COVOL TECHNOLOGIES INC
PRE 14A, 2000-01-07
BITUMINOUS COAL & LIGNITE MINING
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                                  SCHEDULE 14A

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

           Proxy Statement Pursuant to Section 14(a) of the Securities
                              Exchange Act of 1934

   Filed by the Registrant  [X]
   Filed by a Party other than the Registrant  [ ]
   Check the appropriate box:
   [X]   Preliminary Proxy Statement
   [ ]   Definitive Proxy Statement
   [ ]   Definitive Additional Materials
   [ ]   Confidential, for Use of the Commission
         Only (as permitted by Rule 14a-6(e)(2))
   [ ]   Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                            COVOL TECHNOLOGIES, INC.
                ------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


    ------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

   [X]  No fee required.

   [ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
        (1) Title of each class of securities to which transaction applies:
        (2) Aggregate number of securities to which transaction applies:
        (3) Per unit price or other underlying value of transaction computed
            pursuant  to  Exchange  Act Rule 0-11 (set forth the amount on which
            the filing fee is calculated and state how it was determined):
        (4) Proposed maximum aggregate value of transaction:
        (5) Total fee paid:
   [ ]  Fee paid previously with preliminary materials.

   [ ] Check box if any part of the fee is offset as provided  by  Exchange  Act
Rule  0-11(a)(2)  and identify the filing for which the  offsetting fee was paid
previously.  Identify the previous filing by registration  statement  number, or
the Form or Schedule and the date of its filing.

   (1) Amount Previously Paid:
   (2) Form, Schedule or Registration Statement No.:
   (3) Filing Party:
   (4) Date Filed:

                                        1

<PAGE>

                            COVOL TECHNOLOGIES, INC.

                            3280 North Frontage Road
                                Lehi, Utah 84043

                                January 17, 2000

Dear Stockholder:

   You are cordially  invited to attend the 2000 Annual Meeting of  Stockholders
of Covol Technologies,  Inc., which will be held on Wednesday, March 1, 2000, at
2:00 p.m.,  Mountain Standard Time, at the Provo Marriott Hotel, at 100 West 100
North,  Provo,  Utah  84601.  In addition to the matters to be acted upon at the
meeting,  which are  described  in the  attached  Notice of  Annual  Meeting  of
Stockholders  and Proxy  Statement,  there will be a report with  respect to the
progress of Covol and an opportunity for stockholders to ask questions.

   Whether or not you plan to attend the meeting,  please  complete,  date, sign
and  return  the  enclosed  proxy  card  or  voting   instruction  form  in  the
accompanying  envelope  as  promptly  as possible to ensure that your shares are
represented and voted in accordance with your wishes.

   The Proxy Statement contains a more extensive discussion of each proposal and
therefore you should read the Proxy Statement carefully. After you have read the
Proxy Statement and accompanying instructions, you should execute and return the
enclosed form of proxy card or voting  instructions with respect to the proposed
matters.  THE  BOARD OF  DIRECTORS  STRONGLY  RECOMMENDS  THAT YOU  APPROVE  ALL
PROPOSALS.

   Only  stockholders  of record at the close of business on January 4, 2000 are
entitled to vote at the meeting.  Stockholders  are cordially  invited to attend
the meeting in person.  However,  to assure your  representation at the meeting,
please  complete,  date and sign the enclosed proxy card and return it promptly.
If you  choose,  you may still  vote in person at the  meeting  even  though you
previously submitted a proxy card.

   If you have any  questions  after  reading  the  Proxy  Statement  and  other
materials we have sent, please call 1-800-566-9061.  You will be able to talk to
someone from Morrow & Co., Inc., a shareholder  services company that is helping
Covol with this Proxy Statement.

                                             Sincerely,

                                            /s/ Kirk A. Benson

                                            ------------------------------------
                                            Kirk A.  Benson

                                            Chairman and Chief Executive Officer

THE BOARD  ENCOURAGES  STOCKHOLDERS TO ATTEND THE MEETING IN PERSON.  WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING,  YOU ARE URGED TO COMPLETE,  DATE,  SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY IN THE  ACCOMPANYING  ENVELOPE.  STOCKHOLDERS
WHO ATTEND THE MEETING MAY VOTE THEIR  SHARES  PERSONALLY  EVEN THOUGH THEY HAVE
SENT THEIR PROXIES.

                                        2

<PAGE>

                            COVOL TECHNOLOGIES, INC.

                            3280 North Frontage Road
                                Lehi, Utah 84043

                              --------------------

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                     TO BE HELD ON WEDNESDAY, MARCH 1, 2000

                              --------------------

To the Stockholders of Covol Technologies, Inc.:

         The 2000  annual  Meeting  of  Stockholders  (the  "Meeting")  of Covol
Technologies, Inc., a Delaware corporation ("Covol"), will be held on Wednesday,
March 1, 2000,  starting  at 2:00 p.m.,  Mountain  Standard  Time,  at the Provo
Marriott  Hotel,  at 100 West 100 North,  Provo,  Utah 84601,  for the following
purposes:

         1.       To elect one Class III  director  of Covol to serve  until the
                  2003 annual meeting of stockholders, or until his successor is
                  duly elected and qualified;

         2.       To ratify the selection by the Board of PricewaterhouseCoopers
                  LLP as  independent  auditors  of Covol  for the  fiscal  year
                  ending September 30, 2000;

         3.       To ratify the  issuance by Covol in March 1999 of  convertible
                  Preferred Stock and convertible debt financing;

         4.       To   approve  an   amendment   to   Covol's   Certificate   of
                  Incorporation  increasing its  authorized  number of shares of
                  Common Stock from 25,000,000 to 50,000,000; and

         5.       To transact  such other  business as may properly  come before
                  the  Meeting  and any and all  adjournments  or  postponements
                  thereof.

         The Board has fixed the close of business  on Tuesday,  January 4, 2000
as the record date for determining the  stockholders  entitled to notice of, and
to vote at, the Meeting.  Only  stockholders of record as of the record date are
entitled  to notice of,  and to vote at, the  Meeting  and any  adjournments  or
postponements  thereof. A copy of the following materials accompany this notice:
Covol's  Annual  Report on Form 10-K for the year ended  September  30,  1999, a
Proxy  Statement and a proxy card, the March 31, 1999  Quarterly  Report on Form
10-Q,  as amended on  October 6, 1999,  and a Current  Report on Form 8- K filed
March 24, 1999.  These  materials will be first sent to stockholders on or about
January 24, 2000.

         Stockholders  are  cordially  invited to attend the  Meeting in person.
However, to assure your representation at the Meeting, please complete, date and
sign the  enclosed  proxy card and return it  promptly.  If you choose,  you may
still vote in person at the Meeting even though you previously submitted a proxy
card.

                                           By Order of the Board of Directors,

                                           Harlan M. Hatfield
                                           Secretary

Lehi, Utah
January 17, 2000

                             Your vote is important.

You are urged to date,  sign and  promptly  return  your proxy card so that your
shares may be voted in  accordance  with your wishes and that the  presence of a
quorum may be assured.  The prompt return of your signed proxy card,  regardless
of the  number of shares you hold,  will aid Covol in  avoiding  the  expense of
additional proxy solicitations.  Giving your proxy does not affect your right to
vote in person at the meeting or your right to resubmit later dated proxy cards.

                                        3

<PAGE>

                            COVOL TECHNOLOGIES, INC.

                            3280 North Frontage Road
                                Lehi, Utah 84043

                              --------------------

                                 PROXY STATEMENT

                         Annual Meeting of Stockholders
                     To Be Held on Wednesday, March 1, 2000

                              --------------------

                               GENERAL INFORMATION

         This Proxy  Statement is being  furnished to the  stockholders of Covol
Technologies,  Inc. ("Covol"), in connection with the solicitation of proxies on
behalf of the Board of Directors of Covol (the  "Board") for use at Covol's 2000
Annual Meeting of Stockholders  and any and all  adjournments  or  continuations
thereof (the "Meeting"),  to be held Wednesday,  March 1, 2000, starting at 2:00
p.m.,  Mountain  Standard  Time, at the Provo  Marriott  Hotel,  at 100 West 100
North,  Provo, Utah 84601, for the purposes set forth in the accompanying Notice
of Annual Meeting of Stockholders (the "Notice").  These materials will be first
mailed to stockholders on or about January 24, 2000.

                            PURPOSE OF ANNUAL MEETING

         At the Meeting,  stockholders will be asked: (i) to elect one class III
director  of Covol to serve until the 2003 annual  meeting of  stockholders,  or
until his successor is duly elected and qualified;  (ii) to ratify the selection
by the Board of PricewaterhouseCoopers  LLP as independent auditors of Covol for
the fiscal year ending September 30, 2000 ("Fiscal  2000");  (iii) to ratify the
issuance by Covol in March 1999 of convertible  Preferred  Stock and convertible
debt  financing;  (iv)  to  approve  an  amendment  to  Covol's  Certificate  of
Incorporation  increasing its  authorized  number of shares of Common Stock from
25,000,000  to  50,000,000;  and (v) to  transact  such  other  business  as may
properly come before the Meeting or any adjournments or postponements thereof.

         Covol's  Common  Stock,  $.001 par value,  and its Series D Convertible
Preferred Stock (collectively, the "Voting Stock") will be entitled to vote as a
single class at the Meeting. If a quorum exists,  action on items (ii) and (iii)
above will be approved by  affirmative  vote of the holders of a majority of the
shares of Voting  Stock,  present or  represented  by proxy at the  Meeting  and
entitled to vote on such matters.  Broker non-votes will not be considered to be
present for such purpose. If a quorum exists,  action on item (iv) above will be
approved by  affirmative  vote of the holders of a majority of the Voting Stock.
Directors  are elected by a plurality  of the Voting  Stock  represented  at the
meeting.  The Board  recommends  a vote "FOR" each of the  proposals.  The Board
knows of no other matters which are likely to be brought before the Meeting.  If
any other matters properly come before the Meeting, however, the person named in
the enclosed proxy, or his duly  constituted  substitute  acting at the Meeting,
will be  authorized  to vote or  otherwise  act thereon in  accordance  with his
judgment  on such  matters.  If the  enclosed  proxy is  properly  executed  and
returned prior to voting at the Meeting,  the shares represented thereby will be
voted in accordance  with the  instructions  marked  thereon.  In the absence of
instructions,  executed  proxies  will be voted  "FOR" the  items  listed in the
Notice.

