alabama, and Mary Harris Wood, as Co-Trustees under the Will of Allen K. Wood, Deceased, as Lessor (the "Owner"), pertaining to the lease of 280 acres of land in Jefferson County, Alabama (the "Parker Property"); and Parker has, pursuant to the provisions of Section XV of that Lease exercised an Option to renew for an additional five year term (such that term now extends to May 23, 1998); and, Parker desires to sublease to Covol, and Covol desires to rent from Parker, a portion (consisting of approximately 15.45 acres, more particularly described below) of said real property for a term also extending to May 23, 1998; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: SECTION I Demise, Description, and Use of Premises. (a) Parker hereby demises and leases to Covol and Covol leases from Parker, to have and to hold through the term hereof for the sole purpose of operating a facility which will heat coal fines, blend the fines with a bonding agent and extrude the material making a high quality metallurgical coal product and conducting activities related thereto, those certain premises and appurtenances, situated in Jefferson County, Alabama, and more particularly described and shown on the plat prepared by Almon Associates and attached hereto as Exhibit "A". As used herein, the term "premises"' refers to the real property above described and to any improvements located thereon from time to time during the term hereof, but specifically excludes mineral, mining, timber, or oil and gas rights.

SECTION II Term. The term of this Sublease shall commence on September 1, 1996, and shall be for a period of approximately two years, expiring May 23, 1998. In addition, the term hereof may be extended for two consecutive extension terms, one for five years (through May 23, 2003) and the second for three additional years (through May 23, 2006). In order to exercise such option, Covol shall so notify Parker in writing not less than 210 days prior to the end of the then existing term, whereupon the term hereof shall automatically be extended accordingly. As used herein, the expression "term hereof" refers to such initial term and to any extension hereof. SECTION III Rent and Wharfage (a) Rental Payments. Covol shall pay to Parker, as rent for the premises, the sum of One Dollar per year during the term of this Sublease. (b) Wharfage. Covol agrees to pay wharfage for all cargo, goods, merchandise, or whatever, either bulk or package (the "Cargo"), which is moved by Covol or its assignees or licensees through, across or onto any dock and wharf facilities located on the premises, an amount equal to fifty cents ($.50) per ton (2,000 pounds) of Cargo. Notwithstanding the foregoing, no such wharfage shall be payable in the event Parker or any of its subsidiaries or affiliated companies provides barging for such Cargo. In the event any Cargo is moved onto or from the premises by truck or other method other than by barge, by Covol or its assignees or licensees, Covol agrees to pay Parker a storage fee in an amount equal to fifty ($.50) per ton (2,000 pounds) of such Cargo. Each such payment of wharfage and storage shall be due on or before the 15th day of the month for the immediately preceding month. (c) Late Payments. Covol shall be obligated to pay a late fee equal to two percent of the amount of any rental or wharfage installment which is not paid within ten (10) days from its due date, which late fee shall be due and paid with the late rental or wharfage and storage installment. (d) Access to Records. Covol will furnish to Parker, by the 15th day of each month, a report setting out the volume of all Cargo shipped to or from the premises, including the number of barges or trucks loaded or unloaded and the type and weight of Cargo, during the preceding month. At all reasonable times and intervals, Parker may examine the books of account of Covol and any other reports, records and materials of Covol pertaining to the determination of wharfage and storage due hereunder; and upon written request by Parker, Covol shall promptly furnish Parker copies of such records, reports and materials. 2

SECTION IV Warranties of Title and Quiet Possession. Parker covenants that Parker is the tenant of AmSouth Bank N.A., Birmingham, Alabama, and Mary Harris Wood, as Co-Trustees under the Will of Allen K Wood, Deceased, as above recited; and has full right to make this Sublease and that Covol shall have quiet and peaceable possession of the demised premises during the term hereof. SECTION V Compliance with Laws; Waste and Nuisance Prohibited. During the term of this Sublease, Covol shall comply with all applicable laws, regulations or governmental rules affecting the premises demised hereunder, including, without limitation, all state or federal laws or regulations respecting environmental protection or hazardous wastes or substances. Covol also agrees to furnish from time to time, upon the request of Parker or Owner, a certificate to the effect that Covol is at the time of such request in compliance with all such laws, regulations or governmental rules. Covol shall not commit, or suffer to be committed, any waste on the premises, or any nuisance. Covol hereby covenants and agrees to indemnify and hold harmless Parker and Owner for any loss or damage to either of them or their respective interests in the premises as a result of any violation of the foregoing covenants. SECTION VI Abandonment of Premises. Covol shall not vacate or abandon the premises at any time during the term hereof. Neither shall Covol cease to use the premises at any time as a facility for receiving, storing, processing and loading coal product, except that in the event of casualty or other loss Covol may cease to use the premises for such purpose for such time as shall be reasonably required to repair the facility. SECTION VII Construction; Ownership of Improvements. (a) Construction of Improvements. Covol, at its own cost and expense, may make such improvements to the premises, including erection of a coal loading facility, processing facilities, buildings, docks, roads, and other facilities that may be required in the operation of its business, and may dredge any waterway serving the premises. Covol shall have the right at any time and from time to time to grade, gravel and clear the premises, and to construct on all or any part of the premises such buildings, structures and other improvements as Covol shall determine will further Covol's construction and operation of its 3

facility. All costs and expenses incurred in connection with any construction, site preparation, grading or similar activities shall be borne solely by Covol. (b) Use of Existing Equipment. Covol shall have the right, without any payments in excess of the rent due hereunder, to use in conjunction with its use of the premises such conveyors, motors and hoppers as are presently located on the premises [and as are more fully described on the schedule attached hereto as Exhibit "B"]. All such equipment is provided as is, where is and Covol hereby assumes the risk of use of all such equipment and agrees to indemnify and hold harmless Parker for any injury, loss or damage resulting from such use. (c) Alterations and Additions. Covol shall have the right at any time, at its own discretion and solely at its expense, to make additions to or alterations of any of the buildings, structures or other improvements on the premises. (d) Ownership of Improvements. All buildings, structures and other improvements and all machinery, equipment and trade fixtures (other than as described below) now or hereafter constructed, installed or placed by Covol upon the premises or any part thereof, shall become affixed to the premises and shall become the property of Parker upon the termination of the Sublease. Notwithstanding the foregoing, Covol shall be entitled prior to the termination of this Sublease to remove machinery (other than the conveyors and other equipment furnished by Parker under Paragraph (b) hereof), rolling stock and office furniture and equipment. SECTION VIII Parker's Right of Re-entry; Access Easements. (a) Right of Re-entry. Covol shall permit Parker and the agents and employees of Parker to enter into and upon the premises at all reasonable times for the purpose of inspecting the, same, or for the purpose of posting notices of nonresponsibility for alterations, additions, or repairs, without any rebate of rent and without any liability to Covol for any loss of occupation or quiet enjoyment of the premises thereby occasioned, and shall permit Parker or the Owner and their respective agents and employees, at any time within the last ninety (90) days prior to the expiration of this Sublease, or any extension thereof, to place on the demised premises any usual or ordinary "To Lease" or "For Sale" signs and exhibit the premises to prospective tenants or purchasers at reasonable hours. (b) Access Easements. Parker agrees to provide Covol an easement at least thirty (30) feet wide, for ingress and egress to the Premises, such easement to be located for the mutual convenience of Covol and Parker. In addition, Parker hereby retains an easement over and across the premises for general ingress and egress to and from the Parker Property or any part 4

thereof. Such easement shall inure to the benefit of Parker and any successor, assign or sublessee of Parker occupying any of the Parker Property. SECTION IX Subletting and Assignment. The parties acknowledge the limited purposes for which the premises are to be used, and therefore agree that, except as hereinafter set forth, Covol may sublet the premises in whole or in part, or may assign or transfer this Sublease, or any interest herein, only with Parker's prior written consent, which consent may be withheld in the event Parker determines that such subletting, assignment or transfer would or could result in any additional liability or economic loss to it, or for other reasons in the reasonable discretion of Parker. No consent to any subletting, assignment or transfer shall be deemed to be a consent to any subsequent subletting, assignment or transfer. No sublease, assignment or transfer of any interest in this Sublease shall release Covol from, or otherwise affect in any manner, any of Covol's obligations hereunder and Covol hereby expressly agrees that it shall continue to be liable for its obligations hereunder notwithstanding any sublease, assignment or transfer as contemplated by this Section IX. SECTION X Taxes and Assessment. (a) Taxes. Covol shall pay all ad valorem taxes assessed to or on any buildings, improvements, futures, machinery or personal property located on the premises. In the event any of such property is not assessed separately from other portions of the Parker property, the parties shall endeavor to have such property separately assessed or, failing such, to allocate any taxes payable according to the relative values of the properties. (b) Fees. All license fees of every kind and nature which may be levied, assessed, charged or imposed or which may become a lien or charge on or against the land hereby demised, or any part thereof, arising from or due to any improvements placed on the premises by Covol or by and through Covol's operations shall be paid by Covol. SECTION XI Utilities. (a) Payment of Costs. Covol shall fully and promptly pay for all water, gas, heat, light, power, telephone service, and other public utilities of every kind, including connection fees and installation expenses, furnished to the premises throughout the term hereof, and all other costs and expenses of every kind whatsoever of or in connection with the use, operation, and 5

maintenance of the premises and all activities conducted thereon, and Parker shall have no responsibility of any kind for any thereof. (b) Utility Easement; Access Easements. Covol shall be entitled and is hereby authorized to enter into such easement agreements with utility companies as may be required or needed in order to provide service to any improvements located on the premises; provided, however, the precise ground location of such easements shall be approved in advance by Parker, and Parker will cooperate in planning for utility service to the site. SECTION XII Liens. (a) Covol's Duty to Keep Premises Free of Liens. Covol shall keep all of the premises and every part thereof and all buildings and other improvements at any time located thereon free and clear of any and all mechanics', materialmen's, and other liens for or arising out of or in connection with work or labor done, services performed, or materials or appliances used or furnished for or in connection with any operations of Covol, any alteration, improvement, or repairs or additions which Covol may make or permit or cause to be made, or any work or construction, by, for, or permitted by Covol on or about the premises, or any obligations of any kind incurred by Covol. Covol shall at all times promptly and fully pay and discharge any and all claims on which any such lien may or could be based, and agrees to indemnify Parker and all of the premises and all buildings and improvements thereon against all such liens and claims of liens and suits or other proceedings pertaining thereto. (b) Contesting Liens. If Covol desires to contest any such lien, it shall notify Parker of its intention to do so within thirty (30) days after the filing of such lien. In such case, and provided that Covol shall on demand protect Parker by a good and sufficient surety bond against contest, Covol shall be permitted to pursue such contest so long as neither Parker's leasehold interest nor Owner's fee interest shall be impaired or endangered. In the event of any such contest, Covol shall protect and indemnify Parker and Owner against all loss, expenses, and damage resulting therefrom. SECTION XIII Attorney's Fees. If any action at law or in equity shall be brought to recover any rent under this Sublease, or for or on account of any breach of, or to enforce or interpret any of, the covenants, terms, or conditions of this Sublease, or for the recovery of the possession of the premises, the prevailing party shall be entitled to recover from the other party as part of the prevailing party's costs, reasonable attorney's fees. 6

SECTION XIV Indemnity. Covol assumes responsibility for the condition of the premises and covenants for and agrees that (except as expressly provided below) neither Parker nor Owner shall be liable for any injuries or damages to persons or property caused by Covol or occurring on the premises during the use, occupation, control or enjoyment of the premises by Covol, and Covol will save and hold harmless Parker and Owner from and against any and all such liability, loss, penalties, damages, expenses and judgments whatsoever on account of such injuries or damages, including reasonable attorney's fees and court costs; provided, that Parker shall be responsible for damages to persons or property caused by Parker or by Waterway Forest Products, Inc., Cargo Handlers, Inc., other affiliates of Parker, or their agents, employees, contractors, subcontractors, customers or invitees, including injuries occurring on the premises. In addition, Covol shall be responsible for, and shall indemnify and hold Parker harmless against any claims arising out, any and all injuries to Covol's employees, contractors or while on or about any barge or other vessel owned by Parker but within the custody and control of Covol or parties acting under contract with or with permission of Covol. Without limiting the generality of the foregoing, Covol agrees, upon the request of Parker or Owner, to defend any claim against such party, or both of them, in any way related to any such injuries or damages. SECTION XV Use of Run-Off Control Pond The parties acknowledge that there is a run-off control pond located on the premises. Covol shall cooperate with Parker in causing Covol to be named by the Alabama Department of Environmental Management as the "operator" of such pond and shall be solely responsible for control of such pond under the rules and regulations applicable thereto. Covol shall be solely responsible for any injury occurring in or on such pond and shall indemnify and hold harmless Parker for any such injury, damage or failure to comply with applicable laws, rules and regulations. SECTION XVI Redelivery of Premises. Covol shall pay the rent, wharfage, storage and all other sums required to be paid by Covol hereunder in the ~mounts, at the times, and in the manner herein provided, and shall keep and perform all other terms and conditions hereof on its part to be kept and performed, and, at the expiration of this Sublease, shall peaceably and quietly quit and surrender to Parker the premises in good order and condition subject to the other provisions of this Sublease. 7

SECTION XVII Remedies Cumulative. All remedies hereinbefore and hereinafter conferred on Parker and Covol shall be deemed cumulative and no one exclusive of the other, or of any other remedy conferred by law. SECTION XVIII Insurance. (a) Property Insurance. Covol shall at all times during the term of this Lease, and at Covol's sole expense, keep all improvements which are a part of the premises insured on an "all risk of loss" basis for their full replacement value. (b) Liability Insurance. Covol shall maintain in effect throughout the term of this Sublease Commercial General Liability Insurance, including coverage for their Maritime Operations, with a combined-single limit of $1,000,000 per occurrence, $2,000,000 annual aggregate. Covol will also carry the appropriate Wharfingers, Terminal Operators, and Stevedores Liability Coverage, to include bodily injury liability, with a Combined-Single Limit of $1,000,000. Both of these policies shall name Parker, Waterway Forest Products, Inc., and Cargo Handlers, Inc. as additional insureds. Automobile Liability Coverage, including Hired and Non-Owned Coverage, shall be carried with CombinedSingle Limit of $1,000,000. Umbrella Liability Coverage in the Mount of $2,000,000 shall be carried with Parker, Waterways Forest products, Inc., and Cargo Handlers, Inc. shown as additional insureds. (c) Worker's Compensation Insurance. Covol will also carry Worker's Compensation Coverage with a Longshoreman and Harbor Worker's Endorsement, with waiver of subrogation in favor of Parker, Waterways Forest Products, Inc. and Cargo Handlers, Inc. (d) Insurance During Construction. In regard to any construction operations to be performed on behalf of Covol on these premises, Covol shall ensure that all contractors and subcontractors are adequately insured with Commercial General and Automobile Liability Coverages, including coverages for the Maritime Operations of such contractors and subcontractors for limits of $1,000,000 per occurrence, $2,000,000 per Annual Aggregate, and an Umbrella Policy in the Mount of $2,000,000. Such policies shall name Parker, Waterways Forest Products, Inc., and Cargo Handlers, Inc., as additional insureds. Covol shall also ensure that all such contractors and subcontractors shall carry Worker's Compensation Coverages with the Longshoreman and Harbor Worker's Endorsement and subrogation shall be waived against Parker, Waterways Forest Products, Inc., and Cargo Handlers, Inc. 8

Covol shall also execute a contract, in a form satisfactory to Parker, with such subcontractors and contractors whereby Covol, Parker, Waterways Forest Products, Inc., and Cargo Handlers, Inc. will be held harmless for any liability arising out of the contractors or subcontractors operations in regard to construction on these premises. (e) Certificates. Upon execution of this Sublease and thereafter from time to time upon the request of Parker, Covol shall furnish certificates of insurance providing 30 days notice of cancellation, non-renewal or material changes in any of the foregoing policies. SECTION XIX Default. (a) Events of Default. Each of the following acts or omissions of Covol or occurrences shall constitute an event of default hereunder: (i) Failure to pay rent, wharfage, storage or other payments hereunder promptly when due, if any such failure continues for a period of ten (10) days following written notice to Covol of such failure; (ii) Failure to perform or preserve any other obligation, covenant or condition of this Sublease by Covol and the continuation of such failure for a period of thirty (30) days following written notice to Covol of such failure, unless Covol upon receipt of such notice in good faith shall have promptly commenced and thereafter shall continue diligently to prosecute all action necessary to cure each default. (iii) Covol shall file a voluntary petition in bankruptcy or shall be adjudicated as a bankrupt or insolvent, or shall file any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal or state law relating to bankruptcy, insolvency or other relief for debtors; or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of itself; or shall make any assignment for the benefit of creditors or 9

admit in writing its inability to pay its debts generally as they become due. (iv) The entry by court of competent jurisdiction of an order, judgment or decree approving a petition filed against Covol seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future federal or state law or regulation relating to bankruptcy, insolvency or other relief for debtors, which order, judgment or decree remains unvacated and unstayed for an aggregate of sixty (60) days (whether or not consecutive) from the date of entry thereof; or the appointment of any trustee, receiver or liquidator of Covol without the consent or acquiescence of Covol, which appointment shall remain unvacated and unstayed for an aggregate of sixty (60) days (whether or not consecutive). (b) Remedies. Upon the occurrence of any event of default, Parker shall have the option, in addition to any remedy or right given hereunder or by law or equity, to do any one or more of the following (i) Terminate this Sublease, in which event Covol shall immediately surrender possession of the premises to Parker together with all rights of Covol with respect to the premises. (ii) Re-enter and take possession of the premises with or without having terminated this Sublease. (iii) Alter locks and other security devices of Covol at or on the premises; (iv) File suit to collect any and all amounts presently due and owing to Parker. If Parker elects to repossess the premises without terminating the Sublease, the rent required to be paid by Covol to Parker thereafter during the remainder of the term hereof shall be due and payable each month as herein provided, and Parker may bring action from time to time to collect such amounts as have already accrued without waiting until expiration of the current term, provided that any net sums received by Parker by reletting the premises during said period shall be applied against the total indebtedness of Covol to Parker hereunder, but in no event shall Covol be entitled to any excess of any rents obtained by reletting over and above the rent herein reserved, although Covol shall receive credit therefor against rents as they accrue. 10

(c) Forbearance No Waiver. Any forbearance or failure of Parker to enforce its rights under this Sublease shall not be deemed a waiver of such rights and shall not constitute a waiver of its right to proceed against Covol for any act of default then existing or thereafter occurring. SECTION XX Effect of Eminent Domain. (a) Effect of Total Condemnation. In the event the entire premises shall be appropriated or taken under the power of eminent domain by any public or quasi-public authority, this Sublease shall terminate and expire as of the date of such taking, and Parker and Covol shall thereupon be released from any liability thereafter accruing hereunder, except for Covol's obligations to indemnify and hold harmless Parker and Owner. (b) Effect of Partial Condemnation. In the event a portion of the premises shall be so appropriated or taken and the remainder of the premises shall not be suitable for the use then being made of the premises by Covol, or if the remainder of the premises is not one undivided parcel of property, Covol shall have the right to terminate this Sublease as of the date of such taking or giving to Parker written notice of such termination within ninety (90) days after Parker has notified Covol in writing that a portion of the premises has been so appropriated or taken. In the event of such partial taking and Covol does not so terminate this Sublease, then this Sublease shall continue in full force and effect as to the part not taken. (c) Condemnation Award. In the event of the termination of this Sublease by reason of the total or partial taking of the premises by eminent domain, then in any such condemnation proceedings Parker and Covol shall be free to make claim against the condemning or taking authority for the amount of any damage done to them, respectively, as a result thereof. SECTION XXI Permits and Licenses. Parker agrees to take such steps as shall be reasonably necessary to assign to Covol the benefit of Parker's existing permits with respect to use of navigable waterways contiguous to the premises. Covol shall be responsible for obtaining and maintaining all other necessary permits, licenses and approvals required in connection with its use of the premises. Parker shall not be responsible for obtaining any such other permits, licenses or approvals, but shall execute such applications or other documents as Covol shall reasonably request so long as Parker shall not incur any liability thereunder. 11

SECTION XXII Waste Disposal; Covenant to Comply with Environmental Requirements. (a) Covol shall promptly remove from the premises all waste products produced in connection with its use of the premises and all spoil resulting from any dredging and waterway improvement. Such waste products may be stored on the premises, in a safe and sanitary manner, for a period not exceeding sixty (60) days. The coals fines used by Tenant as feedstock for its coal processing plant will not be considered a waste product and may be reasonably stockpiled for operational purposes. (b) Environmental Covenant and Indemnity. Without limiting the generality of Paragraph (a) hereof, Covol agrees to comply in all respects with all laws, rules and regulations pertaining to storage, use or disposal of hazardous substances or wastes. In addition, Covol agrees to indemnify, defend and hold harmless Parker, the Owner and their respective officers, directors, employees, agents, assignees, sublessees and licensees from any liability which may arise from or relate in any way, directly or indirectly, to the handling, use, generation, processing, release, discharge, storage or disposal of any hazardous or toxic substances, including, without limitation, petroleum products or byproducts, any flammable explosives, radioactive materials, hazardous materials, hazardous waste, asbestos, PCB's, phosphates, lead or other heavy metals, chlorine, radon gas, "hazardous substance," "hazardous material," or "hazardous waste," all as contemplated and governed by applicable federal, state or local laws, rules and regulations pertaining to such matters. (c) Notwithstanding other provisions herein, Tenant will not be responsible or liable for contamination of the premises which occurred prior to the execution of this Lease. Tenant will establish a baseline for such contamination by taking ground water and other samples within 30 days of execution of this Lease. The samples will then be analyzed and the reports therefrom will establish the baseline for allocation of liability under this Lease. Tenant will furnish a copy of such fundings to the Landlord and Landlord may independently verify Tenant's findings. SECTION XXIII Miscellaneous Provisions. (a) Time of the Essence. The parties agree that time shall be of the essence as to the performance of each and every provision hereof. (b) Notices. Any and all notices by Parker to Covol, or by Covol to Parker, shall be in writing and shall be deemed to have been given when personally delivered to the other party or when deposited in the U.S. mail, registered or certified, return receipt requested, addressed to the respective addresses below stated: 12

To Parker at:

Parker Towing Company, Inc. Post Office Box 020908 Tuscaloosa, Alabama 35402-0908 Covol Technologies, Inc. 3280 No. Frontage Road Lehi, UT 84043

To Covol at:

Either party may at any time change the address by notice to the other party in writing by registered or certified U.S. mail, return receipt requested. Unless Parker shall have given notice of, and there shall be continuing, any event of default as provided in Section XVIII hereof, rent shall be payable by check sent by ordinary mail by Covol to Parker at the address set forth above or any change thereof made pursuant to this Section. (c) Successors and Assigns. All covenants, agreements, provisions, conditions and undertakings in this Sublease contained, shall extend to and be binding upon the heirs, executors, successors and assigns or Parker and Covol, respectively, but nothing herein shall permit sublease or assignment by Covol without compliance with Section IX hereof. (d) Holdover. If Covol shall continue in possession of the premises after the expiration of the term of this Sublease, or any extension thereof, such tenancy shall be from month-to-month only and upon all the terms, covenants and conditions hereof. (e) Lease Agreement. Covol hereby acknowledges receipt of the Lease Agreement pursuant to which Parker occupies the premises. Parker has obtained consent to this Sublease, as required under the terms of such Lease Agreement. Covol agrees not to take any actions which would cause the occurrence of a default or event of default under such Lease Agreement. IN WITNESS WHEREOF, the parties have executed this Sublease in duplicate original counterparts as of the date first above written. This 9th day of September, 1996.
WITNESS PARKER TOWING COMPANY, INC.

Beverly Smith

By: Richard A. Kienitz COVOL TECHNOLOGIES, INC.

By: Michael Midgley

13

STATE OF ALABAMA ) PARKER TOWING COMPANY, INC. JEFFERSON COUNTY ) 19 JULY 1994 A parcel of land lying and being in the east half of the Southwest Quarter of Section 6, Township 17 South, Range 5 West, Jefferson County, Alabama, containing 15.45 acres, more or less, and being more particularly described as follows: Commence at the northwest corner of said Section 6; thence southerly along the west boundary of said Section 6 a distance of 3,035.09 feet; thence with a deflection angle of 90 degrees 00 minutes 00 seconds to the left, run easterly a distance of 2,023.16 feet to the point of beginning; thence with a deflection angle of 21 degrees 08 minutes 28 seconds to the right, run southeasterly a distance of 574.53 feet; thence with a deflection angle to the right of 72 degrees 46 minutes 06 seconds, run southerly a distance of 1,202.65 feet to the right margin of the Locust Fork of the Black Warrior River; thence with a deflection angle to the right of 97 degrees 00 minutes 16 seconds, run westerly along the right margin of said river a distance of 529.49 feet; thence with a deflection angle to the right of 81 degrees 58 minutes 47 seconds run northerly a distance of 1,308.48 feet to the point of beginning. 14

STATE OF ALABAMA JEFFERSON COUNTY

) )

Parker Towing Company, Inc. Field Line Easement 29 December 1994

A parcel of land lying and being in the east half of the Southwest Quarter of Section 6, Township 17 South, Range 5 West, Jefferson County, Alabama, containing 3.31 acres, more or less, and being more particularly described as follows: Commence at the northwest corner of said Section 6; thence southerly along the west boundary of said Section 6 a distance of 3,021.21 feet; thence with a deflection angle of 90 degrees 00 minutes 00 seconds to the left, run easterly a distance of 1,748.51 feet to the POINT OF BEGINNING; thence with a deflection angle of 02 degrees 53 minutes 37 seconds to the right, continue easterly a distance of 275.00 feet; thence with a deflection angle to the right of 90 degrees 00 minutes 00 seconds, run southerly a distance of 525.00 feet; thence with a deflection angle to the right of 90 degrees 00 minutes 00 seconds, run westerly a distance of 275.00 feet; thence with a deflection angle to the right of 90 degrees 00 minutes 00 seconds run northerly a distance of 525.00 feet to the POINT OF BEGINNING. 15

SUPPLY AGREEMENT This Supply Agreement (the "Agreement") effective the 11th day of September, 1996, is between K-Lee Processing, Inc., an Alabama corporation ("K-Lee"), Concord Coal Recovery Limited Partnership, an Alabama limited partnership ("Concord") (K-Lee and Concord collectively referred to herein as the "Seller") and Covol Technologies. Inc., a Delaware corporation ("Buyer"). Buyer and Seller are sometimes jointly referred to herein as the "Parties." The Parties, intending to be legally bound, mutually agree as follows: ARTICLE 1 Scope and Term of Agreement 1.1 SCOPE OF AGREEMENT: Buyer desires to assure a continuous supply of appropriate coal fines ("Fines") for its facility ("Facility ") and Seller is willing and able to provide such Fines. The Parties agree that all purchases of Fines by Buyer from Seller during the term of this Agreement shall be subject to and in accordance with the provisions of the Agreement, which shall supersede and take precedence over any contrary or additional terms stated in Seller's acknowledgment, invoice or other document unless the Parties expressly agree by written modification to this Agreement, in accordance with Section 4.5 hereof, that the provisions of this Agreement shall not apply. 1.2 TERM OF AGREEMENT: This Agreement shall become effective on December 1, 1996 and, unless sooner terminated as provided herein, shall remain in full force and effect until December 1, 2001, inclusive, at which time it shall terminate without notice or other action by the Parties. ARTICLE 2 Sale of Fines 2.1 DESCRIPTION OF FINES AND PRICE SCHEDULE: In accordance with the terms of this Agreement Seller agrees to transfer ownership and deliver to Buyer, and Buyer agrees to accept and pay Seller for washed Fines produced or located at Seller's Plant located in Jefferson County, Alabama. The coal specifications shall be approximately 12,500 Btu per ton, not to exceed 14% moisture, not to exceed 10.5% dry ash. The price which Buyer will pay for the Fines during the first year of this Agreement is $29.00 per ton. If moisture content varies from the 14% level the price per ton shall be weight adjusted to reflect a higher or lower moisture. A per ton premium or penalty will apply for variances in ash content at the rate of $0.75 per percentage point (or fraction thereof) above or below 10.5%. A price escalation of 5% may be enacted by the Seller after January 1, 1998, and an additional price escalation of 5% may be enacted by the Seller after January 1, 1999. After January 1, 2000, annual price escalations shall be the greater of 5% per year or the average market price of coal fines of the same specification as outlined in this agreement, sold in the Alabama area.

2.2 QUANTITY: Buyer shall be obligated as outlined in Section 3.1 to purchase from Seller a minimum of twenty thousand tons of Fines per month at the prices contained herein. Buyer may purchase additional Fines from Seller at a mutually agreed upon price. Both parties acknowledge the existence of the contract between KLee and Drummond Coal Sales Inc., dated March 16, 1996, and will cooperate to see such terms are met until March 31, 1997. If more than 2,500 tons of Fines accumulates at Seller's Plant without Buyer notifying Seller as to Buyer's intent to purchase, Seller shall have the right to market fines to third parties prior to the 20,000 ton limit, the qantity of fine specified herein. If Buyer's facility is in operation producing briquettes and Buyer does not purchase Fines from Seller for two consecutive months, Seller may give 30 day notice and terminate this Agreement. 2.3 WEIGHING AND SAMPLING: Weights shall be determined via certified truck certificates at Buyer's facility. Buyer's scales shall be certified quarterly and subject to review by Seller. Quality of Fines for purposes of determining premiums or penalties as outlined in Section 2.1 shall be determined using an average of Buyer's and Seller's daily sampling utilizing generally accepted standards and sampling techniques (using ASTM certified laboratories). Any discrepancies or disputes shall be settled by third party sampling at Buyer's expense. 2.4 SELLER'S OBLIGATION TO PERFORM: Seller shall immediately notify Buyer when Seller has reason to believe that it will not be able to operate the Plant or that it will not be able to supply sufficient Fines to meet the quantity requirements of this Agreement. Notwithstanding the foregoing, Seller shall not take any action or fail to take any action during the term of this Agreement with the intent of jeopardizing Seller's ability to fulfill the requirements of this Agreement. Seller shall in good faith use its best efforts to keep the Plant in operation and to operate the Plant such that it can consistently and substantially produce the purchase quantities required by this Agreement. Notwithstanding any clause to the contrary, Seller cannot guarantee its' ability to produce the quality of Fines designed herein given the variance in feed stock which may occur in the USSM impoundments. ARTICLE 3 Orders, Shipment and Payment 3.1 ORDER PROCEDURE: Buyer shall be required to submit all Purchase Orders at least 30 days in advance of the first day of the month in which said deliveries are made. Buyer shall be obligated to take and pay for the tonnage specified in the Purchase Order at the price agreed upon herein. (For example, Buyer shall issue a Purchase Order for December delivery by no later than November 1st). Buyer shall pick up coal fines on a continuous daily haul basis until such time as they have removed 20,000 tons each month; thereafter orders for Fines shall be made on signed Purchase Orders or orally by telephone by an authorized agent of Buyer. Orders shall be sent to Seller at the address listed in Section 3.2, or such other address as Seller shall direct.

3.2 NOTICES: All notices given pursuant to this Agreement shall be sent to the following addresses or facsimile numbers:
SELLER K-Lee Processing, Inc. Attn: Tom Bryan P.O. Box 19127 Birmingham, AL 35219 Fax: (205) 491-7598 BUYER Covol Technologies, Inc. Attn: Brent M. Cook 3280 North Frontage Road Lehi, UT 84043 Fax: (801) 768-4483

3.3 F.O.B. POINT AND SHIPPING INSTRUCTIONS: Prices are F.O.B. Seller's Plant. Buyer will provide trucks and Seller will load the trucks. Buyer will arrange for transportation of the Fines from Seller's loadout facility to Buyer's plant. Trucks will be tarped and hauling of product will be subject to Seller guidelines while on USS Mining property. 3.4 PAYMENT TERMS: Payment in full by Buyer is due on or before the seventh day following receipt by Buyer of an invoice that conforms to the terms of this Agreement. Invoices shall be submitted weekly and any adjustments to the price as outlined in Section 2.1 shall be invoiced monthly. A premium of two (2) percent will be paid by Buyer for payment sent after seven (7) days following such receipt. All invoices submitted by Seller to Buyer shall the date and tonnage weight of each shipment covered by the invoice. Buyer will pay a late fee of 1.5% per month for invoices delinquent 30 days or longer. If unpaid in excess of 90 days Seller shall have the right to exercise Buyer's letter of credit or other financial arrangement and shall have the right to terminate this Agreement. Payment shall be sent to Seller's address listed in Section 3.2 of this Agreement. 3.5 MUTUAL OBLIGATION TO NOTIFY: Seller shall promptly notify Buyer if Seller plans to shut down its Plant for any reason beyond routine maintenance. Likewise, Buyer shall promptly notify Seller if Buyer intends to buy less than twenty thousand tons of Fines in any calendar month due to plant shutdown for any reason beyond routine maintenance. Buyer shall not be obligated to purchase the 20,000 ton monthly quantity if the construction of the buyers plant is delayed or fails to occur. 3.6 LETTER OF CREDIT: On or before December 1, 1996 Buyer shall obtain a letter of credit from an institution acceptable to Seller in the amount of $580,000, or other financial backing on terms satisfactory to seller to adequately assure Seller of Seller's ability to collect all proceeds due Seller pursuant to a binding Purchase Order issued under this Agreement as specified in Section 3.1.

ARTICLE 4 Miscellaneous 4.1 ADVERTISING AND PUBLICIZING AGREEMENT: Neither Party will advertise, circularize or release any information regarding this Agreement to any person, entity, organization, news agency or media without written permission from the other Party. This Section will not prevent either Party from disclosing such information as said Party in good faith believes is reasonably required in order to comply with state and federal governmental regulations or in compliance with a court order. Either Party may also disclose such information to business partners and potential investors as said Party in good faith believes is reasonably required to carry out the purposes of this Agreement. 4.2 APPLICABLE LAW: This Agreement shall be governed by the laws of the State of Alabama. 4.3 CONSENT TO JURISDICTION: The Parties hereby irrevocably submit to the nonexclusive jurisdiction of any court of the State of Alabama or the United States of America, in any action or proceeding arising out of or relating to this Agreement, and the Parties hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in any such court. The Parties hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Parties agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 4.4 ASSIGNABILITY: In the event this Agreement is assigned, it shall not relieve the assigning Party from any of the obligations of this Agreement. Any assignee shall be considered an agent of the assigning Party and the assigning Party shall remain liable to the same extent as if no such agreement had been made. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective successors and assignees of the Parties hereto. 4.5 COMPLETE CONTRACT; NO ORAL MODIFICATION: This Agreement is intended by the Parties as a final expression of their agreement and supersedes all prior communications, representations and agreements, oral or written, between the Parties with respect to the subject matter contained herein. The Parties also intend this Agreement to be a complete and exclusive statement of the terms of their Agreement. This Agreement may not be modified or terminated orally, and no claimed modification, rescission or waiver shall be binding on Buyer or the Seller unless in writing signed by a duly authorized representative of Buyer or Seller.

In witness whereof, the Parties have signed this Agreement on the dates shown below:
SELLER K-LEE PROCESSING, INC. BUYER COVOL TECHNOLOGIES, INC.

By: /s/Thomas B. Bryan Its: President Date: September 13, 1996 CONCORD COAL RECOVERY, L.P.

By: /s/Brent M. Cook Its: Chief Financial Officer Date: September 11, 1996

By: /s/Thomas M. Ellbogen Its: Partner CCRLP Date: September 12, 1996

By: /s/ Ken Young Its: Chief Executive Officer Date: September 11, 1996

PACIFICORP FINANCIAL SERVICES, INC. LETTER INTENT (Covol Technologies) September 12, 1996 Subject to the qualifications and conditions set forth below, PacifiCorp Financial Services, Inc. ("PFS") proposes, directly and/or through its subsidiaries and affiliates ("PFS Investors") to make the following investments in Covol Technologies, Inc. ("Covol") and in the coal briquetting facility to be located in Birmingham, Alabama, known as Alabama Syn Fuel #1 Ltd. (the "Alabama Project"). Loan: A PFS Investor shall make a first-priority secured convertible loan (the "Loan") to Covol on the following terms: a. Borrower: Covol ("Borrower"). b. Amount: $5,000,000, in the aggregate (the "Loan Commitment"). c. Purpose: The Loans shall be available for the following purposes: (i) $2.3 million to complete construction by Covol of the Alabama Project, (ii) to finance the acquisition by Covol for the benefit of the Alabama Project of up to 100,000 tons of coal fines to be stored at the Port Hodder site, (iii) funding of net working capital needs of plant operations of the Alabama Project as approved by PFS, (iv) to finance the development and construction of a wash plant for coal fines at a location, price and with specifications approved by PFS, and (v) other uses by Borrowers as approved by PFS in its sole discretion. d. Advances: Subject to the terms and conditions contained herein and in the final documents, advances up to the Letter of Intent Page 1 (Covol Technologies) LLO1-48682.8 17509-028

aggregate Loan Commitment shall be made from time to time through six months after the date of the loan agreement (the "Commitment Period"). Such advances shall be made upon the written request of Borrowers against invoices for the purposes contemplated above as approved by PFS. The first advance shall be available on the last of the following to occur: (i) October 1, 1996, (ii) the filing of the request for a Letter Ruling contemplated below, (iii) the obtaining of a Coal Fines Contract (see "Coal Fines," below), or (iv) the execution and delivery of the Transaction Documents. The amount and timing of the Loan advances shall be staged over the Commitment Period, with the availability to be reflected in the final loan agreement, as determined by mutual agreement of the parties based upon reasonable projections. For purposes hereof, the "Transaction Documents" shall mean the Loan Agreement, the security agreement, the Alabama Project Sale Agreement, the O&M Agreement, the Licensing Contract, the Sales Contract (each as defined below), and any other documents or agreements required in the opinion of PFS to effect the transactions contemplated herein. e. Term: 12 months from the date of the loan agreement ("Maturity"). Prime + 2% per annum, compounded monthly; unless the Loan is accelerated, interest shall not be payable but shall accrue prior to Maturity, at which point it will be payable in full.

f.

Interest:

Prepayment; Voluntary Termination of Commitment: Borrowers may prepay the Loan in whole (but not in part) and terminate the commitment to make further Loans at any time without penalty; provided, that the PFS Investors will have sixtyLetter of Intent Page 2 (Covol Technologies) LLO1-48682.8 17509-028

g.

days' notice prior to any such prepayment and termination (the "Early Termination Period") during which Early Termination Period the PFS Investors may convert all or any portion of the outstanding Loan, and may simultaneously advance and convert all or any portion of the remaining commitment, in each case to Common Stock of Covol, as set forth below. h. Termination of Commitment By PFS: PFS may terminate the commitment to make further Loans at any time it determines (in the case of clause (iii), in its sole discretion, and in the case of each of the other clauses, in its reasonable discretion) that (i) a favorable Letter Ruling will not be obtained by Newco, (ii) the environmental report discloses an adverse matter, or (iii) an Event of Default has occurred and is continuing under the Transaction Documents. Security: The obligation of Borrowers under the Loan will be secured by a first priority lien on all of the real and personal property constituting the Alabama Project (including, without limitation, an assignment of all related contracts).

i.

j.

Covenants, Representations, etc. To be negotiated. Conversion: At any time, the PFS Investors may elect to convert all or any portion of the then outstanding principal and interest owing under the Loan into shares of Common Stock of Covol. In addition, within 30 days' prior to the end of the Commitment Period and at any time during the Early Termination Period, the PFS Investors may elect to simultaneously advance and convert all or any portion of the remaining Loan Commitment into shares of Common Stock of Covol. The PFS

k.

Letter of Intent (Covol Technologies)

Page 3

LLO1-48682.8 17509-028

*** Missing information may be available uon request to the Company
Investor shall receive one share of Common Stock for each *** of principal and/or interest converted (including, without limitation, principal upon any Loan which is simultaneously advanced and converted). l. Anti-dilution Protection: Registration Rights:

*** The PFS Investors will have demand and piggyback registration rights with respect to any Common Stock received upon conversion of the Loan. Covol will be responsible for all of the expenses of registration other than (i) the cost of counsel to the PFS Investors and (ii) any commission or similar fee paid by the PFS Investors to an underwriter or placement agent for the sale of such Common Stock.

m.

n. Board of Directors Meetings:

The PFS Investors will have the right to receive notices of all regular and special meetings of the Board of Directors of Covol and any committee thereof and the right to attend such meetings. Letter of Intent Page 4 (Covol Technologies) LLO1-48682.8 17509-028

*** Missing information may be available upon request to the Company Formation of Newco; Acquisition of Alabama Project: It is anticipated that Alabama Synfuel #1 Ltd., a Delaware limited liability partnership ("Alabama Synfuel"), will enter into various agreements (which shall be in form and substance satisfactory to the PFS Investors) with Covol for the acquisition of the Alabama Project. An Alabama limited liability company ("Newco") would be formed by the PFS Investors. Newco would enter into an agreement with Alabama Synfuel and Covol (the "Alabama Project Sale Agreement") pursuant to which Alabama Synfuel would agree to assign to Newco its right to acquire the entire interest in the Alabama Project (including, without limitation, any of its rights under the agreement with the design/builder for the Alabama Project, any contracts relating to purchase of raw materials, the lease of the land at the site, and the licenses contemplated below, in each case relating to the Alabama Project), and would assign the license of the technology from Covol to Newco. In consideration of the foregoing transfers, Newco would pay cash in the amount of *** to Alabama Synfuels as the Base Licensing Fee contemplated below (see "Licensing Contract," below) (which amount shall not be payable until receipt of a favorable Letter Ruling contemplated below,) and would provide to Alabama Synfuel a six year installment note in the principal amount of ***, bearing interest at *** per annum (the "Installment Note"). The transfer would occur upon the earlier of (i) receipt of a favorable Letter Ruling contemplated below, or (ii) immediately prior to start-up of the Alabama Project. Payments upon the Installment Note would be made on a quarterly basis after start-up of the Alabama Project (after an agreed-to testing period) (such date, the "Acceptance Date") from available net operating cash flow of Newco, at a rate of *** per MM Btu (adjusted as set forth below) of briquettes sold from the Alabama Project during the immediately preceding quarter; provided that the full amount of the Installment Note will be payable upon maturity. Put Option: If the Alabama Project is not completed consistent with approved plans and specifications or placed in service (for purposes of the Code and Section 29) by June 30, 1997, or if there occur other defaults by Covol with respect to the various Transaction Documents (a "Put Event"), then the PFS Investors will have an option to require Covol to purchase their entire interest in Newco and the Loan. The purchase price under the put option shall be payable in cash in an amount equal to the sum of (i) all capital contributions of the PFS Investors to Letter of Intent Page 5 (Covol Technologies) LLO1-48682.8 17509-028

*** Missing information may be available upon request to the Company Newco, (ii) the outstanding principal and interest on the Loan, and (iii) all of the out-of-pocket expenses of PFS and the PFS Investors in connection with this transaction. Such an event may also be, but shall not be required to be, considered by the PFS Investors as an event of acceleration of the Covol Loan. Completion of Alabama Plant: Covol shall be responsible for the completion of the development and construction of the Alabama Project. Operation and Maintenance: Newco shall enter into an operating and maintenance agreement (the "O&M Agreement") with Covol (or an affiliate thereof, the "Operator"); provided that such O&M Agreement shall only be effective upon the acquisition of the Alabama Project. In the event there are any operating deficits with respect to the operation and maintenance (excluding the O&M Fee referred to below) of the Alabama Project, the Operator shall loan (the "Deficit Loans"), from time to time, funds to Newco, at the times and in the amounts needed to cover any such deficits. If the Operator is not Covol, the undertakings of the Operator under the O&M Agreement, including the obligation to make Deficit Loans, shall be guaranteed by Covol. The Deficit Loans shall bear interest at the Prime rate and be payable from net operating cash flow of Newco. The O&M Agreement shall provide for a quarterly fee (the "O&M Fees") to the Operator equal to *** per ton of briquettes produced at the Alabama Project during the immediately preceding quarter. Any accrued but unpaid O&M Fee shall bear interest at the Prime rate and be payable from net operating cash flow of Newco. The O&M Agreement shall also provide for an annual incentive management fee (the "O&M Incentive Fee") to the Operator equal to *** of available net cash flow of Newco. Licensing and Royalties: Alabama Synfuels shall enter into a long-term licensing contract (through rights received from Covol) (the "Licensing Contract") which shall grant to Newco any licenses or similar rights required in order to develop, construct and operate the Alabama Project and to manufacture and market the briquettes; provided that such Licensing Contract shall only be effective upon the acquisition of the Alabama Letter of Intent Page 6 (Covol Technologies) LLO1-48682.8 17509-028

*** Missing information my be available upon request to the Company Project. Alabama Synfuels shall be paid a base fee (the "Base Licensing Fee") under the Licensing Contract of $500,000 (which amount shall not be payable until receipt of a favorable Letter Ruling contemplated below) and, after the Acceptance Date, shall be entitled to a quarterly royalty payment (the "Royalty") at a rate of $0.6014 per MM Btu (adjusted as set forth below) of briquettes sold from the Alabama Project during the immediately preceding quarter; provided, that, from and after the time the Installment Note has been paid in full, the Royalty shall be increased to a rate of *** per MM Btu (adjusted as set forth below) of briquettes sold from the Alabama Project during the immediately preceding quarter. Any accrued but unpaid Base Licensing Fee and Royalty shall bear interest at the Prime rate and be payable from net operating cash flow of Newco. Binder Contract: Covol (and/or an appropriate affiliate of Covol, with the undertaking guaranteed by Covol) shall enter into a longterm contract with Newco to provide the "binder" required to manufacture the briquettes (the "Binder Contract") at the levels contemplated herein; provided that such Sales Contract shall only be effective upon the acquisition of the Alabama Project. The cost of the "binder" shall be cost plus ***; provided, however, that the cost of the binder in any year shall not be increased above the rate for the immediately preceding year (and any increased rate for such year shall be subject to rebate) if the imposition of the increased rate would require a Deficit Loan. The Binder Contract shall include rights and technology which would enable Newco to manufacture the "binder" in the event the Covol was unable to fulfill its obligations under the Binder Contract. Long-Term Sales Contract: Covol (and/or the appropriate affiliate of Covol, with the undertaking guaranteed by Covol) shall enter into a long-term contract for the purchase of briquettes from Newco (the "Sales Contracts); provided that such Sales Contract shall only be effective upon the acquisition of the Alabama Project. Covol shall purchase all of the briquettes produced by the Alabama Project for a purchase price equal to *** per ton for metallurgical grade coal (which price may be adjusted, based upon actual operating experience within the initial six months of operation, such that the Alabama Project achieves a *** (without considering the Section 29 Credit defined below), with the prices adjusted as agreed to by the parties for Letter of Intent Page 7 (Covol Technologies) LLO1-48682.8 17509-028

*** Missing information may be available upon request to the Company other grades of coal (the "Sales Price"), which amount shall be payable on a quarterly basis for the briquettes produced by the Alabama Project and made available to Covol during the immediately preceding quarter. Commencing the first anniversary of the Sales Contract and on each anniversary thereafter, the Sales Price per ton for the contract year then commencing shall be increased by *** over the Sale Price for the contract year just ended. Adjustments to Fees and Payments: Each of the amounts per ton reflected for the payments on the Installment Note are based upon Newco maintaining a production level of 300,000 tons of briquettes per year. In the event the production level is less than 300,000 tons per year, the payments under the Installment Note shall be adjusted accordingly. In addition, commencing on the first anniversary of the date of the acquisition of the Alabama Project, and each anniversary thereafter, the amounts per ton reflected for the payments on the Installment Note and the Royalty shall be adjusted each year by *** of the relative change between (i) the "inflation adjustment factor" (contemplated under Section 29(d)(2) of the Code) as calculated for the immediately preceding year and (ii) the "inflation adjustment factor" as calculated for the second preceding year. Priority of Payments; Determination of Available Net Operating Cash Flow: Net operating cash flow shall include the funding of replacement and operating reserves for the Alabama Project, the amounts and timing of which are subject to negotiation. The payments set forth below which are payable from net operating cash flow shall be made in the following order of priority: 1. O&M Fee; 2. Installment Note; 3. Royalty; and 4. O&M Incentive Fee. Letter of Intent Page 8 (Covol Technologies) LLO1-48682.8 17509-028

*** Missing informaiton mya be available upon request to the Company Coal Fines: Covol shall enter into a coal fines supply agreement with Concord Coal Recovery, Ltd. (in form and substance acceptable to PFS) (the "Concord Supply Agreement") which shall provide Covol with a right of first refusal to obtain up to 20,000 tons of coal fines per month from the Concord USX coal fine source at a price no more than *** per ton (adjusted annually by no more than ***). In addition, Covol shall obtain a long-term (a minimum of five years) fixed price contract(s) (in form and substance acceptable to PFS) for the purchase of up to an aggregate of 20,000 tons of coal fines per month (the "Coal Fines Contracts"), which may include USX, to provide the Alabama Project with a firm source of coal fines (substantially similar in quality to the fines located at the Concord USX coal fine source) required to manufacture briquettes in an amount sufficient to operate the Alabama Project at 240,000 tons per year and a term of at least five years. Upon the acquisition of the Alabama Project, the Concord Supply Agreement and the Coal Fines Contracts shall be assigned to Newco. Section 29 Credits; Letter Ruling: As an additional condition to the obligation of the PFS Investors to make the investments contemplated hereunder, Newco shall obtain a letter ruling (the "Letter Ruling" from the Internal Revenue Service setting forth the specific terms of the proposed transaction and confirming to the satisfaction of PFS, among other things, (i) the availability and calculation of the credit available under Section 29 (the "Section 29 Credits") of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) that the construction contract for the Alabama Project satisfies the requirements of the Section 29 Credits, and (hi) that the allocation of the Section 29 Credits to the various members of Newco is valid under the Code. The letter ruling request shall be prepared by counsel and accountants for PFS, but shall be subject to the review and continent of Covol. Call Option: Newco will grant to Covol the right to acquire the Alabama Project for cash at the then fair market value after January 1, 2008. Letter of Intent Page 9 (Covol Technologies) LLO1-48682.8 17509-028

Support and Security; Set off Rights: The obligations of Covol under the transaction documents shall be guaranteed by the affiliates thereof. The obligations of the Covol under the transaction documents shall also be secured in a manner satisfactory to PFS, including, without limitation, cross-collateralization and set off rights of the various contracts and agreements. Noncompetition: Covol and the principals and affiliates thereof shall agree not to (i) acquire coal fines for resale or use in any other plant other than the Alabama Project, or (ii) build or be involved in another briquetting plant using the same or similar technology designed to produce "qualified solid synthetic fuel" pursuant to Section 29 of the Internal Revenue Code, in either case where the source of coal fines or the plant are within a 100 mile radius of the Alabama Project without the prior written consent of PFS. Expenses: Each party shall be responsible for its own legal expenses. Covol shall be responsible for all other expenses relating to the transactions, including, without limitation, expenses relating to the transfer of the Alabama Project. Option of PFS to Acquire Additional Plants: PFS would have an option, upon the substantially similar terms and conditions (other than the convertible loan), through separate limited liability companies to acquire up to two additional coal briquetting plants prior to December 31, 1998. Nondisclosure: THIS LETTER OF INTENT IS STRICTLY CONFIDENTIAL AND SHALL NOT BE DISCLOSED BY COVOL OR ANY OF ITS AFFILIATES OR PFS OR ANY OF ITS AFFILIATES TO ANY OTHER PERSON OR ENTITY WITHOUT THE CONSENT OF THE OTHER PARTY. Letter of Intent Page 10 (Covol Technologies) LLO1-48682.8 17509-028

Due Diligence; Conditions to Closing: The transaction is subject to satisfactory completion of the following conditions and a due diligence inquiry into the Alabama Project, the briquetting technology, the patents, Covol, and the principals thereof and their respective affiliates, including, but not limited to the following: o Approval by the PacifiCorp Investment Committee. o The creditworthiness of Covol and its affiliates. o Negotiation of documentation acceptable to the parties. o Satisfaction of other conditions typically required in a transaction such as that described herein, as requested by PFS. o Receipt by PFS Investors and Newco of a tax opinion prepared by Covol's tax counsel acceptable to PFS Investors addressing all material tax issues of the transaction. o Receipt by PFS Investors and Newco of a general opinion prepared by Covol's counsel acceptable to PFS Investors addressing all material authority, enforceability and related issues of the transaction. o Review to the satisfaction of PFS of the development and construction budget, all construction documents (including, but not limited to, drawings, plans, specifications and inspection reports), environmental studies or assessments, equipment data, permits, orders, letters, tax and assessment bills, all public agency documents (including directives, inspections, and requirements) and other documents relating to the Alabama Project. o Review to the satisfaction of PFS of the availability and quality of coal fines for use at the Alabama Project, including, without limitation, the presence of long term contracts for such fines satisfactory to PFS and the marketability of the briquettes. Letter of Intent Page 11 (Covol Technologies) LLO1-48682.8 17509-028

o Review to the satisfaction of PFS of all documentation pertaining to compliance results, rulings, appeals, the zoning and land use regulations and related matters governing the property where the Alabama Project is to be located. o Review to the satisfaction of PFS of all documentation pertaining to the briquetting technology, including, but not limited to, patents, patent applications, and licenses. o Receipt of an environmental audit relating to the Alabama Project addressed to Newco and the PFS Investors and acceptable to PFS. o Receipt of confirmation acceptable to PFS that neither Newco nor any PFS Investor shall be subject to any environmental liability relating to the source of the coal fines or any other matter relating to the Alabama Project. o Review of all matters relating to the tax credits to the satisfaction of PFS. o Review to the satisfaction of PFS of all documentation pertaining to Covol and the issuance of Common Stock. o No material adverse change in the condition (financial or other), business, net worth, results of operations or expectations of Covol. o Confirmation that Covol shall receive at least *** of the net economic benefits from royalty and debt service payments received by Alabama Synfuels. Dated this 12th day of September, 1996. PACIFICORP FINANCIAL SERVICES, INC.
By: /s/ Craig N. Longfield Craig N. Longfield President

Letter of Intent Page 12 (Covol Technologies) LLO1-48682.8 17509-028

ACKNOWLEDGMENT AND AGREEMENT THE TERMS OF THE FOREGOING LETTER OF INTENT ARE HEREBY ACKNOWLEDGED AND AGREED TO BY THE UNDERSIGNED ON ITS OWN BEHALF AND ON BEHALF OF ALABAMA SYNFUEL #l LTD, A DELAWARE LIMITED PARTNERSHIP. COVOL TECHNOLOGIES, INC., in its corporate capacity and as general partner of Alabama Synfuel #1 Ltd.
By:/s/ Michael Midgley Name: Michael Midgley Title: President

Letter of Intent Page 13 (Covol Technologies) LLO1-48682.8 17509-028

EXCLUSIVE FINANCIAL ADVISOR AGREEMENT This Exclusive Financial Advisor Agreement ("Agreement") is made as of September 16, 1996, between Covol Technologies, Inc., a Delaware corporation ("Covol") and Coalco Corporation, a Massachusetts corporation ("COALCO"). WHEREAS, Covol is seeking financing in connection with its synthetic coal producing, facility currently located at Vinyard, Utah (the "Facility"). WHEREAS, Covol has generally discussed its objectives and activities with COALCO and desires COALCO to assist with such financing in accordance with the terms and conditions of this Agreement. NOW, THEREFORE. in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the parties hereto as follows: 1. Term and Duties. (a) Covol engages COALCO as an independent contractor to advise and consult with it with respect to financing for the Facility, the sale of some or all of the Facility or other similar material transactions during the period commencing on the date hereof and terminating on the Final Date (as hereafter defined). COALCO's responsibilities under this Agreement shall be to provide to Covol a list of prospective investors (the "Investor Lists"), to introduce Covol to the person or entities on the Investor List, and to initiate discussions with those parties. If Covol and COALCO mutually agree, COALCO may initiate discussions with other parties which are not on the Investor List but which are specified by Covol. The persons, entities and parties on the Investor List or specified by Covol to COALCO for discussion are collectively referred to herein as the "Investors." COALCO may have such other duties hereunder as the parties may mutually agree. It is understood and agreed that COALCO has no authority to contractually obligate Covol in any way whatsoever and that any obligations of Covol must be authorized by the duly authorized representative of Covol. (b) For purposes of this Agreement, "Final Date" means the later of August 20, 1997 or the six-month anniversary of the "Operations Date"; "Operations Date" means the first date on which the Facility has produced and sold 5,000 tons of synthetic coal product during any consecutive 30-day period, provided (i) such Facility has been placed in service within the meaning of Section 29(f) and (g) of the Code, and (ii) substantially all of the energy content (expressed in MMBtus) of the synthetic coal comprising such production and sale qualifies for the credit under Section 29 of the Code; and

"Code" means the Internal Revenue Code of 1986, as amended and any successor statute thereto. (c) If, prior to the Final Date, any discussions initiated by COALCO with an Investor on the Investor List or with an Investor specified by Covol as described above result in (i) Covol selling a material portion (or substantially all) of the Facility, or (ii) C financing or an investment for its activities with respect to the Facility, (B) a binding commitment which results in such financing, invent or sale, or (C) a guarantee which enables such financing, investment or sale (including from a third party), (collectively the "Financing"), Covol agrees to pay COALCO the compensation in the amount and at the times provided in Section 5 hereof. COALCO shall be entitled to the compensation provided for herein even if some, most or all of the actual funding of the Financing occurs after the Final Date. 2. Related Transactions. Covol agrees to pay COALCO additional compensation in the amount and at the times provided in Section 5 hereof, with particular regard to the provisions of Section 5(e) if: (a) (i) Covol receives any Financing from any Investor at any time prior to the Final Date, and (ii) such Investor provides any other Financing to Covol or any affiliate thereof (with respect to any facility producing synthetic coal or substantially similar product) at any time during the five (5) year period commencing on the date of the closing of the Financing to Covol; or (b) Covol or any affiliate thereof receives any Financing with respect to any facility producing synthetic coal or substantially similar product from any Investor on the Investor List at any time prior to December 31, 1998 and a significant portion of the benefits intended to be received by such Investor as a result of making such Financing is in the form of credits under Section 29 of the Code. 3. No Requirements for Investment. (a) Nothing combined in this Agreement requires Covol to accept any Financing on the terns or conditions thereof. COALCO shall be entitled to the compensation provided in Section 5 hereof only if Covol or any affiliate thereof accepts any portion of the Financing and actually receives, directly or indirectly, the gross proceeds of any portion thereof. (b) This Agreement does not constitute a commitment or undertaking by COALCO to provide any portion of the Financing, and not ensure the successful arrangement or completion of any such Financing or any portion thereof. 2

*** Missing informaiton mya be available upon request to the Company 4. Investor List. The term "Investor" as used in this Agreement shall include any subsidiary or affiliate of such Investor. COALCO may add Investors to the Investor List at arty time during the term hereof, with the consent of Covol which consent shall not be unreasonably withheld. Investors may be removed from the Investor List only by mutual agreement. Any investor directly introduced to Covol by an Investor on the Investor List shall also be deemed to be an Investor on the Investor List "introduced" by COALCO to Covol for all purposes of this Agreement. However, the foregoing principle or secondary introductions shall apply beyond the second step (i.e., COALCO introduces A, which introduces B) only when such further introductions (i.e., B introduces C, C introduces D, etc.) involve the material and active participation of COALCO in the introduction which result in a Financing. 5. Compensation. (a) Covol agrees to pay COALCO a fee in the amount set forth in this Section 5 in the event that at any time prior to the "Final Date" Covol receives any Financing from an Investor on the Investor List or an Investor specified by Covol as described in Section 1 hereof. (b) In the event the aggregate amount of the Financing is receive by Covol in one lump sum at or soon after the closing of the Financing, the fee in dollars payable to COALCO hereunder shall equal: (i) *** (ii) *** (c) In the event the aggregate amount of the Financing is received by Covol in quarterly installments based primarily on the Production Amount (as defined below) during the calendar quarter immediately preceding the calendar quarter in which Covol receives such installment, the fee in dollars payable to COALCO hereunder shall be paid quarterly and shall equal each calendar quarter: (i) *** (ii) *** (d) For purposes of this Section 5, "Production Amount" shall mean the energy content (expressed in MMBtus of the synthetic coal projected to be produced (by the Facility ) and sold to any purchaser (which is unrelated to Covol within the meaning of Section 29(a)(2)(A) of the Code) during a specified period; provided, however that (A) prior to the summation of the energy content for each calendar quarter during 3

the specified period, such energy content shall be increased on an annual basis commencing on January 1, 1996, by an amount equal to the change in the GNP implicit price deflator ("GND") for the prior calendar year with 1995 as the base year; (B) if the manner in which the GND is determined is substantially revised or the GND shall become unavailable, the parties hereto shall cooperate in good faith to determine an acceptable alternative comparable index; and (C) in computing such energy content, there shall be excluded the energy content resulting from such production and sale which does not or will not qualify, for the credit under Section 29 of the Code. "F" shall mean the aggregate gross proceeds of the Financing received, directly or indirectly, by Covol at or soon after the closing of such Financing. "T" shall mean the Production Amount (as defined above) during the period commencing on the date of closing of such Financing and ending on December 31, 2007, as accepted by the Investor in connection with its providing the Financing. "Q" shall mean the aggregate gross proceeds of the installments of the Financing received, directly or indirectly, by Covol during a specific calendar quarter. "P" shall mean the Production Amount (as defined above) during the calendar quarter immediately preceding the calendar quarter during which "Q" (as defined above) is received by Covol. (e) In the event the aggregate amount of the Financing is received by Covol in a manner other than as specified in Section 5(b) or (c) above, the parties shall use their best efforts to determine an acceptable alternative comparable method to calculate the fee payable to COALCO hereunder so that the amount of such fee and the manner of its payment shall be substantially the same as described in Sections 5(b), (c) and (d) above and Section 5(f) below. (f) The sums due pursuant to this Section 5 shall be paid to COALCO contemporaneously with the receipt of the actual cash proceeds of the lump sum payment or each installment of the Financing by Covol from the Investor. All fees (or portions thereof) which are not paid within 30 toys of Covol's receipt of the related cash proceeds from the Investor shall bear interest at 12% per annum commencing on the date of such receipt by Covol. 6. Representations, Warranties Covenants and Agreements of Covol. Covol hereby represents, warrants, covenants and agrees that: (a) No Untrue Statement; Compliance with Securities Laws. No Document (as defined in Section 9(a) hereof) will include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Furthermore, Covol represents and warrants that any projections provided by Covol to 4

COALCO or any Investor in connection with any aspect of the Financing will have been prepared in good faith and will be based upon assumptions which, in light of the circumstances under which they were made, are reasonable. (b) Notification of Subsequent Material Events. If Covol incurs any material liability or obligation, direct or contingent, or enters into any material transaction not in the ordinary course of business, or there has been any material adverse change in the financial position or results of operation of Covol, then Covol shall promptly notify COALCO of any such event. (c) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by Covol and constitutes a valid and binding agreement of Covol enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights in general and subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); the performance of this Agreement by Covol and the consummation by Covol of the transactions contemplated herein, will not result in a material breach of any of the terms and provisions of, or constitute a default under, any law, regulation, indenture, mortgage, deed of trust, note, agreement, lease or other agreement or instrument to which Covol is a party or by which it or any of its property is bound, or under any rule or regulation or order of any court or other governmental agency or body applicable to Covol; and, no consent, approval, authorization or order of any court or governmental agency or body has been or is required for the performance of this Agreement by Covol, or for the consummation by Covol of the transactions contemplated hereby. 7. Exclusivity; Non-solicitation. By the terms of this Agreement, COALCO has been appointed by Covol as its sole and exclusive financial advisor with respect to matters pertaining to any Financing. Accordingly, Covol agrees that it will not solicit, entertain proposals from, or hold discussions with, any other person or entity regarding a Financing to Covol with respect to the Facility, during the period commencing the date hereof and ending on the Final Date, except for discussions with Investors on the Investor List or Investors specified by Covol as set forth in Section 1 hereof which are initiated by, or immediately referred to, COALCO. 8. Indemnification. (a) Indemnification of COALCO. Covol agrees to indemnify, defend and hold harmless COALCO, its shareholders, directors, officers, employees and agents (individually, the "Indemnitee" and collectively, the "Indemnitees"), from and against any losses, claims, damages or liabilities, joint or several, including costs and reasonable attorneys' fees incurred in the investigation and defense of such claims, to which any Indenmitee becomes subject, insofar as such losses, claims, damages or liabilities (or actions in respect thereof), arise out of or are based, directly or indirectly, upon (i) any untrue statement or alleged untrue statement of any material fact contained in any documents or written material 5

furnished by Covol to COALCO or any Investor in connection with the transactions contemplated herein (collectively, the "Documents"), (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (iii) any breach by Covol of any of its representations, warranties, covenants or agreements in this Agreement, or (iv) any Financing. In addition, Covol agrees to reimburse each Indemnitee for any legal or other expenses reasonably incurred by such Indemnitee in connection with investigating or defending any such loss, claim, damage, liability or action. (b) Indemnification of Covol. COALCO agrees to indemnify, defend and hold harmless Covol, its shareholders, directors, officers, employees and agents (individually the "Covol Indemnitee" and collectively, the "Covol Indemnitees"), for any willful violation by COALCO in connection with the transactions contemplated herein, of (i) any applicable state or federal law or any rule or regulation thereunder, provided that such violation is not based upon any violation by any Covol Indemnitee of such law, rule or regulation, or (ii) any breach by COALCO of any of its representations, warranties, covenants or agreements in this Agreement. (c) Notice of Claim. Within 30 allays of the receipt by a party entitled to indemnification or legal defense under Section 8(a) or (b) hereof of notice of the commencement of any action referred to therein, such indemnified party shall, if any claim in respect thereof is to be made against the indemnifying party under Section 8(a) or (b), notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to the indemnified party otherwise than under Section 8(a) or (b) hereof. In case any action shall be brought against any indemnified party, and it shall notify the indemnifying party of the commencement thereof, the indemnifying patty shall be entitled to participate in, and, to the extent that it shall wish, jointly with any indemnifying party similarly notified, to assume the defense thereof with counsel satisfactory to the indemnified party. After notice to the indemnified party of its election to so assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under Section 8(a) or (b) for any expenses subsequently incurred by such indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that the indemnifying party shall continue to be liable for all other losses sustained by the indemnified party to the extent provided in Section 8(a) or 8(b) hereof. No indemnification shall be required hereunder for any payment made in settlement of any suit or claim unless such payment is approved by the indemnifying party or by a court of competent jurisdiction. (d) Contribution. If the indemnification provided in Section 8(a) above is for any reason held to be unavailable, then Covol shall contribute to any damages paid by any Indemnitee. If the indemnification provided in Section 8 (b) above is for any reason held to be unavailable, then COALCO shall contribute to any damages paid by the Covol Indemnitee. Any contribution in either case shall be based on relative fault and on the relative benefits received. 6

9. Confidentiality. Neither party hereto stall disclose any of the terms, conditions or other aspects of the transactions contemplated herein, except to their advisors, shareholders and Investors and the advisors of such Investors. Any information (a) provided by COALCO to Covol or by Covol to COALCO, and (b) which is not otherwise customarily excluded for the definition of confidential information, shall be treated in accordance with the confidentiality agreement dated on or about July 2, 1996, signed by Covol and LKD Energy Corporation as if such agreement were reciprocal with respect to the treatment of such information and as if the agreement had been signed by Covol, on the one hand, and by COALCO, on the other hand. 10. Termination. This Agreement shall terminate on the Final Date, unless sooner terminated by any party hereto in accordance with this Section. The term of this Agreement may be extended by mutual agreement of all of the parties hereto. Covol shall have the right to terminate this Agreement in the event of a material default by COALCO under this Agreement or a material breach of any representation or warranty by COALCO under this Agreement; and COALCO shall have the right to terminate this Agreement in the event of the occurrence of one of the events with respect to Covol set forth In Section 6(b) hereof, a material default by Covol under this Agreement or a material breach of any representation or warranty by Covol under this Agreement; provided in the case where a non-defaulting party asserts that a material default has occurred, it shall notify the defaulting party in writing and allow the party in default a period of 30 days from the date of receipt of such notice to cure the default. In the event of a default or breach under this Agreement by my party hereto, the the other parties shalt have all rights and remedies as are provided at law or in equity in addition to the rights expressly provided herein. Notwithstanding anything contained herein, the provisions of Sections 2, 5, 8 and 9 hereof shall remain operative and in full force and effect, and shall survive the termination or expiration of this Agreement. 11. Notices. All notices, demands and other communications provided for or permitted herein shall be in writing and shall be deemed properly served (i) by hand delivery, telecopy or other facsimile transmission, on the day sued at the time on which delivered to the intended recipient at the address or telecopier number set forth in this Agreement, (ii) if sent by mail, on the third business day after the day on which deposited in the United States certified or registered mail, postage prepaid, return receipt requested, addressed to the intended recipient at its address set forth in this Agreement; or (iii) if by Federal Express or other reputable express mail service for overnight delivery, on the next business day after delivery to such express mail service, addressed to the intended recipient at its address set forth in this Agreement. All notices required or permitted to be served upon either party hereunder will be directed to: 7

if to CovoL, to:

Covol Technologies, Inc. 3820 North Frontage Road Lehi, Utah 84043 Attn: Michael Midgley, President (801) 768-4483 (fax)

if to COALCO, to:

COALCO c/o Palmer Management Corp. 13 Elm Street, Suite 200 Cohasset, MA 02025 Attn: Gordon L. Deane (617) 383-3205 (fax)

Any party may specify a different address or telecopier number by sending the other parties a notice thereof in the manner specified in this Section 11. 12. Construction. All questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereunder shall be determined in accordance with the laws of the State of Massachusetts. The parties agree that, to the extent possible, the federal and/or state courts of the State of Massachusetts shall have jurisdiction over any litigation entered into hereunder. If the parties hereto so agree in writing at the time any dispute arises, any dispute between any of the parties hereto arising under this Agreement which cannot be settled may be submitted to arbitration conducted in accordance with the Rules of the American Arbitration Association. The award or decision rendered by any arbitrator shall be final, and judgment may be entered in any court having jurisdiction concept that any party may petition a court of competent jurisdiction for review of errors of law. 13. Counterparts. This Agreement may be executed in counterparts each of which shall be deemed an original and all of which shall constitute a single agreement 14. Headings. The headings appearing in this Agreement are intended for convenience and reference only, and are not to be considered in construing this Agreement or any part hereof. 15. Severability. If any term or provision of this Agreement or the application thereof to any party or circumstance be invalid or unenforceable to any extent, the remainder of this Agreement or the application of such terms or provisions to persons or circumstances other than those to which it has been held invalid or unenforceable shall not be affected thereby and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 8

16. Successors and Assigns. Subject to the restrictions on assignment herein contained, the terms and provisions of this Agreement shall be binding upon, and shall inure to the benefit of, the successors, assigns and personal representatives of the respective parties hereto. This Agreement shall not (directly, indirectly. contingently or otherwise) confer or be construed as conferring any rights or benefits on any person or entity not named as a party hereto, except as otherwise specifically provided in Section 9 hereof. No party hereto may assign this Agreement or any of its obligations hereunder without the prior consent of the other parties. except that COALCO may subcontract out or delegate any or all of its obligations hereunder without obtaining the consent of Covol, provided in such case, COALCO is not relieved of any of its obligations or liabilities hereunder. 17. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements end understandings between the parties relating to the subject matter hereof. 18. Amendments. This Agreement may only be amended or modified by a written instrument signed by both parties hereto. IN WITNESS WHEREOF, COVOL and COALCO have executed this Agreement as of the date set forth above. COVOL TECHNOLOGIES, INC. a Delaware corporation By: Michael Midgley COALCO CORPORATION, a Massachusetts corporation By: Douglas M. Kinney 9

SETTLEMENT AGREEMENT THIS AGREEMENT is made and entered into this 17th day of September 1996, by and between Covol Technologies, Inc., a Delaware corporation, and its predecessor in interest, Environmental Technologies Group International, Inc., a Nevada corporation, Larson Limestone Company, Inc., a Utah corporation (collectively called "Plaintiffs"), Michael Q. Midgley, an individual, Mark Hardman, an individual, and Kenneth M. Young, an individual (collectively called "Messrs. Midgley Hardman and Young, or Consolidated Defendants"), Farrell Larson, an individual, Irene Larson, an individual (collectively called "Larsons"), and Gary Burningham dba Burningham and Company, a Financial Consulting Firm, and Burningham Enterprises, Inc. a Utah corporation (collectively called "Burningham"). All of the foregoing Parties to this Agreement shall be referred to individually as a "Party" and collectively as "Parties." RECITALS A. Plaintiffs have filed and maintain a lawsuit against the Larsons and Burningham in the Fourth Judicial District Court of Utah County, State of Utah, Case No. 950400278, entitled Environmental Technologies, Inc., Covol Technologies, and Larson Limestone Company, Inc. v. Farrell Larson, Irene Larson, Gary Burningham individually, and dba Burningham and Company, and Burningham Enterprises, Inc. asserting a number of claims. The Larsons and Burningham have denied the principal allegations which form the basis for Plaintiffs' claims, and the Larsons have asserted counterclaims against Plaintiffs in this lawsuit. B. The Larsons filed a lawsuit against a number of Plaintiffs' agents, their attorneys and their expert in the Fourth Judicial District Court of Utah County, State of Utah, Case No. 960400032, entitled Farrell Larson and Irene Larson v. Lynn G. Foster, Brett L. Foster, Foster& Foster L.C., Lynn M. Carlson, Lynn M. Carlson & Co., Michael Q. Midgley, Mark Hardman and Kenneth M. Young, asserting a number of claims. The Defendants in this case denied the principal allegations which formed the basis for the Larsons' claims, but did not assert any counterclaims in that lawsuit. C. The two above-referenced lawsuits were consolidated into a single case under Consolidated Case No. 950400278. These consolidated cases are hereafter referred to as the "Litigation." D. Lynn G. Foster, Brett L. Foster, Foster & Foster L.C., Lynn M. Carlson, and Lynn M. Carlson & Co. moved the Court for summary judgment dismissal of all claims the Larsons asserted against them. The Court has granted that motion, dismissing all claims against them. Accordingly, the only claims still pending in the Larsons' consolidated lawsuit are against the above-referenced Consolidated Defendants. E. Through this Agreement, the Parties desire to reach a full and final compromise, settlement, and discharge of all claims, counterclaims, and defenses which have been asserted or which could be asserted by Plaintiffs and Consolidated Defendants against the Larson or Burningham, and which have been asserted or which could be asserted by the Larsons or Burningham against Plaintiffs and Consolidated Defendants in the Litigation. This Agreement

is specifically intended by the Parties to resolve and forever release any and all disputes or claims which have been, may have been, or could be asserted between the Parties prior to the date of this Agreement, without reservation. AGREEMENT Based upon the foregoing, the Parties agree as follows: 1. CONSIDERATION FOR SETTLEMENT. In full consideration for settlement and mutual release of the claims, counterclaims and defenses asserted by the Parties against one another in the Litigation and for the other obligations and covenants set forth in this Agreement, the Parties agree as follows: a. RELEASE OF DEPOSITED FUNDS TO THE LARSONS. Plaintiffs and Consolidated Defendants shall and hereby do release all claims they may have to any sums deposited by Plaintiffs with the Court in the Litigation and agree to execute a stipulation and motion for the release of said deposited sums and for disbursement of such funds to the Larsons. The Parties assume and condition this Agreement on the assumption that the amount deposited with the Court is equal to $325,000 plus any interest accrued through the date of its distribution. b. RELEASE OF DEPOSITED ESCROW DOCUMENTS TO PLAINTIFFS. The Larsons shall and hereby do release any claims they may have to all escrow documents deposited by David Glazier, Esq. with the Court in the Litigation and agree to execute a stipulation and motion for the release of said deposited escrow documents and for tender of such escrow documents to Plaintiffs. The Parties assume and condition this Agreement upon the assumption that the following escrow documents are on deposit with the Court:
(1) Original STOCK PURCHASE AGREEMENT, dated effective 30 September 1994, with schedules. Original PROMISSORY September 1994. NOTE, dated effective 30

(2)

(3) (4) (5)

Original LARSON LIMESTONE MINUTES. Original ETGI MINUTES. Original TRUST DEED, dated effective 30 September 1994; recorded 26 October 1994.

