Exhibit 99.3


                             HEADWATERS INCORPORATED
                              INCENTIVE BONUS PLAN


1.       PURPOSE

         The purpose of this Incentive Bonus Plan is to promote the success of
         Headwaters Incorporated and Headwaters subsidiaries, by providing
         financial incentive for employees to strive for more effective
         operation of the business through ongoing development and use of their
         knowledge, skill, ingenuity, resourcefulness and industry. The Plan
         provides that annual Awards may be made to employees who are
         responsible for successful operation and management of the Company.

2.       DEFINITIONS

         The following definitions shall be applicable throughout the Plan:

         (a)      "Award" means the total dollar amount that may be paid to a
                  Participant following a given Performance Year. It is the sum
                  of the "Business Unit Award" and the "Reporting Unit Award"
                  earned by the Participant.

         (b)      "Base Compensation" means the annualized W2 wages of a
                  Participant determined on the last day of a Performance Year.

         (c)      "Board" means the Board of Directors of Headwaters
                  Incorporated

         (d)      "Bonus Percent" means the percentages associated with each
                  Participant based on position, responsibility, and other
                  factors, listed on the appropriate Business Participation
                  Schedule as defined on Schedule 1.

         (e)      "Business Unit" means the businesses, subsidiaries, or units
                  thereof, identified on Schedule 1.

         (f)      "Business Unit Award" means the dollar amount earned by a
                  Participant during a Performance Year associated with Business
                  Unit performance.

         (g)      "Business Unit Percent" means the percentage of a
                  Participant's Award weighted towards performance of the
                  Participant's Business Unit, as associated with each
                  Participant listed on the appropriate Business Participation
                  Schedule.

                  (a)      "Change in Control" means:

                           (i)      The consummation of a merger or
         consolidation of the Company with or into another entity or any other
         corporate reorganization, if persons who were not stockholders of the
         Company immediately prior to such merger, consolidation or other
         reorganization own immediately after such merger, consolidation or
         other reorganization 50% or more of the voting power of the outstanding
         securities of each of (A) the continuing or surviving entity and (B)

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         any direct or indirect parent corporation of such continuing or
         surviving entity;

                           (ii)     The sale, transfer or other disposition of
         all or substantially all of the Company's assets;

                           (iii)    Any transaction as a result of which any
         person is the "beneficial owner" (as defined in Rule 13d-3 under the
         Securities Exchange Act of 1934), directly or indirectly, of securities
         of the Company representing at least 50% of the total voting power
         represented by the Company's then outstanding voting securities. For
         purposes of this Paragraph (iii), the term "person" shall have the same
         meaning as when used in sections 13(d) and 14(d) of the Securities
         Exchange Act of 1934 but shall exclude (A) a trustee or other fiduciary
         holding securities under an employee benefit plan of the Company or of
         a parent or subsidiary of the Company and (B) a corporation owned
         directly or indirectly by the stockholders of the Company in
         substantially the same proportions as their ownership of the common
         stock of the Company.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

         (h)      "Committee" means the Headwaters' Compensation Committee, or
                  such other committee comprised of members of the Board
                  designated by the Board to oversee the Plan.

         (i)      "Company" means collectively Headwaters Incorporated and
                  certain subsidiaries named on Schedule 1.

         (j)      "Reporting Unit Award" means the dollar amount earned by a
                  Participant during a Performance Year associated with the
                  overall performance of the Reporting Unit.

         (k)      "Reporting Unit Percent" means the percentage of a
                  Participant's Award weighted towards performance of the
                  Participant's Reporting Unit, as identified on Schedule 1, and
                  is equal to 1 minus the Business Unit Percent.

         (l)      "EVA" means the net operating profit before taxes, as adjusted
                  pursuant to items identified in Schedule 1, ("NOPAT"), less
                  the average cost of capital employed by the applicable
                  Business Unit during the Performance Year.

         (m)      "EVA Multiplier" means that factor identified on the
                  appropriate EVA Multiplier Table for the Business Unit or the
                  Reporting Unit, associated with different levels of EVA

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                  obtained during the Performance Year that exceeds the
                  Threshold EVA. The appropriate EVA Multiplier Table is
                  identified by each Participant on the Business Participant
                  Schedule.