                                        1

<PAGE>

                     QUORUM, VOTING RIGHTS AND OTHER MATTERS

         The  presence,  in person or by proxy,  of the holders of a majority of
the voting power of the Voting Stock is necessary to  constitute a quorum at the
Meeting.  Only  stockholders  of  record at the close of  business  on  Tuesday,
January 4, 2000 (the "Record Date"),  will be entitled to notice of, and to vote
at, the Meeting.  As of the Record Date, there were 17,176,911  shares of Common
Stock  outstanding  and 62,108 shares of Preferred  Stock issued and outstanding
under  three  series  designated  as series A,  series B, and series D. Only the
series D  Preferred  Stock has voting  rights.  Each share of series D Preferred
Stock is  entitled  to one vote for each  share of Common  Stock  issuable  upon
conversion of such preferred share,  limited however to 2,481,925 shares,  which
number is 19.9% of the  outstanding  shares of Common  Stock  outstanding  as of
March 17,  1999,  the date of  issuance of the series D  Preferred  Stock.  As a
result of the 19.9%  limitation and further  reduced by conversions  into Common
Stock up to the Record Date,  the maximum number of shares of Common Stock which
could have been issued on  conversion  on the Record  Date,  and  therefore  the
Common Stock  equivalent  voting  power of the Series D Preferred  Stock on such
date, was 878,150  shares.  Without regard to the 19.9%  limitation,  the 44,798
shares of series D  Preferred  Stock  outstanding  on the Record Date would have
been convertible into 9,556,908 shares of Common Stock on that date.  Therefore,
there are a total of  18,055,061  shares of  Voting  Stock  which can vote as of
January 4, 2000,  consisting  of  17,176,911  shares of Common Stock and 878,150
shares of Common Stock issuable upon conversion of the series D Preferred Stock.
Holders of Common  Stock as of the Record Date are entitled to one vote for each
share  held.  Holders of Common  Stock and  holders of  Preferred  Stock are not
entitled to cumulative voting rights.

         All shares of Voting Stock  represented  by properly  executed  proxies
will,  unless such proxies have previously been revoked,  be voted in accordance
with the  instructions  indicated in such proxies.  If no such  instructions are
indicated,  such shares will be voted in favor of (i.e., "FOR") the items listed
in the  Notice.  Abstentions  and  broker  non-votes  will be  counted as shares
present for quorum  purposes.  Abstentions  otherwise  will have the effect of a
vote against Proposals 2 through 4. Broker non-votes will not affect the outcome
of Proposals 2 and 3, but will have the same effect as a vote  against  Proposal
4.  Abstentions  and  broker  non-votes  have no  effect on the  outcome  of the
election of directors.

         As described above,  abstentions  (including failures to return a proxy
or cast a vote) and broker non-votes are effectively the same as votes "against"
Proposal 4. Broker  non-votes  result from  stockholders who own stock through a
brokerage  account  failing to properly  instruct their broker how to vote their
shares.  Due to the  critical  nature  of these  Proposals,  Covol  urges  every
stockholder to vote (by proxy or in person) at this meeting.

         Any stockholder executing a proxy has the power to revoke such proxy at
any time prior to its exercise.  A proxy may be revoked prior to exercise by (i)
filing  with Covol a written  revocation  of the proxy,  (ii)  appearing  at the
Meeting and casting a vote  contrary to that  indicated  on the proxy,  or (iii)
submitting a duly executed proxy bearing a later date.

         The cost of  preparing,  printing,  assembling  and mailing  this Proxy
Statement and other material  furnished to  stockholders  in connection with the
solicitation of proxies will be borne by Covol. In addition to the  solicitation
of proxies by use of the mails,  officers,  directors,  employees  and agents of
Covol may solicit  proxies by written  communication,  telephone,  telegraph  or
personal  call.  Such  persons  are to receive no special  compensation  for any
solicitation  activities.  Covol will reimburse banks, brokers and other persons
holding  Common  Stock in their  names,  or those of their  nominees,  for their
expenses in forwarding  proxy  solicitation  materials to  beneficial  owners of
Common Stock.

                                        2

<PAGE>

                               EXECUTIVE OFFICERS

         The following table sets forth (i) the names of the executive officers,
(ii)  their ages as of the Record  Date and (iii) the  capacities  in which they
serve Covol:

   Name                   Age            Position(s)              Officer Since

   ----                   ---            -----------              -------------
Kirk A. Benson            49       Chief Executive Officer and         1999
                                      Chairman of the Board
Brent M. Cook             39       President and Director              1996
Steven G. Stewart         51       Chief Financial Officer             1998
Harlan M. Hatfield        39       Vice President, General Counsel     1998
                                      and Secretary

         See  "Proposal  No. 1 -- Election of Director - Nominee for Election as
Director" for biographical information regarding Messrs. Benson and Cook.

Steven G. Stewart was appointed Chief  Financial  Officer of Covol in July 1998,
and served as Vice  President of Finance and  Treasurer  from April 1998 through
July 1998.  From  October 1996 through  March 1998,  Mr.  Stewart was a business
assurance  partner at  PricewaterhouseCoopers  LLP  (formerly  Coopers & Lybrand
LLP), with primary  responsibility  for public  companies  operating in the high
technology,   mining  and  extractive  industries.  From  January  1994  through
September 1996, Mr. Stewart was self-employed and provided  consulting  services
to high technology companies, established strategic alliances, advised companies
on  alternative   valuation  methods  applicable  to  acquisition   targets  and
negotiated  acquisition/sale  transactions.  Prior to 1994,  Mr.  Stewart was an
audit partner with Ernst & Young  (formerly  Arthur Young) and was the Salt Lake
City office  Director  of High  Technology  and  Entrepreneurial  Services.  Mr.
Stewart is a Certified Public Accountant.

Harlan M.  Hatfield has served as Corporate  Counsel since October 1996, as Vice
President and General Counsel since July 1998, and as Secretary since July 1999.
His primary  activities  with Covol have been the  development of synthetic fuel
projects, including licensing, financing, permitting, construction,  feedstocks,
site selection, and other aspects of project development.  As General Counsel he
oversees  the legal  staff and outside  legal  counsel,  litigation,  regulatory
disputes,  contracts,  and other legal  matters.  Prior to his  employment  with
Covol, he was in private practice at the Seattle law firm of Oles,  Morrison and
Rinker for more than nine years where he was a partner.

                 EXECUTIVE COMPENSATION AND RELATED INFORMATION

         The following sets forth the  compensation  of Covol's Chief  Executive
Officer, the other officers who were executive officers as of September 30, 1999
and whose total annual salary and bonus  exceeded  $100,000 in fiscal 1999,  and
one  officer  who served as an  executive  officer  during the year whose  total
annual salary and bonus exceeded $100,000.  The amounts shown represent what was
earned in the respective years.

                                        3

<PAGE>
<TABLE>
<CAPTION>

                                                        Summary Compensation Table
                                                                            Long-Term Compensation
                                                                        -----------------------------------
                                          Annual Compensation             Awards                 Payouts
                                  ------------------------------------  ----------              -----------
                                                                       Restricted   Securities
                                                       Other Annual      Stock      Underlying     LTIP        All Other
Name and                          Salary     Bonus     Compensation      Awards       Options    Payouts      Compensation
Principal Position       Year       ($)       ($)         ($)(3)          ($)          (#)(4)       ($)            ($)
- -------------------------------- --------- --------- ---------------- ------------ ------------------------ ----------------
<S>                     <C>       <C>        <C>            <C>         <C>             <C>        <C>          <C>
Kirk A. Benson (1)       1999       80,000         -           13,142      -             250,000     -             -
Chief Executive
Officer

Brent M. Cook            1999      180,000         -           52,845      -                   -     -             -
President                1998      133,333    54,400           53,120      -             250,000     -             -
                         1997       93,811         -           46,520      -                   -     -             -
Steven G. Stewart (2)    1999      119,580         -            6,325      -              50,000     -             -
Chief Financial          1998       56,175         -            2,750      -              50,000     -             -
Officer

Stanley M. Kimball (2)   1999      112,500         -           81,368      -                   -     -             -
Vice President           1998      100,000     5,366          287,850      -             100,000     -             -
                         1997       66,667         -          215,334      -              50,000     -             -
- ------------------
</TABLE>

(1)      Mr.  Benson was  appointed  Chairman  and CEO in April 1999.  The above
         salary for Mr.  Benson is for the period April 1999  through  September
         1999. Prior to his appointment as CEO, Mr. Benson was not an officer or
         employee of Covol, but served as a director for which he earned $10,667
         of  director  fees.  These  director  fees,  along with $2,475 of other
         compensation,  are included in other annual  compensation  in the above
         table.

(2)      Mr.  Stewart was employed by Covol in May 1998. The 1998 salary for Mr.
         Stewart is for the period May 1998 through  September 1998. Mr. Kimball
         was employed by Covol in January 1997.  The 1997 salary for Mr. Kimball
         is for the period January 1997 through September 1997.

(3)      For Messrs.  Cook and  Kimball,  other annual  compensation  represents
         primarily  compensation  expense  from the grant of options to purchase
         Common  Stock which have an exercise  price at grant date below  market
         value.  Compensation is recognized  during the period the stock options
         vest.  In 1999,  it also  includes  $6,325  of other  compensation  for
         Messrs.  Cook and  Stewart and  $11,325 of other  compensation  for Mr.
         Kimball.  In 1998, it includes $6,600 of other compensation for Messrs.
         Cook and  Kimball  and $2,750 for Mr.  Stewart.  In 1997,  it  includes
         $4,400 of other compensation for Mr. Kimball.

(4)      The 1998 option grant to Mr. Cook for the purchase of 250,000 shares of
         Common Stock was  approved by  stockholders  in March 1999.  The option
         grants to Messrs.  Benson,  Stewart and Kimball were granted  under the
         1995 Stock Option Plan.

         Other than Covol's 1995 Stock  Option  Plan,  there are no  retirement,
pension, or profit sharing plans for the benefit of Covol's officers,  directors
and employees. Covol provides health, dental and life insurance coverage for its
employees. The Board of Directors may recommend and adopt additional programs in
the future for the benefit of officers, directors and employees.

                                        4

<PAGE>

Option Grants in 1999

         The following table sets forth certain  information  concerning options
to purchase  Common Stock granted during fiscal 1999 to the executives  named in
the Summary Compensation Table.

<TABLE>
<CAPTION>

                                                OPTION GRANTS IN 1999
- ---------------------------------------------------------------------------------------------------------------------
                           Number of         % of Total
                           Securities         Options
                           Underlying        Granted to
                            Options         Employees in         Exercise          Expiration         Grant Date
Name                      Granted (#)           1999         Price ($/Sh)(1)          Date           Value ($)(2)
- ---------------------- ------------------------------------ ------------------ --------------------------------------
<S>                         <C>                <C>                 <C>                  <C>             <C>
Kirk A. Benson              250,000            57.5%               4.13             May 2009            668,300
Steven G. Stewart            50,000            11.5%               5.88             December 2008       182,115
- ------------------
</TABLE>

(1)      The  exercise  price was equal to the fair market  value on the date of
         grant,  determined by the closing price of the Common Stock as reported
         by the NASDAQ stock market.

(2)      Determined using the Black-Scholes option valuation model.

Aggregated Option Exercises in 1999 and September 30, 1999 Option Values

         The following  table  summarizes  for the named  executive  officers of
Covol the number of stock options  exercised  during fiscal 1999,  the aggregate
dollar value  realized upon exercise,  the total number of  unexercised  options
held at  September  30,  1999 and the  aggregate  dollar  value of  in-the-money
unexercised  options held at September 30, 1999. Value realized upon exercise is
the  difference  between the fair market  value of the  underlying  stock on the
exercise  date (based upon the closing  price of Common Stock as reported by the
NASDAQ stock market for the exercise date) and the exercise price of the option.
Options are  in-the-money if the fair market value of the underlying  securities
exceeds the exercise price of the option. The value of unexercised, in-the-money
options at September 30, 1999 is the aggregate amount of the difference  between
their  exercise  price  and  $2.50  per  share,  the  fair  market  value of the
underlying stock on September 30, 1999, based on the closing price of the Common
Stock on that  date.  The  underlying  options  have  not been and may  never be
exercised. The actual gains, if any, on exercise will depend on the value of the
Common  Stock on the actual date of  exercise.  There can be no  assurance  that
these values will be realized.

