Document:

Exhibit 10.90.1

                             HEADWATERS INCORPORATED
                     NONSTATUTORY STOCK OPTION GRANT NOTICE
                            (GRANT OUTSIDE OF A PLAN)

Headwaters Incorporated, a Delaware corporation (the "Company"), hereby grants
an option (the "Option") to purchase shares of its common stock, par value
$0.001 per share ("Common Stock"), to the individual named below (the
"Optionee"). The terms and conditions of the Option are set forth in this Grant
Notice, and in the attachments, the terms of which are incorporated herein by
this reference. The Option is granted outside of any plan of the Company and is
made as an inducement to the Optionee to accept and continue employment with the
Company.

Date of Grant:                                  September 22, 2004

Name of Optionee:                     John N. Lawless, III______________________
Number of Shares Covered by Option:   One Hundred Twenty Five Thousand (125,000)
Exercise Price (Per Share):           $28.49____________________________________
Vesting Start Date:                   September 22, 2004________________________
Expiration Date:                      One Day Prior to Tenth Anniversary of Date
                                        of Grant
Permissible Forms of Payment:         Payment of the exercise price may be made
                                      in cash, check or any other method
                                        provided in the Stock Option Agreement.

Vesting Schedule: The total number of shares subject to this Option shall vest
according to the following schedule, subject to the Optionee's Continuous
Service and satisfaction of all applicable conditions to vesting and
exercisability set forth in the Stock Option Agreement.

                                                 Percentage of Total Shares
                  Vesting Date                    Vesting On Vesting Date
                  ------------                    -----------------------

                  March 31, 2005                              20%
                  March 31, 2006                              20%
                  March 31, 2007                              20%
                  March 31, 2008                              20%
                  March 31, 2009                              20%

No additional shares shall vest after your "Continuous Service" (as defined in
the attached Stock Option Agreement) has terminated except as otherwise set
forth in the Stock Option Agreement.

By signing below, you acknowledge and agree to all of the terms and conditions
set forth herein and in the attached Stock Option Agreement and Notice of
Exercise.

Optionee:
          ------------------------------------
               (Signature)

Company:
          ------------------------------------
          Steven G. Stewart (Signature)
          Title:  Chief Financial Officer

Attachments
Attachment I: Stock Option Agreement
Attachment II: Form of Notice of Exercise

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                                  ATTACHMENT I
                             STOCK OPTION AGREEMENT

                             HEADWATERS INCORPORATED
                             STOCK OPTION AGREEMENT

         Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, Headwaters Incorporated, a California corporation (the
"Company"), has granted you an option (the "Option") to purchase the number of
shares of the Company's common stock, par value $0.001 per share ("Common
Stock"), indicated in the Grant Notice at the exercise price indicated in such
Grant Notice, subject to the terms set forth herein.

         This Option is granted in order to induce you to accept and continue
employment with the Company. This Option is not intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). This Option is granted outside
of, and is not subject to, the Company's 2003 Stock Incentive Plan or any other
stock plan of the Company.

         The terms of the Option are as follows:

         1. VESTING. Subject to the limitations contained herein, the Option
will vest as provided in your Grant Notice, provided that, except to the extent
expressly set forth herein, vesting will cease upon the termination of your
Continuous Service (as defined in Section 6 below).

         2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to the Option and your exercise price per share are set forth in
your Grant Notice and shall be adjusted for Capitalization Adjustments, if any,
as provided in Section 9 below.

         3. METHOD OF PAYMENT. Payment of the applicable exercise price is due
in full upon exercise of all or any part of the Option. You may elect to make
payment of the exercise price in cash or by check or pursuant to one of the
following methods:

                  (a) In the Company's sole discretion at the time you exercise
the Option and provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, payment may be
made pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds of the shares of Common Stock underlying the Option (a
"cashless exercise").

                  (b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in THE WALL STREET JOURNAL, payment may be
made by delivery of already-owned shares of Common Stock either that you have
held for the period required to avoid a charge to the Company's reported
earnings (generally six months) or that you did not acquire, directly or
indirectly, from the Company, that are owned free and clear of any liens,
claims, encumbrances or security interests, and that are valued at Fair Market
Value on the date of exercise. "Delivery" for these purposes, in the sole
discretion of the Company at the time you exercise the Option, shall include
delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
you may not exercise the Option by tender to the Company of Common Stock to the
extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company's stock.

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            "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows: (i) if the Common Stock is listed on any
established stock exchange or traded on the NASDAQ National Market or the NASDAQ
SmallCap Market, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable, or (ii) in the absence of such
markets for the Common Stock, the Fair Market Value shall be determined in good
faith by the Board of Directors of the Company.

         4. WHOLE SHARES. You may exercise the Option only for whole shares of
Common Stock.

         5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise the Option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
of 1933, as amended (the "Securities Act"), or, if such shares of Common Stock
are not then so registered, the Company has determined that such exercise and
issuance would be exempt from the registration requirements of the Securities
Act. The exercise of the Option must also comply with other applicable laws and
regulations governing the Option, and you may not exercise the Option if the
Company determines that such exercise would not be in material compliance with
such laws and regulations.