(6) ETGI FINANCING STATEMENT, original with exhibits and carbon copy without exhibits. (7) LARSON LIMESTONE FINANCING STATEMENT original with exhibits and carbon copy without exhibits.

(8) Original AGREEMENT FOR SALE OF BUILDING AND ASSIGNMENT OF LEASE, dated effective 30 September 1994. (9) Original EMPLOYMENT AGREEMENT, dated effective 30 September 1994. (10) Original OWNERS POLICY OF TITLE INSURANCE. (11) Original STOCK CERTIFICATE NO. 4, for 750 shares marked "Canceled." (12) Original STOCK CERTIFICATE NO. 9, for 2,500 shares. (13) A copy of SIX MONTH PAYMENT ON LOAN AT BANK OF AMERICAN FORK in the form of $25,000 Certificate of Deposit. A copy of check with letter from Midgley to Chatfield (at Bank of American Fork) included. (14) Original WAIVER OF CLOSING CONDITIONS. (15) QUIT CLAIM DEED FROM FARRELL LARSON AND GERALD LARSON TO LARSON LIMESTONE COMPANY, INC. (16) Original LETTER FROM FAR WEST BANK, dated 19 October 1994, addressed to David Glazier. (17) Original INDEMNITY AGREEMENT, dated 19 October 1994, between Gerald Larson and ETGI. c. RELEASE OF LIENS, LIS PENDENS, AND OTHER ENCUMBRANCES RELATING TO PLAINTIFFS' REAL PROPERTY. The Larsons shall and hereby do release any and all liens, lis pendens and other encumbrances which they have caused to be filed or recorded against any and all real property owned or reputed to be owned by Plaintiffs and Consolidated Defendants, or any of them. Although there may be other liens, lis pendens or other encumbrances which the Larsons have caused to be filed or recorded against Plaintiffs' real property, Plaintiffs have identified the following specific encumbrances: (1) A $600,000 Trust Deed from Larson Limestone Company, Inc. in favor of Farrell Larson, effective 30 September 1994, recorded on 26 October 1994; (2) A $10,000 Trust Deed issued by Larson Limestone Company, Inc. in favor of Farrell Larson, Gerald Larson, Thelma Barnes and Joanne Parker, effective October 7, 1988, recorded on March 30, 1989; (3) A lis pendens filed by Farrell Larson against Larson Limestone's property recorded on 8 December 1995, entry No. 85275, book 3836, page 442; and

(4) A lis pendens filed by Farrell Larson against ETGI's real property recorded in the Utah County Recorder's Office on 8 December 1995 as entry No. 85276, book 3836, page 446. In order to fulfill the intent of this Agreement, upon the execution of this Agreement, the Larsons shall execute and tender to Plaintiffs (a) a reconveyance of all trust deeds identified above in a recordable form, attached hereto as Exhibit A; and (b) a release of all lispendens identified above, in a recordable form, attached hereto as Exhibit B. In respect to any other liens, lis pendens, or any other encumbrances subsequently discovered but not listed above, if any, the Larsons agree to execute whatever recordable instrument that may be necessary to remove said liens, lis pendens, or other encumbrances or other clouds from Plaintiffs' title to real property due to the Larsons' actions. d. RELEASE OF LIENS AND ENCUMBRANCES RELATING TO PLAINTIFFS' EQUIPMENT. The Larsons shall and hereby do release any and all liens or other encumbrances which they have caused to be filed or recorded against equipment (personal property) owned or reputed to be owned by Plaintiffs and Consolidated Defendants, and any of them. Although there may be other liens or encumbrances which the Larsons have caused to be filed or recorded against Plaintiffs' equipment, Plaintiffs are aware of the following such encumbrances: (1) U.C.C. 1 filing by Farrell Larson for certain equipment of ETGI, filed 26 October 1994; and (2) U.C.C. 1 filing by Farrell Larson against certain equipment of Larson Limestone Company, Inc. filed 26 October 1994. In order to fulfill the intent and purpose of this provision, the Larsons shall execute U.C.C. 3 Termination Statements in a recordable or fileable form, attached as Exhibit C, for all of the foregoing U.C.C. 1 statements and shall deliver those executed U.C.C. 3 Termination Statements to an agreed upon escrow agent which shall remain in escrow until all loans to which Farrell Larson has guaranteed are paid off, at which time the escrow agent shall be instructed by Plaintiffs and the Larsons to deliver said U.C.C. 3 Termination Statements to Plaintiffs . In respect to all liens and encumbrances including U.C.C. 1 filings concerning Plaintiffs' equipment which are not known but are discovered after the execution of this Agreement, if any, the Larsons agree to execute an appropriate, recordable release of said liens and encumbrances, tender them to an agreed upon escrow agent to hold them until all loans that Farrell Larson has secured are paid off, at which time the escrow agent shall be instructed who shall be instructed by Plaintiffs and the Larsons to deliver said release of liens, encumbrances, or U.C.C. 3 Termination Statements to Plaintiffs. e. REFINANCING OF BEALL TRAILERS LEASE BY BURNINGHAM.

Burningham shall be required to refinance or payoff Zions Credit Corporation Master Finance Lease No. 6528, equipment schedule No. 1, relating to two Beall trailers, such that Larson Limestone Company, Inc. is removed as a guarantor. Prior to the execution of this Agreement, Burningham shall provide commercially reasonable evidence that Larson Limestone Company, Inc. has been removed as a guarantor on said Zions lease. f. COVOL'S SALE OF LARSON LIMESTONE. The Larsons agree that Covol may sell Larson Limestone Company, Inc. to any third party without violating this Agreement, and without providing the Larsons with any new causes of action. g. COVENANT NOT TO PURCHASE COVOL STOCK. Burningham and the Larsons hereby covenant and agree that they will directly or indirectly following the execution of this Agreement purchase any stock of Covol, any of its subsidiary companies, or any successors. 4. STIPULATED DISMISSAL OF CLAIMS OR ENTRY OF JUDGMENT. Concurrently with the execution hereof, and as additional consideration for settlement, counsel for each of the Parties shall execute a Stipulation and Joint Motion to Dismiss all claims with prejudice, in the form attached hereto as Exhibit D. 5. MUTUAL RELEASES. Each of the Parties to this Agreement hereby forever release, completely acquit and discharge each other Party, their past and present partners, predecessors and successors in interest, officers, directors, shareholders, children, employees, representatives and agents from and against any and all claims, demands, liabilities, obligations, costs, expenses, damages, actions, and causes of actions of any kind known or unknown, contingent or non-contingent, that they may have against any Party, arising prior to the date of this Agreement, whether or not arising out of the allegations set forth in the Litigation. 6. DISCLAIMER. By executing this Agreement, the Parties do not admit any liability or wrongdoing and do not admit any allegations set forth in the Litigation, nor do they admit any violation of state or federal law. Each of the Parties acknowledge that the consideration received by them under this Agreement is in full accord and satisfaction and in full compromise of disputed claims. 7. ATTORNEY'S FEES. The Parties hereto agree that they shall bear their own costs and attorney's fees incurred in connection with the Litigation and related proceedings. However, in the event any Party to this Agreement brings an action to enforce the terms hereof, or to enter judgment in the breach of any terms or conditions of this Agreement, the prevailing Party shall be entitled to an award of its reasonable attorney's fees and costs incurred in such an enforcement proceeding or entry and collection of judgment. 8. TERMS TO BE HELD IN CONFIDENCE. The terms of this Agreement shall be held by the Parties in strict confidence and no Party shall be permitted to disclose these terms unless they have been served with a valid subpoena requiring such disclosure, or such disclosure is required to enforce the terms of this Agreement. Each of the Parties may, when responding to inquiry regarding the Litigation, state that a settlement has been reached by the Parties and

that the terms of the settlement are satisfactory and agreeable to all Parties. However, the terms of the settlement agreement shall remain strictly confidential. 9. ASSURANCES. Each of the Parties acknowledge that they have executed this Agreement voluntarily, after consultation with counsel of their choice, and of their own free will, without coercion or duress, intending to be legally bound hereby. The Parties further acknowledge that they have had a reasonable opportunity to review and consider the Agreement before signing it. 10. COUNTERPART ORIGINALS. This Agreement may be executed in multiple counterpart originals and shall have the same force and effect as if all signatures appeared on the same original. For purposes of this Agreement and the documents required hereby, and executed copy shall be considered an executed original. 11. CONSTRUCTION OF AGREEMENT. This Agreement and the documents required hereby shall be construed in accordance with the laws of the State of Utah. 12. INTEGRATION. This Agreement constitutes the final written expression of all of the terms of the settlement of the Litigation between the Parties and is a complete and exclusive statement of those terms. Each of the Parties acknowledges that no representations or promises not expressly contained in this Agreement have been made by any Party, or by the agents or representative of any Party.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in counterpart as of the date entered in the first paragraph of this Agreement.
COVOL TECHNOLOGIES, INC., a Delaware corporation ENVIRONMENTAL TECHNOLOGIES GROUP INTERNATIONAL, INC., a Nevada corporation

By: Its:

/s/ Michael Q. Midgley President

By: /s/ Michael Q. Midgley Its: President

LARSON LIMESTONE COMPANY, INC., a Utah corporation

By: Its:

/s/ President

/s/ MICHAEL Q. MIDGLEY, Individually

/s/ MARK HARDMAN, Individually

/s/ KENNETH M. YOUNG, Individually

/s/ IRENE LARSON, Individually GARY BURNINGHAM, Individually and dba BURNINGHAM AND COMPANY, a Financial Consulting Firm

/s/ FARRELL LARSON, Individually

By: /s/ Gary Burningham BURNINGHAM ENTERPRISES, INC.

By: Its:

/s/ Gary Burningham President

COVOL TECHNOLOGIES, INC. DEBENTURE AGREEMENT AND SECURITY AGREEMENT DECEMBER 20, 1996 JZM5843

TABLE OF CONTENTS
Section 1. Purchase 1.1 1.2 1.3 Page and Sale of Debenture.................................. Issuance of Convertible Subordinated Debenture......... Issuance of the Senior Debentures...................... Closing................................................ 1 1 1 1

2.

Representations, Warranties and Covenants of the Company........ 2 2.1 Corporate Existence; Compliance with Law............... 2 2.2 Corporate Power; Authorization; Enforceable Obligations. 2 2.3 Authorization and Valid Issuance of Debentures and Shares of Common Stock............................................ 3 ........................................................ 3 2.4 Disclosure.............................................. 3 2.5 Ownership of Property; Liens............................ 3 2.6 Patents, Trademarks, Copyrights and Licenses............ 3 2.7 No Material Adverse Effect.............................. 4 2.8 Environmental Laws...................................... 4 2.9 Use of Proceeds......................................... 4 Representations, Warranties and Covenants of the Investor........ 3.1 Purchase Entirely for Own Account....................... 3.2 Disclosure of Information............................... 3.3 Investment Experience................................... 3.4 Restricted Securities................................... 3.5 Legends................................................. 3.6 Accredited Investor..................................... Security 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Agreement............................................... Security Interest....................................... Collateral.............................................. Perfection and Priority................................. Affirmative Covenants................................... Negative Covenants...................................... Insurance; Payment of Premiums.......................... Remedies Upon Default................................... 4 4 4 5 5 5 5 5 6 6 6 6 7 7 8

3.

4.

5.

Conditions Precedent............................................. 9 5.1 Execution and Delivery of Agreement..................... 9 5.2 Documents and Other Agreements.......................... 9

JZM5843 i

5.3 5.4 5.5 6.

Absence of Material Adverse Change......................10 Conditions to the Initial Closing.......................10 Conditions to Each Closing..............................10

Miscellaneous....................................................11 6.1 Survival of Warranties..................................11 6.2 Successors and Assigns..................................11 6.3 Governing Law...........................................11 6.4 Counterparts............................................11 6.5 Titles and Subtitles....................................11 6.6 Notices.................................................11 6.7 Expenses................................................11 6.8 Amendments and Waivers..................................11 6.9 Severability............................................12 6.10 Indemnity...............................................12 6.11 Waiver of Trial by Jury.................................12 6.12 Entire Agreement........................................12

JZM5843 ii

DEBENTURE AGREEMENT AND SECURITY AGREEMENT THIS DEBENTURE AGREEMENT AND SECURITY AGREEMENT is made as of the 20th day of December, 1996, by and among COVOL TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and AJG FINANCIAL SERVICES, INC., a Delaware corporation ("Investor"). THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Purchase and Sale of Debenture. 1.1 Issuance of Convertible Subordinated Debenture. Subject to the terms and conditions of this Agreement, Investor agrees to lend at the Closing, and the Company agrees to borrow and issue to Investor at the Closing, the Company's 6% Convertible Subordinated Debenture in the form set forth in Exhibit A (the "Convertible Debenture") in the principal amount of $1,100,000, such amount to be paid by wire transfer or check payable to the order of Covol Technologies, Inc. within three (3) business days of the Initial Closing. 1.2 Issuance of the Senior Debentures. Subject to the terms and conditions of this Agreement, Investor agrees to lend and the Company agrees to borrow and issue at each Subsequent Closing the Company's Senior Debenture in the form set forth in Exhibit B (the "Senior Debenture" and together with the "Convertible Debenture, the "Debentures"), in the principal amount set forth in the Funding Request, up to $2,900,000, such amount to be paid by wire transfer or check payable to the order of Covol Technologies, Inc. at each Subsequent Closing. 1.3 Closing. (a) The issuance of the Convertible Debenture hereunder shall be on December 20, 1996 (the "Initial Closing"). Within three (3) business days of the Initial Closing Investor shall pay by wire transfer or check the principal amount of the Convertible Debenture. (b) The issuance of the Senior Debentures shall occur from time to time within 10 days of the delivery of request by the Company ("Funding Request") setting forth the amount requested and the proposed use of the proceeds of the amount requested (each a "Subsequent Closing"). At each Subsequent Closing, Investor shall pay to the Company the amount set forth in the Funding Request, up to an aggregate of $2,900,000, and the Company shall deliver to JZM5843

Investor a Senior Debenture in a principal amount equal to the amount set forth in the Funding Request, up to an aggregate principal amount of $2,900,000. 2. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants to each Investor that: 2.1 Corporate Existence; Compliance with Law. The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification (iii) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore and proposed to be conducted; (iv) has all material licenses, permits, consents or approvals from or by, and has or will have made all material filings with, and has or will have given all material notices to, all governmental authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (v) is in compliance with its certificate of incorporation and by-laws; and (vi) is in compliance with all applicable provisions of law, including, without limitation, the Employee Retirement Income Security Act of 1974, as amended, those regarding the collection, payment and deposit of employees' income, unemployment and Social Security taxes, and those relating to environmental matters where the failure to comply could reasonably be expected to have a material adverse effect on the business of the Company. 2.2 Corporate Power; Authorization; Enforceable Obligations. The execution, delivery and performance by the Company of this Agreement and the Debentures (i) are within the Company's corporate power; (ii) have been duly authorized by all necessary or proper corporate action; (iii) are not in contravention of any provision of the Company's certificate of incorporation or by-laws; (iv) will not violate any law or regulation, or any order or decree of any court or governmental instrumentality; (v) will not conflict with or result in the breach or termination of, constitute a default under, or accelerate any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which the Company is a party or by which the Company or any of its property is bound (except such conflict, breach, termination, default or acceleration as could not reasonably be expected to have a material adverse effect on the business of the Company); (vi) will not result in the creation or imposition of any lien upon any of the property of the Company other than those in favor of the Investor; and (vii) do not require the consent or approval of any governmental body, agency, authority or any other Person. At or prior to the Initial Closing, each of the documents to be delivered at such time shall have been duly executed and delivered for the benefit of or on behalf of the Company, and each shall then constitute a legal, valid JZM5843 2

and binding obligation of the Company to the extent it is a party thereto, enforceable against it in accordance with its terms, subject to the effects of laws governing creditors rights generally and general principles of equity. 2.3 Authorization and Valid Issuance of Debentures and Shares of Common Stock. All corporate action on the part of the Company and its officers, directors and stockholders necessary for the authorization, issuance and delivery of the Debentures being issued hereunder and the reservation for issuance of shares of Common Stock issuable upon conversion of the Debentures has been taken or will be taken prior to the Closing, and this Agreement and the Debentures, when issued and paid for, shall then constitute valid and legally binding obligations of the Company, each enforceable in accordance with its terms. The Debentures which are being acquired by the Investor, when issued and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued. The Common Stock issuable upon conversion of the Convertible Debentures purchased under this Agreement has been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Company's Certificate of Incorporation, shall be duly and validly issued, fully paid and nonassessable, and issued in compliance with all applicable federal and state securities laws, as currently in effect. 2.4 Disclosure. The Company's (i) Registration Statement on Form 10/A, Amendment No. 2, filed on approximately April 25, 1996, (ii) Form 10-Q for the quarter ended March 31, 1996, (iii) Form 8-K dated June 3, 1996, (iv) Form 10-Q for the quarter ended June 30, 1996, and (v) all other written information furnished to Investor did not, as of the date of such filings or information, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading. The Company is currently preparing its financial statements for the fiscal year ended September 30, 1996, subject to audit, and its annual report on Form 10-K for the fiscal year ended September 30, 1996, which may show significant changes from prior filings with the Securities and Exchange Commission. 2.5 Ownership of Property; Liens. The Company owns good and merchantable title to, or valid leasehold interests in, all of its properties and assets; and the Company has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and duly effected all recordings, filings and other actions necessary to establish, protect and perfect the Company's right, title and interest in and to all such property to the extent necessary to use such property in its ordinary business operations. 2.6 Patents, Trademarks, Copyrights and Licenses. The Company owns all material licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, and trade names necessary to continue to conduct its business as JZM5843 3

heretofore conducted by it, now conducted by it and proposed to be conducted by it, each of which is listed, together with Patent and Trademark Office application or registration numbers, where applicable, on Schedule 2.6 hereto. The Company conducts its businesses without infringement or claim of infringement of any license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of others. To the best knowledge of the Company, there is no infringement or claim of infringement by others of any material, license, patent, copyright, service mark, trademark, trade name, trade secret or other intellectual property right of the Company. 2.7 No Material Adverse Effect. Except as disclosed on Schedule 2.7 hereto, no event has occurred since June 30, 1996, and is continuing which has had or could reasonably be expected to have a material adverse effect on the business, assets, properties, operations, prospects or financial or other condition of the Company. 2.8 Environmental Laws. All premises and facilities owned, leased, used or operated by the Company or, to the knowledge of any executive officer of the Company after a reasonable investigation, any predecessor in interest, have been, and continue to be, owned, leased, used or operated in compliance in all material respects with all applicable environmental laws. 2.9 Use of Proceeds. The proceeds of the issuance of the Debentures shall be used to satisfy certain contractual obligations of the Company, for working capital to fund operations, and to purchase equipment to be used to construct coal briquetting facilities to be managed and/or sold by the Company or affiliates of the Company. 3. Representations, Warranties and Covenants of the Investor. Investor hereby represents and warrants that: 3.1 Purchase Entirely for Own Account. Investor hereby confirms that the Debentures to be received by Investor hereunder and the Common Stock issuable upon conversion of the Convertible Debenture (collectively, the "Securities") will be acquired for Investor's own account and not with a view to the resale or distribution of any part thereof, and that Investor has no agreement or arrangement with regard to or present intention of selling, granting any participation in, or otherwise distributing the same; provided, however, notwithstanding the foregoing, Investor may effect transactions in reliance on Rule 144A promulgated under the Securities Act of 1933, as amended (the "Act"). 3.2 Disclosure of Information. Investor has received all the information it considers necessary or appropriate for deciding whether to purchase the Debentures being issued hereunder. Investor further represents that it has had an opportunity to ask JZM5843 4

questions and receive answers from the Company regarding the terms and conditions of the sale of the Debentures. 3.3 Investment Experience. Investor acknowledges that it is able to fend for itself, can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Debentures being issued hereunder. 3.4 Restricted Securities. Investor understands that the Debenture and the shares of Common Stock issuable upon conversion of the Convertible Debenture it is acquiring pursuant hereto are characterized as "restricted securities" under the federal securities laws inasmuch as each is being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act only in certain limited circumstances. In this connection, Investor represents that it is familiar with Rule 144 under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 3.5 Legends. It is understood that the Debentures being issued hereunder (and the Common Stock issuable upon conversion thereof) will bear a legend substantially similar to the following: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, PLEDGED, HYPOTHECATED OR DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT AND REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER SUCH STATE SECURITIES LAWS OR AN EXCEPTION FROM REGISTRATION THEREUNDER IS AVAILABLE." 3.6 Accredited Investor. Investor is an Accredited Investor within the definition set forth in Rule 501(a) under the Act. 4. Security Agreement. Payment of the Senior Debenture shall be secured to the extend described below: JZM5843 5

4.1 Security Interest. The Company hereby grants to Investor a security interest in the property and its proceeds described in Section 4.2 herein to secure the Company's obligations under the Senior Debenture (the "Security Interest"). 4.2 Collateral. The property in which the Security Interest is granted (the "Collateral") consists of a continuing interest in all real and personal property purchased by the Company from the proceeds of the issuance of the Senior Debentures, and all accessions to, substitutions for and all replacements, products and proceeds thereof, including, without limitation, proceeds of insurance policies insuring the Collateral, and all books and records (including, without limitation, computer programs, printouts and other computer materials and records) of the Company pertaining to any of the foregoing. The Company shall provide in each Funding Request an accounting to Investor of the proposed use of any proceeds of the issuance of the Senior Debentures. At the applicable Subsequent Closing or at the time the Collateral is acquired, the Company shall execute and deliver to Investor any documents, notices or instruments reasonably requested by Investor to perfect, evidence, give effect to or give notice of Investor's security interest, and shall pay all costs in connection therewith. 4.3 Perfection and Priority. The Security Interest grant herein shall be a first priority lien on the Collateral, subject to no other liens, claims or rights of others. 4.4 Affirmative Covenants. The Company covenants that it shall: (a) Keep and maintain all Collateral consisting of equipment and machinery in good operating condition and repair; make all necessary replacements thereof so that the value and operating efficiency thereof shall at all times be maintained and preserved; promptly inform Investor of any additions to or deletions from such equipment and machinery; and prevent any such equipment and machinery from becoming a fixture to real estate or accession to other personal property; (b) Promptly discharge any liens, encumbrances or other claims against the Collateral; (c) Maintain such insurance as may be required by law and such other insurance to such extent and against such hazards and liabilities as is customarily maintained by companies similarly situated, and include Investor as an additional insured on all liability policies; and (d) Comply strictly and in all respects with all applicable environmental laws. JZM5843 6

4.5 Negative Covenants. The Company covenants that it shall not, without Investor's prior written consent, which Investor may or may not in its sole discretion give: (a) Enter into any transaction which materially and adversely affects the Collateral or the Company's ability to repay the indebtedness under the Senior Debentures; (b) Remove the Collateral from the locations set forth in the Funding Request with respect to the purchase of such Collateral or keep the Collateral at any other location(s) unless (i) the Company gives Investor written notice thereof and of the new location of the Collateral at least thirty (30) days prior thereto, and (ii) the other location is within the continental United States of America; or (c) Create or permit any lien on any of the Collateral, other than liens created hereunder. 4.6 Insurance; Payment of Premiums. The Company shall, at its sole cost and expense, keep and maintain the Collateral insured for its full insurable value against loss or damage by fire, theft, explosion, sprinklers and all other hazards and risks ordinarily insured against by other owners or users of such properties in similar businesses and notify Investor promptly of any occurrence causing a material loss or decline in value of the Collateral and the estimated (or actual, if available) amount of such loss or decline. All policies of insurance on the Collateral shall be in form and with insurers recognized as adequate by prudent business persons and all such policies shall be in such amounts as may be satisfactory to Investor. The Company shall deliver to Investor a certificate of insurance and, upon request, the original (or certified copy) of each policy of insurance, and evidence of payment of all premiums therefor. Such policies of insurance shall contain an endorsement, in form and substance acceptable to Investor, showing loss payable to Investor, as its interests may appear. Such endorsement, or an independent instrument furnished to Investor, shall provide that the insurance companies will give Investor at least thirty (30) days prior written notice before any such policy or policies of insurance shall be altered or cancelled and that no act or default of the Company or any other person shall affect the right of Investor to recover under such policy or policies of insurance in case of loss or damage. The Company hereby directs all insurers under such policies of insurance to pay all proceeds payable thereunder directly to Investor, as its interests may appear. The Company irrevocably makes, constitutes and appoints Investor (and all officers, employees or agents designated by Investor) as the Company's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of the Company on any check, draft, instrument or other items of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. In the event the Company, at any time hereafter, shall fail to JZM5843 7

obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then Investor, without waiving or releasing any obligations or default by the Company hereunder, may at any time thereafter (but shall be under no obligation to) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which Investor deems advisable. All sums so disbursed by Investor, including reasonable attorneys' fees, court costs, expenses and other charges relating thereto, shall be payable on demand by the Company to Investor and shall be additional liabilities under the Senior Debentures secured by the Collateral. 4.7 Remedies Upon Default. In the event of any Event of Default under the Senior Debentures, Investor may do any one or more of the following: (a) Declare any indebtedness under the Senior Debenture immediately due and payable; (b) Enforce the security interest given in this Agreement under the provisions of the Uniform Commercial Code of the applicable state or any other equivalent law; (c) Enter upon the premises of the Company, without any obligation to pay rent to the Company, through selfhelp and without judicial process, without first obtaining a final judgment or giving the Company notice and opportunity for a hearing on the validity of Investor's claim, or any other place or places where the Collateral is located and kept, and remove the Collateral therefrom to the premises of Investor or any agent of Investor, for such time as Investor may desire, in order to effectively collect or liquidate the Collateral, or (ii) require the Company to assemble the Collateral and make it available to Investor at a place to be designated by Investor, in its sole discretion; (d) Take possession of the Collateral or any part of it and of the records pertaining to the Collateral; (e) Sell or otherwise dispose of all or any Collateral at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Investor, in its sole discretion, may deem advisable; (ii) adjourn such sales from time to time with or without notice; (iii) conduct such sales on the Company's premises or elsewhere and use the Company's premises without charge for such sales for such time or times as Investor may see fit. Investor shall have the right to sell, lease or otherwise dispose of the Collateral, or any part thereof, for cash, credit or any combination thereof, and Investor may purchase all or any part of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of such purchase JZM5843 8

price, may setoff the amount of such price against the indebtedness under the Senior Debentures. The proceeds realized from the sale of any Collateral shall be applied first to the reasonable costs, expenses and attorneys' fees and expenses incurred by Investor for collection and for acquisition, completion, protection, removal, storage, sale and delivery of the Collateral; second to interest due upon any of the indebtedness under the Senior Debentures; and third to the principal of the indebtedness under the Senior Debentures. If any deficiency shall arise, the Company shall remain liable to Investor therefor; and (f) Exercise any other rights and remedies of a secured party under the Uniform Commercial Code of the applicable state or other applicable law, all of which rights and remedies shall be cumulative and non-exclusive, to the extent permitted by law. 5. Conditions Precedent This Agreement shall become effective upon the satisfaction of the following conditions precedent: 5.1 Execution and Delivery of Agreement. This Agreement or counterparts thereof shall have been duly executed by, and delivered to, the Company and the Investor. 5.2 Documents and Other Agreements. The Investor shall have received all of the following, each in form and substance satisfactory to the Investor: (a) Convertible Debenture; (b) Registration Rights Agreement between the Company and the Investor (the "Registration Rights Agreement"); (c) A Certificate of the Secretary of the Company, together with true and correct copies of the Certificate of Incorporation and By-Laws of the Company, and all amendments thereto, true and correct copies of the resolutions of the Board of Directors of the Company authorizing or ratifying the execution, delivery and performance of this Agreement, the Debentures and the Registration Rights Agreement, and the names of the officer or officers of the Company authorized to sign this Agreement, the Debentures and the Registration Rights Agreement, together with a sample of the true signature of each such officer; (d) Certified copies of all documents evidencing any other necessary corporate action, consents and governmental approvals (if any) with respect to this Agreement, the Debentures and the Registration Rights Agreement; JZM5843 9

(e) The favorable opinion of Ballard, Spahr, Andrews & Ingersoll, counsel for the Company, addressed to the Investor with respect to such matters as may be reasonably requested by the Investor; (f) The Certificate of Incorporation of the Company certified by the Secretary of State of Delaware; (g) Good Standing Certificates for the Company from the Secretaries of State of Delaware and Utah; (h) UCC lien search reports of filings against the Company for such jurisdictions as the Investor deems appropriate; (i) UCC Financing Statements filed against the Company in respect to such jurisdictions as the Investor deems appropriate; and (j) Certificate of insurance, together with a properly executed Lender's Loss Payable Clause. 5.3 Absence of Material Adverse Change. No material adverse change in the business, operations or condition, financial or otherwise, of the Company shall have occurred or be continuing. 5.4 Conditions to the Initial Closing. It shall be a condition to the Initial Closing that the conditions contained in Sections 5.1, 5.2 and 5.3 shall have been fulfilled. 5.5 Conditions to Each Closing. It shall be a further condition to the Initial Closing and to each Subsequent Closing that the following statements shall be true on the date of each such Closing: (a) All of the representations and warranties of the Company contained herein shall be correct in all material respects on and as of the date of each such Closing as though made on and as of such date, except (i) to the extent that any such representation or warranty expressly relates to an earlier date, and (ii) for changes therein permitted or contemplated by this Agreement. (b) No event shall have occurred and be continuing which constitutes or would constitute an Event of Default under the Debentures. The acceptance by the Company of the proceeds of the issuance of any Debenture shall be deemed to constitute, as of the date of such acceptance, (i) a representation and warranty by the Company that the conditions in this Section 5.5 have been satisfied and JZM5843 10

(ii) a confirmation by the Company of the granting and continuance of the Investor's lien on the Collateral. 6. Miscellaneous. 6.1 Survival of Warranties. The warranties, representations and covenants of the Company and the Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of Investor or the Company. 6.2 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any of the Debentures issued hereunder or any Common Stock issued upon conversion thereof). 6.3 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Utah without regard to choice of law principles. 6.4 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 6.6 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with a reputable overnight courier or with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten (10) days advance written notice to the other parties. 6.7 Expenses. Each party shall bear its own expenses in connection with the transactions contemplated by this Agreement. 6.8 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of the Company and the Investor. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any securities JZM5843 11

purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities, and the Company. 6.9 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so exuded and shall be enforceable in accordance with its terms. 6.10 Indemnity. The Company hereby indemnifies the Investor, and its directors, officers, employees, affiliates and agents (collectively, "Indemnified Persons") against, and agrees to hold each such Indemnified Person harmless from, any and all losses, claims, damages and liabilities, including claims brought by any stockholder or former stockholder of the Company, and related expenses, including reasonable counsel fees and expenses, incurred by such Indemnified Person arising out of any claim, litigation, investigation or proceeding (whether or not such Indemnified Person is a party thereto) relating to any transactions, services or matters that are the subject of this Agreement; provided, however, that such indemnity shall not apply to any such losses, claims, damages, or liabilities or related expenses determined by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Indemnified Person. 6.11 Waiver of Trial by Jury. THE COMPANY AND THE INVESTOR HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE DEBENTURES OR ANY ACT OR OMISSION WHICH EITHER PARTY ASSERTS RESULTED IN ANY LIABILITY TO THE COMPANY, THE INVESTOR OR THEIR RESPECTIVE OFFICERS, DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES OR AGENTS, TO THE FULL EXTENT PERMITTED BY LAW. 6.12 Entire Agreement. This Agreement, the Debentures, and other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. THE DEBENTURES (AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE CONVERTIBLE DEBENTURE) ARE SUITABLE ONLY FOR SOPHISTICATED INVESTORS FOR WHOM AN INVESTMENT IN THE DEBENTURES DOES NOT CONSTITUTE A COMPLETE INVESTMENT PROGRAM AND WHO FULLY UNDERSTAND AND ARE WILLING TO ASSUME THE RISK INVOLVED IN PURCHASE OF THE DEBENTURES. NO OFFER TO SELL (OR SOLICITATION OF AN OFFER TO BUY) IS BEING MADE IN ANY JURISDICTION IN WHICH SUCH OFFER ORSOLICITATION WOULD BE UNLAWFUL. THERE WILL BE NO PUBLIC OFFERING OF THE DEBENTURES. JZM5843 12

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE DEBENTURES (AND THE COMMON STOCK ISSUABLE UPON CONVERSION THEREOF) HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY NOR HAS ANY SUCH FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF ANY INFORMATION PROVIDED HEREWITH. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
Address: 3280 North Frontage Road Lehi, Utah 84043 COVOL TECHNOLOGIES, INC.

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

Address:

The Gallagher Centre Two Pierce Place Itasca, Illinois 60143-3141

AJG FINANCIAL SERVICES, INC.

By: /s/ David Long Name: David Long Title: Vice President

JZM5843 13

Schedule 2.6 to Debenture Agreement and Security Agreement LICENSES, PATENTS, PATENT APPLICATIONS, COPYRIGHTS, SERVICE MARKS, TRADEMARKS, TRADEMARK APPLICATIONS AND TRADE NAMES UNITED STATES PATENTS: o No. 5,453,103, issued 26 September 1995 o No. 5,487,764, issued 30 January 1996 UNITED STATES PATENT APPLICATIONS: o Title: Reclaiming and Utilizing Discarded and Newly Formed Coke Breeze, Coal Fines, and Blast Furnace Revert Materials, and Related Methods, filed on 25 June 1995. Will issue 31 December 1996. INTERNATIONAL PATENT COOPERATIVE TREATY o Serial No. PCT/US94/03814, lodged on 7 April 1994 o Serial No. PCT/US94/01798, lodged on 8 February 1996 TRADEMARKS AND SERVICE MARKS o Intent-to-use trademark application for briquettes identified by "Covol". Serial No. 75/061,295, filed 22 February 1996, published for opposition 5 November 1996. o Licensing services identified by "Covol". Serial No. 75/067,086, filed 4 March 1996, published for opposition 26 November 1996. JZM5843

Schedule 2.7 to Debenture Agreement and Security Agreement POTENTIALLY ADVERSE EVENTS COVOL TECHNOLOGIES, INC. AGTC. AGTC is a coal broker located in the State of Alabama, and organized as a partnership of three individuals: Mark Rodack, Rick Visovsky, and Ed Hodder. Ed Hodder is the owner of Port Hodder, the port in Alabama where the Company is building its second full scale agglomeration facility. The Company entered into an agreement with AGTC in March, 1996, to assist the Company in developing coal agglomeration projects. The Company terminated the agreement in July, 1996 because they were dissatisfied with AGTC's performance. Subsequent to termination of the agreement, the Company reached an agreement with Ed Hodder to purchase his property as a site for the Company's Alabama project. The Company offered payment of $35,000 in the form of a check with a restrictive indorsement as a settlement of all outstanding obligations. AGTC cashed the check and them immediately claimed the Company owed them additional amounts. AGTC has threatened litigation, which the Company believes has a very low likelihood of success. The agreement specifies Utah law, and Utah has a strong accord and satisfaction provision. Assuming AGTC files and the case is decided against the Company, the maximum liability by the Company would be "8% of the gross sales or monetized price" of the Alabama project. JZM5843

EXHIBIT A THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF ANY STATE. THIS DEBENTURE MAY NOT BE TRANSFERRED OR SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HAS BEEN DELIVERED TO THE ISSUER TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. 6% CONVERTIBLE SUBORDINATED DEBENTURE DUE DECEMBER 20, 1999 Salt Lake City, Utah December 20, 1996 $1,100,000 COVOL TECHNOLOGIES, INC., a Delaware corporation whose headquarters are located at 3280 North Frontage Road, Lehi, Utah 84043 (the "Company"), promises to pay to the order of AJG FINANCIAL SERVICES, INC., or its successors and assigns (the "Holder"), the aggregate principal sum of One Million, One Hundred Thousand Dollars ($1,100,000) (the "Principal Amount"), in lawful money of the United States of America, together with interest thereon from the date hereof on the unpaid Principal Amount, on the terms and conditions as hereinafter specified, until the Principal Amount is repaid in full. 1. Identification of Debenture. This Debenture is the "Convertible Debenture" defined in that certain Debenture Agreement and Security Agreement of even date herewith between the Company and the Holder (the "Purchase Agreement") and the Holder is entitled to all of the benefits that arise under the Purchase Agreement from being the "Investor" and the holder of the "Convertible Debenture" thereunder. 2. Payment of Principal and Interest. (a) The Principal Amount shall be payable, unless converted pursuant to Section 4 below, on December 20, 1999 ("Principal Repayment Date", also herein referred to as the "Maturity Date"). At the Maturity Date, any required prepayment pursuant to Section 3 below, any acceleration of the Principal Amount pursuant to Section 8 below, or upon the effective date of any conversion of the total unpaid JZM5841

Principal Amount of this Debenture pursuant to Section 4 below, any unpaid Principal Amount of this Debenture, all interest accrued thereon and other sums payable hereunder shall be due and payable in full, notwithstanding any other provision hereof. (b) From and after the date hereof, interest on the unpaid balance of the Principal Amount shall accrue and be due and payable at the per annum rate of six percent (6%). Interest on the outstanding unpaid Principal Amount shall be payable upon the Maturity Date, any Prepayment and any acceleration of the Principal Amount pursuant to Section 8 below. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed. In the event that all or any portion of the Principal Amount is not paid on any regularly scheduled payment date of this Debenture or upon acceleration (regardless of the reason therefor) and whether or not such payment is deferred because of the subordination provisions of this Debenture, the portion of the Principal Amount not paid when due shall bear interest until paid at the "Default Rate" (as defined in Section 8 below). (c) All portions of the Principal Amount, all interest thereon and all other sums due hereunder, shall be payable, without set-off or deduction, at the offices of the Holder set forth above or at such other place as Holder, from time to time may designate to the Company in writing, in cash, certified check or check of the Company that the Holder has agreed in writing in advance to accept or a wire transfer to such account as Holder may have previously designated to the Company in writing. (d) The Company shall not have the right to prepay any portion of the Principal Amount or any installment thereof. 3. Required Prepayment. If a Change in Control (as hereinafter defined) occurs, the Holder may, by notice to the Company given not later than the date 10 days after the date the Company has notified the Holder of such Change in Control, require the prepayment of the entire unpaid Principal Amount of this Debenture and all accrued but unpaid interest thereon; whereupon the Company shall, on the date 10 days after the date such notice is given by the Holder, prepay this Debenture. The Company shall give the Holder notice of the occurrence of any Change in Control not later than 10 days after such Change in Control occurred. As used herein, "Change in Control" of the Company means: (a) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company JZM5841 17

representing 30% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years (not including any period prior to the date of this Debenture), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c) or (d) of this Section) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (I) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 4. Conversion of Debentures. (a) Conversion into Company's Common Stock. (i) Conversion by Holder. On any day on which the Company is open for business from and after the date hereof and prior to 5:00 p.m. Salt Lake City time on the Maturity Date, subject to and upon compliance with the provisions of this Section 4, at the option of the Holder, any portion of the then outstanding Principal Amount which is $50,000 or greater and an integral multiple of $1,000 or the remaining balance due, may, so long as this Debenture or any part thereof remains outstanding, be converted into the number of duly authorized, validly issued, fully-paid and nonassessable shares of the Company's Common Stock equal to the then unpaid Principal Amount being converted, JZM5841 18

*** Missing informaiton mya be available upon request to the Company divided by the Conversion Price then in effect. For purposes of this Debenture, the "Conversion Price" shall be *** subject to adjustment as provided herein. Holder shall exercise its conversion right by surrendering this Debenture to the Company, at any time after 8:00 a.m. and prior to 5:00 p.m. Salt Lake City time at the Company's offices, set forth above, or at such other place in Salt Lake City, Utah as the Company from time to time may designate to the Holder in writing, accompanied by a written notice of election to convert in the form attached hereto as Exhibit A. (ii) Conversion by Company. Provided the Company is not then in default of any of its obligations under this Debenture or the Purchase Agreement, and further provided no Event of Default or any event with the passage of time would be an Event of Default has occurred and is continuing at any time from and after six (6) months from the date hereof and prior to 5:00 p.m. Salt Lake City time on the Maturity Date, the Company may, at its option, cause the then outstanding entire Principal Amount of this Debenture to be converted into shares of the Company's Common Stock, so long as this Debenture or any part thereof remains outstanding, such rights to be exercisable with not less than 15 days and not more than 30 days written notice in the form attached hereto as Exhibit B (the "Notice") to the Holder, which Notice shall be irrevocable without the written consent of the Holder. The Notice shall designate the date upon which such conversion shall occur (the "Conversion Date"); provided, however, the Conversion Date shall not be a date subsequent to the Maturity Date. Within 10 days of the Holder's receipt of the Notice, the Holder shall have the right to designate whether Holder shall receive on the Conversion Date shares of the Company's Common Stock or cash in an amount equal to the then outstanding Principal Amount of this Debenture and any accrued and unpaid interest thereon; provided, however, that in the event the Conversion Date is the Maturity Date, the Holder shall have no right to receive cash. The then unpaid Principal Amount of the Debenture shall be converted into the number of duly authorized, validly issued, fullypaid and nonassessable shares of the Company's Common Stock equal to the then unpaid Principal Amount divided by the Conversion Price in effect on the Conversion Date. On or before the Conversion Date, the Holder shall surrender the Debenture to the Company at the address in Salt Lake City, Utah designated in the Notice from the Company. (b) Adjustment for Interest. In the event that all or any portion of this Debenture shall be converted into Common Stock pursuant to the terms of this Debenture, any accrued but unpaid interest relating to the Principal Amount converted shall be paid and, at the option of the Company, may be paid in either cash or shares of Common Stock. If such interest is paid in shares of Common Stock pursuant to a conversion under Section 4(a)(i) hereof the Holder shall receive number of duly authorized, validly issued, fully-paid and nonassessable JZM5841 19

shares of the Company's Common Stock equal to the then accrued but unpaid interest divided by the Conversion Price in effect on the date on which the Debenture shall have been surrendered for conversion with proper notice of the amount to be converted. If such interest is paid in shares of Common Stock pursuant to a conversion under Section 4(a)(ii) hereof the Holder shall receive number of duly authorized, validly issued, fully-paid and nonassessable shares of the Company's Common Stock equal to the then accrued but unpaid interest divided by the Conversion Price in effect on the Conversion Date. If such interest is paid in cash pursuant to a conversion under Section 4(a)(i) hereof the Company shall pay such interest in cash to the Holder within five (5) days of the date on which the Debenture shall have been surrendered for conversion with proper notice of the amount to be converted. If such interest is paid in cash pursuant to a conversion under Section 4(a)(ii) hereof the Company shall pay such interest in cash to the Holder on the Conversion Date. (c) Issuance of Shares of Common Stock upon Conversion. (i) As promptly as practicable after the surrender, as herein provided, of the Debenture or any portion thereof for conversion, the Company shall deliver or cause to be delivered to the Holder a certificate or certificates representing the appropriate number of duly authorized, validly issued, fully-paid and non-assessable shares of the Company's Common Stock. If conversion is effected pursuant to Section 4(a)(i) hereof, the conversion shall be deemed to have been made at the time that the Debenture shall have been surrendered for conversion with proper notice of the amount to be converted. If conversion is affected under Section 4(a)(i) hereof, upon surrender to the Company for conversion, this Debenture or such portion as is being converted shall be cancelled by the Company and the rights of the Holder as to the portion converted shall cease at such time (or such earlier time as shall be specified in Section 4(d), and the person or persons entitled to receive the shares of Common Stock upon conversion of such Debenture or Debentures shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at the time the Debenture is surrendered for conversion as provided herein. If conversion is effected pursuant to Section 4(a)(ii) hereof, the conversion shall be deemed to have been made on the Conversion Date. If conversion is effected under Section 4(a)(ii) hereof, on the Conversion Date this Debenture or such portion as is being converted shall be cancelled by the Company and the rights of the Holder as to the portion converted shall cease at such time (or such earlier time as shall be specified in Section 4(d), and the person or persons entitled to receive the shares of Common Stock upon conversion of such Debenture or Debentures shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock on the Conversion Date. If the Debenture is converted JZM5841 20

in part only, upon such conversion, the Company shall execute and deliver to the Holder a new Debenture in a Principal Amount equal to the unconverted portion. (ii) Each Common Stock certificate issued upon conversion of all or any portion of this Debenture, shall be stamped or otherwise imprinted with a legend substantially in the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, PLEDGED, HYPOTHECATED OR DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT AND REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER SUCH STATE SECURITIES LAWS OR AN EXCEPTION FROM REGISTRATION THEREUNDER IS AVAILABLE." (d) Tender. From and after tender to the Holder of the unpaid Principal Amount and all accrued but unpaid interest thereon on or after the Maturity Date, this Debenture shall not, for the purposes of this Debenture, or any other purpose, be deemed to be outstanding, and the rights of the Holder under this Debenture (except to receive the consideration tendered) shall cease, regardless of whether this Debenture has been surrendered. (e) Fractional Interests. No fractional shares of Common Stock shall be delivered upon conversion of Debentures. If more than one Debenture shall be surrendered for exchange at one time by the same Holder, the number of full shares which shall be delivered upon such exchange shall be computed on the basis of the aggregate Principal Amounts of the Debentures (or specified portions thereof) so surrendered. In lieu of any fractional shares which otherwise would be deliverable upon exchange of any Debenture (or specified portions thereof), the number of shares issuable upon such conversion will be rounded down to the next lower whole share and the Holder shall be paid an amount in cash equal to the Conversion price times the fraction of a share of Common Stock the Holder would otherwise be entitled to. (f) Taxes, Etc. The Company shall pay all documentary stamp or other transactional taxes attributable to the issuance or delivery of Common Stock upon conversion of the Debenture, provided, however, that the Company shall not be required to pay any taxes which may be payable in respect to any transfer involved in the issuance or JZM5841 21

delivery of any certificate for Common Stock in a name other than that of the Holder of the Debenture in respect of which such Common Stock is issued. (g) Reservation of Stock. The Company shall at all times reserve and keep available, out of its treasury stock or authorized and unissued stock, or both, solely for the purpose of effecting the conversion of the Debenture, such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Debenture. (h) Listing. In the event that the outstanding Common Stock shall be listed on one or more national securities exchanges or The NASDAQ Stock Market at any time after the date hereof, the Company shall use its best efforts to obtain the listing of the Common Stock issuable upon conversion of the Debenture, upon official notice of such issuance at the same time the outstanding Common Stock shall become listed such national securities exchange or The Nasdaq Stock Market. 5. Subordination. (a) This Debenture and any instrument issued in exchange, renewal or substitution of any such Debenture, including any amendment thereto or modifications of any of the foregoing, are referred to in this Section 5 collectively as the "Debenture." The Holder hereby agrees, by accepting this Debenture, for Holder and any transferee, assignee or subsequent holder (each a "Subordinated Creditor"), that the indebtedness of the Company evidenced by the Debenture is subordinated and junior in right of payment to all unpaid "Senior Indebtedness." For purposes of the Debenture, "Senior Indebtedness" shall mean all of the unpaid principal and accrued interest on (including, without limitation, any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Company) all other indebtedness of the Company for borrowed money which is not expressly pari passu with, or subordinated to, this Debenture. (b) As used in this Debenture, the term "subordinated and junior in right of payment" shall mean that no part of this Debenture shall have any claim to the assets of the Company on a parity with or prior to the claims of the Senior Indebtedness. Subject to the provisions of this Section 5, until and unless the Senior Indebtedness shall have been fully paid and satisfied, the Subordinated Creditor shall not be entitled to receive any payment on the whole or any part of the Principal Amount or of any interest on this Debenture. Prior to such time as either (i) a petition or case under any bankruptcy, insolvency, reorganization or other similar law has been filed by or against the Company or the Company has made an assignment for the benefit of creditors or admitted in writing its inability to pay its debts as they come due or there occurs any other event set forth in Sections 8(c) or 8(d) of this Debenture, or (ii) the holder of any of the Senior JZM5841 22

Indebtedness (or any person or entity acting on behalf of such holder) has declared an event of default under any note or other instrument relating to any of the Senior Indebtedness and has notified the Company and the Subordinated Creditor thereof, the Company may make, and the Subordinated Creditor may accept payment of principal and interest due under this Debenture. Each of the events referred to in clauses (i) and (ii) of this Section 5(b) is hereafter referred to as a "Specified Event". (c) Upon the occurrence of any Specified Event: (i) the holders of Senior Indebtedness shall be entitled to receive payment in full in cash (or in such other medium as such holders shall agree) of the principal of, premium, if any, and interest and other amounts payable with respect to, the Senior Indebtedness to the date of payment on the Senior Indebtedness before Holder shall be entitled to receive any payment on the Debenture; and (ii) until the Senior Indebtedness is paid in full in cash (or in such other medium as such holders shall agree), any distribution to which Holder would be entitled but for this Section 5 shall be made to the holders of the Senior Indebtedness. Upon any distribution of assets (in cash, securities or other property) of the Company to Holder in violation of this Section 5, Holder shall hold the distribution in trust for the benefit of, and shall forthwith pay over and deliver such distribution to, the holders of the Senior Indebtedness. (d) If, while any Senior Indebtedness is outstanding, a Specified Event occurs: (i) an "Event of Default" shall have occurred under this Debenture and the holders of the Senior Indebtedness are hereby irrevocably authorized and empowered (in their own names or in the name of Holder or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution in respect of this Debenture and give acquittance therefor and to file claims and proofs of claim and take such other action (including, without limitation, voting the indebtedness evidenced by this Debenture) as such holders may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of such holders; and (ii) the Subordinated Creditor shall duly and promptly take such action as the holders of such Senior Indebtedness may request (A) to collect this Debenture for the account of the holders of the Senior Indebtedness and to file appropriate claims or proofs of claim in respect of this Debenture, (B) to execute and deliver to the holders of the Senior Indebtedness such powers of attorney, JZM5841 23

assignments, or other instruments as such holders may request in order to enable them to enforce any and all claims with respect to this Debenture, and (C) to collect and receive any and all payments of distributions which may be payable or deliverable upon or with respect to this Debenture. Notwithstanding anything to the contrary contained in this Debenture or any agreement or instrument relating to the indebtedness evidenced hereby, the Subordinated Creditor shall not initiate any action to seek or enforce collection of the Debenture, including initiating a filing of a case or petition for relief under the Federal Bankruptcy Code during any period with respect to which payment may not be made on the Debenture under this Section 5 unless judicial proceedings have been initiated by the holders of the Senior Indebtedness to collect the Senior Indebtedness and are continuing; provided, however, that if the Company fails to pay any interest or principal with respect to this Debenture (for these purposes, the "Defaulted Payment") and such Event of Default continues for a period of thirty (30) days ("Default Period") from the date such interest or principal was due, then the Subordinated Creditor shall have the right to institute proceedings against the Company to recover the Defaulted Payment; provided, further, that (A) prior to instituting proceedings against the Company to recover the Defaulted Payment, the Subordinated Creditor shall give the holders of the Senior Indebtedness at least twenty (20) days notice of Company's failure to pay such interest or principal during which time the holders of the Senior Indebtedness shall have the right, but not the obligation, to pay or cause to be paid the Defaulted Payment (such notice not to extend the Default Period in any manner); (B) the Subordinated Creditor shall not have the right to institute proceedings to recover any amounts other than the Defaulted Payment; and (C) the Subordinated Creditor shall have no right to file any petition in bankruptcy against the Company or take advantage of any insolvency law in connection with the recovery of the Defaulted Payment. Notwithstanding anything herein to the contrary, the Subordinated Creditor may enforce the rights to collect the unpaid balance hereof on and after the Maturity Date. (e) Except as specifically provided herein, the rights under these subordination provisions of the holders of the Senior Indebtedness as against the Subordinated Creditor shall remain in full force and effect without regard to, and shall not be impaired or affected by: (i) any act or failure to act on the part of the Company under the terms of this Debenture; (ii) any extension or indulgence in respect of any payment or prepayment of any Senior Indebtedness or any part thereof or in respect of any other amount payable to any holder of the Senior Indebtedness; JZM5841 24

(iii) any amendment, modification or waiver of, or addition or supplement to, or deletion from, or compromise' release, consent or other action in respect of, any of the terms of any Senior Indebtedness, any agreement which may be made relating to any Senior Indebtedness or any instrument evidencing the Senior Indebtedness; or (iv) any exercise or nonexercise by any holder of the Senior Indebtedness of any right or remedy under or in respect of any Senior Indebtedness or these subordination provisions or any waiver of any such right or remedy or of any default in respect of the Senior Indebtedness or these subordination provisions, or any receipt by any holder of the Senior Indebtedness of any security, or any failure by any holder of the Senior Indebtedness to perfect a security interest in, or any release by any holder of the Senior Indebtedness, any security or guaranty for the payment of the Senior Indebtedness. (f) The obligations of the Subordinated Creditor hereunder shall continue to be effective, or be reinstated, as the case may be, if at any time any payment in respect of any Senior Indebtedness, or any other payment to any holder of any Senior Indebtedness, is rescinded or must otherwise be restored or returned by the holders of such Senior Indebtedness upon the occurrence of any event described in Section 5(b) hereof, all as though such payment had not been made. (g) The provisions of this Section 5 shall continue in full force and effect, notwithstanding the commencement of a case under Title 11 of the United States Code, as amended, by or against the Company or any of its property. In furtherance of the foregoing, if Holder receives, directly or indirectly, by set-off, redemption, purchase or in any other manner, any property of, or payments from, the Company after the commencement of such a case on account of a claim which is subordinated by the terms of this Section 5 (whether as "adequate protection" payments or otherwise), Holder shall immediately turn such property or payments over to the holders of the Senior Indebtedness in accordance with the applicable provisions of this Section 5. (h) Notwithstanding the other provisions in this Section 5, this Debenture may be converted into shares of the Company's Common Stock on the terms set forth in this Debenture or on such other terms as may be agreed to by the Company and the Holder at any time, subject to Section 4(a) above. (i) Subject to the prior payment in full of the Senior Indebtedness, the Subordinated Creditor shall be subrogated to the rights of the holders of the Senior Indebtedness to receive payments, including interest, penalties and fees, or distributions of assets of the Company made on the Senior Indebtedness until the Principal Amount of and interest on this Debenture shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any JZM5841 25

cash, property or securities to which the Subordinated Creditor would be entitled except for these provisions shall, as between the Company and its creditors (other than the holders of the Senior Indebtedness), be deemed to be a payment by the Company to or on account of the Senior Indebtedness. (j) The foregoing provisions of Section 5 are solely for the purpose of defining the relative rights of the holders of the Senior Indebtedness on the one hand and the Subordinated Creditor on the other hand, and nothing in those provisions shall impair, as between the Company and the Subordinated Creditor, the obligation of the Company, which is unconditional and absolute, to pay to the Subordinated Creditor the Principal Amount of and interest on this Debenture or prevent the Subordinated Creditor from exercising all remedies permitted by law upon default under this Debenture, subject to the rights set forth above of the holders of the Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the Subordinated Creditor and to prevent the Subordinated Creditor from exercising such remedies upon default under this Debenture until the Senior Indebtedness has been paid in full. 6. Ranking of Obligations. The obligations of the Company hereunder do rank and will rank at least pari passu in priority of payment with all other indebtedness of the Company except for Senior Indebtedness. 7. Covenants. Until satisfaction in full of all obligations of the Company under this Debenture, the Company shall at all times comply with all of the covenants of the Company set forth herein or in the Purchase Agreement, which are hereby incorporated by reference herein as if each such covenant was set forth in full in this Debenture, together with any necessary defined terms from the Purchase Agreement. 8. Events of Default. The following events are hereby defined for all purposes of this Debenture as Events of Default: (a) Failure of the Company to pay any installment of principal or interest hereunder when and as the same shall become due and payable, which failure shall have continued for a period of 5 days. (b) The breach by the Company of any of the other covenants set forth in this Debenture or in the Purchase Agreement if such breach is not cured within 30 days after written notice thereof is given by the Holder. (c) The institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter in effect, or JZM5841 26

any other applicable Federal or State bankruptcy, insolvency or other similar law, or the consent by it to the institution of proceedings thereunder or the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due; (d) The entry of a decree or order by a court having jurisdiction for relief in respect of the Company, or adjudging the Company a bankrupt or insolvent, or approving as properly filed petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under Title 11 of the United States Code, as now constituted or hereafter in effect, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, trustee (or other similar official) of the Company or of any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (e) A default shall occur under any other agreement, document or instrument to which the Company is a party and such default is not cured within any applicable grace period or waived in writing, and such default (i) involves the failure to make any payment when due in respect of any indebtedness (other than the Principal Amount and interest thereon) of the Company in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate, or (ii) causes such indebtedness or a portion thereof in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or (iii) permits any holder of such indebtedness or a trustee to cause such indebtedness or a portion thereof in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate to become due prior to its stated maturity or prior to the regularly scheduled dates of payment and such default is not cured or waived within 30 days after the occurrence thereof. If one or more Events of Default shall happen and be continuing, then, and in each and every such case, the Holder, at its option, by notice in writing to the Company, may declare the entire Principal Amount and all interest accrued thereon and any other sums due hereunder, if not already due and payable, to be immediately due and payable. If there shall occur an Event of Default described in Sections 8(c) or 8(d), the entire unpaid balance of the Principal Amount with interest accrued thereon and all other sums due under this Debenture shall be immediately due and payable without notice to the Company. If the entire unpaid balance with interest accrued thereon shall, as a result of either of the preceding two sentences, be immediately due and payable, the unpaid balance of the Principal Amount shall accrue interest at the per annum rate of six percent (6%) compounded annually to the date of default and thereafter at a rate JZM5841 27

which shall be equal to a per annum rate of eight percent (8%) compounded annually (the "Default Rate") and all other sums due by the Company hereunder shall also be immediately due and payable; and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Holder in this Debenture or under applicable law. In such case, the Holder may also recover all costs of suit and other expenses in connection therewith, together with reasonable attorney's fees for collection, together with the interest on any judgment obtained by the Holder at the Default Rate, including interest at that rate from and after the date of any execution, judicial or foreclosure sale until actual payment is made to the Holder of the full amount due the Holder. 9. Payment on Default. In the event that an Event of Default shall occur, then the Company shall pay to the Holder the whole amount which then shall have become due on this Debenture for principal and interest, and in addition thereto, such additional amount as shall be sufficient to cover the costs and expenses of collection. No delay or omission of the Holder to exercise any rights or powers accruing upon any default which shall not have been remedied shall impair any such right or power, or shall be construed to be a waiver of any such default or acquiescence therein; and every power and remedy given by this to the Holder may be exercised from time to time and as often as may be deemed expedient by the Holder. 10. Exchange of Debenture. At the option of the Holder, this Debenture may be exchanged for other Debentures in denominations of $1,000 and any integral multiple thereof and of a like aggregate principal amount and tenor. Upon surrender of this Debenture to the Company for exchange, the Company shall execute and deliver to the Holder the Debentures which the Holder is entitled to receive in exchange. 11. Immunity of Incorporators, Stockholders, Officers, Directors and Employees. No recourse shall be had for the payment of the principal or interest on this Debenture or for any claim based thereon or otherwise in any manner in respect thereof, to or against any subsidiary, incorporator, stockholder, officer, director or employee, as such, past, present or future, of the Company or any respective subsidiary, incorporator, stockholder, officer, director or employees, as such, past, present or future, of any predecessor or successor corporation, either directly or through the Company or such predecessor or successor corporation, whether by virtue of any constitutional provision or statute or rule of law, or by the enforcement of any assessment or penalty, or in any other manner, all such liability being expressly waived and released by the acceptance of this Debenture and as part of the consideration for the issue thereof. JZM5841 28

12. Adjustment for Certain Events. In the event of any (i) stock split, stock dividend or other distribution on or reclassification of the Common Stock of the Company payable in securities of the Company, (ii) issuance by the Company of rights or warrants to all holders of Common Stock at a price per share less than the Adjusted Fair Market Value (as defined herein) of the Common Stock on the date of such issuance, (iii) distribution to all holders of Common Stock of evidences of the Company's indebtedness or assets, or (iv) any event as to which the other provisions of this section are not strictly applicable but the failure to make any adjustment would not fairly protect the conversion rights of Holder as provided in this Debenture in accordance with the essential intent and principles hereof, the Conversion Price shall be equitably adjusted, if necessary, so that the Holder shall receive, in exchange for the Conversion Price, such securities of other property which the Holder might have received had the Holder converted the Debenture immediately prior to such event. As used herein "Fair Market Value" means: (a) If the Common Stock of the Company is traded on a national securities exchange or listed on the Nasdaq national market quotation system, the Fair Market Value of the Common Stock shall be the average closing price for the Common Stock for the five consecutive trading days prior to the date on which the Fair Market Value is determined; or (b) if the Common Stock is not so traded on a national securities exchange or listed on the Nasdaq national market quotation system, the Fair Market Value shall be as agreed to by the Holder and the Company and if the Holder and the Company do not agree, then the Fair Market Value shall be determined by binding arbitration in accordance with the rules of the American Arbitration Association. As used herein "Adjusted Fair Market Value" means: Ninety-five percent (95%) of Fair Market Value. If at any time the Company shall issue any rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or other securities convertible into or exchangeable for Common Stock, whether or not such options, rights, securities convertible into or exchangeable for Common Stock are immediately exercisable, and the price per share for which such Common Stock is issuable is less than the Conversion Price or the Adjusted Fair Market Value on the date of such issuance, the Conversion Price shall be reduced to whichever of the following two Conversion Prices (calculated to the nearest cent) shall be lower: (1) the Conversion Price determined by dividing (A) an amount equal to the sum of (x) the product derived by multiplying the Conversion Price in effect immediately prior to such issue or sale times the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale, plus (y) the consideration, if any, JZM5841 29

received by the Corporation upon such issue or sale, by (B) the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale; or (2) the Conversion Price determined by multiplying the Conversion Price in effect immediately prior to such issue or sale by a fraction, the numerator of which shall be the sum of (x) the number of shares of Common Stock Deemed Outstanding immediately prior to such issue or sale multiplied by the Adjusted Fair Market Value of the Common Stock determined as of the time of such issue or sale plus (y) the consideration, if any, received by the Corporation upon such issue or sale, and the denominator of which shall be the product derived by multiplying the Adjusted Fair Market Value of the Common Stock determined as of the time of such issue or sale times the number of shares of Common Stock Deemed Outstanding immediately after such issue or sale. For purposes hereof, "Common Stock Deemed Outstanding" as of any date shall mean all shares of Common Stock issued and outstanding on such date and all shares of Common Stock issuable upon exercise or conversion, as applicable, of the option or convertible security then being issued. The parties acknowledge and agree that, notwithstanding the foregoing, no adjustment to the Conversion Price shall be made as a result of (i) the issuance of up to 800,000 shares of Common Stock pursuant to certain outstanding warrants of the Company which are "out of the money" as of the date of this Debenture, (ii) the issuance of up to 1,500,000 shares of Common Stock pursuant to certain outstanding options, warrants or other securities of the Company convertible into Common Stock which are "in the money" as of the date of this Debenture, (iii) the issuance of or granting of rights to acquire up to 790,000 shares of Common Stock to PacifiCorp Financial Services, Inc. or any of its affiliates ("PacifiCorp"), or their respective assigns, pursuant to a Convertible Loan and Security Agreement to be entered into between the Company and PacifiCorp, (iv) the issuance of or granting of rights to acquire up to 515,000 shares of Common Stock to be sold by the Company pursuant to a Private Placement Memorandum, (v) the issuance of or granting of rights to acquire up to 100,000 shares of Common Stock to LKD Partnership or its assigns pursuant to a Convertible Debenture in the principal amount of approximately $1,000,000 issued in November, 1996, (vi) the issuance of or granting of rights to acquire up to 2,000,000 shares of Common Stock to officers, directors, consultants or employees of the Company, which rights vest over the next 9 to 10 years, and (vii) the issuance of or granting of rights to acquire up to 400,000 additional shares of Common Stock to any third parties in transactions other than those contemplated in this paragraph. 13. Consolidations or Mergers. In case of any consolidation or merger of the Company with or into another person, or any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which share exchange the Common Stock of the Company is converted into other securities, cash or property, the Company, or such successor or purchasing corporation, as the case may be, shall, prior to such conJZM5841 30

solidation, merger, sale, transfer or share exchange, execute and deliver to the Holder an agreement, in form and substance satisfactory to Holder, providing that the Holder shall have the right thereafter to convert this Debenture into the kind and amount of shares of stock or other securities, cash or other property receivable upon such consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Common Stock of the Company into which this Debenture could have been converted immediately prior to such consolidation, merger, sale, transfer or share exchange. Such agreement shall also provide that the provisions of Sections 12 and 13 hereof shall be amended without further action of the Company or any successor to apply to the shares of stock or other securities of the successor issued to the stockholders of the Company in any such consolidation, merger, sale, transfer or share exchange. The Holder of the Debenture shall have the right thereafter to convert this Debenture only into the kind and amount of shares of stock and other securities and property receivable upon or deemed to be held following such consolidation, merger, sale, transfer or share exchange by a holder of a number of shares of the Common Stock of the Company into which the Debenture could have been converted immediately prior to such consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges. 14. Notice of Adjustment Event. The Company shall provide written notice to the Holder of the Debenture at least at least 30 days prior to (i) the occurrence of a stock split, stock dividend or other distribution on or reclassification of the Common Stock of the Company payable in securities of the Company, (ii) the issuance by the Company of rights or warrants to all holders of Common Stock at a price per share less than the Adjusted Fair Market Value (as defined herein) of the Common Stock on the date of such issuance, (iii) a distribution to all holders of Common Stock of evidences of the Company's indebtedness or assets, (iv) any consolidation or merger of the Company with or into another person, or any sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which share exchange the Common Stock of the Company is converted into other securities, cash or property, (v) the record date for a dividend (other than a dividend payable in Common Stock or other securities of the Company) upon Common Stock payable otherwise than out of earnings or earned surplus (determined in accordance with generally accepted accounting principles consistently applied) (a "Liquidating Dividend"); or (vi) the occurrence of an event as to which the other provisions of this section are not strictly applicable but the failure to make any adjustment would not fairly protect the conversion rights of Holder as provided in this Debenture in accordance with the essential intent and principles hereof. The Company shall provide notice to the Holder at least ten (10) days prior to the record date for any dividend other than a Liquidating Dividend or a dividend payable in Common Stock or other securities of the Company. Such notice shall include an adjustment to the Conversion Price including such information showing the calculation of any proposed adjustment or stating that no such adjustment is necessary. The adjustment determined by the Company shall be conclusive unless the Holder shall provide the Company with a written notice objecting to such adjustment within 30 days of Holder's receipt of written notice of such adjustment. JZM5841 31

15. Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with a reputable overnight courier or with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party in the Purchase Agreement, or at such other address as such party may designate by ten (10) days advance written notice to the other party. 16. Miscellaneous. (a) The Company hereby waives presentment, demand, protest, notice of demand, notice of nonpayment or dishonor, notice of protest and all other notices of any kind in connection with the delivery, acceptance, performance default or enforcement of the payment of this Debenture. No failure to exercise, and no delay in exercising any rights hereunder on the part of the Holder hereof shall operate as a waiver of such rights. (b) The Holder and the Company may from time to time enter into written agreements amending or changing any provisions of this Debenture or the Purchase Agreement or the rights of the Holder or the Company hereunder or thereunder, or may grant written waivers or consents to a departure from the due performance of the obligations of the Company hereunder or thereunder. (c) The Company agrees that its liability under this Debenture shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by the Holder. No course of dealing and no delay or failure of the Holder in exercising any right, power, remedy or privilege under this Debenture or the Purchase Agreement shall affect any other or future exercise thereof or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy of privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Holder under this Debenture and the Purchase Agreement are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of the Holder of any breach or default under this Debenture or any such waiver of any provision or condition of this Debenture must be in writing and shall be effective only to the extent specifically set forth in such writing. (d) Whenever any payment or action to be made or taken hereunder shall be stated to be due on a day which is not a business day, such payment or action shall be made or taken on the next following business day, and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. JZM5841 32

(e) All notices, requests, demands, directions and other communications (collectively, "notices") given to or made upon any party hereto under the provisions of the Debenture shall be in writing and shall be effective if given in accordance with the provisions of the Purchase Agreement. (f) The provisions of this Debenture are intended to be severable. If any provision of this Debenture shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. (g) This Debenture and the Purchase Agreement and other documents delivered in connection herewith and therewith supersede all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein. Any Holder of this Debenture acknowledges that such Holder is bound by the applicable provisions of the Purchase Agreement and by the acceptance of this Debenture such Holder agrees to the terms thereof. (h) All representations and warranties of the Company contained herein or made in connection herewith shall survive and shall not be waived by the execution and delivery of this Debenture or by any investigation by the Holder, but shall terminate upon Company's full satisfaction and payment of all outstanding amounts in the Principal Amount of or interest on this Debenture. (i) This Debenture shall be binding upon and shall inure to the benefit of the Holder, the Company and their respective successors and assigns, except that the Company may not assign or transfer any of its rights and obligations hereunder or any interest herein. (j) Whenever the Holder's consent is required to be obtained under this Debenture or the Purchase Agreement as a condition to any action, inaction, condition or event, the Holder shall be authorized to give or withhold such consent in its sole and absolute discretion and to condition its consent upon the giving of additional collateral, the payment of money or any other matter. (k) The representations, warranties and covenants contained herein shall be independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exceptions be deemed to permit any action or omission that would be in contravention of applicable law. JZM5841 33

(l) This Debenture shall be governed by, and construed in accordance with, the laws of the State of Utah, excluding, however, the rules relating to conflicts of law. (m) In no event shall the rate of interest payable under this Debenture exceed the maximum rate of interest permitted to be charged by applicable law (including the choice of law rules) and any interest paid in excess of the permitted rate shall be refunded to the Company. Such refund shall be made by application of the excessive amount of interest paid against any sums outstanding and shall be applied in such order as the Holder may determine. If the excessive amount of interest paid exceeds the sums outstanding, the portion exceeding the said sums outstanding shall be refunded in cash by the Holder. Any such crediting or refund shall not cure or waive any default by the Company hereunder. The Company agrees, however, that in determining whether or not any interest payable under this Debenture exceeds the highest rate permitted by law, any non-principal payment, other than interest payments, including, without limitation, fees and late charges, shall be deemed, to the extent permitted by law, to be an expense, fee, premium or liquidated damages, rather than interest. (n) THE COMPANY AND THE HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATED TO THIS DEBENTURE OR THE PURCHASE AGREEMENT OR ANY ACT OR OMISSION WHICH EITHER PARTY ASSERTS RESULTED IN ANY LIABILITY TO THE COMPANY, THE HOLDER OR THEIR RESPECTIVE OFFICERS, DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES OR AGENTS, TO THE FULL EXTENT PERMITTED BY LAW. JZM5841 34

IN WITNESS WHEREOF, the Company, intending to be legally bound hereby, has caused this Debenture to be duly executed by its respective authorized officers on the day and year first above written. COVOL TECHNOLOGIES, INC. By: Name: Title: [Corporate Seal] ATTEST: _______________, Secretary Accepted and Agreed to as of the first day referred to above AJG FINANCIAL SERVICES, INC. By: Name: Title: JZM5841 35

EXHIBIT A [FORM OF HOLDER'S ELECTION TO CONVERT] The undersigned owner of this Debenture hereby irrevocably exercises the option to convert this Debenture or portion below designated, which shall be $50,000 or greater and in an integral multiple of $1,000, into shares of Common Stock of Covol Technologies, Inc., in accordance with the terms of this Debenture, and directs that the shares issuable and deliverable upon conversion, be issued in the name of and delivered to the undersigned. Dated: Signature (signature guarantee required if shares are to be issued other than to owner) If shares are to be issued otherwise than to owner:

Please print name and address (including zip code number) Social Security or other Tax Identification Number: Portion of Debenture to be converted (no less than $50,000 and in an integral multiple of $1,000, if less than all): $ JZM5841 A-1

EXHIBIT B [FORM OF COMPANY'S ELECTION TO CONVERT] The undersigned, Covol Technologies, Inc., hereby irrevocably exercises its option to convert the entire outstanding Principal Amount of this Debenture into shares of Common Stock of the Covol Technologies, Inc., in accordance with the terms of this Debenture on _____________________, the Conversion Date. Dated: Signature JZM5841 B-1

EXHIBIT B THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF ANY STATE. THIS DEBENTURE MAY NOT BE TRANSFERRED OR SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND SUCH LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HAS BEEN DELIVERED TO THE ISSUER TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED. SENIOR DEBENTURE DUE DECEMBER 20, 1999 Salt Lake City, Utah [$2,900,000] December __, 1996 COVOL TECHNOLOGIES, INC., a Delaware corporation whose headquarters are located at 3280 North Frontage Road, Lehi, Utah 84043 (the "Company"), promises to pay to the order of AJG FINANCIAL SERVICES, INC., or its successors and assigns (the "Holder"), the aggregate principal sum of [Two Million, Nine Hundred Thousand Dollars ($2,900,000.00)] (the "Principal Amount"), in lawful money of the United States of America, together with interest thereon from the date hereof on the unpaid Principal Amount, on the terms and conditions as hereinafter specified, until the Principal Amount is repaid in full. 1. Identification of Debenture. This Debenture is the "Senior Debenture" defined in that certain Debenture Agreement and Security Agreement of even date herewith between the Company and the Holder (the "Purchase Agreement") and the Holder is entitled to all of the benefits that arise under the Purchase Agreement from being the "Investor" and the holder of the "Senior Debenture" thereunder. 2. Payment of Principal and Interest. (a) The Principal Amount shall be payable on December 20, 1999 ("Principal Repayment Date", also herein referred to as the "Maturity Date"). At the Maturity Date, any final Prepayment (as defined in Section 3 below), any acceleration of the Principal Amount JZM5844

pursuant to Section 8 below, any unpaid Principal Amount of this Debenture, all interest accrued thereon and other sums payable hereunder shall be due and payable in full, notwithstanding any other provision hereof. (b) From and after the date hereof, interest on the unpaid balance of the Principal Amount shall accrue and be due and payable at the per annum rate equal to the prime interest rate publicly announced from time to time by Key Bank of Utah (the "Bank"), plus two percent (2%) (the "Interest Rate"). Fifty percent (50%) of the interest on the outstanding Principal Amount shall accrue and be due and payable upon the Maturity Date, and fifty percent (50%) of the interest on the outstanding Principal Amount shall be due and payable on each December 20, commencing December 20, 1997, and upon the Maturity Date, provided that upon any Prepayment and any acceleration of the Principal Amount pursuant to Section 8 below, all accrued and unpaid interest on the principal amount of the Prepayment or on the accelerated Principal Amount shall be immediately due and payable. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed. In the event that all or any portion of the Principal Amount is not paid on any regularly scheduled payment date of this Debenture or upon acceleration (regardless of the reason therefor), the portion of the Principal Amount not paid when due shall bear interest until paid at the "Default Rate" (as defined in Section 8 below). (c) All portions of the Principal Amount, all interest thereon and all other sums due hereunder, shall be payable, without set-off or deduction, at the offices of the Holder set forth above or at such other place as Holder, from time to time may designate to the Company in writing, in cash, certified check or check of the Company that the Holder has agreed in writing in advance to accept or a wire transfer to such account as Holder may have previously designated to the Company in writing. 3. Prepayment. The Company may prepay any portion of the Principal Amount or any installment thereof, without penalty or premium, upon five (5) days' written notice to Holder (a "Prepayment"). Any Prepayments shall be applied first to any overdue payments of principal or interest that bear interest at the "Default Rate", next to any other accrued but unpaid interest in the inverse order of maturity and then to reduction of installments of principal of the Principal Amount in the inverse order in which such installments are due. Any prepayments shall not postpone the due date of or change the amount of any subsequent installment of principal due hereunder. If a Change in Control (as hereinafter defined) occurs, the Holder may, by notice to the Company given not later than the date 10 days after the date the Company has notified the Holder of such Change in Control, require the prepayment of the entire unpaid Principal Amount of this Debenture and all accrued but unpaid interest thereon; whereupon the Company shall, on the date 10 days after the date such notice is given by the Holder, prepay this Debenture. The Company shall give the Holder notice of the occurrence of any Change in Control not later than 10 days after such Change in Control occurred. JZM5844 B-3

As used herein, "Change in Control" of the Company means: (a) any "person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years (not including any period prior to the date of this Debenture), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c) or (d) of this Section) whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (I) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 30% of the combined voting power of the Company's then outstanding securities; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 4. Adjustment of Interest Rate. The Interest Rate shall be adjustable from time and each time the Bank announces a change in its prime interest rate. The change in the Interest Rate shall be effective on the date specified by the Bank as the effective date of the change. 5. Exchange of Debenture. At the option of the Holder, this Debenture may be exchanged for other Debentures in denominations of $1,000 and any integral multiple thereof and of a like aggregate principal amount and tenor. Upon surrender of this Debenture to the JZM5844 B-4

Company for exchange, the Company shall execute and deliver to the Holder the Debentures which the Holder is entitled to receive in exchange. 6. Ranking of Obligations. The obligations of the Company hereunder do rank and will rank at least pari passu in priority of payment with all other indebtedness of the Company. 7. Covenants. Until satisfaction in full of all obligations of the Company under this Debenture, the Company shall at all times comply with all of the covenants of the Company set forth herein or in the Purchase Agreement, which are hereby incorporated by reference herein as if each such covenant was set forth in full in this Debenture, together with any necessary defined terms from the Purchase Agreement. 8. Events of Default. The following events are hereby defined for all purposes of this Debenture as Events of Default: (a) Failure of the Company to pay any installment of principal or interest hereunder when and as the same shall become due and payable, which failure shall have continued for a period of 5 days after receiving written notice of such late payment. (b) The breach by the Company of any of the other covenants set forth in this Debenture or in the Purchase Agreement if such breach is not cured within 30 days after written notice thereof is given by the Holder. (c) The institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter in effect, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or the consent by it to the institution of proceedings thereunder or the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by the Company of an assignment for the benefit of creditors, or the admission by the Company in writing of its inability to pay its debts generally as they become due; (d) The entry of a decree or order by a court having jurisdiction for relief in respect of the Company, or adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under Title 11 of the United States Code, as now constituted or hereafter in effect, or any other applicable Federal or State bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, trustee (or other similar official) of the Company or of any substantial part of JZM5844 B-5

its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (e) A default shall occur under any other agreement, document or instrument to which the Company is a party and such default is not cured within any applicable grace period or waived in writing, and such default (i) involves the failure to make any payment when due in respect of any indebtedness (other than the Principal Amount and interest thereon) of the Company in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate, or (ii) causes such indebtedness or a portion thereof in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or (iii) permits any holder of such indebtedness or a trustee to cause such indebtedness or a portion thereof in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate to become due prior to its stated maturity or prior to the regularly scheduled dates of payment and such default is not cured or waived within 30 days after the occurrence thereof. If one or more Events of Default shall happen and be continuing, then, and in each and every such case, the Holder, at its option, by notice in writing to the Company, may declare the entire Principal Amount and all interest accrued thereon and any other sums due hereunder, if not already due and payable, to be immediately due and payable. If there shall occur an Event of Default described in Sections 8(c) or 8(d), the entire unpaid balance of the Principal Amount with interest accrued thereon and all other sums due under this Debenture shall be immediately due and payable without notice to the Company. If the entire unpaid balance with interest accrued thereon shall, as a result of either of the preceding two sentences, be immediately due and payable, the unpaid balance of the Principal Amount shall accrue interest at the Interest Rate compounded annually to the date of default and thereafter at a rate which shall be equal to the Interest Rate plus two percent (2%) (the "Default Rate") and all other sums due by the Company hereunder shall also be immediately due and payable; and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Holder in this Debenture or under applicable law. In such case, the Holder may also recover all costs of suit and other expenses in connection therewith, together with reasonable attorney's fees for collection, together with the interest on any judgment obtained by the Holder at the Default Rate, including interest at that rate from and after the date of any execution, judicial or foreclosure sale until actual payment is made to the Holder of the full amount due the Holder. 9. Payment on Default. In the event that an Event of Default shall occur, then the Company shall pay to the Holder the whole amount which then shall have become due on the Debenture for principal and interest, and in addition thereto, such additional amount as shall be sufficient to cover the costs and expenses of collection. JZM5844 B-6

No delay or omission of the Holder to exercise any rights or powers accruing upon any default which shall not have been remedied shall impair any such right or power, or shall be construed to be a waiver of any such default or acquiescence therein; and every power and remedy given by this to the Holder may be exercised from time to time and as often as may be deemed expedient by the Holder. 10. Immunity of Incorporators, Stockholders, Officers, Directors and Employees. No recourse shall be had for the payment of the principal or interest on this Debenture or for any claim based thereon or otherwise in any manner in respect thereof, to or against any subsidiary, incorporator, stockholder, officer, director or employee, as such, past, present or future, of the Company or any respective subsidiary, incorporator, stockholder, officer, director or employees, as such, past, present or future, of any predecessor or successor corporation, either directly or through the Company or such predecessor or successor corporation, whether by virtue of any constitutional provision or statute or rule of law, or by the enforcement of any assessment or penalty, or in any other manner, all such liability being expressly waived and released by the acceptance of this Debenture and as part of the consideration for the issue thereof. 11. Notices. Unless otherwise provided, any notice required or permitted under this Debenture shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with a reputable overnight courier or with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party in the Purchase Agreement, or at such other address as such party may designate by ten (10) days advance written notice to the other party. 12. Miscellaneous. (a) The Company hereby waives presentment, demand, protest, notice of demand, notice of nonpayment or dishonor, notice of protest and all other notices of any kind in connection with the delivery, acceptance, performance default or enforcement of the payment of this Debenture. No failure to exercise, and no delay in exercising any rights hereunder on the part of the Holder hereof shall operate as a waiver of such rights. (b) The Holder and the Company may from time to time enter into written agreements amending or changing any provisions of this Debenture or the Purchase Agreement or the rights of the Holder or the Company hereunder or thereunder, or may grant written waivers or consents to a departure from the due performance of the obligations of the Company hereunder or thereunder. (c) The Company agrees that its liability under this Debenture shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by the JZM5844 B-7

Holder. No course of dealing and no delay or failure of the Holder in exercising any right, power, remedy or privilege under this Debenture or the Purchase Agreement shall affect any other or future exercise thereof or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power, remedy of privilege preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of the Holder under this Debenture and the Purchase Agreement are cumulative and not exclusive of any rights or remedies which they would otherwise have. Any waiver, permit, consent or approval of any kind or character on the part of the Holder of any breach or default under this Debenture or any such waiver of any provision or condition of this Debenture must be in writing and shall be effective only to the extent specifically set forth in such writing. (d) Whenever any payment or action to be made or taken hereunder shall be stated to be due on a day which is not a business day, such payment or action shall be made or taken on the next following business day, and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. (e) All notices, requests, demands, directions and other communications (collectively, "notices") given to or made upon any party hereto under the provisions of this Debenture shall be in writing and shall be effective if given in accordance with the provisions of the Purchase Agreement. (f) The provisions of this Debenture are intended to be severable. If any provision of this Debenture shall be held invalid or unenforceable in whole or in part in any jurisdiction such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. (g) This Debenture and the Purchase Agreement and other documents delivered in connection herewith and therewith supersede all prior understandings and agreements, whether written or oral, between the parties hereto and thereto relating to the transactions provided for herein and therein. Any Holder of this Debenture acknowledges that such Holder is bound by the applicable provisions of the Purchase Agreement and by the acceptance of this Debenture such Holder agrees to the terms thereof. (h) All representations and warranties of the Company contained herein or made in connection herewith shall survive and shall not be waived by the execution and delivery of this Debenture or by any investigation by the Holder, but shall terminate upon Company's full satisfaction and payment of all outstanding amounts in the Principal Amount of or interest on this Debenture. JZM5844 B-8

(i) This Debenture shall be binding upon and shall inure to the benefit of the Holder, the Company and their respective successors and assigns, except that the Company may not assign or transfer any of its rights and obligations hereunder or any interest herein. (j) Whenever the Holder's consent is required to be obtained under this Debenture or the Purchase Agreement as a condition to any action, inaction, condition or event, the Holder shall be authorized to give or withhold such consent in its sole and absolute discretion and to condition its consent upon the giving of additional collateral, the payment of money or any other matter. (k) The representations, warranties and covenants contained herein shall be independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other representation, warranty or covenant contained herein unless expressly provided, nor shall any such exceptions be deemed to permit any action or omission that would be in contravention of applicable law. (l) This Debenture shall be governed by, and construed in accordance with, the laws of the State of Utah, excluding, however, the rules relating to conflicts of law. (m) In no event shall the rate of interest payable under this Debenture exceed the maximum rate of interest permitted to be charged by applicable law (including the choice of law rules) and any interest paid in excess of the permitted rate shall be refunded to the Company. Such refund shall be made by application of the excessive amount of interest paid against any sums outstanding and shall be applied in such order as the Holder may determine. If the excessive amount of interest paid exceeds the sums outstanding, the portion exceeding the said sums outstanding shall be refunded in cash by the Holder. Any such crediting or refund shall not cure or waive any default by the Company hereunder. The Company agrees, however, that in determining whether or not any interest payable under this Debenture exceeds the highest rate permitted by law, any non-principal payment, other than interest payments, including, without limitation, fees and late charges, shall be deemed, to the extent permitted by law, to be an expense, fee, premium or liquidated damages, rather than interest. (n) THE COMPANY AND THE HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATED TO THIS DEBENTURE OR THE PURCHASE AGREEMENT OR ANY ACT OR OMISSION WHICH EITHER PARTY ASSERTS RESULTED IN ANY LIABILITY TO THE COMPANY, THE HOLDER OR THEIR RESPECTIVE OFFICERS, DIRECTORS, STOCKHOLDERS, PARTNERS, EMPLOYEES OR AGENTS, TO THE FULL EXTENT PERMITTED BY LAW. JZM5844 B-9

IN WITNESS WHEREOF, the Company, intending to be legally bound hereby, has caused this Debenture to be duly executed by its respective authorized officers on the day and year first above written. COVOL TECHNOLOGIES, INC. By: Name: Title: [Corporate Seal] Attest: , Secretary Accepted and Agreed to as of the first day referred to above AJG FINANCIAL SERVICES, INC. By: Name: Title: JZM5844 B-10

REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT is made as of the 20th day of December, 1996, by and among COVOL TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and AJG FINANCIAL SERVICES, INC. and its successors, assigns and transferees (herein referred to collectively as the "Holders" and individually as a "Holder"). W I T N E S S E T H: WHEREAS, on the date hereof, Holder is the holder of that certain 6% Convertible Subordinated Debenture due December 20, 1999, in the principal amount of $1,100,000 (the "Debenture"); WHEREAS, pursuant to the terms of the Debenture, Holder and the Company have the right to convert all or any portion of the outstanding principal amount of the Debenture and any accrued and unpaid interest thereon into shares of Common Stock of the Company; and WHEREAS, the Company has agreed to provide the Holders with certain registration rights as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Company Common Stock" shall mean the shares of common stock, $.01 par value per share, of the Company. "Debenture" shall have the meaning set forth in the preamble. "Effective Date" shall mean the date of this Agreement. JZM5800

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Holder" or "Holders" shall have the meaning set forth in the preamble. "Person" shall mean an individual, partnership, corporation, trust, or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, and any such prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "Public Sale" shall mean a public sale or distribution of Registrable Securities, including a sale pursuant to Rule 144 (or any similar provision then in effect) under the Securities Act. "Registrable Securities" shall mean the Shares, excluding (i) Shares for which a Registration Statement relating to the sale thereof by the Holder shall have become effective under the Securities Act and which have been disposed of by the Holder under such Registration Statement, and (ii) Shares sold or otherwise distributed pursuant to Rule 144 under the Securities Act. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance with this Agreement, including, without limitation: (i) all SEC or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualification of any of the Registrable Securities and the preparation of a Blue Sky Memorandum) and compliance with the rules of the NASD, (iii) all expenses of any Persons engaged by the Company in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, certificates and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges pursuant to Section 3 (a)(vii) hereof, and (v) the fees and disbursements of counsel for the Company and of the independent public accountants of the Company, including the expenses of any special audits or "cold comfort" letters, if any, required by or incident to such performance and compliance. Registration Expenses shall specifically exclude the fees and disbursements of counsel representing a selling Holder and underwriting discounts and commissions, and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a selling Holder, all of which shall be borne by such Holder in all cases. JZM5800 B-12

"Registration Statement" shall mean a registration statement of the Company and any other entity required to be a registrant with respect to such registration statement pursuant to the requirements of the Securities Act which covers the Registrable Securities requested by Holders to be covered by such registration statement, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all materials incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Selling Holder" shall mean each Holder who elects to participate in an underwritten public offering of Company Common Stock. "Shares" shall mean Company Common Stock that is issued upon conversion of all or any portion of the outstanding principal amount of the Debenture and any accrued but unpaid interest thereon. 2. Registration Under the Securities Act. (a) Filing of Registration Statement. As promptly as practicable after the date hereof, the Company intends, but is not obligated, to cause to be filed a Registration Statement providing for the issuance of the Shares to the Holder to the extent allowed by applicable regulations and the resale by the Holder of Registrable Securities then held by the Holder and intends to use its best efforts to cause such Registration Statement if filed to be declared effective by the SEC as soon as reasonably practicable. The Company agrees to use its best efforts to keep such Registration Statement continuously effective under the Securities Act for a period expiring on the date two (2) years from the date of the last issuance of any Shares and further agrees to supplement or amend the Registration Statement, if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Registration Statement or by the Securities Act or by any other rules and regulations thereunder for such Registration Statement. (b) Demand Registration. In the event the Company has not caused to be filed a Registration Statement as provided in Section 2(a) within six (6) months from the date hereof, Holder shall have the right, at any time and from time to time after such six (6) month period, to demand that the Company cause to be filed a Registration Statement or an amendment to a Registration Statement providing for the registration under the Securities Act of the Shares to be issued to Holder to the extent allowed by applicable regulations and the resale by the Holder of all Registrable Securities, or, in the event the Company has filed a Registration Statement as provided in Section 2(a) within six (6) months from the date hereof, but such JZM5800 B-13

Registration Statement has not been declared effective by the SEC, Holder shall have the right at any time and from time to time after January 1, 1998, to demand that the Company cause to be filed a Registration Statement or an amendment to a Registration Statement providing for the registration under the Securities Act of the Shares to be issued to Holder and the resale by the Holder of all Registrable Securities; provided, however, if at the time of such demand, the Shares have been issued, such Registration Statement shall only relate to sales by Holder. The Company agrees to use its best efforts to keep such Registration Statement continuously effective under the Securities Act for a period expiring on the date two (2) years from the date of the last issuance of any Shares and further agrees to supplement or amend the Registration Statement, if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Registration Statement or by the Securities Act or by any other rules and regulations thereunder for such Registration Statement. (c) Cut-Back Registration. In the event that the Holder has requested the inclusion of Registrable Securities in a registration statement pursuant to Section 3(a) or Section 3(b) and all or a portion of the Registrable Securities with respect to which the Holder has requested registration are not registered by virtue of the provisions of said sections, Holder shall thereupon have the right to require the registration under the Securities Act of such Registrable Securities pursuant to the provisions of Section 2(b), irrespective of whether the date upon which Registration is requested is within six months of the date of this Agreement. (d) Expenses. The Company shall pay all Registration Expenses in connection with any Registration Statement filed pursuant to this Section 2. (e) Inclusion in Registration Statement. The Company may require each Holder of Registrable Securities to furnish to the Company in writing such information regarding the proposed offer or sale by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing. Any Holder who does not provide the information reasonably requested by the Company in connection with the Registration Statement as promptly as practicable after receipt of such request, but in no event later than ten (10) days thereafter, shall not be entitled to have its Registrable Securities included in the Registration Statement. (f) Underwritten Demand by Holder. If at the demand of Holder, the Company proposes to file a Registration Statement relating to an underwritten public offering of any Registerable Securities and the investment banking firm selected by Holder to act as lead underwriter in connection with such public offering of securities by Holder advises in writing that, in such firm's opinion, a registration of other securities of the Company at that time would materially and adversely affect the offering by Holder, no person (including the Company) shall have a right to have shares of common stock or other securities included in such Registration Statement; provided, however, that if an offering of some but not all of the shares requested to JZM5800 B-14

be registered by Holder would not adversely affect the offering by Holder, the aggregate number of shares requested to be included in such offering by the Company and each other person shall be reduced pro rata according to the total number of securities proposed to be sold by the Company and other Person taken as a whole; provided, in no event shall the shares requested by Holder to be included in the Registration Statement shall be reduced. (g) Rights to Subsequent Investors. The Company shall not grant any rights to any other person which shall diminish in any way the rights granted to the Holders hereunder. The Company may grant subsequent investors rights of registration (such as those provided in Section 2 hereof); provided, however, that (i) such rights are limited to shares of Common Stock (including, in the case of any underwritten offering, shares issuable upon the conversion of convertible securities or upon the exercise of warrants if such conversion or exercise is effected by the sellers or the underwriters prior to sale to the public in such offering), (ii) such rights are not inconsistent with the provisions hereof; (iii) the instrument granting such rights specifically confirms the rights of the Holders of Registrable Shares hereunder; (iv) the rights of the Holder hereunder shall be the same as the rights of registration granted to the subsequent investors. 3. Incidental Registration. (a) If the Company proposes to register any shares of Company Common Stock ("Other Securities") for public sale by the Company pursuant to an underwritten offering under the Securities Act it will give prompt written notice to Holders of its intention to do so, and upon the written request of Holders delivered to the Company within fifteen (15) Business Days after the giving of any such notice which request shall specify the number of Registrable Securities intended to be disposed of by Holders and the Company shall include such Registrable Securities in such Registration Statement. The Company will not be required to effect any registration pursuant to this Section 3(a) if the Company shall have been advised in writing (with a copy to the Selling Holders) by a nationally recognized independent investment banking firm selected by the Company to act as lead underwriter in connection with the public offering of securities by the Company that, in such firm's opinion, a registration at that time by other holders would materially and adversely affect the Company's own scheduled offering, provided, however, that if an offering of some but not all of the shares requested to be registered by Holder and other holders would not adversely affect the Company's offering, the aggregate number of shares requested to be included in such offering by each selling holder shall be reduced pro rata according to the total number of securities proposed to be sold by the selling holders taken as a whole. (b) If at the demand of any other Person but the Holder ("Other Person"), the Company proposes to register Other Securities for public sale pursuant to an underwritten offering under the Securities Act it will give prompt written notice to Holder of its intention to do so, and upon the written request of Holders delivered to the Company within fifteen (15) Business Days after the giving of any such notice which request shall specify the number of Registrable Securities intended to be disposed of by Holder and the Company shall include such JZM5800 B-15

Registrable Securities in such Registration Statement. If the Other Person shall have been advised in writing (with a copy to the Selling Holders) by a nationally recognized independent investment banking firm acting as lead underwriter in connection with the public offering of securities by the Other Person that, in such firm's opinion, a registration by the Holders at that time would materially and adversely affect the offering by the Other Person, the Registrable Securities of the Holder shall not be included in such Registration, provided, the number of shares requested to be included in such offering by the Holders and all other Persons shall be reduced pro rata according to the total number of securities proposed to be sold by the Holder and other selling holders taken as a whole; provided, however, notwithstanding the foregoing paragraph, the shares requested by the Other Person demanding registration to be included in the Registration Statement shall not be reduced if required by an agreement between such Other Person and the Company. (c) With respect to any proposed sale or sale by the Holder of Registrable Securities pursuant to this Section 3 the Company shall pay all Registration Expenses. (d) No registration of Registrable Securities effected under this Section 3 shall relieve the Company of its obligation (if any) to effect registrations of Registrable Securities pursuant to Section 2. 4. Registration Procedures. (a) Obligations of the Company. In connection with any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall: (i) cause the Registration Statement to be available for the sale of the Registrable Securities by Holders in one or more transactions, in negotiated transactions, through the writing of options of the Registrable Securities, or a combination of such methods of sale, and to comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith and in the event the Company is listed on the NASDAQ National Market System ("NMS") in one or more transactions on NMS or otherwise in special offerings, exchange distributions or secondary distribution pursuant to and in accordance with the rules of the NMS, in the over-the-counter market; (ii) (A) prepare and file with the SEC such amendments and post-effective amendments to any Registration Statement as may be necessary to keep each such Registration Statement effective for the applicable period; (B) cause the Prospectus included in each such Registration Statement to be supplemented by any required JZM5800 B-16

prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; (C) respond promptly to any comments received from the SEC with respect to each Registration Statement, or any amendment, post-effective amendment or supplement relating thereto; and (D) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement; (iii) furnish to each Holder of Registrable Securities, without charge, as many copies of each Prospectus, and any amendment or supplement thereto and such other documents as they may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; the Company consents to the use of the Prospectus, by each such Holder of Registrable Securities, in connection with the offering and sale of the Registrable Securities covered by the Prospectus; (iv) notify promptly each Holder of Registrable Securities and confirm such advice in writing (A) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (B) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and (C) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the Prospectus), not misleading; (v) use its best effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (vi) use its best efforts to register or qualify the Registrable Securities by the time the applicable Registration Statement is declared effective by the SEC under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably JZM5800 B-17

request in writing, keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective or during the period offers or sales are being made by a Holder that has delivered a Registration Notice to the Company, whichever is shorter, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(vi), (B) subject itself to taxation in any such jurisdiction, or (C) submit to the general service of process in any such jurisdiction; (vii) upon the occurrence of any event contemplated by Section 4(a)(iv)(C) hereof, use its best efforts promptly to prepare and file a supplement or prepare, file and obtain effectiveness of a post- effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) use its best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar securities issued by the Company are then listed; (ix) provide a CUSIP number for all Registrable Securities, not later than the effective date of the Registration Statement or amendment thereto relating to such Registrable Securities; (x) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earning statement covering at least twelve (12) months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and JZM5800 B-18

(xi) use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable Holders to consummate the disposition of such Registrable Securities. (b) Obligations of Holders. In connection with and as a condition to the Company's obligations with respect to a Registration Statement pursuant to Section 2 hereof and this Section 4, each Holder agrees that (i) it will not offer or sell its Registrable Securities under the Registration Statement until it has received copies of the supplemental or amended Prospectus contemplated by Section 4(a)(ii) hereof and receives notice that any post-effective amendment has become effective; and (ii) upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a)(iv)(C) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder receives copies of the supplemented or amended Prospectus contemplated by Section 4(a)(vii) hereof and receives notice that any post-effective amendment has become effective, and, if so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. (c) Lockup. In the event the Company proposes to effect the distribution of its securities by the Company through an underwritten public offering, each Holder who then beneficially owns in excess of 100,000 shares agrees for a period of time, beginning seven (7) days prior to the effective date of the underwriting agreement pertaining to such offering and ending thirty (30) days after such effective date that such Holder will forthwith cease any sale or other disposition of any of the Registrable Securities or sale or other disposition of any of its Registrable Securities during such period of time, if requested in writing by the representatives of the underwriters for any such underwritten public offering; provided, however, that Holders shall not be subject to more than one Lockup Period during any twelve (12) month period. 5. Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, each officer and director of such Holder, and each Person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to JZM5800 B-19

which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 4(a) does not apply to any Holder with respect to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) Indemnification by the Holders. Each Holder severally agrees to indemnify and hold harmless the Company and the other selling Holders, and each of their respective directors and officers (including each director and officer of the Company who signed the Registration Statement), and each Person, if any, who controls the Company or any other selling Holder within the meaning of Section 15 of the Securities Act, to the same extent as the indemnity contained in Section 5(a) hereof (except that any settlement described in Section 4(a)(ii) shall be effected only with the written consent of such Holder), but only insofar as such loss, liability, claim, damage or expense arises out of or is based upon (i) any untrue statement or omission, or alleged untrue statements or omissions, made in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company JZM5800 B-20

by such selling Holder expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto), or (ii) such Holder's failure to deliver a Prospectus to any purchaser of Registrable Securities where such a delivery obligation was applicable to such Holder's sale of Registrable Securities and such Holder had been provided with sufficient copies of such Prospectus for the relevant deliveries thereof. In no event shall the liability of any Holder under this Section 4(b) be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 4(a) or (b) above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 4(a) or (b) above. If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified parties defendant in such action or proceeding, which approval shall not be unreasonably withheld; provided, however, that, if such indemnified party or parties reasonably determine that a conflict of interest exists where it is advisable for such indemnified party or parties to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to them which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume such defense and the indemnified party or parties shall be entitled to one separate counsel at the indemnifying party's expense. If an indemnifying party is not entitled to assume the defense of such action or proceeding as a result of the proviso to the preceding sentence, such indemnifying party's counsel shall be entitled to conduct the defense of such indemnified party or parties, it being understood that both such counsel will cooperate with each other to conduct the defense of such action or proceeding as efficiently as possible. If an indemnifying party is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party or parties will pay the reasonable fees and expenses of counsel for the indemnified party or parties. In such event, however, no indemnifying party will be liable for any settlement effected without the written consent of such indemnifying party. If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action or proceeding. The indemnification obligations provided pursuant to Sections 4(a) and (b) hereof survive, with respect to a Holder, the transfer of Registrable JZM5800 B-21

Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. (d) Contribution. (i) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 4 is for any reason held to be unenforceable although applicable in accordance with its terms, the Company and the selling Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and the selling Holders, in such proportion as is appropriate to reflect the relative fault of and benefits to the Company on the one hand and the selling Holders on the other (in such proportions that the selling Holders are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified parties shall be determined by reference to, among other things, the total proceeds received by the indemnified party and indemnified parties in connection with the offering to which such losses, claims, damages, liabilities or expenses relate. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. (ii) The Company and the Holders agree that it would not be just or equitable if contribution pursuant to this Section 4(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4(d), no selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling Holder were offered to the public exceeds the amount of any damages which such selling Holder would otherwise have been required to pay by reason of such untrue statement or omission. JZM5800 B-22

(iii)Notwithstanding the foregoing, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(d), each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act and directors and officers of a Holder shall have the same rights to contribution as such Holder, and each director of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. (iv) The contribution provided for in this Section 4(d) shall survive, with respect to a Holder, the transfer of Registrable Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. 6. Rule 144 Sales. (a) Reports. The Company covenants that it will file the reports required to be filed by the Company under the Securities Act and the Securities Exchange Act of 1934, as amended, and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required to enable such Holder to sell Registrable Securities pursuant to Rule 144 under the Securities Act. (b) Certificates. In connection with any sale, transfer or other disposition by any Holder of any Registrable Securities pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as the selling Holders may reasonably request at least two (2) business days prior to any sale of Registrable Securities. 7. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers JZM5800 B-23

or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders of a majority in amount of the outstanding Registrable Securities; provided, however, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Sections 2, 3, 4, 5, 6 or 7 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities, as the case may be. Notice of any amendment, modification or supplement to this Agreement adopted in accordance with this Section 6(a) shall be provided by the Company to each Holder of Registrable Securities at least thirty (30) days prior to the effective date of such amendment, modification or supplement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(b), which address initially is, with respect to each Holder, the address set forth next to such Holder's name on the books and records of the Company, or (ii) if to the Company, at: COVOL Technologies, Inc., 3280 N. Frontage Road, Lehi, Utah 84043; Facsimile: (801) 7684483; Attn: General Counsel. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; or at the time delivered if delivered by an air courier guaranteeing overnight delivery. (c) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the Company and the Holders, including without limitation and without the need for an express assignment, subsequent Holders. If any successor, assignee or transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities, as the case may be, shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits hereof and shall be conclusively deemed to have agreed to be bound by all of the terms and provisions hereof. (d) Headings. The headings in this Agreement are for the convenience of reference only and shall not limit or otherwise affect the meaning hereof. (e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF. JZM5800 B-24

(f) Specific Performance. The Company and the Holders hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (g) Entire Agreement. This Agreement is intended by the Company as a final expression of its agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Company in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings of the Company with respect to such subject matter. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. COVOL TECHNOLOGIES, INC. By: Name: Title: AJG FINANCIAL SERVICES, INC. By: Name: Title: JZM5800 B-25

[letterhead] ARTHUR J. GALLAGHER & CO. November 13, 1996 COVOL Technologies, Inc., and Utah Synfuel #1, L.P. 3280 N. Frontage Rd. Lehi, UT 84043 Gentlemen: Arthur J. Gallagher & Co. or one of its subsidiaries (the "Investor") hereby acknowledges receipt of: (a) Synthetic Coal Investment Summary dated October 31, 1996 attached as Exhibit A hereto: (b) Financial Projections dated November 7, 1996 entitled Gallagher Newco - Preliminary Proforma attached as Exhibit B hereto; and (c) Outline dated November 12, 1996 entitled US1 Acquisition Structure attached as Exhibit C hereto. The items described in (a), (b) and (c) above are collectively referred to herein as the "Memorandum," and are incorporated herein and are made a part hereof by reference. The transaction described in the Memorandum is referred to herein as the "Transaction," and all other capitalized terms herein have the same meanings as in the Memorandum. Based on the foregoing Memorandum, the Investor hereby states its intention to Covol and US1 (i) to make an initial investment of $2.5 million, and subsequent license fees and other payments at the times and at the rates described in the Memorandum in respect of the Facility described in the Memorandum and an initial investment of $2.5 million, and subsequent license fees and other payments at the times and at the rates described in the Memorandum in respect of the Expansion described in the Memorandum, in each case based upon production and sales of Briquettes set forth in the Memorandum, and (ii) to use its best efforts to consummate the Transaction and the relevant agreements described in the Memorandum at substantially the same prices, fees and other consideration as soon as the conditions set forth below are satisfied. The Transaction as set forth above is subject to the reasonable satisfaction by the Investor of each of the following conditions: 1

(a) Covol Technologies, Inc. ("Covol") has entered into agreements with third parties for the supply of coal fines (necessary to produce at least 320,000 tons of the Briquettes) and has demonstrated the ready availability of the chemical binder; (b) Covol has demonstrated its ability to sell the Briquettes produced at the Facility; (c) Covol has entered into an extension of its lease with Railco, Inc. with respect to the facility site until December 31, 2011; (d) review by the Investor's engineers of Covol's patented technology to ensure that it meets the requirements of the relevant Private Letter Ruling issued by the Internal Revenue Service to Covol and to ensure that there is no material environmental liability to the Investor as a result of this investment; (e) the issuance of all necessary permits and licenses for the construction of the Facility and Covol's agreement to obtain the necessary permits and licenses for the operation of the Facility and an appropriate washer; (f) the Facility has been placed in service for purposes of Section 29 of the Internal Revenue Code; (g) the receipt by the Investor of a tax opinion from reputable counsel, in form and substance reasonably satisfactory to the Investor, to the effect that the Investor will more likely than not be entitled (i) to the tax credits under Section 29 of the Internal Revenue Code projected from the Transaction and (ii) to prevail on the other tax issues which are the most significant to a taxpayer in the position of the Investor; (h) the receipt by the Investor of a legal opinion from reputable counsel, in form and substance reasonable satisfactory to the Investor, to the effect that Newco has been validly formed and that the Investor's liability as an owner of Newco is limited to the extent of its required investment in Newco; (i) the execution by US1 and Covol of the relevant agreements described in the Memorandum in form and substance reasonably satisfactory to the Investor, and a satisfactory review of the legal and accounting aspects of the transaction by the Investor; and (j) the Facility has commenced daily operations and has produced at least 5000 tons of Briquettes during a 30day period. In consideration of the foregoing, Covol and US1 hereby agree that for the next 30 days, they will not negotiate with, or commit to, any other party with respect to the Transaction and that they will extend such period for another 30 days thereafter if, in their sole discretion, they determine that Investor has made substantial progress in consummating the Transaction. Covol 2

and US1 also hereby agree that during such exclusive period, they will use their best efforts to satisfy the above conditions and consummate the Transaction with the Investor. The Investor acknowledges that it is and continues to be bound by that certain confidentiality letter agreement dated September 30, 1996 between Arthur J. Gallagher & Co. and Coalco Corporation (for itself and on behalf of Covol). Nothing in this letter shall limit Covol's right to describe or show the facility to any third party during such exclusive period or to discuss similar investments in similar facilities with such third parties. All parties acknowledge that after review of the Memorandum, counsel may restructure the Transaction and the relevant agreements described in the Memorandum to better meet the accounting, tax and other objectives of the parties; all parties agree to work with counsel to make such changes as long as they do not adversely affect the underlying economics of the Transaction. In addition, subject to execution by Covol of the relevant agreements in form and substance reasonably satisfactory to the Investor, the Investor also hereby commits to make two loans in the aggregate amount of $4 million to Covol upon the terms and conditions set forth below: I. Convertible Loan. (a) Borrower: Covol (b) Amount: $1,100,000 (c) Advance: The loan amount shall be advanced to Covol within three business days of the execution of the convertible debt instrument. (d) Term: Three years from the date of the advance. (e) Interest: Six percent per annum simple interest; interest shall not be payable but shall accrue until the end of the term, at which time it will be payable in full. (f) Conversion: At maturity; Covol may at any time, however, elect to convert all or any portion of the outstanding principal and interest owing into shares of common stock of Covol. The Investor shall receive one share of common stock; such shares having registration rights, for each $11 of principal and/or interest converted. The Investor may elect to receive cash in lieu of stock in the event Covol exercises its option prior to maturity. (g) Antidilution: The conversion price shall be subject to adjustment to protect the Investor from dilution from adjustments following distributions, recapitalizations, stock splits, dividends, and mergers. 3

II. Secured Loan (a) Borrower: Covol (b) Amount: $2,900,000 (c) Advances: Advances up to the $2,900,000 amount shall be made from time to time upon the written request of Covol. The first advance shall be available within three business days of the execution of the loan documents. (d) Term: Three years from the date of the execution of the loan documents. (e) Interest: Prime plus 2% simple interest; 50% of interest shall be payable annually; the balance shall accrue until the end of the term, at which time it will be payable in full. (f) Prepayment: Borrower may prepay the loan in whole or in part without penalty. (g) Security: The loan shall be secured by a lien on all real and personal property purchased with the loan proceeds and Covol will account to the Investor for the expenditure of all funds. The parties understand that the consummation and funding of the above loans are not dependent on the consummation of the Transaction or the preconditions to the Transaction, except for satisfactory confirmation by the Investor of the patented process and satisfactory confirmation of joint venture agreements entered into or proposed by Covol. However, the Transaction will not be completed until the loans have been funded. This is a letter of intent and, except as provided in the first and third sentences of the paragraph beginning at the bottom of page two, no binding agreement is intended to be created hereby and the parties shall be bound only pursuant to duly executed and delivered definitive agreements referenced herein. 4

If the foregoing correctly states our understanding, please so indicate by signing below and returning to the undersigned a copy of this letter. Very truly yours, ARTHUR J. GALLAGHER & CO.
/s/ David R. Long David R. Long, Vice President Accepted and agreed this 15th day of November, 1996

COVOL TECHNOLOGIES, INC.
By: /s/ Brent M. Cook Name/Title: Brent M. Cook, President

UTAH SYNFUEL #1, L.P.
By: /s/ Brent M. Cook Name/Title: Brent M. Cook, President

5

EXHIBIT A SYNTHETIC COAL - SECTION 29 Investment Summary October 31, 1996 Project Type: Using a patented binding process, coal fines (small pieces of coal and coal dust resulting from coal mining) can be converted into solid formed coal briquettes. Because the molecular structure of the coal fines is modified during the process, the Internal Revenue Service ("IRS") has ruled that the coal is a synthetic fuel, the production and sale of which enables the seller to claim tax credits under Section 29 of the Internal Revenue Code ("Code"). Project Description: Utah Synfuel # 1, L.P. ("US1") is a Delaware limited partnership established to own and operate a coal fines processing facility ("Facility") in Carbon County, Utah. The Facility is currently undergoing start-up procedures and should be fully completed by November, 1996. The synthetic coal from the Facility will be sold to US1 who will then resell it to a railroad company which owns a rail terminal near the Facility. US1 may also sell the synthetic coal to electric utility companies or industrial facilities who use it in their boilers or processes. Developer: Covol Technologies, Inc. ("Covol") a Delaware corporation is the general partner of US1. Covol is a public company traded on the OTC Bulletin Board and has a current market capitalization of approximately $70 million. Marketing Agent: Coalco Corporation ("Coalco"), a Massachusetts corporation is an affiliate of Palmer Capital Corporation and is the marketing agent seeking investor(s) to purchase the Facility from US1. Investor: A tax-oriented corporate investor ("Investor") who purchases the Facility from US1. The Investor should be able to project a long-term ability to use tax credits through 2007. Newco: The Investor will create a newly-formed entity ("Newco") which will be created as a vehicle for the Investor to buy the Facility from US1. Investment: Newco will purchase the Facility and a proprietary license from US1 for $25 million payable at the closing with subsequent payments of 6

approximately xxx cents per million British thermal units ("MMBtus") from the synthetic coal produced and sold. The subsequent payments will be made on a quarterly "pay as you go" basis in arrears to US1. The Investor will be entitled to the Section 29 tax credits generated by the Facility, as well as depreciation and cash flow from operations. In return for its initial investment and subsequent contributions, the Investor can expect to receive approximately $121 million of tax credits and approximately $39 million of additional after-tax benefits and cash through 2007. Because the vast majority of payments will be made as benefits are received, the return on investment is exceptionally high "an after-tax IRR in excess of 100%). Section 29 Credits: Section 29 of the Code provides a credit against regular tax liability in an amount equal to $1.005 per MMBtu (1995 rate) for qualifying fuels sold to an unrelated third party. All synthetic coal manufactured is expected to be sold as a qualifying fuel. The Facility is expected to have a total capacity of 360,000 tons per year. The projected Section 29 credits available in 1997 would be approximately $90 million. The Section 29 credit is available for production and sales through 2007 for output from this Facility. The value of the tax credit per MMBtu rises each year with an inflation rate. Section 29 tax credits allow a corporate investor to offset taxes on almost all kinds of income. However, Section 29 credits cannot be used to reduce one's tax liability below the Alternative Minimum Tax. Section 29 credits can be carried forward indefinitely to the extent that the credits cannot be used as a result of the Alternative Minimum Tax. IRS Ruling: In September 1995 Covol received a private letter ruling from the IRS which confirmed that the synthetic coal manufactured by Covol's patented binding process qualifies for the Section 29 credit. The private letter cited the fact that the molecular structure of the coal fines is altered when certain chemicals used in Covol's process are added to the coal fines causing the fines to bind together. The IRS based its ruling on the findings of Covol and its consultants. The primary technological findings, utilizing infrared spectrometry and thermogravimetric mass spectroscopy, were provided by Advanced Combustion Engineering Research Center ("ACERC") which is affiliated with the University of Utah and Brigham Young University. Additional support for these findings was provided by the Department of Energy, Sandia National Laboratory and the United States Patent Office. Proprietary 7

Technology: Covol's patented technology combines its liquid binder with coal fines which changes the structure of the carbon molecules so that they can bind together as lump coal. Then an extruder or briquetter forms the coal into usable shapes. This process enables the fuel to be classified as a synthetic coal product, or synfuel, which is a qualified fuel under Section 29. In the process, a conditioner is sprayed on the coal fines. The conditioner acts as a reducing agent which allows the oxygen molecules of the coal to mix with the chemicals in the binder. The introduction of the binder takes place in the pug mill or mixer. The resulting moist granular mixture is then fed into the extruder. The extrusions made by the extruder are called briquettes. The briquettes emerge from the extruder and move on conveyor belts to the dryers where the briquettes are heated to remove moisture. The finished briquettes then emerge from the dryers. The binder and the Covol chemical process of binding are both patented. Facility Description: The manufacturing process uses an even-flow feeder, a pug mill, an extruder, and dryers to form extrusions of compressed coal (one inch in diameter by one to four inches in length). The Facility is expected to produce approximately 360,000 tons per year of synthetic coal. The synthetic coal is expected to have an average heating value of 12,000 Btus per pound. Therefore, the sale of a ton of synthetic coal generates over $25 in tax credits (12,000 Btus per pound times 2,000 pounds in a ton, divided by one million times the tax credit rate, which is projected to be about $1.06 per MMBtu in 1997.) Therefore, the total projected credits for 1997 from the operation are about $9 million increasing to about $12.8 million in 2007. (A second production line is expected to be constructed in 1997 in the same building with the first production line. This would double the amount of tax credits available to approximately $19.6 million in 1998). Equipment: With the exception of the two dryers, all of the major equipment is new. Land:The Facility is being constructed on land leased from the same railroad company which will initially deliver fines and purchase the synthetic coal output. The present lease is ten years, however, an extension and renewal options are currently being negotiated. US1 Structure: US1 is a Delaware limited partnership with Covol as the majority owner and general partner. Covol has granted a non-exclusive license for the technology to US1. US1 purchased and is installing the Equipment under 8

a turn-key contract with Lockwood Greene, a major engineering and construction company headquartered in Spartanburg, SC. All of US1's interest in the equipment necessary to make briquettes and in the license for the technology is expected to be sold to Newco to allow the Investor to claim the tax credits, depreciation and cash flow from US1. Newco may retain Covol to operate and maintain the Facility. Operations: Covol will acquire and sell coal fines to Newco. Covol expects to procure coal fines from nay suppliers located throughout Carbon County and neighboring Emery County. For example, one supplier, the railroad company on whose land the Facility is located, has approximately 320,000 tons of coal fines located within one-half mile of the Facility and is currently negotiating to sell and deliver the coal fines to the Facility. Covol has considerable experience in the production of the synthetic fuel, having operated two similar facilities. Operating experience of the Facility include personnel, a payment to Covol for the liquid binder, a management fee to Covol, electricity from Utah Power and Light, water from the Price Water District, and natural gas. The Facility is projected to have an operating margin of up to $1 per ton of synthetic coal produced. US1 will purchase all of Newco's briquette output as produced and will resell the briquettes to coal purchasers. Coal Fines Supply: The conversion of coal Fines piles to a useable product provides a significant environmental remediation benefit because coal fines are essentially waste coal left behind at the mouth of a coal mine. There are many coal fines piles in Carbon County and neighboring Emery County including several which are under the control of the State of Utah, Division of Oil and Gas and Mining which is eager to begin clean-up and disposal of such coal fines piles. The Facility has been centrally located to allow Covol to utilize coal fines from two major coal fines piles totaling about 6 million tons located a few miles from the Facility. One of the coal fines piles is only six miles from the Facility and is owned by a major investor-owned utility which has closed its mining operations. The other fines pile, located fifteen miles from the Facility, belongs to a Fortune 500 mining Company. For both the utility and the mining company, the coal fines piles are an environmental liability, although for the utility it is a more pressing problem because the utility has ceased operations at the site and has a large reclamation bond which is frozen by the State of Utah until the pile is removed. 9

The coal fines from the utility and the mining company piles contain a higher percentage of ash than the coal fines from the 320,000 ton fines pile one-half mile from the Facility. With the ash removed, the utility's and mining company's piles can easily supply the Facility for over 15 years. To reduce the percentage of ash in the coal, near the end of the first year of operation at the Facility (before the 320,000 ton coal fines pile has been exhausted), US1 Covol expects to purchase and install a coal washer at a cost of $2-3 million using, in part, the proceeds from this financing. Once removed from the coal fines piles, ash and waste coal will typically be returned to the coal fines pile site or placed in local landfills. Typically, the original seller of the fines will retain responsibility for ash disposal. Technology History: In 1992, Covol built a prototype briquetting facility in Price, Utah, which is located about five miles from the Facility. Covol's fundamental business strategy has been to commercialize the briquettemaking technology through joint ventures, licenses and collaborative arrangements with steel, coke and coal producers or investors by building briquette- making facilities. Risks and Mitigating Factors: This project has risks including the traditional risks of any relatively new technology and business venture. Many of the risks in this Covol transaction are substantially mitigated for the Investor because of the structure of the primarily "pay-as-you-go" investment and because of the fact that equipment will be in place and operating prior to the initial investment. A listing of some of the risks and their mitigating factors follows: The Facility may not be operated efficiently or reliably. Quarterly payments by the Investor for the Facility will be contingent on processing and sale of briquettes in the prior quarter. As operator of the Facility and majority owner of US1, Covol has substantial incentive to maximize output. The Facility may not receive air quality permits. The Facility is a "de minimis" source of emissions and the air quality permit will be in hand before the Investor makes the first investment. Further, the Facility is solving a major environmental problem, the disposal of waste coal fines, and, as such, enjoys a favorable review by environmentalists and governmental agencies. The wash plant will require a separate air quality and operating permit. 10

Section 29 tax credits may be reduced or eliminated because of higher oil prices. In October 1992, Congress extended the availability of Section 29 credits to 2007 for coal synfuels (such as are produced by this Facility) and gas produced from biomass. The Minimum Wage Increase Act of 1996 extended the grandfather dates for Section 29 projects to December 31, 1996 for binding construction contracts and June 30, 1998 for placement in service. Therefore, the intent of Congress seems clearly in favor of Section 29. With respect to the possible phase out of tax credits due to high oil prices, oil prices would have to more than triple (to over $46 per barrel) from the 1995 reference price ($14.62 per barrel) to begin to reduce the availability of the credit and would have to quadruple to result in a complete phase out of the credits. As the Investor would reap some of the benefits from higher energy prices and only pays based on fuel produced which qualifies for the credit, the Investor is well protected in this scenario. US1 may not be able to acquire the necessary coal fines. Before Newco buys the Facility, US1 will have signed a contract with the railroad company to deliver 320,000 tones of low-ash coal fines. This is nearly a one-year supply and the railroad company will deliver the coal fines and take away the briquettes. Negotiations are proceeding with the utility and the mining company as explained above which would cover up to an additional 15 years supply. Approximately 40 million tons of coal is mined each year in Carbon County. There are additional coal fines piles located near the Facility which need to be remediated. Newco may not be able to sell the synthetic coal product. US1 will be obligated to buy all the output of the Facility and then will be responsible for reselling it to an end-user. Before Newco buys the Facility, US1 will have signed a contract with the railroad company, providing for the railroad to purchase the synthetic coal made from the railroad company's own fines. Negotiations are proceeding with other synthetic coal purchasers, including coal brokers and a mining company for its cogeneration project near Salt Lake City. The synthetic coal is desirable because it burns more evenly in a steam boiler than does run-of-mine coal. Coal products from Utah enjoy strong demand throughout the Western states and substantial amounts of coal are sent from Utah to Asia, particularly Japan. Coal is a commodity and synthetic coal will be sold for the same price per ton as similar grades of coal. 11

For further information, please contact Coalco Corporation, the Marketing Agent. Donald R. Logan Vice President Coalco Corporation 605 Willowglen Rd., Suite 200 Santa Barbara, CA 93105 Tel. (805) 687-2315 Fax (805) 687-2795 or Gordon L. Deane Executive Vice President Palmer Capital Corporation 13 Elm Street, Suite 200 Cohasset, MA 02025 Tel. (617) 383-3200 Fax (617) 383-3205 12

EXHIBIT B GALLAGHER NEWCO PRELIMINARY PROFORMA 13

*** Missing informaiton my be available upon request to the Company EXHIBIT C US1 ACQUISITION STRUCTURE November 12, 1996 1. Covol Technologies, Inc., a Delaware corporation ("Covol") is a public company which has developed a patented technology to produce synthetic coal products ("Briquettes") from coal fines mixed with a chemical binder. 2. Covol is leasing from Railco, Inc. certain real estate (the "Premises") near Price, Utah for a term (and extension) commencing on June 20, 1996 and ending on December 31, 2011; it has also entered into a construction contract with Lockwood Greene for the construction of a facility to produce the Briquettes (the "Facility") on the Premises. 3. Covol has formed Utah Synfuel #1,L.P., a Delaware limited partnership ("US1") having Covol ***. 4. Covol and US1 have entered into a license agreement under which Covol has granted US1 a non-exclusive license of the patented technology for 15 years for a lump sum payment of *** and a sale agreement under which Covol will sell the Facility to US1 upon completion and delivery for *** in cash. 5. Coalco Corporation, a Massachusetts corporation ("Coalco"), has entered into an exclusive financial advisor agreement with Covol and US1 under which Coalco has been engaged to advise on maximizing the value of the Facility and the license. Coalco is owned by Douglas Kinney, Gordon Deane, Thomas Linden and Donald Logan. Geocapital, Inc., an Illinois corporation ("Geo") is owned by George Fink. 6. Coalco, after discussions with Geo, has introduced Covol and US1 to Arthur J. Gallagher & Co. (the "Investor") who is interested in maximizing the value of the Facility and the license. 7. The Investor will form and own a limited partnership ("Newco") with Covol or a subsidiary thereof as its general partner and then agree to fund Newco on an ongoing basis in order to accomplish the transactions described in this Memorandum. The Investor will agree with US1 and Covol that it will honor its agreed-upon funding obligations to Newco. The Investor will enter into an agreement with Geo under which Geo will be compensated for its role in the transaction on a quarterly basis tied to the level of Briquette production and sales at the Facility. 14

*** Missing information my be available upon request to the Company 8. Newco will enter into an acquisition agreement with US1 to acquire the Facility for a purchase price of *** payable upon the Facility passing the agreed-upon performance test described in paragraph (j) of the accompanying letter. 9. US1 will also license the technology to Newco for 15 years for a fee based on the amount of Briquettes produced and sold by Newco during the prior quarter. The license fee will be at the rate of *** (escalating with inflation). "Qualifying" means that the Briquettes meet the standards represented in Covol's request dated March 22, 1995 for an IRS Private Letter Ruling. 10. Newco will give a first priority security interest over the Facility, the license, and its related assets and rights back to US1 to secure Newco's obligations under its agreements with US1 and Covol. If at any time Newco defaults, US1 will be entitled to acquire the Facility and related assets and license rights (for no consideration) through foreclosure. If required by applicable laws to grant US1 additional remedies as a secured creditor, Newco will deliver a *** mortgage debt instrument to US1 at closing secured by the Facility. This secured loan would be paid down during the next 11 years in equal quarterly installments of principal. The preceding sentence modifies the Financial Projections attached as Exhibit "B." 11. Covol will lease to Newco (i) the portion of the Premises on which the Facility is located (ii) a portion of the building in which the Facility is located, and (iii) certain equipment outside the building (e.g. washer, truck scales, load equipment, etc.) which are incidental but necessary to the Facility's operation. The lease will be in effect until December 31, 2011 at a rental of *** per month (escalating with inflation). 12. Newco will enter into an O&m Agreement with Covol for a fixed fee of *** (escalating with inflation) payable quarterly. This fee will be subject each quarter to an appropriate bonus (or penalty) which will be payable (or assessed) to the extent of any excess (or shortfall) in Briquettes produced and sold by Newco beyond or below) the projected MMBtu's. The O&M fee is intended to cover routine O&M expenses (including supplies, labor, etc.) for which Covol will be responsible. In addition, Covol will wash the coal fines purchases by Newco for a fee of *** per ton. Plus a reasonable ash disposal fee. 13. Newco, however, will be responsible for the actual expenses associated with (a) utilities and coal fines washing; and (b) any necessary modification or improvement of the Facility and for non-routine repairs, provided that in each case such expenses do not exceed annually the amount set forth in a 12-year "operations budget" and a 12-year "capital expenditure budget," respectively, agreed-upon between Newco and Covol at closing. Covol will be responsible for any expenditures in excess of the annual budgets. Newco will basically own and operate the Facility in accordance with the assumptions in the financial models. 15

*** Missing information my be available upon request to the Company 14. Covol will enter into a supply agreement with Newco to use its best efforts to supply and deliver until December 31, 2007 the coal fines and the chemical binder necessary to produce the Briquettes at market prices which are assumed for the purpose of the Outline to be *** per ton for the coal fines and *** per ton for the chemical binder (both prices escalating with inflation or a coal price index). In turn, Covol will then have the obligation to locate and purchase adequate coal fines from suppliers in the area and the necessary chemical binder throughout the term of the supply agreement. 15. Using the coal fines and the chemical binder, Newco will then produce the Briquettes and sell them to US1 pursuant to an 11-year "take or pay" arrangement at a price equal to the *** (escalating at the same rate as in #14 above - either with inflation or a coal price index). Newco will have the right to sell the Briquettes to a third party at a higher price but US1 will then have the right to match. In turn, US1 will be responsible for selling all the Briquettes produced at the Facility to willing end-users who would use the Briquettes to provide energy for their manufacturing, industrial or other facility. 16. US1 will have the right under its acquisition agreement with Newco to reacquire on January 1, 2008 the Facility and related assets for their ten fair market value. 17. Newco will have the right to "abandon" the Facility and related assets in the case where there is a material adverse change to the economics of the transactions or the Investor is unable to utilize the tax benefits. Newco will provide US1 with advance notice of its intention to abandon the Facility. Such notice shall be six months in advance if one line is in operation and three months in advance if two lines are in operation. In each case, US1 will be required to use its best efforts to resume possession and title to all such assets for fair consideration (not to exceed 50% of the initial down payments) to Newco. After three years from the closing of the Transaction, Newco shall waive such fair consideration if it abandons the property pursuant to this paragraph. 18. In addition, Covol will undertake to enter into a construction agreement for the expansion of the Facility (the "Expansion") prior to December 31, 1996. The Expansion, after completion, would be capable to producing another 360,000 tons of Briquettes annually, Covol will undertake to have the Expansion completed and in daily operation prior to September 30, 1997 and to do all other things necessary to qualify the production for credits under Section 29 of the Code. 19. Newco will acquire the Expansion upon startup for a purchase price of *** payable as follows: *** when Briquette production from the Facility reaches *** tons in any 30-day period; *** when Briquette production from the Expansion reaches *** in any 30-day period; and *** in three *** installments payable when Briquette production from the Expansion reaches the ***, *** and *** cumulative ton milestones. In addition, Newco, Covol and US1 will 16

also consummate the relevant agreements (and on terms substantially the same as are) set fothr in #8-17 above, except (i) Covol or its designee will be the other party in each case instead of US1, and (ii) the equipment (except the washer) and building leased in #11 (ii) and (iii) will be transferred to Newco for no additional consideration. 20. All agreements described in this Outline are to be governed by the laws of the State of Utah. 21. The parties will be responsible for their respective costs and expenses (including all counsel fees) incurred in the consummating the Transaction. The Investor will be responsible for the costs and expenses (including all counsel fees) incurred in managing Newco's business or affairs. 17

LEASE AGREEMENT THIS LEASE, made and entered into this _____ day of December, 1996, by and between U.P.C., INC., a Utah corporation, 53 West Angelo Avenue, Salt Lake City, Utah 84115 ("Landlord"), and COVOL TECHNOLOGIES, INC., a Utah corporation, 3280 North Frontage Road, Lehi, Utah 84043 ("Tenant"). W I T N E S S E T H: Landlord hereby leases, demises and lets unto Tenant, and Tenant hereby leases, hires and takes from Landlord those certain premises, hereinafter called the demised premises, described as follows: See Exhibit "A" attached hereto 1. Term. This lease shall be for a term of ten years and six months, commencing July 1, 1996 and ending December 31, 2007. Thereafter, this lease may be renewed for an additional five (5) years, upon the mutual agreement of the parties. 2. Monthly Rental. Tenant shall pay to Landlord during the term of this Lease, as monthly rental for the demised premises, the sum of $250.00 per month for the months of July 1996 through September 1996, and the sum of $600.00 per month for the months of October 1996 through September 2001. Thereafter, commencing October 2001, the monthly rental shall increase five percent (5%) per annum, with each annual increase becoming effective October 1 of each year through the end of the lease period. The monthly rental shall be paid in advance on the first day of each calendar month throughout the term of this Lease. The first and last month's rental and a security deposit as described in paragraph 21 below, shall be paid upon the execution of this Lease Agreement. In the event Tenant fails to pay said rental on the due date or within five (5) days thereafter, a late charge of $30.00 per month shall be added to said rental and paid to Landlord. In addition, interest shall accrue on all delinquent amounts thirty days or more past due, at the rate of eighteen percent (18%) per annum. Remittance shall be made to Landlord at such address as shall from time to time be designated by landlord to Tenant in writing. 3. Use. Tenant agrees to use and occupy the premises during the term hereof for the purpose of constructing and operating a coal processing plant, and for no other purpose whatsoever without the written consent of Landlord. All construction and improvements shall be at Tenant's sole cost and expense, shall be done in a workmanlike manner and shall conform to all applicable building codes and governmental regulations. Tenant shall not allow or permit any mechanic's or other liens to be assessed against the property and shall indemnify and save Landlord harmless from any and all claims arising out of or resulting from any construction or improvements on the leased premises. Tenant shall not use, or permit said premises or any part thereof to be used for any purpose or purposes other than the purpose or purposes for which the said premises are hereby leased. Tenant shall accept and process only coal on the demised premises, free from any toxic or hazardous substances. Tenant will not store, generate, transport or release in or on the rented space or Landlord's property any hazardous waste or substance and shall obey all laws respecting the handling of such. Tenant shall allow Landlord the right to inspect and test the

content of any incoming vehicles. Tenant shall upon termination of this Lease Agreement, promptly remove all hazardous substances from the premises. Removal, remediation and/or disposal shall always be the sole responsibility of the Tenant, and Tenant shall remain the sole owner of any hazardous substance it shall cause to be deposited in or on Tenant's rented space. Tenant shall be responsible for all costs and shall indemnify and hold harmless Landlord, its successors or assigns, or any party acting as a representative of Landlord, for any damage arising from Tenant storing or depositing any hazardous substance in or around the demised premises or on Landlord's property. Such indemnification shall survive the termination of this Lease, both as to Tenant and as to any guarantors of Tenant's obligations under this Lease Agreement. "Hazardous substances" shall mean: (a) hazardous substances as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, (b) "PCB's", as defined in 40 C.F.R. 761 et seq. and "TCDD" as defined in 40 C.F.R. 755 et seq., (c) "asbestos" as defined in 29 C.F.R. 1910-1001 et seq., (d) waste oils, and (3) used tires. Tenant shall not be permitted to store or keep any waste or waste product, whether from Tenant's processing operation or otherwise, on the demised premises, or on any adjoining property owned or controlled by Landlord, whether or not such waste or waste product is toxic or hazardous. All such waste and waste product must be disposed of off the demised property. Notwithstanding this paragraph 3, Tenant may store waste oil in suitable containers for use with EPA approved waste oil heaters to provide heating for the plant; however, such storage and use shall still be governed by the provisions of this paragraph 3. 4. Nuisance. Tenant shall not commit, or suffer to be committed, any waste upon the demised premises, or any public or private nuisance, or other act or thing which may disturb the quiet enjoyment of any other tenant or occupant of the demised premises or of Landlord's adjoining property. 5. Construction and Alterations. Tenant agrees to submit all plans for construction of the coal processing facility to Landlord for Landlord's prior approval before construction begins, which approval will not be unreasonably denied. Landlord agrees that such plans are confidential and will not disclose the same to any third party without Tenant's prior consent. Once such plans are approved by Landlord, Tenant shall not make or suffer to be made, any alternations or additions to such plans or to any structures completed pursuant to such loans, without the prior written consent of Landlord. Such structures, alterations and/or additions, shall immediately become a part of the realty and belong to the Landlord. However, if Landlord advises Tenant that Landlord desires not to assume ownership and control of said structures, Tenant shall remove the same and restore the demised premises to its condition before Tenant entered thereon, upon the termination of this Lease. Tenant shall be free to remove its equipment and personal property from the leased premises upon the termination of this lease, provided Tenant is not then in default hereunder. 6. Abandonment. Tenant agrees not to vacate or abandon the premises at any time during the demised term. Should Tenant vacate or abandon said premises or be dispossessed by process of law or otherwise, such abandonment, vacation or dispossession shall be a breach of this Lease and in addition to any other rights which Landlord may have, Landlord may at once remove any property belonging to Tenant which remains on the premises and store or dispose of the same, the cost of such removal, disposal and/or storage to be charged to the account of Tenant. 7. Maintenance, Repairs and Reclamation Bond. Tenant shall at its sole cost, keep and maintain the demised premises and appurtenances and every part thereof, in good, clean and sanitary order, condition and repair, hereby waiving all right to make repairs or replacements at the expense of Landlord. By entry hereunder, Tenant accepts the premises as being in good

order, condition and repair and agrees on the last day of said term, or sooner termination of this Lease, to surrender unto Landlord said premises with improvements, in the same condition as when received or as improved, reasonable wear and tear excepted, and to remove those improvements to the real property that Landlord requests Tenant remove and all of Tenant's personal property form the premises, repairing any damage caused thereby and restoring and reclaiming the demised premises to its original condition, or as improved at Landlord's request, or to such other condition as any federal, state or local agency may require, upon the termination of Tenant's operation. As security for Tenant's obligation to repair, restore and reclaim the demised premises, Tenant shall obtain and maintain throughout the term of this Lease Agreement and so long thereafter as Tenant occupies the leased premises, a reclamation and surety bond to guarantee Tenant's obligations. Such bond shall be in favor of and be payable to Landlord. At the commencement of this Lease, the bond shall be in the amount of $2,000.00 per acre of land used or occupied by Tenant or such greater sum as any Federal, State and/or local regulatory authority may require. Thereafter, from time to time, based upon Tenant's use and activity on the leased premises, Landlord may require Tenant to increase the amount of such bond as Landlord may determine will be needed, from proposed clean-up, reclamation and restoration plans which Tenant will periodically provide to Landlord as a condition of this Lease. 8. Laws and Regulations. Tenant, at its own cost and expense, shall comply with all laws, rules and orders of all federal, state, county and municipal governments, or departments, which may be applicable to the use of the leased premises. 9. Indemnification and Liability Insurance. Except for such loss or damage as may be caused by the negligent or willful act of Landlord, its agents, or employees, Landlord shall not be liable to Tenant, its officers, agents, employees, customers, invitees, or third parties for loss of or damage to property, including goods, wares and merchandise, or for injury or death to persons, in, on, or about the premises and Tenant agrees to indemnify and save and hold Landlord harmless from and on account thereof, howsoever arising or by whomever caused. During the term hereof, Tenant shall maintain in full force and effect with insurance companies of good reputation a comprehensive liability insurance policy applicable to the premises and the activities of Tenant therein with a combined single limit for bodily injury and property damage of not less than $1,000,000.00. A certificate evidencing such coverage and providing that the insurance may not be canceled without thirty (30) days prior written notice to Landlord shall be provided to Landlord. 10. Signs. Tenant shall not affix or maintain upon the demised premises, any sign or other like item, except such shall have first received written approval of the landlord as to the size, type, location, nature and display qualities. Landlord's approval hereunder shall not be unreasonably withheld. 11. Utilities. Tenant, from the time it first enters the premises for the purpose of setting fixtures, or from the commencement of the term of this Lease, which ever comes first, and throughout the term of this Lease, shall pay for all public and other utilities and related services rendered or furnished to the premises, including but not limited to water, gas, electricity, telephone, heat, light, sewer charges, installation and connection charges or deposits therefor and refuse or garbage collection or disposal. Tenant shall not allow refuse, garbage, or trash to accumulate inside or outside the demised premises. 12. Entry by Landlord. Tenant shall permit Landlord and its agents to enter the demised premises at all reasonable times, to inspect the same.