<TABLE>
<CAPTION>

                     AGGREGATED OPTION EXERCISES IN 1999 AND SEPTEMBER 30, 1999 OPTION VALUES

                           Shares                           Number of Securities           Value of Unexercised
                          Acquired          Value          Underlying Unexercised         In-the-Money Options at
                         on Exercise       Realized        Options at 9/30/99 (#)               9/30/99 ($)
Name                         (#)             ($)          Exercisable/Unexercisable      Exercisable/Unexercisable
- ---------------------- --------------- ----------------------------------------------- -----------------------------
<S>                        <C>             <C>              <C>                         <C>
Kirk A. Benson                0               0                  0 / 250,000                       0 / 0
Brent M. Cook                 0               0               180,333 / 207,167              109,500 / 28,000
Steven G. Stewart             0               0                20,833 / 79,167                     0 / 0
Stanley M. Kimball            0               0               110,417 / 84,583                  45,000 / 0
</TABLE>

                                                        5

<PAGE>

Long-Term Incentive Plan ("LTIP") Awards in 1999

         Covol granted no LTIP awards in fiscal 1999.

Future Benefits of Pension Plan Disclosure in 1999

         Covol has no such benefit plans.

Stock Option Plans

         1995 Stock Option Plan.  Covol has only one stock option plan, the 1995
Stock Option Plan (the "Plan"), under which 2,400,000 shares of Common Stock are
reserved for ultimate issuance. A committee of Covol's Board of Directors, or in
its absence,  the Board (the "Committee")  administers and interprets the Option
Plan.  This Committee is authorized to grant options and other awards both under
the terms of the Option Plan and outside the Option Plan to eligible  employees,
officers,  directors, and consultants of Covol. The Option Plan provides for the
granting of both incentive stock options and non-statutory stock options.  Terms
of options granted under the Option Plan,  including vesting  requirements,  are
determined  by the  Committee.  Options  granted under the Option Plan vest over
periods ranging from 0 to ten years, expire ten years from the date of grant and
are  not  transferable  other  than  by  will  or by the  laws  of  descent  and
distribution.  Incentive  stock option grants must meet the  requirements of the
Internal Revenue Code.

         As of September  30, 1999,  Covol had issued  900,000  shares of Common
Stock upon  exercise  of options  granted  under the Plan,  and  options for the
purchase of an aggregate  of 1,281,500  shares of Common Stock (net of exercises
and  cancellations)  were outstanding under the Plan.  Options for an additional
218,500 shares could be granted in the future,  under terms of the Plan.  During
fiscal 1999,  options to purchase 579,000 shares of Common Stock were granted to
six officers and employees and four  non-employee  directors of Covol,  of which
300,000  were  granted  to  the  named  executives,  as  shown  in  the  Summary
Compensation  Table.  The option grants to the named executives have terms of 10
years,  an exercise price equal to the fair market value of Covol's Common Stock
on the date of grant ($4.13 for Mr. Benson, and $5.88 for Mr. Stewart), and vest
ratably over a three-year  period,  beginning the year  following the grant date
for Mr.  Benson,  and  ratably  over a  60-month  period,  beginning  the  month
following the grant date for Mr. Stewart.

         Other Options. In addition to options granted under the Plan, Covol has
granted  options  for the  purchase  of  Common  Stock to  employees,  officers,
directors and consultants  outside the Plan that were not qualified as incentive
stock options for tax  purposes.  Such option  grants  totaled  88,000 shares in
fiscal 1999, of which 28,000 were granted to four  non-employee  directors,  and
60,000 were granted to consultants.

Employment  Contracts  and  Termination  of  Employment  and  Change in  Control
Arrangements

         Kirk A. Benson. Effective April 1999, Covol and Mr. Benson entered into
an employment  agreement covering the succeeding  three-year term, with a salary
of $15,000 per month until  adjusted by the Board of Directors.  The  employment
agreement further provides for participation in Covol's incentive bonus plan, if
any, as in effect  from time to time,  expense  reimbursement,  and the grant of
stock options. Specifically, the agreement provides for the grant of options for
250,000 shares of Common Stock at an exercise price of $4.13 per share,  to vest
on a pro rata basis at the  beginning  of each 12 month  anniversary  during the
term of the employment agreement, which are exercisable through April 2009, with
full  vesting upon  disability  or death.  Under the  agreement,  Mr.  Benson is
entitled to six weeks annual paid vacation, a monthly car allowance of $550, and
other benefits  comparable to those generally  available to Covol employees.  If
his employment is terminated by Covol without cause or

                                        6

<PAGE>

terminated by Mr. Benson for good reason, he is entitled to termination benefits
equal to 100% of his then annual base salary.

         Brent M.  Cook.  In April  1998,  Covol and Mr.  Cook  entered  into an
employment  agreement covering the succeeding five year term, with the salary to
be established by the Board of Directors  consistent with an annual compensation
review of comparable  positions of public  companies.  The employment  agreement
further provides for  participation in Covol's  incentive bonus plan, if any, as
in  effect  from  time to time,  expense  reimbursement,  and the grant of stock
options.  Specifically,  the  agreement  provides  for the grant of options  for
250,000 shares of Common Stock at an exercise price of $12.97 per share, to vest
on a pro rata  basis  at the  beginning  of each  month  during  the term of the
employment  agreement,  which are  exercisable  through  April  2008,  with full
vesting upon disability or death.  Under the agreement,  Mr. Cook is entitled to
six weeks  annual paid  vacation,  a monthly car  allowance  of $550,  an annual
dental  allowance of $4,500,  and other benefits  comparable to those  generally
available to Covol  employees.  If his employment is terminated by Covol without
cause or terminated by Mr. Cook for good reason,  he is entitled to  termination
benefits equal to 100% of his then annual base salary.

         Steven G. Stewart.  Effective May 1998,  Covol and Mr. Stewart  entered
into an employment agreement,  as amended,  covering a three-year period, unless
terminated  by Covol for cause or  disability,  or by Mr.  Stewart  for  certain
Company  actions which  constitute good cause or without good reason provided 90
days prior written notice is given. Mr. Stewart's regular monthly salary will be
at least $8,334 for the period from May 1998 through  September 1999 and $11,360
thereafter.  The employment  agreement  further  provides for  participation  in
Covol's  incentive  bonus plan, if any, as in effect from time to time,  and the
grant of stock options.  Specifically,  the agreement  provides for the grant of
options for 50,000  shares of Common  Stock at an  exercise  price of $12.63 per
share, to vest on a pro rata basis over 60 months  beginning May 1998, which are
exercisable  through April 2008,  with full vesting upon disability or death. In
addition, Mr. Stewart receives a monthly car allowance of $550 and if employment
is terminated  by Covol  without  cause or  terminated  by Mr.  Stewart for good
reason, he is entitled to termination  benefits equal to 200% of his then annual
base salary and all outstanding options vest immediately.

         Stanley M. Kimball. In January 1997, Covol and Mr. Kimball entered into
an employment agreement covering the succeeding three-year period. Mr. Kimball's
employment  with Covol  terminated  effective as of January 1, 2000. Mr. Kimball
alleged his employment was constructively  terminated by Covol, which allegation
Covol disputes.  The employment  agreement called for payment of two years' base
salary upon constructive  termination of employment;  however,  in settlement of
any claims under the employment  agreement,  the parties agreed that Mr. Kimball
would be paid an amount approximating one year's base compensation.

Board Meetings

         The  Board  held a total  of ten  regular  meetings  and  four  special
meetings  during fiscal 1999.  All directors  attended over 75% of the aggregate
number of regular meetings of the Board.

Committees of the Board

         The Board of Directors  has two  committees,  an Audit  Committee and a
Compensation Committee, both of which are comprised solely of outside directors.
The Compensation Committee consists of Mr. Weller, as chair, and Mr. Herickhoff.
The Audit Committee  consists of Mr.  Herickhoff,  as chair, Mr. Squire, and Mr.
Hill. The Audit  Committee  held two meetings in fiscal 1999.  The  Compensation
Committee held one meeting in fiscal 1999.

                                        7

<PAGE>

Compensation Committee Report on Executive Compensation

         The Compensation  Committee  reviews and makes  recommendations  to the
Board of Directors  concerning the overall compensation for Covol's officers and
other  key  executives,  including  the named  executives.  The  Committee  also
oversees the granting of stock options to all executives and employees of Covol.
Future compensation  polices will be dependent on Covol's cash flow and employee
performance.

         Covol seeks to compensate executives at competitive levels, considering
current compensation surveys for companies in similar industries and development
patterns,  the growth of Covol,  each  executive's  individual  contribution  to
meeting Covol's goals and objectives, and overall business conditions as part of
the total benefit package for employees.

         The current  employment  agreement  for Mr.  Benson was approved by the
Board of Directors in a meeting on April 20, 1999.  The  Compensation  Committee
recommended  the cash  compensation  and grant of options to Mr. Benson based on
Mr. Benson's prior business experience and ability to meet Covol's objectives as
well as the compensation that was paid to Covol's prior CEO.

         The Compensation  Committee strives to ensure that Covol's compensation
plan  attracts,  retains and rewards both staff and management  personnel  while
continuing to operate in the best interests of the stockholders.

                                                     Compensation Committee,

                                                     Raymond J. Weller, Chairman
                                                     James A. Herickhoff
                                                     January 7, 2000

Compensation of Directors

         Covol's  directors hold office until the end of their  respective terms
or until their successors have been duly elected and qualified.

         Outside  directors  are entitled to annual cash  compensation  of up to
$32,000,  which is paid  quarterly.  The outside  directors are also entitled to
1,000  options for each month of service,  subject to vesting  limitations.  The
Chairman of the Board,  unless a salaried employee of Covol, is entitled to cash
compensation and options on the same vesting terms, but in the amount of 125% of
that  which  may  be  received  by  the  other  directors.   Directors   receive
reimbursement  for  out-of-pocket  expenses.  The cash  compensation and options
described in this section do not apply to directors  who are salaried  employees
of Covol.

         In December 1998, each of Covol's outside directors  received (i) 7,000
options  for the period of service  from the fiscal  1998  annual  shareholders'
meeting to the fiscal 1999 shareholders'  meeting,  subject to vesting, and (ii)
36,000 options for the three-year period following the 1999 annual shareholders'
meeting,  subject to vesting,  on a pro rata basis, at the fiscal 2000, 2001 and
2002 annual  shareholders'  meetings.  The options  granted in December 1998 are
exercisable  at the closing  price of the Common  Stock on the grant  date.  The
option  grants  described in (ii) above were granted under the 1995 Stock Option
Plan.

         Covol's executive  officers are appointed by the Board of Directors and
serve at the  discretion  of the Board.  The authority of the Board of Directors
over the officers of Covol has been delegated to the Chief Executive Officer.

                                        8

<PAGE>

Stockholder Return Performance Graph

         The  following  graph  shows  a  comparison  of  the  cumulative  total
stockholder return,  calculated on a dividend  reinvestment basis, for September
30, 1994 through September 30, 1999, on Covol's Common Stock with (1) the NASDAQ
Composite  Index--U.S.  and (2) the Standard & Poors Energy Composite Index. The
comparison assumes $100 was invested on September 30, 1994.

