Exhibit 10.74


                            ASSET PURCHASE AGREEMENT


                                 by and between


                             HEADWATERS INCORPORATED


                                       and


                              RED HAWK ENERGY, LLC

                                December 28, 2001



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                            ASSET PURCHASE AGREEMENT

         ASSET PURCHASE AGREEMENT,  made as of December 28, 2001, by and between
HEADWATERS INCORPORATED, a Delaware corporation ("Seller"), and Red Hawk Energy,
LLC, a California limited liability company ("Buyer").

                                    RECITALS

         WHEREAS,  Seller owns the Assets  comprised  of a Facility  (as defined
herein) to manufacture synthetic fuel from coal located in Utah County, Utah;

         WHEREAS, Seller desires to sell an undivided 50% interest in the Assets
to Buyer and Buyer  desires to purchase an undivided  50% interest in the Assets
from Seller,  all on the terms and subject to the  conditions  set forth herein;
and

         WHEREAS,  Buyer  and  Seller  intend  to  contribute  their  respective
interests  in the Assets to a limited  liability  company  and to  relocate  the
Facility to a location in Carbon County, Utah.

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

                                    ARTICLE I
                                   DEFINITIONS

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

         1.1. Affiliate shall mean, as to any person, any other person or entity
that, directly or indirectly through one or more  intermediaries,  controls,  is
controlled by or is under common control with such person.  For purposes of this
definition,  "control" (including,  with correlative meanings,  the terms "under
common control with" and  "controlled  by"), as used with respect to any person,
means the  possession,  directly or indirectly,  of the power to direct or cause
the direction of the management or policies of such person,  whether through the
ownership of voting stock or other equity interests, by contract or otherwise.

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

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

         1.5.  Bill of Sale  shall  mean the Bill of Sale  from  Seller to Buyer
relating to the Assets, in the form of Exhibit A attached hereto.

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         1.5. Books and Records shall mean original or true and complete  copies
of all of the books, records,  files, data and information of Seller relating to
the design, ownership,  construction and operation of the Facility and operation
of the Assets prior to the Effective Time,  which are relevant to Buyer's use of
the Assets and  operation of the Facility  after the Effective  Time,  including
without limitation Plans and Specifications.

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

         1.7.  Closing  shall mean the meeting of the parties to be held at 5:00
p.m.,   local  time,   on  the  Closing  Date,  at  the  offices  of  Headwaters
Incorporated,  or such other time and place as the parties may mutually agree in
writing.

         1.8.  Closing Date shall mean  December 28, 2001, or such other date as
the parties may mutually agree in writing.

         1.9. Coal Supply Agreement shall mean the coal supply agreement between
ETG and Red Hawk Energy, LLC executed as of the Closing.

         1.10. Confidentiality Agreement shall mean the confidentiality
agreement, dated December 28, 2001, between Seller and Buyer.

         1.11. Construction Report shall mean such report prepared by Buyer and
Seller or their consultants, in form and substance satisfactory to Buyer and
Seller, to the effect that the costs for the relocation, construction and
testing of the Assets and appurtenances thereto at the Site shall not exceed
$550,000.

         1.12. Effective Time shall mean 12:01 a.m., Mountain Time, on the
Closing Date.

         1.13. Environmental Technologies Group, LLC Articles of Organization
shall mean the certificate of organization for ETG executed as of the Closing.

         1.14. Environmental Technologies Group, LLC Operating Agreement shall
mean the limited liability company operating agreement for ETG executed by Buyer
and Seller as of the Closing.

         1.15. ETG shall mean Environmental  Technologies Group, LLC, the entity
to which the Assets shall be contributed at Closing.

         1.16. ETG Transfer Documents shall mean the bill of sale and/or other
documents which are required to evidence the transfer of the Assets from Seller
and Buyer to ETG at Closing.

         1.17.  Facility  shall  mean  the  coal  processing  facility  commonly
referred to as the Geneva facility owned by Seller at the Facility Site.

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         1.18. Facility Site shall mean the site where the Facility is currently
located in Utah County, Utah.