         (n)      "Participant" means a full time employee of the Company,
                  employed by the Company on the last day of a Performance Year.

         (o)      "Performance Adjustment Factor or PAF" means the multiplier
                  obtained by combining the completion factors from the MBO
                  commitments of the Participants. The Performance Adjustment
                  Factor can vary from 0% to 100% depending upon the attainment
                  of the Participant's MBOs.

         (p)      "Performance Year" means a designated fiscal year of the
                  Company during which Company and individual performance will
                  be measured and Participant services will be rendered for
                  which an Award may be granted.

         (q)      "Plan" means this Headwaters Incorporated Incentive Bonus
                  Plan.

         (r)      "Chief Executive Officer" means the Chief Executive Officer of
                  Headwaters Incorporated.

         (s)      "Reporting Unit" means the organization level above the
                  Business Unit level of a Participant, or if there is no higher
                  organizational level, it is the Business Unit.

         (t)      "Retrospective Review" means the formal report prepared
                  annually which details the Company's, Business Units', and the
                  Participants' performance during the Performance Year and
                  provides the basis for the Committee's determination of the
                  Performance Adjustment Factor and individual Awards.

         (u)      "Threshold EVA" means the level of EVA performance below which
                  there will be no Award.

3.       POWERS AND ADMINISTRATION

                  The Committee shall have such powers and duties as are
         conferred upon it under this Plan, or any amendments thereto, or by the
         Board. The Committee shall have the authority to determine the time or
         times when approved Participant Awards shall be paid each year; and the
         Committee, shall determine Plan participation and Award amounts for
         Participant's pursuant to Section 6 (a).

                  The Committee shall take whatever action is necessary in
         fulfilling the purposes and intent of the Plan. The Committee is
         authorized and empowered to interpret the terms and conditions of the
         Plan, to promulgate any rules, regulations and schedules of general
         applicability and to adopt such forms deemed necessary to carry out the
         purposes of the Plan. However, no such interpretation, rule or
         regulation shall be contrary to the clearly expressed provisions of the
         Plan.

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                  The Committee may prescribe rules and procedures for the
         allocation of responsibilities among the agents appointed by the
         Committee for the performance of ministerial duties.


4.       ELIGIBILITY FOR PARTICIPATION

         (a)      Those employees of the Company employed by the Company on the
                  last day of the Performance Year who:
                  (i)      have achieved relevant Plan performance criteria; and
                  (ii)     are not otherwise eligible to receive regularized,
                           periodic performance-based bonus compensation under
                           some established plan of the Company or its business
                           units or subsidiaries.

         (b)      Those employees of the Company who are eligible to participate
                  shall receive a copy of this Plan document.

         (c)      Participation in a given Performance Year does not entitle
                  participation in any subsequent Performance Year.

5. DETERMINATION OF AWARDS

         (a)      The Business Unit Award shall be computed as follows:

         EVA Multiplier X Base Compensation X Bonus Percent X Business Unit
         Percent X PAF

         (b)      The Reporting Unit Award shall be computed as follows:

         EVA Multiplier X Base Compensation X Bonus Percent X Reporting Unit
         Percent X PAF


6.       PARTICIPANT SELECTION AND AWARD DETERMINATION

         (a)      Chief Executive Officer. Each year the Chief Executive Officer
                  shall present to the Committee the list of Participants, their
                  PAF and the computation of the proposed Award, and the Award
                  amounts recommended for each Participant.

         (b)      Committee. The Committee shall consider the Chief Executive
                  Officer's report referred to in Section 6 (a) and approve the
                  total Awards to be granted for the Performance Year.

7.       INDIVIDUAL AWARDS

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         (a)      A Participant's Award shall be prorated based upon number of
                  months of service in a given Performance Year or if the
                  Participant is in different employment categories during a
                  Performance year.

         (b)      The actual Award granted to any individual Participant
                  hereunder shall be based upon the Company's overall
                  performance and individual performance considerations and
                  shall be determined by the Committee, in its sole discretion.

         (c)      No Award will be granted if the Company's overall performance
                  is below Threshold EVA or if a Participant's individual
                  performance is unsatisfactory, as determined by the Committee
                  in its sole discretion, upon the recommendation of the Chief
                  Executive Officer.