         Please note that historic stock price performance shown on the graph is
not  necessarily  indicative  of future  price  performance.  Covol has not paid
dividends on its Common Stock.

                               [GRAPHIC OMITTED]

<TABLE>
<CAPTION>

                                Total Returns Assume Reinvestment of Dividends

                                      9/30/94        9/30/95       9/30/96        9/30/97       9/30/98        9/30/99
                                   -------------  ------------- -------------  ------------- -------------- -------------
<S>                                         <C>            <C>           <C>            <C>            <C>            <C>
Covol                                       $100           $240          $264           $296           $300           $80
S&P Energy Composite                         100            120           150            221            209           249
NASDAQ Composite (US)                        100            138           164            225            229           372
</TABLE>

                                        9

<PAGE>

                    SECURITY OWNERSHIP OF DIRECTORS, NOMINEES
                           AND PRINCIPAL STOCKHOLDERS

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table sets forth certain  information  as of January 4,
2000 regarding the beneficial  ownership of Covol's Common Stock,  for: (i) each
person (or group of affiliated  persons) who,  insofar as Covol has been able to
ascertain,  beneficially  owned more than 5% of the outstanding shares of Common
Stock;  (ii)  each  director  and  executive  officer  of  Covol;  and (iii) all
directors  and  executive  officers  of Covol as a group.  Covol  has  relied on
information received from each stockholder as to beneficial ownership, including
information  contained on  Schedules  13D and Forms 3, 4 and 5. As of January 4,
2000, there were 17,176,911 shares of Common Stock outstanding. As of that date,
there were  outstanding  options to purchase  2,969,250  shares of Common Stock,
outstanding  warrants to purchase 4,298,053 shares of Common Stock,  outstanding
shares of Preferred Stock  convertible  into  approximately  9,999,790 shares of
Common Stock,  and outstanding debt  convertible  into  approximately  7,877,387
shares of Common Stock.

  Name and Address of                 Amount and Nature of          Percent of
  Beneficial Owner (1)                Beneficial Ownership(2)         Class
  --------------------                -----------------------         -----
OZ Master Fund, Ltd.(3)                    10,278,971 (4)              37.6%
153 East 53rd Street
New York, NY 10022

Joe K. Johnson(5)                           3,779,268 (6)              19.2%
8989 South Schofield Circle
Sandy, UT 84093

DH Financial, L.C.(7)                       3,814,725 (8)              18.2%
5478 Green Street
Murray, Ut 84123

Directors

Kirk A. Benson                                827,220 (9)               4.7%
Brent M. Cook                                 208,917(10)               1.2%
Raymond J. Weller                             362,838(11)               2.1%
DeLance W. Squire                              42,500(12)               *
James A. Herickhoff                            34,500(13)               *
John P. Hill, Jr.                              33,500(14)               *

Executive Officers

Steven G. Stewart                              30,000(15)               *
Harlan M. Hatfield                             67,500(16)               *

All directors and executive officers as a   1,606,975(17)               8.9%
group (eight persons)
- ------------------
 *       Less than 1%

(1)      Unless  otherwise  indicated,  the address of each person  named in the
         table is c/o Covol, 3280 North Frontage Road, Lehi, Utah 84043.

                                       10

<PAGE>

(2)      The persons named in this table have sole voting and  investment  power
         with  respect to all shares of Common Stock  reflected as  beneficially
         owned by  them.  A  person  is  deemed  to be the  beneficial  owner of
         securities  that can be acquired by such person  within sixty (60) days
         from  January  4,  2000,  and  the  total  outstanding  shares  used to
         calculate  each  beneficial  owner's  percentage  includes such shares.
         Beneficial  ownership as reported  does not include  shares  subject to
         option or conversion that are not exercisable within 60 days of January
         4, 2000.

(3)      OZ Master Fund, Ltd. is owned by more than 150 investors and is managed
         by OZ  Management  L.L.C.,  which is also  deemed to be the  beneficial
         owner of the listed shares.

(4)      Consists of 150,633  shares held by OZ Master Fund,  Ltd. on the record
         date and for which OZ Master  Fund,  Ltd.  has voting  power,  of which
         150,603 shares were in process of being  transferred,  9,556,908 shares
         issuable upon conversion of 44,798 shares of series D Preferred  Stock,
         convertible within 60 days of January 4, 2000, and warrants for 571,430
         shares  exercisable within 60 days of January 4, 2000 at prices ranging
         from $5.00 to $10.00  per  share.  Does not  include  3,000,000  shares
         issuable  on  conversion  of  convertible  debt.  Actual  voting  power
         includes  only  1,028,783  shares due to the  limitation  on conversion
         to19.9% of the  outstanding  shares of Common Stock  outstanding  as of
         March 17, 1999, the date of issuance of the series D Preferred Stock.

(5)      Covol has been informed that Joe K.  Johnson,  a lender to Covol,  owns
         99% of Aspen Capital  Resources,  LLC, also a shareholder and lender to
         Covol.

(6)      Consists of 1,232,748  shares held by Mr.  Johnson and by Aspen Capital
         Resources, LLC on the record date and for which they have voting power,
         of which 846,841 shares were in process of being transferred,  warrants
         for 549,133  shares  exercisable  within 60 days of January 4, 2000, at
         prices  ranging  from $3.60 to $7.00 per share,  and  1,997,387  shares
         issuable  upon  conversion  of  convertible  debt held by Aspen Capital
         Resources, LLC convertible within 60 days of January 4, 2000.

(7)      Covol has been informed  that DH  Financial,  L.C. is owned 50% each by
         Mr. Corwin L. Hair and Mr. Brad Dennis.

(8)      Consists of warrants for 934,725 shares  exercisable  within 60 days of
         January 4, 2000 at $.88 per share,  and 2,880,000  shares issuable upon
         conversion of convertible debt within 60 days of January 4, 2000.

(9)      Consists of 471,665 shares owned by Mr. Benson and warrants for 355,555
         shares exercisable within 60 days of January 4, 2000 at $7.50 to $12.00
         per share.

(10)     Consists  of 3,750  shares  owned by Mr.  Cook and  options to purchase
         205,167 shares held by Mr. Cook which are exercisable within 60 days of
         January 4, 2000.

(11)     Consists of 295,088  shares owned by Mr. Weller and options to purchase
         67,750 shares held by Mr. Weller which are  exercisable  within 60 days
         of January 4, 2000.

(12)     Consists of 2,500  shares  owned by Mr.  Squire and options to purchase
         40,000 shares held by Mr. Squire which are  exercisable  within 60 days
         of January 4, 2000.

(13)     Consists of options to purchase  34,500  shares held by Mr.  Herickhoff
         which are exercisable within 60 days of January 4, 2000.

                                       11

<PAGE>

(14)     Consists  of options to purchase  33,500  shares held by Mr. Hill which
         are exercisable within 60 days of January 4, 2000.

(15)     Consists of options to purchase 30,000 shares held by Mr. Stewart which
         are exercisable within 60 days of January 4, 2000.

(16)     Consists of options to  purchase  67,500  shares  held by Mr.  Hatfield
         which are exercisable within 60 days of January 4, 2000.

(17)     Consists  of 773,003  shares  issued and  outstanding,  and options and
         warrants to purchase  833,972  shares which are  exercisable  within 60
         days of January 4, 2000.

                        TRANSACTIONS WITH RELATED PARTIES

         Major  Financing  Transaction.  On March 17,  1999,  Covol  completed a
financing  transaction (the "Financing") with OZ Master Fund, Ltd., an affiliate
of the  Och-Ziff  Capital  Management  Group.  The  Financing  consisted  of the
issuance of $20,000,000 face value of convertible  secured debt, issued at a 50%
discount,  and the issuance of 60,000 shares of cumulative convertible preferred
stock  (series D) for  $6,000,000,  for total  gross  proceeds  of  $16,000,000.
Warrants  for the  purchase  of Common  Stock  were  also  issued as part of the
Financing.  Net cash proceeds were used to retire  maturing  short-term debt and
related accrued  interest,  for working capital uses and other general corporate
purposes.  This transaction is described in detail in the accompanying  Form 8-K
filed  March 24,  1999 and in the  accompanying  Form  10-Q/A for the  quarterly
period ended March 31, 1999, both of which are incorporated herein by reference.
Beginning  in  November  1999 and  through  January  4,  2000,  Covol has issued
1,603,775  shares of Common  Stock on  conversion  of 15,202  shares of series D
Preferred Stock.

         Sale of Series C  Convertible  Preferred  Stock.  During  January 1999,
Covol completed a financing transaction with Joe K. Johnson, a major shareholder
and lender to Covol,  that consisted of the sale of 1,000 shares of a new series
of non-voting preferred stock,  designated as Series C 7% Convertible  Preferred
Stock.  Covol  received  $900,000  in net  proceeds  from the  issuance  of this
preferred stock, which has the following rights and privileges:

_        Dividends on the preferred  stock are  cumulative and accrue whether or
         not they have been  declared  or  whether  Covol has any  profits.  The
         dividend  rate is 7% per year of the  liquidation  value of $1,000  per
         share.

_        The preferred  stock is  convertible  into common shares in incremental
         stages beginning April 1999 through July 1999, at which time all of the
         outstanding  shares became  convertible to Common Stock.  The number of
         common  shares  to  be  received  upon   conversion  is  determined  by
         multiplying the number of preferred  shares by $1,000 and dividing that
         number by the conversion price (originally $5.50 per share,  subject to
         market adjustment).  Upon conversion,  all accrued and unpaid dividends
         are paid or converted into shares of Common Stock.

_        Covol  may  at  its  option  redeem  the  outstanding  preferred  stock
         beginning  July  1999  for a  redemption  price  equal  to  125% of the
         liquidation value plus any accrued and unpaid dividends thereon.

                                       12

<PAGE>

         Warrants for the purchase of 72,727  shares of Common Stock were issued
in conjunction  with this preferred  stock.  The warrants are  exercisable  from
April  1999  through  July 2001 at an  exercise  price of $6.88 per  share.  The
warrants  issued and  changes  made to other  existing  warrants  were valued at
approximately $500,000. The exercise deadline for certain other warrants with an
exercise price of $7.00 per share held by Mr. Johnson were extended to June 2000
and certain additional  warrants with an exercise price of $30.00 per share were
relinquished and canceled.  Covol granted registration rights for the restricted
common shares  issuable upon  conversion of the preferred stock or upon exercise
of the common  stock  warrants.  Through  January  4, 2000,  all of the Series C
preferred stock had been converted. Approximately 237,000 shares of Common Stock
were issued on conversion of the preferred  stock and related accrued but unpaid
dividends.