         1.19. Fixed Assets shall mean all tangible personal property  currently
located at the Facility Site which  constitute  part of, or are otherwise  owned
and used by Seller in the operation of, the Facility, including, but not limited
to, all personal  property,  trade  fixtures,  chattels,  machinery,  equipment,
computer  hardware,  fixtures,  furniture,   furnishings,   handling  equipment,
implements, spare parts, tools and accessories of all kinds.

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

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

         1.22.  Knowledge of Seller shall mean the actual  knowledge,  after due
inquiry, of the Seller.

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

         1.24.  Lease shall mean the site lease for the Facility upon relocation
as  contemplated  in Section 5.5 or a commitment  to lease in form and substance
acceptable to both Seller and Buyer.

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

         1.26.  Losses  shall  have the  meaning  given to such term in  Section
8.1(a).

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

         1.28.  Note shall mean the promissory  note in the amount of $2,000,000
made by Buyer and payable to Seller in the form of Exhibit C attached hereto.

         1.29.  Operations  and  Maintenance  Agreement  shall mean the Facility
operations and maintenance  agreement  between ETG and Seller executed as of the
Closing.

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         1.30. Permit Report shall mean such report prepared by Buyer and Seller
or their consultants, in form and substance satisfactory to Buyer and Seller, to
the  effect  that the  permits  required  for the  construction,  operation  and
maintenance  of the  Assets at the Site have been  obtained  or can be  obtained
without restriction within three months of the Closing Date.

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

         1.32. Plans and Specifications  shall mean the plans and specifications
used to engineer, procure, and construct the Facility.

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

         1.34.  Required  Consents  shall mean  those  consents,  approvals  and
waivers required from  governmental  authorities or other third parties that are
necessary  or required in order to  transfer  the Assets to Buyer and  otherwise
give effect to the transactions  contemplated  herein (other than such consents,
the  failure  of which to  obtain,  taken as a whole,  could not  reasonably  be
expected to have a Material Adverse Effect) and that are specifically identified
on Schedule 1. attached hereto.

         1.35. Seller's Closing Certificate shall mean the certificate of Seller
substantially in the form of Exhibit D attached hereto.

         1.36. Site shall mean the real property  covered by the Lease where the
Facility will be relocated after the Closing.

         1.37.  Synthetic Fuel Purchase  Agreement shall mean the synthetic fuel
purchase  agreement between ETG and Red Hawk Energy,  LLC, a California  limited
liability company, executed as of the Closing.

         1.38.  Technology  License and Reagent Supply  Agreement shall mean the
technology  license and supply  agreement  between ETG and Seller executed as of
the Closing.

         1.39. Transaction Documents shall mean:

                  (a) this Agreement;

                  (b) the Bill of Sale;

                  (c) the Note;

                  (d) the  Environmental  Technologies  Group,  LLC  Articles of
         Organization;

                  (e)  the  Environmental  Technologies,  Group,  LLC  Operating
         Agreement;

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                  (f) the Technology License and Reagent Supply Agreement;

                  (g) the Lease;

                  (h) the Operations and Maintenance Agreement;

                  (i) the Coal Supply Agreement;

                  (j)  the  coal  supply  agreement  between  Buyer  and  Seller
         executed as of the Closing;

                  (k) the Synthetic Fuel Purchase Agreement;

                  (l) the synthetic  fuel purchase  agreement  between Buyer and
         Seller executed as of the Closing;

                  (m) the ETG Transfer Documents;

                  (n) the option agreement  between Buyer and Seller executed as
         of the Closing Date;

                  (o) the Permit Report;

                  (a) the Construction Report;

                  (q) the Buyer's Closing Certificate;

                  (r)  the  Seller's   Closing   Certificate;   and  such  other
         agreements and instruments as may be contemplated by this Agreement.

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1.  Purchase  and Sale.  Buyer and  Seller  hereby  agree that at the
Closing,  and upon all of the terms and subject to all of the conditions of this
Agreement,  Seller shall sell,  convey,  transfer and assign to Buyer, and Buyer
shall  purchase and accept from Seller,  an undivided 50% interest in all of the
Assets, free and clear of all Liens, except Permitted Liens.