         6. TERM. The term of the Option commences on the Date of Grant (as
specified in your Grant Notice) and expires upon the EARLIEST of the following:

                  (a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability, death or termination without
"Cause" (as defined in your employment agreement with the Company or its
affiliated corporation) or for "Good Reason" (as defined in your employment
agreement with the Company or its affiliated corporation); PROVIDED that if
during any part of such three- (3-) month period the Option is not exercisable
solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," the Option shall not expire until the earlier of
the Expiration Date indicated in your Grant Notice or until it shall have been
exercisable for an aggregate period of three (3) months after the termination of
your Continuous Service;

                  (b) twelve (12) months after the termination of your
Continuous Service as an Employee, Director or Consultant due to your
Disability;

                  (c) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates;

                  (d) six (6) months after the termination of your Continuous
Service as a result of a termination of your employment without "Cause" (as
defined in your employment agreement with the Company or its affiliated
corporation) or for "Good Reason" (as defined in your employment agreement with
the Company or its affiliated corporation); or

                  (e) the Expiration Date indicated in your Grant Notice.

Notwithstanding the foregoing, the terms of this Stock Option Agreement shall be
subject to acceleration of vesting and extension of exercisability pursuant to
Section 10 and Section 12, as applicable.

For purposes of your option, "Continuous Service" means that your service with
the Company or an affiliate of the Company, whether as an employee, director or

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consultant, is not interrupted or terminated. Your Continuous Service shall not
be deemed to have terminated merely because of a change in the capacity in which
you render service to the Company or an affiliate as an employee, consultant or
director or a change in the entity for which you render such service, provided
that there is no interruption or termination of your Continuous Service. For
example, a change in status from an employee of the Company directly to a
consultant of an affiliate or a director will not constitute an interruption of
Continuous Service. The Board of Directors of the Company (the "Board") or the
Compensation Committee of the Board, in each body's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence, including sick leave, military leave or any other
personal leave.

         For purposes of your option, "Disability" means the permanent and total
disability of a person within the meaning of Section 22(e)(3) of the Code.

         7. EXERCISE.

                  (a) You may exercise all or any portion of the vested portion
of the Option during its term by delivering a Notice of Exercise (in the
attached form, or such other form as may be designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require.

                  (b) By exercising the Option you agree that, as a condition to
any exercise of all or part of the Option, the Company may require you to enter
into an arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
the Option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise or (3) the
disposition of shares of Common Stock acquired upon such exercise.

         8. TRANSFERABILITY. The Option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise the
Option, subject to the terms and conditions otherwise applicable to such
exercise, the issuance of Common Stock pursuant to such exercise and the
subsequent transfer of such Common Stock.

         9. CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Option without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), this Stock Option Agreement will be appropriately
adjusted in the class(es) and number of shares and price per share of stock
subject to the Option. Such adjustments shall be made by the Board,
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
transaction "without receipt of consideration" by the Company.)

         10. CORPORATE SALE, MERGER, CONSOLIDATION OR REVERSE MERGER. In the
event of (i) a sale of all of the securities of the Company or a consolidation
or merger of the Company with or into any other corporation or other entity or
person, or any other corporate reorganization, in which the stockholders of the
Company immediately prior to such sale, consolidation, merger or reorganization,
own less than 50% of the outstanding voting power of the surviving entity (or
its parent) following the consolidation, merger or reorganization or (ii) any

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transaction (or series of related transactions involving a person or entity, or
a group of affiliated persons or entities) in which in excess of fifty percent
(50%) of the Company's outstanding voting power is transferred, then any
surviving corporation or acquiring corporation shall continue or assume the
Option under this Agreement or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders of the
Company in the transaction described in this Section 10) for the Option under
this Agreement. In the event any surviving corporation or acquiring corporation
in such transaction refuses to assume the Option under this Agreement or to
substitute similar stock awards for the Option under this Agreement, then (i)
the Company shall give written notice to you within a reasonable period of time
of not less than ten (10) days prior to the effectiveness of the transaction
that the surviving corporation or acquiring corporation has refused to assume
the Option or to substitute similar stock awards for the Option under this
Agreement, and (ii) the vesting and exercisability of the Option under this
Agreement (and, if applicable, the time during which the Option may be
exercised) shall be accelerated in full immediately prior to such transaction
provided that the transaction occurs (so that you will have the opportunity to
exercise the Option under this Agreement prior to the transaction), and the
Option under this Agreement shall terminate if not exercised (if applicable)
upon the effectiveness of such transaction.

         11. OPTION NOT A SERVICE CONTRACT. The Option is not an employment or
service contract, and nothing herein shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company
or an affiliate, or of the Company or an affiliate to continue your employment.
In addition, nothing herein shall obligate the Company or an affiliate, their
respective stockholders, Boards of Directors, officers or employees to continue
any relationship that you might have as a director or consultant for the Company
or an affiliate.