13. Assignment. The parties acknowledge the limited purposes for which the premises are to be used, and therefore agree that, except as hereinafter set forth, Tenant shall not sublet the premises in whole or in part, or assign or transfer this Lease, or any interest herein, without first obtaining the written consent of Landlord, which consent may be withheld in the event Landlord determines that such subletting, assignment or transfer would or could create any additional risk, result in any additional liability or economic loss to Landlord, or for any other reasons in the reasonable discretion of Landlord. No consent to any subletting, assignment or transfer shall be construed as a consent to any subsequent assignment, subletting, transfer, occupancy or use. No sublease, assignment or transfer of any interest in this Lease shall release Tenant from, or otherwise affect in any manner, any of Tenant's obligations hereunder and Tenant hereby expressly agrees that it shall continue to be liable for the obligations hereunder notwithstanding any sublease, assignment or transfer as contemplated by this paragraph. Any such assignment, subletting, occupancy or use, without the prior written consent of Landlord shall be null and void. 14. Default. Should the Tenant be in default hereunder with respect to any rental payments or other charges to the Tenant hereunder, and should such default continue for a period of three (3) days after written notice from Landlord to Tenant; or should the Tenant be in default in the prompt and full performance of any other of its promises, covenants or agreements herein contained and should such default or breach of performance continue for more than a reasonable time (in no event to exceed thirty (30) days) after written notice thereof from the Landlord to Tenant specifying the particulars of such default or breach of performance; or should Tenant vacate or abandon the premises; or should Tenant or any agent of Tenant falsify any report required to be furnished to Landlord pursuant to the terms of this Lease; or should Tenant or any guarantor of this Lease become bankrupt or insolvent, or file any debtors proceedings or take or have taken against Tenant or any guarantor of this Lease in any court pursuant to any statute either of the United States or of any state a petition in bankruptcy or insolvency of for reorganization or for the appointment of a receiver of trustee of all or a portion of Tenant's or any guarantor's property, or if Tenant or any such guarantor makes an assignment for the benefit of creditors, or petitions for or enters into an arrangement or if Tenant shall suffer this Lease to be taken under any writ of execution; then the Landlord may treat the occurrence of any one or more of the foregoing events as a breach of this Lease, and in addition to any and all other rights or remedies of the Landlord hereunder and by the law provided, it shall be, at the option of the Landlord, without further notice or demand of any kind to Tenant or any other person: (a) The right of the Landlord without declaring this Lease ended to re-enter the premises and take possession thereof and remove all persons therefrom and Tenant shall have no further claim thereon or thereunder, or (b) The right of the Landlord without declaring this Lease ended to re-enter the premises and occupy or lease the whole or any part thereof for an on account of the Tenant and upon such terms and conditions and for such rent as the Landlord may deem proper and to collect said rent and any other rent that may thereafter become payable and apply the same toward the amount due or thereafter to become due from the Tenant and on account of such expenses of such subletting and any other damages sustained by the Landlord; and should such rental be less than that herein agreed to be paid by Tenant, the Tenant agrees to pay such deficiency to the Landlord in advance on the day of each month herein before specified for payment and to pay to Landlord forthwith upon any such reletting the costs and expenses the Landlord may incur by reason thereof; or (c) The right of Landlord, even though it may have relet said premises, to thereafter elect to terminate this Lease and all the rights of the Tenant in or to the premises. Should the Landlord have relet the premises under the provisions of subparagraph (b) above, it may execute any such lease either in its own name or in the name of Tenant as it shall see fit, the Tenant therein named shall be under no obligation whatsoever to see to the application by Landlord of any rent

collected by Landlord from such tenant nor shall the Tenant hereunder have any right of authority whatever to collect any rent from such tenant. The Landlord shall not be deemed to have terminated this Lease, or the liability of the Tenant to pay rent thereafter to accrue or its liability for damage under any of the provisions hereof, by any such re-entry or by any action in unlawful detainer, or otherwise, to obtain possession of the premise, unless the Landlord shall have notified the Tenant in writing that it has so elected to terminate this Lease, and the Tenant further covenants that the services by Landlord of any notice pursuant to the unlawful detainer statutes of the State of Utah and the surrender of possession pursuant to such notice shall not (unless the Landlord elects to the contrary at the time of or at any time subsequent to the service of such notices and such election be evidenced by a written notice to the Tenant) be deemed to be a termination of this Lease. Nothing herein contained shall be construed as obligating the Landlord to relet the whole or any part of the premises. In the event of any entry or taking possession of the premises as aforesaid, the Landlord shall have the right but not the obligation, to remove therefrom all or any part of the personal property located thereon and may place the same in storage at a public warehouse at the expense and risk of the owner or owners thereof. In the event of Tenant's default and Landlord's retaking of possession of the premises, whether this Lease is terminated by Landlord or not, Tenant agrees to pay to Landlord as an additional item of damages the cost of repairs, alterations, redecoration, leasing commissions, attorneys fees and Landlord's other costs and expenses incurred in retaking the premises and in reletting the premises to a new tenant. Should the Landlord elect to terminate this Lease under the provisions of subparagraph (a) or (c) above, the Landlord shall thereupon, without waiting for the end of the term hereof, be entitled to recover from Tenant as damages, the difference, if any, between the then reasonable rental value of the premises for the period of the term reserved in the Lease and the amount of rental and other charges payable by Tenant for the balance of the term of this Lease, together with the rent then unpaid, if any. For all purposes of this Paragraph 14, the rental agreed to be paid by Tenant or the amount of rental payable by the Tenant shall be deemed to be the monthly rental and all other sums required to be paid by Tenant pursuant to the terms of this Lease. In the event of default, all of the Tenant's fixtures, furniture, equipment, improvements, additions, alterations, and other personal property, shall remain on the subject premises and in that event, and continuing during the length of said default, Landlord shall have the right to take the exclusive possession of same and to use same, rent or charge free, until all defaults are cured, or at its option, at any time during the term of this Lease, to require Tenant to forthwith remove same. Notwithstanding any other provisions of this paragraph, the Landlord agrees that if the default complained of, other than for the payment of money, or of such a nature that the same cannot be rectified or cured within the thirty (30) day period requiring such rectification or curing as specified in the written notice relating thereto, then such default shall be deemed to be rectified or cured if the Tenant within such period of thirty (30) days shall have commenced the rectification and curing thereof and shall continue thereafter with all due diligence to cause such rectification and curing and does so complete the same with the use of such diligence as aforesaid. The remedies given to Landlord in this paragraph shall be in addition and supplemental to all other rights or remedies which the Landlord may have under the laws then in force. 15. Voluntary Surrender. The voluntary or other surrender of this Lease by tenant, or a mutual cancellation thereof, shall not work a merger, but shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or operate as an assignment to it of any or all such subleases or subtenancies. 16. Attorney's Fees. If Landlord shall be made a party to any litigation commenced by or against Tenant, Tenant shall pay all costs, expense and attorney's fees incurred by Landlord in connection with such litigation

except in the event that such litigation shall determine that Landlord is liable therefor. In the event of any action at law or in equity between Landlord and Tenant to enforce any of the provisions and/or rights hereunder, the unsuccessful party to such litigation covenants and agrees to pay to the successful party all costs and expenses, including reasonable attorney's fees incurred therein by such successful party, and if such successful party shall recover judgment in any such action or proceeding, such costs, expenses and attorney's fees shall be included in and as part of such judgment. 17. Notices. All notices to be given to Tenant or Landlord hereunder may be given in writing personally or by depositing the same in the United States mail, certified, postage prepaid, and addressed to such party at the address specified herein, or such other address as may hereafter be specified by such party to the other in writing. 18. Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein shall not be deemed to be a waiver of any other term, covenant or condition or any subsequent breach of the same or any other term, covenant, or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time off acceptance of such rent. 19. Holding Over. Any holding over after the expiration of the said term, with the consent of Landlord, shall be construed to be a tenancy from month to month, and shall be on the terms and conditions herein specified, so far as applicable. 20. Successors. All the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto, provided that nothing in this paragraph shall be deemed to permit any assignment, subletting, occupancy or use contrary to the provisions of paragraph 13. 21. Security Deposit. (a) Tenant has deposited with Landlord the sum of $28,600.00, as a security deposit, receipt of which is hereby acknowledged, with sum represents the reclamation bond referred to in paragraph 7 above, plus $600.00. Said deposit shall be held by Landlord, without liability for interest, as security for the faithful performance by Tenant of all the terms of this Lease by said Tenant to be observed and performed. The security deposit shall not be mortgaged, assigned, transferred, or encumbered by Tenant without the written consent of Landlord and any such act on the part of Tenant shall be without force and effect and shall not be binding upon Landlord. (b) If any of the rents herein reserved or any other sums payable by Tenant shall be overdue and unpaid or should Landlord make payments on behalf of Tenant, or should Tenant fail to perform any of the terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy which Landlord may have on account thereof, appropriate and apply said entire deposit or so much thereof as may be necessary to compensate Landlord toward the payment of rent or additional rent or expense or loss or damage sustained by Landlord due to such breach on the part of Tenant, and Tenant shall forthwith upon demand restore said security to the original sum deposited. Should Tenant comply with all of said terms, promptly pay all of the rentals as they fall due and all other sums payable by Tenant to Landlord, and

should Tenant reclaim the demised premises to the satisfaction of Landlord and all regulatory agencies, said deposit shall be returned to Tenant at the end of the term. (c) In the event of bankruptcy or other debtor-creditor proceedings against Tenant, such security deposit shall be deemed to be applied first to the payment of rent and other charges, including reclamation expenses, due Landlord for all periods prior to the filing of such proceedings. (d) Landlord may deliver the funds deposited hereunder by Tenant to the purchasers of Tenant's interest in the premises in the event that such interest be sold and thereupon Landlord shall be discharged from any further liability with respect to such deposit, and this provision shall apply to any subsequent transferees. 22. Brokers. Tenant agrees to hold Landlord harmless from any cost, expense or liability for any compensation, commission or other charges claimed by any realtor, broker or agent other than Landlord's representative. 23. Interest. Any sum accruing to Landlord under the terms and provisions of this Lease which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the date when the same becomes due and payable by the terms and provisions hereof until paid, notwithstanding specific reference thereto elsewhere in this Lease. 24. Taxes. Landlord shall pay the real property taxes assessed against the leased premises, however, Tenant shall reimburse Landlord for all real property taxes assessed against the leased premises within thirty (30) days of receipt of an invoice from Landlord for the taxes. Such reimbursement shall be additional rent hereunder. Tenant shall also pay as additional rent hereunder, prior to delinquency, all such taxes assessed against the property and any increase assessed thereon, as a result of structures, buildings, improvement or other changes made to the leased premises by Tenant. Tenant shall also pay prior to delinquency, all taxes assessed against and levied upon fixtures, furnishings, equipment and all other personal property of Tenant contained on the demised premises. 25. Free from Liens. Tenant shall keep the demised premises, including the improvements made thereon by Tenant, and the property on which the demised premises are situated, completely free and clear from any liens arising out of any work performed, material furnished, or obligations incurred by Tenant. 26. Landlord's Right to Require Move. Landlord shall have the right at any time during the term of this Lease or any extension hereof, to require Tenant to remove and relocate any and all of Tenant's property and improvements from the demised premises to an alternate location of Landlord's choosing, anywhere on property now owned or hereafter acquired by Landlord. Upon written notice to Tenant from Landlord that Tenant must relocate its improvements, Tenant shall have twelve (12) months from the date of such notice to remove its property from the demised premises to the alternate location and to commence restoration and reclamation of the demised premises. Landlord shall also have the right at any time during the term of this Lease or any extension, upon 180 days notice, to require Tenant to move Tenant's radial stacker and storage area to a location west of Tenant's building, on land of Landlord's choosing, of the same size as that then being used by Tenant. 27. First Right on Freight, Loading and Purchase of Product. As partial consideration for this Lease, Tenant hereby grants unto Landlord the first right to transport any coal or coal fines to Tenant's processing facility and any finished coal product from Tenant's processing facility. For any such coal, coal fines and finished product to be transported, Tenant shall advise Landlord of its best good faith bid for such transporting service and Landlord shall be entitled to match such bid, either personally or through a subcontractor, and thereby obtain the right to perform such transporting service for Tenant on the same terms and conditions as the matched bid. Tenant also hereby grants unto Landlord the first right to load Tenant's finished load product on the rail at the Railco load-out facility near the leased premises, by matching any good faith bid obtained by Tenant for the loading of Tenant's coal product. Tenant also hereby grants unto Landlord the first right to purchase any or all of the finished coal product produced by Tenant, by Landlord agreeing to pay Tenant the same price for said product, on the same terms, that Tenant offers to any other buyers. 28. Construction of Acceleration Lane. As partial consideration for this Lease, in order to avoid traffic congestion on roads servicing the demised premises and surrounding businesses, Tenant agrees that upon the execution of this Lease, Tenant will immediately commence construction of, and will diligently pursue to completion, an acceleration lane on the demised property, from the access road on the south of the demised premises, to the north boundary of the demised premises. The design and layout of the acceleration lane shall be subject to the

approval of Landlord, will be suitable for heavy truck traffic, and will be continuously maintained at Tenant's sole cost, during the entire term of this Lease and so long as Tenant occupies the premises. 29. Weighing Trucks. As partial consideration for this Lease, during the term of this Lease and as long as Tenant occupies the demised premises, at Landlord's option, Tenant agrees to weigh trucks hauling material to the Railco load-out facility, on Tenant's scales, for $1.00 per truck. 30. Lessor's Lien. Notwithstanding any other provision of this Lease Agreement, no furniture fixtures, equipment, buildings or other property of Tenant located on the leased premises may be removed from the same unless and until Tenant is current in all obligations to Landlord under this Lease Agreement, and Tenant hereby grants unto Landlord a lien upon such furniture, fixtures, equipment, buildings and other property to secure faithful performance and full payment by Tenant of the terms, conditions and obligations of this Lease Agreement. 31. Miscellaneous. (a) Time is of the essence of this Lease and of all provisions hereof. (b) This Lease shall be construed and enforced in accordance with the laws of the State of Utah. (c) No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement of statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction and Landlord may accept such check or payment without prejudice to Landlord's right to the balance of such rent or pursue any other remedy in this Lease provided. (d) This Lease Agreement sets forth all of the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the leased premises and there are no covenants,

promises, agreements conditions and understandings, either oral or written, between them other than are herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them. (e) Landlord does not by this Lease Agreement, in any way or for any purpose, become a partner or joint venturer of Tenant in the conduct of Tenant's business or otherwise. (f) If any term, covenant, or condition of this Lease or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law. IN WITNESS WHEREOF, the parties have duly executed this Lease Agreement, the day and year first written above. U.P.C., INC. COVOL TECHNOLOGIES, INC. Landlord Tenant
By: /s/ B.E. Crossley By: /s/ Brent M. Cook

STANDARD FORM OF AGREEMENT BETWEEN OWNER AND DESIGN/BUILDER DESIGN AND CONSTRUCTION AGREEMENT AGREEMENT made as of the 20th day of Deccember , 1996, (Contract No. CL-003)
BETWEEN the Owner: (Name and address) Covol Technologies, Inc. 3280 North Frontage Road Lehi, UT 84043

and the Design/Builder: (Name and address)

Centerline Engineering Corporation A Lockwood Greene Company 12450 Perry Highway Post Office Box 249 Wexford, PA 15090

For the following Project: (Include Project name, location and detailed description of scope.) The Design/Builder shall provide to the Owner or its successors or assigns one (1) Coal Fines Agglomeration Facility ("Facility"). Article 14.1, Scope of Work, shall provide a detailed description of the Coal Fines Agglomeration Facility to be provided by the Design/Builder. The Owner and the Design/Builder agree as set forth below. ARTICLE 1 GENERAL PROVISIONS Page 1

1.1 Basic Definitions 1.1.1 The Contract Documents consist of this Agreement together with its Exhibits, the Construction Documents identified in Exhibit "C" and Modifications issued after execution of the Agreement. A Modification is a Change Order or a written amendment to the Agreement, signed by both parties. These form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. 1.1.2 The Project is the total design and construction for which the Design/Builder is responsible under the Agreement, including all professional design services and all labor, services, materials and equipment used or incorporated in such design and construction. 1.1.3 The Work comprises the completed construction designed under the Project and includes labor necessary to produce such construction, and materials and equipment incorporated or to be incorporated in such construction. 1.1.4 The Design/Builder accepts the relationship of trust and confidence established between it and the Owner by this agreement. The Design/Builder agrees to furnish the engineering and construction services set forth herein and agrees to furnish efficient business administration and superintendence, and to use its best efforts to perform the services in an expeditious and economical manner consistent with the interest of the Owner. 1.1.5 The Design/Builder shall act as Agent for the Owner in all dealings with the vendor(s), supplier(s) and contractor(s) under this agreement. All contracts with the vendor(s), supplier(s) and contractor(s) shall be with the Owner and not the Design/Builder. Prior to making any financial commitments, the Design/Builder shall obtain the Owner's written approval except within the scope of the Project where time constraints make advance approval impractical or in cases of extreme emergencies which might involve life or property damage. The Design/Builder will immediately notify the Owner of such orders or commitments. Owner and Design/Builder shall execute a separate Limited Agency Agreement to define the terms and conditions of this agency relationship. This Limited Agency Agreement is attached as Exhibit "D." Nothing in this paragraph shall be construed as a release or limitation, in whole or in part, of Design/Builder=s obligations under this Agreement. 1.2 Execution, Correlation and Intent 1.2.1 This Agreement shall be signed in not less than duplicate by the Owner and the Design/Builder. Page 2

1.2.2 It is the intent of the Owner and Design/Builder that the Contract Documents include all items necessary for proper execution and completion of the Work. The Contract Documents are complementary, and what is required by any one shall be as binding as if required by all. Work not covered in the Contract Documents will not be required unless it is consistent with and is reasonably inferable from the Contract Documents as being necessary to produce the intended results. Words and abbreviations which have well-known technical or trade meanings are used in the Contract Documents in accordance with such recognized meanings. 1.3 Ownership and Use of Documents 1.3.1 The drawings, specifications and other documents furnished by the Design/Builder are the property of the Owner whether or not the project for which they are made is commenced. Drawings, specifications and other documents furnished by the Design/Builder may be used by the Owner on other projects at the sole responsibility and risk of the Owner for correctness, fitness for purpose, and suitability of application for use. The Owner shall indemnify and hold harmless the Design/Builder for any use of these documents for any purpose other than the originally intended project. 1.3.2 (Deleted) ARTICLE 2 Design/Builder 2.1 Services and Responsibilities 2.1.1 Design services shall be performed by qualified engineers and other professionals selected and paid by the Design/Builder. The professional obligations of such persons shall be undertaken and performed in the interest of the Design/Builder. Construction services shall be performed by qualified and licensed construction contractors and suppliers, selected by the Design/Builder. The Design/Builder shall negotiate and prepare the contract documents between the Owner and such contractors and suppliers. The Design/Builder shall retain control and management of the contractors and suppliers. Payments shall be made by the Owner upon Design/Builder=s approval.
2.2 2.2.1 14. 2.2.2 Basic Services The Design/Builder=s Basic Services are described below and in Article

The Design/Builder shall submit Construction Documents for

review

and

approval by the Owner. Construction Documents shall include technical drawings, Page 3

schedules, diagrams and specifications, setting forth in detail the requirements for construction of the Work. 2.2.3 (Deleted) 2.2.4 Unless otherwise provided in the Contract Documents, the Design/Builder shall provide or cause to be provided and shall pay for design services, labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. Tools and materials purchased by Design/Builder specifically for the Project shall belong to the Owner. 2.2.5 The Design/Builder shall be responsible for and shall coordinate all construction means, methods, techniques, sequences and procedures. 2.2.6 The Design/Builder shall keep the Owner informed on a timely basis of the progress and quality of the work. 2.2.7 (Deleted) 2.2.8 The Design/Builder shall correct on a timely basis and at its own expense, work which does not conform to the Construction Documents. 2.2.9 The Design/Builder warrants to the Owner that materials and equipment incorporated in the Work will be new unless otherwise specified by separate written notice to Owner prior to installation, and that the Work will be of good quality, free from faults and defects, and in conformance with the Contract Documents. Work not conforming to these requirements shall be corrected in accordance with Article 9. 2.2.10 The Design/Builder shall secure and pay for building and other permits and governmental fees, licenses and inspections necessary for the proper execution and completion of the Work which are either customarily secured after execution of the Agreement or are legally required at the time the Design/Builder=s Proposal was first submitted to the Owner. 2.2.11 The Design/Builder shall give notices and comply with laws, ordinances, rules, regulations and lawful orders of public authorities relating to Design/Builder=s business activities with respect to the Project. 2.2.12 The Design/Builder shall pay royalties and license fees. The Design/Builder shall defend suits or claims for infringement of patent rights and shall save the Owner harmless from loss on account thereof, except that the Owner shall be responsible for such loss when a Page 4

particular design, process or product of a particular manufacturer is required by the Owner. 2.2.13 The Design/Builder shall be responsible to the Owner and shall bear the costs of defending Owner for acts and omissions of the Design/Builder=s employees and parties in privity of contract with the Design/Builder to perform a portion of the Work, including their agents and employees. 2.2.14 The Design/Builder shall keep the premises free from accumulation of waste materials or rubbish caused by the Design/Builder=s operations and shall remove same in compliance with applicable regulations and ordinances. At the completion of the Work, the Design/Builder shall remove from and about the Project, the Design/Builder=s tools, construction equipment, machinery, surplus materials, waste materials and rubbish. 2.2.15 The Design/Builder shall prepare Change Orders for the Owner=s approval and execution in accordance with the Agreement and shall have authority to make minor changes in the design and construction consistent with the intent of the Agreement not involving an adjustment in the contract sum or an extension of the contract time. The Design/Builder shall promptly inform the Owner, in writing, of minor changes in the design and construction. 2.2.16 The Owner shall notify the Design/Builder when the Work or an agreed portion thereof is substantially completed by issuing a Certificate of Substantial Completion which will establish the Date of Substantial Completion, shall state the responsibility of each party for security, maintenance, heat, utilities, damage to the Work, and insurance, shall include a list of items to be completed or corrected and shall fix a time within which the Design/Builder shall complete items listed therein. Disputes between the Owner and Design/Builder regarding the Certificate of Substantial Completion shall be resolved by arbitration in accordance with Article 10. 2.2.17 The Design/Builder shall maintain in good order at the site one record copy of the drawings, specifications, product data, samples, shop drawings, Change Orders and other Modifications, marked currently to record changes made during construction. These "as built" drawings and materials shall be delivered to the Owner upon completion of the design and construction and prior to final payment. ARTICLE 3 OWNER 3.1 The Owner shall designate a representative authorized to act on the Owner's behalf with respect to the Project. Page 5

3.2 The Owner shall appoint an on-site project representative to observe the Work. Design/Builder shall give the representative access to the Project and all records on a timely basis. 3.3 The Design/Builder shall assist the Owner in securing all building and other permits, licenses and inspections and the Design/Builder shall pay the fees for such permits, licenses and inspections as part of the Contract Price. 3.4 The Owner shall furnish services by land surveyors, geotechnical engineers and other consultants for subsoil, air, and water conditions for use by the Design/Builder. 3.5 The Owner shall provide a Site properly zoned, with access thereto as necessary for the Design/Builder to perform the Work. 3.6 The Owner shall provide all environmental permits and regulatory agency approvals. 3.7 If the Owner observes or otherwise becomes aware of a material fault or defect in the Work or nonconformity with the Construction Documents, the Owner shall give prompt written notice thereof to the Design/Builder. 3.8 The Owner shall furnish required information and services and shall promptly render decisions pertaining thereto to avoid delay in the orderly progress of the design and construction. 3.9 The Owner shall, at the request of the Design/Builder and upon execution of this Agreement provide a certified or notarized statement of funds available for the Project and their source. 3.10 The Owner shall communicate with contractors and suppliers, only through the Design/Builder or with the Design/Builder=s knowledge and approval, provided Design/Builder is not in default under this Agreement. ARTICLE 4 TIME 4.1 The Design/Builder shall provide services consistent with reasonable skill and care and the orderly progress of the design and construction. Page 6

4.2 Time limits stated in the Contract Documents are of the essence of the Agreement. The Work to be performed under this Agreement shall commence within ten (10) days of the Design/Builder=s receipt of the Owners Notice to Proceed. Failure by Owner to issue Notice to Proceed by September 1, 1997, will constitute a breach of this Agreement unless the Parties agree to the Notice to Proceed at a later date. 4.3 The Work shall be Mechanically Complete within two hundred ten (210) days following receipt of the Notice to Proceed by the Design/Builder, unless the parties mutually agree in writing to an earlier or later date. Mechanically Complete is the stage of the Work in which all of the Facility systems and components have been installed, checked out and are completely ready for start-up, commissioning, and Performance and Operational Testing. Seven (7) working days before Design/Builder expects to achieve Mechanical Completion, he shall notify Owner of same and request a Mechanical Completion inspection. The Owner will promptly inspect and accept or reject the project for Mechanical Completion. If rejected, a list of reasons will be issued by Owner, which Design/Builder shall promptly accomplish or remedy. If accepted, Owner will issue a Certificate of Mechanical Completion to Design/Builder. 4.4 Upon receipt of the Certificate of Mechanical Completion, the Design/Builder will work with the Owner in scheduling the start-up and commissioning, as well as the Performance Demonstration. Seven (7) work days before the start of the Performance Demonstration, the Design/Builder shall notify the Owner of such tests. 4.5 The Date of Substantial Completion of the Work shall be no later than sixty (60) days following the Date of Mechanical Completion unless the parties mutually agree in writing to an earlier or later date. But in no event shall the Date of Substantial Completion be later than June 30, 1998. Substantial Completion is defined as the date when the Performance and Operational Testing is complete and the Work is sufficiently complete, so the Owner can occupy and operate the Facility. If after the date established for the Date of Substantial Completion, Design/Builder has sufficiently completed the Work but the Facility fails the Performance Tests through no fault of the Design/Builder, the Facility will be deemed Substantially Complete for purposes of payment to the Design/Builder and the beginning of the warranty periods. 4.6 Not more than fourteen (14) days after the receipt by Design/Builder of the Notice to Proceed, the Design/Builder shall submit a written progress schedule indicating each major category or unit of general work to be performed at site, properly sequenced and intermeshed and showing completion of the work consistent with the time period established in this Article 4. The Design/Builder shall provide the Owner with written monthly updates of the progress schedule indicating completed activities and any changes in sequencing or activity durations. 4.7 If the Design/Builder is delayed in the performance of the Project by any acts of or Page 7

neglect of the Owner, or by an employee, agent or representative of the Owner, or by changes ordered in the Work by the Owner, and not required to correct design problems or discrepancies, or by the combined action of the Owner and any of its employees, agents or representatives and is in no way caused by or resulting from default or collusion on the part of the Design/Builder or by any other cause, which the Design/Builder could not reasonably control or circumvent, then the Scheduled Completion Date shall be extended for a period equal to the length of such delay. ARTICLE 5 PAYMENTS 5.1 Progress Payments 5.1.1 The Design/Builder shall deliver to the Owner itemized Applications for Payment by the 5th day of each month. Design/Builder shall submit with each Application for Payment proper vouchers or other evidence satisfactory to Owner certifying its payments for labor, and where applicable, to subcontractors and for materials. Each Application for Payment shall include a breakdown of the cost of labor, materials, sales tax and services in the form as prescribed by Owner. 5.1.2 Properly submitted and correct Applications for Payment, received by Owner by the 5th will be paid on the 20th day of each month, respectively. Any disputed amounts will be withheld from the invoice and the undisputed amount paid on time. 5.1.3 The Application for Payment shall constitute a representation by the Design/Builder to the Owner that the design and construction have progressed to the point indicated; the quality of the Work covered by the application is in accordance with the Contract Documents; and the Design/Builder is entitled to payment in the amount requested. 5.1.4 The Design/Builder shall pay each contractor, upon receipt of payment from the Owner, out of the amount paid to the Design/Builder on account of such contractor=s work, the amount to which said contractor is entitled in accordance with the terms of the Design/Builder=s contract with such contractor. The Design/Builder shall, by appropriate agreement with each contractor, require each contractor to make payments to subcontractors in similar manner. 5.1.5 The Owner shall have no obligation to pay or to be responsible in any way for payment to a contractor of the Design/Builder, except as otherwise required by law. Page 8

5.1.6 No progress payment or partial or entire use or occupancy of the Project by the Owner shall constitute an acceptance of Work not in accordance with the Contract Documents. 5.1.7 The Design/Builder warrants that: (1) title to Work, materials and equipment covered by an Application for Payment will pass to the Owner either by incorporation in construction or upon receipt of payment by the Design/Builder, whichever occurs first; (2) Work, materials and equipment covered by previous Applications for payment for which payment has been received are free and clear of liens, claims, security interests or encumbrances, hereinafter referred to as Aliens@; and (3) no Work, materials or equipment covered by an Application for Payment will have been acquired by the Design/Builder, or any other person performing work at the site or furnishing materials or equipment for the Project, subject to an agreement under which an interest therein or an encumbrance thereon is retained by the seller or otherwise imposed by the Design/Builder or such other person. 5.1.8 The Contract provides for up to 5% retainage. At the date of Substantial Completion or occupancy of the Work or any agreed upon portion thereof by the Owner, whichever occurs first, the Design/Builder may apply for and the Owner, if the Design/Builder has satisfied the requirements of Paragraph 5.2.1 and any other requirements of the Contract relating to retainage, shall pay the Design/Builder the amount retained, if any, for the Work or for the portion completed or occupied, less the reasonable value of incorrect or incomplete Work. Final payment of such withheld sum shall be made upon correction or completion of such Work. 5.1.9 Concurrent with Article 4.2, Notice to Proceed, the Owner shall furnish to the Design/Builder an advance payment of $250,000 and any advance payments required for the procurement of long lead time equipment which will assist in the expediting of the Project. The payment shall be made within thirty (30) days of the Notice to Proceed. 5.2 Final Payment 5.2.1 Neither final payment nor amounts retained, if any, shall become due until the Design/Builder submits to the Owner (1) an affidavit that payrolls, bills for materials and equipment, and other indebtedness connected with the Project for which the Owner or Owner=s property might be liable have been paid or otherwise satisfied, (2) consent of surety, if any, to final payment, (3) a certificate acceptable to Owner that insurance required by the Contract Documents is in force following completion of the Work, and (4) if required by the Owner, other data establishing payment or satisfaction of obligations, such as receipts, releases and waivers of liens arising out of the Agreement, to the extent and in such form as may be designated by the Owner. If a contractor refuses to furnish a release or waiver required by the Owner, the Design/Builder may furnish a bond satisfactory to the Owner to indemnify the Owner against such lien. If such Lien remains unsatisfied after payments are made, the Page 9

Design/Builder shall promptly reimburse the Owner for moneys the latter may be compelled to pay in discharging such lien, including all costs and reasonable attorneys= fees. 5.2.2 Final payment constituting the entire unpaid balance due shall be paid by the Owner to the Design/Builder upon the Owner=s receipt of a correct Design/Builder=s final Application for Payment when the Work has been completed and the Contract fully performed except for those responsibilities of the Design/Builder which survive final payment. 5.2.3 The making of final payment shall constitute a waiver of all claims by the Owner except those arising from: .1 unsettled liens; .2 faulty or defective Work appearing after Substantial Completion; .3 failure of the Work to comply with requirements of the Contract Documents; or .4 terms of special warranties required by the Contract Documents. .5 outstanding contractual issues identified in writing at the time of final payment. 5.2.4 Acceptance of final payment shall constitute a waiver of all claims by the Design/Builder. 5.3 Interest Payments 5.3.1 Payments due the Design/Builder under the Agreement which are not paid when due shall bear interest from the date due at the rate specified in Article 13. ARTICLE 6 PROTECTION OF PERSONS AND PROPERTY 6.1 The Design/Builder shall be solely responsible for initiating, maintaining and providing supervision of safety, precautions and programs in connection with the Work. 6.2 The Design/Builder shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to: (1) employees on the work and other persons who may be affected thereby; (2) the Work and materials and equipment to be incorporated therein; and (3) other property at or adjacent to the site. 6.3 The Design/Builder shall give notices and comply with applicable laws, ordinances, rules, regulations and orders of public authorities bearing on the safety of persons and property and their protection from damage, injury or loss. Page 10

6.4 The Design/Builder shall be liable for damage or loss to property at the site caused in whole or in part by the Design/Builder, a contractor of the Design/Builder or anyone directly or indirectly employed by either of them or by anyone for whose acts they may be liable, except damage or loss attributable to the acts or omissions of the Owner, the Owner=s separate contractors or anyone directly or indirectly employed by them or by anyone for whose acts they may be liable, and not attributable to the fault or negligence of the Design/Builder. ARTICLE 7 INSURANCE AND BONDS 7.1 Design/Builder's Liability Insurance 7.1.1 The Design/Builder shall purchase and maintain in a company or companies authorized to do business in the state in which the Work is located such insurance as will protect the Design/Builder from claims set forth below which may arise out of or result from operations under the Contract by the Design/Builder or by a contractor of the Design/Builder, or by anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable: .1 claims under workers= or workmen=s compensation, disability benefit and other similar employee benefit laws which are applicable to the Work to be performed; .2 claims for damages because of bodily injury, occupational sickness or disease, or death of the Design/Builder=s employees under any applicable employer=s liability law; .3 claims for damages because of bodily injury, sickness or disease, or death of persons other than the Design/Builder=s employees; .4 claims for damages covered by usual personal injury liability coverage which are sustained (1) by a person as a result of an offence directly or indirectly related to employment of such person by the Design/Builder or (2) by another person; .5 claims for damages, other than to the Work at the site, because of injury to or destruction of tangible property, including loss of use; and .6 claims for damages for bodily injury or death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle. 7.1.2 The insurance required by the above Subparagraph 7.1.1 shall be written for not less than the limits of liability specified in the Contract Documents or required by law, whichever are greater. Page 11

7.1.3 The Design/Builder=s liability insurance shall include contractual liability insurance applicable to the Design/Builder's obligations under Paragraph 11.7. 7.1.4 Certificates of Insurance, and copies of policies if requested, acceptable to the Owner shall be delivered to the Owner prior to commencement of design and construction. These Certificates as well as insurance policies required by this Paragraph shall contain a provision that coverage will not be canceled or allowed to expire until at least thirty (30) days= written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment, an additional certificate evidencing continuation of such coverage shall be submitted along with the application for final payment. 7.2 Owner=s Liability Insurance 7.2.1 The Owner shall be responsible for purchasing and maintaining, in a company or companies authorized to do business in the state in which the principal improvements are to be located, Owner=s liability insurance to protect the Owner against claims which may arise from operations under this Project. 7.3 Property Insurance 7.3.1 Unless otherwise provided under this Agreement, the Owner shall purchase and maintain, in a company or companies authorized to do business in the state in which the principal improvements are to be located, property insurance upon the Work at the site to the full insurable value thereof. Property insurance shall include interests of the Owner, Mortgagees, the Design/Builder, and their respective contractors and subcontractors in the Work. It shall insure against perils of fire and extended coverage and shall include all risk insurance for physical loss or damage including, without duplication of coverage, theft, vandalism and malicious mischief. If the Owner does not intend to purchase such insurance for the full insurable value of the entire work, the Owner shall inform the Design/Builder in writing prior to commencement of the Work. The Design/Builder may then effect insurance for the Work at the site which will protect the interests of the Design/Builder and the Design/Builder=s contractors and subcontractors, and by appropriate Change Order the costs thereof shall be charged to the Owner. If the Design/Builder is damaged by failure of the Owner to purchase or maintain such insurance without notice to the Design/Builder, then the Owner shall bear all reasonable costs properly attributable thereto. If not covered under the all risk insurance or not otherwise provided in the Contract Documents, the Owner shall effect and maintain similar property insurance on portions of the Work stored off-site or in transit when such portions of the Work are to be included in an Application for Payment. 7.3.2 Unless otherwise provided under this Agreement, the Owner shall purchase and maintain Page 12

such machinery insurance as may be required by the Contract documents or by law and which shall specifically cover such insured objects during installation and until final acceptance by the Owner. This insurance shall cover interests of the Owner, Lenders, Mortgagees, the Design/Builder, and the Design/Builder=s contractors and subcontractors in the Work. 7.3.3 A loss insured under Owner=s property insurance is to be adjusted with the Owner and made payable to the Owner as trustee for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Subparagraph 7.3.8. The Design/Builder shall pay contractors their share of insurance proceeds received by the Design/Builder, and by appropriate agreement, written where legally required for validity, shall require contractors to make payments to their subcontractors in similar manner. 7.3.4 Before an exposure to loss may occur, the Owner shall file with the Design/Builder a copy of each policy required by this Paragraph 7.3. Each policy shall contain only those endorsements specifically related to this Project. Each policy shall contain a provision that the policy will not be canceled or allowed to expire until at least thirty (30) days= prior written notice has been given the Design/Builder. 7.3.5 If the Design/Builder requests in writing that insurance for Project risks other than those described herein or for other special hazards be included in the property insurance policy, the Owner shall, if possible, obtain such insurance, and the cost thereof shall be charged to the Design/Builder by appropriate Change Order. 7.3.6 The Owner and Design/Builder waive all rights against each other and the contractors, subcontractors, agents and employees, each of the other, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 7.3 or other property insurance applicable to the Work, except such rights as they may have to proceeds of such insurance held by the Owner as trustee. The Owner or Design/Builder, as appropriate, shall require from contractors and subcontractors by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated in this Paragraph 7.3. The policies shall be endorsed to include such waivers of subrogation. 7.3.7 If required in writing by a party in interest, the Owner as trustee shall provide, upon occurrence of an insured loss, a bond for proper performance of the Owner=s duties. The cost of required bonds shall be charged against proceeds received as trustee. The Owner shall deposit proceeds so received in a separate account and shall distribute them in accordance with such agreement as the parties in interest may reach, or in accordance with an arbitration award in which case, the procedure shall be provided in Article 10. If after such loss, no other special agreement is made, replacement of damaged Work shall be covered by appropriate Change Order. Page 13

7.3.8 The Owner, as trustee, shall have power to adjust and settle a loss with insurers, unless one of the parties in interest shall object, in writing, within ten (10) days after occurrence of loss, to the Owner=s exercise of this power. If such objection be made, the Owner as trustee shall make settlement with the insurers in accordance with the decision of arbitration as provided in Article 10. If distribution of insurance proceeds by arbitration is required, the arbitrators will direct such distribution. 7.3.9 If the Owner finds it necessary to occupy or use a portion or portions of the Work before Substantial Completion, such occupancy or use shall not commence prior to a time agreed to by the Owner and Design/Builder and to which the insurance company or companies providing property insurance have consented by endorsement to the policy or policies. The property insurance shall not lapse or be canceled on account of such partial occupancy or use. Consent of the Design/Builder and of the insurance company or companies to such occupancy or use shall not be unreasonably withheld. 7.4 Loss of Use Insurance 7.4.1 The Owner, at the Owner=s option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner=s property due to fire or other hazards, however caused. The Owner waives all rights of action against the Design/Builder, and its contractors and their agents and employees, for loss of use of the Owner=s property, including consequential losses due to fire or other hazards, however caused, to the extent covered by insurance under this Paragraph 7.4. 7.5 Performance Bond and Payment Bond 7.5.1 At Owner s request, the Design/Builder shall furnish a surety bond for the installation amount (labor and materials) of the Contract covering the faithful performance of the Contract and the payment of all obligations arising thereunder. The cost of any such surety bond shall be paid by the Owner. 7.6 Professional Liability Insurance 7.6.1 The Design/Builder shall provide a Professional Liability Insurance Project Policy for a minimum amount of $5,000,000 aggregate in a form acceptable to the Owner. Page 14

ARTICLE 8 CHANGES IN THE WORK 8.1 Change Orders 8.1.1 A Change Order is a written order signed by the Owner and Design/Builder, and issued after execution of the Agreement, authorizing a change in the Work or adjustment in the contract sum or contract time. The contract sum and contract time may be changed only by Change Order. 8.1.2 The Owner=s designated representative, without invalidating the Agreement, may order changes in the Work within the general scope of the Agreement consisting of additions, deletions or other revisions and the contract sum and contract time shall be adjusted accordingly. Such changes in the Work shall be authorized by Change Order, and shall be performed under applicable conditions of the Contract Documents. 8.1.3 (Deleted) 8.1.4 Cost or credit to the Owner resulting from a change in the Work shall be determined in one or more of the following ways: .1 by mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation; .2 by unit prices stated in the Contract Documents or subsequently agreed upon; .3 by cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or .4 by the method provided below. 8.1.5 If none of the methods set forth in Clauses 8.1.4.1, 8.1.4.2, or 8.1.4.3 is agreed upon, the Design/Builder, provided a written order signed by the Owner is received, shall promptly proceed with the Work involved. The cost of such Work shall then be determined on the basis of reasonable expenditures and savings of those performing the Work attributable to the change, including the expenditures for design services and revisions to the Contract Documents. In case of an increase in the contract sum, the cost shall include a 15% allowance for overhead and profit, and shall be exclusive of existing soft costs or overhead. In case of the methods set for the Clauses 8.1.4.3 and 8.1.4.4, the Design/Builder shall keep and present an itemized accounting together with appropriate supporting data for inclusion in a Change Order. Unless otherwise provided in the Contract Documents, cost shall be limited to the following: cost of materials, including sales tax and cost of delivery; cost of labor, including social security, old age and unemployment insurance; and fringe benefits required by agreement or custom; Page 15

workers= or workmen=s compensation insurance, bond premiums; rental cost of equipment and machinery; and fees paid to architects, engineers and other professionals. The amount of credit to be allowed by the Design/Builder to the Owner for deletion or change which results in a net decrease in the contract sum will be actual net cost. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of the net increase, if any, with respect to that change. 8.1.6 (Deleted) 8.2 CONCEALED CONDITIONS 8.2.1 If concealed or unknown conditions of an unusual nature that affect the performance of the Work and vary from those indicated by the Contract Documents are encountered below ground or in an existing structure other than the Work, which conditions are not ordinarily found to exist or which differ materially from those generally recognized as inherent in work of the character provided for in this Part 2, notice by the observing party shall be given promptly to the other party and, if possible, before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The contract sum shall be equitably adjusted for such concealed or unknown conditions by Change Order upon claim by either party made within twenty-one days after the claimant becomes aware of the conditions. 8.3 Regulatory Changes 8.3.1 The Design/Builder shall be compensated for changes in the Work necessitated by the enactment or revision of codes, laws or regulations subsequent to the execution of this Agreement. ARTICLE 9 CORRECTION OF WORK 9.1 The Design/Builder shall promptly correct at Contractor=s own expense, Work rejected by the Owner or known by the Design/Builder to be defective or failing to conform to the Construction Documents, whether observed before or after Substantial Completion and whether or not fabricated, installed or completed, and shall correct Work under this Agreement found to be defective or nonconforming within a period of one (1) year from the date of Substantial Completion of the Work or designated portion thereof, or within such longer period provided by an applicable special warranty in the Contract Documents. 9.2 Nothing contained in this Article 9 shall be construed to establish a period of limitation Page 16

with respect to other obligations of the Design/Builder under this Agreement. Paragraph 9.1 relates only to the specific obligation of the Design/Builder to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Design/Builder=s liability with respect to the Design/Builder=s obligations other than correction of the Work. 9.3 If the Design/Builder fails to correct defective Work as required or persistently fails to carry out Work in accordance with the Contract Documents, the Owner, by written order signed personally or by an agent specifically so empowered by the Owner in writing, may order the Design/Builder to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the Owner=s right to stop the Work shall not give rise to a duty on the part of the Owner to exercise the right for benefit of the Design/Builder or other persons or entities. 9.4 If the Design/Builder defaults or neglects to carry out the Work in accordance with the Contract Documents and fails within seven (7) days after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, the Owner may give a second written notice to the Design/Builder and, seven days following receipt by the Design/Builder of that second written notice and without prejudice to other remedies the Owner may have, correct such deficiencies. In such case an appropriate Change Order shall be issued deducting from payments then or thereafter due the Design/Builder costs of correcting such deficiencies. If the payments then or thereafter due the Design/Builder are not sufficient to cover the amount of the deduction, the Design/Builder shall pay the difference to the Owner. Such action by the Owner shall be subject to arbitration, in accordance with Article 10. ARTICLE 10 ARBITRATION 10.1 Claims, disputes and other matters in question between the parties to this Agreement arising out of or relating to this Agreement shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect unless the parties agree otherwise. No arbitration arising out of or relating to this Agreement shall include, by consolidation or joinder or in any other manner, an additional person not a party to this Agreement except by written consent containing specific reference to this Agreement and signed by the Owner, Design/Builder and any other person sought to be joined. Consent to arbitration involving an additional person or persons shall not constitute consent to arbitration of a dispute not described or with a person not named therein. This provision shall be specifically enforceable in any court of competent jurisdiction. Page 17

10.2 Notice of demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim dispute or other matter in questions has arisen. In no event shall demand for arbitration be made after the date when the applicable statute of limitations would bar institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. 10.3 The award rendered by arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction. 10.4 Unless otherwise agreed in writing, the Design/Builder shall carry on the Work and maintain its progress during any arbitration proceedings, and the Owner shall continue to make payments to the Design/Builder in accordance with the Contract Documents, except where arbitration originates from Owner=s stop work order. 10.5 This Article 10 shall survive completion or termination of this Agreement. ARTICLE 11 MISCELLANEOUS PROVISIONS 11.1 This Agreement shall be governed by the laws of the state where the Facility is located. Until the site is identified by the Owner pursuant to written notice to Design/Builder prior to or with the Notice to Proceed, this Agreement shall be governed by the laws of the state of Utah. 11.2 (Deleted) 11.3 In case a provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. 11.4 Subcontracts 11.4.1 The Design/Builder, as soon as practicable after receipt of the Notice to Proceed, shall furnish to the Owner in writing the names of the persons or entities the Design/Builder will engage as contractors for the Project. 11.4.2 Nothing contained in the Design/Build Contract Documents shall create a professional obligation or contractual relationship between the Owner and any third party. Page 18

11.5 Work By Owner Or Owner=s Contractors 11.5.1 The Owner reserves the right to perform work related to, but not part of, the Project and to award separate contracts in connection with other work at the site. If the Design/Builder claims that delay or additional cost is involved because of such action by the Owner, the Design/Builder shall make such claims as provided in Paragraph 11.6. 11.5.2 The Design/Builder shall afford the Owner=s separate contractors reasonable opportunity for introduction and storage of their materials and equipment for execution of their work. The Design/Builder shall incorporate and coordinate the Design/Builder=s Work with work of the Owner=s separate contractors as required by the Contract Documents. 11.6 Claims For Damages 11.6.1 If the Design/Builder suffers any injury or damage to person or property because of an act or omission of the Owner, the Owner=s employees or agents, or another for whose acts the Owner is legally liable, any claim shall be made in writing in the form of a Request for Change Order within ten (10) days after such injury or damage is or should have been first known to Design/Builder. Any and all claims not made within ten (10) days are barred, waived, released and discharged. The decision of the Owner shall be final and binding on both parties unless the Design/Builder files a Demand for Arbitration within ten (10) days of the Owner=s decision. If the Design/Builder files a Demand for Arbitration, the claim will be arbitrated in accordance with Article 10. 11.7 Indemnification 11.7.1 To the fullest extent permitted by law, the Design/Builder shall indemnify and hold harmless the Owner and the Owner=s consultants and separate contractors, any of their subcontractors, sub-tier-contractors, agents and employees from and against claims, damages, losses and expenses, including but no limited to attorneys= fees, arising out of or resulting from performance of the Work. These indemnification obligations shall be limited to claims, damages, losses or expenses (1) that are attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, and (2) to the extent such claims, damages, losses or expenses are caused in whole or in party by negligent acts or omissions of the Design/Builder, the Design/Builder=s contractors, anyone directly or indirectly employed by either or anyone for whose acts either may be liable, regardless of whether or not they are caused in party by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge or otherwise reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 11.7. The above indemnification shall not extend to include indirect or consequential damages. Page 19

11.7.2 In claims against the Owner or its consultants and its contractors, any of their subcontractors, sub-tiercontractors, agents or employees by an employee of the Design/Builder, its contractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Paragraph 11.7 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Design/Builder, or a Design/Builder=s contractor, under workers= or workmen=s compensation acts, disability benefit acts or other employee benefit acts. 11.7.3 Under no circumstances shall Design/Builder be liable to Owner for, nor shall Owner make claim to Design/Builder for, consequential loss or damage, including but not limited to loss or damage resulting from loss of use, loss of profits or revenues, cost of capital, loss of good will, claims of Owner=s customers, or like items of loss or damage, and Owner hereby releases Design/Builder therefrom. 11.8 Successors and Assigns 11.8.1 This Agreement shall be binding on successors, assigns, and legal representatives of and persons in privity of contract with the Owner or Design/Builder. The Design/Builder shall not assign, sublet or transfer an interest in the Agreement without written consent of the Owner. 11.8.2 This Paragraph 11.8 shall survive completion or termination of the Agreement. 11.9 In case of termination of the Engineer, the Design/Builder shall provide the services of another lawfully licensed person or entity against whom the Owner makes no reasonable objection. 11.10 Extent of Agreement 11.10.1 Since the Facility to be designed and constructed under this Agreement is expected, once operational, to provide tax credits under Section 29 of the Internal Revenue Code of 1986, it is the express intent of the parties that this Agreement qualify as a binding contract for the purposes of construing Section 29(g)(1)(A) of the Internal Revenue Code. In the event that any one or more of the provisions or parts of any provisions contained in this Agreement are held or found to cause this Agreement not to be "binding" within the meaning of Section 29(g)(1)(A), such provision or provisions shall automatically be struck from this Agreement, but the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. Page 20

11.11 Design/Builder shall check all materials, equipment and labor entering into the Work and shall keep such full and detailed accounts as may be necessary for proper financial management under this Agreement, and the accounting methods shall be satisfactory to the Owner. Owner shall be afforded access for timely review in a practical manner of all Design/Builder=s records, books, correspondence, instructions, drawings, receipts, vouchers, memoranda, and similar data relating to the Cost of the Work and Design/Builder=s Fee. Design/Builder shall be preserve all such documents for a period of three (3) years after the final payment by Owner. ARTICLE 12 TERMINATION OF THE AGREEMENT 12.1 Termination By The Owner 12.1.1 The Agreement may be terminated by the Owner upon fourteen (14) days= written notice at the Owner=s election. In the event of termination at the Owner=s election and not due to the fault of the Design/Builder, the Design/Builder shall be compensated for services performed to termination date, together with reasonable industry standard demobilization expenses, reasonable close-out costs, reimbursable expenses then due, and a reasonable overhead and profit on work performed; provided, however, that in no event shall the compensation paid pursuant to this Subparagraph 12.1.1 (excluding reimbursement) be less than 6% of the Total Contract Price as defined in Subparagraph 13.2.1. If the Total Contract Price has not been established, the minimum 6% compensation in this Subparagraph shall be based on the Guaranteed Maximum Price specified in Subparagraph 13.2.1. 12.1.2 If the Design/Builder defaults or persistently fails or neglects to carry out the work in accordance with the Contract Documents or fails to perform the provisions of the Agreement, the Owner may give written notice that the Owner intends to terminate the Agreement. If the Design/Builder fails to correct the defaults within fourteen (14) days after being given notice, the Owner may without prejudice to any other remedy make good such deficiencies and may deduct the cost thereof from the payment due the Design/Builder or, at the Owner=s option, may terminate the employment of the Design/Builder and take possession of the site and of all materials, equipment, tools and construction equipment and machinery thereon owned by the Design/Builder as well as all drawings, plans, and specifications and finish the Work by whatever means the Owner may deem expedient. If the expense to complete the Work exceeds the unpaid balance of the Contract Sum, the Design/Builder shall pay the difference to the Owner. 12.2 Termination by the Design/Builder 12.2.1 If the Owner fails to make payment when due or is otherwise in default with this Page 21

Agreement, the Design/Builder may give written notice of the Design/Builder=s intention to terminate the Agreement. If the Design/Builder fails to receive payment within fourteen (14) days after receipt of such notice by the Owner, the Design/Builder may give a second written notice and, fourteen (14) days after receipt of such second written notice by the Owner, may terminate the Agreement and recover from the Owner payment for the cost of the Work executed and for proven losses sustained upon materials, equipment, tools, and construction equipment and machinery, including reasonable profit and applicable damages; provided, however, that in no event shall the compensation paid pursuant to this Subparagraph 12.2.1 (excluding reimbursement) be less than 6% of the Total Contract Price as defined in Subparagraph 13.2.1. If the Total Contract Price has not been established, the minimum 6% compensation in this Subparagraph shall be based on the Guaranteed Maximum Price specified in Subparagraph 13.2.1. ARTICLE 13 BASIS OF COMPENSATION The Owner shall compensate the Design/Builder in accordance with Article 5, Payments, and the other provisions of this Agreement as described below. 13.1 Compensation 13.1.1 FOR BASIC SERVICES, as described in Paragraphs 2.2.2 through 2.2.17, and for any other services included in Article 14 as part of Basic Services, Basic Compensation shall be as follows: 13.2 Project Prices 13.2.1 Owner shall pay Design/Builder for the faithful performance of this Agreement, subject to the additions or deductions provided herein. The parties intend within 30 days of the Notice to Proceed to establish a lump sum price ("Total Contract Price"). Until such Total Contract Price is established, Design/Builder will proceed with the Work on a cost-reimbursable basis in accord with Exhibit "B" ("Cost Plus Proposal"); provided that once the Total Contract Price is established, credit will be allowed for any payments made on the cost-reimbursable basis. Both the Total Contract Price and the Cost Plus Proposal covers all Work required to reach Contract Completion. In no event shall the Total Contract Price or the Cost Plus Proposal exceed $5,300,000 without written approval of the Owner ("Guaranteed Maximum Price"). 13.2.2 A detailed breakdown of the Total Contract Price as well as a list of allowances and clarifications to the Scope of Work, shall be provided and Page 22

attached hereto as Exhibit "A." 13.2.3 The adjustments to Total Contract Price shall be adjusted by Change Orders as outlined in Article 8, Changes in Work. 13.2.4 Costs reimbursable by the Owner will include all materials, shipping, and procurement costs, engineering costs, construction management, equipment costs, subcontract costs, and all other costs directly related to the design and construction of the Facility. Engineering and field construction management personnel will be billed in accordance with Exhibit "B." Any general overhead costs and profit shall be included in the Design/Builder=s Fixed Fee. 13.2.5 The Total Contract Price, subject to modification as provided herein, shall include a Fixed Fee of $300,000.00. The Fixed Fee will be paid proportionately with the rest of the Total Contract Price, as the Work is performed. 13.2.6 No casual, spot, or discretionary overtime will change the Total Contract Price. In the case of other overtime, the same shall increase the Total Contract Price only if authorized in writing by Owner and incorporated by Change Order. 13.2.7 (Deleted) 13.2.8 (Deleted) 13.3.1 If Total Contract Price, as adjusted, is exceeded, Owner will pay for labor, as set forth in Paragraphs 13.2.4 and shall pay other agreed properly substantiated Design/Builder costs. The first $100,000.00 of the excess over the Total Contract Price will be deducted from the Fee otherwise payable under Paragraph 13.2.5. 13.3.2 If Total Contract Price is underrun, then Owner and Design/Builder shall share the underrun 25/75 (25 percent to Design/Builder and 75 percent to Owner), and in addition, Design/Builder shall receive the Fee set forth in Paragraph 13.2.5 of this Agreement. 13.4 Reimbursable Expenses 13.4.1 Reimbursable Expenses are in addition to the compensation for Basic and Additional Services and include actual expenditures made by the Design/Builder in the interest of the Project for the expenses listed in Exhibit "B." 13.4.2 For Reimbursable Expenses, compensation shall be as specified in Exhibit Page 23

"B." 13.5 Interest Payments 13.5.1 The rat e of interest for past due payments shall be as follows: prime rate plus 2%, compounded annually. ARTICLE 14 OTHER PROVISIONS 14.1 Scope of Work 14.1.1 The Design/Builder shall provide all engineering, materials, labor, and equipment associated with the construction at a Coal Fine Agglomeration Facility to be constructed at a site to be designated by the Owner. 14.1.2 The Design/Builder will construct the Facility in accordance with one of the following two options, as specified by Owner at the time Owner issues the Notice to Proceed: (i) for Option A, the Design/Builder will construct the Facility in accordance with Exhibit AC,@ Specification For The Construction Of A Coal Agglomeration Facility, dated November 15, 1996 and prepared by Centerline Engineering Corporation; or (ii) for Option B, the Design/Builder will provide the Facility in accordance with Exhibit "E," Skid Mounted Agglomeration Facility. 14.1.2.1 The agglomeration equipment for the Facility shall be a Model 90AD extruder supplied by J.C. Steele and Sons, Statesville, North Carolina, unless Owner specifies a different piece of equipment. The Owner may specify a different piece of agglomeration equipment, including but not limited to a Bepex Model MS-450 Briquetter or a CPM Pelletmill Model 7932- 6 pelletizer, in order to adapt to the particular characteristics and properties of the expected raw material feedstock or the product specifications of the expected purchaser of the finished product, or based on availability. The Owner may also specify a different equivalent model and brand of extruder, briquetter or pelletizer, provided that the agglomeration equipment that is selected shall have a rated total product output capacity equal to the Model 90AD extruder from J.C. Steele. The use of other agglomeration equipment shall be added through Change Orders. 14.1.3 The site location will be determined by the Owner in Southern West Virginia. Page 24

Any site demolition work, construction of utility above normal service extensions and connections, and major earthwork required will be added through Change Orders. 14.1.6 All utilities, including fuel, electricity and water, will be the responsibility of the Owner. 14.1.7. The Design/Builder will provide five (5) sets of all Operation and Maintenance Manuals, Spare Part Lists and other plant-related documents. The Design/Builder shall also provide start-up and operational testing for the first month of plant operation. The Owner and Design/Builder will mutually develop an acceptable operational testing program ninety (90) days before mechanical completion. The start-up and operational testing will be performed on a cost reimbursable basis in accordance with Exhibit "B." 14.2 Warranty 14.2.1 For a period of (1) one year following the date of Substantial Completion, the Design/Builder warrants to the Owner that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Agreement, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Design/Builder=s warranty excludes remedy for damages or defect cause by abuse, modifications not executed by the Design/Builder, improper or insufficient maintenance, improper operation, or normal wear and tear under normal usage. If required by the Owner, the Design/Builder shall furnish satisfactory evidence as to the kind and quality or materials and equipment. 14.2.2 The Design/Builder agrees to assign to the Owner at the time of final completion of the Work, any and all manufacturer=s warranties relating to materials and labor used in the Work and further agrees to perform the Work in such manner so as to preserve any and all such manufacturer=s warranties. The parties agree that Design/Builder=s warranties relating to the performance of Design/Builder furnished equipment, is limited to that reasonably obtainable from suppliers. 14.2.3 THE WARRANTIES DESCRIBED HEREIN ARE IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 14.3 Project Meetings Page 25

14.3.1 Owner will hold frequent Project Meetings on a regularly scheduled basis for the purpose of ensuring orderly and expeditious completion of the Work. Such meetings will include Design/Builder=s Project Manager and responsible representatives or subcontractors, and when desirable, vendors or suppliers. 14.3.2 At these meetings, schedule and progress shall be reviewed, work activities and administrative procedures coordinated, problem areas identified and corrective actions initiated, pending changes discussed, and safety activities reported. Any other pertinent or timely subjects should be included on the meeting agenda. 14.3.3 Minutes of each meeting shall be promptly issued by Design/Builder to all attendees and/or designated persons. 14.4 Design/Builder shall, in addition to other information required by the Contract Documents, provide, in a format acceptable to Owner, the following reports, compiled separately for each facility, and cumulatively: Project Procedures Manual; Monthly Progress Report (will include procurement status report and schedule updates). This Agreement (Contract No. CL-003) entered into as of the day and year first written above.
OWNER /s/ Steven R. Brown Steven R. Brown, Vice President Covol Technologies, Inc. DESIGN/BUILDER /s/ Andrew Kapusta Andrew Kapusta, President Centerline Engineering Corp.

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THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH REGISTRATION OR (2) DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR (3) SUBMISSION TO THE GENERAL PARTNER OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS, OR ANY RULES OR REGULATIONS PROMULGATED THEREUNDER. CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP OF Utah Synfuel #1 Ltd. THIS CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP, made this ___ day of February, 1996, by and among Covol Technologies, Inc., as General Partner, and all persons and entities whose names and addresses are set forth on Exhibit "A" hereto as Limited Partners. ARTICLE I Section 1.1 FORMATION OF PARTNERSHIP. Subject to the provisions hereof, the General Partner, and the Limited Partners hereby form the Partnership as a limited partnership pursuant to the provisions of the Delaware Act. The General Partner, and the Limited Partners hereby enter into this Agreement in order to set forth the rights and obligations of the Partners and certain matters related thereto. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and dissolution of the Partnership shall be governed by the Delaware Act. The partnership Interest of any Partner shall be personal property for all purposes. Section 1.2 DEFINITIONS "Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each fiscal year of the Partnership (a) increased by any amounts which such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5)) and (b) decreased by (a) the amount of all losses and deductions that, as of the end of such fiscal year, are reasonably expected to be allocated to such Partner

in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1 (b)(2)(ii) and (b) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases pursuant to a minimum gain chargeback pursuant to Sections 11.1.2(i) or 11.1.2(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b) (2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.4.4. Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination thereof pursuant to Section 708 of the Code, such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is further adjusted pursuant to Section 4.4.4. "Adjusted Value" means, with respect to an Adjusted Property, the fair market value of such property as determined by the General Partner, in its sole discretion at the time such property became an Adjusted Property. "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question. As used herein, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controls" shall have meanings correlative to the foregoing. "Agreed Value" means, with respect to any property contributed to the Partnership, the fair market value of such property at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt. "Agreement" means this Certificate and Agreement of Limited Partnership, as is presently in effect or as may be hereafter amended which establishes the relationships among the Partners. "Allocation Regulations" means Treasury Regulation Section 1.704-1(b), Treasury Regulation Section 1.704-2, and Treasury Regulation Section 1.704-3 as such regulations may be amended and in effect from time to time (including temporary regulations) and any corresponding provisions of succeeding regulations. "Book-Tax Disparity" means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 4.4

and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Capital Account" means the capital account maintained for a Partner pursuant to Section 4.4. "Capital Investment" means the aggregate cash or property contributed to the Partnership by the Limited Partners pursuant to their investment in Units of the Partnership. No distributions, credits, charges (including depreciation and amortization) or adjustments shall be used in computing "Capital Investment", except as specified herein. "Carrying Value" means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, depletion (computed as a separate item of deduction), amortization and cost recovery deductions charged to the Partners' Capital Accounts, (b) with respect to an Adjusted Property, the Adjusted Value of such property reduced (but not below zero) by all depreciation and cost recovery deductions charged to the Partner's Capital Accounts and (c) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. "Certificate of Limited Partnership" means the certificate of limited partnership filed with the Secretary of State of the State of Delaware pursuant to Section 5.2 hereof, as such certificate may be amended or restated from time to time. "Class A Limited Partners" means the Limited Partners other than "Class B Limited Partners" and any successors in interest. "Class B Limited Partners" means the General Partner, in its capacity as a limited partner and any successors in interest. "Code" means the Internal Revenue Code of 1986, as amended, and in effect from time to time, and any successor to such statute. "Contributed Property" means any property, other than cash, contributed to the Partnership by a Partner. "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act as it may be amended and in effect from time to time, and any successor to such statute. "Distributable Cash" means the gross cash revenues received by the Partnership in the conduct of Partnership business including cash received from financing or refinancing of Partnership property or other borrowing by the Partnership from any source, reduced by the sum of the following, to the extent made from such cash revenues: (a) all principal and interest payments on mortgages and other indebtedness of the Partnership and all other sums paid to lenders (including loans made by Partners), (b) all cash expenditures (including expenditures for capital improvements) incurred incident to the normal operation of the Partnership's business,

including any compensation to the General Partner or its affiliates, and (c) such cash reserves as the General Partner, in its sole discretion, deems reasonable, prudent, necessary and appropriate for proper operation of the Partnership's business. "Fiscal Year" means the calendar year. "General Partner" means Covol Technologies Inc. or its successor in interest. "Limited Partners" means the Persons listed as such on Exhibit "A" and any other person or entity who subsequently becomes a Limited Partner in accordance with the requirements of Articles IV and VII of the Agreement. "Net Agreed Value" means (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed and (b) in the case of any property distributed to a Partner or Assignee by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code. "Net Capital Investment" means the aggregate cash or property investments in the Partnership actually made by the Limited Partners pursuant to their investment in Units of the Partnership, less all sums of cash and the fair market value of property of whatever character or nature distributed, from time to time, to Limited Partners.] "Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1) of the Allocation Regulations. "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Allocation Regulations. "Participating Percentage" means, as to the General Partner, 1% with respect to the General Partner's general partner interest, 49% with respect to the Class B Limited Partner's limited partner interest and to each Class A Limited Partner, at any specified time, the percentage derived by dividing the total number of Units held by such Class A Limited Partner by the total number of Units then outstanding held by all Class A Limited Partners and multiplying the quotient by fifty percent (50%). "Partners" means the General Partner and the Limited Partners. "Partner Nonrecourse Debt" has the meaning set forth in Section 1.704-2(b)(4) of the Regulations. "Partner Nonrecourse Debt Minimum Gain" means that amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such

Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with the principles of Regulations Section 1.704-2(i)(3). "Partner Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (including any expenditure described in Sections 705(a)(2)(B) of the Code) that in accordance with the principles of Regulations Section 1.704-2(i)(1) and (2) are attributable to a Partner Nonrecourse Debt. "Partnership" means the limited partnership being formed pursuant to the Agreement "Partnership Minimum Gain" has the meaning set forth in Sections 1.704-2(b)(2) and of the Allocation Regulations. "Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment required by Sections 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Unit" means an interest in the capital, profits and losses of the Partnership, as well as the rights, privileges and powers appurtenant thereto, as set forth in this Agreement. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property (as determined under Section 4.4.4 as of such date), over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.4.4) as of such date. "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.4.4 as of such date, over (b) the fair market value of such property (as determined under Section 4.4.4) as of such date. Section 1.3 PARTNERSHIP NAME. The business of the Partnership shall be conducted under the name "Utah Synfuel #1 Ltd." or under such other name as the General Partner may determine. Section 1.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the partnership shall be in Utah County, Utah, but additional places of business may be established at such other locations in Utah as the General Partner may determine. Section 1.5 ADDRESS OF PARTNERS. The address of the General Partner and the Partnership is 3280 North Frontage Road, Lehi, Utah 84043. The addresses of the Limited Partners shall be as stated after their names set forth in Exhibit "A" to this Agreement or such other addresses as are subsequently established by the Limited Partners upon receipt of notice thereof by the General Partner.