         2.2.  Purchase  Consideration.   In  consideration  of  Seller's  sale,
conveyance, transfer, delivery and assignment to Buyer by the Bill of Sale of an
undivided  50%  interest  in the  Assets,  at the  time of the  Closing  of this
Agreement,  Buyer shall (i) execute and deliver the Note,  (ii) pay to Seller in
immediately  available funds the sum of One Hundred Twenty Five Thousand Dollars
($125,000). In addition, Buyer shall pay to Seller the sum of One Hundred Twenty
Five Thousand  Dollars  ($125,000)  at the earlier of (i) 30 days  following the
Closing Date, or (ii) execution of the Lease. (The foregoing  collectively,  the
"Purchase Consideration".)

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         2.3. Deliveries at Closing.

                  (a) By Seller to Buyer.  At the  Closing,  in  addition  to an
         undivided  50%  interest  in  the  Assets,  Seller  shall  deliver  the
         following  items to Buyer,  each properly  executed and dated as of the
         Closing Date by Seller and in form and substance reasonably  acceptable
         to Buyer:

                           (i) all Required Consents applicable to Seller in its
                  own capacity and to Seller in its  capacities  as a member and
                  manager of ETG,

                           (ii) a  certificate  of the  corporate  secretary  of
                  Seller as to such  matters as may  reasonably  be requested by
                  Buyer, and

                           (iii) all Transaction Documents.

                  (b) By Buyer to Seller.  At the Closing,  Buyer shall  deliver
         the Purchase  Consideration  and the  following  items to Seller,  each
         properly executed and dated as of the Closing Date by Buyer and in form
         and substance reasonably acceptable to Seller:

                           (i) all Required Consents applicable to Buyer, in its
                  own capacity and to Buyer in its capacity as a member of ETG,

                           (ii) a certificate of the manager of Buyer as to such
                  matters as may reasonably be requested by Seller, and

                           (iii) all Transaction Documents.

         2.4. No Assumption of Liabilities.

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

         2.5. Sales Tax Exemption.

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

                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF SELLER

         Seller represents and warrants to Buyer that:

         3.1. Corporate Standing.

         Seller is a corporation duly organized and validly existing and in good
standing  under the laws of the state of  Delaware.  Seller has the power to own
its property, and to execute, deliver and perform this Agreement and each of the

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Transaction  Documents  applicable  to it, and to carry on its  business  as now
being  conducted.  Seller is duly  qualified  to do  business  in and is in good
standing as a foreign  corporation  authorized to do business  under the laws of
the State of Utah.

         3.2. Authorizations; Binding Agreements.

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

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

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

         3.4. Taxes.

         All tax returns  and reports  relating to the Assets and the conduct of
the construction,  ownership, maintenance and operation of the Facility required

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

         3.5. Brokers or Finders Fees.

         Except  as set  forth  in  Schedule  3.5,  there  is no  obligation  or
liability,  contingent  or  otherwise,  for brokers or finders  fees  created by
Seller with respect to the matters  provided for in this Agreement and the other
Transaction  Documents.  No  obligation or liability for brokers or finders fees
created by Seller with respect to the matters provided for in this Agreement and
the other Transaction Documents shall be imposed upon Buyer or the Assets.

         3.6. No Imposition of Liens.

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

         3.7. Title to Assets.

         (a) As of the date hereof,  Seller owns, and as of the Effective  Time,
it will own,  good,  valid and marketable  title to all of the Assets,  free and
clear of any and all Liens, except for Permitted Liens. As of the Effective Time
and upon Buyer's payment of the Purchase  Consideration  pursuant hereto,  good,
valid and  marketable  title to an undivided 50% interest in the Assets free and
clear of all Liens, except for Permitted Liens, shall pass to Buyer.

         (b) The Assets  constitute all property and equipment  required for the
operation  of a  facility  to  manufacture  synthetic  fuel  from  coal  with an
estimated annual rated capacity of not less than 150,000 tons; provided that the
Assets do not  necessarily  include  (i)  material  handling  equipment  for the
delivery of feedstock and reagent to, and the removal of finished  product from,
the Facility,  such as trucks,  loaders,  conveyor belts and shovels,  (ii) site
specific  property and  equipment,  such as suitable real estate and building to
house the Facility,  storage areas, electrical cables and connectors and bracing
or mounting hardware, (iii) reagent and other consumables, (iv) a license to use
the  technology  for which the Facility was designed,  (v)  miscellaneous  nuts,
bolts,  belts and other standard  hardware which may have become lost or damaged

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in the  course of  disassembly,  storage,  moving and  re-assembly  or which are
considered wear items.

