Document:

Exhibit 10.72.1

                            SHARE EXCHANGE AGREEMENT

         THIS SHARE EXCHANGE  AGREEMENT  (the "Exchange  Agreement") is made and
entered into, effective as of May 2, 2001, by and among HEADWATERS INCORPORATED,
a Delaware corporation ("Headwaters"),  HEADWATERS SUB CORPORATION, a New Jersey
corporation  and  a  wholly-owned   subsidiary  of  Headwaters  ("Merger  Sub"),
HYDROCARBON  TECHNOLOGIES,  INC., a New Jersey corporation  ("HTI"), and each of
the  individuals  listed on the  signature  pages  hereto  (the  "Transferors").
(Headwaters,  HTI,  Merger Sub, and the Transferors are referred to collectively
herein as the "Parties.")

                                    RECITALS

         A. Each of the Transferors owns shares of common stock,  $.01 par value
per share, of HTI (the "HTI Common  Stock").  Each Transferor owns the number of
shares of HTI Common Stock set forth  opposite his or her name on the  signature
pages hereto.

         B. In order to  enable  Headwaters  to  directly  acquire  one  hundred
percent  (100%) of the capital  stock of HTI, the Parties are entering into this
Exchange  Agreement,  under which each Transferor agrees with Headwaters,  among
other things,  to exchange all of the Transferor's  interest in HTI Common Stock
(each an "Exchange,  and  collectively  the  "Exchanges"),  representing  in the
aggregate for all Transferors up to approximately  ninety-seven percent (97%) of
the  outstanding  shares of HTI Common Stock, to Merger Sub in exchange for cash
and shares of Headwaters  Common Stock (the  "Headwaters  Shares"),  as provided
herein.

         C.  In  connection  with  the  execution  of this  Exchange  Agreement,
Headwaters,  HTI, Merger Sub, and certain  individual HTI shareholders (the "HTI
Founders") are entering into an Agreement and Plan of Reorganization dated as of
May 2, 2001 (the "Merger Agreement"),  pursuant to which Headwaters and HTI will
enter into a business combination  transaction pursuant to which Merger Sub will
merge with and into HTI following the Exchanges (the "Merger").

         D. Headwaters, Merger Sub, HTI, and the Transferors each desire to make
certain  representations  and warranties and other agreements in connection with
the Exchanges and the Merger.

         NOW,  THEREFORE,  in  consideration  of the  premises and of the mutual
agreements herein contained, the Parties do hereby agree as follows:

                                   ARTICLE I
                               THE share Exchange

         1.1 The Share Exchange.  Subject to the  satisfaction of the conditions
precedent set forth in Articles VI and VII below,  as of the Closing (as defined
herein), each Transferor hereby agrees to transfer to Merger Sub, and Merger Sub
agrees to accept,  the number of shares of HTI Common Stock shown  opposite such
Transferor's  name on the signature  pages hereto (each such share an

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"Exchanged Share" and collectively the "Exchanged Shares"),  in exchange for the
consideration  provided  herein.  The Parties agree that the Exchanges  shall be
part of a single transaction.  As a result, the obligation of each Transferor to
transfer the Exchanged  Shares to Merger Sub is conditioned on the  simultaneous
transfer  by each other  Transferor  of such  Transferor's  HTI Common  Stock or
waiver  by  Merger  Sub,  in its sole  discretion,  of the  obligations  of such
non-transferring Transferors.

         1.2 Closing.  The closing of the Exchanges (the  "Closing")  shall take
place at the offices of HTI or Headwaters, at a time and date to be specified by
the Parties after the last of the conditions  precedent set forth in Articles VI
and VII below shall have been satisfied or waived,  and shall occur  immediately
prior to the  closing  of the  Merger,  pursuant  to  Section  1.2 of the Merger
Agreement,  or at such other time,  date,  and location as the Parties  agree in
writing (the date of the Closing being the "Closing Date").

         1.3 Effect on Capital Stock.

                  (a) Definitions. For purposes of this Exchange Agreement:

                           (i)  Business  Plan  shall  mean  the  business  plan
prepared by HTI and dated February 2000.

                           (ii)  Business  Unit shall mean the business  unit of
Headwaters  after the Merger that includes the business and operations of HTI as
they existed  immediately  prior to the Effective Time (as defined in the Merger
Agreement), which business unit shall include only HTI's business and operations
unless consented to in writing by the Representative.

                           (iii) EBITDA  shall mean  earnings  before  interest,
taxes, depreciation, and amortization of the Business Unit, after elimination of
intracompany  transfers and costs incurred in connection  with the  transactions
contemplated  hereby and by the Merger  Agreement,  as reported  on  Headwaters'
statement of operations prepared in accordance with GAAP consistently applied in
accordance with HTI's practices in effect immediately prior to the Closing,  and
without the effect of any restatement of the financial  statements of HTI or the
Business  Unit unless HTI (in the case of any  pre-Closing  restatement)  or the
Representative (in the case of any post-Closing restatement) consents thereto in
writing.

                           (iv) 2001  Actual  EBITDA  shall  mean  EBITDA of the
Business Unit for the year ended  December 31, 2001  (calculated  to reflect the
elimination of intracompany  transfers and costs incurred in connection with the
transactions  contemplated  hereby and by the Merger  Agreement),  not including
revenues  from any sale of  material  assets  or other  extraordinary  corporate
events;  provided that, for this purpose,  a sale of Chemsampco or its assets or
the nonexclusive  licensing of intellectual property rights of the Business Unit
in the  ordinary  course of business  will not be  considered a sale of material
assets or an extraordinary corporate event.

                           (v) 2001  Projected  EBITDA  shall  mean  $3,670,000;
provided that, if, with the consent of Headwaters,  HTI's  financial  statements
are restated in a manner that would affect 2001 Actual  EBITDA,  2001  Projected
EBITDA will be correspondingly adjusted.

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                           (vi) 2002 Actual  EBITDA shall mean the EBITDA of the
Business Unit for the year ended  December 31, 2002  (calculated  to reflect the
elimination of intracompany  transfers and costs incurred in connection with the
transactions  contemplated  hereby and by the Merger  Agreement),  not including
revenues  from any sale of  material  assets  or other  extraordinary  corporate
events;  provided that, for this purpose,  a sale of Chemsampco or its assets or
the nonexclusive  licensing of intellectual property rights of the Business Unit
in the  ordinary  course of business  will not be  considered a sale of material
assets or an extraordinary corporate event.

                           (vii) 2002  Projected  EBITDA shall mean  $3,362,000;
provided that, if, with the consent of Headwaters,  HTI's  financial  statements
are restated in a manner that would affect 2002 Actual  EBITDA,  2002  Projected
EBITDA will be correspondingly adjusted.