Section 1.6 TERM OF PARTNERSHIP. The Partnership shall be formed and shall be effective from the date of filing for record of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until December 31, 2015 unless sooner terminated in accordance with the dissolution provisions of this Agreement or as otherwise provided by law. ARTICLE II Section 2.1 POWER OF ATTORNEY. Each Limited Partner does irrevocably constitute and appoint the General Partner as his true and lawful attorney and agent, with full power and authority in his name, place and stead to execute, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates and other instruments (including counterparts of this Agreement) which the General Partner deems appropriate to qualify or continue the Partnership as a limited partnership in jurisdictions in which the partnership may conduct business, or which the General Partner deems advisable to effect the admission of additional Limited Partners or substituted Limited Partners, including amendments as may be appropriate from time to time to reduce the capital accounts of Limited Partners following distributions thereof, (b) all instruments which the General Partner deems appropriate to effect a change or modification of the Partnership in accordance with the terms of this Agreement or which the General Partner deems necessary to maintain the tax status of the Partnership, upon advice of counsel, (c) all conveyances and other instruments which the General Partner deems appropriate to effect the dissolution and termination of the Partnership, (d) all instruments relating to the admission or substitution of a Partner and (e) all agreements and other instruments relating to any merger or consolidation of the Partnership pursuant to Article XV hereof. The power of attorney granted herein is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive the death, incompetency, disability, dissolution, bankruptcy or termination of any Partner and the transfer of all or any portion of his Partnership Interest and shall extend to such Partner and the transfer of all or any portion of his Partnership Interest and shall extend to such Partner's heirs, successors, assigns and personal representatives. Each Partner hereby agrees to be bound by any representations made by the General Partner, acting in good faith pursuant to such power of attorney. Each Partner hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner, taken in good faith under such power of attorney. Each Partner shall execute and deliver to the General Partner, within fifteen (15) days after receipt of its request therefore, such further assignations, powers of attorney and other instruments as the General Partner deems appropriate or necessary to effectuate this Agreement and the purposes of the Partnership. The Limited Partners agree to be bound by all representations of the General Partner as their said attorney-in-fact and waive any and all defenses which may be available to them to contest, negate or disaffirm the actions of the General Partner or its successors under the power of attorney, and ratify and confirm all acts which the said attorney-in-fact may take in that capacity in all respects as though performed by the Limited Partners. ARTICLE III

Section 3.1 PURPOSES AND POWERS OF PARTNERSHIP. The Partnership is formed for, and shall have the power to accomplish, the following objectives and purposes: 3.1.1 To enter into a license with the General Partner to use certain patented technology of the General Partner necessary to convert coal dust and coal fines into briquettes of synthetic fuel. 3.1.2 To construct for investment purposes a coal briquetting facility in Utah. 3.1.3 To borrow all funds necessary to carry out the objectives and purposes of the Partnership and to pledge or encumber any and all items of property of the Partnership for the payment of such loans. 3.1.4 To enter into operating, management, maintenance or any other type of agreements with respect to the assets and businesses of the Partnership. 3.1.5 To do each and every thing necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any one or more of the objectives herein enumerated, either alone, or in association with, or as agent or representative for other corporations (whether public, governmental or private), partnerships, individuals, or entities, or to accomplish any other lawful business whatsoever, or which shall at any time appear conducive to or expedient for the protection or benefit of this Partnership and its assets and businesses. 3.1.6 To exercise all other powers necessary to or reasonably connected with the Partnership's business which may be legally exercised by limited partnerships in the State of Delaware. 3.1.7 To carry on any other business that a limited partnership organized under the Delaware Act may carry on. ARTICLE IV Section 4.1 CAPITAL CONTRIBUTIONS OF COVOL TECHNOLOGIES, INC. Covol Technologies, Inc. shall contribute all of its rights under a certain engineering/construction contract referenced Exhibit A hereto to the capital of the Partnership for its General Partner and its Class B Limited Partner interest. The Agreed Value of the engineering/construction contract shall be equal to the amount set forth on Exhibit A. Section 4.2 CAPITAL CONTRIBUTIONS BY CLASS A LIMITED PARTNERS. The initial capital contributions of the Limited Partners shall be the amounts set forth opposite the name of each Limited Partner on Exhibit "A" attached hereto. Section 4.3 CAPITAL CONTRIBUTIONS OF ADDITIONAL CLASS A LIMITED PARTNERS. The General Partner is authorized to admit, from time to time, additional Class A Limited Partners and to issue to all such additional Limited Partners not greater than an aggregate of four thousand (4,000) Units of Class A Limited Partner interests upon such terms

and conditions as the General Partner deems appropriate, but in no event shall the purchase price per Unit be less than One Thousand Dollars ($1,000) per Unit. An issuance of additional Units will dilute only the Units held by the Class A Limited Partners. Limited Partners have no preemptive rights to such additional Units. Upon the admission of such additional Class A Limited Partners, an amendment to the Agreement reflecting such admission shall be filed in the appropriate office. Prior to admission, each additional Class A Limited Partner shall become a signatory to this Agreement. The original counterparts of this Agreement executed by the respective Limited Partners and the General Partner, taken together, shall constitute a single instrument. Section 4.4 CAPITAL ACCOUNTS. 4.4.1 The Partnership shall maintain for each Partner a separate Capital Account in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (a) the cash amount or Net Agreed Value of all Capital Contributions made by such Partner to the Partnership pursuant to this Agreement and (b) all items of Partnership income and gain computed in accordance with Section 4.4.2 and allocated to such Partner pursuant to Section 11.1. Such Capital Account shall be decreased by (x) the cash amount or Net Agreed Value of all actual and deemed distributions of cash made to such Partner pursuant to this Agreement, and (y) all items of Partnership deduction and loss computed in accordance with Section 4.4.2 and allocated to such Partner pursuant to Section 11.1 4.4.2 For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of such items shall be the same as its determination, recognition and classification for federal income tax purposes; provided, that: (a) Any deductions for depreciation, cost recovery or amortization attributable to a property contributed to the Partnership shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership was equal to the Agreed Value of such property and shall be allocated among the Partners in accordance with their Percentage Interests (in effect at the time of the contribution of such property). Upon an adjustment pursuant to 4.4.4 to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (i) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (ii) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided however, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt. (b) Any gain or loss attributable to the taxable disposition of any Partnership Property shall be determined by the Partnership as if the adjusted basis of such property

as of such date of disposition was equal in amount to the Partnership's Carrying Value of such property as of such date. (c) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code shall, for purposes of Capital Account maintenance, be treated as an item of deduction and shall be allocated among the Partners pursuant to Section 11.1. (d) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalizable for federal income tax purposes. 4.4.3 Generally, a transferee of a Partnership Interest will succeed to the Capital Account relating to the Partnership Interest transferred. However, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including the transferee of a Partnership Interest) pursuant to Section 13.1.3 and recontributed by such Partners and transferees in reconstitution of the Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.4. 4.4.4 Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or other property, the Capital Accounts attributable to the General Partner's general partner interest and to the Class B Limited Partner, and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such property, as if the Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to cause the General Partner's Capital Account attributable to its general partner interest to equal 1% of all Capital Accounts after assurance of additional Partnership Interests and the Class B Limited Partner's Capital Account to equal 49% of all Capital Accounts after issuance of Additional Partnership Interests. It is agreed that the Carrying Value of the Partnership's property immediately prior to issuance shall be an amount such that the Agreed Value of the assets (including cash) contributed to the Partnership pursuant to such Capital Contribution will be in the same ratio to the Carrying Value of all Partnership property immediately after the Capital Contribution that corresponds to the Participating Percentage attributed to such additional Partnership Interest. In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to the distribution of any Partnership property (other than an oil and gas property), the Capital Accounts of all Partners and the Carrying Value of each Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such property, as if such Unrealized Gain or

Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value and had been allocated among the Partners in the manner provided in Article 11.1. Section 4.5 INTEREST. Interest earned on Partnership funds shall inure to the benefit of the Partnership, but Limited Partners, as such, shall not receive interest on funds contributed by them. Section 4.6 ADVANCES BY THE GENERAL PARTNER. The General Partner or any of its affiliates may, but are not obligated to, loan monies to the Partnership for use by the Partnership in its operation. The aggregate amount of such loans shall become an obligation of the Partnership to the person(s) or entity(s) making the loans, in accordance with the terms of such loans, payable from gross revenues of the Partnership with interest two percent (2%) above the prime rate as quoted from time to time by Key Bank, Salt Lake City, Utah, but not to exceed the maximum legal rate of interest. Such loans shall not be deemed a capital contribution. To the extent that any such loans are unpaid upon the dissolution and liquidation of the Partnership, the same, together with the accrued and unpaid interest, shall become immediately due and payable prior to any distributions to the Partners. ARTICLE V Section 5.1 RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER. 5.1.1 The General Partner shall have full, exclusive and complete discretion in the management and control of the affairs of the Partnership for the purposes herein stated and shall make all decisions affecting partnership affairs, including all decisions made regarding the administration, supervision, and management of the partnership's business. In amplification and not in limitation of the general powers of the partnership, the General Partner shall have the power and authority, on behalf of and in the name of the partnership: (a) to buy, sell, acquire, exchange, trade, receive, deliver, hold, encumber, pledge, release and otherwise deal in and with and dispose of Partnership property, whether in the ordinary course of business of the Partnership or otherwise; (b) to execute and deliver such documents or instruments relating to Partnership affairs as may in their opinion be appropriate in the conduct of the Partnership's business, including without limitation, licenses, employment, consultation and management agreements, notes, leases, joint venture agreements, guaranty agreements, documents of transfer and conveyance, and bills of sale; (c) to open, maintain and close bank accounts as shall be designated by the General Partner and to draw checks and other orders on such accounts for the payment of money signed on behalf of the General Partner or by its authorized representatives; (d) to hold title to Partnership property as nominee for the Partnership;

(e) to borrow money and to make, issue, accept, endorse and execute promissory notes, drafts, bills of exchange and other instruments and evidences of indebtedness, all without limit as to amount, and to pay or repay with respect thereto and to secure the payment thereof by security interest, mortgage, deed of trust, pledge or assignment of, all or any part of any property then owned or hereafter acquired by the partnership and to prepay, refinance, increase, modify, consolidate or extend any mortgage, deed of trust, security interest, or other encumbrance of any kind or nature; (f) to employ such employees, consultants, accountants, managers, agents, appraisers, attorneys, mortgage brokers and other persons in the operation, conduct, administration, supervision and management of the business of the Partnership as in the judgment of the General Partner are necessary or desirable, and to pay the reasonable expenses and fees of the same out of Partnership funds; (g) to purchase, at the expense of the Partnership, liability and other insurance coverage that the General Partner in its sole discretion determines to be necessary to protect the Partners from liability created in pursuit of or in the furtherance of Partnership business or which is related to its business affairs; (h) to perform any and all other acts or activities, customary or incidental to the business, objectives and purposes of the Partnership as set forth herein; (i) to be reimbursed (or reimburse its affiliates) for all expenses incurred in conducting the Partnership's business including all general and administrative expenses allocable to operations of the Partnership, including, without limitation, allocable employee salaries, office rental, and miscellaneous office supplies and expenses; and (j) to apply for or file notices of claims of exemptions from registration under the Utah Uniform Securities Act, the Securities Act of 1933, or any other federal or state securities statutes, rules or regulations for the sale of securities of the Partnership; to secure any and all other authorizations or permits which the General Partners deem necessary or appropriate in connection with the business of the partnership, and to execute, acknowledge, file and deliver any and all applications, documents and consents which the General Partner may deem appropriate in connection therewith. 5.1.2 The General Partner shall devote such time to the Partnership as it deems necessary to conduct the business and affairs of the Partnership. The General Partner may engage in a business which is the same as or similar to the business of the Partnership, irrespective of whether such business shall be competitive with the Partnership or otherwise and may act as General Partner in limited partnerships formed for the same purpose as the Partnership. The General Partner shall do what is advised by the Partnership's counsel or what is required of it by the Internal Revenue Service, to the extent of its ability, to obtain or maintain classification of the Partnership as a partnership for federal income tax purposes.

5.1.3 The General Partner shall maintain or cause to be maintained complete and accurate records of all real and personal property acquired, leased, rented and disposed of by the Partnership, account records of all Partners, insurance policies or copies of certificates thereof, and opinions of counsel received by the Partnership. Such documents, opinions and records, together with receipts, vouchers and other supporting evidence thereof, will be available for inspection by any Limited Partner or his duly authorized representative during normal business hours at the principal office of the General Partner. 5.1.4 The General Partner shall keep the Limited Partners informed of the status of the business and affairs of the Partnership by means of periodic, written, unaudited reports of operations. Such reports shall be rendered not less often than annually. 5.1.5 The General Partner shall maintain or cause to be maintained complete and accurate records and accounts of all income and expenditures and furnish the Limited Partners with annual statements of account which may be included in the applicable reports referred to in Section 5.1.4 hereof, together with all necessary tax reporting information. Such records and accounts shall be maintained in accordance with generally accepted accounting principles applied on a consistent basis and shall be available for inspection by any Limited Partner or his duly authorized representative during normal business hours at the office of the General Partner; however, the General Partner shall not be required to maintain such records and material referred to herein for a period in excess of six (6) years from the date of the making or receipt thereof. 5.1.6 The General Partner shall not have authority to act in contravention of this Agreement, to do any act which would make it impossible to carry on the ordinary business of the Partnership, to confess a judgment against the Partnership or to admit any persons as a General or Limited Partner except as provided by this Agreement. 5.1.7 No person, firm or corporation dealing with the Partnership shall be required to inquire into the authority of the General Partner to take any action or make any decision and they may rely conclusively on the power and authority of the General Partner as set forth in this Agreement. Section 5.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner shall file the Certificate of Limited Partnership as required by the Delaware Act and shall cause to be filed such other certificates or documents as may be determined by the General Partner to be necessary or appropriate for the formation or qualification and operation of a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business. If the General Partner in its sole discretion determines such action to be necessary or appropriate, the General Partner in its sole discretion determines such action to be necessary or appropriate, the General Partner shall file amendments to the Certificate of Limited Partnership and shall do all things to maintain the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) under the laws of the State of Texas or any other state in which the Partnership may elect to do business. Subject to applicable law, the General Partner may omit from the Certificate of

Limited Partnership and any other certificates or documents, and from all amendments thereto, the names and addresses of the Limited Partners and information relating to the Capital Contributions and shares of profits and compensation of the Limited Partners, or may state such information in the aggregate rather than with respect to each individual Limited Partner. ARTICLE VI Section 6.1 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS. 6.1.1 No Limited Partner shall be personally liable for any of the debts of the Partnership or any of the losses thereof beyond (a) the amount contributed by him to the capital of the Partnership; (b) any obligations to the Partnership resulting from unpaid subscriptions; and (c) his share of undistributed accumulated profits of the Partnership. It is acknowledged that, to the extent required by the Delaware Act, a Limited Partner who has received the return in whole or in part of his capital contribution may be liable to the Partnership in an amount, not in excess of such sum with interest, necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return. 6.1.2 No Limited Partner, as such, shall take part in the management of the business or transact any business for the Partnership, and no Limited Partner shall have power to sign for or to bind the Partnership. 6.1.3 No salary shall be paid to any Limited Partner, as such, nor shall any Limited Partner have a drawing account. 6.1.4 No Limited Partner shall have the right to demand distribution of his capital account except on the dissolution and liquidation of the Partnership or as otherwise provided for in this Agreement. 6.1.5 Even though distribution may be made in cash or in kind, or both, as herein set forth, no Limited Partner shall have the right to demand property other than cash in return for his respective interest. 6.1.6 Except as herein provided, no Limited Partner shall have priority over any other Limited Partner either as to distributions, return of contributions of capital, or as to allocation of profits, losses, credits or tax deductions. 6.1.7 No Limited Partner shall have the right to designate a substituted Limited Partner except in accordance with the provisions of Article VII hereof.

6.1.8 Subsequent to the execution of this Agreement as provided herein, the Partnership agrees to, and does hereby, indemnify the General Partner and hold it harmless against loss, damage or liability for, and the Limited Partners will make no claim against the General Partner for, any act or failure to act with respect to the business of the Partnership unless such act or omission is the result of gross negligence or willful misconduct. 6.1.9 Limited Partners holding at least thirty five percent (35%) of the Units then outstanding (other than Units held by the General partner) may propose to remove the General Partner by submitting their proposal in writing to the General Partner in the manner provided for giving notice. Within forty-five (45) days after the receipt of any such proposal, the General Partner shall submit the proposal to the vote of all Limited Partners. An affirmative vote of seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner) as required by Section 14.1.1 shall be necessary for such removal. Any removal of a General Partner shall not cause a forfeiture, or otherwise deprive the removed General Partner of any rights then owned by the removed General Partner to share in allocations of profits, losses, credits and deductions or distributions or any other rights given herein and to compensation or remuneration earned by such General Partner. Any removal of General Partner(s) shall be effective as of the date sixty (60) days following the count of such vote. Prior to any action contemplated by the Limited Partners pursuant to this Section 6.1.9 hereof, the General Partner shall obtain an opinion rendered by the Partnership's general counsel which opinion shall indicate that the Limited Partners, by taking such contemplated action, will not lose the benefits of limited liability as described in Section 6.1.1 hereof and in the Delaware Act.

ARTICLE VII Section 7.1 ASSIGNMENT BY LIMITED PARTNERS. 7.1.1 Each Limited Partner represents and acknowledges that he has acquired his Units for his own investment purposes only and not with a view to distribution or fractionalization thereof. Each Limited Partner further acknowledges that, due to the speculative nature of the Partnership's business, and the restrictions contained herein, sale or other assignment of Units may be practicably impossible. 7.1.2 A Limited Partner may assign his Units provided: (a) the General Partner consents, in its sole discretion, in writing to the assignment; (b) the General Partner may impose a reasonable transfer fee as a condition to the assignment; (c) the assignment has been registered under the Securities Act of 1933, as amended, and applicable state securities laws, rules and regulations or an exemption to registration is available, and the Limited Partner has supplied the Partnership, at his own cost and expense, if requested by the General Partner, with an opinion of counsel in form and substance acceptable to the General Partner to the effect that the interest to be assigned has been registered under the Securities Act of 1933, as amended, and applicable state securities laws, rules and regulations, or that an exemption to such registration is available for the proposed transfer; (d) the interest assigned may not be less than the total interest of a Limited Partner in the Partnership unless, in the opinion of the General Partner, the Limited Partner has sufficient interest to be divided; (e) all assignments shall be effective as of the last day of the calendar quarter during which each assignment is made. 7.1.3 No assignee of an interest of a Limited Partner may be admitted to the Partnership as a substitute Limited Partner without the consent of the General Partner which consent may be exercised in the General Partner's sole discretion. Any Assignee seeking substitution as a Limited Partner must consent, in writing in form satisfactory to the General Partner, to be bound by the terms of this Agreement in the place and stead of the assigning Limited Partner. 7.1.4 Upon the death or legal incompetency of an individual Limited Partner, his legal representative shall have all of the rights of a Limited Partner for the purpose of settling or managing his estate, and such power as the decedent or incompetent possessed to substitute a successor as an assignee of his interest in the Partnership and to join with such assignee in making application to substitute such assignee as a Limited Partner.

7.1.5 Without limiting the discretion of the General Partner to withhold its consent to any assignment, the General Partner shall not consent to any transfer which would cause a termination of the Partnership under the Internal Revenue Code of 1954, as amended. 7.1.6 Upon the bankruptcy, insolvency, dissolution or the cessation to exist as a legal entity of a Limited Partner, the legal representative of such person or entity shall have the rights of a Limited Partner for the purpose of effecting the orderly disposition of the Units of such Limited Partner; provided, however, the terms and conditions of this Article VII shall be complied with as a condition precedent to any assignment by such legal representative. ARTICLE VIII Section 8.1 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar year, and the General Partner shall keep or cause to be kept complete and accurate books of account, in accordance with generally accepted accounting practices applied on a consistent basis. The books and records as so prepared shall be conclusive on all Partners except for fraud or manifest error. Section 8.2 AUDIT. The books of the Partnership may be audited annually by such independent public accountants as the General Partner shall designate. Section 8.3 INCOME TAX MATTERS 8.3.1 The General Partner shall arrange for the preparation (at the Partnership's expense) and timely filing of all returns of Partnership income, gains, deductions and losses necessary for federal and state income tax purposes and shall use reasonable efforts to cause copies of such returns or all pertinent information contained therein to be furnished to the Partners within ninety (90) days of the close of the taxable year. A copy of the Partnership's federal income tax return will be furnished to any Partner upon request at such Partner's own expense. 8.3.2 Except as otherwise provided herein, the General Partner shall determine whether to make any available election (including the election provided for in Section 168 of the Code). The General Partner shall make the election under Section 754 of the Code upon the request of the transferee of a Unit or, upon a distribution of property to the Limited Partners, upon the consent of all Limited Partners. The General Partner may seek to revoke any such election upon the General Partner's determination that such revocation is in the best interests of the Limited Partners, provided that the General Partner shall not seek to revoke any such election unless it receives an opinion of counsel that such revocation would not result in the loss of limited liability of the Limited Partners in the Partnership or cause the Partnership to be treated as an association taxable as a corporation for federal income tax purposes. 8.3.3 Subject to the provisions hereof, the General Partner is designated as the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's

affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Limited Partner agrees to cooperate with the General Partner to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 8.3.4 The Partnership shall elect to deduct expenses incurred in organizing the Partnership ratably over a sixty (60) month period as provided in Section 709 of the Code. 8.3.5 No election shall be made by the Partnership, or any Partner for the Partnership to be excluded from the application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions of any state tax laws. ARTICLE IX Section 9.1 COMPENSATION TO GENERAL PARTNERS AND AFFILIATES. 9.1.1 It is anticipated that the Partnership will engage the General Partner or its affiliates to provide management services to the Partnership with respect to the assets and small businesses of the Partnership which require management services. The Partnership shall pay the General Partner or affiliates a fee for all such services which shall be fifty cents ($0.50) per ton of coal produced at the facility. 9.1.2 The General Partner shall be reimbursed for all expenses, disbursements and advances incurred or made in connection with the organization and start-up of the Partnership, the Offering, the qualification of the Partnership and the General Partner to do business and any subsequent offerings of Units or other securities by the Partnership. The General Partner shall be reimbursed on a monthly basis for all direct out-of-pocket expenses it incurs or makes on behalf of the Partnership. The General Partner shall determine the expenses that are allocable to the Partnership in any manner that is reasonable and fair to all parties. Section 9.2 REPORTS OF COMPENSATION. 9.2.1 The General Partner, with respect to each calendar year, shall inform the Limited Partners of all transactions between them, or its affiliates, and the Partnership regarding commissions, compensation or other benefits, paid or accrued during such year, to the General Partner or its affiliates. ARTICLE X Section 10.I DISTRIBUTIONS OF DISTRIBUTABLE CASH. 10.1.1 The General Partner shall have the right to accumulate all Distributable Cash of the Partnership until dissolution and liquidation of the Partnership. The General Partner may, however, at its complete discretion from time to time declare a distribution of Distributable Cash to be distributed to

the Limited Partners and to the General Partner, as of the record date set by the General Partner for such distribution, in proportion to their respective Participating Percentages. ARTICLE XI Section 11.1 ALLOCATION OF PROFIT AND LOSS FOR CAPITAL ACCOUNT PURPOSES. 11.1.1 Except as hereinafter provided in this Article XI for purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the income, gain, losses, deductions and credits from operations of the Partnership for each fiscal year will be allocated among the Limited Partners and the General Partner in the following manner: (a) Net Income. After giving effect to the special allocations set forth in Section 11.1.2, Net Income for each taxable period and all items of income, gain, loss, and deduction taken into account in computing Net Income shall be allocated as follows: (1) first, 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 11.1.1(a)(1) for the current and all previous taxable periods is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 11.1.1(b)(2) for all previous taxable years; and (2) second, the balance, if any, to the Partners in accordance with their respective Participating Percentages. (b) Net Losses. After giving effect to the special allocations set forth in Section 11.1.2, Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows: (1) First, to the Partners in accordance with their respective Participating Percentages; provided, that Net Losses shall not be allocated pursuant to this Section 11.1.1(b)(1) to the extent such allocation would cause any Limited Partner to have a deficit balance in his Adjusted Capital Account at the end of such taxable year (or increase any existing balance in his Adjusted Capital Account); and (2) second, the balance, if any, to the General Partner. 11.1.2 The following mandatory allocations shall be made prior to making any allocations provided for in 11.1.1 above: (a) Minimum Gain Chargeback. Notwithstanding any other provisions of this Article XI, except as provided in Regulation Section 1.704-2(f), if there is a net decrease

in Partnership Minimum Gain during any Fiscal Year, each Partner shall be allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 11.2.1(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. (b) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Article XI (other than Section 11.2.1(a), except as provided in Regulation Section 1.704-2(i)(4)), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership Fiscal Year, any Partner with a share of Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be allocated items of Partnership income and gain for such period (and if necessary, subsequent periods) in an amount equal to such Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 11.2.1(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704- 2(i)(4) of the Regulations and shall be interpreted consistently therewith. (c) Qualified Income Offset. Except as provided in Section 11.1.2(d) hereof, in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1 (b) (2) (i) (d) (4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Allocation Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible, provided that an allocation pursuant to this Section 11.1.2(c) shall be made only if and to the extent that the Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article XI have been tentatively made as if this Section 11.1.2(c) were not in the Agreement. This Section 11.1.2(c) is intended to constitute a "qualified income offset" within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d), and shall be interpreted consistently therewith.. (d) Gross Income Allocations. In the event any Partner has a deficit balance in its Adjusted Capital Account at the end of any Partnership taxable period, such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 11.1.2(d) shall be made only if and to the extent that such

Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 11.1 have been tentatively made as if Sections 11.1.2(c) and 11.1.2(d) were not in the Agreement. (e) Nonrecourse Deductions. Nonrecourse deductions for any fiscal year of the Partnership shall be allocated to the Partners in accordance with their Participating Percentages. (f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any fiscal year of the Partnership or other period shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i)(1). (g) Code Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to the Allocation Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to the Allocation Regulations. (h) Curative Allocation. The s pecial allocations set forth in Section 11.1.2(a), (b), (c), (d), (e), (f), and (g) (the "Regulatory Allocations") are intended to comply with the Allocation Regulations. Notwithstanding any other provisions of this Section 11.1, the Regulatory Allocations shall be taken into account in allocating items of income, gain, loss and deduction among the Partners such that, to the extent possible, the net amount of allocations of such items and the Regulatory Allocations to each Partner shall be equal to the net amount that would have been allocated to each Partner if the Regulatory Allocations had not occurred. Section 11.2 TAX ALLOCATIONS 11.2.1 For federal income tax purposes, except as otherwise provided in this Section 11.2, each item of Partnership income, gain, loss, deduction and credit shall be allocated among the Partners in the same manner as corresponding items are allocated in Section 11.1. 11.2.2 In the case of Contributed Property, any income, gain, loss or deduction attributable to such property shall for federal income tax purposes be allocated first among the Partners to take account of the variation between the Agreed Value of such property and its adjusted basis for federal income tax purposes at the time of contribution and thereafter in the same manner as its correlative book gain or loss is allocated pursuant to Section 11.1. In the case of Adjusted Property, first in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 4.4.4. Second, in the event the property

was originally a Contributed Property, in a manner to take into account the Agreed Value of such property and its adjusted basis for federal income tax purposes at the time of contribution; and thereafter, in the same manner as its correlative "book" gain or loss is allocated pursuant to Section 11.1. 11.2.3 It is intended that the allocations in Section 11.2.2 hereof effect an allocation for federal income tax purposes pursuant to Section 704(c) of the Code and the regulations thereunder and comply with any limitations or restrictions therein. Such allocations are designed to eliminate, to the extent possible, disparities that otherwise exist between the balances of the Partners' Capital Accounts, as maintained pursuant to Section 4.4 and such balances had such Capital Accounts been maintained strictly in accordance with tax accounting principles. The General Partner shall have discretion to make the allocation in any reasonable manner permitted under such Code section. 11.2.4 Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 11.2 be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. 11.2.5 In the event of the transfer of a Partnership Interest during a year, each item of Partnership income, gain, loss, deduction and credit attributable to the transferred Partnership Interest shall, for federal income tax purposes, be prorated between the transferor and the transferee on a daily or other reasonable basis, as required by Section 706 of the Code. 11.2.6 If the Participating Percentage of a Limited Partner or an Assignee is changed during a taxable year for any reason other than the transfer of a Partnership Interest to another Person, such Limited Partner's or Assignee's share of taxable income or loss shall be determined for federal income tax purposes by prorating all items of taxable income or loss on a daily or other reasonable basis and allocating such items among the Partners taking into account the applicable Participating Percentages in the Partnership on each such day (or other reasonable period) and each such Partner's varying share thereof as required by Section 706 of the Code. 11.2.7 All items of income, gain, loss, deduction, credit and basis allocation recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted by Sections 734 and 743 of the Code. ARTICLE XII Section 12.1 WITHDRAWAL OR DEATH OF A LIMITED PARTNER.

12.1.1 The withdrawal or death of any Limited Partner shall not affect the continuation of the Partnership and shall not cause a dissolution of the Partnership. ARTICLE XIII Section 13.1 DISSOLUTION, LIQUIDATION AND TERMINATION. 13.1.1 The Partnership shall be dissolved upon the occurrence of any of the following: (a) the expiration of twenty (20) years from the date hereof or upon the sale of substantially all of the Partnership's assets, whichever occurs first; (b) by affirmative vote of Limited Partners owning not less than seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner); (c) by any event which makes it unlawful for the Partnership's business to be continued; (d) by the written notice of the General Partner of its election to dissolve the Partnership; or (e) by bankruptcy, adjudication of insolvency, removal, death or withdrawal (on sixty (60) days prior written notice from the General Partner to all Partners) of the General Partner. In the event of a dissolution of the Partnership pursuant to Section 13.1.1(e), the remaining Partners may elect to continue the Partnership in accordance with the terms of this Agreement and, if the Partnership is continued, the remaining Partners owning in excess of 50% of the Units appoint a new general partner or general partners who shall succeed to the general partner interest of the former General Partner. 13.1.2 Upon a dissolution of the Partnership, the Partnership shall not terminate, but shall cease to engage in further business except to the extent necessary to perform existing contracts and preserve the value of its assets, and the General Partner shall take full account of the Partnership assets and liabilities and shall wind up its affairs and liquidate its assets. During the course of liquidation, the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Partnership. 13.1.3 After the Partnership's affairs have been wound up and its assets liquidated, the General Partner (or the person acting in its stead) shall distribute the proceeds therefrom in the following order: (a) to creditors of the Partnership, other than Partners, in the order of priority as provided by law; and

(b) to the payment of any loans or advancements made by the Partners or their affiliates and to the payment of compensation or fees for services rendered to which the General Partner or its affiliates are entitled by reason of their management of the Partnership or otherwise; and (c) to the Partners in proportion to and to the extent of the positive balances in their respective Capital Accounts after taking into account all adjustments to the Capital Account balances pursuant to Sections 4.4 and 11.1; and provided however, that the Liquidator may place in escrow a reserve of cash or other assets of the Partnership for contingent liabilities in an amount determined by the Liquidator as appropriate for such purposes. 13.1.4 No Limited Partner shall be obligated to restore any negative balance in its Capital Account or have any obligation to make additional contributions of capital upon liquidation. 13.1.5 Upon completion of the dissolution, winding up, liquidation, and distribution of the liquidation proceeds and any other Partnership assets, the Partnership shall terminate. ARTICLE XIV Section 14.1 VOTING RIGHTS OF LIMITED PARTNERS. All actions and votes of Limited Partners required or permitted under the terms of this Agreement shall be conducted pursuant to the following terms and provisions: 14.1.1 Each Limited Partner shall have the right to cast one vote for each Unit owned of record on the books of the Partnership by such Limited Partner. Limited Partners shall not be entitled to cumulate their votes. Except with respect to removal of a General Partner, in which case the affected General Partner shall have no vote, a General Partner shall have full voting rights as Limited Partner with respect to any Units he may own. 14.1.2 The General Partner shall set a record date for determining the Limited Partners entitled to cast a ballot and to vote, which date shall not be more than sixty (60) or less than twenty (20) days prior to the date on which such ballots are deposited in the mails or otherwise delivered to the Limited Partners. The General Partner shall give notice to each Limited Partner and shall transmit with any such notice the following: (a) a description of each matter being voted upon; (b) a ballot providing for each Limited Partner to cast his number of votes for or against each matter being voted upon;

(c) a statement of the date by which each Limited Partner's ballot must be received by the General Partner, which date shall be not less than twenty (20) days from the date on which such ballots are deposited in the regular mails or otherwise delivered to the Limited Partners; and (d) an envelope self-addressed to the General Partner at the General Partner's address. 14.1.3 All ballots must be returned to the General Partner not later than the date indicated on the ballot pursuant to Section 15.1.2(iii). ballots received after said twenty (20) day period shall be considered void. 14.1.4 Within ten (10) days after the date indicated on the ballot pursuant to Section 14.1.2(c), the General Partner shall count the vote. All ballots not returned, or returned after the twenty (20) day period, shall not be counted in the vote. The General Partner shall within ten (10) days after tallying the vote notify the Limited Partners of the outcome of said vote by written notice. 14.1.5 Unless otherwise specified in this Agreement, any matters which shall be submitted to a vote of the Limited Partners shall be deemed approved if Limited Partners owning not less than seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner) and who are entitled to vote in accordance with the provisions of Section 14.1.1 shall cast their votes in favor of any such matter. ARTICLE XV Section 15.1 MERGER OR CONSOLIDATION 15.1.1 The Partnership may merge or consolidate with one or more limited partnerships formed under the laws of the State of Delaware or another state of the United States of America pursuant to a written agreement of merger or consolidation ("Merger Agreement") in accordance with this Article XV. 15.1.2 Merger or consolidation of the Partnership pursuant to this Article XV requires the prior written consent of the General Partner. If the General Partner determines, in the exercise of its sole discretion, to consent to the merger or consolidation, the General Partner shall approve the merger agreement, which shall set forth: (a) the names and states of domicile of the limited partnerships proposing to merge or consolidate; (b) the name and states of domicile of the limited partnership into which they propose to merge or consolidate (hereafter designated as the "Surviving Limited Partnership"); (c) the manner and basis of exchanging or converting the general and limited partnership interest of each merging limited partnership for, or into, cash, property, general or

limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership, and (1) if any general or limited partnership interests of whether merging limited partnership are not to be exchanged or converted solely for, or into, cash, property, general or limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership, the cash, property, general or limited partnership interests, rights, securities or obligations of any limited partnership (other than the Surviving Limited Partnership), corporation, trust or other entity which the holders of such general or limited partnership interests are to receive in exchange for, or upon conversion of, their general or limited partnership interests and (2) in the case of general or limited partnership interests represented by certificates, upon the surrender of such certificates, which cash, property, general or limited partnership interest are to receive in exchange for, or upon conversion of, their general or limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership or any limited partnership (other than the Surviving Limited Partnership), corporation, trust or other entity, or evidences thereof, are to be delivered; (e) a statement of any changes in the certificate of limited partnership of the Surviving Limited Partnership to be effected by such merger or consolidation; (f) the effective time of the merger or consolidation, which may be the date of the filing of the certificate of merger pursuant to Section 15.1.4 or a later date specified in or determinable in accordance with the merger agreement (provided that if the effective time of the merger or consolidation is to be later than the date of the filing of the certificate of merger, the effective time shall be fixed at or prior to the time of the filing of the certificate of merger and stated therein); and (g) such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable. Section 15.1.3 (a) The General Partner, upon approving a Merger Agreement, shall direct that the merger Agreement be submitted to a vote of Limited Partners either at a meeting or by written consent, in either case in accordance with the requirements of Article XIV. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a meeting or the written consent. (b) The Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of at least fifty percent (50%) of the Units outstanding (other than Units held by the General Partner), unless the merger agreement contains any additional voting requirements or contains any provision which, if contained in an amendment to the Agreement, would require the vote or consent of a greater percentage of the Percentage Interests of the Limited Partners, in which case such greater percentage vote or consent shall be required for approval of the merger agreement. (c) No vote or consent of Limited Partners shall be required if, on the date that the merger agreement is approved by the General Partner, the

Partnership is the Surviving Limited Partnership and is the owner of at least ninety (90%) percent of the partnership interests (determined with respect to participation in the capital or profits of the partnership) of the other partnership that is a party to the merger. (d) After such approval by vote or consent of the Limited Partners, and at anytime prior to filing of the certificate of merger pursuant to Section 15.1.4, the merger or consolidation may be abandoned pursuant to provisions therefore, if any, set forth in the merger agreement. 15.1.4 Upon the required approval by the General Partner and Limited Partners of a merger agreement, a certificate of merger shall be executed and filed with the Secretary of State in conformity with the requirements of the Delaware Act. ARTICLE XVI Section 16.1 NOTICES. All notices or other communications required or permitted to be given pursuant to this Agreement shall, in the case of notices to be given to the Limited Partners, be in writing and shall be considered as properly given or made if mailed from within the United States by first class mail, postage prepaid, or if sent by prepaid telegram, and addressed to the address set forth opposite a Limited Partner's name on Exhibit "A" to this Agreement or as set forth in such Limited Partner's Subscription Documents. In the case of notices required or permitted to be given to the General Partner, the same shall be in writing and shall be considered as properly given or made if mailed by United States certified or registered mail, return receipt requested, addressed to the General Partner at 3280 North Frontage Road, Lehi, Utah 84043. Any Limited Partner may change his address by giving notice in writing, stating his new address, to the General Partner, and the General Partner may change its address by giving such notice to all Limited Partners. Commencing on the tenth (10th) day after the giving of such notice, such newly designated address shall be such Partner's address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement. Section 16.2 LAW GOVERNING. This agreement shall be governed by and construed in accordance with the laws of the State of Delaware. Section 16.3 AMENDMENTS. Except as otherwise herein provided to the contrary, this Agreement is subject to amendment only upon the approval of the Limited Partners owning of record, on the books of the partnership, not less than fifty-one percent (51%) of the then outstanding Units (other than Units held by the General Partner); provided, however, no amendment shall alter, modify, expand or extend the obligations or liabilities of the General Partner without its prior written consent, and provided that no amendment shall reduce the percentage vote required under Section 6.1.9 hereof to remove a General Partner. Section 16.4 SUCCESSORS AND ASSIGNS. This Agreement and all the terms and provisions hereof shall be binding upon the partners, their respective legal representatives, heirs, successors and assigns.

Section 16.5 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall constitute this Agreement. Section 16.6 NECESSARY DOCUMENTS . Each Limited Partner agrees upon request of the General Partner, to execute such certificates or other documents and perform such acts as the General Partner deems necessary for purposes and business of the Partnership. Section 16.7 HEADINGS AND PRONOUNS. Paragraph titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the intent of any provision hereof. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders and the word "person" shall include corporation, partnership, firm, association or other entity. Section 16.8 VALIDITY. If any provision of this Certificate and Agreement of Limited Partnership or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Certificate and Agreement of Limited Partnership, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. Section 16.9 MODIFICATION TO BE IN WRITING. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and no amendment, modification or alteration of the terms hereof shall be binding unless the same be in writing. Section 16.10 WAIVER OF ACTION OF PARTITION. Each of the Partners hereto irrevocably waives during the term of the Partnership any right it may have to maintain any action of partition with respect to any property of the partnership. Section 16.11 LIMITATION ON TRANSFER OF UNITS. An appropriate legend noting the restrictions on transfer shall be placed conspicuously on the face of all certificates representing Units and a notation restricting transfer will be placed in the books and records of the Partnership. All transferees of Units shall be treated similarly and corresponding notations shall be placed on new certificates for Units issued upon transfer as well as in the Partnership records.

IN WITNESS WHEREOF, the undersigned have executed this Certificate and Agreement of Limited Partnership as of the ___ day of February, 1996. GENERAL PARTNER: Covol Technologies, Inc. By_________________________________ Its President LIMITED PARTNERS:

STATE OF UTAH) : ss. COUNTY OF UTAH) On the _____, day of ____________, 1996, personally appeared before me Kirby Cochran, who being by me duly sworn did say that he is the President of Covol Technologies, Inc., and did execute the foregoing instrument as a General Partner, and that the information contained therein is true and correct, and that ____________________________ and _________________________________, also, executed the same as a Limited Partner. NOTARY PUBLIC My Commission Expires: Residing at:

EXHIBIT "A" TO CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP OF Utah Synfuel #1 Capital Units Contributions GENERAL PARTNER: Covol Technologies, Inc. 3280 North Frontage Road Lehi, Utah 84043 LIMITED PARTNERS:

COVOL TECHNOLOGIES, INC. List of Subsidiaries
Name Jurisdiction of Organization Utah Corporation Utah Corporation Utah Corporation Utah Corporation Delaware limited partnership Delaware limited partnership

Industrial Management and Engineering, Inc. State Incorporated Central Industrial Construction, Inc. Larson Limestone Company, Inc. Utah Synfuel #1 Alabama Synfuel #1, Ltd.

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

YEAR SEP 30 1996 OCT 01 1995 SEP 30 1996 490106 0 77744 0 162757 779073 7528058 402813 8772072 4261300 1109066 0 0 7714 (241078) 8772072 195165 295165 859574 13268773 41793 0 0 (12931815) (23000) (12954815) (881505) 0 0 (13836320) (1.99) (1.99)

cause such Registration Statement if filed to be declared effective by the SEC as soon as reasonably practicable. The Company agrees to use its best efforts to keep such Registration Statement continuously effective under the Securities Act for a period expiring on the date two (2) years from the date of the last issuance of any Shares and further agrees to supplement or amend the Registration Statement, if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Registration Statement or by the Securities Act or by any other rules and regulations thereunder for such Registration Statement. (b) Demand Registration. In the event the Company has not caused to be filed a Registration Statement as provided in Section 2(a) within six (6) months from the date hereof, Holder shall have the right, at any time and from time to time after such six (6) month period, to demand that the Company cause to be filed a Registration Statement or an amendment to a Registration Statement providing for the registration under the Securities Act of the Shares to be issued to Holder to the extent allowed by applicable regulations and the resale by the Holder of all Registrable Securities, or, in the event the Company has filed a Registration Statement as provided in Section 2(a) within six (6) months from the date hereof, but such JZM5800 B-13

Registration Statement has not been declared effective by the SEC, Holder shall have the right at any time and from time to time after January 1, 1998, to demand that the Company cause to be filed a Registration Statement or an amendment to a Registration Statement providing for the registration under the Securities Act of the Shares to be issued to Holder and the resale by the Holder of all Registrable Securities; provided, however, if at the time of such demand, the Shares have been issued, such Registration Statement shall only relate to sales by Holder. The Company agrees to use its best efforts to keep such Registration Statement continuously effective under the Securities Act for a period expiring on the date two (2) years from the date of the last issuance of any Shares and further agrees to supplement or amend the Registration Statement, if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Registration Statement or by the Securities Act or by any other rules and regulations thereunder for such Registration Statement. (c) Cut-Back Registration. In the event that the Holder has requested the inclusion of Registrable Securities in a registration statement pursuant to Section 3(a) or Section 3(b) and all or a portion of the Registrable Securities with respect to which the Holder has requested registration are not registered by virtue of the provisions of said sections, Holder shall thereupon have the right to require the registration under the Securities Act of such Registrable Securities pursuant to the provisions of Section 2(b), irrespective of whether the date upon which

Registration Statement has not been declared effective by the SEC, Holder shall have the right at any time and from time to time after January 1, 1998, to demand that the Company cause to be filed a Registration Statement or an amendment to a Registration Statement providing for the registration under the Securities Act of the Shares to be issued to Holder and the resale by the Holder of all Registrable Securities; provided, however, if at the time of such demand, the Shares have been issued, such Registration Statement shall only relate to sales by Holder. The Company agrees to use its best efforts to keep such Registration Statement continuously effective under the Securities Act for a period expiring on the date two (2) years from the date of the last issuance of any Shares and further agrees to supplement or amend the Registration Statement, if and as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Registration Statement or by the Securities Act or by any other rules and regulations thereunder for such Registration Statement. (c) Cut-Back Registration. In the event that the Holder has requested the inclusion of Registrable Securities in a registration statement pursuant to Section 3(a) or Section 3(b) and all or a portion of the Registrable Securities with respect to which the Holder has requested registration are not registered by virtue of the provisions of said sections, Holder shall thereupon have the right to require the registration under the Securities Act of such Registrable Securities pursuant to the provisions of Section 2(b), irrespective of whether the date upon which Registration is requested is within six months of the date of this Agreement. (d) Expenses. The Company shall pay all Registration Expenses in connection with any Registration Statement filed pursuant to this Section 2. (e) Inclusion in Registration Statement. The Company may require each Holder of Registrable Securities to furnish to the Company in writing such information regarding the proposed offer or sale by such Holder of such Registrable Securities as the Company may from time to time reasonably request in writing. Any Holder who does not provide the information reasonably requested by the Company in connection with the Registration Statement as promptly as practicable after receipt of such request, but in no event later than ten (10) days thereafter, shall not be entitled to have its Registrable Securities included in the Registration Statement. (f) Underwritten Demand by Holder. If at the demand of Holder, the Company proposes to file a Registration Statement relating to an underwritten public offering of any Registerable Securities and the investment banking firm selected by Holder to act as lead underwriter in connection with such public offering of securities by Holder advises in writing that, in such firm's opinion, a registration of other securities of the Company at that time would materially and adversely affect the offering by Holder, no person (including the Company) shall have a right to have shares of common stock or other securities included in such Registration Statement; provided, however, that if an offering of some but not all of the shares requested to JZM5800 B-14

be registered by Holder would not adversely affect the offering by Holder, the aggregate number of shares requested to be included in such offering by the Company and each other person shall be reduced pro rata according to the total number of securities proposed to be sold by the Company and other Person taken as a whole; provided, in no event shall the shares requested by Holder to be included in the Registration Statement shall be reduced. (g) Rights to Subsequent Investors. The Company shall not grant any rights to any other person which shall diminish in any way the rights granted to the Holders hereunder. The Company may grant subsequent investors rights of registration (such as those provided in Section 2 hereof); provided, however, that (i) such rights are limited to shares of Common Stock (including, in the case of any underwritten offering, shares issuable upon the conversion of convertible securities or upon the exercise of warrants if such conversion or exercise is effected by the sellers or the underwriters prior to sale to the public in such offering), (ii) such rights are not inconsistent with the provisions hereof; (iii) the instrument granting such rights specifically confirms the rights of the Holders of Registrable Shares hereunder; (iv) the rights of the Holder hereunder shall be the same as the rights of registration granted to the subsequent investors.

be registered by Holder would not adversely affect the offering by Holder, the aggregate number of shares requested to be included in such offering by the Company and each other person shall be reduced pro rata according to the total number of securities proposed to be sold by the Company and other Person taken as a whole; provided, in no event shall the shares requested by Holder to be included in the Registration Statement shall be reduced. (g) Rights to Subsequent Investors. The Company shall not grant any rights to any other person which shall diminish in any way the rights granted to the Holders hereunder. The Company may grant subsequent investors rights of registration (such as those provided in Section 2 hereof); provided, however, that (i) such rights are limited to shares of Common Stock (including, in the case of any underwritten offering, shares issuable upon the conversion of convertible securities or upon the exercise of warrants if such conversion or exercise is effected by the sellers or the underwriters prior to sale to the public in such offering), (ii) such rights are not inconsistent with the provisions hereof; (iii) the instrument granting such rights specifically confirms the rights of the Holders of Registrable Shares hereunder; (iv) the rights of the Holder hereunder shall be the same as the rights of registration granted to the subsequent investors. 3. Incidental Registration. (a) If the Company proposes to register any shares of Company Common Stock ("Other Securities") for public sale by the Company pursuant to an underwritten offering under the Securities Act it will give prompt written notice to Holders of its intention to do so, and upon the written request of Holders delivered to the Company within fifteen (15) Business Days after the giving of any such notice which request shall specify the number of Registrable Securities intended to be disposed of by Holders and the Company shall include such Registrable Securities in such Registration Statement. The Company will not be required to effect any registration pursuant to this Section 3(a) if the Company shall have been advised in writing (with a copy to the Selling Holders) by a nationally recognized independent investment banking firm selected by the Company to act as lead underwriter in connection with the public offering of securities by the Company that, in such firm's opinion, a registration at that time by other holders would materially and adversely affect the Company's own scheduled offering, provided, however, that if an offering of some but not all of the shares requested to be registered by Holder and other holders would not adversely affect the Company's offering, the aggregate number of shares requested to be included in such offering by each selling holder shall be reduced pro rata according to the total number of securities proposed to be sold by the selling holders taken as a whole. (b) If at the demand of any other Person but the Holder ("Other Person"), the Company proposes to register Other Securities for public sale pursuant to an underwritten offering under the Securities Act it will give prompt written notice to Holder of its intention to do so, and upon the written request of Holders delivered to the Company within fifteen (15) Business Days after the giving of any such notice which request shall specify the number of Registrable Securities intended to be disposed of by Holder and the Company shall include such JZM5800 B-15

Registrable Securities in such Registration Statement. If the Other Person shall have been advised in writing (with a copy to the Selling Holders) by a nationally recognized independent investment banking firm acting as lead underwriter in connection with the public offering of securities by the Other Person that, in such firm's opinion, a registration by the Holders at that time would materially and adversely affect the offering by the Other Person, the Registrable Securities of the Holder shall not be included in such Registration, provided, the number of shares requested to be included in such offering by the Holders and all other Persons shall be reduced pro rata according to the total number of securities proposed to be sold by the Holder and other selling holders taken as a whole; provided, however, notwithstanding the foregoing paragraph, the shares requested by the Other Person demanding registration to be included in the Registration Statement shall not be reduced if required by an agreement between such Other Person and the Company. (c) With respect to any proposed sale or sale by the Holder of Registrable Securities pursuant to this Section 3 the Company shall pay all Registration Expenses.

Registrable Securities in such Registration Statement. If the Other Person shall have been advised in writing (with a copy to the Selling Holders) by a nationally recognized independent investment banking firm acting as lead underwriter in connection with the public offering of securities by the Other Person that, in such firm's opinion, a registration by the Holders at that time would materially and adversely affect the offering by the Other Person, the Registrable Securities of the Holder shall not be included in such Registration, provided, the number of shares requested to be included in such offering by the Holders and all other Persons shall be reduced pro rata according to the total number of securities proposed to be sold by the Holder and other selling holders taken as a whole; provided, however, notwithstanding the foregoing paragraph, the shares requested by the Other Person demanding registration to be included in the Registration Statement shall not be reduced if required by an agreement between such Other Person and the Company. (c) With respect to any proposed sale or sale by the Holder of Registrable Securities pursuant to this Section 3 the Company shall pay all Registration Expenses. (d) No registration of Registrable Securities effected under this Section 3 shall relieve the Company of its obligation (if any) to effect registrations of Registrable Securities pursuant to Section 2. 4. Registration Procedures. (a) Obligations of the Company. In connection with any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall: (i) cause the Registration Statement to be available for the sale of the Registrable Securities by Holders in one or more transactions, in negotiated transactions, through the writing of options of the Registrable Securities, or a combination of such methods of sale, and to comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith and in the event the Company is listed on the NASDAQ National Market System ("NMS") in one or more transactions on NMS or otherwise in special offerings, exchange distributions or secondary distribution pursuant to and in accordance with the rules of the NMS, in the over-the-counter market; (ii) (A) prepare and file with the SEC such amendments and post-effective amendments to any Registration Statement as may be necessary to keep each such Registration Statement effective for the applicable period; (B) cause the Prospectus included in each such Registration Statement to be supplemented by any required JZM5800 B-16

prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; (C) respond promptly to any comments received from the SEC with respect to each Registration Statement, or any amendment, post-effective amendment or supplement relating thereto; and (D) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement; (iii) furnish to each Holder of Registrable Securities, without charge, as many copies of each Prospectus, and any amendment or supplement thereto and such other documents as they may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; the Company consents to the use of the Prospectus, by each such Holder of Registrable Securities, in connection with the offering and sale of the Registrable Securities covered by the Prospectus; (iv) notify promptly each Holder of Registrable Securities and confirm such advice in writing (A) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (B) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and (C) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or

prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 or any similar rule that may be adopted under the Securities Act; (C) respond promptly to any comments received from the SEC with respect to each Registration Statement, or any amendment, post-effective amendment or supplement relating thereto; and (D) comply with the provisions of the Securities Act with respect to the disposition of all securities covered by each Registration Statement; (iii) furnish to each Holder of Registrable Securities, without charge, as many copies of each Prospectus, and any amendment or supplement thereto and such other documents as they may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; the Company consents to the use of the Prospectus, by each such Holder of Registrable Securities, in connection with the offering and sale of the Registrable Securities covered by the Prospectus; (iv) notify promptly each Holder of Registrable Securities and confirm such advice in writing (A) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (B) if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, and (C) of the happening of any event during the period a Registration Statement is effective as a result of which such Registration Statement or the related Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the Prospectus), not misleading; (v) use its best effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment; (vi) use its best efforts to register or qualify the Registrable Securities by the time the applicable Registration Statement is declared effective by the SEC under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably JZM5800 B-17

request in writing, keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective or during the period offers or sales are being made by a Holder that has delivered a Registration Notice to the Company, whichever is shorter, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(vi), (B) subject itself to taxation in any such jurisdiction, or (C) submit to the general service of process in any such jurisdiction; (vii) upon the occurrence of any event contemplated by Section 4(a)(iv)(C) hereof, use its best efforts promptly to prepare and file a supplement or prepare, file and obtain effectiveness of a post- effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) use its best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar securities issued by the Company are then listed; (ix) provide a CUSIP number for all Registrable Securities, not later than the effective date of the Registration Statement or amendment thereto relating to such Registrable Securities; (x) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make

request in writing, keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective or during the period offers or sales are being made by a Holder that has delivered a Registration Notice to the Company, whichever is shorter, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction or to register as a broker or dealer in such jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(vi), (B) subject itself to taxation in any such jurisdiction, or (C) submit to the general service of process in any such jurisdiction; (vii) upon the occurrence of any event contemplated by Section 4(a)(iv)(C) hereof, use its best efforts promptly to prepare and file a supplement or prepare, file and obtain effectiveness of a post- effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) use its best efforts to cause all Registrable Securities to be listed on any securities exchange on which similar securities issued by the Company are then listed; (ix) provide a CUSIP number for all Registrable Securities, not later than the effective date of the Registration Statement or amendment thereto relating to such Registrable Securities; (x) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earning statement covering at least twelve (12) months which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and JZM5800 B-18

(xi) use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable Holders to consummate the disposition of such Registrable Securities. (b) Obligations of Holders. In connection with and as a condition to the Company's obligations with respect to a Registration Statement pursuant to Section 2 hereof and this Section 4, each Holder agrees that (i) it will not offer or sell its Registrable Securities under the Registration Statement until it has received copies of the supplemental or amended Prospectus contemplated by Section 4(a)(ii) hereof and receives notice that any post-effective amendment has become effective; and (ii) upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a)(iv)(C) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder receives copies of the supplemented or amended Prospectus contemplated by Section 4(a)(vii) hereof and receives notice that any post-effective amendment has become effective, and, if so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. (c) Lockup. In the event the Company proposes to effect the distribution of its securities by the Company through an underwritten public offering, each Holder who then beneficially owns in excess of 100,000 shares agrees for a period of time, beginning seven (7) days prior to the effective date of the underwriting agreement pertaining to such offering and ending thirty (30) days after such effective date that such Holder will forthwith cease any sale or other disposition of any of the Registrable Securities or sale or other disposition of any of its Registrable Securities during such period of time, if

(xi) use its best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable Holders to consummate the disposition of such Registrable Securities. (b) Obligations of Holders. In connection with and as a condition to the Company's obligations with respect to a Registration Statement pursuant to Section 2 hereof and this Section 4, each Holder agrees that (i) it will not offer or sell its Registrable Securities under the Registration Statement until it has received copies of the supplemental or amended Prospectus contemplated by Section 4(a)(ii) hereof and receives notice that any post-effective amendment has become effective; and (ii) upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a)(iv)(C) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder receives copies of the supplemented or amended Prospectus contemplated by Section 4(a)(vii) hereof and receives notice that any post-effective amendment has become effective, and, if so directed by the Company, such Holder will deliver to the Company (at the expense of the Company) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. (c) Lockup. In the event the Company proposes to effect the distribution of its securities by the Company through an underwritten public offering, each Holder who then beneficially owns in excess of 100,000 shares agrees for a period of time, beginning seven (7) days prior to the effective date of the underwriting agreement pertaining to such offering and ending thirty (30) days after such effective date that such Holder will forthwith cease any sale or other disposition of any of the Registrable Securities or sale or other disposition of any of its Registrable Securities during such period of time, if requested in writing by the representatives of the underwriters for any such underwritten public offering; provided, however, that Holders shall not be subject to more than one Lockup Period during any twelve (12) month period. 5. Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, each officer and director of such Holder, and each Person, if any, who controls any Holder within the meaning of Section 15 of the Securities Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to JZM5800 B-19

which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission,

which Registrable Securities were registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including reasonable fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above; provided, however, that the indemnity provided pursuant to this Section 4(a) does not apply to any Holder with respect to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) Indemnification by the Holders. Each Holder severally agrees to indemnify and hold harmless the Company and the other selling Holders, and each of their respective directors and officers (including each director and officer of the Company who signed the Registration Statement), and each Person, if any, who controls the Company or any other selling Holder within the meaning of Section 15 of the Securities Act, to the same extent as the indemnity contained in Section 5(a) hereof (except that any settlement described in Section 4(a)(ii) shall be effected only with the written consent of such Holder), but only insofar as such loss, liability, claim, damage or expense arises out of or is based upon (i) any untrue statement or omission, or alleged untrue statements or omissions, made in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company JZM5800 B-20

by such selling Holder expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto), or (ii) such Holder's failure to deliver a Prospectus to any purchaser of Registrable Securities where such a delivery obligation was applicable to such Holder's sale of Registrable Securities and such Holder had been provided with sufficient copies of such Prospectus for the relevant deliveries thereof. In no event shall the liability of any Holder under this Section 4(b) be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 4(a) or (b) above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 4(a) or (b) above. If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified parties defendant in such action or proceeding, which approval shall not be unreasonably withheld; provided, however, that, if such indemnified party or parties reasonably determine that a conflict of interest exists where it is advisable for such indemnified

by such selling Holder expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto), or (ii) such Holder's failure to deliver a Prospectus to any purchaser of Registrable Securities where such a delivery obligation was applicable to such Holder's sale of Registrable Securities and such Holder had been provided with sufficient copies of such Prospectus for the relevant deliveries thereof. In no event shall the liability of any Holder under this Section 4(b) be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party (i) shall not relieve it from any liability which it may have under the indemnity agreement provided in Section 4(a) or (b) above, unless and to the extent it did not otherwise learn of such action and the lack of notice by the indemnified party results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided under Section 4(a) or (b) above. If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified parties defendant in such action or proceeding, which approval shall not be unreasonably withheld; provided, however, that, if such indemnified party or parties reasonably determine that a conflict of interest exists where it is advisable for such indemnified party or parties to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to them which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume such defense and the indemnified party or parties shall be entitled to one separate counsel at the indemnifying party's expense. If an indemnifying party is not entitled to assume the defense of such action or proceeding as a result of the proviso to the preceding sentence, such indemnifying party's counsel shall be entitled to conduct the defense of such indemnified party or parties, it being understood that both such counsel will cooperate with each other to conduct the defense of such action or proceeding as efficiently as possible. If an indemnifying party is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the indemnifying party or parties will pay the reasonable fees and expenses of counsel for the indemnified party or parties. In such event, however, no indemnifying party will be liable for any settlement effected without the written consent of such indemnifying party. If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this paragraph, such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action or proceeding. The indemnification obligations provided pursuant to Sections 4(a) and (b) hereof survive, with respect to a Holder, the transfer of Registrable JZM5800 B-21

Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. (d) Contribution. (i) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 4 is for any reason held to be unenforceable although applicable in accordance with its terms, the Company and the selling Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and the selling Holders, in such proportion as is appropriate to reflect the relative fault of and benefits to the Company on the one hand and the selling Holders on the other (in such proportions that the selling Holders are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified parties shall be determined by reference to, among other things, the total proceeds received by the indemnified party and indemnified parties in connection with the offering to which such losses, claims, damages, liabilities or expenses relate. The relative fault of the indemnifying party and

Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. (d) Contribution. (i) In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in this Section 4 is for any reason held to be unenforceable although applicable in accordance with its terms, the Company and the selling Holders shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity agreement incurred by the Company and the selling Holders, in such proportion as is appropriate to reflect the relative fault of and benefits to the Company on the one hand and the selling Holders on the other (in such proportions that the selling Holders are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified parties shall be determined by reference to, among other things, the total proceeds received by the indemnified party and indemnified parties in connection with the offering to which such losses, claims, damages, liabilities or expenses relate. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. (ii) The Company and the Holders agree that it would not be just or equitable if contribution pursuant to this Section 4(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4(d), no selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such selling Holder were offered to the public exceeds the amount of any damages which such selling Holder would otherwise have been required to pay by reason of such untrue statement or omission. JZM5800 B-22

(iii)Notwithstanding the foregoing, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(d), each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act and directors and officers of a Holder shall have the same rights to contribution as such Holder, and each director of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. (iv) The contribution provided for in this Section 4(d) shall survive, with respect to a Holder, the transfer of Registrable Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. 6. Rule 144 Sales. (a) Reports. The Company covenants that it will file the reports required to be filed by the Company under the Securities Act and the Securities Exchange Act of 1934, as amended, and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required to enable such Holder to sell Registrable Securities pursuant to Rule 144 under the Securities Act. (b) Certificates. In connection with any sale, transfer or other disposition by any Holder of any Registrable Securities pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of

(iii)Notwithstanding the foregoing, no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4(d), each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act and directors and officers of a Holder shall have the same rights to contribution as such Holder, and each director of the Company, each officer of the Company who signed the Registration Statement and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. (iv) The contribution provided for in this Section 4(d) shall survive, with respect to a Holder, the transfer of Registrable Securities by such Holder, and with respect to a Holder or the Company, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party. 6. Rule 144 Sales. (a) Reports. The Company covenants that it will file the reports required to be filed by the Company under the Securities Act and the Securities Exchange Act of 1934, as amended, and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required to enable such Holder to sell Registrable Securities pursuant to Rule 144 under the Securities Act. (b) Certificates. In connection with any sale, transfer or other disposition by any Holder of any Registrable Securities pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such names as the selling Holders may reasonably request at least two (2) business days prior to any sale of Registrable Securities. 7. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers JZM5800 B-23

or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders of a majority in amount of the outstanding Registrable Securities; provided, however, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Sections 2, 3, 4, 5, 6 or 7 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities, as the case may be. Notice of any amendment, modification or supplement to this Agreement adopted in accordance with this Section 6(a) shall be provided by the Company to each Holder of Registrable Securities at least thirty (30) days prior to the effective date of such amendment, modification or supplement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(b), which address initially is, with respect to each Holder, the address set forth next to such Holder's name on the books and records of the Company, or (ii) if to the Company, at: COVOL Technologies, Inc., 3280 N. Frontage Road, Lehi, Utah 84043; Facsimile: (801) 7684483; Attn: General Counsel. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; or at the time delivered if delivered by an air courier guaranteeing overnight delivery.

or consents to departures from the provisions hereof may not be given without the written consent of the Company and the Holders of a majority in amount of the outstanding Registrable Securities; provided, however, that no amendment, modification or supplement or waiver or consent to the departure with respect to the provisions of Sections 2, 3, 4, 5, 6 or 7 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder of Registrable Securities, as the case may be. Notice of any amendment, modification or supplement to this Agreement adopted in accordance with this Section 6(a) shall be provided by the Company to each Holder of Registrable Securities at least thirty (30) days prior to the effective date of such amendment, modification or supplement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(b), which address initially is, with respect to each Holder, the address set forth next to such Holder's name on the books and records of the Company, or (ii) if to the Company, at: COVOL Technologies, Inc., 3280 N. Frontage Road, Lehi, Utah 84043; Facsimile: (801) 7684483; Attn: General Counsel. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; or at the time delivered if delivered by an air courier guaranteeing overnight delivery. (c) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the Company and the Holders, including without limitation and without the need for an express assignment, subsequent Holders. If any successor, assignee or transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities, as the case may be, shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be entitled to receive the benefits hereof and shall be conclusively deemed to have agreed to be bound by all of the terms and provisions hereof. (d) Headings. The headings in this Agreement are for the convenience of reference only and shall not limit or otherwise affect the meaning hereof. (e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF. JZM5800 B-24

(f) Specific Performance. The Company and the Holders hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (g) Entire Agreement. This Agreement is intended by the Company as a final expression of its agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Company in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings of the Company with respect to such subject matter. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. COVOL TECHNOLOGIES, INC.

(f) Specific Performance. The Company and the Holders hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. (g) Entire Agreement. This Agreement is intended by the Company as a final expression of its agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Company in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings of the Company with respect to such subject matter. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. COVOL TECHNOLOGIES, INC. By: Name: Title: AJG FINANCIAL SERVICES, INC. By: Name: Title: JZM5800 B-25

[letterhead] ARTHUR J. GALLAGHER & CO. November 13, 1996 COVOL Technologies, Inc., and Utah Synfuel #1, L.P. 3280 N. Frontage Rd. Lehi, UT 84043 Gentlemen: Arthur J. Gallagher & Co. or one of its subsidiaries (the "Investor") hereby acknowledges receipt of: (a) Synthetic Coal Investment Summary dated October 31, 1996 attached as Exhibit A hereto: (b) Financial Projections dated November 7, 1996 entitled Gallagher Newco - Preliminary Proforma attached as Exhibit B hereto; and (c) Outline dated November 12, 1996 entitled US1 Acquisition Structure attached as Exhibit C hereto. The items described in (a), (b) and (c) above are collectively referred to herein as the "Memorandum," and are incorporated herein and are made a part hereof by reference. The transaction described in the Memorandum is referred to herein as the "Transaction," and all other capitalized terms herein have the same meanings as in the Memorandum. Based on the foregoing Memorandum, the Investor hereby states its intention to Covol and US1 (i) to make an initial investment of $2.5 million, and subsequent license fees and other payments at the times and at the rates

[letterhead] ARTHUR J. GALLAGHER & CO. November 13, 1996 COVOL Technologies, Inc., and Utah Synfuel #1, L.P. 3280 N. Frontage Rd. Lehi, UT 84043 Gentlemen: Arthur J. Gallagher & Co. or one of its subsidiaries (the "Investor") hereby acknowledges receipt of: (a) Synthetic Coal Investment Summary dated October 31, 1996 attached as Exhibit A hereto: (b) Financial Projections dated November 7, 1996 entitled Gallagher Newco - Preliminary Proforma attached as Exhibit B hereto; and (c) Outline dated November 12, 1996 entitled US1 Acquisition Structure attached as Exhibit C hereto. The items described in (a), (b) and (c) above are collectively referred to herein as the "Memorandum," and are incorporated herein and are made a part hereof by reference. The transaction described in the Memorandum is referred to herein as the "Transaction," and all other capitalized terms herein have the same meanings as in the Memorandum. Based on the foregoing Memorandum, the Investor hereby states its intention to Covol and US1 (i) to make an initial investment of $2.5 million, and subsequent license fees and other payments at the times and at the rates described in the Memorandum in respect of the Facility described in the Memorandum and an initial investment of $2.5 million, and subsequent license fees and other payments at the times and at the rates described in the Memorandum in respect of the Expansion described in the Memorandum, in each case based upon production and sales of Briquettes set forth in the Memorandum, and (ii) to use its best efforts to consummate the Transaction and the relevant agreements described in the Memorandum at substantially the same prices, fees and other consideration as soon as the conditions set forth below are satisfied. The Transaction as set forth above is subject to the reasonable satisfaction by the Investor of each of the following conditions: 1

(a) Covol Technologies, Inc. ("Covol") has entered into agreements with third parties for the supply of coal fines (necessary to produce at least 320,000 tons of the Briquettes) and has demonstrated the ready availability of the chemical binder; (b) Covol has demonstrated its ability to sell the Briquettes produced at the Facility; (c) Covol has entered into an extension of its lease with Railco, Inc. with respect to the facility site until December 31, 2011; (d) review by the Investor's engineers of Covol's patented technology to ensure that it meets the requirements of the relevant Private Letter Ruling issued by the Internal Revenue Service to Covol and to ensure that there is no material environmental liability to the Investor as a result of this investment; (e) the issuance of all necessary permits and licenses for the construction of the Facility and Covol's agreement to obtain the necessary permits and licenses for the operation of the Facility and an appropriate washer; (f) the Facility has been placed in service for purposes of Section 29 of the Internal Revenue Code;

(a) Covol Technologies, Inc. ("Covol") has entered into agreements with third parties for the supply of coal fines (necessary to produce at least 320,000 tons of the Briquettes) and has demonstrated the ready availability of the chemical binder; (b) Covol has demonstrated its ability to sell the Briquettes produced at the Facility; (c) Covol has entered into an extension of its lease with Railco, Inc. with respect to the facility site until December 31, 2011; (d) review by the Investor's engineers of Covol's patented technology to ensure that it meets the requirements of the relevant Private Letter Ruling issued by the Internal Revenue Service to Covol and to ensure that there is no material environmental liability to the Investor as a result of this investment; (e) the issuance of all necessary permits and licenses for the construction of the Facility and Covol's agreement to obtain the necessary permits and licenses for the operation of the Facility and an appropriate washer; (f) the Facility has been placed in service for purposes of Section 29 of the Internal Revenue Code; (g) the receipt by the Investor of a tax opinion from reputable counsel, in form and substance reasonably satisfactory to the Investor, to the effect that the Investor will more likely than not be entitled (i) to the tax credits under Section 29 of the Internal Revenue Code projected from the Transaction and (ii) to prevail on the other tax issues which are the most significant to a taxpayer in the position of the Investor; (h) the receipt by the Investor of a legal opinion from reputable counsel, in form and substance reasonable satisfactory to the Investor, to the effect that Newco has been validly formed and that the Investor's liability as an owner of Newco is limited to the extent of its required investment in Newco; (i) the execution by US1 and Covol of the relevant agreements described in the Memorandum in form and substance reasonably satisfactory to the Investor, and a satisfactory review of the legal and accounting aspects of the transaction by the Investor; and (j) the Facility has commenced daily operations and has produced at least 5000 tons of Briquettes during a 30day period. In consideration of the foregoing, Covol and US1 hereby agree that for the next 30 days, they will not negotiate with, or commit to, any other party with respect to the Transaction and that they will extend such period for another 30 days thereafter if, in their sole discretion, they determine that Investor has made substantial progress in consummating the Transaction. Covol 2

and US1 also hereby agree that during such exclusive period, they will use their best efforts to satisfy the above conditions and consummate the Transaction with the Investor. The Investor acknowledges that it is and continues to be bound by that certain confidentiality letter agreement dated September 30, 1996 between Arthur J. Gallagher & Co. and Coalco Corporation (for itself and on behalf of Covol). Nothing in this letter shall limit Covol's right to describe or show the facility to any third party during such exclusive period or to discuss similar investments in similar facilities with such third parties. All parties acknowledge that after review of the Memorandum, counsel may restructure the Transaction and the relevant agreements described in the Memorandum to better meet the accounting, tax and other objectives of the parties; all parties agree to work with counsel to make such changes as long as they do not adversely affect the underlying economics of the Transaction. In addition, subject to execution by Covol of the relevant agreements in form and substance reasonably satisfactory to the Investor, the Investor also hereby commits to make two loans in the aggregate amount of $4 million to Covol upon the terms and conditions set forth below:

and US1 also hereby agree that during such exclusive period, they will use their best efforts to satisfy the above conditions and consummate the Transaction with the Investor. The Investor acknowledges that it is and continues to be bound by that certain confidentiality letter agreement dated September 30, 1996 between Arthur J. Gallagher & Co. and Coalco Corporation (for itself and on behalf of Covol). Nothing in this letter shall limit Covol's right to describe or show the facility to any third party during such exclusive period or to discuss similar investments in similar facilities with such third parties. All parties acknowledge that after review of the Memorandum, counsel may restructure the Transaction and the relevant agreements described in the Memorandum to better meet the accounting, tax and other objectives of the parties; all parties agree to work with counsel to make such changes as long as they do not adversely affect the underlying economics of the Transaction. In addition, subject to execution by Covol of the relevant agreements in form and substance reasonably satisfactory to the Investor, the Investor also hereby commits to make two loans in the aggregate amount of $4 million to Covol upon the terms and conditions set forth below: I. Convertible Loan. (a) Borrower: Covol (b) Amount: $1,100,000 (c) Advance: The loan amount shall be advanced to Covol within three business days of the execution of the convertible debt instrument. (d) Term: Three years from the date of the advance. (e) Interest: Six percent per annum simple interest; interest shall not be payable but shall accrue until the end of the term, at which time it will be payable in full. (f) Conversion: At maturity; Covol may at any time, however, elect to convert all or any portion of the outstanding principal and interest owing into shares of common stock of Covol. The Investor shall receive one share of common stock; such shares having registration rights, for each $11 of principal and/or interest converted. The Investor may elect to receive cash in lieu of stock in the event Covol exercises its option prior to maturity. (g) Antidilution: The conversion price shall be subject to adjustment to protect the Investor from dilution from adjustments following distributions, recapitalizations, stock splits, dividends, and mergers. 3

II. Secured Loan (a) Borrower: Covol (b) Amount: $2,900,000 (c) Advances: Advances up to the $2,900,000 amount shall be made from time to time upon the written request of Covol. The first advance shall be available within three business days of the execution of the loan documents. (d) Term: Three years from the date of the execution of the loan documents. (e) Interest: Prime plus 2% simple interest; 50% of interest shall be payable annually; the balance shall accrue until the end of the term, at which time it will be payable in full. (f) Prepayment: Borrower may prepay the loan in whole or in part without penalty. (g) Security: The loan shall be secured by a lien on all real and personal property purchased with the loan

II. Secured Loan (a) Borrower: Covol (b) Amount: $2,900,000 (c) Advances: Advances up to the $2,900,000 amount shall be made from time to time upon the written request of Covol. The first advance shall be available within three business days of the execution of the loan documents. (d) Term: Three years from the date of the execution of the loan documents. (e) Interest: Prime plus 2% simple interest; 50% of interest shall be payable annually; the balance shall accrue until the end of the term, at which time it will be payable in full. (f) Prepayment: Borrower may prepay the loan in whole or in part without penalty. (g) Security: The loan shall be secured by a lien on all real and personal property purchased with the loan proceeds and Covol will account to the Investor for the expenditure of all funds. The parties understand that the consummation and funding of the above loans are not dependent on the consummation of the Transaction or the preconditions to the Transaction, except for satisfactory confirmation by the Investor of the patented process and satisfactory confirmation of joint venture agreements entered into or proposed by Covol. However, the Transaction will not be completed until the loans have been funded. This is a letter of intent and, except as provided in the first and third sentences of the paragraph beginning at the bottom of page two, no binding agreement is intended to be created hereby and the parties shall be bound only pursuant to duly executed and delivered definitive agreements referenced herein. 4

If the foregoing correctly states our understanding, please so indicate by signing below and returning to the undersigned a copy of this letter. Very truly yours, ARTHUR J. GALLAGHER & CO.
/s/ David R. Long David R. Long, Vice President Accepted and agreed this 15th day of November, 1996

COVOL TECHNOLOGIES, INC.
By: /s/ Brent M. Cook Name/Title: Brent M. Cook, President

UTAH SYNFUEL #1, L.P.
By: /s/ Brent M. Cook Name/Title: Brent M. Cook, President

5

If the foregoing correctly states our understanding, please so indicate by signing below and returning to the undersigned a copy of this letter. Very truly yours, ARTHUR J. GALLAGHER & CO.
/s/ David R. Long David R. Long, Vice President Accepted and agreed this 15th day of November, 1996

COVOL TECHNOLOGIES, INC.
By: /s/ Brent M. Cook Name/Title: Brent M. Cook, President

UTAH SYNFUEL #1, L.P.
By: /s/ Brent M. Cook Name/Title: Brent M. Cook, President

5

EXHIBIT A SYNTHETIC COAL - SECTION 29 Investment Summary October 31, 1996 Project Type: Using a patented binding process, coal fines (small pieces of coal and coal dust resulting from coal mining) can be converted into solid formed coal briquettes. Because the molecular structure of the coal fines is modified during the process, the Internal Revenue Service ("IRS") has ruled that the coal is a synthetic fuel, the production and sale of which enables the seller to claim tax credits under Section 29 of the Internal Revenue Code ("Code"). Project Description: Utah Synfuel # 1, L.P. ("US1") is a Delaware limited partnership established to own and operate a coal fines processing facility ("Facility") in Carbon County, Utah. The Facility is currently undergoing start-up procedures and should be fully completed by November, 1996. The synthetic coal from the Facility will be sold to US1 who will then resell it to a railroad company which owns a rail terminal near the Facility. US1 may also sell the synthetic coal to electric utility companies or industrial facilities who use it in their boilers or processes. Developer: Covol Technologies, Inc. ("Covol") a Delaware corporation is the general partner of US1. Covol is a public company traded on the OTC Bulletin Board and has a current market capitalization of approximately $70 million. Marketing Agent: Coalco Corporation ("Coalco"), a Massachusetts corporation is an affiliate of Palmer Capital Corporation and is the marketing agent seeking investor(s) to purchase the Facility from US1. Investor: A tax-oriented corporate investor ("Investor") who purchases the Facility from US1. The Investor should be able to project a long-term ability to use tax credits through 2007.