         12. ACCELERATION OF EXERCISABILITY AND VESTING. (a) Notwithstanding any
other provision herein and subject and pursuant to the terms and conditions of
the Executive Change in Control Agreement between the Company and the Optionee
effective as of September 22, 2004 (the "CIC Agreement"), in the event that a
"Change in Control" (as defined in the CIC Agreement) occurs prior to the
expiration or exercise in full of the Option, the Option shall, immediately
prior to the effectiveness of the Change in Control, vest in full and shall
become fully exercisable, and, unless the Option is terminated because the
Option is not continued, assumed or substituted for as provided in Section 10
above, the Option shall remain exercisable for a period of twenty-four (24)
months following the termination of the Optionee's employment (as determined
under the CIC Agreement). In the event the Change in Control is not consummated,
this provision shall not have any force or effect.

                  (b) The Board shall retain the power to accelerate the time at
which the Option may first be exercised or the time during which the Option or
any part thereof will vest, notwithstanding the provisions in the Grant Notice
or this Stock Option Agreement stating the time at which it may first be
exercised or the time during which it will vest.

                  (c) The Company shall give written notice to you within a
reasonable period of time of not less than ten (10) days of the expected date of
the effectiveness of the Change in Control.

         13. STOCKHOLDER RIGHTS. You shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common
Stock subject to the Option unless and until you have satisfied all requirements
for exercise of the Option pursuant to its terms.

         14. WITHHOLDING OBLIGATIONS.

                  (a) At the time you exercise the Option, in whole or in part,
or at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless

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exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an affiliate of the Company, if any, which arise
in connection with the exercise of the Option.

                  (b) Upon your request and subject to approval by the Company,
in its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of Common
Stock otherwise issuable to you upon the exercise of the Option a number of
whole shares of Common Stock having a fair market value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
the Option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of the Option.

                  Notwithstanding the filing of such election, shares of Common
Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of the Option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.

                  Notwithstanding the foregoing, the Company shall not be
authorized to withhold shares of Common Stock in excess of the minimum statutory
withholding requirements for federal and state tax purposes, including payroll
taxes.

                  (c) You may not exercise the Option unless the tax withholding
obligations of the Company and/or any affiliate are satisfied. Accordingly, you
may not be able to exercise the Option when desired even though your option is
vested, and the Company shall have no obligation to issue such shares of Common
Stock.

         15. NOTICES. Any notices provided for or required in connection with
the Option shall be given in writing and shall be deemed effectively given upon
receipt or, in the case of notices delivered by mail by the Company to you, five
calendar (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.

         16. CHOICE OF LAW. This option shall be governed by, and construed in
accordance with the laws of the State of Delaware, as such laws are applied to
contracts entered into and performed in such State.

         17. GOVERNING AUTHORITY. This Option is subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted by the Company. This authority shall be exercised by the Board, or by a
committee of one or more members of the Board in the event that the Board
delegates its authority to a committee. The Board, in the exercise of this
authority, may correct any defect, omission or inconsistency in this Option in a
manner and to the extent the Board shall deem necessary or desirable to make
this Option fully effective. References to the Board also include any committee
appointed by the Board to administer and interpret this option. Any
interpretations, amendments, rules and regulations promulgated by the Board
shall be final and binding upon the Company and its successors in interest as
well as you and your heirs, assigns, and other successors in interest.

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<PAGE>

         18. AMENDMENT OF OPTION. The Board at any time, and from time to time,
may amend the terms of this Option; PROVIDED, HOWEVER, that the rights under
this Option shall not be impaired by any such amendment unless (i) the Company
requests your consent and (ii) you consent in writing.

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                                  ATTACHMENT II
                           FORM OF NOTICE OF EXERCISE

                               NOTICE OF EXERCISE

Headwaters Incorporated (the "Company")
10653 S. River Front Parkway, Suite 300
South Jordan, UT 84095                            Date of Exercise: ____________

Ladies and Gentlemen:

         This constitutes notice under my nonstatutory stock option that I elect
to purchase the number of whole shares of the common stock of the Company for
the price set forth below.

         Stock option dated:                 _______________________

         Number of shares as
         to which option is
         exercised:                          _____________________(the "Shares")

         Certificates to be
         issued in name of:                  ________________________

         Total exercise price:               $_______________________

         Cash payment delivered
         herewith:                           $_______________________

         By this exercise, I agree (i) to provide such additional documents as
you may require and (ii) to provide for the payment by me to the Company (in the
manner designated by the Company) of your withholding obligation, if any,
relating to the exercise of this option. By this exercise, I also hereby agree
to be bound by the insider trading policies of the Company and its affiliated
corporations. I warrant and represent to the Company that I have no present
intention of distributing or selling said Shares, except as permitted under the
Securities Act of 1933, as amended, and any applicable state securities laws.

         I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws. In order to enforce the foregoing
covenants, the Company may impose stop-transfer instructions with respect to my
Shares whiles such covenants are applicable.