                           (viii) Fully Diluted  Number shall mean the aggregate
of (1) the number of shares of HTI Common Stock outstanding immediately prior to
the Closing,  plus (2) the number of shares of HTI Common Stock  underlying  all
vested and unvested HTI Stock Options (as defined below) outstanding immediately
prior to the Closing.

                           (ix) GAAP shall mean  generally  accepted  accounting
principles.

                           (x)  Headwaters  Common  Stock  shall mean the common
stock, $0.01 par value per share, of Headwaters.

                           (xi)  HTI  Stock   Options  shall  mean  all  options
pursuant to HTI's Stock Option Plan or pursuant to any other agreement of HTI.

                           (xii)  Merger  Shares shall mean the number of shares
of HTI Common Stock  outstanding  immediately  prior to the  Closing,  minus the
number of Exchanged Shares.

                           (xiii)  Purchaser   Representative  shall  mean  that
person  or entity  selected  by HTI,  which  shall  assist  the  Transferors  in
evaluating  the  merits  and  risks  of  the  investment  decision  contemplated
hereunder, and which shall satisfy the requirements of Rule 501(b) of Regulation
D promulgated  under the  Securities  Act of 1933,  as amended (the  "Securities
Act"),  as required by  securities  laws for the  protection  of  non-accredited
investors.

                           (xiv)   Representative   shall  mean  a  three-member
committee initially consisting of Alfred G. Comolli, L.K. (Theo) Lee, Ph.D., and
David Tanner,  acting together as representative  for the Transferors as set out
in this  Exchange  Agreement.  The  decisions of the  Representative,  including
without limitation the designation of new members if a vacancy on such committee
should occur, shall be made by majority vote.

                  (b) Share Exchange Consideration. At Closing, Merger Sub shall
acquire  the  Exchanged  Shares,  the  aggregate  consideration  for which  (the
"Exchange Consideration") shall consist of shares of Headwaters Common Stock and
cash, as set out below, subject to the provisions of this Section 1.3:

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                           (i) Stock  Consideration.  The stock  portion  of the
Exchange  Consideration (the "Stock  Consideration")  shall consist of 1,330,154
shares of Headwaters Common Stock; and

                           (ii)  Cash  Consideration.  The cash  portion  of the
Exchange   Consideration  (the  "Cash   Consideration")  shall  consist  of  (A)
$2,893,750,  less any costs to be borne by HTI pursuant to Section 5.6(c), minus
(B) that  amount  which is equal to  $14,468,750  divided  by the Fully  Diluted
Number and then  multiplied  by the number of Merger  Shares;  provided that the
cash portion of any  payment(s)  provided for in Section  1.3(c) may be adjusted
pursuant to Section 1.3(f).

                  (c)  Conversion  of HTI Common  Stock.  Subject to Section 1.2
hereof,  at the Closing,  by virtue of the Exchanges,  and without any action on
the part of the  Transferors,  each Exchanged  Share,  and all rights to accrued
dividends in respect thereof,  will be transferred to Merger Sub in exchange for
the right to receive,  on the dates  specified  below,  the following  aggregate
consideration  for each Exchanged  Share;  provided that twenty percent (20%) of
each of the Closing Stock Amount and the Closing Cash Amount (as defined  below)
to each Transferor  shall be placed into escrow (for which purpose,  the numbers
of shares of stock of each  Transferor to be placed into escrow shall be rounded
to the next  whole  number  of  shares),  pursuant  to the  terms  of an  Escrow
Agreement in  substantially  the form attached  hereto as Exhibit A (the "Escrow
Agreement"),  until the Final Release Date (as defined in the Escrow Agreement);
and provided further that each Transferor will be deemed to be the record holder
of the shares of Headwaters Common Stock held in escrow:

                           (i) at the Closing,

                                    (x) (A) an  amount of cash  equal  to  fifty
                                        percent (50%) of the Cash Consideration,
                                        plus the aggregate exercise price of any
                                        vested  HTI  Stock   Options   exercised
                                        between   the   date   hereof   and  the
                                        Effective  Time,   minus  fifty  percent
                                        (50%) of the  Merger  Consideration  (as
                                        defined   in  the   Merger   Agreement),
                                        divided by (B) the Fully Diluted  Number
                                        (the "Closing Cash Amount"); and

                                    (y) the right to receive  a number of shares
                                        of  Headwaters  Common  Stock  equal  to
                                        fifty   percent   (50%)  of  the   Stock
                                        Consideration   divided   by  the  Fully
                                        Diluted   Number  (the  "Closing   Stock
                                        Amount");

                           (ii) at March 31, 2002,  or such later time as is set
forth in Section 1.3(d),  up to an additional  twenty-five  percent (25%) of the
Cash Consideration and the Stock Consideration (the "First Contingent  Payment")
shall be deemed  earned  and shall be paid,  in each case  divided  by the Fully
Diluted Number, in the event that HTI:

                                    (x) has 2001  Actual  EBITDA  equal to or in
                                        excess  of (the  2001  Projected  EBITDA
                                        (the "2001 EBITDA Test"), in which event
                                        the full First Contingent  Payment shall
                                        be deemed to have been  earned and shall

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                                        be paid,  in each  case  divided  by the
                                        Fully  Diluted  Number;  or, if the 2001
                                        EBITDA Test is not met:

                                    (y) has entered  into  a  coal  liquefaction
                                        license agreement with the Shenhua Group
                                        of  the   Peoples'   Republic  of  China
                                        ("PRC")  ("Shenhua"),  containing  terms
                                        that  can   reasonably  be  expected  to
                                        result in  license  revenues  consistent
                                        with the Business  Plan,  and containing
                                        other  commercial  terms and  conditions
                                        common  in this  type of  agreement,  by
                                        March  31,   2002,   and  such   license
                                        agreement,  if  entered  into  prior  to
                                        October 31, 2001,  is still in effect as
                                        of  October  31,   2001  (the   "Shenhua
                                        Test"),  in which  event  sixty  percent
                                        (60%)   each  of  the  cash  and   stock
                                        portions of the First Contingent Payment
                                        shall be deemed to have been  earned and
                                        shall be paid,  in each case  divided by
                                        the Fully Diluted Number; and

                                    (z) has entered  into a heavy oil  licensing
                                        agreement,  containing  terms  that  can
                                        reasonably  be  expected  to  result  in
                                        license  revenues  consistent  with  the
                                        Business  Plan,  and  containing   other
                                        commercial  terms and conditions  common
                                        in   this   type  of   agreement,   with
                                        PetroChina    Company    Limited,    PRC
                                        ("PetroChina")  by March 31,  2002,  and
                                        such license agreement,  if entered into
                                        prior to October 31,  2001,  is still in
                                        effect  as  of  October  31,  2001  (the
                                        "PetroChina Test"), in which event forty
                                        percent (40%) each of the cash and stock
                                        portions of the First Contingent Payment
                                        shall be deemed to have been  earned and
                                        shall be paid,  in each case  divided by
                                        the Fully Diluted Number

                           (collectively, the "First Milestone").