         Issuance  of  Convertible  Debt to Aspen  Capital  Resources,  LLC . In
September 1999, Covol entered into a transaction  with Aspen Capital  Resources,
LLC ("Aspen"),  which is 99% owned by Joe K. Johnson,  a major  shareholder  and
lender  to  Covol,  to  provide  financing  of up to $4  million  in the form of
convertible  secured  debt.  The  agreement  provides for Covol to make draws as
needed. Covol received $850,000 at the time of closing,  less a placement fee of
10%, and subsequent to September 30, 1999 received a total of $1,650,000, less a
placement  fee of 10%. The debt is  convertible  at $3.00 per share,  or market,
whichever is less, and is convertible at the rate of 25% every 30 days beginning
30 days from the date of  closing,  subject to certain  restrictions.  Covol can
redeem all outstanding debt at a rate of 125% of face value by providing 30 days
notice. Borrowings are due in March 2001, if not converted earlier, and interest
payments are due quarterly beginning March 2000. Covol assigned the royalties to
be  received  from a licensed  synthetic  fuel  facility as  collateral  for the
financing.  In November and December  1999,  approximately  2,532,000  shares of
Common Stock were issued on conversion of $1,460,000 of the convertible debt.

         The  agreement  requires  the  issuance of  warrants to purchase  Covol
shares  equal to 40% of the  shares  issuable  under any  borrowings  under this
financing  arrangement.  The warrants have a three-year  exercise  period and an
exercise  price of $3.60 per  share.  Warrants  for the  purchase  of a total of
approximately  350,000  shares of Common  Stock were issued and were  assigned a
value,  using  the  Black-Scholes   option  valuation  model,  of  approximately
$477,000.

         Issuance of  Convertible  Debt to DH Financial,  L.C. In December 1999,
Covol placed the final  $1,500,000 of financing with DH Financial,  L.C.  rather
than Aspen  providing  the entire  $4,000,000  of funding as provided  under the
September financing arrangement.  The terms and conditions of the financing with
DH Financial,  L.C. are similar to the September  financing.  As of December 20,
1999, Covol had received a total of $1,500,000, less a placement fee of 10%. The
debt is  convertible at $.73 per share,  the market price at closing,  or market
price on the conversion date,  whichever is less. The debt is convertible  after
January 21, 2000.

         The  agreement  requires  the  issuance of  warrants to purchase  Covol
shares equal to 40% of the shares  issuable under the debt  agreement.  Warrants
for the purchase of approximately  935,000 shares were issued. The warrants have
a three-year  exercise period and an exercise price of $.88 per share,  and were
assigned  a  value,   using  the   Black-Scholes   option  valuation  model,  of
approximately $269,000.

         Trans Pacific Stores,  Ltd.  ("TPS").  On March 17, 1998, Covol entered
into a loan  agreement  in which  TPS,  a company  for which Mr.  John  Hill,  a
director of Covol,  serves as president,  agreed to loan Covol up to $4,000,000.
The loan was secured by future  earned  license fees payable to Covol  resulting
from the synthetic  fuel  manufacturing  facilities  constructed  by Pace Carbon
Fuels, LLC. Interest on the outstanding  principal balance originally accrued at
12%. The  interest  rate  increased  to 13% on September  20, 1998 and to 14% on
December 20, 1998. Each time the interest rate was adjusted, a 1% renewal fee of
$40,000 was incurred.  Principal and interest were due and paid in full on March
20, 1999.

                                       13

<PAGE>

         On June 12, 1998,  Covol  entered into another loan  agreement in which
TPS agreed to loan Covol an  additional  amount up to  $4,000,000.  This loan is
secured by a certain  promissory note between Covol and Gerald Larson and future
cash flows  payable to Covol  resulting  from the synthetic  fuel  manufacturing
facilities constructed and owned by Appalachian Synfuel,  L.L.C., a wholly-owned
subsidiary of Fluor  Corporation.  Warrants to purchase 100,000 shares of Common
Stock were granted in October 1998 based on the outstanding principal balance at
that time. The warrants were assigned a value,  using the  Black-Scholes  option
valuation  model,  of  approximately  $247,000.   Interest  on  the  outstanding
principal  balance accrued at 18% per annum until October 1998, at which time it
increased to 22%.  Principal and interest were  originally  due and payable June
12,  1999.  The terms of this  loan were  amended  in May 1999 to  provide  that
$1,000,000 of principal is due in December  1999 and  $3,000,000 of principal is
due in April 2000. Subsequent to June 12, 1999, interest is payable monthly at a
rate of 14%.  Additionally,  the terms of existing  warrants for the purchase of
185,713  shares of Common Stock were amended to extend the exercise  periods for
one year and to lower the  exercise  prices to market  value of  Covol's  Common
Stock.  The  warrants  were  assigned a value,  using the  Black-Scholes  option
valuation model, of approximately $244,000.

         Financing Transactions with Officer and Director. During November 1998,
Covol completed a financing transaction with several investors,  one of whom was
Kirk A. Benson, then a major shareholder,  and currently the Chairman and CEO of
Covol.  Mr. Benson  purchased  300,000  units at $5.00 per unit,  for total cash
proceeds of  $1,500,000.  Each unit consisted of one share of Common Stock and a
warrant for the purchase of one share of Common  Stock at a price of $7.50.  The
warrants were  exercisable  until  November 12, 1999, at which time they expired
unexercised.

         Employment  Agreements.  Covol has entered into  employment  agreements
with Messrs.  Benson,  Cook,  Stewart and Kimball which provide for  significant
benefits.  See "Employment Contracts and Termination of Employment and Change in
Control Arrangements."

         $500,000 Loan from Certain Officers. In November 1996, Steven R. Brown,
an officer, loaned $280,000 and Asael T. Sorensen, Jr., a former officer, loaned
$220,000  to Covol  which  accrued  interest  at prime  plus 2%.  Principal  and
interest  was due on or before  November 26,  2002.  As of  September  30, 1998,
approximately $353,000 had been paid by Covol toward the repayment of the loans.
The remaining balance of approximately  $147,000 was paid by Covol during fiscal
1999. The purpose of the loans was to provide operating capital for Covol.

         Related  Partnerships.  In June 1996, Covol formed Utah Synfuel #1 ("US
#1") and  Alabama  Synfuel #1 ("AS #1"),  for the  purpose of  facilitating  the
financing and  construction  of synthetic  fuel  facilities in Utah and Alabama,
respectively. Mr. Russell Madsen, Mr. Dean Young, Mr. Kenneth M. Young, Mr. Alan
D. Ayers,  Mr. Asael T. Sorensen,  Jr., Mr. Steven R. Brown,  and Mr. Michael Q.
Midgley (former or current  officers and directors of Covol) acquired  interests
in US #1 and AS #1. Their aggregate interests represented  approximately 8.1% of
the contributed  capital of US #1 and 0.6% of the contributed  capital of AS #1.
See "Key Bank Loan" below.  In  connection  with the sale of the Utah  facility,
Covol granted US #1 a non-exclusive  license to Covol's binder  technologies for
which  it  received  an  advance  license  fee of  $500,000  from  US #1.  These
transactions  are not based on arms- length  negotiations by the parties.  Covol
retained  a 64%  interest  in US #1 and a 74%  interest  in AS #1 and  privately
placed the  remaining  partnership  interests in the  Partnerships.  The limited
partners paid  $3,277,500 for the remaining  partnership  interests in US #1 and
$2,062,500  for the  remaining  partnership  interests  in AS #1.  See  "ITEM 1.
BUSINESS--Sale  of Facilities,  Utah Synfuel #1 and Birmingham Syn Fuel," in the
Form 10-K for a discussion of transactions with related partnerships.

         In September 1998,  Covol formally offered the limited partners in Utah
Synfuel #1, and Alabama Synfuel #1 an exchange of Covol's Common Stock for their
limited  partnership  interests.  The  exchange  ratio  was  based in part on an
independent valuation of the limited partnerships' assets and other factors

                                       14

<PAGE>

including  but not  limited to current  and  future  expected  cash flows of the
partnerships  and the market  value of Covol's  Common  Stock at the date of the
offer,  $9.00 per share.  As of  September  30, 1998,  substantially  all of the
limited partners had elected to exchange their limited partnership interests for
shares of Covol's Common Stock. During October and November 1998, all but one of
the other limited partners  exchanged their interests and Utah Synfuel #1 became
a  wholly-owned  subsidiary  of Covol and Alabama  Synfuel #1 became a 98%-owned
subsidiary of Covol.

         Covol  recorded this exchange using the market values of Covol's Common
Stock on the dates the limited  partners  tendered  acceptance of Covol's offer.
These  market  values  ranged  from  $6.75 to $11.13 per  share.  Subsequent  to
September 30, 1999,  Covol  reached an agreement  settling  several  outstanding
issues with the remaining  limited partner of Alabama Synfuel #1 following which
Alabama Synfuel #1 became a wholly-owned  subsidiary of Covol.  The officers and
directors of Covol  received an aggregate of 95,900 shares of Covol Common Stock
in exchange for their interests,  with an aggregate market value,  using a value
of $9.00 per share, of $863,100.  Included in this amount is $304,632 related to
Mr. Weller.

         Key Bank Loan. In an effort to obtain capital for the  construction  of
the Utah and Alabama  facilities,  Covol borrowed $700,000 from Key Bank of Utah
("Key Bank"). The loan accrued interest at Key Bank's prime rate plus 2% and was
to be paid in full in October 1996. In November 1996 Covol paid accrued interest
plus principal of $100,000. Covol and Key Bank agreed to roll over the remaining
$600,000  principal  balance of the loan for another 90 days,  until January 29,
1997, which was later extended to May 30, 1997. Additional payments of principal
and  interest  were  paid in March and May,  1997  totaling  $110,000.  Key Bank
thereafter notified Covol that it was in default on the loan. Covol paid off the
principal and interest on the loan in the amount of $522,516 on August 20, 1997.
As a condition to making the loan,  Key Bank  required  that  certain  officers,
directors and employees of Covol also sign as guarantors of the note  evidencing
the loan (the "Key Bank Note"). To induce such officers, directors and employees
to sign  individually and be severally liable on the Key Bank Note, Covol loaned
$100,000 each to Mr.  Russell G. Madsen,  Mr. Dean Young,  Mr. Kenneth M. Young,
Mr. Alan D. Ayers,  Mr.  Asael T.  Sorensen,  Jr.,  Mr.  Steven R. Brown and Mr.
Michael  Q.  Midgley  (the  "Individuals").  The loan to the  Individuals  is on
similar  terms as the loan  from Key Bank and was  initially  collateralized  by
their respective  interests in US#1 and AS#1 and is currently  collateralized by
approximately  79,000 shares of Covol's  Common Stock.  The proceeds of the loan
from  Covol to the  Individuals,  along  with  other  money  of the  Individuals
aggregating  $1,850,000,  were invested in partnership interests in US #1 and AS
#1. Covol has not received any direct  payments from the  Individuals.  On March
21, 1997, US #1 made cash distributions to each of the limited partners of US #1
in the aggregate amount of $272,000. The cash distributions  attributable to the
interests  in US #1 acquired  through the loan to the  Individuals  as described
above were made directly to Covol and applied against the principal and interest
due from the  Individuals.  As of  September  30,  1999,  the  individuals  were
indebted to Covol in an aggregate  amount of  approximately  $672,000,  which is
collateralized  by Common Stock of Covol. No interest income is being recognized
by Covol.