                                                    Very truly yours,

                                       8Exhibit 10.90.2

                             HEADWATERS INCORPORATED

                      EXECUTIVE CHANGE IN CONTROL AGREEMENT

         THIS EXECUTIVE CHANGE IN CONTROL AGREEMENT (this "Agreement") is
entered into by and between Headwaters Incorporated, a Delaware corporation, and
the undersigned executive employee of the Company ("Executive") to be effective
as of the 22nd day of September, 2004 (the "Start Date"). As used in this
Agreement, the term "Company" shall refer to Headwaters Incorporated and any of
its affiliates, unless the context requires otherwise.

         WHEREAS, Executive has entered in an employment agreement with an
affiliate of the Company of even date (the "Employment Agreement") which makes
reference to this Agreement;

         WHEREAS, in the event that the Board of Directors of the Company
determines that it would be in the best interests of the Company and its
stockholders to consider a possible sale, merger or other change in control of
the Company, the Company recognizes that the possibility of such transaction may
have an adverse effect on its retention of key management personnel, and that
the possibility of such transaction may make it difficult for such personnel to
function effectively in the best interests of the Company and its stockholders
in managing the businesses of the Company and in negotiating such transaction
with another entity;

         WHEREAS, the Board has determined that it is appropriate to offer
additional security in the form of salary and benefits continuation to certain
key management personnel in the event of a transaction to better enable them to
function effectively without distraction in the event that uncertainties as to
the future control of the Company should arise and to provide them with a
reasonable incentive to negotiate such possible transaction in the best
interests of the stockholders of the Company;

         WHEREAS, contemporaneous with this Agreement, the Company has a granted
a stock option to Executive (the "Options") outside of the Headwaters
Incorporated 2003 Stock Incentive Plan for the purpose of providing equity
compensation to Executive and aligning Executive's interests with those of the
stockholders of the Company;

         WHEREAS, the Company has determined that it would be in the best
interests of the Company and its stockholders to provide for acceleration of the
vesting and extension of the post-termination exercise period of the Options and
future stock awards granted to Executive in the event of a Change in Control (as
defined below) of the Company in order to align further the interests of
Executive with those of the stockholders of the Company;

         NOW, THEREFORE, the parties hereby agree that in the event of the
occurrence of a Change in Control (as described below), the Company shall
provide the following stock award rights and severance payments and benefits to
Executive as follows:

         1. Stock Award Rights and Severance Pay and Benefits.

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                  (a) Acceleration of Vesting and Extension of Period of
Exercisability of Stock Awards Following a Change in Control. Executive's
Options or future stock awards from the Company shall, immediately prior to the
effective date of a Change in Control (provided that the Change in Control
transaction closes), vest in full and if applicable, become fully exercisable to
the extent not previously vested or exercisable, and shall (notwithstanding the
provisions of the applicable stock award agreements for the exercisable stock
awards) be continued, assumed or substituted for by the Company or its successor
or assign and the continued or assumed Options or substitute options shall
continue to be exercisable for a period of twenty-four (24) months following the
termination of the employment of the Executive or until the Expiration Date
stated in Executive's grant notices for such stock awards, whichever period is
shorter.

                  (b) Severance Pay and Benefits. In addition to all unpaid
salary and incentive payments to which Executive is entitled and in lieu of any
of any severance pay and benefits payable under Executive's employment agreement
(if any), if Executive's employment with the Company or its successor is
terminated by reason of an Involuntary Termination without Cause (as defined
below) or a Voluntary Termination For Good Reason (as defined below) within
three (3) months prior to and twenty (24) months following the effective date of
the closing of the Change in Control, and provided Executive executes a valid
release in substantially the form attached as Exhibit A ("Release of Claims"),
then the Company shall provide the following severance pay and benefits to
Executive as follows:

                           (1) Severance Pay. Within five (5) business days of
the effective date of the Release of Claims (following the expiration of any
required rescission period under any applicable law), the Company shall pay
Executive an amount equal to twice the Executive's annual base salary at the
higher of the rate in effect as of Executive's termination of employment or the
rate in effect immediately preceding the Start Date.

                           (2) Severance Health Benefits. The Company shall
continue and pay for the same or similar group health benefits coverage for the
benefit of Executive and Executive's covered dependents at the time of the
Change in Control at the same level that it paid for such coverage prior to the
termination of Executive's employment, for two years. Such coverage shall apply
towards the period of continuation coverage required to be offered by the
Company to a terminated employee under section 4980B of the federal Internal
Revenue Code of 1986, as amended, and section 601, et seq., of the federal
Employee Retirement Income Security Act of 1974, as amended.

         2. Definitions. The following terms in this Agreement shall have the
meanings set forth below solely for purposes of this Agreement.

                  (a) "Involuntary Termination without Cause" shall mean the
involuntary termination of Executive's employment by the Company for reasons
other than (1) the conviction of Executive or a plea of nolo contendre by
Executive to a felony, (2) any act of fraud, embezzlement or misappropriation of
property of the Company by Executive which has a materially adverse impact on
the business or affairs of the Company, (3) any intentional unauthorized use or
disclosure by Executive of confidential information or trade secrets of the

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Company, (4) any other intentional misconduct by Executive which has a
materially adverse impact on the business or affairs of the Company, (5) the
death of Executive, (6) the inability of Executive to perform Executive's duties
due to a disability for a period of six months or more (as defined and
determined under the terms of the Company's long-term disability plan), or (7)
the failure or refusal by Executive to perform the duties of Executive's
position with the Company, provided that solely for the purpose of this item
(7), Executive shall be given thirty (30) days written notice (and the
opportunity to correct such conduct if such conduct can be corrected during that
notice period) of the Company's intention to terminate the employment of
Executive and to deem the termination of Executive's employment to be for the
foregoing reason. As used in this Subsection (a), an action shall not be
determined to be "intentional" if it is undertaken with a reasonable and good
faith belief that it is in the best interests of the Company.