Notwithstanding the foregoing,

                  (A) in  addition  to any  amounts  earned  pursuant to Section
         1.3(c)(ii)(y)  or (z), if HTI fails to satisfy the 2001 EBITDA Test and
         one or both of the Shenhua Test and the  PetroChina  Test, but has 2001
         Actual EBITDA of greater than eighty  percent  (80%) of 2001  Projected
         EBITDA, a portion of each of the cash and stock components of the First
         Contingent  Payment (in each case divided by the Fully Diluted  Number)
         shall be deemed  earned and shall be paid that is, in each case,  equal
         to the ratio of (i) 2001 Actual  EBITDA minus eighty  percent  (80%) of
         2001  Projected  EBITDA to (ii) twenty  percent (20%) of 2001 Projected
         EBITDA.  For  purposes  of  clarity,  if 2001  Actual  EBITDA is eighty
         percent (80%) (or less) of 2001 Projected EBITDA,  the amount deemed to
         have been earned and that shall be paid (the "Amount  Earned")  will be
         zero;  if  eighty-five   percent  (85%),  the  Amount  Earned  will  be
         twenty-five  percent (25%) of the First Contingent  Payment;  if ninety
         percent  (90%),  the Amount  Earned will be fifty  percent (50%) of the
         First  Contingent  Payment;  if ninety-five  percent (95%),  the Amount
         Earned  will be  seventy-five  percent  (75%) of the  First  Contingent
         Payment (in each case divided by the Fully Diluted Number);

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                  (B) in  addition  to any  amounts  earned  pursuant to Section
         1.3(c)(ii)(y), (z), or (A), if (i) HTI fails to satisfy the 2001 EBITDA
         Test and (ii)  fails to sign a license  agreement  with  either or both
         Shenhua  and/or  PetroChina by March 31, 2002, but executes one or both
         of the aforesaid license agreements with Shenhua and/or PetroChina,  as
         applicable,  in a form otherwise satisfying the Shenhua Test and/or the
         PetroChina Test, as applicable,  after March 31, 2002, but by March 31,
         2003,  half  of  each of the  cash  and  stock  portions  of the  First
         Contingent  Payment  that would have been deemed to have been earned if
         HTI had met the Shenhua Test and/or the PetroChina Test, as applicable,
         shall be deemed to have been earned and shall be paid;

         provided that in no event shall the aggregate  amounts paid pursuant to
         this  Section  1.3(c)(ii)  exceed  the  amount of the First  Contingent
         Payment.

                           (iii) at March 31, 2003, or such later time as is set
forth in Section  1.3(d),  an additional  twenty-five  percent (25%) of the Cash
Consideration  and  twenty-five  percent (25%) of the Stock  Consideration  (the
"Second Contingent Payment"),  in each case divided by the Fully Diluted Number,
shall be  deemed  earned  and shall be paid in the  event  that the 2002  Actual
EBITDA  is  equal  to  or  exceeds  the  2002  Projected   EBITDA  (the  "Second
Milestone");  provided  that,  if the 2002 Actual  EBITDA is greater than eighty
percent (80%) of 2002 Projected EBITDA, but less than the 2002 Projected EBITDA,
a portion of the Second  Contingent  Payment (in each case  divided by the Fully
Diluted  Number) shall be deemed earned and shall be paid that is, in each case,
equal to the ratio of (i) 2002 Actual EBITDA minus eighty  percent (80%) of 2002
Projected  EBITDA to (ii) twenty  percent (20%) of 2002  Projected  EBITDA.  For
purposes  of  clarity,  if 2002 Actual  EBITDA is eighty  percent  (80%) of 2002
Projected  EBITDA (or less),  the Second  Contingent  Payment  will be zero;  if
eighty-five  percent (85%), the Amount Earned will be twenty-five  percent (25%)
of the Second  Contingent  Payment;  if ninety percent (90%),  the Amount Earned
will be fifty percent (50%) of the Second  Contingent  Payment;  if  ninety-five
percent  (95%),  the Amount  Earned will be  seventy-five  percent  (75%) of the
Second  Contingent  Payment (in each case divided by the Fully Diluted Number) .
(The First  Milestone and the Second  Milestone shall each be referred to herein
as a "Milestone".)

                  (d)  Requirements as to Contingent  Payments.  With respect to
the First Contingent  Payment and the Second Contingent  Payment  (collectively,
the "Contingent Payments"):

                           (i) Headwaters  shall complete its calculations as to
whether  the  EBITDA-related  Milestones  have been  satisfied  as  promptly  as
practicable  following the  appropriate  year-end,  and in any event by the date
which is 90 days  following  the end of the year in  which  such  EBITDA-related
Milestone is to be achieved.  Headwaters  will pay the Contingent  Payments that
are not EBITDA-related  within fifteen (15) days after such Contingent  Payments
are  earned.  Each of the  Milestones  will  stand  alone  and must be  achieved
separately.

                           (ii) Headwaters agrees not to cause the Business Unit
to  dividend  any cash or  profits  or make  any  other  distributions  from the
Business  Unit during the periods in which the  Milestones  are to be  achieved.
Headwaters  agrees to make funds  available to the Business  Unit to be used for
reasonable and budgeted  operating expenses of the Business Unit, and to provide
other general operational assistance and advice to the Business Unit. Subject to
Headwaters' sole

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discretion,  Headwaters agrees to make other resources available to the Business
Unit,  upon the  Business  Unit's  reasonable  request  therefor,  to assist the
Business  Unit in achieving  the  Milestones.  Headwaters  will also maintain an
independent  profit and loss  statement  for the Business Unit that will include
the business and operations of the Business Unit after the  consummation  of the
Merger  for the period  through  and  including  the  calculation  of the Second
Milestone.  The  Business  Unit will make  commercially  reasonable  efforts  to
achieve the  performance  objectives set forth in the Business Plan.  Headwaters
will refrain from taking any action,  including without  limitation  engaging in
any activities  which compete with those of the Business Unit,  which may impair
achievement of each of the Milestones  within the time periods set forth in this
Section 1.3.