EXHIBIT A SYNTHETIC COAL - SECTION 29 Investment Summary October 31, 1996 Project Type: Using a patented binding process, coal fines (small pieces of coal and coal dust resulting from coal mining) can be converted into solid formed coal briquettes. Because the molecular structure of the coal fines is modified during the process, the Internal Revenue Service ("IRS") has ruled that the coal is a synthetic fuel, the production and sale of which enables the seller to claim tax credits under Section 29 of the Internal Revenue Code ("Code"). Project Description: Utah Synfuel # 1, L.P. ("US1") is a Delaware limited partnership established to own and operate a coal fines processing facility ("Facility") in Carbon County, Utah. The Facility is currently undergoing start-up procedures and should be fully completed by November, 1996. The synthetic coal from the Facility will be sold to US1 who will then resell it to a railroad company which owns a rail terminal near the Facility. US1 may also sell the synthetic coal to electric utility companies or industrial facilities who use it in their boilers or processes. Developer: Covol Technologies, Inc. ("Covol") a Delaware corporation is the general partner of US1. Covol is a public company traded on the OTC Bulletin Board and has a current market capitalization of approximately $70 million. Marketing Agent: Coalco Corporation ("Coalco"), a Massachusetts corporation is an affiliate of Palmer Capital Corporation and is the marketing agent seeking investor(s) to purchase the Facility from US1. Investor: A tax-oriented corporate investor ("Investor") who purchases the Facility from US1. The Investor should be able to project a long-term ability to use tax credits through 2007. Newco: The Investor will create a newly-formed entity ("Newco") which will be created as a vehicle for the Investor to buy the Facility from US1. Investment: Newco will purchase the Facility and a proprietary license from US1 for $25 million payable at the closing with subsequent payments of 6

approximately xxx cents per million British thermal units ("MMBtus") from the synthetic coal produced and sold. The subsequent payments will be made on a quarterly "pay as you go" basis in arrears to US1. The Investor will be entitled to the Section 29 tax credits generated by the Facility, as well as depreciation and cash flow from operations. In return for its initial investment and subsequent contributions, the Investor can expect to receive approximately $121 million of tax credits and approximately $39 million of additional after-tax benefits and cash through 2007. Because the vast majority of payments will be made as benefits are received, the return on investment is exceptionally high "an after-tax IRR in excess of 100%). Section 29 Credits: Section 29 of the Code provides a credit against regular tax liability in an amount equal to $1.005 per MMBtu (1995 rate) for qualifying fuels sold to an unrelated third party. All synthetic coal manufactured is expected to be sold as a qualifying fuel. The Facility is expected to have a total capacity of 360,000 tons per year. The projected Section 29 credits available in 1997 would be approximately $90 million. The Section 29 credit is available for production and sales through 2007 for output from this Facility. The value of the tax credit per MMBtu rises each year with an inflation rate. Section 29 tax credits allow a corporate investor to offset taxes on almost all kinds of income. However, Section 29 credits cannot be used to reduce one's tax liability below the Alternative Minimum Tax. Section 29 credits can be carried forward indefinitely to the extent that the credits cannot be used as a result of the Alternative Minimum Tax.

approximately xxx cents per million British thermal units ("MMBtus") from the synthetic coal produced and sold. The subsequent payments will be made on a quarterly "pay as you go" basis in arrears to US1. The Investor will be entitled to the Section 29 tax credits generated by the Facility, as well as depreciation and cash flow from operations. In return for its initial investment and subsequent contributions, the Investor can expect to receive approximately $121 million of tax credits and approximately $39 million of additional after-tax benefits and cash through 2007. Because the vast majority of payments will be made as benefits are received, the return on investment is exceptionally high "an after-tax IRR in excess of 100%). Section 29 Credits: Section 29 of the Code provides a credit against regular tax liability in an amount equal to $1.005 per MMBtu (1995 rate) for qualifying fuels sold to an unrelated third party. All synthetic coal manufactured is expected to be sold as a qualifying fuel. The Facility is expected to have a total capacity of 360,000 tons per year. The projected Section 29 credits available in 1997 would be approximately $90 million. The Section 29 credit is available for production and sales through 2007 for output from this Facility. The value of the tax credit per MMBtu rises each year with an inflation rate. Section 29 tax credits allow a corporate investor to offset taxes on almost all kinds of income. However, Section 29 credits cannot be used to reduce one's tax liability below the Alternative Minimum Tax. Section 29 credits can be carried forward indefinitely to the extent that the credits cannot be used as a result of the Alternative Minimum Tax. IRS Ruling: In September 1995 Covol received a private letter ruling from the IRS which confirmed that the synthetic coal manufactured by Covol's patented binding process qualifies for the Section 29 credit. The private letter cited the fact that the molecular structure of the coal fines is altered when certain chemicals used in Covol's process are added to the coal fines causing the fines to bind together. The IRS based its ruling on the findings of Covol and its consultants. The primary technological findings, utilizing infrared spectrometry and thermogravimetric mass spectroscopy, were provided by Advanced Combustion Engineering Research Center ("ACERC") which is affiliated with the University of Utah and Brigham Young University. Additional support for these findings was provided by the Department of Energy, Sandia National Laboratory and the United States Patent Office. Proprietary 7

Technology: Covol's patented technology combines its liquid binder with coal fines which changes the structure of the carbon molecules so that they can bind together as lump coal. Then an extruder or briquetter forms the coal into usable shapes. This process enables the fuel to be classified as a synthetic coal product, or synfuel, which is a qualified fuel under Section 29. In the process, a conditioner is sprayed on the coal fines. The conditioner acts as a reducing agent which allows the oxygen molecules of the coal to mix with the chemicals in the binder. The introduction of the binder takes place in the pug mill or mixer. The resulting moist granular mixture is then fed into the extruder. The extrusions made by the extruder are called briquettes. The briquettes emerge from the extruder and move on conveyor belts to the dryers where the briquettes are heated to remove moisture. The finished briquettes then emerge from the dryers. The binder and the Covol chemical process of binding are both patented. Facility Description: The manufacturing process uses an even-flow feeder, a pug mill, an extruder, and dryers to form extrusions of compressed coal (one inch in diameter by one to four inches in length). The Facility is expected to produce approximately 360,000 tons per year of synthetic coal. The synthetic coal is expected to have an average heating value of 12,000 Btus per pound. Therefore, the sale of a ton of synthetic coal generates over $25 in tax credits (12,000 Btus per pound times 2,000 pounds in a ton, divided by one million times the tax credit rate, which is projected to be about $1.06 per MMBtu in 1997.) Therefore, the total projected credits for 1997 from the operation are about $9 million increasing to about $12.8 million in 2007. (A second production line is expected to be constructed in 1997 in the same building with the first production

Technology: Covol's patented technology combines its liquid binder with coal fines which changes the structure of the carbon molecules so that they can bind together as lump coal. Then an extruder or briquetter forms the coal into usable shapes. This process enables the fuel to be classified as a synthetic coal product, or synfuel, which is a qualified fuel under Section 29. In the process, a conditioner is sprayed on the coal fines. The conditioner acts as a reducing agent which allows the oxygen molecules of the coal to mix with the chemicals in the binder. The introduction of the binder takes place in the pug mill or mixer. The resulting moist granular mixture is then fed into the extruder. The extrusions made by the extruder are called briquettes. The briquettes emerge from the extruder and move on conveyor belts to the dryers where the briquettes are heated to remove moisture. The finished briquettes then emerge from the dryers. The binder and the Covol chemical process of binding are both patented. Facility Description: The manufacturing process uses an even-flow feeder, a pug mill, an extruder, and dryers to form extrusions of compressed coal (one inch in diameter by one to four inches in length). The Facility is expected to produce approximately 360,000 tons per year of synthetic coal. The synthetic coal is expected to have an average heating value of 12,000 Btus per pound. Therefore, the sale of a ton of synthetic coal generates over $25 in tax credits (12,000 Btus per pound times 2,000 pounds in a ton, divided by one million times the tax credit rate, which is projected to be about $1.06 per MMBtu in 1997.) Therefore, the total projected credits for 1997 from the operation are about $9 million increasing to about $12.8 million in 2007. (A second production line is expected to be constructed in 1997 in the same building with the first production line. This would double the amount of tax credits available to approximately $19.6 million in 1998). Equipment: With the exception of the two dryers, all of the major equipment is new. Land:The Facility is being constructed on land leased from the same railroad company which will initially deliver fines and purchase the synthetic coal output. The present lease is ten years, however, an extension and renewal options are currently being negotiated. US1 Structure: US1 is a Delaware limited partnership with Covol as the majority owner and general partner. Covol has granted a non-exclusive license for the technology to US1. US1 purchased and is installing the Equipment under 8

a turn-key contract with Lockwood Greene, a major engineering and construction company headquartered in Spartanburg, SC. All of US1's interest in the equipment necessary to make briquettes and in the license for the technology is expected to be sold to Newco to allow the Investor to claim the tax credits, depreciation and cash flow from US1. Newco may retain Covol to operate and maintain the Facility. Operations: Covol will acquire and sell coal fines to Newco. Covol expects to procure coal fines from nay suppliers located throughout Carbon County and neighboring Emery County. For example, one supplier, the railroad company on whose land the Facility is located, has approximately 320,000 tons of coal fines located within one-half mile of the Facility and is currently negotiating to sell and deliver the coal fines to the Facility. Covol has considerable experience in the production of the synthetic fuel, having operated two similar facilities. Operating experience of the Facility include personnel, a payment to Covol for the liquid binder, a management fee to Covol, electricity from Utah Power and Light, water from the Price Water District, and natural gas. The Facility is projected to have an operating margin of up to $1 per ton of synthetic coal produced. US1 will purchase all of Newco's briquette output as produced and will resell the briquettes to coal purchasers. Coal Fines Supply: The conversion of coal Fines piles to a useable product provides a significant environmental remediation benefit because coal fines are essentially waste coal left behind at the mouth of a coal mine. There are many coal fines piles in Carbon County and neighboring Emery County including several which are under the control of the State of Utah, Division of Oil and Gas and Mining which is eager to begin clean-up and disposal of

a turn-key contract with Lockwood Greene, a major engineering and construction company headquartered in Spartanburg, SC. All of US1's interest in the equipment necessary to make briquettes and in the license for the technology is expected to be sold to Newco to allow the Investor to claim the tax credits, depreciation and cash flow from US1. Newco may retain Covol to operate and maintain the Facility. Operations: Covol will acquire and sell coal fines to Newco. Covol expects to procure coal fines from nay suppliers located throughout Carbon County and neighboring Emery County. For example, one supplier, the railroad company on whose land the Facility is located, has approximately 320,000 tons of coal fines located within one-half mile of the Facility and is currently negotiating to sell and deliver the coal fines to the Facility. Covol has considerable experience in the production of the synthetic fuel, having operated two similar facilities. Operating experience of the Facility include personnel, a payment to Covol for the liquid binder, a management fee to Covol, electricity from Utah Power and Light, water from the Price Water District, and natural gas. The Facility is projected to have an operating margin of up to $1 per ton of synthetic coal produced. US1 will purchase all of Newco's briquette output as produced and will resell the briquettes to coal purchasers. Coal Fines Supply: The conversion of coal Fines piles to a useable product provides a significant environmental remediation benefit because coal fines are essentially waste coal left behind at the mouth of a coal mine. There are many coal fines piles in Carbon County and neighboring Emery County including several which are under the control of the State of Utah, Division of Oil and Gas and Mining which is eager to begin clean-up and disposal of such coal fines piles. The Facility has been centrally located to allow Covol to utilize coal fines from two major coal fines piles totaling about 6 million tons located a few miles from the Facility. One of the coal fines piles is only six miles from the Facility and is owned by a major investor-owned utility which has closed its mining operations. The other fines pile, located fifteen miles from the Facility, belongs to a Fortune 500 mining Company. For both the utility and the mining company, the coal fines piles are an environmental liability, although for the utility it is a more pressing problem because the utility has ceased operations at the site and has a large reclamation bond which is frozen by the State of Utah until the pile is removed. 9

The coal fines from the utility and the mining company piles contain a higher percentage of ash than the coal fines from the 320,000 ton fines pile one-half mile from the Facility. With the ash removed, the utility's and mining company's piles can easily supply the Facility for over 15 years. To reduce the percentage of ash in the coal, near the end of the first year of operation at the Facility (before the 320,000 ton coal fines pile has been exhausted), US1 Covol expects to purchase and install a coal washer at a cost of $2-3 million using, in part, the proceeds from this financing. Once removed from the coal fines piles, ash and waste coal will typically be returned to the coal fines pile site or placed in local landfills. Typically, the original seller of the fines will retain responsibility for ash disposal. Technology History: In 1992, Covol built a prototype briquetting facility in Price, Utah, which is located about five miles from the Facility. Covol's fundamental business strategy has been to commercialize the briquettemaking technology through joint ventures, licenses and collaborative arrangements with steel, coke and coal producers or investors by building briquette- making facilities. Risks and Mitigating Factors: This project has risks including the traditional risks of any relatively new technology and business venture. Many of the risks in this Covol transaction are substantially mitigated for the Investor because of the structure of the primarily "pay-as-you-go" investment and because of the fact that equipment will be in place and operating prior to the initial investment. A listing of some of the risks and their mitigating factors follows: The Facility may not be operated efficiently or reliably. Quarterly payments by the Investor for the Facility will be contingent on processing and sale of briquettes in the prior quarter. As operator of the Facility and majority owner of US1, Covol has substantial incentive to maximize output. The Facility may not receive air quality permits. The Facility is a "de minimis" source of emissions and the air

The coal fines from the utility and the mining company piles contain a higher percentage of ash than the coal fines from the 320,000 ton fines pile one-half mile from the Facility. With the ash removed, the utility's and mining company's piles can easily supply the Facility for over 15 years. To reduce the percentage of ash in the coal, near the end of the first year of operation at the Facility (before the 320,000 ton coal fines pile has been exhausted), US1 Covol expects to purchase and install a coal washer at a cost of $2-3 million using, in part, the proceeds from this financing. Once removed from the coal fines piles, ash and waste coal will typically be returned to the coal fines pile site or placed in local landfills. Typically, the original seller of the fines will retain responsibility for ash disposal. Technology History: In 1992, Covol built a prototype briquetting facility in Price, Utah, which is located about five miles from the Facility. Covol's fundamental business strategy has been to commercialize the briquettemaking technology through joint ventures, licenses and collaborative arrangements with steel, coke and coal producers or investors by building briquette- making facilities. Risks and Mitigating Factors: This project has risks including the traditional risks of any relatively new technology and business venture. Many of the risks in this Covol transaction are substantially mitigated for the Investor because of the structure of the primarily "pay-as-you-go" investment and because of the fact that equipment will be in place and operating prior to the initial investment. A listing of some of the risks and their mitigating factors follows: The Facility may not be operated efficiently or reliably. Quarterly payments by the Investor for the Facility will be contingent on processing and sale of briquettes in the prior quarter. As operator of the Facility and majority owner of US1, Covol has substantial incentive to maximize output. The Facility may not receive air quality permits. The Facility is a "de minimis" source of emissions and the air quality permit will be in hand before the Investor makes the first investment. Further, the Facility is solving a major environmental problem, the disposal of waste coal fines, and, as such, enjoys a favorable review by environmentalists and governmental agencies. The wash plant will require a separate air quality and operating permit. 10

Section 29 tax credits may be reduced or eliminated because of higher oil prices. In October 1992, Congress extended the availability of Section 29 credits to 2007 for coal synfuels (such as are produced by this Facility) and gas produced from biomass. The Minimum Wage Increase Act of 1996 extended the grandfather dates for Section 29 projects to December 31, 1996 for binding construction contracts and June 30, 1998 for placement in service. Therefore, the intent of Congress seems clearly in favor of Section 29. With respect to the possible phase out of tax credits due to high oil prices, oil prices would have to more than triple (to over $46 per barrel) from the 1995 reference price ($14.62 per barrel) to begin to reduce the availability of the credit and would have to quadruple to result in a complete phase out of the credits. As the Investor would reap some of the benefits from higher energy prices and only pays based on fuel produced which qualifies for the credit, the Investor is well protected in this scenario. US1 may not be able to acquire the necessary coal fines. Before Newco buys the Facility, US1 will have signed a contract with the railroad company to deliver 320,000 tones of low-ash coal fines. This is nearly a one-year supply and the railroad company will deliver the coal fines and take away the briquettes. Negotiations are proceeding with the utility and the mining company as explained above which would cover up to an additional 15 years supply. Approximately 40 million tons of coal is mined each year in Carbon County. There are additional coal fines piles located near the Facility which need to be remediated. Newco may not be able to sell the synthetic coal product. US1 will be obligated to buy all the output of the Facility and then will be responsible for reselling it to an end-user. Before Newco buys the Facility, US1 will have signed a contract with the railroad company, providing for the railroad to purchase the synthetic coal made from the railroad company's own fines. Negotiations are proceeding with other synthetic coal purchasers, including coal brokers and a mining company for its cogeneration project near Salt Lake City. The synthetic coal is desirable because it burns more evenly in a steam boiler than does run-of-mine coal. Coal products from Utah enjoy strong demand throughout the Western states and substantial amounts of coal are sent from Utah to Asia, particularly Japan. Coal is a commodity and synthetic coal will be sold for the same price per ton as similar

Section 29 tax credits may be reduced or eliminated because of higher oil prices. In October 1992, Congress extended the availability of Section 29 credits to 2007 for coal synfuels (such as are produced by this Facility) and gas produced from biomass. The Minimum Wage Increase Act of 1996 extended the grandfather dates for Section 29 projects to December 31, 1996 for binding construction contracts and June 30, 1998 for placement in service. Therefore, the intent of Congress seems clearly in favor of Section 29. With respect to the possible phase out of tax credits due to high oil prices, oil prices would have to more than triple (to over $46 per barrel) from the 1995 reference price ($14.62 per barrel) to begin to reduce the availability of the credit and would have to quadruple to result in a complete phase out of the credits. As the Investor would reap some of the benefits from higher energy prices and only pays based on fuel produced which qualifies for the credit, the Investor is well protected in this scenario. US1 may not be able to acquire the necessary coal fines. Before Newco buys the Facility, US1 will have signed a contract with the railroad company to deliver 320,000 tones of low-ash coal fines. This is nearly a one-year supply and the railroad company will deliver the coal fines and take away the briquettes. Negotiations are proceeding with the utility and the mining company as explained above which would cover up to an additional 15 years supply. Approximately 40 million tons of coal is mined each year in Carbon County. There are additional coal fines piles located near the Facility which need to be remediated. Newco may not be able to sell the synthetic coal product. US1 will be obligated to buy all the output of the Facility and then will be responsible for reselling it to an end-user. Before Newco buys the Facility, US1 will have signed a contract with the railroad company, providing for the railroad to purchase the synthetic coal made from the railroad company's own fines. Negotiations are proceeding with other synthetic coal purchasers, including coal brokers and a mining company for its cogeneration project near Salt Lake City. The synthetic coal is desirable because it burns more evenly in a steam boiler than does run-of-mine coal. Coal products from Utah enjoy strong demand throughout the Western states and substantial amounts of coal are sent from Utah to Asia, particularly Japan. Coal is a commodity and synthetic coal will be sold for the same price per ton as similar grades of coal. 11

For further information, please contact Coalco Corporation, the Marketing Agent. Donald R. Logan Vice President Coalco Corporation 605 Willowglen Rd., Suite 200 Santa Barbara, CA 93105 Tel. (805) 687-2315 Fax (805) 687-2795 or Gordon L. Deane Executive Vice President Palmer Capital Corporation 13 Elm Street, Suite 200 Cohasset, MA 02025 Tel. (617) 383-3200 Fax (617) 383-3205 12

EXHIBIT B GALLAGHER NEWCO PRELIMINARY PROFORMA 13

*** Missing informaiton my be available upon request to the Company EXHIBIT C US1 ACQUISITION STRUCTURE November 12, 1996

For further information, please contact Coalco Corporation, the Marketing Agent. Donald R. Logan Vice President Coalco Corporation 605 Willowglen Rd., Suite 200 Santa Barbara, CA 93105 Tel. (805) 687-2315 Fax (805) 687-2795 or Gordon L. Deane Executive Vice President Palmer Capital Corporation 13 Elm Street, Suite 200 Cohasset, MA 02025 Tel. (617) 383-3200 Fax (617) 383-3205 12

EXHIBIT B GALLAGHER NEWCO PRELIMINARY PROFORMA 13

*** Missing informaiton my be available upon request to the Company EXHIBIT C US1 ACQUISITION STRUCTURE November 12, 1996 1. Covol Technologies, Inc., a Delaware corporation ("Covol") is a public company which has developed a patented technology to produce synthetic coal products ("Briquettes") from coal fines mixed with a chemical binder. 2. Covol is leasing from Railco, Inc. certain real estate (the "Premises") near Price, Utah for a term (and extension) commencing on June 20, 1996 and ending on December 31, 2011; it has also entered into a construction contract with Lockwood Greene for the construction of a facility to produce the Briquettes (the "Facility") on the Premises. 3. Covol has formed Utah Synfuel #1,L.P., a Delaware limited partnership ("US1") having Covol ***. 4. Covol and US1 have entered into a license agreement under which Covol has granted US1 a non-exclusive license of the patented technology for 15 years for a lump sum payment of *** and a sale agreement under which Covol will sell the Facility to US1 upon completion and delivery for *** in cash. 5. Coalco Corporation, a Massachusetts corporation ("Coalco"), has entered into an exclusive financial advisor agreement with Covol and US1 under which Coalco has been engaged to advise on maximizing the value of the Facility and the license. Coalco is owned by Douglas Kinney, Gordon Deane, Thomas Linden and Donald Logan. Geocapital, Inc., an Illinois corporation ("Geo") is owned by George Fink. 6. Coalco, after discussions with Geo, has introduced Covol and US1 to Arthur J. Gallagher & Co. (the "Investor") who is interested in maximizing the value of the Facility and the license. 7. The Investor will form and own a limited partnership ("Newco") with Covol or a subsidiary thereof as its general partner and then agree to fund Newco on an ongoing basis in order to accomplish the transactions described in this Memorandum. The Investor will agree with US1 and Covol that it will honor its agreed-upon funding obligations to Newco. The Investor will enter into an agreement with Geo under which Geo will be compensated for its role in the transaction on a quarterly basis tied to the level of Briquette production and sales at the Facility.

EXHIBIT B GALLAGHER NEWCO PRELIMINARY PROFORMA 13

*** Missing informaiton my be available upon request to the Company EXHIBIT C US1 ACQUISITION STRUCTURE November 12, 1996 1. Covol Technologies, Inc., a Delaware corporation ("Covol") is a public company which has developed a patented technology to produce synthetic coal products ("Briquettes") from coal fines mixed with a chemical binder. 2. Covol is leasing from Railco, Inc. certain real estate (the "Premises") near Price, Utah for a term (and extension) commencing on June 20, 1996 and ending on December 31, 2011; it has also entered into a construction contract with Lockwood Greene for the construction of a facility to produce the Briquettes (the "Facility") on the Premises. 3. Covol has formed Utah Synfuel #1,L.P., a Delaware limited partnership ("US1") having Covol ***. 4. Covol and US1 have entered into a license agreement under which Covol has granted US1 a non-exclusive license of the patented technology for 15 years for a lump sum payment of *** and a sale agreement under which Covol will sell the Facility to US1 upon completion and delivery for *** in cash. 5. Coalco Corporation, a Massachusetts corporation ("Coalco"), has entered into an exclusive financial advisor agreement with Covol and US1 under which Coalco has been engaged to advise on maximizing the value of the Facility and the license. Coalco is owned by Douglas Kinney, Gordon Deane, Thomas Linden and Donald Logan. Geocapital, Inc., an Illinois corporation ("Geo") is owned by George Fink. 6. Coalco, after discussions with Geo, has introduced Covol and US1 to Arthur J. Gallagher & Co. (the "Investor") who is interested in maximizing the value of the Facility and the license. 7. The Investor will form and own a limited partnership ("Newco") with Covol or a subsidiary thereof as its general partner and then agree to fund Newco on an ongoing basis in order to accomplish the transactions described in this Memorandum. The Investor will agree with US1 and Covol that it will honor its agreed-upon funding obligations to Newco. The Investor will enter into an agreement with Geo under which Geo will be compensated for its role in the transaction on a quarterly basis tied to the level of Briquette production and sales at the Facility. 14

*** Missing information my be available upon request to the Company 8. Newco will enter into an acquisition agreement with US1 to acquire the Facility for a purchase price of *** payable upon the Facility passing the agreed-upon performance test described in paragraph (j) of the accompanying letter. 9. US1 will also license the technology to Newco for 15 years for a fee based on the amount of Briquettes produced and sold by Newco during the prior quarter. The license fee will be at the rate of *** (escalating with inflation). "Qualifying" means that the Briquettes meet the standards represented in Covol's request dated March 22, 1995 for an IRS Private Letter Ruling.

*** Missing informaiton my be available upon request to the Company EXHIBIT C US1 ACQUISITION STRUCTURE November 12, 1996 1. Covol Technologies, Inc., a Delaware corporation ("Covol") is a public company which has developed a patented technology to produce synthetic coal products ("Briquettes") from coal fines mixed with a chemical binder. 2. Covol is leasing from Railco, Inc. certain real estate (the "Premises") near Price, Utah for a term (and extension) commencing on June 20, 1996 and ending on December 31, 2011; it has also entered into a construction contract with Lockwood Greene for the construction of a facility to produce the Briquettes (the "Facility") on the Premises. 3. Covol has formed Utah Synfuel #1,L.P., a Delaware limited partnership ("US1") having Covol ***. 4. Covol and US1 have entered into a license agreement under which Covol has granted US1 a non-exclusive license of the patented technology for 15 years for a lump sum payment of *** and a sale agreement under which Covol will sell the Facility to US1 upon completion and delivery for *** in cash. 5. Coalco Corporation, a Massachusetts corporation ("Coalco"), has entered into an exclusive financial advisor agreement with Covol and US1 under which Coalco has been engaged to advise on maximizing the value of the Facility and the license. Coalco is owned by Douglas Kinney, Gordon Deane, Thomas Linden and Donald Logan. Geocapital, Inc., an Illinois corporation ("Geo") is owned by George Fink. 6. Coalco, after discussions with Geo, has introduced Covol and US1 to Arthur J. Gallagher & Co. (the "Investor") who is interested in maximizing the value of the Facility and the license. 7. The Investor will form and own a limited partnership ("Newco") with Covol or a subsidiary thereof as its general partner and then agree to fund Newco on an ongoing basis in order to accomplish the transactions described in this Memorandum. The Investor will agree with US1 and Covol that it will honor its agreed-upon funding obligations to Newco. The Investor will enter into an agreement with Geo under which Geo will be compensated for its role in the transaction on a quarterly basis tied to the level of Briquette production and sales at the Facility. 14

*** Missing information my be available upon request to the Company 8. Newco will enter into an acquisition agreement with US1 to acquire the Facility for a purchase price of *** payable upon the Facility passing the agreed-upon performance test described in paragraph (j) of the accompanying letter. 9. US1 will also license the technology to Newco for 15 years for a fee based on the amount of Briquettes produced and sold by Newco during the prior quarter. The license fee will be at the rate of *** (escalating with inflation). "Qualifying" means that the Briquettes meet the standards represented in Covol's request dated March 22, 1995 for an IRS Private Letter Ruling. 10. Newco will give a first priority security interest over the Facility, the license, and its related assets and rights back to US1 to secure Newco's obligations under its agreements with US1 and Covol. If at any time Newco defaults, US1 will be entitled to acquire the Facility and related assets and license rights (for no consideration) through foreclosure. If required by applicable laws to grant US1 additional remedies as a secured creditor, Newco will deliver a *** mortgage debt instrument to US1 at closing secured by the Facility. This secured loan would be paid down during the next 11 years in equal quarterly installments of principal. The preceding sentence modifies the Financial Projections attached as Exhibit "B."

*** Missing information my be available upon request to the Company 8. Newco will enter into an acquisition agreement with US1 to acquire the Facility for a purchase price of *** payable upon the Facility passing the agreed-upon performance test described in paragraph (j) of the accompanying letter. 9. US1 will also license the technology to Newco for 15 years for a fee based on the amount of Briquettes produced and sold by Newco during the prior quarter. The license fee will be at the rate of *** (escalating with inflation). "Qualifying" means that the Briquettes meet the standards represented in Covol's request dated March 22, 1995 for an IRS Private Letter Ruling. 10. Newco will give a first priority security interest over the Facility, the license, and its related assets and rights back to US1 to secure Newco's obligations under its agreements with US1 and Covol. If at any time Newco defaults, US1 will be entitled to acquire the Facility and related assets and license rights (for no consideration) through foreclosure. If required by applicable laws to grant US1 additional remedies as a secured creditor, Newco will deliver a *** mortgage debt instrument to US1 at closing secured by the Facility. This secured loan would be paid down during the next 11 years in equal quarterly installments of principal. The preceding sentence modifies the Financial Projections attached as Exhibit "B." 11. Covol will lease to Newco (i) the portion of the Premises on which the Facility is located (ii) a portion of the building in which the Facility is located, and (iii) certain equipment outside the building (e.g. washer, truck scales, load equipment, etc.) which are incidental but necessary to the Facility's operation. The lease will be in effect until December 31, 2011 at a rental of *** per month (escalating with inflation). 12. Newco will enter into an O&m Agreement with Covol for a fixed fee of *** (escalating with inflation) payable quarterly. This fee will be subject each quarter to an appropriate bonus (or penalty) which will be payable (or assessed) to the extent of any excess (or shortfall) in Briquettes produced and sold by Newco beyond or below) the projected MMBtu's. The O&M fee is intended to cover routine O&M expenses (including supplies, labor, etc.) for which Covol will be responsible. In addition, Covol will wash the coal fines purchases by Newco for a fee of *** per ton. Plus a reasonable ash disposal fee. 13. Newco, however, will be responsible for the actual expenses associated with (a) utilities and coal fines washing; and (b) any necessary modification or improvement of the Facility and for non-routine repairs, provided that in each case such expenses do not exceed annually the amount set forth in a 12-year "operations budget" and a 12-year "capital expenditure budget," respectively, agreed-upon between Newco and Covol at closing. Covol will be responsible for any expenditures in excess of the annual budgets. Newco will basically own and operate the Facility in accordance with the assumptions in the financial models. 15

*** Missing information my be available upon request to the Company 14. Covol will enter into a supply agreement with Newco to use its best efforts to supply and deliver until December 31, 2007 the coal fines and the chemical binder necessary to produce the Briquettes at market prices which are assumed for the purpose of the Outline to be *** per ton for the coal fines and *** per ton for the chemical binder (both prices escalating with inflation or a coal price index). In turn, Covol will then have the obligation to locate and purchase adequate coal fines from suppliers in the area and the necessary chemical binder throughout the term of the supply agreement. 15. Using the coal fines and the chemical binder, Newco will then produce the Briquettes and sell them to US1 pursuant to an 11-year "take or pay" arrangement at a price equal to the *** (escalating at the same rate as in #14 above - either with inflation or a coal price index). Newco will have the right to sell the Briquettes to a third party at a higher price but US1 will then have the right to match. In turn, US1 will be responsible for selling all the Briquettes produced at the Facility to willing end-users who would use the Briquettes to provide energy for their manufacturing, industrial or other facility. 16. US1 will have the right under its acquisition agreement with Newco to reacquire on January 1, 2008 the

*** Missing information my be available upon request to the Company 14. Covol will enter into a supply agreement with Newco to use its best efforts to supply and deliver until December 31, 2007 the coal fines and the chemical binder necessary to produce the Briquettes at market prices which are assumed for the purpose of the Outline to be *** per ton for the coal fines and *** per ton for the chemical binder (both prices escalating with inflation or a coal price index). In turn, Covol will then have the obligation to locate and purchase adequate coal fines from suppliers in the area and the necessary chemical binder throughout the term of the supply agreement. 15. Using the coal fines and the chemical binder, Newco will then produce the Briquettes and sell them to US1 pursuant to an 11-year "take or pay" arrangement at a price equal to the *** (escalating at the same rate as in #14 above - either with inflation or a coal price index). Newco will have the right to sell the Briquettes to a third party at a higher price but US1 will then have the right to match. In turn, US1 will be responsible for selling all the Briquettes produced at the Facility to willing end-users who would use the Briquettes to provide energy for their manufacturing, industrial or other facility. 16. US1 will have the right under its acquisition agreement with Newco to reacquire on January 1, 2008 the Facility and related assets for their ten fair market value. 17. Newco will have the right to "abandon" the Facility and related assets in the case where there is a material adverse change to the economics of the transactions or the Investor is unable to utilize the tax benefits. Newco will provide US1 with advance notice of its intention to abandon the Facility. Such notice shall be six months in advance if one line is in operation and three months in advance if two lines are in operation. In each case, US1 will be required to use its best efforts to resume possession and title to all such assets for fair consideration (not to exceed 50% of the initial down payments) to Newco. After three years from the closing of the Transaction, Newco shall waive such fair consideration if it abandons the property pursuant to this paragraph. 18. In addition, Covol will undertake to enter into a construction agreement for the expansion of the Facility (the "Expansion") prior to December 31, 1996. The Expansion, after completion, would be capable to producing another 360,000 tons of Briquettes annually, Covol will undertake to have the Expansion completed and in daily operation prior to September 30, 1997 and to do all other things necessary to qualify the production for credits under Section 29 of the Code. 19. Newco will acquire the Expansion upon startup for a purchase price of *** payable as follows: *** when Briquette production from the Facility reaches *** tons in any 30-day period; *** when Briquette production from the Expansion reaches *** in any 30-day period; and *** in three *** installments payable when Briquette production from the Expansion reaches the ***, *** and *** cumulative ton milestones. In addition, Newco, Covol and US1 will 16

also consummate the relevant agreements (and on terms substantially the same as are) set fothr in #8-17 above, except (i) Covol or its designee will be the other party in each case instead of US1, and (ii) the equipment (except the washer) and building leased in #11 (ii) and (iii) will be transferred to Newco for no additional consideration. 20. All agreements described in this Outline are to be governed by the laws of the State of Utah. 21. The parties will be responsible for their respective costs and expenses (including all counsel fees) incurred in the consummating the Transaction. The Investor will be responsible for the costs and expenses (including all counsel fees) incurred in managing Newco's business or affairs. 17

LEASE AGREEMENT

also consummate the relevant agreements (and on terms substantially the same as are) set fothr in #8-17 above, except (i) Covol or its designee will be the other party in each case instead of US1, and (ii) the equipment (except the washer) and building leased in #11 (ii) and (iii) will be transferred to Newco for no additional consideration. 20. All agreements described in this Outline are to be governed by the laws of the State of Utah. 21. The parties will be responsible for their respective costs and expenses (including all counsel fees) incurred in the consummating the Transaction. The Investor will be responsible for the costs and expenses (including all counsel fees) incurred in managing Newco's business or affairs. 17

LEASE AGREEMENT THIS LEASE, made and entered into this _____ day of December, 1996, by and between U.P.C., INC., a Utah corporation, 53 West Angelo Avenue, Salt Lake City, Utah 84115 ("Landlord"), and COVOL TECHNOLOGIES, INC., a Utah corporation, 3280 North Frontage Road, Lehi, Utah 84043 ("Tenant"). W I T N E S S E T H: Landlord hereby leases, demises and lets unto Tenant, and Tenant hereby leases, hires and takes from Landlord those certain premises, hereinafter called the demised premises, described as follows: See Exhibit "A" attached hereto 1. Term. This lease shall be for a term of ten years and six months, commencing July 1, 1996 and ending December 31, 2007. Thereafter, this lease may be renewed for an additional five (5) years, upon the mutual agreement of the parties. 2. Monthly Rental. Tenant shall pay to Landlord during the term of this Lease, as monthly rental for the demised premises, the sum of $250.00 per month for the months of July 1996 through September 1996, and the sum of $600.00 per month for the months of October 1996 through September 2001. Thereafter, commencing October 2001, the monthly rental shall increase five percent (5%) per annum, with each annual increase becoming effective October 1 of each year through the end of the lease period. The monthly rental shall be paid in advance on the first day of each calendar month throughout the term of this Lease. The first and last month's rental and a security deposit as described in paragraph 21 below, shall be paid upon the execution of this Lease Agreement. In the event Tenant fails to pay said rental on the due date or within five (5) days thereafter, a late charge of $30.00 per month shall be added to said rental and paid to Landlord. In addition, interest shall accrue on all delinquent amounts thirty days or more past due, at the rate of eighteen percent (18%) per annum. Remittance shall be made to Landlord at such address as shall from time to time be designated by landlord to Tenant in writing. 3. Use. Tenant agrees to use and occupy the premises during the term hereof for the purpose of constructing and operating a coal processing plant, and for no other purpose whatsoever without the written consent of Landlord. All construction and improvements shall be at Tenant's sole cost and expense, shall be done in a workmanlike manner and shall conform to all applicable building codes and governmental regulations. Tenant shall not allow or permit any mechanic's or other liens to be assessed against the property and shall indemnify and save Landlord harmless from any and all claims arising out of or resulting from any construction or improvements on the leased premises. Tenant shall not use, or permit said premises or any part thereof to be used for any purpose or purposes other than the purpose or purposes for which the said premises are hereby leased. Tenant shall accept and process only coal on the demised premises, free from any toxic or hazardous substances. Tenant will not store, generate, transport or release in or on the rented space or Landlord's property any hazardous waste or substance and shall obey all laws respecting the handling of such. Tenant shall allow Landlord the right to inspect and test the

LEASE AGREEMENT THIS LEASE, made and entered into this _____ day of December, 1996, by and between U.P.C., INC., a Utah corporation, 53 West Angelo Avenue, Salt Lake City, Utah 84115 ("Landlord"), and COVOL TECHNOLOGIES, INC., a Utah corporation, 3280 North Frontage Road, Lehi, Utah 84043 ("Tenant"). W I T N E S S E T H: Landlord hereby leases, demises and lets unto Tenant, and Tenant hereby leases, hires and takes from Landlord those certain premises, hereinafter called the demised premises, described as follows: See Exhibit "A" attached hereto 1. Term. This lease shall be for a term of ten years and six months, commencing July 1, 1996 and ending December 31, 2007. Thereafter, this lease may be renewed for an additional five (5) years, upon the mutual agreement of the parties. 2. Monthly Rental. Tenant shall pay to Landlord during the term of this Lease, as monthly rental for the demised premises, the sum of $250.00 per month for the months of July 1996 through September 1996, and the sum of $600.00 per month for the months of October 1996 through September 2001. Thereafter, commencing October 2001, the monthly rental shall increase five percent (5%) per annum, with each annual increase becoming effective October 1 of each year through the end of the lease period. The monthly rental shall be paid in advance on the first day of each calendar month throughout the term of this Lease. The first and last month's rental and a security deposit as described in paragraph 21 below, shall be paid upon the execution of this Lease Agreement. In the event Tenant fails to pay said rental on the due date or within five (5) days thereafter, a late charge of $30.00 per month shall be added to said rental and paid to Landlord. In addition, interest shall accrue on all delinquent amounts thirty days or more past due, at the rate of eighteen percent (18%) per annum. Remittance shall be made to Landlord at such address as shall from time to time be designated by landlord to Tenant in writing. 3. Use. Tenant agrees to use and occupy the premises during the term hereof for the purpose of constructing and operating a coal processing plant, and for no other purpose whatsoever without the written consent of Landlord. All construction and improvements shall be at Tenant's sole cost and expense, shall be done in a workmanlike manner and shall conform to all applicable building codes and governmental regulations. Tenant shall not allow or permit any mechanic's or other liens to be assessed against the property and shall indemnify and save Landlord harmless from any and all claims arising out of or resulting from any construction or improvements on the leased premises. Tenant shall not use, or permit said premises or any part thereof to be used for any purpose or purposes other than the purpose or purposes for which the said premises are hereby leased. Tenant shall accept and process only coal on the demised premises, free from any toxic or hazardous substances. Tenant will not store, generate, transport or release in or on the rented space or Landlord's property any hazardous waste or substance and shall obey all laws respecting the handling of such. Tenant shall allow Landlord the right to inspect and test the

content of any incoming vehicles. Tenant shall upon termination of this Lease Agreement, promptly remove all hazardous substances from the premises. Removal, remediation and/or disposal shall always be the sole responsibility of the Tenant, and Tenant shall remain the sole owner of any hazardous substance it shall cause to be deposited in or on Tenant's rented space. Tenant shall be responsible for all costs and shall indemnify and hold harmless Landlord, its successors or assigns, or any party acting as a representative of Landlord, for any damage arising from Tenant storing or depositing any hazardous substance in or around the demised premises or on Landlord's property. Such indemnification shall survive the termination of this Lease, both as to Tenant and as to any guarantors of Tenant's obligations under this Lease Agreement. "Hazardous substances" shall mean: (a) hazardous substances as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, (b) "PCB's", as defined in 40 C.F.R. 761 et seq. and "TCDD" as defined in 40 C.F.R. 755 et seq., (c) "asbestos" as defined in 29 C.F.R. 1910-1001 et seq., (d) waste oils, and (3) used tires. Tenant shall not be permitted to store or keep any waste or waste product, whether from Tenant's processing operation or otherwise, on the demised premises, or on any adjoining property owned or controlled by Landlord, whether or

content of any incoming vehicles. Tenant shall upon termination of this Lease Agreement, promptly remove all hazardous substances from the premises. Removal, remediation and/or disposal shall always be the sole responsibility of the Tenant, and Tenant shall remain the sole owner of any hazardous substance it shall cause to be deposited in or on Tenant's rented space. Tenant shall be responsible for all costs and shall indemnify and hold harmless Landlord, its successors or assigns, or any party acting as a representative of Landlord, for any damage arising from Tenant storing or depositing any hazardous substance in or around the demised premises or on Landlord's property. Such indemnification shall survive the termination of this Lease, both as to Tenant and as to any guarantors of Tenant's obligations under this Lease Agreement. "Hazardous substances" shall mean: (a) hazardous substances as defined in the Comprehensive Environmental Response, Compensation and Liability Act, as amended, (b) "PCB's", as defined in 40 C.F.R. 761 et seq. and "TCDD" as defined in 40 C.F.R. 755 et seq., (c) "asbestos" as defined in 29 C.F.R. 1910-1001 et seq., (d) waste oils, and (3) used tires. Tenant shall not be permitted to store or keep any waste or waste product, whether from Tenant's processing operation or otherwise, on the demised premises, or on any adjoining property owned or controlled by Landlord, whether or not such waste or waste product is toxic or hazardous. All such waste and waste product must be disposed of off the demised property. Notwithstanding this paragraph 3, Tenant may store waste oil in suitable containers for use with EPA approved waste oil heaters to provide heating for the plant; however, such storage and use shall still be governed by the provisions of this paragraph 3. 4. Nuisance. Tenant shall not commit, or suffer to be committed, any waste upon the demised premises, or any public or private nuisance, or other act or thing which may disturb the quiet enjoyment of any other tenant or occupant of the demised premises or of Landlord's adjoining property. 5. Construction and Alterations. Tenant agrees to submit all plans for construction of the coal processing facility to Landlord for Landlord's prior approval before construction begins, which approval will not be unreasonably denied. Landlord agrees that such plans are confidential and will not disclose the same to any third party without Tenant's prior consent. Once such plans are approved by Landlord, Tenant shall not make or suffer to be made, any alternations or additions to such plans or to any structures completed pursuant to such loans, without the prior written consent of Landlord. Such structures, alterations and/or additions, shall immediately become a part of the realty and belong to the Landlord. However, if Landlord advises Tenant that Landlord desires not to assume ownership and control of said structures, Tenant shall remove the same and restore the demised premises to its condition before Tenant entered thereon, upon the termination of this Lease. Tenant shall be free to remove its equipment and personal property from the leased premises upon the termination of this lease, provided Tenant is not then in default hereunder. 6. Abandonment. Tenant agrees not to vacate or abandon the premises at any time during the demised term. Should Tenant vacate or abandon said premises or be dispossessed by process of law or otherwise, such abandonment, vacation or dispossession shall be a breach of this Lease and in addition to any other rights which Landlord may have, Landlord may at once remove any property belonging to Tenant which remains on the premises and store or dispose of the same, the cost of such removal, disposal and/or storage to be charged to the account of Tenant. 7. Maintenance, Repairs and Reclamation Bond. Tenant shall at its sole cost, keep and maintain the demised premises and appurtenances and every part thereof, in good, clean and sanitary order, condition and repair, hereby waiving all right to make repairs or replacements at the expense of Landlord. By entry hereunder, Tenant accepts the premises as being in good

order, condition and repair and agrees on the last day of said term, or sooner termination of this Lease, to surrender unto Landlord said premises with improvements, in the same condition as when received or as improved, reasonable wear and tear excepted, and to remove those improvements to the real property that Landlord requests Tenant remove and all of Tenant's personal property form the premises, repairing any damage caused thereby and restoring and reclaiming the demised premises to its original condition, or as improved at Landlord's request, or to such other condition as any federal, state or local agency may require, upon the termination of Tenant's operation. As security for Tenant's obligation to repair, restore and reclaim the demised premises, Tenant shall obtain and maintain throughout the term of this Lease Agreement and so long thereafter as Tenant occupies the leased premises, a reclamation and surety bond to guarantee Tenant's obligations. Such bond shall be in favor of and be payable to Landlord. At the commencement of this Lease, the bond shall be in

order, condition and repair and agrees on the last day of said term, or sooner termination of this Lease, to surrender unto Landlord said premises with improvements, in the same condition as when received or as improved, reasonable wear and tear excepted, and to remove those improvements to the real property that Landlord requests Tenant remove and all of Tenant's personal property form the premises, repairing any damage caused thereby and restoring and reclaiming the demised premises to its original condition, or as improved at Landlord's request, or to such other condition as any federal, state or local agency may require, upon the termination of Tenant's operation. As security for Tenant's obligation to repair, restore and reclaim the demised premises, Tenant shall obtain and maintain throughout the term of this Lease Agreement and so long thereafter as Tenant occupies the leased premises, a reclamation and surety bond to guarantee Tenant's obligations. Such bond shall be in favor of and be payable to Landlord. At the commencement of this Lease, the bond shall be in the amount of $2,000.00 per acre of land used or occupied by Tenant or such greater sum as any Federal, State and/or local regulatory authority may require. Thereafter, from time to time, based upon Tenant's use and activity on the leased premises, Landlord may require Tenant to increase the amount of such bond as Landlord may determine will be needed, from proposed clean-up, reclamation and restoration plans which Tenant will periodically provide to Landlord as a condition of this Lease. 8. Laws and Regulations. Tenant, at its own cost and expense, shall comply with all laws, rules and orders of all federal, state, county and municipal governments, or departments, which may be applicable to the use of the leased premises. 9. Indemnification and Liability Insurance. Except for such loss or damage as may be caused by the negligent or willful act of Landlord, its agents, or employees, Landlord shall not be liable to Tenant, its officers, agents, employees, customers, invitees, or third parties for loss of or damage to property, including goods, wares and merchandise, or for injury or death to persons, in, on, or about the premises and Tenant agrees to indemnify and save and hold Landlord harmless from and on account thereof, howsoever arising or by whomever caused. During the term hereof, Tenant shall maintain in full force and effect with insurance companies of good reputation a comprehensive liability insurance policy applicable to the premises and the activities of Tenant therein with a combined single limit for bodily injury and property damage of not less than $1,000,000.00. A certificate evidencing such coverage and providing that the insurance may not be canceled without thirty (30) days prior written notice to Landlord shall be provided to Landlord. 10. Signs. Tenant shall not affix or maintain upon the demised premises, any sign or other like item, except such shall have first received written approval of the landlord as to the size, type, location, nature and display qualities. Landlord's approval hereunder shall not be unreasonably withheld. 11. Utilities. Tenant, from the time it first enters the premises for the purpose of setting fixtures, or from the commencement of the term of this Lease, which ever comes first, and throughout the term of this Lease, shall pay for all public and other utilities and related services rendered or furnished to the premises, including but not limited to water, gas, electricity, telephone, heat, light, sewer charges, installation and connection charges or deposits therefor and refuse or garbage collection or disposal. Tenant shall not allow refuse, garbage, or trash to accumulate inside or outside the demised premises. 12. Entry by Landlord. Tenant shall permit Landlord and its agents to enter the demised premises at all reasonable times, to inspect the same.

13. Assignment. The parties acknowledge the limited purposes for which the premises are to be used, and therefore agree that, except as hereinafter set forth, Tenant shall not sublet the premises in whole or in part, or assign or transfer this Lease, or any interest herein, without first obtaining the written consent of Landlord, which consent may be withheld in the event Landlord determines that such subletting, assignment or transfer would or could create any additional risk, result in any additional liability or economic loss to Landlord, or for any other reasons in the reasonable discretion of Landlord. No consent to any subletting, assignment or transfer shall be construed as a consent to any subsequent assignment, subletting, transfer, occupancy or use. No sublease, assignment or transfer of any interest in this Lease shall release Tenant from, or otherwise affect in any manner, any of Tenant's obligations hereunder and Tenant hereby expressly agrees that it shall continue to be liable for the obligations hereunder notwithstanding any sublease, assignment or transfer as contemplated by this paragraph. Any such assignment, subletting, occupancy or use, without the prior written consent of Landlord shall be null and

13. Assignment. The parties acknowledge the limited purposes for which the premises are to be used, and therefore agree that, except as hereinafter set forth, Tenant shall not sublet the premises in whole or in part, or assign or transfer this Lease, or any interest herein, without first obtaining the written consent of Landlord, which consent may be withheld in the event Landlord determines that such subletting, assignment or transfer would or could create any additional risk, result in any additional liability or economic loss to Landlord, or for any other reasons in the reasonable discretion of Landlord. No consent to any subletting, assignment or transfer shall be construed as a consent to any subsequent assignment, subletting, transfer, occupancy or use. No sublease, assignment or transfer of any interest in this Lease shall release Tenant from, or otherwise affect in any manner, any of Tenant's obligations hereunder and Tenant hereby expressly agrees that it shall continue to be liable for the obligations hereunder notwithstanding any sublease, assignment or transfer as contemplated by this paragraph. Any such assignment, subletting, occupancy or use, without the prior written consent of Landlord shall be null and void. 14. Default. Should the Tenant be in default hereunder with respect to any rental payments or other charges to the Tenant hereunder, and should such default continue for a period of three (3) days after written notice from Landlord to Tenant; or should the Tenant be in default in the prompt and full performance of any other of its promises, covenants or agreements herein contained and should such default or breach of performance continue for more than a reasonable time (in no event to exceed thirty (30) days) after written notice thereof from the Landlord to Tenant specifying the particulars of such default or breach of performance; or should Tenant vacate or abandon the premises; or should Tenant or any agent of Tenant falsify any report required to be furnished to Landlord pursuant to the terms of this Lease; or should Tenant or any guarantor of this Lease become bankrupt or insolvent, or file any debtors proceedings or take or have taken against Tenant or any guarantor of this Lease in any court pursuant to any statute either of the United States or of any state a petition in bankruptcy or insolvency of for reorganization or for the appointment of a receiver of trustee of all or a portion of Tenant's or any guarantor's property, or if Tenant or any such guarantor makes an assignment for the benefit of creditors, or petitions for or enters into an arrangement or if Tenant shall suffer this Lease to be taken under any writ of execution; then the Landlord may treat the occurrence of any one or more of the foregoing events as a breach of this Lease, and in addition to any and all other rights or remedies of the Landlord hereunder and by the law provided, it shall be, at the option of the Landlord, without further notice or demand of any kind to Tenant or any other person: (a) The right of the Landlord without declaring this Lease ended to re-enter the premises and take possession thereof and remove all persons therefrom and Tenant shall have no further claim thereon or thereunder, or (b) The right of the Landlord without declaring this Lease ended to re-enter the premises and occupy or lease the whole or any part thereof for an on account of the Tenant and upon such terms and conditions and for such rent as the Landlord may deem proper and to collect said rent and any other rent that may thereafter become payable and apply the same toward the amount due or thereafter to become due from the Tenant and on account of such expenses of such subletting and any other damages sustained by the Landlord; and should such rental be less than that herein agreed to be paid by Tenant, the Tenant agrees to pay such deficiency to the Landlord in advance on the day of each month herein before specified for payment and to pay to Landlord forthwith upon any such reletting the costs and expenses the Landlord may incur by reason thereof; or (c) The right of Landlord, even though it may have relet said premises, to thereafter elect to terminate this Lease and all the rights of the Tenant in or to the premises. Should the Landlord have relet the premises under the provisions of subparagraph (b) above, it may execute any such lease either in its own name or in the name of Tenant as it shall see fit, the Tenant therein named shall be under no obligation whatsoever to see to the application by Landlord of any rent

collected by Landlord from such tenant nor shall the Tenant hereunder have any right of authority whatever to collect any rent from such tenant. The Landlord shall not be deemed to have terminated this Lease, or the liability of the Tenant to pay rent thereafter to accrue or its liability for damage under any of the provisions hereof, by any

collected by Landlord from such tenant nor shall the Tenant hereunder have any right of authority whatever to collect any rent from such tenant. The Landlord shall not be deemed to have terminated this Lease, or the liability of the Tenant to pay rent thereafter to accrue or its liability for damage under any of the provisions hereof, by any such re-entry or by any action in unlawful detainer, or otherwise, to obtain possession of the premise, unless the Landlord shall have notified the Tenant in writing that it has so elected to terminate this Lease, and the Tenant further covenants that the services by Landlord of any notice pursuant to the unlawful detainer statutes of the State of Utah and the surrender of possession pursuant to such notice shall not (unless the Landlord elects to the contrary at the time of or at any time subsequent to the service of such notices and such election be evidenced by a written notice to the Tenant) be deemed to be a termination of this Lease. Nothing herein contained shall be construed as obligating the Landlord to relet the whole or any part of the premises. In the event of any entry or taking possession of the premises as aforesaid, the Landlord shall have the right but not the obligation, to remove therefrom all or any part of the personal property located thereon and may place the same in storage at a public warehouse at the expense and risk of the owner or owners thereof. In the event of Tenant's default and Landlord's retaking of possession of the premises, whether this Lease is terminated by Landlord or not, Tenant agrees to pay to Landlord as an additional item of damages the cost of repairs, alterations, redecoration, leasing commissions, attorneys fees and Landlord's other costs and expenses incurred in retaking the premises and in reletting the premises to a new tenant. Should the Landlord elect to terminate this Lease under the provisions of subparagraph (a) or (c) above, the Landlord shall thereupon, without waiting for the end of the term hereof, be entitled to recover from Tenant as damages, the difference, if any, between the then reasonable rental value of the premises for the period of the term reserved in the Lease and the amount of rental and other charges payable by Tenant for the balance of the term of this Lease, together with the rent then unpaid, if any. For all purposes of this Paragraph 14, the rental agreed to be paid by Tenant or the amount of rental payable by the Tenant shall be deemed to be the monthly rental and all other sums required to be paid by Tenant pursuant to the terms of this Lease. In the event of default, all of the Tenant's fixtures, furniture, equipment, improvements, additions, alterations, and other personal property, shall remain on the subject premises and in that event, and continuing during the length of said default, Landlord shall have the right to take the exclusive possession of same and to use same, rent or charge free, until all defaults are cured, or at its option, at any time during the term of this Lease, to require Tenant to forthwith remove same. Notwithstanding any other provisions of this paragraph, the Landlord agrees that if the default complained of, other than for the payment of money, or of such a nature that the same cannot be rectified or cured within the thirty (30) day period requiring such rectification or curing as specified in the written notice relating thereto, then such default shall be deemed to be rectified or cured if the Tenant within such period of thirty (30) days shall have commenced the rectification and curing thereof and shall continue thereafter with all due diligence to cause such rectification and curing and does so complete the same with the use of such diligence as aforesaid. The remedies given to Landlord in this paragraph shall be in addition and supplemental to all other rights or remedies which the Landlord may have under the laws then in force. 15. Voluntary Surrender. The voluntary or other surrender of this Lease by tenant, or a mutual cancellation thereof, shall not work a merger, but shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or operate as an assignment to it of any or all such subleases or subtenancies. 16. Attorney's Fees. If Landlord shall be made a party to any litigation commenced by or against Tenant, Tenant shall pay all costs, expense and attorney's fees incurred by Landlord in connection with such litigation

except in the event that such litigation shall determine that Landlord is liable therefor. In the event of any action at law or in equity between Landlord and Tenant to enforce any of the provisions and/or rights hereunder, the unsuccessful party to such litigation covenants and agrees to pay to the successful party all costs and expenses, including reasonable attorney's fees incurred therein by such successful party, and if such successful party shall recover judgment in any such action or proceeding, such costs, expenses and attorney's fees shall be included in and as part of such judgment. 17. Notices. All notices to be given to Tenant or Landlord hereunder may be given in writing personally or by depositing the same in the United States mail, certified, postage prepaid, and addressed to such party at the address specified herein, or such other address as may hereafter be specified by such party to the other in writing. 18. Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein shall not be

except in the event that such litigation shall determine that Landlord is liable therefor. In the event of any action at law or in equity between Landlord and Tenant to enforce any of the provisions and/or rights hereunder, the unsuccessful party to such litigation covenants and agrees to pay to the successful party all costs and expenses, including reasonable attorney's fees incurred therein by such successful party, and if such successful party shall recover judgment in any such action or proceeding, such costs, expenses and attorney's fees shall be included in and as part of such judgment. 17. Notices. All notices to be given to Tenant or Landlord hereunder may be given in writing personally or by depositing the same in the United States mail, certified, postage prepaid, and addressed to such party at the address specified herein, or such other address as may hereafter be specified by such party to the other in writing. 18. Waiver. The waiver by Landlord of any breach of any term, covenant or condition herein shall not be deemed to be a waiver of any other term, covenant or condition or any subsequent breach of the same or any other term, covenant, or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord's knowledge of such preceding breach at the time off acceptance of such rent. 19. Holding Over. Any holding over after the expiration of the said term, with the consent of Landlord, shall be construed to be a tenancy from month to month, and shall be on the terms and conditions herein specified, so far as applicable. 20. Successors. All the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto, provided that nothing in this paragraph shall be deemed to permit any assignment, subletting, occupancy or use contrary to the provisions of paragraph 13. 21. Security Deposit. (a) Tenant has deposited with Landlord the sum of $28,600.00, as a security deposit, receipt of which is hereby acknowledged, with sum represents the reclamation bond referred to in paragraph 7 above, plus $600.00. Said deposit shall be held by Landlord, without liability for interest, as security for the faithful performance by Tenant of all the terms of this Lease by said Tenant to be observed and performed. The security deposit shall not be mortgaged, assigned, transferred, or encumbered by Tenant without the written consent of Landlord and any such act on the part of Tenant shall be without force and effect and shall not be binding upon Landlord. (b) If any of the rents herein reserved or any other sums payable by Tenant shall be overdue and unpaid or should Landlord make payments on behalf of Tenant, or should Tenant fail to perform any of the terms of this Lease, then Landlord may, at its option and without prejudice to any other remedy which Landlord may have on account thereof, appropriate and apply said entire deposit or so much thereof as may be necessary to compensate Landlord toward the payment of rent or additional rent or expense or loss or damage sustained by Landlord due to such breach on the part of Tenant, and Tenant shall forthwith upon demand restore said security to the original sum deposited. Should Tenant comply with all of said terms, promptly pay all of the rentals as they fall due and all other sums payable by Tenant to Landlord, and

should Tenant reclaim the demised premises to the satisfaction of Landlord and all regulatory agencies, said deposit shall be returned to Tenant at the end of the term. (c) In the event of bankruptcy or other debtor-creditor proceedings against Tenant, such security deposit shall be deemed to be applied first to the payment of rent and other charges, including reclamation expenses, due Landlord for all periods prior to the filing of such proceedings. (d) Landlord may deliver the funds deposited hereunder by Tenant to the purchasers of Tenant's interest in the premises in the event that such interest be sold and thereupon Landlord shall be discharged from any further liability with respect to such deposit, and this provision shall apply to any subsequent transferees.

should Tenant reclaim the demised premises to the satisfaction of Landlord and all regulatory agencies, said deposit shall be returned to Tenant at the end of the term. (c) In the event of bankruptcy or other debtor-creditor proceedings against Tenant, such security deposit shall be deemed to be applied first to the payment of rent and other charges, including reclamation expenses, due Landlord for all periods prior to the filing of such proceedings. (d) Landlord may deliver the funds deposited hereunder by Tenant to the purchasers of Tenant's interest in the premises in the event that such interest be sold and thereupon Landlord shall be discharged from any further liability with respect to such deposit, and this provision shall apply to any subsequent transferees. 22. Brokers. Tenant agrees to hold Landlord harmless from any cost, expense or liability for any compensation, commission or other charges claimed by any realtor, broker or agent other than Landlord's representative. 23. Interest. Any sum accruing to Landlord under the terms and provisions of this Lease which is not paid when due shall bear interest at the rate of eighteen percent (18%) per annum from the date when the same becomes due and payable by the terms and provisions hereof until paid, notwithstanding specific reference thereto elsewhere in this Lease. 24. Taxes. Landlord shall pay the real property taxes assessed against the leased premises, however, Tenant shall reimburse Landlord for all real property taxes assessed against the leased premises within thirty (30) days of receipt of an invoice from Landlord for the taxes. Such reimbursement shall be additional rent hereunder. Tenant shall also pay as additional rent hereunder, prior to delinquency, all such taxes assessed against the property and any increase assessed thereon, as a result of structures, buildings, improvement or other changes made to the leased premises by Tenant. Tenant shall also pay prior to delinquency, all taxes assessed against and levied upon fixtures, furnishings, equipment and all other personal property of Tenant contained on the demised premises. 25. Free from Liens. Tenant shall keep the demised premises, including the improvements made thereon by Tenant, and the property on which the demised premises are situated, completely free and clear from any liens arising out of any work performed, material furnished, or obligations incurred by Tenant. 26. Landlord's Right to Require Move. Landlord shall have the right at any time during the term of this Lease or any extension hereof, to require Tenant to remove and relocate any and all of Tenant's property and improvements from the demised premises to an alternate location of Landlord's choosing, anywhere on property now owned or hereafter acquired by Landlord. Upon written notice to Tenant from Landlord that Tenant must relocate its improvements, Tenant shall have twelve (12) months from the date of such notice to remove its property from the demised premises to the alternate location and to commence restoration and reclamation of the demised premises. Landlord shall also have the right at any time during the term of this Lease or any extension, upon 180 days notice, to require Tenant to move Tenant's radial stacker and storage area to a location west of Tenant's building, on land of Landlord's choosing, of the same size as that then being used by Tenant. 27. First Right on Freight, Loading and Purchase of Product. As partial consideration for this Lease, Tenant hereby grants unto Landlord the first right to transport any coal or coal fines to Tenant's processing facility and any finished coal product from Tenant's processing facility. For any such coal, coal fines and finished product to be transported, Tenant shall advise Landlord of its best good faith bid for such transporting service and Landlord shall be entitled to match such bid, either personally or through a subcontractor, and thereby obtain the right to perform such transporting service for Tenant on the same terms and conditions as the matched bid. Tenant also hereby grants unto Landlord the first right to load Tenant's finished load product on the rail at the Railco load-out facility near the leased premises, by matching any good faith bid obtained by Tenant for the loading of Tenant's coal product. Tenant also hereby grants unto Landlord the first right to purchase any or all of the finished coal product produced by Tenant, by Landlord agreeing to pay Tenant the same price for said product, on the same terms, that Tenant offers to any other buyers. 28. Construction of Acceleration Lane. As partial consideration for this Lease, in order to avoid traffic congestion on roads servicing the demised premises and surrounding businesses, Tenant agrees that upon the execution of this Lease, Tenant will immediately commence construction of, and will diligently pursue to completion, an acceleration lane on the demised property, from the access road on the south of the demised premises, to the north boundary of the demised premises. The design and layout of the acceleration lane shall be subject to the

approval of Landlord, will be suitable for heavy truck traffic, and will be continuously maintained at Tenant's sole cost, during the entire term of this Lease and so long as Tenant occupies the premises. 29. Weighing Trucks. As partial consideration for this Lease, during the term of this Lease and as long as Tenant occupies the demised premises, at Landlord's option, Tenant agrees to weigh trucks hauling material to the Railco load-out facility, on Tenant's scales, for $1.00 per truck. 30. Lessor's Lien. Notwithstanding any other provision of this Lease Agreement, no furniture fixtures, equipment, buildings or other property of Tenant located on the leased premises may be removed from the same unless and until Tenant is current in all obligations to Landlord under this Lease Agreement, and Tenant hereby grants unto Landlord a lien upon such furniture, fixtures, equipment, buildings and other property to secure faithful performance and full payment by Tenant of the terms, conditions and obligations of this Lease Agreement. 31. Miscellaneous. (a) Time is of the essence of this Lease and of all provisions hereof. (b) This Lease shall be construed and enforced in accordance with the laws of the State of Utah. (c) No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement of statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction and Landlord may accept such check or payment without prejudice to Landlord's right to the balance of such rent or pursue any other remedy in this Lease provided. (d) This Lease Agreement sets forth all of the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the leased premises and there are no covenants,

promises, agreements conditions and understandings, either oral or written, between them other than are herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them. (e) Landlord does not by this Lease Agreement, in any way or for any purpose, become a partner or joint venturer of Tenant in the conduct of Tenant's business or otherwise. (f) If any term, covenant, or condition of this Lease or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law. IN WITNESS WHEREOF, the parties have duly executed this Lease Agreement, the day and year first written above. U.P.C., INC. COVOL TECHNOLOGIES, INC. Landlord Tenant
By: /s/ B.E. Crossley By: /s/ Brent M. Cook

STANDARD FORM OF AGREEMENT BETWEEN OWNER AND DESIGN/BUILDER DESIGN AND CONSTRUCTION AGREEMENT

promises, agreements conditions and understandings, either oral or written, between them other than are herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them. (e) Landlord does not by this Lease Agreement, in any way or for any purpose, become a partner or joint venturer of Tenant in the conduct of Tenant's business or otherwise. (f) If any term, covenant, or condition of this Lease or the application thereof to any persons or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law. IN WITNESS WHEREOF, the parties have duly executed this Lease Agreement, the day and year first written above. U.P.C., INC. COVOL TECHNOLOGIES, INC. Landlord Tenant
By: /s/ B.E. Crossley By: /s/ Brent M. Cook

STANDARD FORM OF AGREEMENT BETWEEN OWNER AND DESIGN/BUILDER DESIGN AND CONSTRUCTION AGREEMENT AGREEMENT made as of the 20th day of Deccember , 1996, (Contract No. CL-003)
BETWEEN the Owner: (Name and address) Covol Technologies, Inc. 3280 North Frontage Road Lehi, UT 84043

and the Design/Builder: (Name and address)

Centerline Engineering Corporation A Lockwood Greene Company 12450 Perry Highway Post Office Box 249 Wexford, PA 15090

For the following Project: (Include Project name, location and detailed description of scope.) The Design/Builder shall provide to the Owner or its successors or assigns one (1) Coal Fines Agglomeration Facility ("Facility"). Article 14.1, Scope of Work, shall provide a detailed description of the Coal Fines Agglomeration Facility to be provided by the Design/Builder. The Owner and the Design/Builder agree as set forth below. ARTICLE 1 GENERAL PROVISIONS Page 1

STANDARD FORM OF AGREEMENT BETWEEN OWNER AND DESIGN/BUILDER DESIGN AND CONSTRUCTION AGREEMENT AGREEMENT made as of the 20th day of Deccember , 1996, (Contract No. CL-003)
BETWEEN the Owner: (Name and address) Covol Technologies, Inc. 3280 North Frontage Road Lehi, UT 84043

and the Design/Builder: (Name and address)

Centerline Engineering Corporation A Lockwood Greene Company 12450 Perry Highway Post Office Box 249 Wexford, PA 15090

For the following Project: (Include Project name, location and detailed description of scope.) The Design/Builder shall provide to the Owner or its successors or assigns one (1) Coal Fines Agglomeration Facility ("Facility"). Article 14.1, Scope of Work, shall provide a detailed description of the Coal Fines Agglomeration Facility to be provided by the Design/Builder. The Owner and the Design/Builder agree as set forth below. ARTICLE 1 GENERAL PROVISIONS Page 1

1.1 Basic Definitions 1.1.1 The Contract Documents consist of this Agreement together with its Exhibits, the Construction Documents identified in Exhibit "C" and Modifications issued after execution of the Agreement. A Modification is a Change Order or a written amendment to the Agreement, signed by both parties. These form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. 1.1.2 The Project is the total design and construction for which the Design/Builder is responsible under the Agreement, including all professional design services and all labor, services, materials and equipment used or incorporated in such design and construction. 1.1.3 The Work comprises the completed construction designed under the Project and includes labor necessary to produce such construction, and materials and equipment incorporated or to be incorporated in such construction. 1.1.4 The Design/Builder accepts the relationship of trust and confidence established between it and the Owner by this agreement. The Design/Builder agrees to furnish the engineering and construction services set forth herein and agrees to furnish efficient business administration and superintendence, and to use its best efforts to perform the services in an expeditious and economical manner consistent with the interest of the Owner. 1.1.5 The Design/Builder shall act as Agent for the Owner in all dealings with the vendor(s), supplier(s) and contractor(s) under this agreement. All contracts with the vendor(s), supplier(s) and contractor(s) shall be with the Owner and not the Design/Builder. Prior to making any financial commitments, the Design/Builder shall obtain the Owner's written approval except within the scope of the Project where time constraints make advance