                  (b) "Voluntary Termination With Good Reason" shall mean
Executive's voluntary resignation within sixty (60) calendar days following the
occurrence of any of the following actions without Executive's consent ("Good
Reason"): (1) the material, involuntary reduction in Executive's title,
responsibilities, authorities or functions as an employee of the Company as in
effect immediately prior to a Change in Control (but not merely a change in
title or reporting relationships), except in connection with the termination of
Executive's employment for death, disability, retirement, fraud,
misappropriation, embezzlement or any other conduct listed under the definition
of Cause; (2) a reduction in Executive's level of compensation (including base
salary, fringe benefits and target bonuses under any corporate-performance based
bonus or incentive programs) by more than ten percent (10%) unless such
reduction is part of a general reduction applicable to all of the executives of
the Company, (3) a relocation of Executive's regular place of employment by more
than sixty (60) miles, (4) the imposition of business travel requirements
substantially more demanding of Executive than such travel requirements existing
immediately prior to the date of the Change in Control, (5) any material breach
by the Company or its successor or assign of any employment agreement between
the Company and Executive, or (6) any failure by the Company to obtain the
assumption of any material agreement, including but not limited to this
Agreement and the material provisions of any stock incentive grant, between
Executive and the Company from any successor or assign of the Company following
a Change in Control.

                  Notwithstanding the foregoing, Executive must provide the
Company with twenty (20) calendar days advance written notice of Company's
conduct giving rise to Good Reason prior to Executive's resignation as a
Voluntary Termination With Good Reason (the "Cure Period") and during the Cure
Period, the Company may attempt to rescind or correct the matter giving rise to
Good Reason. If the Company does not rescind or correct the conduct giving rise
to Good Reason to Executive's reasonable satisfaction by the expiration of the
Cure Period, Executive may then resign Executive's employment and to claim that
such resignation is a Voluntary Termination With Good Reason.

                  (c) "Change in Control" shall mean any of the following
events:

                           (1) a sale, lease or other disposition of all or
substantially all of the assets of the Company so long as the Company's
stockholders immediately prior to such transaction will, immediately after such
transaction, fail to possess direct or indirect beneficial ownership of more
than fifty percent (50%) of the voting power of the acquiring entity (for

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purposes of this section, any person who acquired securities of the Company
prior to the occurrence of such asset transaction in contemplation of such
transaction and who after such transaction possesses direct or indirect
ownership of at least ten percent (10%) of the securities of the acquiring
entity immediately following such transaction shall not be included in the group
of stockholders of the Company immediately prior to such transaction);

                           (2) either a merger or consolidation in which the
Company is not the surviving corporation and the stockholders of the Company
immediately prior to the merger or consolidation fail to possess direct or
indirect beneficial ownership of more than fifty percent (50%) of the voting
power of the securities of the surviving corporation (or if the surviving
corporation is a controlled Subsidiary of another entity, then the required
beneficial ownership shall be determined with respect to the securities of that
entity which controls the surviving corporation and is not itself a controlled
Subsidiary of any other entity) immediately following such transaction, or a
reverse merger in which the Company is the surviving corporation and the
stockholders of the Company immediately prior to the reverse merger fail to
possess direct or indirect beneficial ownership of more than fifty percent (50%)
of the securities of the Company (or if the Company is a controlled Subsidiary
of another entity, then the required beneficial ownership shall be determined
with respect to the securities of that entity which controls the Company and is
not itself a controlled Subsidiary of any other entity) immediately following
the reverse merger (for purposes of this section, any person who acquired
securities of the Company prior to the occurrence of a merger, reverse merger,
or consolidation in contemplation of such transaction and who after such
transaction possesses direct or indirect beneficial ownership of at least ten
percent (10%) of the securities of the Company or the surviving corporation (or
if the Company or the surviving corporation is a controlled Subsidiary, then of
the appropriate entity as determined above) immediately following such
transaction shall not be included in the group of stockholders of the Company
immediately prior to such transaction);

                           (3) an acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or a subsidiary or other controlled Subsidiary of the Company) of
the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors; or

                           (4) the individuals who, as of the date of this
Agreement, are members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds (2/3) of the Board. If the election, or
nomination for election by the Company's stockholders, of any new director was
approved by a vote of at least fifty percent (50%) of the Incumbent Board, such
new director shall be considered as a member of the Incumbent Board.

         Notwithstanding the foregoing, neither a public offering of the
securities of the Company nor a reincorporation of the Company in another state
shall be considered a "Change in Control."