         Option Exercise Notes. In 1995, Covol entered into loan agreements with
16 then current and former officers, directors and employees of Covol in payment
of the  exercise  price of options to purchase  900,000  shares of Covol  Common
Stock.  Nine of these individuals are current or former officers or directors of
Covol.  Specifically,  Messrs.  Madsen,  Ford, Brown, Weller,  Sorensen,  Ayers,
Lambert,  Young and Midgley are  indebted to Covol in the  principal  amounts of
$516,875,  $488,519,  $488,519, $417,266, $322,503, $251,250, $322,503, $288,938
and  $516,875  respectively.  The  promissory  notes bear  interest at 5.7% with
principal and interest due in December 2000 and are collateralized by the shares
purchased.  As of September 30, 1999, Covol had received  approximately $313,000
toward repayment of the loans. No interest income is being recognized by Covol.

         Return of Shares of Common Stock. In March 1996, Raymond G. Weller made
a personal  loan of $459,250 to Covol at the request of Covol's then CEO and CFO
at a time when Covol was in great

                                       15

<PAGE>

financial  need.  This loan was repaid in 1996  through  the  issuance  of Covol
Common Stock to Mr.  Weller.  A certificate  was issued to Mr. Weller for 34,000
shares  of  Covol  Common  Stock.  Mr.  Weller  understood  that the CEO and CFO
existing at the time  intended  this stock to be  compensation  for the personal
risk taken by Mr. Weller pending completion of the transaction.  The CEO and CFO
left Covol in October  1996 before the  transaction  was fully  documented.  Mr.
Weller  continued  to support  Covol and provided  leadership  and guidance as a
director through the period of transition between prior and current  management.
After confirming the circumstances surrounding the transaction,  Covol's current
management  negotiated a resolution of the matter with Mr. Weller,  and approved
the issuance of 20,000 shares of restricted  stock in complete  satisfaction  of
any  obligation  Covol may have to Mr. Weller with respect to this  transaction.
The  disinterested  members of the Board have  approved the  resolution  and Mr.
Weller  returned  14,000  shares of Common Stock to Covol in fiscal 1999,  which
shares were subsequently canceled.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities  Exchange Act of 1934 requires  Covol's
officers  and  directors,  and  persons  who own  more  than  ten  percent  of a
registered class of Covol's equity securities,  to file reports of ownership and
changes  in  ownership  with the  Securities  and  Exchange  Commission  and the
National  Association of Securities Dealers.  Officers,  directors,  and greater
than ten-percent stockholders are required by Securities and Exchange Commission
regulations  to furnish  Covol with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms  furnished to Covol between
October 1, 1998 and September 30, 1999, on year-end  reports  furnished to Covol
after  September  30, 1999,  and on  representations  that no other reports were
required,  Covol has determined  that during the 1999 fiscal year all applicable
16(a) filing requirements were met.

                     PROPOSAL NO. 1 -- ELECTION OF DIRECTOR

Nominee for Election as Director

         At the  Meeting,  the  stockholders  will elect a class III director to
hold office until the annual meeting of  stockholders in 2003, the expiration of
his term,  or until his  successor is duly elected and  qualified.  The Board of
Directors  is divided  into three  classes,  currently  comprised of two class I
directors,  whose terms will  expire at Covol's  annual  meeting in 2001,  three
Class II directors,  whose terms will expire at Covol's  annual meeting in 2002,
and one Class III director,  whose term will expire at Covol's annual meeting in
2000. The Board currently consists of six members:  Raymond J. Weller,  Brent M.
Cook,  DeLance M. Squire,  John P. Hill,  Jr.,  James A.  Herickhoff and Kirk A.
Benson.  The Board  proposes  that the  individual  listed  below as  nominee be
elected as a class III director of Covol.  The nominee has consented to serve if
elected  to the  Board.  In the event  that the  nominee is unable to serve as a
director  at the time of the  Meeting  (which  is not  expected),  proxies  with
respect  to  which no  contrary  direction  is made  will be  voted  "FOR"  such
substitute nominee as shall be designated by the Board to fill the vacancy.

         The name of the nominee,  together with certain  information about him,
is set forth below:

    Name         Age       Positions with Covol              Director Since
    ----         ---       --------------------              --------------
Brent M. Cook    39       Director and President                  1996

Brent M. Cook has served as President  since April 1999.  From  November 1996 to
April 1999 he served

                                       16

<PAGE>

as Chief  Executive  Officer  and  Director.  He also served as  President  from
October  1996 until July 1998,  and as Chief  Financial  Officer  from June 1996
until November 1996. Mr. Cook is a Certified Public Accountant. Prior to joining
Covol,  Mr.  Cook  was  Director  of  Strategic  Accounts-Utah  Operations,  for
PacifiCorp, Inc. ("PacifiCorp"). His responsibilities included the management of
revenues of approximately  $128 million per year, and seeking out and evaluating
strategic  growth  opportunities  for  PacifiCorp,  including joint ventures and
other  transactions.  Mr.  Cook spent more than 12 years  with  PacifiCorp.  Mr.
Cook's term expires in 2000.

         The names of the Class I Directors,  together with certain  information
about them, are set forth below:

     Name                 Age       Position with Covol       Director Since
     ----                 ---       -------------------       --------------
John P. Hill, Jr.          39              Director                 1997
James A. Herickhoff        57              Director                 1997

John P. Hill, Jr. has served as a Director since September 1997. Mr. Hill is the
president of Quince Associates,  a closely-held  investment company. Since 1989,
Mr. Hill has also served as President of Trans Pacific Stores, Ltd., a privately
held operator of retail stores.  Prior to 1989, Mr. Hill was the Chief Financial
Officer for various  privately  held retail and restaurant  companies.  Mr. Hill
received a Bachelor  of Science  degree in  Accounting  from the  University  of
Maryland  and became a Certified  Public  Accountant  in 1984.  Mr.  Hill's term
expires in 2001.

James A.  Herickhoff  has served as a Director since August 1997 and was elected
Vice  Chairman in April 1999.  Mr.  Herickhoff  has been a corporate  consultant
since 1994,  and from 1987 to 1994 he served as President of Atlantic  Richfield
Company's  Thunder  Basin  Coal  Company.  Mr.  Herickhoff  has over 25 years of
experience  in the  coal and  mining  industries  and  extensive  experience  in
strategic   positioning   of  these   companies   for   long-term   growth   and
competitiveness.  Mr.  Herickhoff  led the growth of the Black  Thunder and Coal
Creek coal mines from  19,000,000 to  approximately  40,000,000 tons per year of
production.  Mr.  Herickhoff  previously  served as President  of Mountain  Coal
Company,  managing all of ARCO's underground mining and preparation  plants. Mr.
Herickhoff is the past President of the Wyoming Mining  Association and a former
Board  member of the  Colorado  and Utah  Mining  Associations.  Mr.  Herickhoff
received  a  Bachelor  degree in 1964 from St.  John's  University,  a Master of
Science degree in 1966 from St. Cloud State  University and attended the Kellogg
Executive  Management   Institute  at  Northwestern   University  in  1986.  Mr.
Herickhoff's term expires in 2001.

         The names of the Class II directors,  together with certain information
about them, are set forth below:

      Name              Age       Position with Covol       Director Since
      ----              ---       -------------------       --------------
Raymond J. Weller        54              Director                 1991
DeLance W. Squire        80              Director                 1996
Kirk A. Benson           49              Director                 1999

Raymond J.  Weller has served as a Director  of Covol since July 1991 and served
as Chairman of the Board from January 1997  through July 1998.  Since 1991,  Mr.
Weller has been Vice  President of HMO Benefits of Utah, a Utah based  insurance
brokerage  firm.  From 1985 to 1991,  Mr. Weller was an agent with the insurance
brokerage of Galbraith, Benson, and McKay. Mr. Weller's term expires in 2002.

                                       17

<PAGE>

DeLance  W.  Squire  has  served as a Director  of Covol  since  December  1996.
Currently Mr. Squire is President of Management and Professional Inc. Mr. Squire
was the founder of Squire & Co., Orem, Utah and retired in 1986. From 1986 until
1987,  Mr.  Squire  served as the  Executive  Director  for the  Commission  for
Economic  Development,  Orem,  Utah.  Mr. Squire was previously the mayor of the
City of Orem, Utah. In addition,  Mr. Squire serves as the chairman of the board
of trustees for Timpanogos  Regional  Hospital,  Orem, Utah. Mr. Squire received
his B.S. degree in Accounting from Brigham Young University in 1947 and became a
Certified Public Accountant in 1950. Mr. Squire's term expires in 2002.

Kirk A.  Benson has served as a Director  of Covol since  January  1999,  and as
Chairman and CEO since April 1999.  Most  recently,  Mr.  Benson was Senior Vice
President of Foundation Health Systems,  Inc., the nation's 4th largest publicly
traded managed healthcare company. Mr. Benson was with Foundation Health Systems
and its  predecessors for  approximately  ten years,  holding various  positions
including  president  and chief  operating  officer for  commercial  operations,
general counsel,  and senior vice president for development with  responsibility
for merger and  acquisition  activity.  Mr.  Benson is a Ph.D.  candidate at the
Peter F. Drucker Graduate School of Management at Claremont Graduate University.
He also holds a Master of Laws in Taxation from the University of Denver,  and a
Master of Accountancy  and Juris  Doctorate from Brigham Young  University.  Mr.
Benson's term expires in 2002.

                 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
                            THE ELECTION OF MR. COOK

     PROPOSAL NO. 2 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

         The Board has appointed  PricewaterhouseCoopers  LLP,  certified public
accountants, as auditors to examine the financial statements of Covol for Fiscal
2000 and to perform  other  appropriate  accounting  services and is  requesting
ratification of such appointment by the stockholders. PricewaterhouseCoopers LLP
(formerly Coopers & Lybrand L.L.P.) has served as Covol's auditors since 1994.

         In the event that the  stockholders  do not ratify the  appointment  of
PricewaterhouseCoopers  LLP, the adverse vote will be  considered a directive to
the Audit  Committee and the Board to select other  auditors for the next fiscal
year.  The  appointment  of other  auditors  could have a significant  financial
impact on Covol and could  significantly  impact  Covol's  current  registration
statements.

         A representative  of  PricewaterhouseCoopers  LLP is expected to attend
the Meeting and will have an opportunity to make a statement if he desires to do
so and to respond to appropriate questions.

     THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS
                  OF COVOL AND ITS STOCKHOLDERS AND RECOMMENDS
                          A VOTE "FOR" APPROVAL THEREOF

     PROPOSAL NO. 3 -- RATIFICATION OF THE ISSUANCE OF CONVERTIBLE PREFERRED
                    STOCK AND CONVERTIBLE DEBT IN MARCH 1999

         Covol is  soliciting  the  proxies  of its  stockholders  to ratify the
issuance by Covol in March 1999 of convertible  Preferred  Stock and convertible
debt financing. Funds provided by the financing were critical in order for Covol
to remain in business.