         (c) The Assets upon relocation to the Site pursuant to Section 5.5 will
be in operable condition.

         3.8. Pending Litigation.

         There are no actions,  suits,  arbitrations  or  proceedings  currently
pending or, to the Knowledge of Seller, threatened against the Assets. There are
no outstanding or  unsatisfied  judgments,  orders or decrees to which Seller is
bound.

         3.9. Compliance With Laws.

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

         3.10. Consents

         Schedule  1.34 is a true,  correct and  complete  list of all  Required
Consents.

         3.11. Environmental Conditions.

         (a) Definitions. When used in this Section:

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

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

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

         (b) Environmental Representations and Warranties:

                  (i) Seller has not operated the Facility or conducted business
         or other  activities  at or from the Facility,  in connection  with the

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         construction of the Facility or otherwise, in a manner that constituted
         or constitutes a violation of any applicable Environmental Law;

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

                  (iii) Seller has not received any notices or claims that it is
         a  responsible  party in connection  with any claim or notice  asserted
         pursuant to 42 U.S.C.  Section 9601 et seq.,  or any  comparable  state
         Environmental Law, in connection with the Facility.

         3.12. Liabilities.

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

         3.13. Factual Representations.

                  (a) Each of the material facts  regarding the Assets set forth
         in the due  diligence  information  delivered  to  Buyer  was  true and
         correct as of the date on which it spoke and  remains  true and correct
         as of the date hereof unless superceded by subsequent disclosures.

                  (b) The information  furnished by Seller to Buyer,  taken as a
         whole, does not contain any untrue statement of a material fact or omit
         to state a material  fact  necessary to make the  statements  contained
         therein statements not misleading.

                  (c)  Seller  does not have  knowledge  of any  fact,  event or
         circumstance which it is aware would render the Facility, as relocated,
         ineligible  for tax credits  under  Section 29 of the Internal  Revenue
         Code.

         3.14. Other Agreements.

         Other than the Transaction Documents, there are no contracts, licenses,
agreements or  arrangements  with Seller or any other person in connection  with
the construction,  maintenance,  ownership and operation of the Facility,  other
than as disclosed on Schedule 3.14.

         3.15 Section 29.

         Sales of synthetic  fuel from the Facility to unrelated  third  parties
will qualify for tax credits under Internal Revenue Code section 29 when claimed
by an eligible tax payer.

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                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer hereby represents and warrants to Seller that:

         4.1. Organization and Standing.

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

         4.2. Authorizations; Binding Agreements.

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

         4.3. Brokers or Finders Fees.

         Except  as set  forth  in  Schedule  4.3,  there  is no  obligation  or
liability, contingent or otherwise, for brokers or finders fees created by Buyer
with  respect  to the  matters  provided  for in this  Agreement  and the  other
Transaction  Documents.  No  obligation or liability for brokers or finders fees
created by Buyer with respect to the matters  provided for in this Agreement and
the other Transaction Documents shall be imposed upon Seller or the Assets.

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

         There  are no  actions,  suits,  or  proceedings  pending,  or,  to the
Knowledge of Buyer,  threatened,  against Buyer in any court, or  administrative

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governmental  body or agency which will affect in any adverse manner the ability
of  Buyer  to  execute,  deliver  and  perform  this  Agreement  and  the  other
Transaction Documents.

                                    ARTICLE V
                      CERTAIN UNDERSTANDINGS AND AGREEMENTS

         5.1. Reasonable Efforts.

         Subject  to the  terms  and  conditions  herein  provided,  each of the
parties  hereto agrees to use its  commercially  reasonable  efforts to take, or
cause to be  taken,  all  action,  and to do,  or cause to be done,  all  things
necessary, proper and advisable under applicable Law, and to obtain the Required
Consents,   necessary  to  consummate  and  make   effective  the   transactions
contemplated by this Agreement, including, but not limited to, relocation of the
Assets.  In case at any time  after the  Effective  Time any  further  action is
necessary or desirable to carry out the purposes of this  Agreement,  the proper
officers  and  members  of each  party  to this  Agreement  shall  take all such
necessary  action.  Buyer and Seller  will  execute any  additional  instruments
necessary to consummate the transactions contemplated hereby.