         3. Employment and Post Termination Covenants. By accepting the terms of
this Agreement and as a condition for the termination payments and benefits

                                       4
<PAGE>

Executive hereby agrees to the following covenants in addition to any
obligations Executive may have by law and makes the following representations.

                  (a) Confidentiality. Executive acknowledges that, in
connection with Executive's employment by the Company, Executive will have
access to trade secrets of the Company and other information and materials which
the Company desires to keep confidential, including customer lists, supplier
lists, financial statements, business records and data, marketing and business
plans, and information and materials relating to the Company's services,
products, methods of operation, key personnel, proprietary software and other
proprietary intellectual property and information disclosed to the Company of
third parties to which the Company owes a duty of nondisclosure (collectively,
the "Confidential Information"); provided, however, that Confidential
Information does not include information which (i) is or becomes publicly known
other than as a result of your actions in violation of this Agreement; (ii) is
or becomes available to Executive from a source (other than the Company) that
Executive reasonably believes is not prohibited from disclosing such information
to Executive by a contractual or fiduciary obligation to the Company, (iii) has
been made available by the Company, directly or indirectly, to a non-affiliated
third party without obligation of confidentiality; (iv) Executive is obligated
to produce as a result of a court order or pursuant to governmental action or
proceeding, provided that Executive gives the Company prompt written notice of
such requirement prior to such disclosure and assistance in obtaining an order
protecting such Confidential Information from public disclosure; or (v) is
business knowledge you have acquired unrelated to any specific proprietary
information relating to the Company. Executive covenants and agrees that, both
during and after the term of Executive's employment with the Company, Executive
will keep secret all Confidential Information and will not disclose, reveal,
divulge or otherwise make known any Confidential Information to any person
(other than the Company or its employees or agents in the course of performing
Executive's duties hereunder) or use any Confidential Information for
Executive's own account or for the benefit of any other individual or entity,
except with the prior written consent of the Company.

                  (b) Ownership of Intellectual Property. Executive agrees that
all inventions, copyrightable material, software, formulas, trademarks, trade
secrets and the like which are developed or conceived by Executive in the course
of Executive's employment by the Company or on the Company's time or property
(collectively, the "Intellectual Property") shall be disclosed promptly to the
Company and the Company shall own all right, title and interest in and to the
Intellectual Property. The parties expressly agree that any and all of the
Intellectual Property developed by the Employee shall be considered works
made-for-hire for the Company pursuant to the United States Copyright Act of
1976, as amended from time to time. In order to ensure that the Company shall
own all right, title and interest in and to the Intellectual Property in the
event that any of the Intellectual Property is not deemed a work made-for-hire
(as defined in the Copyright Act of 1976) and in any other event, Executive
hereby sells and assigns all right, title and interest in and to all such
Intellectual Property to the Company, and Executive covenant and agree to affix
to the Intellectual Property appropriate legends and copyright notices
indicating the Company's ownership of all Intellectual Property and all
underlying documentation to the extent reasonably appropriate, and shall execute
such instruments of transfer, assignment, conveyance or confirmation as the
Company reasonably considers necessary to transfer, confirm, vest, perfect,
maintain or defend the Company's right, title and interest in and to the
Intellectual Property throughout the world. Executive's obligation under this
Section 4(b) to assign to the Company inventions created or conceived by
Executive shall not apply to an invention that Executive developed entirely on

                                       5
<PAGE>

Executive's own time without using the Company's equipment, supplies,
facilities, or trade secret information, provided that those inventions (i) do
not or did not relate directly, at the time of conception or reduction to
practice of the invention, to the Company's business as conducted at such time
or actual or demonstrably anticipated research or development of the Company;
and (ii) do not or did not result from any work performed by Executive for the
Company.

                  (c) Non-Solicitation. Executive agrees for a period of not
less than twelve (12) months following termination of Executive's employment or
service (whichever is later) with the Company or its affiliated companies that
Executive shall not solicit or engage the services or employment of the
employees of the Company or its affiliated companies.

                  (d) Non-Competition. Executive agrees not to compete directly
or indirectly by becoming a principal, partner, shareholder, equity holder,
limited liability company member, agent, officer, other employee, advisor,
consultant, member of a board of directors, or by becoming interested in any
other capacity, with any of the following entities, their successors or
affiliates: Alcoa, Dinesol, Alpha, Girardin, Pinckney Molded Plastics, and any
firm or business formed or established by Executive, during the period of twelve
(12) months following the termination of Executive's employment or service with
the Company or its affiliated companies.

         4. Alternate Dispute Resolution and Attorneys Fees and Costs.

                  (a) Arbitration. The parties agree that any future disputes
between Executive and the Company (the "parties") under this Agreement including
but not limited to disputes relating to the Release of Claims shall be resolved
by binding arbitration, except where the law specifically forbids the use of
arbitration as a final and binding remedy, except as provided in Section 4(a)(7)
below.

                           (1) The complainant shall provide the other party a
written statement of the claim. Such statement shall identify any supporting
witnesses or documents and the relief requested.