                                       18

<PAGE>

         The  consequences  of Covol  stockholders  not approving this financing
would be extremely detrimental for Covol. The financing agreements require Covol
to obtain stockholder  approval of the transaction by March 31, 2000. Failure to
obtain that approval  would put Covol in default of these  financing  agreements
and would require Covol to redeem the  outstanding  Series D Preferred Stock and
convertible debt,  including  significant  premiums.  Covol could be forced into
bankruptcy  because of the inadequacy of funds  available to redeem the Series D
Preferred Stock and convertible debt which has been issued.  Covol's  redemption
obligation  would be in addition to Covol's  ongoing  need to meet debt  service
requirements  and the  ongoing  cash needs of its  operating  activities.  Covol
believes it is critical that stockholders ratify this financing  transaction and
the potential issuances of Common Stock that could result from the conversion of
the convertible  securities that were issued in March 1999.  Covol has no viable
alternative  plans to remain  solvent  should this  proposal  not be approved by
stockholders.  Further,  it is  also  critical  that  stockholders  approve  the
proposed  amendment  to Covol's  certificate  of  incorporation  to increase the
number of  authorized  shares of Common  Stock (See  Proposal No. 4) in order to
allow  the  additional  shares  issuable  upon  conversion  of  the  convertible
securities to actually be issued.

         The  March  1999  financing   consisted  of   convertible   equity  and
convertible debt securities which, upon conversion, could result in the issuance
of common shares of Covol in excess of 20% of the number of  outstanding  shares
as of the date of the  transaction  and 20% of the voting power.  Regulations of
the  Nasdaq  Stock  Market(sm)  require  stockholder  approval  for  any  equity
issuances  at less than  market  value  which  result in or could  result in the
issuance of Common Stock of Covol that exceeds 20% of the number of  outstanding
shares and 20% of the voting power.  This  financing  arrangement  requires such
stockholder approval.

         The March 1999  financing  consisted of the issuance of  $20,000,000 of
convertible  secured  debt,  issued  at a 50%  discount,  and  the  issuance  of
$6,000,000 of a new series D cumulative  convertible  Preferred Stock, for total
gross  proceeds  of  $16,000,000.   Costs  related  to  the  financing   totaled
approximately  $1,400,000.  Warrants  for the purchase of Common Stock were also
issued  as  part  of  the  financing.   Covol  received  net  cash  proceeds  of
approximately  $14,600,000,  which were used to retire maturing  short-term debt
and  related  accrued  interest,  for  working  capital  uses and other  general
corporate  purposes.  No officers,  directors,  principal  shareholders or other
affiliates provided any of the funding in this transaction.

         The terms of the  financing  and the  accounting  for the financing are
described in detail in Covol's Current Report on Form 8-K, filed March 24, 1999,
and in Covol's  Quarterly  Report on Form 10-Q/A for the quarterly  period ended
March 31, 1999,  filed  October 6, 1999,  both of which are being  provided with
this proxy  statement  and which  have been  incorporated  herein by  reference.
Stockholders  are encouraged to read these  documents to familiarize  themselves
with the details of this transaction.

         During 1998,  Covol had significant  cash needs for the construction of
synthetic fuel facilities. These requirements continued after June 30, 1998 when
construction of these  facilities was completed in order to fund costs in excess
of construction financing, fund required facility modifications, fund operations
of the synthetic fuel  facilities  constructed  including a facility  located in
Price Utah operated by Covol,  and for other  working  capital needs and general
corporate   purposes.   Covol  completed  a  comprehensive   review  of  funding
alternatives in the financial community, from conventional banking sources to an
offering of Common Stock.  Several  potential  sources of funding were contacted
and the process of reviewing  viable  alternatives  and performing due diligence
procedures began in the fall of 1998 and lasted over five months. This extensive
and exhaustive process culminated in the March financing. The financing obtained
was approved by Covol's Board of Directors as being the best  alternative and in
the best  interest of all  stockholders,  on both a  short-term  and a long-term
basis.

         The  Preferred   Stock  became   convertible   at  the  option  of  the
stockholders on June 15, 1999, up to

                                       19

<PAGE>

a maximum  of 20% of the  outstanding  shares of  Preferred  Stock.  Each  month
thereafter,  the amount of Preferred Stock that could be converted  increased by
20%  until  October  13,  1999,  at which  time all of the  Preferred  Stock was
convertible  into Common Stock.  On March 17, 2002,  all  outstanding  Preferred
Stock  automatically  converts to Common  Stock.  The number of shares of Common
Stock into which the Preferred Stock is convertible is determined by multiplying
the number of  preferred  shares by $100 and  dividing by the lesser of $5.25 or
90% of the  market  value of  Covol's  Common  Stock on the date of  conversion.
Market  value is defined as the average of the three  lowest  closing bid prices
over the immediately preceding 20 business days.

         The  convertible  debt  has an  effective  three-year  term  and  bears
interest  at a stated  rate of 2.5% per annum on the  $20,000,000  face  amount.
After consideration of the 50% discount and the value assigned to warrants,  the
imputed interest rate is approximately  36%. The debt is convertible into Common
Stock of Covol at a discount to the market price at the time of conversion.  The
debt is not convertible until after March 17, 2002 except upon the occurrence of
an event of default. If converted,  the number of shares into which the debt can
be  converted  would be  calculated  based on a price per share of Common  Stock
equal to 33% of the then market  price at the time of  conversion,  but not less
than $6.67 per share nor more than $10.00 per share.

         Beginning  in  November  1999 and  through  January 4, 2000,  Covol has
issued  1,603,775  shares of Common Stock on  conversion of 15,202 shares of the
convertible  Preferred Stock issued in March 1999 (series D Preferred Stock). As
of January 4, 2000, the remaining 44,798 shares of series D Preferred Stock were
potentially   convertible  into  9,556,908  shares  of  Common  Stock  (using  a
conversion  price of $.47  which was 90% of the market  value of Covol's  Common
Stock at that date), and the convertible  debt was potentially  convertible into
3,000,000  shares of Common Stock (using a conversion price of $6.67 per share).
Warrants  for the  purchase of Common Stock were  potentially  convertible  into
1,283,626  shares  of Common  Stock,  with a total  exercise  price of more than
$8,000,000. As described previously,  the conversion terms of both the Preferred
Stock and  convertible  debt provide for  conversion  into a number of shares of
Common Stock that could vary  depending  on the market  value of Covol's  Common
Stock on the  conversion  dates.  Therefore,  depending  on the price of Covol's
Common Stock when these securities are actually converted into Common Stock, the
actual  number of shares  could be  different  from the above  amounts,  and the
difference  could be  significant.  Also,  at the election of Covol,  additional
shares of Common  Stock can be issued for  dividends  on the series D  Preferred
Stock and in lieu of interest payments on the convertible debt. As of January 4,
2000, the total number of shares of Common Stock issuable under the terms of the
convertible  Preferred Stock (reduced by 1,603,775 shares for conversions  which
have  occurred  through  January 4, 2000),  convertible  debt,  and  warrants is
13,840,534. Not all of these shares are actually issuable as of January 4, 2000;
some are not issuable until March 2002.

         Current  regulations of the Nasdaq Stock Market(sm) require stockholder
approval  for the  issuance of  securities  at less than market  value where the
total  shares to be  issued  exceed  20% of the  current  number of  outstanding
shares.   The  contractual  terms  of  the  March  financing   agreements  limit
convertibility  to 19.9%  of the  outstanding  Common  Stock  until  shareholder
approval is obtained and obligate Covol to obtain such approval. As of March 17,
1999, there were 12,471,985  shares of Common Stock  outstanding.  If all of the
outstanding  convertible  securities issued in the March financing  transactions
could have been  converted as of January 4, 2000,  there would be an increase of
13,840,534  shares  of  Common  Stock  outstanding  related  solely to the March
financing,  which when added to the shares  already  issued on conversion of the
series D  Preferred  Stock,  represents  an increase  in  outstanding  shares of
approximately  124%, using as a base number the number of shares  outstanding on
March 17, 1999 of 12,471,985.  Significant financial consequences could occur if
Covol is  unable to  convert  all of the March  1999  securities  due to the 20%
limitation and lack of stockholder approval.

         The  consequences  of Covol  stockholders  not approving this financing
would be extremely

                                       20

<PAGE>

detrimental  for  Covol.  The  financing  agreements  require  Covol  to  obtain
stockholder  approval of the  transaction  by March 31, 2000.  Failure to obtain
that approval would put Covol in default of these financing agreements and would
require Covol to redeem the outstanding Series D Preferred Stock and convertible
debt,  including  significant  premiums.  Covol could be forced into  bankruptcy
because of the  inadequacy  of funds  available to redeem the Series D Preferred
Stock and convertible debt which has been issued.  Covol's redemption obligation
would be in addition to Covol's  ongoing need to meet debt service  requirements
and the ongoing cash needs of its  operating  activities.  Covol  believes it is
critical that stockholders  ratify this financing  transaction and the potential
issuances  of  Common  Stock  that  could  result  from  the  conversion  of the
convertible  securities  that  were  issued in March  1999.  Covol has no viable
alternative  plans to remain  solvent  should this  proposal  not be approved by
stockholders.  Further,  it is  also  critical  that  stockholders  approve  the
proposed  amendment  to Covol's  certificate  of  incorporation  to increase the
number of  authorized  shares of Common  Stock (See  Proposal No. 4) in order to
allow  the  additional  shares  issuable  upon  conversion  of  the  convertible
securities to actually be issued.

           THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR"
          RATIFICATION OF THE ISSUANCE IN MARCH 1999 OF THE CONVERTIBLE
                      PREFERRED STOCK AND CONVERTIBLE DEBT.

        PROPOSAL NO. 4 - TO AMEND COVOL'S CERTIFICATE OF INCORPORATION TO
         INCREASE THE AUTHORIZED NUMBER OF SHARES AVAILABLE FOR ISSUANCE

         Covol is  soliciting  the  proxies of its  stockholders  to approve the
amendment of its Certificate of Incorporation to increase the authorized  shares
of Common  Stock.  Additional  shares of Common Stock need to be  available  for
Covol in case additional shares are required to be issued upon the conversion of
equity  securities or debt obligations  convertible into Common Stock previously
discussed, and for general corporate growth.

         As of January 4, 2000,  there were  17,176,911  shares of Common  Stock
outstanding.  As of that  date,  there  were  outstanding  options  to  purchase
approximately 2,969,250 shares of Common Stock, outstanding warrants to purchase
approximately 4,298,053 shares of Common Stock,  outstanding shares of Preferred
Stock  convertible  into  approximately  9,999,790  shares of Common Stock,  and
outstanding  debt  convertible  into  approximately  7,877,387  shares of Common
Stock.  Exercise of the current  outstanding  stock options and warrants,  which
have  exercise  prices  ranging  from $.88 to $20.00 per share,  would result in
Covol receiving  approximately  $44,000,000 of cash,  although currently none of
these options and warrants are "in-the-money."

         Not all of the  convertible  securities  are  immediately  convertible.
However,  if all  convertible  securities were converted into Common Stock as of
January  4,  2000,  the  total  amount  of  Common  Stock  outstanding  would be
approximately  42,321,391  shares,  which  would  exceed the  current  number of
authorized  shares of 25,000,000.  The number of shares of Common Stock issuable
upon conversion is dependent, in part, on the price of Covol's Common Stock when
these securities are actually converted into Common Stock. Therefore,  depending
on the price of Covol's  Common  Stock at the time of  conversion,  the issuable
number of shares of Common  Stock  could  exceed the number of shares  currently
authorized to be issued.  Covol must meet obligations to issue Common Stock upon
conversion of convertible  equity and debt securities,  some of which have short
time periods in which Covol can act, in order to avoid being in default of those
security agreements.