                           (iii) The Business Unit shall provide recommendations
to  Headwaters  concerning  the  proposed  sales  price for each  product of the
Business Unit.  Headwaters shall consider such  recommendations  in establishing
pricing,  but shall have ultimate  authority for establishing the prices of such
products,  provided that such prices shall be  commercially  reasonable.  In the
event that any product of the  Business  Unit is combined  with or  incorporated
into another  Headwaters  product for resale (an "Integrated  Product"),  rather
than being sold on a "stand-alone"  basis, the price of such Integrated  Product
for purposes of this  Exchange  Agreement  shall be  determined  to be an amount
equal to not less than the price at which such product  would be sold if it were
sold commercially on a stand-alone basis. Such price determination shall be made
by Headwaters with the consent of the Representative (which consent shall not be
unreasonably withheld).

                           (iv) In the event that, after the Signing Date, there
has occurred (i) a merger or  consolidation of Headwaters with or into any other
corporation or  corporations  pursuant to which the  stockholders  of Headwaters
immediately  prior to the  transaction  own less than fifty percent (50%) of the
voting securities of the surviving corporation or a sale of all or substantially
all of the  assets  of  Headwaters  (an  "Acquisition"),  or  (ii)  any  merger,
consolidation, reorganization, sale of all or substantially all of the assets or
of any material asset of the Business Unit, or any spin-off of the securities of
any entity conducting the business of the Business Unit (a "Spin Off"), or (iii)
a material  violation of this Exchange  Agreement by Headwaters such that one or
more  Milestones  could not  reasonably  be  achieved  within  the time  periods
established in Section 1.3, all unpaid Contingent Payments shall be deemed to be
earned. Any Contingent  Payment which is accelerated  pursuant to subsection (i)
or (ii) of the preceding sentence shall be paid at the consummation of the event
described  in such  subsection;  any  Contingent  Payment  which is  accelerated
pursuant to subsection  (iii) of the preceding  sentence shall be payable at the
earlier of the date such payment  would  otherwise be due or five  business days
after final resolution of any dispute  regarding the occurrence of an applicable
event  (provided,  however,  that if the Contingent  Payment is not made at such
date,  Transferors  shall be entitled to interest at the then  applicable  legal
interest  rate for  judgments  from the date any such payment is due to the date
payment  is  made);  and  provided,  further,  that  if the  payment  to be made
hereunder is the result of a breach of this Exchange  Agreement that affects the
achievability of one or more Milestones, only the Contingent Payment relating to
the affected Milestone shall be paid pursuant to this subsection.

                           (v) In the  event  that,  after the  Effective  Time,
Headwaters  materially modifies or alters the business plan or operations of the
Business Unit, including, without limitation, Headwaters causing the termination
without  cause of (i) more  than  fifty  percent  (50%) of the

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operational and maintenance employees,  or more than twenty percent (20%) of the
other  employees,  who were  employed by HTI as of the Closing  Date or (ii) any
employment  agreement to which HTI is a party on the Closing  Date, in each case
such that one or more  Milestones  could not  reasonably be achieved  within the
time periods  established  in Section 1.3, all unpaid  Contingent  Payments with
respect to the affected  Milestone(s) shall be deemed earned and payable in full
on the date on which such Contingent Payment(s) would otherwise be due.

                           (vi)  Headwaters   agrees  to  provide  promptly  all
information as reasonably  requested by the Representative to the Representative
or a designated  accountant,  and to make available for inspection and review to
the  Representative  or a  designated  accountant,  during  business  hours upon
reasonable  prior notice,  the books and records of  Headwaters  relating to the
Business  Unit,  including,  but not  limited  to, all  production  reports  and
projections, purchase orders, and worksheets for the period under review and the
computations  underlying the  determination  of whether the Milestones have been
achieved.

                           (vii) Headwaters shall deliver to the  Representative
no later than five days prior to the payment  date of each year for a Contingent
Payment, a certificate signed by an officer of Headwaters  containing a detailed
summary of all  computations,  including any  adjustments,  as described  above,
performed by Headwaters in arriving at the Contingent Payment for such year (the
"Contingent  Payment  Certificate").  The Representative  shall have a period of
sixty (60) days after receipt of the Contingent  Payment  Certificate to dispute
any amounts reflected  thereon;  provided that the  Representative  shall notify
Headwaters  in  writing of each  disputed  item in  reasonable  detail and shall
specify  the  amount  thereof  in dispute  within  such  sixty (60) day  period.
Headwaters  agrees to  cooperate  with any such  confirmation  request  and make
available to the Representative or his designated accountant,  at all reasonable
times, for inspection and review,  the books and records of Headwaters  relating
to the Business  Unit,  including,  but not limited to, all  worksheets  for the
period under review and the  aforementioned  computations.  If no objections are
raised  within such sixty (60) day period or if the  Representative  consents in
writing to the amounts  reflected  in the  Certificate  prior to the end of such
period, the Contingent  Payment  Certificate and the Contingent Payment shall be
final,  binding,  and  conclusive  upon all of the parties hereto and Headwaters
shall  make the  Contingent  Payment  within  ten (10)  business  days after the
earlier of the  expiration  of such sixty (60) day period or its  receipt of the
written consent of the  Representative.  If, during his review of the Contingent
Payment Certificate and accompanying  worksheets and records, the Representative
or  his  designated  accountant  disagrees  with  the  computation  prepared  by
Headwaters and such  disagreement  cannot,  with good faith effort,  be promptly
settled, Headwaters and the Representative shall appoint a mutually satisfactory
independent certified public accountant (the "Resolution  Accountant") to review
the computations of both Headwaters and the Representative. The determination of
the  Resolution  Accountant,  which shall be based on GAAP,  shall be  delivered
within ninety (90) days after the  appointment of the Resolution  Accountant and
shall be binding on Headwaters  and the  Transferors.  The fees and costs of the
Resolution  Accountant shall be borne one-half by Headwaters and one-half by the
Transferors.  Within three (3)  business  days after the  Resolution  Accountant
makes his  determination,  Headwaters  shall pay the  Transferors the Contingent
Payment as so finally determined.

                  (e) No Fractional  Shares.  No fractional shares of Headwaters
Common Stock shall be issued to any holder of HTI Common Stock in the Exchanges.
To the extent that application

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of the  conversion  procedures  of Section  1.3(c) to shares of HTI Common Stock
held by a Transferor would result in a fractional number of shares of Headwaters
Common  Stock being  issued to the  Transferor  in the  Exchange,  the number of
shares of Headwaters Common Stock issuable to such holder in respect of all such
shares in the Merger  shall be rounded up to the next whole  number of shares of
Headwaters Common Stock.