                           (2) The respondent shall furnish a statement of the
relief, if any, that it is willing to provide, and identifying supporting
witnesses or documents. If the matter is not resolved, the parties agree to
submit their dispute to a non-binding mediation paid for by the Company,
provided, however, that if the amount in dispute is $50,000 or less, this step
may be waived at the election of either party.

                           (3) If the matter is not resolved, the parties agree
that the dispute shall be resolved by binding arbitration according to the
commercial arbitration rules of the American Arbitration Association, including
any provisions thereof pertaining to discovery. If the parties are not able to
agree upon the selection of an arbitrator, an arbitrator shall be selected
according to the applicable procedures established by the American Arbitration
Association.

                           (4) The arbitrator shall have the authority to
determine whether the conduct complained of in Section 4(a)(1) violates the
complainant's rights under this Agreement and, if so, to grant any relief

                                       6
<PAGE>

authorized by law; subject to the provisions of Section 4(a)(7) below. The
arbitrator shall not have the authority to modify, change or refuse to enforce
any lawful term of this Agreement and the Release of Claims.

                           (5) The Company shall bear the costs of the
arbitration, provided, however, if the Company prevails in the arbitration,
Executive shall pay any arbitration costs of the Company awarded by the
Arbitrator to the same extent as if the matter had been heard in a court of
general jurisdiction.

                           (6) Arbitration shall be the exclusive final remedy
for any dispute between the parties under this Agreement and disputes involving
claims for discrimination or harassment (such as claims under the Fair
Employment and Housing Act, Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act, or the Age Discrimination in Employment Act),
wrongful termination, breach of contract, breach of public policy, physical or
mental harm or distress or any other disputes, and the parties agree that no
dispute shall be submitted to arbitration where the complainant has not complied
with the preliminary steps provided for in Sections 4(a)(1) and (2) above.

                           (7) The parties agree that the arbitration award
shall be enforceable in any court having jurisdiction to enforce this Agreement
and Release of Claims, so long as the arbitrator's findings of fact are
supported by substantial evidence on the whole and the arbitrator has not made
errors of law; however, either party may bring an action in a court of competent
jurisdiction, regarding or related to matters involving the Company's
confidential, proprietary or trade secret information, or regarding or related
to inventions that Executive may claim to have developed prior to or after
joining the Company, seeking preliminary injunctive relief in court to preserve
the status quo or prevent irreparable injury before the matter can be heard in
arbitration.

                           (8) The arbitration shall be held in a location
within 50 miles of Wixom, Michigan unless the parties mutually agree to a
different location for the arbitration.

                           (9) In the event that the Company wishes to contest
or dispute a Voluntary Termination for Good Reason by Executive, it must give
written notice of such dispute within the fifteen (15) business day period after
the date of Executive's resignation. If Executive wishes to contest or dispute a
termination for cause by the Company, or any failure to make payments claimed to
be due hereunder, Executive must give written notice of such dispute within
ninety (90) calendar days of receiving a Notice of Termination (or, if the claim
is with respect to stock award rights under Section 1(a) above, within ninety
(90) calendar days after Executive first learns that the Company or its
successor does not recognize Executive's rights under Section 1(a) following the
closing of a Change in Control). In the event of a dispute as to whether
Executive's employment was terminated due to a Involuntary Termination Without
Cause, the Company shall continue to pay Executive's full base salary and
continue all of Executive's employee benefits in force until the final
resolution of any such dispute by mutual agreement, arbitrator's award or the
final judgment, decree or order of a court of competent jurisdiction (including
any appeals, if such are perfected). Executive may, at Executive's or the
Company's option, be suspended from all duties during the pendency of such a
contest or dispute. If Executive prevails in any such contest or dispute, the
Company or its successor or assign shall thereupon be liable for the full
amounts due under Section 1 as of the date of termination after adjustments for
amounts already paid. If the Company or its successor or assign prevails in any

                                       7
<PAGE>

such contest or dispute, all payments and benefits being paid to Executive shall
immediately cease subject only to the Company's obligations under applicable law
to provide notice of the right to continue such benefits as may be applicable to
the situation.

                  (b) Fees and Expenses and Interest Accruals.

                           (1) Fees and Expenses. Subject to the provisions of
Section 4(a)(5) above, the Company will pay all reasonable fees and expenses,
including reasonable attorneys' fees, incurred by Executive in good faith
contesting or disputing any termination after a Change in Control or in seeking
to obtain or enforce any right or benefit provided by this Agreement.

                           (2) Interest Accruals. In the event that any payments
due hereunder shall be delayed for any reason beyond the date set forth in
Section 1(b), the unpaid amounts due shall bear simple interest at the rate of
ten percent (10%) per annum, or, if lower, such maximum legal rate permitted by
applicable law, until paid. Notwithstanding the provisions as to time of payment
as above set forth, Executive may at Executive's sole discretion elect to have
some or all of such amounts due Executive deferred to a date or dates of your
choosing over a period not to exceed three (3) years to the extent permitted by
applicable tax laws without immediate taxation of Executive, in which event the
unpaid balances shall not bear interest during the deferred period elected by
Executive.