         5.2. Public Announcements.

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

         5.3. Confidentiality.

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

         5.4. Taxes.

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

         5.5 Relocation of Facility.

         Buyer and Seller  agree that ETG will  relocate  the Facility to a site
mutually acceptable to Seller and Buyer and appropriate to the planned operation
of the Facility and the Paris  synthetic  fuel  manufacturing  facility  ("Paris
Facility").  The site  selected  will be prepared to host the  Facility  and the
Paris Facility.  Buyer will pay the costs of relocation and  installation of the
Facility  and the Paris  Facility up to $550,000  plus 10%.  Seller will pay the

                                       12
<PAGE>

costs of relocation and  installation  of the Facility and the Paris Facility in
excess of $550,000 plus 10%. Seller will provide oversight,  at its expense, for
relocation,   installation,  and  testing  to  place  the  Assets  in  operating
condition.

         Buyer will  consent to ETG's  grant to Seller of the right to  relocate
and operate the Paris Facility at the site selected for the Facility.

                                   ARTICLE VI
            CONDITIONS PRECEDENT TO THE PAYMENT OBLIGATIONS OF BUYER

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

         6.1. Compliance with Agreement.

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

         6.2. Proceedings and Instruments Satisfactory.

         All  proceedings,  corporate  or  other,  to  be  taken  by  Seller  in
connection  with  the  transactions  contemplated  by  this  Agreement,  and all
agreements,  instruments,  and other documents incident thereto,  including, but
not limited to, the Transaction Documents shall be executed and delivered by the
parties  thereto on the Closing Date and be reasonably  satisfactory in form and
substance to Buyer.

         6.3. No Litigation.

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

         6.4. Representations and Warranties.

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

         6.5. Consents.

         All Required Consents applicable to Seller shall have been obtained.

                                       13
<PAGE>

         6.6. Antitrust Filings.

         The Hart-Scott-Rodino  Act ("HSR Act") and the regulations  promulgated
thereunder  shall  have been  complied  with to the extent  applicable,  and all
waiting periods under the HSR Act shall have expired or been terminated.

         6.7 Material Adverse Change.

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

                                   ARTICLE VII
                CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER

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

         7.1. Compliance with Agreement.

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

         7.2. Proceedings and Instruments Satisfactory.

         All proceedings, corporate or other, to be taken by Buyer in connection
with  the  transactions  contemplated  by this  Agreement,  and all  agreements,
instruments,  and other documents incident thereto,  including,  but not limited
to, the  Transaction  Documents  shall be executed and  delivered by the parties
thereto on the Closing Date and be reasonably satisfactory in form and substance
to Seller.

         7.3. No Litigation.

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

         7.4. Representations and Warranties.

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

                                       14
<PAGE>

         7.5. Required Consents.

         All Required Consents applicable to Buyer shall have been obtained.

         7.6. Antitrust Filings.

         The HSR Act and the regulations  promulgated thereunder shall have been
complied with to the extent  applicable,  and all waiting  periods under the HSR
Act shall have expired or been terminated.

                                  ARTICLE VIII
                      INDEMNITIES AND ADDITIONAL COVENANTS

         8.1. Seller's Indemnity.

                  (a) Seller hereby  indemnifies  and holds Buyer  harmless from
         and against,  and agrees to defend  promptly  Buyer from, and reimburse
         Buyer for, any and all losses, damages,  costs, expenses,  liabilities,
         obligations  and  claims of any kind,  including,  without  limitation,
         environmental   liabilities   (whether  involving  personal  injury  or
         property damage),  reasonable attorneys' fees and other legal costs and
         expenses (hereinafter referred to collectively as "Losses"), that Buyer
         and any  Affiliate of Buyer may at any time suffer or incur,  or become
         subject  to, as a result of or in  connection  with:  (i) any breach or
         inaccuracy of any of the  representations and warranties made by Seller
         in this  Agreement or any other  agreement or  instrument  delivered by
         Seller  pursuant  hereto;  (ii) any  failure  of Seller  to carry  out,
         perform,  satisfy  and  discharge  any  of its  covenants,  agreements,
         undertakings,  liabilities or obligations under this Agreement or under
         any of the agreements and  instruments  delivered by Seller pursuant to
         this Agreement;  (iii) claims by third parties (including  governmental
         authorities)  against Buyer  relating to the  ownership,  construction,
         operation and  maintenance by Seller of the Assets and Facility for the
         period prior to the Effective Time including,  without limitation,  any
         claim of landlord's  statutory  lien; and (iv) any and all  liabilities
         and obligations of Seller;