                  (f) Adjustments for Tax-Free Reorganization.  At HTI's option,
Headwaters  and HTI,  without the  necessity  of  obtaining  the approval of any
Transferor,  shall cooperate with making any necessary,  nonmaterial adjustments
to reduce  the  Closing  Cash  Amount  and the cash  portion  of any  Contingent
Payments in order to achieve an 80%-20% stock-to-cash ratio based on the closing
price of Headwaters Common Stock required to be used for purposes of determining
tax-free reorganization treatment for the transaction comprised of the Exchanges
and the Merger.

                  (g) Representative's Holdback. Notwithstanding anything to the
contrary  contained  herein,  at the time the First  Contingent  Payment (or any
portion  thereof) is paid,  Headwaters  shall  deduct from the First  Contingent
Payment,  or from such portion  thereof as is then  payable,  and deliver to the
Representative  one hundred  thousand  dollars  ($100,000) in cash, which amount
will be held by the  Representative  and applied as the  Representative,  in its
sole  discretion,  deems  desirable  or  appropriate  to  expenses  incurred  in
connection with this Exchange  Agreement,  the Escrow  Agreement,  or the Merger
Agreement. The Representative shall deliver the balance of such amount remaining
after  application  to such  expenses  to the  Transferors  at such  time as the
Representative determines, in its sole discretion, that such amounts will not be
needed for application to such expenses.

         1.4 Exchange Procedures.  Promptly after the Closing,  Headwaters shall
mail to each  Transferor (i) a letter of  transmittal,  which shall specify that
delivery  shall  be  effected,  and  risk of loss  and  title  to the HTI  Share
certificate or certificates (the "Certificates")  shall pass, only upon delivery
of the Certificates to Headwaters, and which shall be in such form and have such
other   provisions  as  Headwaters  may  reasonably   specify  ("the  Letter  of
Transmittal")  and (ii)  instructions  for use in effecting  the transfer of the
Certificates   in  exchange   for  the   applicable   portion  of  the  Exchange
Consideration  pursuant to Section  1.3.  Upon  surrender  of  Certificates  for
cancellation  to  Headwaters,  together  with the  Letter of  Transmittal,  duly
completed and validly executed in accordance with the instructions  thereto, the
holders of such  Certificates  shall be entitled to receive in exchange therefor
the applicable  portion of the Exchange  Consideration  pursuant to Section 1.3.
Notwithstanding  the foregoing,  Headwaters shall cooperate with the Transferors
to cause the Letters of Transmittal  to be made  available  prior to the Closing
Date so they may be completed by the Transferors before the Closing.

         1.5 Tax Treatment.  The parties intend that the Exchanges,  the Merger,
and the other  transactions  contemplated  herein  and  therein  (i) will not be
consummated  unless all such  transactions  are  consummated  and (ii) will be a
reorganization  within the meaning of Section 368 of the  Internal  Revenue Code
and hereby adopt this Exchange  Agreement and the Merger Agreement as a "plan of
reorganization"  within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
Treasury   Regulations.   Notwithstanding   the   foregoing,   each   Transferor
acknowledges and agrees that he or she must consult with his or her tax advisors
concerning  tax  treatment of the  Exchanges and the Merger

                                       9
<PAGE>

and that neither HTI nor Headwaters is responsible  for the tax treatment of the
Exchanges or the Merger.

                                   ARTICLE II
                REPRESENTATIONS AND WARRANTIES OF ALL TRANFERORS

         Each Transferor,  severally and not jointly, hereby makes the following
representations and warranties to Headwaters and Merger Sub:

         2.1 Authority. Such Transferor has all requisite power and authority to
enter  into  this  Exchange  Agreement,   and  to  consummate  the  transactions
contemplated  hereby and thereby.  The  execution  and delivery of this Exchange
Agreement  and the  consummation  of the  transactions  contemplated  hereby and
thereby,  have been duly and validly  authorized by all necessary  action on the
part of such  Transferor,  and no other action on the part of such Transferor is
necessary to authorize such execution and delivery.  This Exchange Agreement has
been duly and validly  executed and delivered by such Transferor  and,  assuming
the valid  authorization,  execution,  and delivery thereof by the other parties
thereto,   constitutes  valid  and  binding   obligations  of  such  Transferor,
enforceable  against such  Transferor  in accordance  with its terms,  except as
enforceability  may be limited by bankruptcy  and other similar laws and general
principles of equity.

         2.2  Title  to the  HTI  Common  Stock.  As of  the  date  hereof  such
Transferor  is, and at the time of Closing  such  Transferor  will be, the owner
(both  beneficially  and of record) of the shares of HTI Common  Stock set forth
opposite such person's name on the signature pages hereto. Except for the shares
of HTI Common Stock and HTI Stock Options set forth  opposite such person's name
on the signature  pages hereto,  such Transferor is not the record or beneficial
owner (as defined in Rule 13d-3 under the  Securities  Exchange Act of 1934,  as
amended  (the  "Exchange  Act")) of,  and does not have any other  rights of any
nature to acquire any shares of HTI Common Stock.  Such Transferor  owns, and at
the time of Closing  will own,  all of the shares of HTI Common  Stock set forth
opposite such person's name on the signature  pages hereto free and clear of all
liens,  claims,  pledges,   options,   rights  of  first  refusal,   agreements,
limitations  on voting rights,  charges,  and other  encumbrances  of any nature
whatsoever,  subject to whatever rights, if any, HTI may have to repurchase such
shares (which rights HTI shall waive as of the Closing).  Such  Transferor  has,
and at the time of Closing will have, sole power of disposition  with respect to
all of the shares of HTI Common Stock set forth  opposite  such person's name on
the signature  pages hereto.  Upon delivery by such  Transferor of its shares of
HTI Common  Stock,  Merger Sub will receive valid and  marketable  title thereto
free and clear of any lien, claim, security interest, or other encumbrance.

         2.3 No Conflict with Other  Instruments.  The execution and delivery of
the Transferor  Agreements by the Transferors do not, and the performance of the
Transferor  Agreements  by the  Transferors  will not, to the  knowledge of such
Transferor  after  reasonable  inquiry,  conflict with or violate any law, rule,
regulation, order, judgment, or decree applicable to any Transferor, or by which
any Transferor, or any of their respective properties, is bound or affected.

         2.4  Investment  Intent.  The  Headwaters  Shares  to be issued to such
Transferor upon consummation of the transactions  contemplated  hereby are being
acquired by such  Transferor  for such  person's  own  account  pursuant to this
Exchange  Agreement and not for any other person,  and

                                       10
<PAGE>

for  investment  only and with no intention of  distributing  or reselling  such
Headwaters Shares or any part thereof or any interest therein in any transaction
that would be in violation of the securities  laws of the United States,  or any
state thereof.  Such  Transferor  has no contract,  undertaking,  agreement,  or
arrangement  with any  person  to sell or  transfer  to such  person,  except as
permitted hereunder, any of the Headwaters Shares.