8.       FORM AND TIME OF PAYMENT

         (a)      An Award shall be paid to the Participant in cash, less
                  applicable federal, state, local and FICA taxes, as soon as
                  practicable after the date on which all awards are approved by
                  Committee.

         (b)      If Banking applies to a Participant as shown on Schedule 1,
                  then 50% of the amount of the Award that is in excess of the
                  Award that would be computed if the EVA multiplier were 1,
                  shall be withheld from payment. Payment of the withheld Award
                  shall be made over the two years immediately subsequent to the
                  Performance Plan Year (50% of the withheld year in the first
                  subsequent year and 50% in the second subsequent year) if the
                  Company reaches the Threshold EVA in the subsequent years. If
                  the Company fails to achieve the Threshold EVA in the
                  subsequent two years, the withheld amounts are forfeited. Any
                  Banked Awards will be paid to a Participant upon the
                  occurrence of (i) the Participant's retirement from the
                  Company after reaching age 60; or (ii) a Change in Control of
                  the Company.

9.       RETIREMENT, TERMINATION, DISABILITY, INCOMPETENCY AND DEATH

         (a)      In the event of the Participant's disability, incompetency or
                  death, or retirement such Participant may receive an Award,
                  prorated to the effective date of such event, at the sole
                  discretion of the Committee. Any such prorated Award shall be
                  determined and paid in accordance with the regular procedures
                  of the Plan.

         (b)      Should an Award be approved under Section 9 (a), such Award
                  shall be paid in cash, less applicable federal, state, local
                  and FICA taxes, on the normal Award payout date to the
                  Participant, or, in the event of the Participant's death, to
                  the Participant's estate, or to the person or persons who have
                  acquired, by will or by the laws of descent and distribution
                  or by other legal proceedings, the right to such Award.

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10.      NO RESERVE OR TRUST

         Nothing contained in the Plan shall require the Company to segregate
         any monies from its general funds, or to create any trust or make any
         special deposit in respect of any amounts payable under the Plan to or
         for any Participant or group of Participants. All amounts payable under
         the Plan shall be paid out of the general funds of the Company.

11.      NO RIGHT TO ASSIGN

         No right or interest of any Participant in the Plan or in any unpaid
         Award shall be assignable or transferable in whole or in part, either
         voluntarily or by operation of law or otherwise, or be subject to
         payment of debts of any Participant by execution, levy, garnishment,
         attachment, pledge, bankruptcy or in any other manner.

12.      NO EMPLOYMENT RIGHTS CONFERRED

         Nothing contained in the Plan or any Award shall confer upon any
         employee any right with respect to continuation of employment with the
         Company in any capacity or interfere in any way with the right of the
         Company to terminate an employee's employment at any time or guarantee
         any right of participation in any other employee benefit plan of the
         Company.

13.      SUCCESSORS AND MERGERS, CONSOLIDATIONS OR CHANGE IN CONTROL

         The terms and conditions of this Plan shall ensure to the benefit of
         and bind the Company, the Participants, their successors, assignees,
         and personal representatives. If substantially all of the stock or
         assets of the Company are acquired by another corporation or entity or
         if the Company is merged into, or consolidated with another corporation
         or entity, then upon such event the Banked portion of any Awards shall
         be immediately payable to the Participants and all other obligations
         created hereunder shall be obligations of the acquirer or successor
         corporation or entity without the requirement of further action by the
         acquirer or successor corporation or entity.

14.      GOVERNING STATE LAW

         The provisions of this Plan shall be construed and administered in
         accordance with the laws of the State of Utah.

15.      AMENDMENT

         The Board may from time to time amend, suspend, terminate or reinstate
         any or all of the provisions of the Plan. However, the Board may not
         cancel awards, including any banked awards, payable on account of a
         completed Performance Year.

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16.      EFFECTIVE DATE AND TERM OF THE PLAN

         The Plan shall become effective for the Performance Year commencing
         October 1, 2002 upon adoption by the Board and shall remain in effect
         until such time as the Board may terminate it.


         Approved by Board:  16 January  2003



         /s/ Kirk A. Benson
         ---------------------------------
         Kirk A. Benson, Chairman & CEO







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