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

                                       15
<PAGE>

         connection with any such claim, action or proceeding, the parties shall
         cooperate  with each  other  and  provide  each  other  with  access to
         relevant books and records in their possession.

                  (c)  Seller  shall  not be  required  to  indemnify  and  hold
         harmless Buyer pursuant to Section  8.1(a)(i)  hereof in respect of the
         representations  and warranties made by Seller herein unless such right
         to  indemnification  is asserted  by Buyer  (whether or not such Losses
         have actually been incurred) by notice to Seller within 30 months after
         the  Closing  Date;  or,  only with  respect  to claims  arising  under
         Sections 3.4, 3.11, within the applicable  statute of limitations;  or,
         only with respect to claims arising under Section 3.15,  until December
         31, 2007.

                  (d) Except with respect to claims  arising under  Sections 3.4
         or 3.11,  Seller's  aggregate  indemnification  obligation  pursuant to
         Section  8.1(a)(i)  shall in no event exceed the money actually paid by
         Buyer and received by Seller pursuant to Section 2.2.

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

         8.2. Buyer's Indemnity.

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

                  (b) In the event a claim against Seller arises that is covered
         by the indemnity  provisions of Section 8.2 of this  Agreement,  notice
         shall be given promptly by Seller to Buyer containing detail reasonably
         sufficient  for Buyer to  identify  the  nature and basis of the claim.
         Provided  that Buyer  admits in  writing  to Seller  that such claim is
         covered by the indemnity  provisions of Section 8.2 hereof, Buyer shall
         have  the  right  to  contest  and  defend  by  all  appropriate  legal
         proceedings  such claim and to control all  settlements  (unless Seller
         agrees to assume the cost of  settlement  and to forgo such  indemnity)
         and to select  lead  counsel to defend  any and all such  claims at the
         sole cost and expense of Buyer;  provided,  however, that Buyer may not
         effect  any  settlement  that  could  result  in any cost,  expense  or
         liability  to  Seller  unless  Seller   consents  in  writing  to  such
         settlement and Buyer agrees to indemnify  Seller  therefor.  Seller may
         select counsel to participate with Buyer's counsel in any such defense,

                                       16
<PAGE>

         in which event Seller' counsel shall be at the sole cost and expense of
         Seller.  In connection with any such claim,  action or proceeding,  the
         parties  shall  cooperate  with each other and provide  each other with
         access to relevant books and records in their possession.

                  (c) Buyer shall not be required to indemnify and hold harmless
         Seller  pursuant  to  Section   8.2(a)(i)  hereof  in  respect  of  the
         representations  and warranties  made by Buyer herein unless such right
         to  indemnification  is asserted by Seller  (whether or not such Losses
         have  actually  been  incurred) by notice to the Buyer within 30 months
         after the Closing Date.

                  (d) Buyer's aggregate  indemnification  obligation pursuant to
         Section  8.2 (a)(i)  shall in no event  exceed  Five  Hundred  Thousand
         Dollars ($500,000.00).

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

         8.3. Bulk Sales Compliance.

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

         8.4. Additional Instruments.

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

         8.5. Access to Books, Records and Employees.

         From and after the date of the  Agreement,  Seller will  authorize  and
permit  Buyer and its  representatives  to have access  during  normal  business
hours, upon reasonable notice and for reasonable  purposes and in such manner as
will not unreasonably  interfere with the conduct of Seller's business, to Books
and Records within the control of Seller that relate to the Facility, and to all
books and records,  files,  documents  and other  correspondence  related to the
Facility prior to the Effective Time, which are not included among the Books and

                                       17
<PAGE>

Records.  Seller  agrees to maintain all books,  records,  files,  documents and
other  correspondence  related to the Facility  prior to the  Effective  Time in
accordance with its normal document retention practices after the Closing Date.