         2.5  No  Registration  of  the  Headwaters   Shares.   Such  Transferor
understands  that the  Headwaters  Shares  are not  being  registered  under the
Securities Act of 1933, as amended (the "Securities Act") on the ground that the
transactions  contemplated hereby are exempt from the registration  requirements
thereof,  and that Headwaters' reliance on an exemption under the Securities Act
is predicated on such Transferor's representations set forth herein.

         2.6 Knowledge and Experience. Such Transferor, either alone or with his
or her Purchaser  Representative,  is able to fend for himself or herself in the
transactions  contemplated  by this Exchange  Agreement,  has such knowledge and
experience in financial and business  matters as to be capable of evaluating the
merits and risks of its  investment,  has the ability to bear the economic risks
of its  investment,  and  has  been  furnished  with or has  had  access  to all
information  such person  deemed  necessary  for such person's full and complete
evaluation of Headwaters,  and such Transferor has had during the course of this
transaction  and prior to the Exchange the  opportunity  to ask questions of and
receive answers from Headwaters,  its employees, and representatives  concerning
financial  affairs of Headwaters,  and all questions  which have been asked have
been adequately answered.

         2.7 Holding Period. Pursuant to Section 5.1 to this Exchange Agreement,
Headwaters has agreed to file a registration  statement on Form S-3  registering
the  resale  of the  Headwaters  Shares  by  Transferors.  Notwithstanding  such
agreement by  Headwaters,  such  Transferor  understands  and agrees that,  if a
registration  statement  covering the securities under the Securities Act is not
in effect and an exemption from the  registration  requirements is not available
when he or she desires to sell the Headwaters  Shares, he or she may be required
to hold such  Headwaters  Shares for an  indeterminate  period.  Such Transferor
understands that any sale of the Headwaters Shares which might be made by him or
her in  reliance  upon  Rule 144 under  the  Securities  Act may be made only in
limited amounts in accordance with the terms and conditions of that rule.

                                  ARTICLE III
             REPRESENTATIONS AND WARRANTIES OF ACCREDITED INVESTORS

         Each  Transferor who is identified on the signature  pages hereto as an
"accredited  investor"  hereby  represents and warrants to Headwaters and Merger
Sub that  such  person  satisfies  at  least  one of the  following  suitability
standards:

                  (a)      that he or she is a natural  person whose  individual
                           net  worth,  or joint  net worth  with that  person's
                           spouse,  at the time of his or her  purchase  exceeds
                           $1,000,000; or

                  (b)      that  he or she is a  natural  person  who had (i) an
                           individual  income in excess of  $200,000  in each of
                           the two most recent years and who reasonably  expects

                                       11
<PAGE>

                           an income in excess of $200,000  in the current  year
                           or (ii) a joint income with that  person's  spouse in
                           excess  of  $300,000  in each of the two most  recent
                           years and who  reasonably  expects a joint  income in
                           excess of $300,000 in the current year.

                                   ARTICLE IV
           REPRESENTATIONS AND WARRANTIES OF HEADWATERS AND MERGER SUB

         Each of  Headwaters  and  Merger Sub  represents  and  warrants  to the
Transferors, except as set forth in the disclosure letter supplied by Headwaters
to the  Transferors  on or  before  the  date  hereof  and  certified  by a duly
authorized  officer of  Headwaters  and Merger Sub (the  "Headwaters  Disclosure
Letter"), as follows:

         4.1 Organization of Headwaters.  Each of Headwaters and Merger Sub is a
corporation  duly organized,  validly  existing,  and in good standing under the
laws of the jurisdiction of its  incorporation,  has the corporate power to own,
lease,  and  operate  its  property  and to carry on its  business  as now being
conducted,  and is duly  qualified to do business  and is in good  standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would  have a  material  adverse  effect  on  the  business,  assets  (including
intangible assets),  financial condition,  or results of operations (a "Material
Adverse Effect") of Headwaters and its subsidiaries taken as a whole.

         4.2 Authority.

                  (a)  Each of  Headwaters  and  Merger  Sub  has all  requisite
corporate  power and  authority  to enter into this  Exchange  Agreement  and to
consummate the transactions  contemplated  hereby. The execution and delivery of
this Exchange  Agreement and the consummation of the  transactions  contemplated
hereby have been duly authorized by all necessary  corporate  action on the part
of Headwaters and Merger Sub. This Exchange Agreement has been duly executed and
delivered by  Headwaters  and Merger Sub and,  assuming  the due  authorization,
execution,  and  delivery  by each of the  Transferors,  constitutes  valid  and
binding obligations of Headwaters and Merger Sub, enforceable in accordance with
its terms,  except as  enforceability  may be limited  by  bankruptcy  and other
similar laws and general  principles  of equity.  The  execution and delivery of
this Exchange Agreement by Headwaters and Merger Sub do not, and the performance
of this Exchange  Agreement by Headwaters  and Merger Sub will not, (i) conflict
with or violate the  Certificate  of  Incorporation  or Bylaws of Headwaters and
Merger Sub or the  equivalent  organizational  documents  of any of  Headwaters'
other  subsidiaries,  (ii) conflict with or violate any law,  rule,  regulation,
order,  judgment,  or decree applicable to Headwaters or any of its subsidiaries
or by  which  its or any of their  respective  properties  is bound or  affected
pursuant to any note, bond, mortgage,  indenture,  contract,  agreement,  lease,
license,  permit,   franchise,  or  other  instrument  or  obligation  to  which
Headwaters or any of its  subsidiaries is a party or by which  Headwaters or any
of its  subsidiaries or its or any of their  respective  properties are bound or
affected,  except,  with respect to clause (ii), for the consent of Zion's First
National  Bank,  and for any  such  conflicts,  violations,  defaults,  or other
occurrences  that would not have a Material Adverse Effect on Headwaters and its
subsidiaries  taken as a whole.  The  Headwaters  Disclosure  Letter  lists  all
consents,  waivers,  and  approvals  under  any  of  Headwaters'  or  any of its
subsidiaries' agreements, contracts, licenses, or leases required to be obtained
in connection with the  consummation  of the  transactions  contemplated

                                       12
<PAGE>

hereby  which,  if  not  obtained,  would  have a  Material  Adverse  Effect  on
Headwaters  and its  subsidiaries  taken as a whole or have a  material  adverse
effect on the ability of the Parties to consummate the Exchanges.