1.1 Basic Definitions 1.1.1 The Contract Documents consist of this Agreement together with its Exhibits, the Construction Documents identified in Exhibit "C" and Modifications issued after execution of the Agreement. A Modification is a Change Order or a written amendment to the Agreement, signed by both parties. These form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. 1.1.2 The Project is the total design and construction for which the Design/Builder is responsible under the Agreement, including all professional design services and all labor, services, materials and equipment used or incorporated in such design and construction. 1.1.3 The Work comprises the completed construction designed under the Project and includes labor necessary to produce such construction, and materials and equipment incorporated or to be incorporated in such construction. 1.1.4 The Design/Builder accepts the relationship of trust and confidence established between it and the Owner by this agreement. The Design/Builder agrees to furnish the engineering and construction services set forth herein and agrees to furnish efficient business administration and superintendence, and to use its best efforts to perform the services in an expeditious and economical manner consistent with the interest of the Owner. 1.1.5 The Design/Builder shall act as Agent for the Owner in all dealings with the vendor(s), supplier(s) and contractor(s) under this agreement. All contracts with the vendor(s), supplier(s) and contractor(s) shall be with the Owner and not the Design/Builder. Prior to making any financial commitments, the Design/Builder shall obtain the Owner's written approval except within the scope of the Project where time constraints make advance approval impractical or in cases of extreme emergencies which might involve life or property damage. The Design/Builder will immediately notify the Owner of such orders or commitments. Owner and Design/Builder shall execute a separate Limited Agency Agreement to define the terms and conditions of this agency relationship. This Limited Agency Agreement is attached as Exhibit "D." Nothing in this paragraph shall be construed as a release or limitation, in whole or in part, of Design/Builder=s obligations under this Agreement. 1.2 Execution, Correlation and Intent 1.2.1 This Agreement shall be signed in not less than duplicate by the Owner and the Design/Builder. Page 2

1.2.2 It is the intent of the Owner and Design/Builder that the Contract Documents include all items necessary for proper execution and completion of the Work. The Contract Documents are complementary, and what is required by any one shall be as binding as if required by all. Work not covered in the Contract Documents will not be required unless it is consistent with and is reasonably inferable from the Contract Documents as being necessary to produce the intended results. Words and abbreviations which have well-known technical or trade meanings are used in the Contract Documents in accordance with such recognized meanings. 1.3 Ownership and Use of Documents 1.3.1 The drawings, specifications and other documents furnished by the Design/Builder are the property of the Owner whether or not the project for which they are made is commenced. Drawings, specifications and other documents furnished by the Design/Builder may be used by the Owner on other projects at the sole responsibility and risk of the Owner for correctness, fitness for purpose, and suitability of application for use. The Owner shall indemnify and hold harmless the Design/Builder for any use of these documents for any purpose other than the originally intended project. 1.3.2 (Deleted) ARTICLE 2 Design/Builder

1.2.2 It is the intent of the Owner and Design/Builder that the Contract Documents include all items necessary for proper execution and completion of the Work. The Contract Documents are complementary, and what is required by any one shall be as binding as if required by all. Work not covered in the Contract Documents will not be required unless it is consistent with and is reasonably inferable from the Contract Documents as being necessary to produce the intended results. Words and abbreviations which have well-known technical or trade meanings are used in the Contract Documents in accordance with such recognized meanings. 1.3 Ownership and Use of Documents 1.3.1 The drawings, specifications and other documents furnished by the Design/Builder are the property of the Owner whether or not the project for which they are made is commenced. Drawings, specifications and other documents furnished by the Design/Builder may be used by the Owner on other projects at the sole responsibility and risk of the Owner for correctness, fitness for purpose, and suitability of application for use. The Owner shall indemnify and hold harmless the Design/Builder for any use of these documents for any purpose other than the originally intended project. 1.3.2 (Deleted) ARTICLE 2 Design/Builder 2.1 Services and Responsibilities 2.1.1 Design services shall be performed by qualified engineers and other professionals selected and paid by the Design/Builder. The professional obligations of such persons shall be undertaken and performed in the interest of the Design/Builder. Construction services shall be performed by qualified and licensed construction contractors and suppliers, selected by the Design/Builder. The Design/Builder shall negotiate and prepare the contract documents between the Owner and such contractors and suppliers. The Design/Builder shall retain control and management of the contractors and suppliers. Payments shall be made by the Owner upon Design/Builder=s approval.
2.2 2.2.1 14. 2.2.2 Basic Services The Design/Builder=s Basic Services are described below and in Article

The Design/Builder shall submit Construction Documents for

review

and

approval by the Owner. Construction Documents shall include technical drawings, Page 3

schedules, diagrams and specifications, setting forth in detail the requirements for construction of the Work. 2.2.3 (Deleted) 2.2.4 Unless otherwise provided in the Contract Documents, the Design/Builder shall provide or cause to be provided and shall pay for design services, labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. Tools and materials purchased by Design/Builder specifically for the Project shall belong to the Owner. 2.2.5 The Design/Builder shall be responsible for and shall coordinate all construction means, methods, techniques, sequences and procedures.

schedules, diagrams and specifications, setting forth in detail the requirements for construction of the Work. 2.2.3 (Deleted) 2.2.4 Unless otherwise provided in the Contract Documents, the Design/Builder shall provide or cause to be provided and shall pay for design services, labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation and other facilities and services necessary for proper execution and completion of the Work, whether temporary or permanent and whether or not incorporated or to be incorporated in the Work. Tools and materials purchased by Design/Builder specifically for the Project shall belong to the Owner. 2.2.5 The Design/Builder shall be responsible for and shall coordinate all construction means, methods, techniques, sequences and procedures. 2.2.6 The Design/Builder shall keep the Owner informed on a timely basis of the progress and quality of the work. 2.2.7 (Deleted) 2.2.8 The Design/Builder shall correct on a timely basis and at its own expense, work which does not conform to the Construction Documents. 2.2.9 The Design/Builder warrants to the Owner that materials and equipment incorporated in the Work will be new unless otherwise specified by separate written notice to Owner prior to installation, and that the Work will be of good quality, free from faults and defects, and in conformance with the Contract Documents. Work not conforming to these requirements shall be corrected in accordance with Article 9. 2.2.10 The Design/Builder shall secure and pay for building and other permits and governmental fees, licenses and inspections necessary for the proper execution and completion of the Work which are either customarily secured after execution of the Agreement or are legally required at the time the Design/Builder=s Proposal was first submitted to the Owner. 2.2.11 The Design/Builder shall give notices and comply with laws, ordinances, rules, regulations and lawful orders of public authorities relating to Design/Builder=s business activities with respect to the Project. 2.2.12 The Design/Builder shall pay royalties and license fees. The Design/Builder shall defend suits or claims for infringement of patent rights and shall save the Owner harmless from loss on account thereof, except that the Owner shall be responsible for such loss when a Page 4

particular design, process or product of a particular manufacturer is required by the Owner. 2.2.13 The Design/Builder shall be responsible to the Owner and shall bear the costs of defending Owner for acts and omissions of the Design/Builder=s employees and parties in privity of contract with the Design/Builder to perform a portion of the Work, including their agents and employees. 2.2.14 The Design/Builder shall keep the premises free from accumulation of waste materials or rubbish caused by the Design/Builder=s operations and shall remove same in compliance with applicable regulations and ordinances. At the completion of the Work, the Design/Builder shall remove from and about the Project, the Design/Builder=s tools, construction equipment, machinery, surplus materials, waste materials and rubbish. 2.2.15 The Design/Builder shall prepare Change Orders for the Owner=s approval and execution in accordance with the Agreement and shall have authority to make minor changes in the design and construction consistent with the intent of the Agreement not involving an adjustment in the contract sum or an extension of the contract time. The Design/Builder shall promptly inform the Owner, in writing, of minor changes in the design and construction.

particular design, process or product of a particular manufacturer is required by the Owner. 2.2.13 The Design/Builder shall be responsible to the Owner and shall bear the costs of defending Owner for acts and omissions of the Design/Builder=s employees and parties in privity of contract with the Design/Builder to perform a portion of the Work, including their agents and employees. 2.2.14 The Design/Builder shall keep the premises free from accumulation of waste materials or rubbish caused by the Design/Builder=s operations and shall remove same in compliance with applicable regulations and ordinances. At the completion of the Work, the Design/Builder shall remove from and about the Project, the Design/Builder=s tools, construction equipment, machinery, surplus materials, waste materials and rubbish. 2.2.15 The Design/Builder shall prepare Change Orders for the Owner=s approval and execution in accordance with the Agreement and shall have authority to make minor changes in the design and construction consistent with the intent of the Agreement not involving an adjustment in the contract sum or an extension of the contract time. The Design/Builder shall promptly inform the Owner, in writing, of minor changes in the design and construction. 2.2.16 The Owner shall notify the Design/Builder when the Work or an agreed portion thereof is substantially completed by issuing a Certificate of Substantial Completion which will establish the Date of Substantial Completion, shall state the responsibility of each party for security, maintenance, heat, utilities, damage to the Work, and insurance, shall include a list of items to be completed or corrected and shall fix a time within which the Design/Builder shall complete items listed therein. Disputes between the Owner and Design/Builder regarding the Certificate of Substantial Completion shall be resolved by arbitration in accordance with Article 10. 2.2.17 The Design/Builder shall maintain in good order at the site one record copy of the drawings, specifications, product data, samples, shop drawings, Change Orders and other Modifications, marked currently to record changes made during construction. These "as built" drawings and materials shall be delivered to the Owner upon completion of the design and construction and prior to final payment. ARTICLE 3 OWNER 3.1 The Owner shall designate a representative authorized to act on the Owner's behalf with respect to the Project. Page 5

3.2 The Owner shall appoint an on-site project representative to observe the Work. Design/Builder shall give the representative access to the Project and all records on a timely basis. 3.3 The Design/Builder shall assist the Owner in securing all building and other permits, licenses and inspections and the Design/Builder shall pay the fees for such permits, licenses and inspections as part of the Contract Price. 3.4 The Owner shall furnish services by land surveyors, geotechnical engineers and other consultants for subsoil, air, and water conditions for use by the Design/Builder. 3.5 The Owner shall provide a Site properly zoned, with access thereto as necessary for the Design/Builder to perform the Work. 3.6 The Owner shall provide all environmental permits and regulatory agency approvals. 3.7 If the Owner observes or otherwise becomes aware of a material fault or defect in the Work or nonconformity with the Construction Documents, the Owner shall give prompt written notice thereof to the Design/Builder. 3.8 The Owner shall furnish required information and services and shall promptly render decisions pertaining thereto to avoid delay in the orderly progress of the design and construction. 3.9 The Owner shall, at the request of the Design/Builder and upon execution of this Agreement provide a certified or notarized statement of funds available for the Project and their source.

3.2 The Owner shall appoint an on-site project representative to observe the Work. Design/Builder shall give the representative access to the Project and all records on a timely basis. 3.3 The Design/Builder shall assist the Owner in securing all building and other permits, licenses and inspections and the Design/Builder shall pay the fees for such permits, licenses and inspections as part of the Contract Price. 3.4 The Owner shall furnish services by land surveyors, geotechnical engineers and other consultants for subsoil, air, and water conditions for use by the Design/Builder. 3.5 The Owner shall provide a Site properly zoned, with access thereto as necessary for the Design/Builder to perform the Work. 3.6 The Owner shall provide all environmental permits and regulatory agency approvals. 3.7 If the Owner observes or otherwise becomes aware of a material fault or defect in the Work or nonconformity with the Construction Documents, the Owner shall give prompt written notice thereof to the Design/Builder. 3.8 The Owner shall furnish required information and services and shall promptly render decisions pertaining thereto to avoid delay in the orderly progress of the design and construction. 3.9 The Owner shall, at the request of the Design/Builder and upon execution of this Agreement provide a certified or notarized statement of funds available for the Project and their source. 3.10 The Owner shall communicate with contractors and suppliers, only through the Design/Builder or with the Design/Builder=s knowledge and approval, provided Design/Builder is not in default under this Agreement. ARTICLE 4 TIME 4.1 The Design/Builder shall provide services consistent with reasonable skill and care and the orderly progress of the design and construction. Page 6

4.2 Time limits stated in the Contract Documents are of the essence of the Agreement. The Work to be performed under this Agreement shall commence within ten (10) days of the Design/Builder=s receipt of the Owners Notice to Proceed. Failure by Owner to issue Notice to Proceed by September 1, 1997, will constitute a breach of this Agreement unless the Parties agree to the Notice to Proceed at a later date. 4.3 The Work shall be Mechanically Complete within two hundred ten (210) days following receipt of the Notice to Proceed by the Design/Builder, unless the parties mutually agree in writing to an earlier or later date. Mechanically Complete is the stage of the Work in which all of the Facility systems and components have been installed, checked out and are completely ready for start-up, commissioning, and Performance and Operational Testing. Seven (7) working days before Design/Builder expects to achieve Mechanical Completion, he shall notify Owner of same and request a Mechanical Completion inspection. The Owner will promptly inspect and accept or reject the project for Mechanical Completion. If rejected, a list of reasons will be issued by Owner, which Design/Builder shall promptly accomplish or remedy. If accepted, Owner will issue a Certificate of Mechanical Completion to Design/Builder. 4.4 Upon receipt of the Certificate of Mechanical Completion, the Design/Builder will work with the Owner in scheduling the start-up and commissioning, as well as the Performance Demonstration. Seven (7) work days before the start of the Performance Demonstration, the Design/Builder shall notify the Owner of such tests. 4.5 The Date of Substantial Completion of the Work shall be no later than sixty (60) days following the Date of Mechanical Completion unless the parties mutually agree in writing to an earlier or later date. But in no event shall the Date of Substantial Completion be later than June 30, 1998. Substantial Completion is defined as the date when the Performance and Operational Testing is complete and the Work is sufficiently complete, so the Owner can occupy and operate the Facility. If after the date established for the Date

4.2 Time limits stated in the Contract Documents are of the essence of the Agreement. The Work to be performed under this Agreement shall commence within ten (10) days of the Design/Builder=s receipt of the Owners Notice to Proceed. Failure by Owner to issue Notice to Proceed by September 1, 1997, will constitute a breach of this Agreement unless the Parties agree to the Notice to Proceed at a later date. 4.3 The Work shall be Mechanically Complete within two hundred ten (210) days following receipt of the Notice to Proceed by the Design/Builder, unless the parties mutually agree in writing to an earlier or later date. Mechanically Complete is the stage of the Work in which all of the Facility systems and components have been installed, checked out and are completely ready for start-up, commissioning, and Performance and Operational Testing. Seven (7) working days before Design/Builder expects to achieve Mechanical Completion, he shall notify Owner of same and request a Mechanical Completion inspection. The Owner will promptly inspect and accept or reject the project for Mechanical Completion. If rejected, a list of reasons will be issued by Owner, which Design/Builder shall promptly accomplish or remedy. If accepted, Owner will issue a Certificate of Mechanical Completion to Design/Builder. 4.4 Upon receipt of the Certificate of Mechanical Completion, the Design/Builder will work with the Owner in scheduling the start-up and commissioning, as well as the Performance Demonstration. Seven (7) work days before the start of the Performance Demonstration, the Design/Builder shall notify the Owner of such tests. 4.5 The Date of Substantial Completion of the Work shall be no later than sixty (60) days following the Date of Mechanical Completion unless the parties mutually agree in writing to an earlier or later date. But in no event shall the Date of Substantial Completion be later than June 30, 1998. Substantial Completion is defined as the date when the Performance and Operational Testing is complete and the Work is sufficiently complete, so the Owner can occupy and operate the Facility. If after the date established for the Date of Substantial Completion, Design/Builder has sufficiently completed the Work but the Facility fails the Performance Tests through no fault of the Design/Builder, the Facility will be deemed Substantially Complete for purposes of payment to the Design/Builder and the beginning of the warranty periods. 4.6 Not more than fourteen (14) days after the receipt by Design/Builder of the Notice to Proceed, the Design/Builder shall submit a written progress schedule indicating each major category or unit of general work to be performed at site, properly sequenced and intermeshed and showing completion of the work consistent with the time period established in this Article 4. The Design/Builder shall provide the Owner with written monthly updates of the progress schedule indicating completed activities and any changes in sequencing or activity durations. 4.7 If the Design/Builder is delayed in the performance of the Project by any acts of or Page 7

neglect of the Owner, or by an employee, agent or representative of the Owner, or by changes ordered in the Work by the Owner, and not required to correct design problems or discrepancies, or by the combined action of the Owner and any of its employees, agents or representatives and is in no way caused by or resulting from default or collusion on the part of the Design/Builder or by any other cause, which the Design/Builder could not reasonably control or circumvent, then the Scheduled Completion Date shall be extended for a period equal to the length of such delay. ARTICLE 5 PAYMENTS 5.1 Progress Payments 5.1.1 The Design/Builder shall deliver to the Owner itemized Applications for Payment by the 5th day of each month. Design/Builder shall submit with each Application for Payment proper vouchers or other evidence satisfactory to Owner certifying its payments for labor, and where applicable, to subcontractors and for materials. Each Application for Payment shall include a breakdown of the cost of labor, materials, sales tax and services in the form as prescribed by Owner.

neglect of the Owner, or by an employee, agent or representative of the Owner, or by changes ordered in the Work by the Owner, and not required to correct design problems or discrepancies, or by the combined action of the Owner and any of its employees, agents or representatives and is in no way caused by or resulting from default or collusion on the part of the Design/Builder or by any other cause, which the Design/Builder could not reasonably control or circumvent, then the Scheduled Completion Date shall be extended for a period equal to the length of such delay. ARTICLE 5 PAYMENTS 5.1 Progress Payments 5.1.1 The Design/Builder shall deliver to the Owner itemized Applications for Payment by the 5th day of each month. Design/Builder shall submit with each Application for Payment proper vouchers or other evidence satisfactory to Owner certifying its payments for labor, and where applicable, to subcontractors and for materials. Each Application for Payment shall include a breakdown of the cost of labor, materials, sales tax and services in the form as prescribed by Owner. 5.1.2 Properly submitted and correct Applications for Payment, received by Owner by the 5th will be paid on the 20th day of each month, respectively. Any disputed amounts will be withheld from the invoice and the undisputed amount paid on time. 5.1.3 The Application for Payment shall constitute a representation by the Design/Builder to the Owner that the design and construction have progressed to the point indicated; the quality of the Work covered by the application is in accordance with the Contract Documents; and the Design/Builder is entitled to payment in the amount requested. 5.1.4 The Design/Builder shall pay each contractor, upon receipt of payment from the Owner, out of the amount paid to the Design/Builder on account of such contractor=s work, the amount to which said contractor is entitled in accordance with the terms of the Design/Builder=s contract with such contractor. The Design/Builder shall, by appropriate agreement with each contractor, require each contractor to make payments to subcontractors in similar manner. 5.1.5 The Owner shall have no obligation to pay or to be responsible in any way for payment to a contractor of the Design/Builder, except as otherwise required by law. Page 8

5.1.6 No progress payment or partial or entire use or occupancy of the Project by the Owner shall constitute an acceptance of Work not in accordance with the Contract Documents. 5.1.7 The Design/Builder warrants that: (1) title to Work, materials and equipment covered by an Application for Payment will pass to the Owner either by incorporation in construction or upon receipt of payment by the Design/Builder, whichever occurs first; (2) Work, materials and equipment covered by previous Applications for payment for which payment has been received are free and clear of liens, claims, security interests or encumbrances, hereinafter referred to as Aliens@; and (3) no Work, materials or equipment covered by an Application for Payment will have been acquired by the Design/Builder, or any other person performing work at the site or furnishing materials or equipment for the Project, subject to an agreement under which an interest therein or an encumbrance thereon is retained by the seller or otherwise imposed by the Design/Builder or such other person. 5.1.8 The Contract provides for up to 5% retainage. At the date of Substantial Completion or occupancy of the Work or any agreed upon portion thereof by the Owner, whichever occurs first, the Design/Builder may apply for and the Owner, if the Design/Builder has satisfied the requirements of Paragraph 5.2.1 and any other requirements of the Contract relating to retainage, shall pay the Design/Builder the amount retained, if any, for the Work or for the portion completed or occupied, less the reasonable value of incorrect or incomplete Work. Final payment of such withheld sum shall be made upon correction or completion of such Work.

5.1.6 No progress payment or partial or entire use or occupancy of the Project by the Owner shall constitute an acceptance of Work not in accordance with the Contract Documents. 5.1.7 The Design/Builder warrants that: (1) title to Work, materials and equipment covered by an Application for Payment will pass to the Owner either by incorporation in construction or upon receipt of payment by the Design/Builder, whichever occurs first; (2) Work, materials and equipment covered by previous Applications for payment for which payment has been received are free and clear of liens, claims, security interests or encumbrances, hereinafter referred to as Aliens@; and (3) no Work, materials or equipment covered by an Application for Payment will have been acquired by the Design/Builder, or any other person performing work at the site or furnishing materials or equipment for the Project, subject to an agreement under which an interest therein or an encumbrance thereon is retained by the seller or otherwise imposed by the Design/Builder or such other person. 5.1.8 The Contract provides for up to 5% retainage. At the date of Substantial Completion or occupancy of the Work or any agreed upon portion thereof by the Owner, whichever occurs first, the Design/Builder may apply for and the Owner, if the Design/Builder has satisfied the requirements of Paragraph 5.2.1 and any other requirements of the Contract relating to retainage, shall pay the Design/Builder the amount retained, if any, for the Work or for the portion completed or occupied, less the reasonable value of incorrect or incomplete Work. Final payment of such withheld sum shall be made upon correction or completion of such Work. 5.1.9 Concurrent with Article 4.2, Notice to Proceed, the Owner shall furnish to the Design/Builder an advance payment of $250,000 and any advance payments required for the procurement of long lead time equipment which will assist in the expediting of the Project. The payment shall be made within thirty (30) days of the Notice to Proceed. 5.2 Final Payment 5.2.1 Neither final payment nor amounts retained, if any, shall become due until the Design/Builder submits to the Owner (1) an affidavit that payrolls, bills for materials and equipment, and other indebtedness connected with the Project for which the Owner or Owner=s property might be liable have been paid or otherwise satisfied, (2) consent of surety, if any, to final payment, (3) a certificate acceptable to Owner that insurance required by the Contract Documents is in force following completion of the Work, and (4) if required by the Owner, other data establishing payment or satisfaction of obligations, such as receipts, releases and waivers of liens arising out of the Agreement, to the extent and in such form as may be designated by the Owner. If a contractor refuses to furnish a release or waiver required by the Owner, the Design/Builder may furnish a bond satisfactory to the Owner to indemnify the Owner against such lien. If such Lien remains unsatisfied after payments are made, the Page 9

Design/Builder shall promptly reimburse the Owner for moneys the latter may be compelled to pay in discharging such lien, including all costs and reasonable attorneys= fees. 5.2.2 Final payment constituting the entire unpaid balance due shall be paid by the Owner to the Design/Builder upon the Owner=s receipt of a correct Design/Builder=s final Application for Payment when the Work has been completed and the Contract fully performed except for those responsibilities of the Design/Builder which survive final payment. 5.2.3 The making of final payment shall constitute a waiver of all claims by the Owner except those arising from: .1 unsettled liens; .2 faulty or defective Work appearing after Substantial Completion; .3 failure of the Work to comply with requirements of the Contract Documents; or .4 terms of special warranties required by the Contract Documents. .5 outstanding contractual issues identified in writing at the time of final payment. 5.2.4 Acceptance of final payment shall constitute a waiver of all claims by the Design/Builder. 5.3 Interest Payments

Design/Builder shall promptly reimburse the Owner for moneys the latter may be compelled to pay in discharging such lien, including all costs and reasonable attorneys= fees. 5.2.2 Final payment constituting the entire unpaid balance due shall be paid by the Owner to the Design/Builder upon the Owner=s receipt of a correct Design/Builder=s final Application for Payment when the Work has been completed and the Contract fully performed except for those responsibilities of the Design/Builder which survive final payment. 5.2.3 The making of final payment shall constitute a waiver of all claims by the Owner except those arising from: .1 unsettled liens; .2 faulty or defective Work appearing after Substantial Completion; .3 failure of the Work to comply with requirements of the Contract Documents; or .4 terms of special warranties required by the Contract Documents. .5 outstanding contractual issues identified in writing at the time of final payment. 5.2.4 Acceptance of final payment shall constitute a waiver of all claims by the Design/Builder. 5.3 Interest Payments 5.3.1 Payments due the Design/Builder under the Agreement which are not paid when due shall bear interest from the date due at the rate specified in Article 13. ARTICLE 6 PROTECTION OF PERSONS AND PROPERTY 6.1 The Design/Builder shall be solely responsible for initiating, maintaining and providing supervision of safety, precautions and programs in connection with the Work. 6.2 The Design/Builder shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury or loss to: (1) employees on the work and other persons who may be affected thereby; (2) the Work and materials and equipment to be incorporated therein; and (3) other property at or adjacent to the site. 6.3 The Design/Builder shall give notices and comply with applicable laws, ordinances, rules, regulations and orders of public authorities bearing on the safety of persons and property and their protection from damage, injury or loss. Page 10

6.4 The Design/Builder shall be liable for damage or loss to property at the site caused in whole or in part by the Design/Builder, a contractor of the Design/Builder or anyone directly or indirectly employed by either of them or by anyone for whose acts they may be liable, except damage or loss attributable to the acts or omissions of the Owner, the Owner=s separate contractors or anyone directly or indirectly employed by them or by anyone for whose acts they may be liable, and not attributable to the fault or negligence of the Design/Builder. ARTICLE 7 INSURANCE AND BONDS 7.1 Design/Builder's Liability Insurance 7.1.1 The Design/Builder shall purchase and maintain in a company or companies authorized to do business in the state in which the Work is located such insurance as will protect the Design/Builder from claims set forth below which may arise out of or result from operations under the Contract by the Design/Builder or by a contractor of the Design/Builder, or by anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable: .1 claims under workers= or workmen=s compensation, disability benefit and other similar employee benefit laws which are applicable to the Work to be performed;

6.4 The Design/Builder shall be liable for damage or loss to property at the site caused in whole or in part by the Design/Builder, a contractor of the Design/Builder or anyone directly or indirectly employed by either of them or by anyone for whose acts they may be liable, except damage or loss attributable to the acts or omissions of the Owner, the Owner=s separate contractors or anyone directly or indirectly employed by them or by anyone for whose acts they may be liable, and not attributable to the fault or negligence of the Design/Builder. ARTICLE 7 INSURANCE AND BONDS 7.1 Design/Builder's Liability Insurance 7.1.1 The Design/Builder shall purchase and maintain in a company or companies authorized to do business in the state in which the Work is located such insurance as will protect the Design/Builder from claims set forth below which may arise out of or result from operations under the Contract by the Design/Builder or by a contractor of the Design/Builder, or by anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable: .1 claims under workers= or workmen=s compensation, disability benefit and other similar employee benefit laws which are applicable to the Work to be performed; .2 claims for damages because of bodily injury, occupational sickness or disease, or death of the Design/Builder=s employees under any applicable employer=s liability law; .3 claims for damages because of bodily injury, sickness or disease, or death of persons other than the Design/Builder=s employees; .4 claims for damages covered by usual personal injury liability coverage which are sustained (1) by a person as a result of an offence directly or indirectly related to employment of such person by the Design/Builder or (2) by another person; .5 claims for damages, other than to the Work at the site, because of injury to or destruction of tangible property, including loss of use; and .6 claims for damages for bodily injury or death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle. 7.1.2 The insurance required by the above Subparagraph 7.1.1 shall be written for not less than the limits of liability specified in the Contract Documents or required by law, whichever are greater. Page 11

7.1.3 The Design/Builder=s liability insurance shall include contractual liability insurance applicable to the Design/Builder's obligations under Paragraph 11.7. 7.1.4 Certificates of Insurance, and copies of policies if requested, acceptable to the Owner shall be delivered to the Owner prior to commencement of design and construction. These Certificates as well as insurance policies required by this Paragraph shall contain a provision that coverage will not be canceled or allowed to expire until at least thirty (30) days= written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment, an additional certificate evidencing continuation of such coverage shall be submitted along with the application for final payment. 7.2 Owner=s Liability Insurance 7.2.1 The Owner shall be responsible for purchasing and maintaining, in a company or companies authorized to do business in the state in which the principal improvements are to be located, Owner=s liability insurance to protect the Owner against claims which may arise from operations under this Project. 7.3 Property Insurance

7.1.3 The Design/Builder=s liability insurance shall include contractual liability insurance applicable to the Design/Builder's obligations under Paragraph 11.7. 7.1.4 Certificates of Insurance, and copies of policies if requested, acceptable to the Owner shall be delivered to the Owner prior to commencement of design and construction. These Certificates as well as insurance policies required by this Paragraph shall contain a provision that coverage will not be canceled or allowed to expire until at least thirty (30) days= written notice has been given to the Owner. If any of the foregoing insurance coverages are required to remain in force after final payment, an additional certificate evidencing continuation of such coverage shall be submitted along with the application for final payment. 7.2 Owner=s Liability Insurance 7.2.1 The Owner shall be responsible for purchasing and maintaining, in a company or companies authorized to do business in the state in which the principal improvements are to be located, Owner=s liability insurance to protect the Owner against claims which may arise from operations under this Project. 7.3 Property Insurance 7.3.1 Unless otherwise provided under this Agreement, the Owner shall purchase and maintain, in a company or companies authorized to do business in the state in which the principal improvements are to be located, property insurance upon the Work at the site to the full insurable value thereof. Property insurance shall include interests of the Owner, Mortgagees, the Design/Builder, and their respective contractors and subcontractors in the Work. It shall insure against perils of fire and extended coverage and shall include all risk insurance for physical loss or damage including, without duplication of coverage, theft, vandalism and malicious mischief. If the Owner does not intend to purchase such insurance for the full insurable value of the entire work, the Owner shall inform the Design/Builder in writing prior to commencement of the Work. The Design/Builder may then effect insurance for the Work at the site which will protect the interests of the Design/Builder and the Design/Builder=s contractors and subcontractors, and by appropriate Change Order the costs thereof shall be charged to the Owner. If the Design/Builder is damaged by failure of the Owner to purchase or maintain such insurance without notice to the Design/Builder, then the Owner shall bear all reasonable costs properly attributable thereto. If not covered under the all risk insurance or not otherwise provided in the Contract Documents, the Owner shall effect and maintain similar property insurance on portions of the Work stored off-site or in transit when such portions of the Work are to be included in an Application for Payment. 7.3.2 Unless otherwise provided under this Agreement, the Owner shall purchase and maintain Page 12

such machinery insurance as may be required by the Contract documents or by law and which shall specifically cover such insured objects during installation and until final acceptance by the Owner. This insurance shall cover interests of the Owner, Lenders, Mortgagees, the Design/Builder, and the Design/Builder=s contractors and subcontractors in the Work. 7.3.3 A loss insured under Owner=s property insurance is to be adjusted with the Owner and made payable to the Owner as trustee for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Subparagraph 7.3.8. The Design/Builder shall pay contractors their share of insurance proceeds received by the Design/Builder, and by appropriate agreement, written where legally required for validity, shall require contractors to make payments to their subcontractors in similar manner. 7.3.4 Before an exposure to loss may occur, the Owner shall file with the Design/Builder a copy of each policy required by this Paragraph 7.3. Each policy shall contain only those endorsements specifically related to this Project. Each policy shall contain a provision that the policy will not be canceled or allowed to expire until at least thirty (30) days= prior written notice has been given the Design/Builder. 7.3.5 If the Design/Builder requests in writing that insurance for Project risks other than those described herein or for other special hazards be included in the property insurance policy, the Owner shall, if possible, obtain such insurance, and the cost thereof shall be charged to the Design/Builder by appropriate Change Order.

such machinery insurance as may be required by the Contract documents or by law and which shall specifically cover such insured objects during installation and until final acceptance by the Owner. This insurance shall cover interests of the Owner, Lenders, Mortgagees, the Design/Builder, and the Design/Builder=s contractors and subcontractors in the Work. 7.3.3 A loss insured under Owner=s property insurance is to be adjusted with the Owner and made payable to the Owner as trustee for the insureds, as their interests may appear, subject to requirements of any applicable mortgagee clause and of Subparagraph 7.3.8. The Design/Builder shall pay contractors their share of insurance proceeds received by the Design/Builder, and by appropriate agreement, written where legally required for validity, shall require contractors to make payments to their subcontractors in similar manner. 7.3.4 Before an exposure to loss may occur, the Owner shall file with the Design/Builder a copy of each policy required by this Paragraph 7.3. Each policy shall contain only those endorsements specifically related to this Project. Each policy shall contain a provision that the policy will not be canceled or allowed to expire until at least thirty (30) days= prior written notice has been given the Design/Builder. 7.3.5 If the Design/Builder requests in writing that insurance for Project risks other than those described herein or for other special hazards be included in the property insurance policy, the Owner shall, if possible, obtain such insurance, and the cost thereof shall be charged to the Design/Builder by appropriate Change Order. 7.3.6 The Owner and Design/Builder waive all rights against each other and the contractors, subcontractors, agents and employees, each of the other, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this Paragraph 7.3 or other property insurance applicable to the Work, except such rights as they may have to proceeds of such insurance held by the Owner as trustee. The Owner or Design/Builder, as appropriate, shall require from contractors and subcontractors by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated in this Paragraph 7.3. The policies shall be endorsed to include such waivers of subrogation. 7.3.7 If required in writing by a party in interest, the Owner as trustee shall provide, upon occurrence of an insured loss, a bond for proper performance of the Owner=s duties. The cost of required bonds shall be charged against proceeds received as trustee. The Owner shall deposit proceeds so received in a separate account and shall distribute them in accordance with such agreement as the parties in interest may reach, or in accordance with an arbitration award in which case, the procedure shall be provided in Article 10. If after such loss, no other special agreement is made, replacement of damaged Work shall be covered by appropriate Change Order. Page 13

7.3.8 The Owner, as trustee, shall have power to adjust and settle a loss with insurers, unless one of the parties in interest shall object, in writing, within ten (10) days after occurrence of loss, to the Owner=s exercise of this power. If such objection be made, the Owner as trustee shall make settlement with the insurers in accordance with the decision of arbitration as provided in Article 10. If distribution of insurance proceeds by arbitration is required, the arbitrators will direct such distribution. 7.3.9 If the Owner finds it necessary to occupy or use a portion or portions of the Work before Substantial Completion, such occupancy or use shall not commence prior to a time agreed to by the Owner and Design/Builder and to which the insurance company or companies providing property insurance have consented by endorsement to the policy or policies. The property insurance shall not lapse or be canceled on account of such partial occupancy or use. Consent of the Design/Builder and of the insurance company or companies to such occupancy or use shall not be unreasonably withheld. 7.4 Loss of Use Insurance 7.4.1 The Owner, at the Owner=s option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner=s property due to fire or other hazards, however caused. The Owner waives all rights of action against the Design/Builder, and its contractors and their agents and employees, for loss of use of the Owner=s property, including consequential losses due to fire or other hazards, however caused, to the extent covered by insurance under this Paragraph 7.4.

7.3.8 The Owner, as trustee, shall have power to adjust and settle a loss with insurers, unless one of the parties in interest shall object, in writing, within ten (10) days after occurrence of loss, to the Owner=s exercise of this power. If such objection be made, the Owner as trustee shall make settlement with the insurers in accordance with the decision of arbitration as provided in Article 10. If distribution of insurance proceeds by arbitration is required, the arbitrators will direct such distribution. 7.3.9 If the Owner finds it necessary to occupy or use a portion or portions of the Work before Substantial Completion, such occupancy or use shall not commence prior to a time agreed to by the Owner and Design/Builder and to which the insurance company or companies providing property insurance have consented by endorsement to the policy or policies. The property insurance shall not lapse or be canceled on account of such partial occupancy or use. Consent of the Design/Builder and of the insurance company or companies to such occupancy or use shall not be unreasonably withheld. 7.4 Loss of Use Insurance 7.4.1 The Owner, at the Owner=s option, may purchase and maintain such insurance as will insure the Owner against loss of use of the Owner=s property due to fire or other hazards, however caused. The Owner waives all rights of action against the Design/Builder, and its contractors and their agents and employees, for loss of use of the Owner=s property, including consequential losses due to fire or other hazards, however caused, to the extent covered by insurance under this Paragraph 7.4. 7.5 Performance Bond and Payment Bond 7.5.1 At Owner s request, the Design/Builder shall furnish a surety bond for the installation amount (labor and materials) of the Contract covering the faithful performance of the Contract and the payment of all obligations arising thereunder. The cost of any such surety bond shall be paid by the Owner. 7.6 Professional Liability Insurance 7.6.1 The Design/Builder shall provide a Professional Liability Insurance Project Policy for a minimum amount of $5,000,000 aggregate in a form acceptable to the Owner. Page 14

ARTICLE 8 CHANGES IN THE WORK 8.1 Change Orders 8.1.1 A Change Order is a written order signed by the Owner and Design/Builder, and issued after execution of the Agreement, authorizing a change in the Work or adjustment in the contract sum or contract time. The contract sum and contract time may be changed only by Change Order. 8.1.2 The Owner=s designated representative, without invalidating the Agreement, may order changes in the Work within the general scope of the Agreement consisting of additions, deletions or other revisions and the contract sum and contract time shall be adjusted accordingly. Such changes in the Work shall be authorized by Change Order, and shall be performed under applicable conditions of the Contract Documents. 8.1.3 (Deleted) 8.1.4 Cost or credit to the Owner resulting from a change in the Work shall be determined in one or more of the following ways: .1 by mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation; .2 by unit prices stated in the Contract Documents or subsequently agreed upon; .3 by cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or .4 by the method provided below. 8.1.5 If none of the methods set forth in Clauses 8.1.4.1, 8.1.4.2, or 8.1.4.3 is agreed upon, the Design/Builder,

ARTICLE 8 CHANGES IN THE WORK 8.1 Change Orders 8.1.1 A Change Order is a written order signed by the Owner and Design/Builder, and issued after execution of the Agreement, authorizing a change in the Work or adjustment in the contract sum or contract time. The contract sum and contract time may be changed only by Change Order. 8.1.2 The Owner=s designated representative, without invalidating the Agreement, may order changes in the Work within the general scope of the Agreement consisting of additions, deletions or other revisions and the contract sum and contract time shall be adjusted accordingly. Such changes in the Work shall be authorized by Change Order, and shall be performed under applicable conditions of the Contract Documents. 8.1.3 (Deleted) 8.1.4 Cost or credit to the Owner resulting from a change in the Work shall be determined in one or more of the following ways: .1 by mutual acceptance of a lump sum properly itemized and supported by sufficient substantiating data to permit evaluation; .2 by unit prices stated in the Contract Documents or subsequently agreed upon; .3 by cost to be determined in a manner agreed upon by the parties and a mutually acceptable fixed or percentage fee; or .4 by the method provided below. 8.1.5 If none of the methods set forth in Clauses 8.1.4.1, 8.1.4.2, or 8.1.4.3 is agreed upon, the Design/Builder, provided a written order signed by the Owner is received, shall promptly proceed with the Work involved. The cost of such Work shall then be determined on the basis of reasonable expenditures and savings of those performing the Work attributable to the change, including the expenditures for design services and revisions to the Contract Documents. In case of an increase in the contract sum, the cost shall include a 15% allowance for overhead and profit, and shall be exclusive of existing soft costs or overhead. In case of the methods set for the Clauses 8.1.4.3 and 8.1.4.4, the Design/Builder shall keep and present an itemized accounting together with appropriate supporting data for inclusion in a Change Order. Unless otherwise provided in the Contract Documents, cost shall be limited to the following: cost of materials, including sales tax and cost of delivery; cost of labor, including social security, old age and unemployment insurance; and fringe benefits required by agreement or custom; Page 15

workers= or workmen=s compensation insurance, bond premiums; rental cost of equipment and machinery; and fees paid to architects, engineers and other professionals. The amount of credit to be allowed by the Design/Builder to the Owner for deletion or change which results in a net decrease in the contract sum will be actual net cost. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of the net increase, if any, with respect to that change. 8.1.6 (Deleted) 8.2 CONCEALED CONDITIONS 8.2.1 If concealed or unknown conditions of an unusual nature that affect the performance of the Work and vary from those indicated by the Contract Documents are encountered below ground or in an existing structure other than the Work, which conditions are not ordinarily found to exist or which differ materially from those generally recognized as inherent in work of the character provided for in this Part 2, notice by the observing party shall be given promptly to the other party and, if possible, before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The contract sum shall be equitably adjusted for such concealed or unknown conditions by Change Order upon claim by either party made within twenty-one days after the claimant becomes aware of the conditions. 8.3 Regulatory Changes

workers= or workmen=s compensation insurance, bond premiums; rental cost of equipment and machinery; and fees paid to architects, engineers and other professionals. The amount of credit to be allowed by the Design/Builder to the Owner for deletion or change which results in a net decrease in the contract sum will be actual net cost. When both additions and credits covering related Work or substitutions are involved in a change, the allowance for overhead and profit shall be figured on the basis of the net increase, if any, with respect to that change. 8.1.6 (Deleted) 8.2 CONCEALED CONDITIONS 8.2.1 If concealed or unknown conditions of an unusual nature that affect the performance of the Work and vary from those indicated by the Contract Documents are encountered below ground or in an existing structure other than the Work, which conditions are not ordinarily found to exist or which differ materially from those generally recognized as inherent in work of the character provided for in this Part 2, notice by the observing party shall be given promptly to the other party and, if possible, before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The contract sum shall be equitably adjusted for such concealed or unknown conditions by Change Order upon claim by either party made within twenty-one days after the claimant becomes aware of the conditions. 8.3 Regulatory Changes 8.3.1 The Design/Builder shall be compensated for changes in the Work necessitated by the enactment or revision of codes, laws or regulations subsequent to the execution of this Agreement. ARTICLE 9 CORRECTION OF WORK 9.1 The Design/Builder shall promptly correct at Contractor=s own expense, Work rejected by the Owner or known by the Design/Builder to be defective or failing to conform to the Construction Documents, whether observed before or after Substantial Completion and whether or not fabricated, installed or completed, and shall correct Work under this Agreement found to be defective or nonconforming within a period of one (1) year from the date of Substantial Completion of the Work or designated portion thereof, or within such longer period provided by an applicable special warranty in the Contract Documents. 9.2 Nothing contained in this Article 9 shall be construed to establish a period of limitation Page 16

with respect to other obligations of the Design/Builder under this Agreement. Paragraph 9.1 relates only to the specific obligation of the Design/Builder to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Design/Builder=s liability with respect to the Design/Builder=s obligations other than correction of the Work. 9.3 If the Design/Builder fails to correct defective Work as required or persistently fails to carry out Work in accordance with the Contract Documents, the Owner, by written order signed personally or by an agent specifically so empowered by the Owner in writing, may order the Design/Builder to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the Owner=s right to stop the Work shall not give rise to a duty on the part of the Owner to exercise the right for benefit of the Design/Builder or other persons or entities. 9.4 If the Design/Builder defaults or neglects to carry out the Work in accordance with the Contract Documents and fails within seven (7) days after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, the Owner may give a second written notice to the Design/Builder and, seven days following receipt by the Design/Builder of that second written notice and without prejudice to other remedies the Owner may have, correct such deficiencies. In such case an appropriate

with respect to other obligations of the Design/Builder under this Agreement. Paragraph 9.1 relates only to the specific obligation of the Design/Builder to correct the Work, and has no relationship to the time within which the obligation to comply with the Contract Documents may be sought to be enforced, nor to the time within which proceedings may be commenced to establish the Design/Builder=s liability with respect to the Design/Builder=s obligations other than correction of the Work. 9.3 If the Design/Builder fails to correct defective Work as required or persistently fails to carry out Work in accordance with the Contract Documents, the Owner, by written order signed personally or by an agent specifically so empowered by the Owner in writing, may order the Design/Builder to stop the Work, or any portion thereof, until the cause for such order has been eliminated; however, the Owner=s right to stop the Work shall not give rise to a duty on the part of the Owner to exercise the right for benefit of the Design/Builder or other persons or entities. 9.4 If the Design/Builder defaults or neglects to carry out the Work in accordance with the Contract Documents and fails within seven (7) days after receipt of written notice from the Owner to commence and continue correction of such default or neglect with diligence and promptness, the Owner may give a second written notice to the Design/Builder and, seven days following receipt by the Design/Builder of that second written notice and without prejudice to other remedies the Owner may have, correct such deficiencies. In such case an appropriate Change Order shall be issued deducting from payments then or thereafter due the Design/Builder costs of correcting such deficiencies. If the payments then or thereafter due the Design/Builder are not sufficient to cover the amount of the deduction, the Design/Builder shall pay the difference to the Owner. Such action by the Owner shall be subject to arbitration, in accordance with Article 10. ARTICLE 10 ARBITRATION 10.1 Claims, disputes and other matters in question between the parties to this Agreement arising out of or relating to this Agreement shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect unless the parties agree otherwise. No arbitration arising out of or relating to this Agreement shall include, by consolidation or joinder or in any other manner, an additional person not a party to this Agreement except by written consent containing specific reference to this Agreement and signed by the Owner, Design/Builder and any other person sought to be joined. Consent to arbitration involving an additional person or persons shall not constitute consent to arbitration of a dispute not described or with a person not named therein. This provision shall be specifically enforceable in any court of competent jurisdiction. Page 17

10.2 Notice of demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim dispute or other matter in questions has arisen. In no event shall demand for arbitration be made after the date when the applicable statute of limitations would bar institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. 10.3 The award rendered by arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction. 10.4 Unless otherwise agreed in writing, the Design/Builder shall carry on the Work and maintain its progress during any arbitration proceedings, and the Owner shall continue to make payments to the Design/Builder in accordance with the Contract Documents, except where arbitration originates from Owner=s stop work order. 10.5 This Article 10 shall survive completion or termination of this Agreement. ARTICLE 11 MISCELLANEOUS PROVISIONS 11.1 This Agreement shall be governed by the laws of the state where the Facility is located. Until the site is

10.2 Notice of demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim dispute or other matter in questions has arisen. In no event shall demand for arbitration be made after the date when the applicable statute of limitations would bar institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. 10.3 The award rendered by arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction. 10.4 Unless otherwise agreed in writing, the Design/Builder shall carry on the Work and maintain its progress during any arbitration proceedings, and the Owner shall continue to make payments to the Design/Builder in accordance with the Contract Documents, except where arbitration originates from Owner=s stop work order. 10.5 This Article 10 shall survive completion or termination of this Agreement. ARTICLE 11 MISCELLANEOUS PROVISIONS 11.1 This Agreement shall be governed by the laws of the state where the Facility is located. Until the site is identified by the Owner pursuant to written notice to Design/Builder prior to or with the Notice to Proceed, this Agreement shall be governed by the laws of the state of Utah. 11.2 (Deleted) 11.3 In case a provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. 11.4 Subcontracts 11.4.1 The Design/Builder, as soon as practicable after receipt of the Notice to Proceed, shall furnish to the Owner in writing the names of the persons or entities the Design/Builder will engage as contractors for the Project. 11.4.2 Nothing contained in the Design/Build Contract Documents shall create a professional obligation or contractual relationship between the Owner and any third party. Page 18

11.5 Work By Owner Or Owner=s Contractors 11.5.1 The Owner reserves the right to perform work related to, but not part of, the Project and to award separate contracts in connection with other work at the site. If the Design/Builder claims that delay or additional cost is involved because of such action by the Owner, the Design/Builder shall make such claims as provided in Paragraph 11.6. 11.5.2 The Design/Builder shall afford the Owner=s separate contractors reasonable opportunity for introduction and storage of their materials and equipment for execution of their work. The Design/Builder shall incorporate and coordinate the Design/Builder=s Work with work of the Owner=s separate contractors as required by the Contract Documents. 11.6 Claims For Damages 11.6.1 If the Design/Builder suffers any injury or damage to person or property because of an act or omission of the Owner, the Owner=s employees or agents, or another for whose acts the Owner is legally liable, any claim shall be made in writing in the form of a Request for Change Order within ten (10) days after such injury or damage is or should have been first known to Design/Builder. Any and all claims not made within ten (10) days are barred, waived, released and discharged. The decision of the Owner shall be final and binding on both parties

11.5 Work By Owner Or Owner=s Contractors 11.5.1 The Owner reserves the right to perform work related to, but not part of, the Project and to award separate contracts in connection with other work at the site. If the Design/Builder claims that delay or additional cost is involved because of such action by the Owner, the Design/Builder shall make such claims as provided in Paragraph 11.6. 11.5.2 The Design/Builder shall afford the Owner=s separate contractors reasonable opportunity for introduction and storage of their materials and equipment for execution of their work. The Design/Builder shall incorporate and coordinate the Design/Builder=s Work with work of the Owner=s separate contractors as required by the Contract Documents. 11.6 Claims For Damages 11.6.1 If the Design/Builder suffers any injury or damage to person or property because of an act or omission of the Owner, the Owner=s employees or agents, or another for whose acts the Owner is legally liable, any claim shall be made in writing in the form of a Request for Change Order within ten (10) days after such injury or damage is or should have been first known to Design/Builder. Any and all claims not made within ten (10) days are barred, waived, released and discharged. The decision of the Owner shall be final and binding on both parties unless the Design/Builder files a Demand for Arbitration within ten (10) days of the Owner=s decision. If the Design/Builder files a Demand for Arbitration, the claim will be arbitrated in accordance with Article 10. 11.7 Indemnification 11.7.1 To the fullest extent permitted by law, the Design/Builder shall indemnify and hold harmless the Owner and the Owner=s consultants and separate contractors, any of their subcontractors, sub-tier-contractors, agents and employees from and against claims, damages, losses and expenses, including but no limited to attorneys= fees, arising out of or resulting from performance of the Work. These indemnification obligations shall be limited to claims, damages, losses or expenses (1) that are attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, and (2) to the extent such claims, damages, losses or expenses are caused in whole or in party by negligent acts or omissions of the Design/Builder, the Design/Builder=s contractors, anyone directly or indirectly employed by either or anyone for whose acts either may be liable, regardless of whether or not they are caused in party by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge or otherwise reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 11.7. The above indemnification shall not extend to include indirect or consequential damages. Page 19

11.7.2 In claims against the Owner or its consultants and its contractors, any of their subcontractors, sub-tiercontractors, agents or employees by an employee of the Design/Builder, its contractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Paragraph 11.7 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Design/Builder, or a Design/Builder=s contractor, under workers= or workmen=s compensation acts, disability benefit acts or other employee benefit acts. 11.7.3 Under no circumstances shall Design/Builder be liable to Owner for, nor shall Owner make claim to Design/Builder for, consequential loss or damage, including but not limited to loss or damage resulting from loss of use, loss of profits or revenues, cost of capital, loss of good will, claims of Owner=s customers, or like items of loss or damage, and Owner hereby releases Design/Builder therefrom. 11.8 Successors and Assigns 11.8.1 This Agreement shall be binding on successors, assigns, and legal representatives of and persons in privity of contract with the Owner or Design/Builder. The Design/Builder shall not assign, sublet or transfer an interest in the Agreement without written consent of the Owner.

11.7.2 In claims against the Owner or its consultants and its contractors, any of their subcontractors, sub-tiercontractors, agents or employees by an employee of the Design/Builder, its contractors, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, the indemnification obligation under this Paragraph 11.7 shall not be limited by a limitation on amount or type of damages, compensation or benefits payable by or for the Design/Builder, or a Design/Builder=s contractor, under workers= or workmen=s compensation acts, disability benefit acts or other employee benefit acts. 11.7.3 Under no circumstances shall Design/Builder be liable to Owner for, nor shall Owner make claim to Design/Builder for, consequential loss or damage, including but not limited to loss or damage resulting from loss of use, loss of profits or revenues, cost of capital, loss of good will, claims of Owner=s customers, or like items of loss or damage, and Owner hereby releases Design/Builder therefrom. 11.8 Successors and Assigns 11.8.1 This Agreement shall be binding on successors, assigns, and legal representatives of and persons in privity of contract with the Owner or Design/Builder. The Design/Builder shall not assign, sublet or transfer an interest in the Agreement without written consent of the Owner. 11.8.2 This Paragraph 11.8 shall survive completion or termination of the Agreement. 11.9 In case of termination of the Engineer, the Design/Builder shall provide the services of another lawfully licensed person or entity against whom the Owner makes no reasonable objection. 11.10 Extent of Agreement 11.10.1 Since the Facility to be designed and constructed under this Agreement is expected, once operational, to provide tax credits under Section 29 of the Internal Revenue Code of 1986, it is the express intent of the parties that this Agreement qualify as a binding contract for the purposes of construing Section 29(g)(1)(A) of the Internal Revenue Code. In the event that any one or more of the provisions or parts of any provisions contained in this Agreement are held or found to cause this Agreement not to be "binding" within the meaning of Section 29(g)(1)(A), such provision or provisions shall automatically be struck from this Agreement, but the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby. Page 20

11.11 Design/Builder shall check all materials, equipment and labor entering into the Work and shall keep such full and detailed accounts as may be necessary for proper financial management under this Agreement, and the accounting methods shall be satisfactory to the Owner. Owner shall be afforded access for timely review in a practical manner of all Design/Builder=s records, books, correspondence, instructions, drawings, receipts, vouchers, memoranda, and similar data relating to the Cost of the Work and Design/Builder=s Fee. Design/Builder shall be preserve all such documents for a period of three (3) years after the final payment by Owner. ARTICLE 12 TERMINATION OF THE AGREEMENT 12.1 Termination By The Owner 12.1.1 The Agreement may be terminated by the Owner upon fourteen (14) days= written notice at the Owner=s election. In the event of termination at the Owner=s election and not due to the fault of the Design/Builder, the Design/Builder shall be compensated for services performed to termination date, together with reasonable industry standard demobilization expenses, reasonable close-out costs, reimbursable expenses then due, and a reasonable overhead and profit on work performed; provided, however, that in no event shall the compensation paid pursuant to this Subparagraph 12.1.1 (excluding reimbursement) be less than 6% of the Total Contract Price as defined in Subparagraph 13.2.1. If the Total Contract Price has not been established, the minimum 6% compensation in this Subparagraph shall be based on the Guaranteed Maximum Price specified in Subparagraph

11.11 Design/Builder shall check all materials, equipment and labor entering into the Work and shall keep such full and detailed accounts as may be necessary for proper financial management under this Agreement, and the accounting methods shall be satisfactory to the Owner. Owner shall be afforded access for timely review in a practical manner of all Design/Builder=s records, books, correspondence, instructions, drawings, receipts, vouchers, memoranda, and similar data relating to the Cost of the Work and Design/Builder=s Fee. Design/Builder shall be preserve all such documents for a period of three (3) years after the final payment by Owner. ARTICLE 12 TERMINATION OF THE AGREEMENT 12.1 Termination By The Owner 12.1.1 The Agreement may be terminated by the Owner upon fourteen (14) days= written notice at the Owner=s election. In the event of termination at the Owner=s election and not due to the fault of the Design/Builder, the Design/Builder shall be compensated for services performed to termination date, together with reasonable industry standard demobilization expenses, reasonable close-out costs, reimbursable expenses then due, and a reasonable overhead and profit on work performed; provided, however, that in no event shall the compensation paid pursuant to this Subparagraph 12.1.1 (excluding reimbursement) be less than 6% of the Total Contract Price as defined in Subparagraph 13.2.1. If the Total Contract Price has not been established, the minimum 6% compensation in this Subparagraph shall be based on the Guaranteed Maximum Price specified in Subparagraph 13.2.1. 12.1.2 If the Design/Builder defaults or persistently fails or neglects to carry out the work in accordance with the Contract Documents or fails to perform the provisions of the Agreement, the Owner may give written notice that the Owner intends to terminate the Agreement. If the Design/Builder fails to correct the defaults within fourteen (14) days after being given notice, the Owner may without prejudice to any other remedy make good such deficiencies and may deduct the cost thereof from the payment due the Design/Builder or, at the Owner=s option, may terminate the employment of the Design/Builder and take possession of the site and of all materials, equipment, tools and construction equipment and machinery thereon owned by the Design/Builder as well as all drawings, plans, and specifications and finish the Work by whatever means the Owner may deem expedient. If the expense to complete the Work exceeds the unpaid balance of the Contract Sum, the Design/Builder shall pay the difference to the Owner. 12.2 Termination by the Design/Builder 12.2.1 If the Owner fails to make payment when due or is otherwise in default with this Page 21

Agreement, the Design/Builder may give written notice of the Design/Builder=s intention to terminate the Agreement. If the Design/Builder fails to receive payment within fourteen (14) days after receipt of such notice by the Owner, the Design/Builder may give a second written notice and, fourteen (14) days after receipt of such second written notice by the Owner, may terminate the Agreement and recover from the Owner payment for the cost of the Work executed and for proven losses sustained upon materials, equipment, tools, and construction equipment and machinery, including reasonable profit and applicable damages; provided, however, that in no event shall the compensation paid pursuant to this Subparagraph 12.2.1 (excluding reimbursement) be less than 6% of the Total Contract Price as defined in Subparagraph 13.2.1. If the Total Contract Price has not been established, the minimum 6% compensation in this Subparagraph shall be based on the Guaranteed Maximum Price specified in Subparagraph 13.2.1. ARTICLE 13 BASIS OF COMPENSATION The Owner shall compensate the Design/Builder in accordance with Article 5, Payments, and the other provisions of this Agreement as described below.

Agreement, the Design/Builder may give written notice of the Design/Builder=s intention to terminate the Agreement. If the Design/Builder fails to receive payment within fourteen (14) days after receipt of such notice by the Owner, the Design/Builder may give a second written notice and, fourteen (14) days after receipt of such second written notice by the Owner, may terminate the Agreement and recover from the Owner payment for the cost of the Work executed and for proven losses sustained upon materials, equipment, tools, and construction equipment and machinery, including reasonable profit and applicable damages; provided, however, that in no event shall the compensation paid pursuant to this Subparagraph 12.2.1 (excluding reimbursement) be less than 6% of the Total Contract Price as defined in Subparagraph 13.2.1. If the Total Contract Price has not been established, the minimum 6% compensation in this Subparagraph shall be based on the Guaranteed Maximum Price specified in Subparagraph 13.2.1. ARTICLE 13 BASIS OF COMPENSATION The Owner shall compensate the Design/Builder in accordance with Article 5, Payments, and the other provisions of this Agreement as described below. 13.1 Compensation 13.1.1 FOR BASIC SERVICES, as described in Paragraphs 2.2.2 through 2.2.17, and for any other services included in Article 14 as part of Basic Services, Basic Compensation shall be as follows: 13.2 Project Prices 13.2.1 Owner shall pay Design/Builder for the faithful performance of this Agreement, subject to the additions or deductions provided herein. The parties intend within 30 days of the Notice to Proceed to establish a lump sum price ("Total Contract Price"). Until such Total Contract Price is established, Design/Builder will proceed with the Work on a cost-reimbursable basis in accord with Exhibit "B" ("Cost Plus Proposal"); provided that once the Total Contract Price is established, credit will be allowed for any payments made on the cost-reimbursable basis. Both the Total Contract Price and the Cost Plus Proposal covers all Work required to reach Contract Completion. In no event shall the Total Contract Price or the Cost Plus Proposal exceed $5,300,000 without written approval of the Owner ("Guaranteed Maximum Price"). 13.2.2 A detailed breakdown of the Total Contract Price as well as a list of allowances and clarifications to the Scope of Work, shall be provided and Page 22

attached hereto as Exhibit "A." 13.2.3 The adjustments to Total Contract Price shall be adjusted by Change Orders as outlined in Article 8, Changes in Work. 13.2.4 Costs reimbursable by the Owner will include all materials, shipping, and procurement costs, engineering costs, construction management, equipment costs, subcontract costs, and all other costs directly related to the design and construction of the Facility. Engineering and field construction management personnel will be billed in accordance with Exhibit "B." Any general overhead costs and profit shall be included in the Design/Builder=s Fixed Fee. 13.2.5 The Total Contract Price, subject to modification as provided herein, shall include a Fixed Fee of $300,000.00. The Fixed Fee will be paid proportionately with the rest of the Total Contract Price, as the Work is performed. 13.2.6 No casual, spot, or discretionary overtime will change the Total Contract Price. In the case of other overtime, the same shall increase the Total Contract Price only if authorized in writing by Owner and incorporated by Change Order. 13.2.7 (Deleted) 13.2.8 (Deleted)

attached hereto as Exhibit "A." 13.2.3 The adjustments to Total Contract Price shall be adjusted by Change Orders as outlined in Article 8, Changes in Work. 13.2.4 Costs reimbursable by the Owner will include all materials, shipping, and procurement costs, engineering costs, construction management, equipment costs, subcontract costs, and all other costs directly related to the design and construction of the Facility. Engineering and field construction management personnel will be billed in accordance with Exhibit "B." Any general overhead costs and profit shall be included in the Design/Builder=s Fixed Fee. 13.2.5 The Total Contract Price, subject to modification as provided herein, shall include a Fixed Fee of $300,000.00. The Fixed Fee will be paid proportionately with the rest of the Total Contract Price, as the Work is performed. 13.2.6 No casual, spot, or discretionary overtime will change the Total Contract Price. In the case of other overtime, the same shall increase the Total Contract Price only if authorized in writing by Owner and incorporated by Change Order. 13.2.7 (Deleted) 13.2.8 (Deleted) 13.3.1 If Total Contract Price, as adjusted, is exceeded, Owner will pay for labor, as set forth in Paragraphs 13.2.4 and shall pay other agreed properly substantiated Design/Builder costs. The first $100,000.00 of the excess over the Total Contract Price will be deducted from the Fee otherwise payable under Paragraph 13.2.5. 13.3.2 If Total Contract Price is underrun, then Owner and Design/Builder shall share the underrun 25/75 (25 percent to Design/Builder and 75 percent to Owner), and in addition, Design/Builder shall receive the Fee set forth in Paragraph 13.2.5 of this Agreement. 13.4 Reimbursable Expenses 13.4.1 Reimbursable Expenses are in addition to the compensation for Basic and Additional Services and include actual expenditures made by the Design/Builder in the interest of the Project for the expenses listed in Exhibit "B." 13.4.2 For Reimbursable Expenses, compensation shall be as specified in Exhibit Page 23

"B." 13.5 Interest Payments 13.5.1 The rat e of interest for past due payments shall be as follows: prime rate plus 2%, compounded annually. ARTICLE 14 OTHER PROVISIONS 14.1 Scope of Work 14.1.1 The Design/Builder shall provide all engineering, materials, labor, and equipment associated with the construction at a Coal Fine Agglomeration Facility to be constructed at a site to be designated by the Owner. 14.1.2 The Design/Builder will construct the Facility in accordance with one of the following two options, as specified by Owner at the time Owner issues the Notice to Proceed: (i) for Option A, the Design/Builder will construct the Facility in accordance with Exhibit AC,@ Specification For The Construction Of A Coal Agglomeration Facility, dated November 15, 1996 and prepared by Centerline Engineering Corporation; or (ii) for Option B, the Design/Builder will provide the Facility in accordance with Exhibit "E," Skid Mounted

"B." 13.5 Interest Payments 13.5.1 The rat e of interest for past due payments shall be as follows: prime rate plus 2%, compounded annually. ARTICLE 14 OTHER PROVISIONS 14.1 Scope of Work 14.1.1 The Design/Builder shall provide all engineering, materials, labor, and equipment associated with the construction at a Coal Fine Agglomeration Facility to be constructed at a site to be designated by the Owner. 14.1.2 The Design/Builder will construct the Facility in accordance with one of the following two options, as specified by Owner at the time Owner issues the Notice to Proceed: (i) for Option A, the Design/Builder will construct the Facility in accordance with Exhibit AC,@ Specification For The Construction Of A Coal Agglomeration Facility, dated November 15, 1996 and prepared by Centerline Engineering Corporation; or (ii) for Option B, the Design/Builder will provide the Facility in accordance with Exhibit "E," Skid Mounted Agglomeration Facility. 14.1.2.1 The agglomeration equipment for the Facility shall be a Model 90AD extruder supplied by J.C. Steele and Sons, Statesville, North Carolina, unless Owner specifies a different piece of equipment. The Owner may specify a different piece of agglomeration equipment, including but not limited to a Bepex Model MS-450 Briquetter or a CPM Pelletmill Model 7932- 6 pelletizer, in order to adapt to the particular characteristics and properties of the expected raw material feedstock or the product specifications of the expected purchaser of the finished product, or based on availability. The Owner may also specify a different equivalent model and brand of extruder, briquetter or pelletizer, provided that the agglomeration equipment that is selected shall have a rated total product output capacity equal to the Model 90AD extruder from J.C. Steele. The use of other agglomeration equipment shall be added through Change Orders. 14.1.3 The site location will be determined by the Owner in Southern West Virginia. Page 24

Any site demolition work, construction of utility above normal service extensions and connections, and major earthwork required will be added through Change Orders. 14.1.6 All utilities, including fuel, electricity and water, will be the responsibility of the Owner. 14.1.7. The Design/Builder will provide five (5) sets of all Operation and Maintenance Manuals, Spare Part Lists and other plant-related documents. The Design/Builder shall also provide start-up and operational testing for the first month of plant operation. The Owner and Design/Builder will mutually develop an acceptable operational testing program ninety (90) days before mechanical completion. The start-up and operational testing will be performed on a cost reimbursable basis in accordance with Exhibit "B." 14.2 Warranty 14.2.1 For a period of (1) one year following the date of Substantial Completion, the Design/Builder warrants to the Owner that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Agreement, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Design/Builder=s warranty excludes remedy for damages or defect cause by abuse, modifications not executed by the Design/Builder, improper or insufficient maintenance, improper operation, or normal wear and tear under normal usage. If required by the Owner, the Design/Builder shall furnish satisfactory evidence as to the kind and quality or materials and equipment.

Any site demolition work, construction of utility above normal service extensions and connections, and major earthwork required will be added through Change Orders. 14.1.6 All utilities, including fuel, electricity and water, will be the responsibility of the Owner. 14.1.7. The Design/Builder will provide five (5) sets of all Operation and Maintenance Manuals, Spare Part Lists and other plant-related documents. The Design/Builder shall also provide start-up and operational testing for the first month of plant operation. The Owner and Design/Builder will mutually develop an acceptable operational testing program ninety (90) days before mechanical completion. The start-up and operational testing will be performed on a cost reimbursable basis in accordance with Exhibit "B." 14.2 Warranty 14.2.1 For a period of (1) one year following the date of Substantial Completion, the Design/Builder warrants to the Owner that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Agreement, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work will conform with the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. The Design/Builder=s warranty excludes remedy for damages or defect cause by abuse, modifications not executed by the Design/Builder, improper or insufficient maintenance, improper operation, or normal wear and tear under normal usage. If required by the Owner, the Design/Builder shall furnish satisfactory evidence as to the kind and quality or materials and equipment. 14.2.2 The Design/Builder agrees to assign to the Owner at the time of final completion of the Work, any and all manufacturer=s warranties relating to materials and labor used in the Work and further agrees to perform the Work in such manner so as to preserve any and all such manufacturer=s warranties. The parties agree that Design/Builder=s warranties relating to the performance of Design/Builder furnished equipment, is limited to that reasonably obtainable from suppliers. 14.2.3 THE WARRANTIES DESCRIBED HEREIN ARE IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 14.3 Project Meetings Page 25

14.3.1 Owner will hold frequent Project Meetings on a regularly scheduled basis for the purpose of ensuring orderly and expeditious completion of the Work. Such meetings will include Design/Builder=s Project Manager and responsible representatives or subcontractors, and when desirable, vendors or suppliers. 14.3.2 At these meetings, schedule and progress shall be reviewed, work activities and administrative procedures coordinated, problem areas identified and corrective actions initiated, pending changes discussed, and safety activities reported. Any other pertinent or timely subjects should be included on the meeting agenda. 14.3.3 Minutes of each meeting shall be promptly issued by Design/Builder to all attendees and/or designated persons. 14.4 Design/Builder shall, in addition to other information required by the Contract Documents, provide, in a format acceptable to Owner, the following reports, compiled separately for each facility, and cumulatively: Project Procedures Manual; Monthly Progress Report (will include procurement status report and schedule updates). This Agreement (Contract No. CL-003) entered into as of the day and year first written above.
OWNER /s/ Steven R. Brown Steven R. Brown, Vice President Covol Technologies, Inc. DESIGN/BUILDER /s/ Andrew Kapusta Andrew Kapusta, President Centerline Engineering Corp.

14.3.1 Owner will hold frequent Project Meetings on a regularly scheduled basis for the purpose of ensuring orderly and expeditious completion of the Work. Such meetings will include Design/Builder=s Project Manager and responsible representatives or subcontractors, and when desirable, vendors or suppliers. 14.3.2 At these meetings, schedule and progress shall be reviewed, work activities and administrative procedures coordinated, problem areas identified and corrective actions initiated, pending changes discussed, and safety activities reported. Any other pertinent or timely subjects should be included on the meeting agenda. 14.3.3 Minutes of each meeting shall be promptly issued by Design/Builder to all attendees and/or designated persons. 14.4 Design/Builder shall, in addition to other information required by the Contract Documents, provide, in a format acceptable to Owner, the following reports, compiled separately for each facility, and cumulatively: Project Procedures Manual; Monthly Progress Report (will include procurement status report and schedule updates). This Agreement (Contract No. CL-003) entered into as of the day and year first written above.
OWNER /s/ Steven R. Brown Steven R. Brown, Vice President Covol Technologies, Inc. DESIGN/BUILDER /s/ Andrew Kapusta Andrew Kapusta, President Centerline Engineering Corp.

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THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH REGISTRATION OR (2) DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR (3) SUBMISSION TO THE GENERAL PARTNER OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS, OR ANY RULES OR REGULATIONS PROMULGATED THEREUNDER. CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP OF Utah Synfuel #1 Ltd. THIS CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP, made this ___ day of February, 1996, by and among Covol Technologies, Inc., as General Partner, and all persons and entities whose names and addresses are set forth on Exhibit "A" hereto as Limited Partners. ARTICLE I Section 1.1 FORMATION OF PARTNERSHIP. Subject to the provisions hereof, the General Partner, and the Limited Partners hereby form the Partnership as a limited partnership pursuant to the provisions of the Delaware Act. The General Partner, and the Limited Partners hereby enter into this Agreement in order to set forth the rights and obligations of the Partners and certain matters related thereto. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and dissolution of the Partnership shall be governed by the Delaware Act. The partnership Interest of any Partner shall be personal property for all purposes.

THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH REGISTRATION OR (2) DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR (3) SUBMISSION TO THE GENERAL PARTNER OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE SECURITIES LAWS, OR ANY RULES OR REGULATIONS PROMULGATED THEREUNDER. CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP OF Utah Synfuel #1 Ltd. THIS CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP, made this ___ day of February, 1996, by and among Covol Technologies, Inc., as General Partner, and all persons and entities whose names and addresses are set forth on Exhibit "A" hereto as Limited Partners. ARTICLE I Section 1.1 FORMATION OF PARTNERSHIP. Subject to the provisions hereof, the General Partner, and the Limited Partners hereby form the Partnership as a limited partnership pursuant to the provisions of the Delaware Act. The General Partner, and the Limited Partners hereby enter into this Agreement in order to set forth the rights and obligations of the Partners and certain matters related thereto. Except as expressly provided herein to the contrary, the rights and obligations of the Partners and the administration and dissolution of the Partnership shall be governed by the Delaware Act. The partnership Interest of any Partner shall be personal property for all purposes. Section 1.2 DEFINITIONS "Adjusted Capital Account" means the Capital Account maintained for each Partner as of the end of each fiscal year of the Partnership (a) increased by any amounts which such Partner is obligated to restore under the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5)) and (b) decreased by (a) the amount of all losses and deductions that, as of the end of such fiscal year, are reasonably expected to be allocated to such Partner

in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1 (b)(2)(ii) and (b) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases pursuant to a minimum gain chargeback pursuant to Sections 11.1.2(i) or 11.1.2(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b) (2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.4.4. Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination thereof pursuant to Section 708 of the Code, such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is further adjusted pursuant to Section 4.4.4.

in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1 (b)(2)(ii) and (b) the amount of all distributions that, as of the end of such fiscal year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner's Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases pursuant to a minimum gain chargeback pursuant to Sections 11.1.2(i) or 11.1.2(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b) (2)(ii)(d) and shall be interpreted consistently therewith. "Adjusted Property" means any property the Carrying Value of which has been adjusted pursuant to Section 4.4.4. Once an Adjusted Property is deemed distributed by, and recontributed to, the Partnership for federal income tax purposes upon a termination thereof pursuant to Section 708 of the Code, such property shall thereafter constitute a Contributed Property until the Carrying Value of such property is further adjusted pursuant to Section 4.4.4. "Adjusted Value" means, with respect to an Adjusted Property, the fair market value of such property as determined by the General Partner, in its sole discretion at the time such property became an Adjusted Property. "Affiliate" means any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question. As used herein, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controls" shall have meanings correlative to the foregoing. "Agreed Value" means, with respect to any property contributed to the Partnership, the fair market value of such property at the time of contribution as determined by the General Partner using such reasonable method of valuation as it may adopt. "Agreement" means this Certificate and Agreement of Limited Partnership, as is presently in effect or as may be hereafter amended which establishes the relationships among the Partners. "Allocation Regulations" means Treasury Regulation Section 1.704-1(b), Treasury Regulation Section 1.704-2, and Treasury Regulation Section 1.704-3 as such regulations may be amended and in effect from time to time (including temporary regulations) and any corresponding provisions of succeeding regulations. "Book-Tax Disparity" means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Partner's share of the Partnership's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Partner's Capital Account balance as maintained pursuant to Section 4.4

and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Capital Account" means the capital account maintained for a Partner pursuant to Section 4.4. "Capital Investment" means the aggregate cash or property contributed to the Partnership by the Limited Partners pursuant to their investment in Units of the Partnership. No distributions, credits, charges (including depreciation and amortization) or adjustments shall be used in computing "Capital Investment", except as specified herein. "Carrying Value" means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, depletion (computed as a separate item of deduction), amortization and cost recovery deductions charged to the Partners' Capital Accounts, (b) with respect to an Adjusted Property, the Adjusted Value of such property reduced (but not below zero) by all depreciation and cost recovery deductions charged to the Partner's Capital Accounts and (c) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination.

and the hypothetical balance of such Partner's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles. "Capital Account" means the capital account maintained for a Partner pursuant to Section 4.4. "Capital Investment" means the aggregate cash or property contributed to the Partnership by the Limited Partners pursuant to their investment in Units of the Partnership. No distributions, credits, charges (including depreciation and amortization) or adjustments shall be used in computing "Capital Investment", except as specified herein. "Carrying Value" means (a) with respect to a Contributed Property, the Agreed Value of such property reduced (but not below zero) by all depreciation, depletion (computed as a separate item of deduction), amortization and cost recovery deductions charged to the Partners' Capital Accounts, (b) with respect to an Adjusted Property, the Adjusted Value of such property reduced (but not below zero) by all depreciation and cost recovery deductions charged to the Partner's Capital Accounts and (c) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. "Certificate of Limited Partnership" means the certificate of limited partnership filed with the Secretary of State of the State of Delaware pursuant to Section 5.2 hereof, as such certificate may be amended or restated from time to time. "Class A Limited Partners" means the Limited Partners other than "Class B Limited Partners" and any successors in interest. "Class B Limited Partners" means the General Partner, in its capacity as a limited partner and any successors in interest. "Code" means the Internal Revenue Code of 1986, as amended, and in effect from time to time, and any successor to such statute. "Contributed Property" means any property, other than cash, contributed to the Partnership by a Partner. "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act as it may be amended and in effect from time to time, and any successor to such statute. "Distributable Cash" means the gross cash revenues received by the Partnership in the conduct of Partnership business including cash received from financing or refinancing of Partnership property or other borrowing by the Partnership from any source, reduced by the sum of the following, to the extent made from such cash revenues: (a) all principal and interest payments on mortgages and other indebtedness of the Partnership and all other sums paid to lenders (including loans made by Partners), (b) all cash expenditures (including expenditures for capital improvements) incurred incident to the normal operation of the Partnership's business,

including any compensation to the General Partner or its affiliates, and (c) such cash reserves as the General Partner, in its sole discretion, deems reasonable, prudent, necessary and appropriate for proper operation of the Partnership's business. "Fiscal Year" means the calendar year. "General Partner" means Covol Technologies Inc. or its successor in interest. "Limited Partners" means the Persons listed as such on Exhibit "A" and any other person or entity who subsequently becomes a Limited Partner in accordance with the requirements of Articles IV and VII of the Agreement. "Net Agreed Value" means (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed and (b) in the case of any property distributed to a Partner or Assignee by the

including any compensation to the General Partner or its affiliates, and (c) such cash reserves as the General Partner, in its sole discretion, deems reasonable, prudent, necessary and appropriate for proper operation of the Partnership's business. "Fiscal Year" means the calendar year. "General Partner" means Covol Technologies Inc. or its successor in interest. "Limited Partners" means the Persons listed as such on Exhibit "A" and any other person or entity who subsequently becomes a Limited Partner in accordance with the requirements of Articles IV and VII of the Agreement. "Net Agreed Value" means (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Partnership upon such contribution or to which such property is subject when contributed and (b) in the case of any property distributed to a Partner or Assignee by the Partnership, the Partnership's Carrying Value of such property at the time such property is distributed, reduced by any indebtedness either assumed by such Partner or Assignee upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code. "Net Capital Investment" means the aggregate cash or property investments in the Partnership actually made by the Limited Partners pursuant to their investment in Units of the Partnership, less all sums of cash and the fair market value of property of whatever character or nature distributed, from time to time, to Limited Partners.] "Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1) of the Allocation Regulations. "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Allocation Regulations. "Participating Percentage" means, as to the General Partner, 1% with respect to the General Partner's general partner interest, 49% with respect to the Class B Limited Partner's limited partner interest and to each Class A Limited Partner, at any specified time, the percentage derived by dividing the total number of Units held by such Class A Limited Partner by the total number of Units then outstanding held by all Class A Limited Partners and multiplying the quotient by fifty percent (50%). "Partners" means the General Partner and the Limited Partners. "Partner Nonrecourse Debt" has the meaning set forth in Section 1.704-2(b)(4) of the Regulations. "Partner Nonrecourse Debt Minimum Gain" means that amount, with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such

Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with the principles of Regulations Section 1.704-2(i)(3). "Partner Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (including any expenditure described in Sections 705(a)(2)(B) of the Code) that in accordance with the principles of Regulations Section 1.704-2(i)(1) and (2) are attributable to a Partner Nonrecourse Debt. "Partnership" means the limited partnership being formed pursuant to the Agreement "Partnership Minimum Gain" has the meaning set forth in Sections 1.704-2(b)(2) and of the Allocation Regulations. "Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment required by Sections 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken

Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with the principles of Regulations Section 1.704-2(i)(3). "Partner Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (including any expenditure described in Sections 705(a)(2)(B) of the Code) that in accordance with the principles of Regulations Section 1.704-2(i)(1) and (2) are attributable to a Partner Nonrecourse Debt. "Partnership" means the limited partnership being formed pursuant to the Agreement "Partnership Minimum Gain" has the meaning set forth in Sections 1.704-2(b)(2) and of the Allocation Regulations. "Recapture Income" means any gain recognized by the Partnership (computed without regard to any adjustment required by Sections 734 or 743 of the Code) upon the disposition of any property or asset of the Partnership, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset. "Unit" means an interest in the capital, profits and losses of the Partnership, as well as the rights, privileges and powers appurtenant thereto, as set forth in this Agreement. "Unrealized Gain" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property (as determined under Section 4.4.4 as of such date), over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.4.4) as of such date. "Unrealized Loss" attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.4.4 as of such date, over (b) the fair market value of such property (as determined under Section 4.4.4) as of such date. Section 1.3 PARTNERSHIP NAME. The business of the Partnership shall be conducted under the name "Utah Synfuel #1 Ltd." or under such other name as the General Partner may determine. Section 1.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the partnership shall be in Utah County, Utah, but additional places of business may be established at such other locations in Utah as the General Partner may determine. Section 1.5 ADDRESS OF PARTNERS. The address of the General Partner and the Partnership is 3280 North Frontage Road, Lehi, Utah 84043. The addresses of the Limited Partners shall be as stated after their names set forth in Exhibit "A" to this Agreement or such other addresses as are subsequently established by the Limited Partners upon receipt of notice thereof by the General Partner.

Section 1.6 TERM OF PARTNERSHIP. The Partnership shall be formed and shall be effective from the date of filing for record of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until December 31, 2015 unless sooner terminated in accordance with the dissolution provisions of this Agreement or as otherwise provided by law. ARTICLE II Section 2.1 POWER OF ATTORNEY. Each Limited Partner does irrevocably constitute and appoint the General Partner as his true and lawful attorney and agent, with full power and authority in his name, place and stead to execute, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates and other instruments (including counterparts of this Agreement) which the General Partner deems appropriate to qualify or continue the Partnership as a limited partnership in jurisdictions in which the partnership may conduct business, or which the General Partner deems advisable to effect the admission of additional Limited Partners or

Section 1.6 TERM OF PARTNERSHIP. The Partnership shall be formed and shall be effective from the date of filing for record of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until December 31, 2015 unless sooner terminated in accordance with the dissolution provisions of this Agreement or as otherwise provided by law. ARTICLE II Section 2.1 POWER OF ATTORNEY. Each Limited Partner does irrevocably constitute and appoint the General Partner as his true and lawful attorney and agent, with full power and authority in his name, place and stead to execute, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates and other instruments (including counterparts of this Agreement) which the General Partner deems appropriate to qualify or continue the Partnership as a limited partnership in jurisdictions in which the partnership may conduct business, or which the General Partner deems advisable to effect the admission of additional Limited Partners or substituted Limited Partners, including amendments as may be appropriate from time to time to reduce the capital accounts of Limited Partners following distributions thereof, (b) all instruments which the General Partner deems appropriate to effect a change or modification of the Partnership in accordance with the terms of this Agreement or which the General Partner deems necessary to maintain the tax status of the Partnership, upon advice of counsel, (c) all conveyances and other instruments which the General Partner deems appropriate to effect the dissolution and termination of the Partnership, (d) all instruments relating to the admission or substitution of a Partner and (e) all agreements and other instruments relating to any merger or consolidation of the Partnership pursuant to Article XV hereof. The power of attorney granted herein is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive the death, incompetency, disability, dissolution, bankruptcy or termination of any Partner and the transfer of all or any portion of his Partnership Interest and shall extend to such Partner and the transfer of all or any portion of his Partnership Interest and shall extend to such Partner's heirs, successors, assigns and personal representatives. Each Partner hereby agrees to be bound by any representations made by the General Partner, acting in good faith pursuant to such power of attorney. Each Partner hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner, taken in good faith under such power of attorney. Each Partner shall execute and deliver to the General Partner, within fifteen (15) days after receipt of its request therefore, such further assignations, powers of attorney and other instruments as the General Partner deems appropriate or necessary to effectuate this Agreement and the purposes of the Partnership. The Limited Partners agree to be bound by all representations of the General Partner as their said attorney-in-fact and waive any and all defenses which may be available to them to contest, negate or disaffirm the actions of the General Partner or its successors under the power of attorney, and ratify and confirm all acts which the said attorney-in-fact may take in that capacity in all respects as though performed by the Limited Partners. ARTICLE III

Section 3.1 PURPOSES AND POWERS OF PARTNERSHIP. The Partnership is formed for, and shall have the power to accomplish, the following objectives and purposes: 3.1.1 To enter into a license with the General Partner to use certain patented technology of the General Partner necessary to convert coal dust and coal fines into briquettes of synthetic fuel. 3.1.2 To construct for investment purposes a coal briquetting facility in Utah. 3.1.3 To borrow all funds necessary to carry out the objectives and purposes of the Partnership and to pledge or encumber any and all items of property of the Partnership for the payment of such loans. 3.1.4 To enter into operating, management, maintenance or any other type of agreements with respect to the assets and businesses of the Partnership. 3.1.5 To do each and every thing necessary, suitable or proper for the accomplishment of any of the purposes or

Section 3.1 PURPOSES AND POWERS OF PARTNERSHIP. The Partnership is formed for, and shall have the power to accomplish, the following objectives and purposes: 3.1.1 To enter into a license with the General Partner to use certain patented technology of the General Partner necessary to convert coal dust and coal fines into briquettes of synthetic fuel. 3.1.2 To construct for investment purposes a coal briquetting facility in Utah. 3.1.3 To borrow all funds necessary to carry out the objectives and purposes of the Partnership and to pledge or encumber any and all items of property of the Partnership for the payment of such loans. 3.1.4 To enter into operating, management, maintenance or any other type of agreements with respect to the assets and businesses of the Partnership. 3.1.5 To do each and every thing necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any one or more of the objectives herein enumerated, either alone, or in association with, or as agent or representative for other corporations (whether public, governmental or private), partnerships, individuals, or entities, or to accomplish any other lawful business whatsoever, or which shall at any time appear conducive to or expedient for the protection or benefit of this Partnership and its assets and businesses. 3.1.6 To exercise all other powers necessary to or reasonably connected with the Partnership's business which may be legally exercised by limited partnerships in the State of Delaware. 3.1.7 To carry on any other business that a limited partnership organized under the Delaware Act may carry on. ARTICLE IV Section 4.1 CAPITAL CONTRIBUTIONS OF COVOL TECHNOLOGIES, INC. Covol Technologies, Inc. shall contribute all of its rights under a certain engineering/construction contract referenced Exhibit A hereto to the capital of the Partnership for its General Partner and its Class B Limited Partner interest. The Agreed Value of the engineering/construction contract shall be equal to the amount set forth on Exhibit A. Section 4.2 CAPITAL CONTRIBUTIONS BY CLASS A LIMITED PARTNERS. The initial capital contributions of the Limited Partners shall be the amounts set forth opposite the name of each Limited Partner on Exhibit "A" attached hereto. Section 4.3 CAPITAL CONTRIBUTIONS OF ADDITIONAL CLASS A LIMITED PARTNERS. The General Partner is authorized to admit, from time to time, additional Class A Limited Partners and to issue to all such additional Limited Partners not greater than an aggregate of four thousand (4,000) Units of Class A Limited Partner interests upon such terms

and conditions as the General Partner deems appropriate, but in no event shall the purchase price per Unit be less than One Thousand Dollars ($1,000) per Unit. An issuance of additional Units will dilute only the Units held by the Class A Limited Partners. Limited Partners have no preemptive rights to such additional Units. Upon the admission of such additional Class A Limited Partners, an amendment to the Agreement reflecting such admission shall be filed in the appropriate office. Prior to admission, each additional Class A Limited Partner shall become a signatory to this Agreement. The original counterparts of this Agreement executed by the respective Limited Partners and the General Partner, taken together, shall constitute a single instrument. Section 4.4 CAPITAL ACCOUNTS. 4.4.1 The Partnership shall maintain for each Partner a separate Capital Account in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (a) the cash amount or Net Agreed Value of all Capital Contributions made by such Partner to the Partnership pursuant to this Agreement and (b) all items of Partnership income and gain computed in accordance with Section 4.4.2 and allocated to such Partner pursuant to Section 11.1. Such Capital Account shall be decreased by (x) the cash amount or Net

and conditions as the General Partner deems appropriate, but in no event shall the purchase price per Unit be less than One Thousand Dollars ($1,000) per Unit. An issuance of additional Units will dilute only the Units held by the Class A Limited Partners. Limited Partners have no preemptive rights to such additional Units. Upon the admission of such additional Class A Limited Partners, an amendment to the Agreement reflecting such admission shall be filed in the appropriate office. Prior to admission, each additional Class A Limited Partner shall become a signatory to this Agreement. The original counterparts of this Agreement executed by the respective Limited Partners and the General Partner, taken together, shall constitute a single instrument. Section 4.4 CAPITAL ACCOUNTS. 4.4.1 The Partnership shall maintain for each Partner a separate Capital Account in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (a) the cash amount or Net Agreed Value of all Capital Contributions made by such Partner to the Partnership pursuant to this Agreement and (b) all items of Partnership income and gain computed in accordance with Section 4.4.2 and allocated to such Partner pursuant to Section 11.1. Such Capital Account shall be decreased by (x) the cash amount or Net Agreed Value of all actual and deemed distributions of cash made to such Partner pursuant to this Agreement, and (y) all items of Partnership deduction and loss computed in accordance with Section 4.4.2 and allocated to such Partner pursuant to Section 11.1 4.4.2 For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Partners' Capital Accounts, the determination, recognition and classification of such items shall be the same as its determination, recognition and classification for federal income tax purposes; provided, that: (a) Any deductions for depreciation, cost recovery or amortization attributable to a property contributed to the Partnership shall be determined as if the adjusted basis of such property on the date it was acquired by the Partnership was equal to the Agreed Value of such property and shall be allocated among the Partners in accordance with their Percentage Interests (in effect at the time of the contribution of such property). Upon an adjustment pursuant to 4.4.4 to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined (i) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment and (ii) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided however, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the General Partner may adopt. (b) Any gain or loss attributable to the taxable disposition of any Partnership Property shall be determined by the Partnership as if the adjusted basis of such property

as of such date of disposition was equal in amount to the Partnership's Carrying Value of such property as of such date. (c) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code shall, for purposes of Capital Account maintenance, be treated as an item of deduction and shall be allocated among the Partners pursuant to Section 11.1. (d) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalizable for federal income tax purposes. 4.4.3 Generally, a transferee of a Partnership Interest will succeed to the Capital Account relating to the Partnership Interest transferred. However, if the transfer causes a termination of the Partnership under Section

as of such date of disposition was equal in amount to the Partnership's Carrying Value of such property as of such date. (c) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under Section 709 of the Code shall, for purposes of Capital Account maintenance, be treated as an item of deduction and shall be allocated among the Partners pursuant to Section 11.1. (d) Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Partnership and, as to those items described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalizable for federal income tax purposes. 4.4.3 Generally, a transferee of a Partnership Interest will succeed to the Capital Account relating to the Partnership Interest transferred. However, if the transfer causes a termination of the Partnership under Section 708(b)(1)(B) of the Code, the Partnership properties shall be deemed to have been distributed in liquidation of the Partnership to the Partners (including the transferee of a Partnership Interest) pursuant to Section 13.1.3 and recontributed by such Partners and transferees in reconstitution of the Partnership. The Capital Accounts of such reconstituted Partnership shall be maintained in accordance with the principles of this Section 4.4. 4.4.4 Consistent with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash or other property, the Capital Accounts attributable to the General Partner's general partner interest and to the Class B Limited Partner, and the Carrying Value of each Partnership property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such property, as if the Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to cause the General Partner's Capital Account attributable to its general partner interest to equal 1% of all Capital Accounts after assurance of additional Partnership Interests and the Class B Limited Partner's Capital Account to equal 49% of all Capital Accounts after issuance of Additional Partnership Interests. It is agreed that the Carrying Value of the Partnership's property immediately prior to issuance shall be an amount such that the Agreed Value of the assets (including cash) contributed to the Partnership pursuant to such Capital Contribution will be in the same ratio to the Carrying Value of all Partnership property immediately after the Capital Contribution that corresponds to the Participating Percentage attributed to such additional Partnership Interest. In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately prior to the distribution of any Partnership property (other than an oil and gas property), the Capital Accounts of all Partners and the Carrying Value of each Partnership property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such property, as if such Unrealized Gain or

Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value and had been allocated among the Partners in the manner provided in Article 11.1. Section 4.5 INTEREST. Interest earned on Partnership funds shall inure to the benefit of the Partnership, but Limited Partners, as such, shall not receive interest on funds contributed by them. Section 4.6 ADVANCES BY THE GENERAL PARTNER. The General Partner or any of its affiliates may, but are not obligated to, loan monies to the Partnership for use by the Partnership in its operation. The aggregate amount of such loans shall become an obligation of the Partnership to the person(s) or entity(s) making the loans, in accordance with the terms of such loans, payable from gross revenues of the Partnership with interest two percent (2%) above the prime rate as quoted from time to time by Key Bank, Salt Lake City, Utah, but not to exceed the maximum legal rate of interest. Such loans shall not be deemed a capital contribution. To the extent that any such loans are unpaid upon the dissolution and liquidation of the Partnership, the same, together with the accrued and unpaid interest, shall become immediately due and payable prior to any distributions to the Partners.

Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its fair market value and had been allocated among the Partners in the manner provided in Article 11.1. Section 4.5 INTEREST. Interest earned on Partnership funds shall inure to the benefit of the Partnership, but Limited Partners, as such, shall not receive interest on funds contributed by them. Section 4.6 ADVANCES BY THE GENERAL PARTNER. The General Partner or any of its affiliates may, but are not obligated to, loan monies to the Partnership for use by the Partnership in its operation. The aggregate amount of such loans shall become an obligation of the Partnership to the person(s) or entity(s) making the loans, in accordance with the terms of such loans, payable from gross revenues of the Partnership with interest two percent (2%) above the prime rate as quoted from time to time by Key Bank, Salt Lake City, Utah, but not to exceed the maximum legal rate of interest. Such loans shall not be deemed a capital contribution. To the extent that any such loans are unpaid upon the dissolution and liquidation of the Partnership, the same, together with the accrued and unpaid interest, shall become immediately due and payable prior to any distributions to the Partners. ARTICLE V Section 5.1 RIGHTS AND OBLIGATIONS OF THE GENERAL PARTNER. 5.1.1 The General Partner shall have full, exclusive and complete discretion in the management and control of the affairs of the Partnership for the purposes herein stated and shall make all decisions affecting partnership affairs, including all decisions made regarding the administration, supervision, and management of the partnership's business. In amplification and not in limitation of the general powers of the partnership, the General Partner shall have the power and authority, on behalf of and in the name of the partnership: (a) to buy, sell, acquire, exchange, trade, receive, deliver, hold, encumber, pledge, release and otherwise deal in and with and dispose of Partnership property, whether in the ordinary course of business of the Partnership or otherwise; (b) to execute and deliver such documents or instruments relating to Partnership affairs as may in their opinion be appropriate in the conduct of the Partnership's business, including without limitation, licenses, employment, consultation and management agreements, notes, leases, joint venture agreements, guaranty agreements, documents of transfer and conveyance, and bills of sale; (c) to open, maintain and close bank accounts as shall be designated by the General Partner and to draw checks and other orders on such accounts for the payment of money signed on behalf of the General Partner or by its authorized representatives; (d) to hold title to Partnership property as nominee for the Partnership;

(e) to borrow money and to make, issue, accept, endorse and execute promissory notes, drafts, bills of exchange and other instruments and evidences of indebtedness, all without limit as to amount, and to pay or repay with respect thereto and to secure the payment thereof by security interest, mortgage, deed of trust, pledge or assignment of, all or any part of any property then owned or hereafter acquired by the partnership and to prepay, refinance, increase, modify, consolidate or extend any mortgage, deed of trust, security interest, or other encumbrance of any kind or nature; (f) to employ such employees, consultants, accountants, managers, agents, appraisers, attorneys, mortgage brokers and other persons in the operation, conduct, administration, supervision and management of the business of the Partnership as in the judgment of the General Partner are necessary or desirable, and to pay the reasonable expenses and fees of the same out of Partnership funds; (g) to purchase, at the expense of the Partnership, liability and other insurance coverage that the General Partner in its sole discretion determines to be necessary to protect the Partners from liability created in pursuit of or in the furtherance of Partnership business or which is related to its business affairs;

(e) to borrow money and to make, issue, accept, endorse and execute promissory notes, drafts, bills of exchange and other instruments and evidences of indebtedness, all without limit as to amount, and to pay or repay with respect thereto and to secure the payment thereof by security interest, mortgage, deed of trust, pledge or assignment of, all or any part of any property then owned or hereafter acquired by the partnership and to prepay, refinance, increase, modify, consolidate or extend any mortgage, deed of trust, security interest, or other encumbrance of any kind or nature; (f) to employ such employees, consultants, accountants, managers, agents, appraisers, attorneys, mortgage brokers and other persons in the operation, conduct, administration, supervision and management of the business of the Partnership as in the judgment of the General Partner are necessary or desirable, and to pay the reasonable expenses and fees of the same out of Partnership funds; (g) to purchase, at the expense of the Partnership, liability and other insurance coverage that the General Partner in its sole discretion determines to be necessary to protect the Partners from liability created in pursuit of or in the furtherance of Partnership business or which is related to its business affairs; (h) to perform any and all other acts or activities, customary or incidental to the business, objectives and purposes of the Partnership as set forth herein; (i) to be reimbursed (or reimburse its affiliates) for all expenses incurred in conducting the Partnership's business including all general and administrative expenses allocable to operations of the Partnership, including, without limitation, allocable employee salaries, office rental, and miscellaneous office supplies and expenses; and (j) to apply for or file notices of claims of exemptions from registration under the Utah Uniform Securities Act, the Securities Act of 1933, or any other federal or state securities statutes, rules or regulations for the sale of securities of the Partnership; to secure any and all other authorizations or permits which the General Partners deem necessary or appropriate in connection with the business of the partnership, and to execute, acknowledge, file and deliver any and all applications, documents and consents which the General Partner may deem appropriate in connection therewith. 5.1.2 The General Partner shall devote such time to the Partnership as it deems necessary to conduct the business and affairs of the Partnership. The General Partner may engage in a business which is the same as or similar to the business of the Partnership, irrespective of whether such business shall be competitive with the Partnership or otherwise and may act as General Partner in limited partnerships formed for the same purpose as the Partnership. The General Partner shall do what is advised by the Partnership's counsel or what is required of it by the Internal Revenue Service, to the extent of its ability, to obtain or maintain classification of the Partnership as a partnership for federal income tax purposes.

5.1.3 The General Partner shall maintain or cause to be maintained complete and accurate records of all real and personal property acquired, leased, rented and disposed of by the Partnership, account records of all Partners, insurance policies or copies of certificates thereof, and opinions of counsel received by the Partnership. Such documents, opinions and records, together with receipts, vouchers and other supporting evidence thereof, will be available for inspection by any Limited Partner or his duly authorized representative during normal business hours at the principal office of the General Partner. 5.1.4 The General Partner shall keep the Limited Partners informed of the status of the business and affairs of the Partnership by means of periodic, written, unaudited reports of operations. Such reports shall be rendered not less often than annually. 5.1.5 The General Partner shall maintain or cause to be maintained complete and accurate records and accounts of all income and expenditures and furnish the Limited Partners with annual statements of account which may be included in the applicable reports referred to in Section 5.1.4 hereof, together with all necessary tax reporting information. Such records and accounts shall be maintained in accordance with generally accepted accounting principles applied on a consistent basis and shall be available for inspection by any Limited Partner or his duly authorized representative during normal business hours at the office of the General Partner; however, the General Partner shall not be required to maintain such records and material referred to herein for a period in excess of six

5.1.3 The General Partner shall maintain or cause to be maintained complete and accurate records of all real and personal property acquired, leased, rented and disposed of by the Partnership, account records of all Partners, insurance policies or copies of certificates thereof, and opinions of counsel received by the Partnership. Such documents, opinions and records, together with receipts, vouchers and other supporting evidence thereof, will be available for inspection by any Limited Partner or his duly authorized representative during normal business hours at the principal office of the General Partner. 5.1.4 The General Partner shall keep the Limited Partners informed of the status of the business and affairs of the Partnership by means of periodic, written, unaudited reports of operations. Such reports shall be rendered not less often than annually. 5.1.5 The General Partner shall maintain or cause to be maintained complete and accurate records and accounts of all income and expenditures and furnish the Limited Partners with annual statements of account which may be included in the applicable reports referred to in Section 5.1.4 hereof, together with all necessary tax reporting information. Such records and accounts shall be maintained in accordance with generally accepted accounting principles applied on a consistent basis and shall be available for inspection by any Limited Partner or his duly authorized representative during normal business hours at the office of the General Partner; however, the General Partner shall not be required to maintain such records and material referred to herein for a period in excess of six (6) years from the date of the making or receipt thereof. 5.1.6 The General Partner shall not have authority to act in contravention of this Agreement, to do any act which would make it impossible to carry on the ordinary business of the Partnership, to confess a judgment against the Partnership or to admit any persons as a General or Limited Partner except as provided by this Agreement. 5.1.7 No person, firm or corporation dealing with the Partnership shall be required to inquire into the authority of the General Partner to take any action or make any decision and they may rely conclusively on the power and authority of the General Partner as set forth in this Agreement. Section 5.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner shall file the Certificate of Limited Partnership as required by the Delaware Act and shall cause to be filed such other certificates or documents as may be determined by the General Partner to be necessary or appropriate for the formation or qualification and operation of a limited partnership (or a partnership in which the Limited Partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business. If the General Partner in its sole discretion determines such action to be necessary or appropriate, the General Partner in its sole discretion determines such action to be necessary or appropriate, the General Partner shall file amendments to the Certificate of Limited Partnership and shall do all things to maintain the Partnership as a limited partnership (or a partnership in which the Limited Partners have limited liability) under the laws of the State of Texas or any other state in which the Partnership may elect to do business. Subject to applicable law, the General Partner may omit from the Certificate of

Limited Partnership and any other certificates or documents, and from all amendments thereto, the names and addresses of the Limited Partners and information relating to the Capital Contributions and shares of profits and compensation of the Limited Partners, or may state such information in the aggregate rather than with respect to each individual Limited Partner. ARTICLE VI Section 6.1 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS. 6.1.1 No Limited Partner shall be personally liable for any of the debts of the Partnership or any of the losses thereof beyond (a) the amount contributed by him to the capital of the Partnership; (b) any obligations to the Partnership resulting from unpaid subscriptions; and

Limited Partnership and any other certificates or documents, and from all amendments thereto, the names and addresses of the Limited Partners and information relating to the Capital Contributions and shares of profits and compensation of the Limited Partners, or may state such information in the aggregate rather than with respect to each individual Limited Partner. ARTICLE VI Section 6.1 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS. 6.1.1 No Limited Partner shall be personally liable for any of the debts of the Partnership or any of the losses thereof beyond (a) the amount contributed by him to the capital of the Partnership; (b) any obligations to the Partnership resulting from unpaid subscriptions; and (c) his share of undistributed accumulated profits of the Partnership. It is acknowledged that, to the extent required by the Delaware Act, a Limited Partner who has received the return in whole or in part of his capital contribution may be liable to the Partnership in an amount, not in excess of such sum with interest, necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return. 6.1.2 No Limited Partner, as such, shall take part in the management of the business or transact any business for the Partnership, and no Limited Partner shall have power to sign for or to bind the Partnership. 6.1.3 No salary shall be paid to any Limited Partner, as such, nor shall any Limited Partner have a drawing account. 6.1.4 No Limited Partner shall have the right to demand distribution of his capital account except on the dissolution and liquidation of the Partnership or as otherwise provided for in this Agreement. 6.1.5 Even though distribution may be made in cash or in kind, or both, as herein set forth, no Limited Partner shall have the right to demand property other than cash in return for his respective interest. 6.1.6 Except as herein provided, no Limited Partner shall have priority over any other Limited Partner either as to distributions, return of contributions of capital, or as to allocation of profits, losses, credits or tax deductions. 6.1.7 No Limited Partner shall have the right to designate a substituted Limited Partner except in accordance with the provisions of Article VII hereof.

6.1.8 Subsequent to the execution of this Agreement as provided herein, the Partnership agrees to, and does hereby, indemnify the General Partner and hold it harmless against loss, damage or liability for, and the Limited Partners will make no claim against the General Partner for, any act or failure to act with respect to the business of the Partnership unless such act or omission is the result of gross negligence or willful misconduct. 6.1.9 Limited Partners holding at least thirty five percent (35%) of the Units then outstanding (other than Units held by the General partner) may propose to remove the General Partner by submitting their proposal in writing to the General Partner in the manner provided for giving notice. Within forty-five (45) days after the receipt of any such proposal, the General Partner shall submit the proposal to the vote of all Limited Partners. An affirmative vote of seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner) as required by Section 14.1.1 shall be necessary for such removal. Any removal of a General Partner shall not cause a forfeiture, or otherwise deprive the removed General Partner of any rights then owned by the removed General Partner to share in allocations of profits, losses, credits and deductions or distributions or any other rights given herein and to compensation or remuneration earned by such General Partner. Any removal of General Partner(s) shall be effective as of the date sixty (60) days following the count of such vote. Prior to any action contemplated by the Limited Partners pursuant to this Section 6.1.9 hereof, the General Partner shall obtain an opinion rendered by the Partnership's general counsel which opinion

6.1.8 Subsequent to the execution of this Agreement as provided herein, the Partnership agrees to, and does hereby, indemnify the General Partner and hold it harmless against loss, damage or liability for, and the Limited Partners will make no claim against the General Partner for, any act or failure to act with respect to the business of the Partnership unless such act or omission is the result of gross negligence or willful misconduct. 6.1.9 Limited Partners holding at least thirty five percent (35%) of the Units then outstanding (other than Units held by the General partner) may propose to remove the General Partner by submitting their proposal in writing to the General Partner in the manner provided for giving notice. Within forty-five (45) days after the receipt of any such proposal, the General Partner shall submit the proposal to the vote of all Limited Partners. An affirmative vote of seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner) as required by Section 14.1.1 shall be necessary for such removal. Any removal of a General Partner shall not cause a forfeiture, or otherwise deprive the removed General Partner of any rights then owned by the removed General Partner to share in allocations of profits, losses, credits and deductions or distributions or any other rights given herein and to compensation or remuneration earned by such General Partner. Any removal of General Partner(s) shall be effective as of the date sixty (60) days following the count of such vote. Prior to any action contemplated by the Limited Partners pursuant to this Section 6.1.9 hereof, the General Partner shall obtain an opinion rendered by the Partnership's general counsel which opinion shall indicate that the Limited Partners, by taking such contemplated action, will not lose the benefits of limited liability as described in Section 6.1.1 hereof and in the Delaware Act.

ARTICLE VII Section 7.1 ASSIGNMENT BY LIMITED PARTNERS. 7.1.1 Each Limited Partner represents and acknowledges that he has acquired his Units for his own investment purposes only and not with a view to distribution or fractionalization thereof. Each Limited Partner further acknowledges that, due to the speculative nature of the Partnership's business, and the restrictions contained herein, sale or other assignment of Units may be practicably impossible. 7.1.2 A Limited Partner may assign his Units provided: (a) the General Partner consents, in its sole discretion, in writing to the assignment; (b) the General Partner may impose a reasonable transfer fee as a condition to the assignment; (c) the assignment has been registered under the Securities Act of 1933, as amended, and applicable state securities laws, rules and regulations or an exemption to registration is available, and the Limited Partner has supplied the Partnership, at his own cost and expense, if requested by the General Partner, with an opinion of counsel in form and substance acceptable to the General Partner to the effect that the interest to be assigned has been registered under the Securities Act of 1933, as amended, and applicable state securities laws, rules and regulations, or that an exemption to such registration is available for the proposed transfer; (d) the interest assigned may not be less than the total interest of a Limited Partner in the Partnership unless, in the opinion of the General Partner, the Limited Partner has sufficient interest to be divided; (e) all assignments shall be effective as of the last day of the calendar quarter during which each assignment is made. 7.1.3 No assignee of an interest of a Limited Partner may be admitted to the Partnership as a substitute Limited Partner without the consent of the General Partner which consent may be exercised in the General Partner's sole discretion. Any Assignee seeking substitution as a Limited Partner must consent, in writing in form satisfactory to the General Partner, to be bound by the terms of this Agreement in the place and stead of the assigning Limited Partner. 7.1.4 Upon the death or legal incompetency of an individual Limited Partner, his legal representative shall have all of the rights of a Limited Partner for the purpose of settling or managing his estate, and such power as the

ARTICLE VII Section 7.1 ASSIGNMENT BY LIMITED PARTNERS. 7.1.1 Each Limited Partner represents and acknowledges that he has acquired his Units for his own investment purposes only and not with a view to distribution or fractionalization thereof. Each Limited Partner further acknowledges that, due to the speculative nature of the Partnership's business, and the restrictions contained herein, sale or other assignment of Units may be practicably impossible. 7.1.2 A Limited Partner may assign his Units provided: (a) the General Partner consents, in its sole discretion, in writing to the assignment; (b) the General Partner may impose a reasonable transfer fee as a condition to the assignment; (c) the assignment has been registered under the Securities Act of 1933, as amended, and applicable state securities laws, rules and regulations or an exemption to registration is available, and the Limited Partner has supplied the Partnership, at his own cost and expense, if requested by the General Partner, with an opinion of counsel in form and substance acceptable to the General Partner to the effect that the interest to be assigned has been registered under the Securities Act of 1933, as amended, and applicable state securities laws, rules and regulations, or that an exemption to such registration is available for the proposed transfer; (d) the interest assigned may not be less than the total interest of a Limited Partner in the Partnership unless, in the opinion of the General Partner, the Limited Partner has sufficient interest to be divided; (e) all assignments shall be effective as of the last day of the calendar quarter during which each assignment is made. 7.1.3 No assignee of an interest of a Limited Partner may be admitted to the Partnership as a substitute Limited Partner without the consent of the General Partner which consent may be exercised in the General Partner's sole discretion. Any Assignee seeking substitution as a Limited Partner must consent, in writing in form satisfactory to the General Partner, to be bound by the terms of this Agreement in the place and stead of the assigning Limited Partner. 7.1.4 Upon the death or legal incompetency of an individual Limited Partner, his legal representative shall have all of the rights of a Limited Partner for the purpose of settling or managing his estate, and such power as the decedent or incompetent possessed to substitute a successor as an assignee of his interest in the Partnership and to join with such assignee in making application to substitute such assignee as a Limited Partner.

7.1.5 Without limiting the discretion of the General Partner to withhold its consent to any assignment, the General Partner shall not consent to any transfer which would cause a termination of the Partnership under the Internal Revenue Code of 1954, as amended. 7.1.6 Upon the bankruptcy, insolvency, dissolution or the cessation to exist as a legal entity of a Limited Partner, the legal representative of such person or entity shall have the rights of a Limited Partner for the purpose of effecting the orderly disposition of the Units of such Limited Partner; provided, however, the terms and conditions of this Article VII shall be complied with as a condition precedent to any assignment by such legal representative. ARTICLE VIII Section 8.1 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar year, and the General Partner shall keep or cause to be kept complete and accurate books of account, in accordance with generally accepted accounting practices applied on a consistent basis. The books and records as so prepared shall be conclusive on all Partners except for fraud or manifest error. Section 8.2 AUDIT. The books of the Partnership may be audited annually by such independent public

7.1.5 Without limiting the discretion of the General Partner to withhold its consent to any assignment, the General Partner shall not consent to any transfer which would cause a termination of the Partnership under the Internal Revenue Code of 1954, as amended. 7.1.6 Upon the bankruptcy, insolvency, dissolution or the cessation to exist as a legal entity of a Limited Partner, the legal representative of such person or entity shall have the rights of a Limited Partner for the purpose of effecting the orderly disposition of the Units of such Limited Partner; provided, however, the terms and conditions of this Article VII shall be complied with as a condition precedent to any assignment by such legal representative. ARTICLE VIII Section 8.1 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar year, and the General Partner shall keep or cause to be kept complete and accurate books of account, in accordance with generally accepted accounting practices applied on a consistent basis. The books and records as so prepared shall be conclusive on all Partners except for fraud or manifest error. Section 8.2 AUDIT. The books of the Partnership may be audited annually by such independent public accountants as the General Partner shall designate. Section 8.3 INCOME TAX MATTERS 8.3.1 The General Partner shall arrange for the preparation (at the Partnership's expense) and timely filing of all returns of Partnership income, gains, deductions and losses necessary for federal and state income tax purposes and shall use reasonable efforts to cause copies of such returns or all pertinent information contained therein to be furnished to the Partners within ninety (90) days of the close of the taxable year. A copy of the Partnership's federal income tax return will be furnished to any Partner upon request at such Partner's own expense. 8.3.2 Except as otherwise provided herein, the General Partner shall determine whether to make any available election (including the election provided for in Section 168 of the Code). The General Partner shall make the election under Section 754 of the Code upon the request of the transferee of a Unit or, upon a distribution of property to the Limited Partners, upon the consent of all Limited Partners. The General Partner may seek to revoke any such election upon the General Partner's determination that such revocation is in the best interests of the Limited Partners, provided that the General Partner shall not seek to revoke any such election unless it receives an opinion of counsel that such revocation would not result in the loss of limited liability of the Limited Partners in the Partnership or cause the Partnership to be treated as an association taxable as a corporation for federal income tax purposes. 8.3.3 Subject to the provisions hereof, the General Partner is designated as the Tax Matters Partner (as defined in Section 6231 of the Code), and is authorized and required to represent the Partnership (at the Partnership's expense) in connection with all examinations of the Partnership's

affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Limited Partner agrees to cooperate with the General Partner to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 8.3.4 The Partnership shall elect to deduct expenses incurred in organizing the Partnership ratably over a sixty (60) month period as provided in Section 709 of the Code. 8.3.5 No election shall be made by the Partnership, or any Partner for the Partnership to be excluded from the application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions of any state tax laws. ARTICLE IX

affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Limited Partner agrees to cooperate with the General Partner to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings. 8.3.4 The Partnership shall elect to deduct expenses incurred in organizing the Partnership ratably over a sixty (60) month period as provided in Section 709 of the Code. 8.3.5 No election shall be made by the Partnership, or any Partner for the Partnership to be excluded from the application of any of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any similar provisions of any state tax laws. ARTICLE IX Section 9.1 COMPENSATION TO GENERAL PARTNERS AND AFFILIATES. 9.1.1 It is anticipated that the Partnership will engage the General Partner or its affiliates to provide management services to the Partnership with respect to the assets and small businesses of the Partnership which require management services. The Partnership shall pay the General Partner or affiliates a fee for all such services which shall be fifty cents ($0.50) per ton of coal produced at the facility. 9.1.2 The General Partner shall be reimbursed for all expenses, disbursements and advances incurred or made in connection with the organization and start-up of the Partnership, the Offering, the qualification of the Partnership and the General Partner to do business and any subsequent offerings of Units or other securities by the Partnership. The General Partner shall be reimbursed on a monthly basis for all direct out-of-pocket expenses it incurs or makes on behalf of the Partnership. The General Partner shall determine the expenses that are allocable to the Partnership in any manner that is reasonable and fair to all parties. Section 9.2 REPORTS OF COMPENSATION. 9.2.1 The General Partner, with respect to each calendar year, shall inform the Limited Partners of all transactions between them, or its affiliates, and the Partnership regarding commissions, compensation or other benefits, paid or accrued during such year, to the General Partner or its affiliates. ARTICLE X Section 10.I DISTRIBUTIONS OF DISTRIBUTABLE CASH. 10.1.1 The General Partner shall have the right to accumulate all Distributable Cash of the Partnership until dissolution and liquidation of the Partnership. The General Partner may, however, at its complete discretion from time to time declare a distribution of Distributable Cash to be distributed to

the Limited Partners and to the General Partner, as of the record date set by the General Partner for such distribution, in proportion to their respective Participating Percentages. ARTICLE XI Section 11.1 ALLOCATION OF PROFIT AND LOSS FOR CAPITAL ACCOUNT PURPOSES. 11.1.1 Except as hereinafter provided in this Article XI for purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the income, gain, losses, deductions and credits from operations of the Partnership for each fiscal year will be allocated among the Limited Partners and the General Partner in the following manner: (a) Net Income. After giving effect to the special allocations set forth in Section 11.1.2, Net Income for each

the Limited Partners and to the General Partner, as of the record date set by the General Partner for such distribution, in proportion to their respective Participating Percentages. ARTICLE XI Section 11.1 ALLOCATION OF PROFIT AND LOSS FOR CAPITAL ACCOUNT PURPOSES. 11.1.1 Except as hereinafter provided in this Article XI for purposes of maintaining the Capital Accounts and in determining the rights of the Partners among themselves, the income, gain, losses, deductions and credits from operations of the Partnership for each fiscal year will be allocated among the Limited Partners and the General Partner in the following manner: (a) Net Income. After giving effect to the special allocations set forth in Section 11.1.2, Net Income for each taxable period and all items of income, gain, loss, and deduction taken into account in computing Net Income shall be allocated as follows: (1) first, 100% to the General Partner until the aggregate Net Income allocated to the General Partner pursuant to this Section 11.1.1(a)(1) for the current and all previous taxable periods is equal to the aggregate Net Losses allocated to the General Partner pursuant to Section 11.1.1(b)(2) for all previous taxable years; and (2) second, the balance, if any, to the Partners in accordance with their respective Participating Percentages. (b) Net Losses. After giving effect to the special allocations set forth in Section 11.1.2, Net Losses for each taxable period and all items of income, gain, loss and deduction taken into account in computing Net Losses for such taxable period shall be allocated as follows: (1) First, to the Partners in accordance with their respective Participating Percentages; provided, that Net Losses shall not be allocated pursuant to this Section 11.1.1(b)(1) to the extent such allocation would cause any Limited Partner to have a deficit balance in his Adjusted Capital Account at the end of such taxable year (or increase any existing balance in his Adjusted Capital Account); and (2) second, the balance, if any, to the General Partner. 11.1.2 The following mandatory allocations shall be made prior to making any allocations provided for in 11.1.1 above: (a) Minimum Gain Chargeback. Notwithstanding any other provisions of this Article XI, except as provided in Regulation Section 1.704-2(f), if there is a net decrease

in Partnership Minimum Gain during any Fiscal Year, each Partner shall be allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 11.2.1(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. (b) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Article XI (other than Section 11.2.1(a), except as provided in Regulation Section 1.704-2(i)(4)), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership Fiscal Year, any Partner with a share of Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be allocated items of Partnership income and gain for such period (and if necessary, subsequent periods) in an amount equal to such Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4).

in Partnership Minimum Gain during any Fiscal Year, each Partner shall be allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain determined in accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 11.2.1(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith. (b) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Article XI (other than Section 11.2.1(a), except as provided in Regulation Section 1.704-2(i)(4)), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership Fiscal Year, any Partner with a share of Partner Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be allocated items of Partnership income and gain for such period (and if necessary, subsequent periods) in an amount equal to such Partner's share of the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 11.2.1(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704- 2(i)(4) of the Regulations and shall be interpreted consistently therewith. (c) Qualified Income Offset. Except as provided in Section 11.1.2(d) hereof, in the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation Sections 1.704-1 (b) (2) (i) (d) (4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specifically allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Allocation Regulations, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible, provided that an allocation pursuant to this Section 11.1.2(c) shall be made only if and to the extent that the Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article XI have been tentatively made as if this Section 11.1.2(c) were not in the Agreement. This Section 11.1.2(c) is intended to constitute a "qualified income offset" within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d), and shall be interpreted consistently therewith.. (d) Gross Income Allocations. In the event any Partner has a deficit balance in its Adjusted Capital Account at the end of any Partnership taxable period, such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 11.1.2(d) shall be made only if and to the extent that such

Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 11.1 have been tentatively made as if Sections 11.1.2(c) and 11.1.2(d) were not in the Agreement. (e) Nonrecourse Deductions. Nonrecourse deductions for any fiscal year of the Partnership shall be allocated to the Partners in accordance with their Participating Percentages. (f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any fiscal year of the Partnership or other period shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i)(1). (g) Code Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to the Allocation Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with

Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section 11.1 have been tentatively made as if Sections 11.1.2(c) and 11.1.2(d) were not in the Agreement. (e) Nonrecourse Deductions. Nonrecourse deductions for any fiscal year of the Partnership shall be allocated to the Partners in accordance with their Participating Percentages. (f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any fiscal year of the Partnership or other period shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i)(1). (g) Code Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to the Allocation Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to the Allocation Regulations. (h) Curative Allocation. The s pecial allocations set forth in Section 11.1.2(a), (b), (c), (d), (e), (f), and (g) (the "Regulatory Allocations") are intended to comply with the Allocation Regulations. Notwithstanding any other provisions of this Section 11.1, the Regulatory Allocations shall be taken into account in allocating items of income, gain, loss and deduction among the Partners such that, to the extent possible, the net amount of allocations of such items and the Regulatory Allocations to each Partner shall be equal to the net amount that would have been allocated to each Partner if the Regulatory Allocations had not occurred. Section 11.2 TAX ALLOCATIONS 11.2.1 For federal income tax purposes, except as otherwise provided in this Section 11.2, each item of Partnership income, gain, loss, deduction and credit shall be allocated among the Partners in the same manner as corresponding items are allocated in Section 11.1. 11.2.2 In the case of Contributed Property, any income, gain, loss or deduction attributable to such property shall for federal income tax purposes be allocated first among the Partners to take account of the variation between the Agreed Value of such property and its adjusted basis for federal income tax purposes at the time of contribution and thereafter in the same manner as its correlative book gain or loss is allocated pursuant to Section 11.1. In the case of Adjusted Property, first in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 4.4.4. Second, in the event the property

was originally a Contributed Property, in a manner to take into account the Agreed Value of such property and its adjusted basis for federal income tax purposes at the time of contribution; and thereafter, in the same manner as its correlative "book" gain or loss is allocated pursuant to Section 11.1. 11.2.3 It is intended that the allocations in Section 11.2.2 hereof effect an allocation for federal income tax purposes pursuant to Section 704(c) of the Code and the regulations thereunder and comply with any limitations or restrictions therein. Such allocations are designed to eliminate, to the extent possible, disparities that otherwise exist between the balances of the Partners' Capital Accounts, as maintained pursuant to Section 4.4 and such balances had such Capital Accounts been maintained strictly in accordance with tax accounting principles. The General Partner shall have discretion to make the allocation in any reasonable manner permitted under such Code section. 11.2.4 Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 11.2 be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.

was originally a Contributed Property, in a manner to take into account the Agreed Value of such property and its adjusted basis for federal income tax purposes at the time of contribution; and thereafter, in the same manner as its correlative "book" gain or loss is allocated pursuant to Section 11.1. 11.2.3 It is intended that the allocations in Section 11.2.2 hereof effect an allocation for federal income tax purposes pursuant to Section 704(c) of the Code and the regulations thereunder and comply with any limitations or restrictions therein. Such allocations are designed to eliminate, to the extent possible, disparities that otherwise exist between the balances of the Partners' Capital Accounts, as maintained pursuant to Section 4.4 and such balances had such Capital Accounts been maintained strictly in accordance with tax accounting principles. The General Partner shall have discretion to make the allocation in any reasonable manner permitted under such Code section. 11.2.4 Any gain allocated to the Partners upon the sale or other taxable disposition of any Partnership asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 11.2 be characterized as Recapture Income in the same proportions and to the same extent as such Partners have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income. 11.2.5 In the event of the transfer of a Partnership Interest during a year, each item of Partnership income, gain, loss, deduction and credit attributable to the transferred Partnership Interest shall, for federal income tax purposes, be prorated between the transferor and the transferee on a daily or other reasonable basis, as required by Section 706 of the Code. 11.2.6 If the Participating Percentage of a Limited Partner or an Assignee is changed during a taxable year for any reason other than the transfer of a Partnership Interest to another Person, such Limited Partner's or Assignee's share of taxable income or loss shall be determined for federal income tax purposes by prorating all items of taxable income or loss on a daily or other reasonable basis and allocating such items among the Partners taking into account the applicable Participating Percentages in the Partnership on each such day (or other reasonable period) and each such Partner's varying share thereof as required by Section 706 of the Code. 11.2.7 All items of income, gain, loss, deduction, credit and basis allocation recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Partnership; provided, however, such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted by Sections 734 and 743 of the Code. ARTICLE XII Section 12.1 WITHDRAWAL OR DEATH OF A LIMITED PARTNER.

12.1.1 The withdrawal or death of any Limited Partner shall not affect the continuation of the Partnership and shall not cause a dissolution of the Partnership. ARTICLE XIII Section 13.1 DISSOLUTION, LIQUIDATION AND TERMINATION. 13.1.1 The Partnership shall be dissolved upon the occurrence of any of the following: (a) the expiration of twenty (20) years from the date hereof or upon the sale of substantially all of the Partnership's assets, whichever occurs first; (b) by affirmative vote of Limited Partners owning not less than seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner); (c) by any event which makes it unlawful for the Partnership's business to be continued;

12.1.1 The withdrawal or death of any Limited Partner shall not affect the continuation of the Partnership and shall not cause a dissolution of the Partnership. ARTICLE XIII Section 13.1 DISSOLUTION, LIQUIDATION AND TERMINATION. 13.1.1 The Partnership shall be dissolved upon the occurrence of any of the following: (a) the expiration of twenty (20) years from the date hereof or upon the sale of substantially all of the Partnership's assets, whichever occurs first; (b) by affirmative vote of Limited Partners owning not less than seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner); (c) by any event which makes it unlawful for the Partnership's business to be continued; (d) by the written notice of the General Partner of its election to dissolve the Partnership; or (e) by bankruptcy, adjudication of insolvency, removal, death or withdrawal (on sixty (60) days prior written notice from the General Partner to all Partners) of the General Partner. In the event of a dissolution of the Partnership pursuant to Section 13.1.1(e), the remaining Partners may elect to continue the Partnership in accordance with the terms of this Agreement and, if the Partnership is continued, the remaining Partners owning in excess of 50% of the Units appoint a new general partner or general partners who shall succeed to the general partner interest of the former General Partner. 13.1.2 Upon a dissolution of the Partnership, the Partnership shall not terminate, but shall cease to engage in further business except to the extent necessary to perform existing contracts and preserve the value of its assets, and the General Partner shall take full account of the Partnership assets and liabilities and shall wind up its affairs and liquidate its assets. During the course of liquidation, the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Partnership. 13.1.3 After the Partnership's affairs have been wound up and its assets liquidated, the General Partner (or the person acting in its stead) shall distribute the proceeds therefrom in the following order: (a) to creditors of the Partnership, other than Partners, in the order of priority as provided by law; and

(b) to the payment of any loans or advancements made by the Partners or their affiliates and to the payment of compensation or fees for services rendered to which the General Partner or its affiliates are entitled by reason of their management of the Partnership or otherwise; and (c) to the Partners in proportion to and to the extent of the positive balances in their respective Capital Accounts after taking into account all adjustments to the Capital Account balances pursuant to Sections 4.4 and 11.1; and provided however, that the Liquidator may place in escrow a reserve of cash or other assets of the Partnership for contingent liabilities in an amount determined by the Liquidator as appropriate for such purposes. 13.1.4 No Limited Partner shall be obligated to restore any negative balance in its Capital Account or have any obligation to make additional contributions of capital upon liquidation. 13.1.5 Upon completion of the dissolution, winding up, liquidation, and distribution of the liquidation proceeds and any other Partnership assets, the Partnership shall terminate. ARTICLE XIV Section 14.1 VOTING RIGHTS OF LIMITED PARTNERS. All actions and votes of Limited Partners required

(b) to the payment of any loans or advancements made by the Partners or their affiliates and to the payment of compensation or fees for services rendered to which the General Partner or its affiliates are entitled by reason of their management of the Partnership or otherwise; and (c) to the Partners in proportion to and to the extent of the positive balances in their respective Capital Accounts after taking into account all adjustments to the Capital Account balances pursuant to Sections 4.4 and 11.1; and provided however, that the Liquidator may place in escrow a reserve of cash or other assets of the Partnership for contingent liabilities in an amount determined by the Liquidator as appropriate for such purposes. 13.1.4 No Limited Partner shall be obligated to restore any negative balance in its Capital Account or have any obligation to make additional contributions of capital upon liquidation. 13.1.5 Upon completion of the dissolution, winding up, liquidation, and distribution of the liquidation proceeds and any other Partnership assets, the Partnership shall terminate. ARTICLE XIV Section 14.1 VOTING RIGHTS OF LIMITED PARTNERS. All actions and votes of Limited Partners required or permitted under the terms of this Agreement shall be conducted pursuant to the following terms and provisions: 14.1.1 Each Limited Partner shall have the right to cast one vote for each Unit owned of record on the books of the Partnership by such Limited Partner. Limited Partners shall not be entitled to cumulate their votes. Except with respect to removal of a General Partner, in which case the affected General Partner shall have no vote, a General Partner shall have full voting rights as Limited Partner with respect to any Units he may own. 14.1.2 The General Partner shall set a record date for determining the Limited Partners entitled to cast a ballot and to vote, which date shall not be more than sixty (60) or less than twenty (20) days prior to the date on which such ballots are deposited in the mails or otherwise delivered to the Limited Partners. The General Partner shall give notice to each Limited Partner and shall transmit with any such notice the following: (a) a description of each matter being voted upon; (b) a ballot providing for each Limited Partner to cast his number of votes for or against each matter being voted upon;

(c) a statement of the date by which each Limited Partner's ballot must be received by the General Partner, which date shall be not less than twenty (20) days from the date on which such ballots are deposited in the regular mails or otherwise delivered to the Limited Partners; and (d) an envelope self-addressed to the General Partner at the General Partner's address. 14.1.3 All ballots must be returned to the General Partner not later than the date indicated on the ballot pursuant to Section 15.1.2(iii). ballots received after said twenty (20) day period shall be considered void. 14.1.4 Within ten (10) days after the date indicated on the ballot pursuant to Section 14.1.2(c), the General Partner shall count the vote. All ballots not returned, or returned after the twenty (20) day period, shall not be counted in the vote. The General Partner shall within ten (10) days after tallying the vote notify the Limited Partners of the outcome of said vote by written notice. 14.1.5 Unless otherwise specified in this Agreement, any matters which shall be submitted to a vote of the Limited Partners shall be deemed approved if Limited Partners owning not less than seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner) and who are entitled to vote in accordance with the provisions of Section 14.1.1 shall cast their votes in favor of any such matter. ARTICLE XV

(c) a statement of the date by which each Limited Partner's ballot must be received by the General Partner, which date shall be not less than twenty (20) days from the date on which such ballots are deposited in the regular mails or otherwise delivered to the Limited Partners; and (d) an envelope self-addressed to the General Partner at the General Partner's address. 14.1.3 All ballots must be returned to the General Partner not later than the date indicated on the ballot pursuant to Section 15.1.2(iii). ballots received after said twenty (20) day period shall be considered void. 14.1.4 Within ten (10) days after the date indicated on the ballot pursuant to Section 14.1.2(c), the General Partner shall count the vote. All ballots not returned, or returned after the twenty (20) day period, shall not be counted in the vote. The General Partner shall within ten (10) days after tallying the vote notify the Limited Partners of the outcome of said vote by written notice. 14.1.5 Unless otherwise specified in this Agreement, any matters which shall be submitted to a vote of the Limited Partners shall be deemed approved if Limited Partners owning not less than seventy-five percent (75%) of the Units then outstanding (other than Units held by the General Partner) and who are entitled to vote in accordance with the provisions of Section 14.1.1 shall cast their votes in favor of any such matter. ARTICLE XV Section 15.1 MERGER OR CONSOLIDATION 15.1.1 The Partnership may merge or consolidate with one or more limited partnerships formed under the laws of the State of Delaware or another state of the United States of America pursuant to a written agreement of merger or consolidation ("Merger Agreement") in accordance with this Article XV. 15.1.2 Merger or consolidation of the Partnership pursuant to this Article XV requires the prior written consent of the General Partner. If the General Partner determines, in the exercise of its sole discretion, to consent to the merger or consolidation, the General Partner shall approve the merger agreement, which shall set forth: (a) the names and states of domicile of the limited partnerships proposing to merge or consolidate; (b) the name and states of domicile of the limited partnership into which they propose to merge or consolidate (hereafter designated as the "Surviving Limited Partnership"); (c) the manner and basis of exchanging or converting the general and limited partnership interest of each merging limited partnership for, or into, cash, property, general or

limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership, and (1) if any general or limited partnership interests of whether merging limited partnership are not to be exchanged or converted solely for, or into, cash, property, general or limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership, the cash, property, general or limited partnership interests, rights, securities or obligations of any limited partnership (other than the Surviving Limited Partnership), corporation, trust or other entity which the holders of such general or limited partnership interests are to receive in exchange for, or upon conversion of, their general or limited partnership interests and (2) in the case of general or limited partnership interests represented by certificates, upon the surrender of such certificates, which cash, property, general or limited partnership interest are to receive in exchange for, or upon conversion of, their general or limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership or any limited partnership (other than the Surviving Limited Partnership), corporation, trust or other entity, or evidences thereof, are to be delivered; (e) a statement of any changes in the certificate of limited partnership of the Surviving Limited Partnership to be effected by such merger or consolidation; (f) the effective time of the merger or consolidation, which may be the date of the filing of the certificate of merger

limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership, and (1) if any general or limited partnership interests of whether merging limited partnership are not to be exchanged or converted solely for, or into, cash, property, general or limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership, the cash, property, general or limited partnership interests, rights, securities or obligations of any limited partnership (other than the Surviving Limited Partnership), corporation, trust or other entity which the holders of such general or limited partnership interests are to receive in exchange for, or upon conversion of, their general or limited partnership interests and (2) in the case of general or limited partnership interests represented by certificates, upon the surrender of such certificates, which cash, property, general or limited partnership interest are to receive in exchange for, or upon conversion of, their general or limited partnership interests, rights, securities or obligations of the Surviving Limited Partnership or any limited partnership (other than the Surviving Limited Partnership), corporation, trust or other entity, or evidences thereof, are to be delivered; (e) a statement of any changes in the certificate of limited partnership of the Surviving Limited Partnership to be effected by such merger or consolidation; (f) the effective time of the merger or consolidation, which may be the date of the filing of the certificate of merger pursuant to Section 15.1.4 or a later date specified in or determinable in accordance with the merger agreement (provided that if the effective time of the merger or consolidation is to be later than the date of the filing of the certificate of merger, the effective time shall be fixed at or prior to the time of the filing of the certificate of merger and stated therein); and (g) such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable. Section 15.1.3 (a) The General Partner, upon approving a Merger Agreement, shall direct that the merger Agreement be submitted to a vote of Limited Partners either at a meeting or by written consent, in either case in accordance with the requirements of Article XIV. A copy or a summary of the Merger Agreement shall be included in or enclosed with the notice of a meeting or the written consent. (b) The Merger Agreement shall be approved upon receiving the affirmative vote or consent of the holders of at least fifty percent (50%) of the Units outstanding (other than Units held by the General Partner), unless the merger agreement contains any additional voting requirements or contains any provision which, if contained in an amendment to the Agreement, would require the vote or consent of a greater percentage of the Percentage Interests of the Limited Partners, in which case such greater percentage vote or consent shall be required for approval of the merger agreement. (c) No vote or consent of Limited Partners shall be required if, on the date that the merger agreement is approved by the General Partner, the

Partnership is the Surviving Limited Partnership and is the owner of at least ninety (90%) percent of the partnership interests (determined with respect to participation in the capital or profits of the partnership) of the other partnership that is a party to the merger. (d) After such approval by vote or consent of the Limited Partners, and at anytime prior to filing of the certificate of merger pursuant to Section 15.1.4, the merger or consolidation may be abandoned pursuant to provisions therefore, if any, set forth in the merger agreement. 15.1.4 Upon the required approval by the General Partner and Limited Partners of a merger agreement, a certificate of merger shall be executed and filed with the Secretary of State in conformity with the requirements of the Delaware Act. ARTICLE XVI

Partnership is the Surviving Limited Partnership and is the owner of at least ninety (90%) percent of the partnership interests (determined with respect to participation in the capital or profits of the partnership) of the other partnership that is a party to the merger. (d) After such approval by vote or consent of the Limited Partners, and at anytime prior to filing of the certificate of merger pursuant to Section 15.1.4, the merger or consolidation may be abandoned pursuant to provisions therefore, if any, set forth in the merger agreement. 15.1.4 Upon the required approval by the General Partner and Limited Partners of a merger agreement, a certificate of merger shall be executed and filed with the Secretary of State in conformity with the requirements of the Delaware Act. ARTICLE XVI Section 16.1 NOTICES. All notices or other communications required or permitted to be given pursuant to this Agreement shall, in the case of notices to be given to the Limited Partners, be in writing and shall be considered as properly given or made if mailed from within the United States by first class mail, postage prepaid, or if sent by prepaid telegram, and addressed to the address set forth opposite a Limited Partner's name on Exhibit "A" to this Agreement or as set forth in such Limited Partner's Subscription Documents. In the case of notices required or permitted to be given to the General Partner, the same shall be in writing and shall be considered as properly given or made if mailed by United States certified or registered mail, return receipt requested, addressed to the General Partner at 3280 North Frontage Road, Lehi, Utah 84043. Any Limited Partner may change his address by giving notice in writing, stating his new address, to the General Partner, and the General Partner may change its address by giving such notice to all Limited Partners. Commencing on the tenth (10th) day after the giving of such notice, such newly designated address shall be such Partner's address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement. Section 16.2 LAW GOVERNING. This agreement shall be governed by and construed in accordance with the laws of the State of Delaware. Section 16.3 AMENDMENTS. Except as otherwise herein provided to the contrary, this Agreement is subject to amendment only upon the approval of the Limited Partners owning of record, on the books of the partnership, not less than fifty-one percent (51%) of the then outstanding Units (other than Units held by the General Partner); provided, however, no amendment shall alter, modify, expand or extend the obligations or liabilities of the General Partner without its prior written consent, and provided that no amendment shall reduce the percentage vote required under Section 6.1.9 hereof to remove a General Partner. Section 16.4 SUCCESSORS AND ASSIGNS. This Agreement and all the terms and provisions hereof shall be binding upon the partners, their respective legal representatives, heirs, successors and assigns.

Section 16.5 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall constitute this Agreement. Section 16.6 NECESSARY DOCUMENTS . Each Limited Partner agrees upon request of the General Partner, to execute such certificates or other documents and perform such acts as the General Partner deems necessary for purposes and business of the Partnership. Section 16.7 HEADINGS AND PRONOUNS. Paragraph titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the intent of any provision hereof. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders and the word "person" shall include corporation, partnership, firm, association or other entity. Section 16.8 VALIDITY. If any provision of this Certificate and Agreement of Limited Partnership or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Certificate

Section 16.5 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall constitute this Agreement. Section 16.6 NECESSARY DOCUMENTS . Each Limited Partner agrees upon request of the General Partner, to execute such certificates or other documents and perform such acts as the General Partner deems necessary for purposes and business of the Partnership. Section 16.7 HEADINGS AND PRONOUNS. Paragraph titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the intent of any provision hereof. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders and the word "person" shall include corporation, partnership, firm, association or other entity. Section 16.8 VALIDITY. If any provision of this Certificate and Agreement of Limited Partnership or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Certificate and Agreement of Limited Partnership, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. Section 16.9 MODIFICATION TO BE IN WRITING. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and no amendment, modification or alteration of the terms hereof shall be binding unless the same be in writing. Section 16.10 WAIVER OF ACTION OF PARTITION. Each of the Partners hereto irrevocably waives during the term of the Partnership any right it may have to maintain any action of partition with respect to any property of the partnership. Section 16.11 LIMITATION ON TRANSFER OF UNITS. An appropriate legend noting the restrictions on transfer shall be placed conspicuously on the face of all certificates representing Units and a notation restricting transfer will be placed in the books and records of the Partnership. All transferees of Units shall be treated similarly and corresponding notations shall be placed on new certificates for Units issued upon transfer as well as in the Partnership records.

IN WITNESS WHEREOF, the undersigned have executed this Certificate and Agreement of Limited Partnership as of the ___ day of February, 1996. GENERAL PARTNER: Covol Technologies, Inc. By_________________________________ Its President LIMITED PARTNERS:

STATE OF UTAH) : ss. COUNTY OF UTAH) On the _____, day of ____________, 1996, personally appeared before me Kirby Cochran, who being by me duly sworn did say that he is the President of Covol Technologies, Inc., and did execute the foregoing instrument

IN WITNESS WHEREOF, the undersigned have executed this Certificate and Agreement of Limited Partnership as of the ___ day of February, 1996. GENERAL PARTNER: Covol Technologies, Inc. By_________________________________ Its President LIMITED PARTNERS:

STATE OF UTAH) : ss. COUNTY OF UTAH) On the _____, day of ____________, 1996, personally appeared before me Kirby Cochran, who being by me duly sworn did say that he is the President of Covol Technologies, Inc., and did execute the foregoing instrument as a General Partner, and that the information contained therein is true and correct, and that ____________________________ and _________________________________, also, executed the same as a Limited Partner. NOTARY PUBLIC My Commission Expires: Residing at:

EXHIBIT "A" TO CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP OF Utah Synfuel #1 Capital Units Contributions GENERAL PARTNER: Covol Technologies, Inc. 3280 North Frontage Road Lehi, Utah 84043 LIMITED PARTNERS:

COVOL TECHNOLOGIES, INC.

EXHIBIT "A" TO CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP OF Utah Synfuel #1 Capital Units Contributions GENERAL PARTNER: Covol Technologies, Inc. 3280 North Frontage Road Lehi, Utah 84043 LIMITED PARTNERS:

COVOL TECHNOLOGIES, INC. List of Subsidiaries
Name Jurisdiction of Organization Utah Corporation Utah Corporation Utah Corporation Utah Corporation Delaware limited partnership Delaware limited partnership

Industrial Management and Engineering, Inc. State Incorporated Central Industrial Construction, Inc. Larson Limestone Company, Inc. Utah Synfuel #1 Alabama Synfuel #1, Ltd.

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES

YEAR SEP 30 1996 OCT 01 1995 SEP 30 1996 490106 0 77744 0 162757 779073 7528058 402813 8772072 4261300 1109066 0 0 7714 (241078) 8772072 195165 295165

COVOL TECHNOLOGIES, INC. List of Subsidiaries
Name Jurisdiction of Organization Utah Corporation Utah Corporation Utah Corporation Utah Corporation Delaware limited partnership Delaware limited partnership

Industrial Management and Engineering, Inc. State Incorporated Central Industrial Construction, Inc. Larson Limestone Company, Inc. Utah Synfuel #1 Alabama Synfuel #1, Ltd.

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

YEAR SEP 30 1996 OCT 01 1995 SEP 30 1996 490106 0 77744 0 162757 779073 7528058 402813 8772072 4261300 1109066 0 0 7714 (241078) 8772072 195165 295165 859574 13268773 41793 0 0 (12931815) (23000) (12954815) (881505) 0 0 (13836320) (1.99) (1.99)

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS PRIMARY EPS DILUTED

YEAR SEP 30 1996 OCT 01 1995 SEP 30 1996 490106 0 77744 0 162757 779073 7528058 402813 8772072 4261300 1109066 0 0 7714 (241078) 8772072 195165 295165 859574 13268773 41793 0 0 (12931815) (23000) (12954815) (881505) 0 0 (13836320) (1.99) (1.99)


				
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