         In  anticipation  of the need for future  issuances of Common Stock for
future  conversions  of  convertible  securities  and  other  general  corporate
purposes, Covol is seeking to amend its Certificate of

                                       21

<PAGE>

Incorporation to provide for  authorization of up to 50,000,000 shares of Common
Stock. Currently,  Article V of Covol's Certificate of Incorporation  authorizes
the issuance of only 25,000,000 shares of Common Stock as follows:

         The  capital  stock  authorized,   the  par  value  thereof,   and  the
         characteristics of such stock shall be as follows:

Number of Shares                  Par Value                        Class of
Authorized                        Per Share                        Stock
- ----------                        ---------                        -----
25,000,000                        $.001                            Common
10,000,000                        $.001                            Preferred

         The  Board  of  Directors  of Covol  hereby  proposes  adoption  of the
following resolution by Covol's stockholders:

  RESOLVED, that Article V of Covol's Certificate of Incorporation is amended to
read as follows:

         The  capital  stock  authorized,   the  par  value  thereof,   and  the
         characteristics of such stock shall be as follows:

Number of Shares                  Par Value                        Class of
Authorized                        Per Share                        Stock
- ----------                        ---------                        -----
50,000,000                        $.001                            Common
10,000,000                        $.001                            Preferred

         If Covol chooses to issue additional  shares of Common Stock,  existing
stockholders'   ownership  in  the  aggregate  could  be  subject  to  dilution.
Notwithstanding this potential dilution, Covol believes that the adoption of the
proposed  amendment  is in  the  best  interest  of  Covol  stockholders  as the
consequences of being in default of security agreements could be significant.

         To  the  extent  convertible  Preferred  Stock,  convertible  debt  and
warrants,  and other  convertible  securities  are converted  into Common Stock,
stockholder  interests  in Covol will be  diluted.  If the  market  value of the
Common  Stock  decreases,  the  variable  conversion  rate  of  the  outstanding
convertible  securities  increases  this  dilution.  If the market  value of the
Common Stock decreases significantly, the offering price per share in any future
private  placements  or  public  offerings  may  decrease  causing  dilution  of
ownership to other stockholders. Sales of Common Stock and convertible Preferred
Stock, and the exercise of options,  warrants and other  convertible  securities
may have an adverse effect on the trading price of and market for Covol's Common
Stock.  A  significant   portion  of  shares  underlying   Covol's   outstanding
convertible  securities  and options and  warrants  are subject to  registration
rights.  These rights may affect  Covol's  ability to raise  additional  capital
because  financial   institutions  which  require  registration  rights  may  be
unwilling  to proceed  with a  financing  where  there are  registration  rights
already in place which impair the value of any new registration rights.

         THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
        RESOLUTION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
                                     STOCK.

                                       22

<PAGE>

                            RELATIONSHIP OF PROPOSALS

         Stockholders  are being asked to vote  separately on Proposals 3 and 4.
Management  urges a vote "FOR" both  Proposals.  Failure of the  stockholders to
approve  either  one of  Proposals  3 or 4 could  result in a default  under the
financing  described above with potentially dire consequences.  If you intend to
vote to ratify the financing described in Proposal 3, please consider that Covol
must have  approval to the  increase in  authorized  Common  Stock  described in
Proposal 4 in order to avoid default under the  financing.  Management  believes
that it is  essential  to Covol's  continued  operation  that both  Proposals be
approved by the stockholders.

         As described above,  abstentions  (including failures to return a proxy
or cast a vote) and broker non-votes are effectively the same as votes "against"
Proposal 4. Broker  non-votes  result from  stockholders who own stock through a
brokerage  account  failing to properly  instruct their broker how to vote their
shares.  Due to the  critical  nature  of these  Proposals,  Covol  urges  every
stockholder to vote (by proxy or in person) at this meeting.

                              STOCKHOLDER PROPOSALS

         Stockholders   may  submit   proposals  on  matters   appropriate   for
stockholder  action at  Covol's  annual  meetings  consistent  with  regulations
adopted by the SEC. For such  proposals to be  considered  for  inclusion in the
proxy statement and form of proxy relating to the 2001 annual meeting, they must
be  received  by Covol not later than  September  15, 2000 or such later date as
Covol may specify in its SEC  filings.  Such  proposals  should be  addressed to
Covol at 3280 North Frontage Road, Lehi, Utah 84043, Attn: Corporate Secretary.

         It is  anticipated  that proxies  solicited in connection  with Covol's
2001 annual  meeting  will confer  discretionary  authority  to vote on matters,
among  others,  of which Covol does not receive  notice prior to  September  15,
2000.

                                  OTHER MATTERS

         Management does not intend to present, and has no information as of the
date of  preparation  of this Proxy  Statement  that  others will  present,  any
business at the Meeting other than business pertaining to matters required to be
set forth in the Notice of Annual Meeting and Proxy Statement. However, if other
matters requiring the vote of the stockholders properly come before the Meeting,
it is the  intention  of the  persons  named in the  enclosed  proxy to vote the
proxies held by them in accordance with their best judgment on such matters.

                             SOLICITATION OF PROXIES

         The  accompanying  form of proxy is being  solicited  on  behalf of the
Board.  The expense of  solicitation  of proxies for the Meeting will be paid by
Covol. In addition to the mailing of the proxy material,  such  solicitation may
be made in  person  or by  written  communication,  telephone  or  telegraph  by
directors, officers, employees or agents of Covol or its subsidiaries.

                                       23

<PAGE>

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

         The following documents are incorporated herein by reference:

o        Current report on Form 8-K filed March 24, 1999, and

o        Quarterly  report  on Form  10-Q  filed May 14,  1999,  for the  fiscal
         quarter  ended March 31, 1999,  as amended on Form 10-Q/A filed October
         6, 1999.

                           ANNUAL REPORT ON FORM 10-K

         CERTAIN  PORTIONS OF COVOL'S  ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED  SEPTEMBER  30, 1999,  AS  REFERENCED  IN THIS PROXY  STATEMENT,  ARE
INCORPORATED  HEREIN BY REFERENCE.  COVOL WILL PROVIDE,  WITHOUT CHARGE, TO EACH
PERSON  SOLICITED BY THIS PROXY  STATEMENT,  ON THE WRITTEN  REQUEST OF ANY SUCH
PERSON,  A COPY OF THE EXHIBITS  THAT ARE ATTACHED TO COVOL'S  ANNUAL  REPORT ON
FORM 10-K AS FILED WITH THE  SECURITIES  AND  EXCHANGE  COMMISSION  FOR ITS MOST
RECENT  FISCAL  YEAR.  SUCH WRITTEN  REQUEST  SHOULD BE DIRECTED TO THE INVESTOR
RELATIONS DEPARTMENT AT THE ADDRESS OF COVOL APPEARING ON THE FIRST PAGE OF THIS
PROXY STATEMENT OR FAXED TO COVOL AT (801) 768-4483.

         If you have any  questions  about  giving  your  proxy or  require  any
assistance,  please contact Morrow & Co., Inc., a shareholder  services  company
that is assisting Covol with this proxy statement, at 1-800-566-9061.

         YOUR VOTE IS IMPORTANT. YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN
YOUR PROXY CARD SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE  WITH YOUR WISHES
AND THAT THE  PRESENCE  OF A QUORUM MAY BE  ASSURED.  THE PROMPT  RETURN OF YOUR
SIGNED PROXY CARD,  REGARDLESS OF THE NUMBER OF SHARES YOU HOLD,  WILL AID COVOL
IN AVOIDING THE EXPENSE OF  ADDITIONAL  PROXY  SOLICITATIONS.  GIVING YOUR PROXY
DOES NOT  AFFECT  YOUR  RIGHT TO VOTE IN PERSON AT THE  MEETING OR YOUR RIGHT TO
RESUBMIT LATER DATED PROXY CARDS.

                                            Covol Technologies, Inc.

                                            By Order of the Board of Directors,

                                            /s/ Harlan M. Hatfield
                                            Harlan M. Hatfield
                                            Secretary

Lehi, Utah
January 17, 2000

                                       24

<PAGE>

                            COVOL TECHNOLOGIES, INC.
                    PROXY SOLICITED BY THE BOARD OF DIRECTORS
                         ANNUAL MEETING OF STOCKHOLDERS

                            WEDNESDAY, MARCH 1, 2000

         The undersigned stockholder(s) of Covol Technologies,  Inc., a Delaware
corporation  (the  "Company"),  revoking all previous  proxies,  hereby appoints
Harlan M. Hatfield as the attorney and proxy of the undersigned, with full power
of substitution, to cast all votes for all shares of Common Stock of Covol which
the  undersigned  would be entitled to cast if personally  present at the Annual
Meeting of  Stockholders of Covol to be held at the Provo Marriott Hotel, at 100
West 100 North,  Provo,  Utah 84601, on Wednesday,  March 1, 2000, at 2:00 p.m.,
Mountain  Standard Time, and any and all adjournments or postponements  thereof.
Said proxies are  authorized  and directed to vote as indicated  with respect to
the following matters:

                          (Please date and sign below)

                                               Please mark your vote as this |X|

1.  ELECTION OF DIRECTOR

    Brent M. Cook                                    FOR  [ ]  WITHHOLD  [ ]
    (If elected, Mr. Cook's term would expire 2003)            AUTHORITY

2.  RATIFY THE SELECTION BY THE BOARD OF             FOR  [ ]  AGAINST   [ ]
    PRICEWATERHOUSECOOPERS LLP AS                              ABSTAIN   [ ]
    INDEPENDENT AUDITORS OF COVOL FOR
    THE 2000 FISCAL YEAR

3.  RATIFICATION OF THE ISSUANCE IN MARCH            FOR  [ ]  AGAINST   [ ]
    1999 OF CONVERTIBLE PREFERRED STOCK                        ABSTAIN   [ ]
    AND CONVERTIBLE DEBT

4.  APPROVAL OF THE PROPOSED                         FOR  [ ]  AGAINST   [ ]
    AMENDMENT TO COVOL'S CERTIFICATE OF                        ABSTAIN   [ ]
    INCORPORATION TO INCREASE THE
    NUMBER OF AUTHORIZED SHARES OF
    COMMON STOCK FROM 25,000,000 TO
    50,000,000

This Proxy is solicited on behalf of the Board of  Directors.  Unless  otherwise
specified,  the shares  will be voted "FOR" items 1, 2, 3 and 4. This Proxy also
delegates discretionary authority to the proxy to vote with respect to any other
business which may properly come before the 2000 Annual Meeting of  Stockholders
and any and all adjournments or  postponements  thereof to the extent allowed by
Rule 14a-4(c) as promulgated by the U.S. Securities and Exchange Commission.

THE  UNDERSIGNED  HEREBY  ACKNOWLEDGES  RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF COVOL TECHNOLOGIES, INC.

Dated: ________________________________, 2000


- ---------------------------------------------
Name of Stockholder


- ---------------------------------------------
Signature of Stockholder

NOTE:  Please date and sign this Proxy exactly as the names appear hereon.  When
signing as  attorney-in-fact,  executor,  administrator,  trustee  or  guardian,
please add your title as such.  Proxies  executed  in the name of a  corporation
should be signed on behalf  of the  corporation  by a duly  authorized  officer.
Where  shares  are owned in the name of two or more  persons,  all such  persons
should sign.

PLEASE RETURN YOUR COMPLETED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE.



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