                  (b) No  consent,  approval,  order,  or  authorization  of, or
registration,  declaration,  or filing with, any Governmental Entity is required
by or with respect to Headwaters or Merger Sub in connection  with the execution
and delivery of this Exchange  Agreement or the consummation of the transactions
contemplated hereby, except for

                           (i) the  filing  with  the  Securities  and  Exchange
         Commission  (the  "SEC")  of a Form D  under  Regulation  D  under  the
         Securities  Act, any required  state filings  related to the Exchanges,
         and  such  reports  under  the  Exchange  Act  as may  be  required  in
         connection   with  this  Exchange   Agreement   and  the   transactions
         contemplated hereby; and

                           (ii) such other  consents,  authorizations,  filings,
         approvals,  and registrations which, if not obtained or made, would not
         have a Material Adverse Effect on Headwaters and its subsidiaries taken
         as a whole or have a  material  adverse  effect on the  ability  of the
         Parties to consummate the Exchanges.

         4.3 No Material  Misrepresentations.  This  Exchange  Agreement,  taken
together with the Headwaters Disclosure Letter,  contains no untrue statement of
material  fact  and,  when this  Exchange  Agreement  is taken in its  entirety,
contains  no untrue  statement  of a material  fact and does not omit to state a
material fact necessary to make the statements  contained  herein not misleading
as of the date hereof.

         4.4 Available  Funds.  Headwaters  and Merger Sub,  collectively,  have
sufficient capital available to consummate the transactions contemplated by this
Exchange  Agreement  and are not relying on  obtaining  additional  financing in
connection with such transactions.

         4.5  SEC  Documents.   Headwaters  has  filed  all  required   reports,
schedules,  forms, statements, and other documents with the SEC since October 1,
1999  (collectively,  and in each case  including  all  exhibits  and  schedules
thereto and documents  incorporated  by reference  therein,  the "Headwaters SEC
Documents"). As of their respective dates, the Headwaters SEC Documents complied
in all material  respects with the  requirements  of the  Securities  Act or the
Exchange  Act,  as the case may be,  and the  rules and  regulations  of the SEC
promulgated thereunder applicable to such Headwaters SEC Documents.  As of their
respective  dates,  none of the Headwaters SEC Documents  (including any and all
financial  statements therein) contained any untrue statement of a material fact
or failed to state any material fact required to be stated  therein or necessary
in order to make the statements  therein,  in light of the  circumstances  under
which they were made, not misleading.  The consolidated  financial statements of
Headwaters  included in the  Headwaters  SEC Documents  comply as to form in all
material  respects with  applicable  accounting  requirements  and the published
rules and  regulations  of the SEC with respect  thereto,  have been prepared in
accordance with GAAP (except,  in the case of unaudited  consolidated  quarterly
statements,  as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the period  involved  (except as may be indicated in the notes  thereto),
and  present  fairly,  in all  material  respects,  the  consolidated  financial
position of

                                       13
<PAGE>

Headwaters  and  its  subsidiaries  at the  respective  dates  thereof  and  the
consolidated  results of  operations  and cash flows for the  periods  specified
(subject,  in the case of unaudited  quarterly  statements,  to normal  year-end
audit  adjustments).  Except as reflected or reserved  against in the Headwaters
Financial Statements or otherwise disclosed in the Headwaters Disclosure Letter,
Headwaters  and  its  subsidiaries   have  no  material   liabilities  or  other
obligations (including contingent liabilities and obligations) except, (i) since
the date of the most recent  audited  balance sheet  included in the  Headwaters
Financial  Statements,  liabilities  and  obligations  incurred in the  ordinary
course  of  business  or (ii) that  would not be  required  to be  reflected  or
reserved  against  in the  consolidated  balance  sheet  of  Headwaters  and its
subsidiaries prepared in accordance with GAAP.

         4.6 Absence of Certain  Changes or Events.  Except as  disclosed in the
Headwaters SEC Documents or in the Headwaters  Disclosure Letter, since the date
of the  most  recent  audited  balance  sheet  included  in the  Headwaters  SEC
Documents,  there is not and has not been (a) any  material  adverse  change  to
Headwaters, or (b) any condition,  event, or occurrence that could reasonably be
expected  to  prevent or  materially  delay  Headwaters  from  consummating  the
transactions  contemplated  by  this  Exchange  Agreement;  provided  that,  for
purposes of this Section 4.6, a change in the price of  Headwaters  Common Stock
shall not be deemed to constitute a "material adverse change".

         4.7 Shares Reserved.  Headwaters has authorized and reserved, and shall
keep  available,  for issuance and delivery,  the number of shares of Headwaters
Common Stock  issuable in connection  with the Exchanges.  Upon  issuance,  such
shares will be validly issued, fully paid, and nonassessable.

         4.8 Securities Law Compliance.  Headwaters shall take such steps as may
be  necessary  to  comply  with  the   securities  and  blue  sky  laws  of  all
jurisdictions that are applicable to the issuance of the Headwaters Common Stock
pursuant hereto.  HTI and the Transferors shall use their best efforts to assist
Headwaters as may be necessary to comply with the  securities  and blue sky laws
of all  jurisdictions  which are  applicable in connection  with the issuance of
Headwaters Common Stock pursuant hereto.

         4.9 Nasdaq  National  Market  Listing.  Headwaters  shall authorize for
listing on the Nasdaq  National  Market the shares of  Headwaters  Common  Stock
issuable pursuant hereto and shall use its best efforts to maintain such listing
on the Nasdaq  National  Market (or such other principal stock exchange on which
shares of Headwaters Common Stock are then listed).

                                   ARTICLE V
                              ADDITIONAL AGREEMENTS

         5.1 Registration.

                  (a) Registration Rights.

                           (i)  Headwaters  will  prepare  and file with the SEC
within  60 days of the  Closing  Date  (the  "Required  Filing  Date") a "shelf"
registration  statement on Form S-3 (or other appropriate form) (as the same may
be  amended,  the  "Registration  Statement")  pursuant  to Rule 415

                                       14
<PAGE>

under the  Securities  Act  providing  for the  resale  from time to time by the
Transferors of the shares of Headwaters Common Stock issuable in connection with
the Exchange (including the Stock Consideration included in the First and Second
Contingent Payments,  except such shares as to which it has then been determined
that such shares will not be earned) and all shares of  Headwaters  Common Stock
issued in connection  therewith by way of a stock  dividend or stock split or in
connection  with a combination  of shares,  reclassification,  recapitalization,
merger or consolidation or reorganization (the "Headwaters Shares"),  through or
to brokers or  dealers or  directly  to  investors  pursuant  to the  prospectus
contained in the Registration  Statement (or another prospectus contained in and
forming a part of an effective  registration statement under the Securities Act)
or in transactions  that are exempt from the requirements of registration  under
the Securities  Act, at a fixed price or prices,  which may be changed from time
to time, at market prices prevailing at the time of such sale, at prices related
to such market  prices or at negotiated  prices;  provided,  however,  that such
transactions shall not include an underwritten public offering. Headwaters shall
use its  reasonable  efforts  to cause  the  Registration  Statement  to  become
effective,  provided  that,  in  any  event,  any  obligation  to  maintain  the
effectiveness  of the  Registration  Statement shall terminate on the earlier of
(i) all Headwaters Shares having been sold under the Registration  Statement and
(ii) the first date on which all Headwaters  Shares can be sold in a three-month
period,  one year from the Closing Date. By written  notice to the  Transferors,
Headwaters may stop the use of the Registration Statement for such resales for a
period of no longer  than 90 days in  aggregate  after the date of the notice if
Headwaters or its subsidiaries are engaged in confidential negotiations or other
confidential  business  activities,  disclosure  of  which,  in  the  reasonable
determination  of the Headwaters  Board of Directors,  would be required in such
registration statement (but would not be required if such registration statement
were not filed).