                                   ARTICLE IX
                                   TERMINATION

         9.1. Termination.

         This  Agreement may be  terminated  and the  transactions  contemplated
hereby may be abandoned as follows: (a) at any time prior to the Closing Date by
mutual written  agreement of Seller and Buyer;  or (b) by either Seller or Buyer
if the Effective  Time shall not have  occurred on or before  December 31, 2001;
provided,  however,  that the right to terminate this Agreement pursuant to this
clause (b) shall not be  available  to any party  whose  failure to fulfill  any
obligation  under  this  Agreement  has been the cause of, or  resulted  in, the
failure of the Effective Time to occur prior to such date.

         9.2. Rights on Termination; Waiver.

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

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

                                    ARTICLE X
                                  MISCELLANEOUS

         10.1. Entire Agreement; Amendment.

         This Agreement and the documents referred to herein and to be delivered
pursuant hereto constitute the entire agreement  between the parties  pertaining
to the  subject  matter  hereof,  and  supersede  all prior and  contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral  or  written,  and  there  are  no  warranties,  representations  or  other
agreements  between the parties in connection  with the subject  matter  hereof,
except as specifically  set forth herein or therein.  No amendment,  supplement,
modification,  waiver or termination  of this Agreement  shall be binding unless
executed  in writing by the party to be bound  thereby.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision of this Agreement, whether or not similar, nor shall such waiver
constitute  a  continuing  waiver  unless  otherwise  expressly  provided.   The
representations  and  warranties  of each  party  hereto  shall be  deemed to be

                                       18
<PAGE>

material and to have been relied upon by the other party.  The  representations,
warranties,  covenants and agreements of Seller and Buyer contained herein shall
survive the execution and delivery of this  Agreement  and  consummation  of the
transactions  contemplated hereby and, as to the representations and warranties,
shall be effective  until the relevant time  limitation for making any indemnity
claim with respect to such representations and warranties under Sections 8.1 and
8.2 shall have been reached and no longer.

         10.2. Expenses.

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

         10.3. Governing Law; Consent to Jurisdiction.

         This Agreement shall be construed and interpreted according to the laws
of the State of Utah,  without  regard to the  conflicts  of law rules  thereof.
Either party hereto may make service on the other party by sending or delivering
a copy of the process to the party to be served at the address and in the manner
provided for the giving of notices in Section 10.5 hereof.

         10.4. Assignment.

         This Agreement and each party's  respective rights hereunder may not be
assigned, by operation of Law or otherwise, without the prior written consent of
the other party;  provided that Buyer may assign all of its rights under Section
8.1 to ETG in connection with the conveyance of Buyer's interest in the Assets.

         10.5. Notices.

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

If to Seller:                    Headwaters Incorporated
                                 11778 South Election Road, Suite 210
                                 Draper, UT  84020
                                 Fax:  (801) 984-9410
                                 Attn:  President

                                       19
<PAGE>

If to Buyer:                     Red Hawk Energy, LLC
                                 10000 Stockdale Highway, Suite 100
                                 Bakersfield, CA  93311
                                 Fax: 661/663-3164
                                 Attn:  Michael L. Hawkins

         10.6. Counterparts; Headings.

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

         10.7. Interpretation.

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

         10.8. Severability.

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

         10.9. No Reliance.

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

         10.10. Parties in Interest.

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

                                       20
<PAGE>

         10.11. Specific Performance.

         The parties  hereto  agree that  irreparable  damage would occur in the
event any of the  provisions of this  Agreement were not performed in accordance
with the  terms  hereof  and that the  parties  shall be  entitled  to  specific
performance  of the terms  hereof,  in  addition  to any other  remedy at Law or
equity.



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                                       21
<PAGE>

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


                                                     HEADWATERS INCORPORATED




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


                                                     RED HAWK ENERGY, LLC



                                                     By: /s/ Michael L. Hawkins
                                                        ------------------------
                                                     Its: Managing Member

                                       22