         5. Tax Withholding and Deductions. All payments under this Agreement
shall be made subject to all applicable tax withholding and other deductions
required by law.

         6. No Additional Rights. This Agreement and the provisions herein shall
not be construed to be a grant to or modification of any right of the Executive
to continued employment with the Company or its successor. Such right, if any,
shall be governed by any other employment agreements between Executive and the
Company.

         7. Notices. Notices to the parties under this Agreement shall be made
to the following persons and addresses (or such other persons and addresses
designated by the recipient party):

         To Executive:

         John N. Lawless, III
         46816 Pickford
         Northville, Michigan  48167
         (248) 348-2980 (fax)

         with a copy to:

         Daniel R. Shemke
         DANIEL R. SHEMKE, P.C.
         206 South Main Street
         Suite 206
         Ann Arbor, Michigan 48104
         (734) 663-1191 (fax)

                                       8
<PAGE>

         To Company:

         CEO, Headwaters Incorporated
         10653 S. Riverfront Parkway, Suite 300
         South Jordan, UT 84095
         Fax:  (801) 984-9410

         with a copy to:

         General Counsel, Headwaters Incorporated
         10653 S. Riverfront Parkway, Suite 300
         South Jordan, UT 84095
         Fax:  (801) 984-9430

         Delivery may be made by U.S. Mail or by facsimile transmission to the
facsimile telephone numbers set forth above with the name of the recipient set
forth in the facsimile transmission.

         8. Successors and Assigns. This Agreement shall be binding on the
successors and assigns of the Company (including but not limited to any
successors or assigns of the Company following a Change in Control) for the
benefit of Executive.

         9. Complete Agreement and Modification of this Agreement. This
Agreement represents the sole agreement of the parties regarding the subject
matter of this Agreement and supersedes any prior or contemporaneous verbal or
written agreements, promises or representations regarding the subject matter of
this Agreement. This Agreement may not be modified except by a written
instrument signed by both parties. In the event that a court of competent
jurisdiction determines that any provision of this Agreement is unlawful or
unenforceable, the Agreement shall be administered without such provision or be
reformed to carry out the intent of the parties to this Agreement.

         10. Jurisdiction and Governing Law. Subject to the mandatory
arbitration provisions set forth above, jurisdiction and venue in any action to
enforce any arbitration award or to enjoin any action that violates the terms of
this Agreement shall be in the state and federal courts serving the locality of
Wixom, Michigan. This Agreement shall be governed by the laws of the state of
Michigan without regard to conflict of laws principles of the laws of that
state.

                                       9
<PAGE>

In Witness Whereof, the parties hereto have executed this Agreement to be
effective as of the date first above written.

Executive                                       Headwaters Incorporated

---------------------------                     --------------------------------
John N. Lawless, III                            By:  Steven G. Stewart
                                                Its: Chief Financial Officer

                                       10
<PAGE>

                                    EXHIBIT A

                            GENERAL RELEASE LANGUAGE

Executive agrees, for himself, his spouse, heirs, executor or administrator,
assigns, insurers, attorneys and other persons or entities acting or purporting
to act on his behalf (the "Executive's Parties"), to irrevocably and
unconditionally release, acquit and forever discharge the Company, its
affiliates, subsidiaries, directors, officers, employees, shareholders,
partners, agents, representatives, predecessors, successors, assigns, insurers,
attorneys, benefit plans sponsored by the Company and said plans' fiduciaries,
agents and trustees (the "Company's Parties"), from any and all actions, cause
of action, suits, claims, obligations, liabilities, debts, demands, contentions,
damages, judgments, levies and executions of any kind, whether in law or in
equity, known or unknown, which the Executive's Parties have, have had, or may
in the future claim to have against the Company's Parties by reason of, arising
out of, related to, or resulting from Executive's employment with the Company or
the termination thereof. This release specifically includes without limitation
any claims arising in tort or contract, any claim based on wrongful discharge,
any claim based on breach of contract, any claim arising under federal, state or
local law prohibiting race, sex, age, religion, national origin, handicap,
disability or other forms of discrimination, any claim arising under federal,
state or local law concerning employment practices, and any claim relating to
compensation or benefits. This specifically includes, without limitation, any
claim which the Executive has or has had under Title VII of the Civil Rights Act
of 1964, as amended, the Age Discrimination in Employment Act, as amended, the
Americans With Disabilities Act, as amended, and the Employee Retirement Income
Security Act of 1974, as amended. It is understood and agreed that the waiver of
benefits and claims contained in this section does not include a waiver of the
right to payment of any vested, non-forfeitable benefits to which the Executive
or a beneficiary of the Executive may be entitled under the terms and provisions
of any employee benefit plan of the company which have accrued as of the
separation date and does not include a waiver of the right to benefits and
payment of consideration to which Executive may be entitled under this
agreement. Executive acknowledges that he is only entitled to the severance
benefits and compensation set forth in this agreement, and that all other claims
for any other benefits or compensation are hereby waived, except those expressly
stated in the preceding sentence. Executive expressly waives and relinquishes
all rights and benefits under that section and any law of any jurisdiction of
similar effect with respect to his release of claims.

                                       11

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