                           (ii)  Headwaters will use its reasonable best efforts
to  prepare  and file  with  the SEC  such  amendments  and  supplements  to the
Registration  Statement and the prospectus contained therein as may be necessary
to keep such Registration Statement effective for a period ending on the date on
which all of the Headwaters Shares can be sold in a three-month  period, or such
shorter period as shall  terminate  when all  Headwaters  Shares covered by such
registration statement have been sold;

                           (iii)   Headwaters   will  as   soon  as   reasonably
practicable,  furnish  to each  Transferor,  prior to  filing  the  Registration
Statement,  copies of such  registration  statement as proposed to be filed, and
thereafter furnish to such Transferor such number of copies of such Registration
Statement,  each amendment and supplement thereto (in each case, if specified by
such Transferor,  including all exhibits  thereto),  the prospectus  included in
such  Registration  Statement  (including each preliminary  prospectus) and such
other documents as such Transferor may reasonably request in order to facilitate
the disposition of Headwaters Shares owned by such Transferor.

                           (iv)  Headwaters will promptly notify the Transferors
at any time when a prospectus relating thereto is required to be delivered under
the  Securities  Act within the period that  Headwaters  is required to keep the
Registration  Statement  effective of the  happening of any event as a result of
which the prospectus included in such Registration Statement (as then in effect)
contains an untrue  statement of a material  fact or omits to state any material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances then existing, not

                                       15
<PAGE>

misleading,  and  Headwaters  will  promptly  prepare and file a  supplement  or
amendment to such prospectus so that, as thereafter  delivered to the purchasers
of such Headwaters Shares,  such prospectus will not contain an untrue statement
of a material  fact or omit to state any  material  fact  required  to be stated
therein  or  necessary  to  make  the  statements   therein,  in  light  of  the
circumstances   then  existing,   not  misleading;   provided,   however,   that
notwithstanding the foregoing,  if the Headwaters Board of Directors  determines
in its good faith judgment that the filing of any supplement or amendment to the
Registration  Statement to keep such Registration Statement available for use by
the Transferors for resales of Headwaters Shares would require the disclosure of
material  information  that  Headwaters  has a bona fide  business  purpose  for
preserving as  confidential,  then upon written notice of such  determination by
Headwaters  to each  Transferor,  the  obligation of Headwaters to supplement or
amend the Registration Statement will be suspended until Headwaters notifies the
Transferors  in writing that the reasons for  suspension of such  obligations on
the part of Headwaters no longer exist and Headwaters  amends or supplements the
Registration Statement as may be required; provided that the aggregate number of
days (whether or not  consecutive)  during which Headwaters may delay the filing
of any such  supplement or amendment  (together with the number of days referred
to in Section  5.1(a)  hereof)  shall in no event exceed ninety (90) days in any
twelve (12) month period.

                           (v) Headwaters  will promptly  notify each Transferor
of any stop order  issued by the SEC and take all  reasonable  actions to obtain
the removal of any such stop order.

                           (vi)  Before  filing any  registration  statement  or
prospectus or any amendments or supplements thereto,  Headwaters will furnish to
counsel selected by the Representative copies of such documents,  which shall be
subject to the reasonable approval of such counsel.

                  (b) Conditions and Limitations.  Headwaters' obligations under
Section 5.1(a) shall be subject to the following limitations:

                           (i)  Headwaters  shall not be  required  to file more
than one Registration Statement pursuant to this Agreement.

                           (ii)  Headwaters  shall have received the information
and  documents  specified  in  Section  5.1(c)  and each  Transferor  shall have
observed or  performed  its other  covenants  and  conditions  contained in such
section and, as a condition  to  registration  of its  Headwaters  Shares,  each
Transferor shall agree in the Letter of Transmittal to perform the covenants and
conditions  applicable to him or her contained in such Section 5.1(c);  provided
that the failure of a  Transferor  to have  observed  and  performed  such other
covenants and conditions shall not excuse Headwaters' obligations hereunder with
respect to  Transferors  who have so observed and performed  such  covenants and
conditions.

                           (iii) Each  Transferor  agrees that,  upon receipt of
any notice from  Headwaters of the happening of any event of the kind  described
in Section 5.1(a)(iv), such Transferor will forthwith discontinue disposition of
Headwaters  Shares  until  such  Transferor's  receipt  of  the  copies  of  the
supplemented or amended  prospectus  contemplated by Section  5.1(a)(iv) hereof,
and, if so directed by Headwaters,  such  Transferor  will deliver to Headwaters
(at

                                       16
<PAGE>

Headwaters'  expense) all copies,  other than permanent file copies then in such
Transferor's  possession,  of the prospectus  covering such Headwaters Shares at
the time of receipt of such notice.

                           (iv) Each Transferor agrees that, upon receipt of any
notice from  Headwaters  stating  that  Headwaters  has  determined  to effect a
registered  underwritten public offering of securities and has taken substantial
steps to effect  such  offering,  such  Transferor  will  forthwith  discontinue
disposition of Headwaters Shares until such Transferor's  receipt of notice from
Headwaters that such dispositions may be continued,  provided that the aggregate
number of days (whether or not consecutive)  during which Headwaters may suspend
use of the  Registration  Statement  pursuant to this Section  shall in no event
exceed  ninety (90) days in any twelve (12) month period,  and provided  further
that the officers and directors of Headwaters  have agreed to refrain from sales
during such period.

                  (c)  Information  from and Certain  Covenants of  Transferors.
Headwaters may require the Transferors to furnish to Headwaters such information
regarding the  Transferors and the  distribution  of such  Headwaters  Shares as
Headwaters may from time to time reasonably  request in writing to carry out its
obligations as to the Registration  Statement.  Each Transferor agrees to notify
Headwaters as promptly as practicable of any inaccuracy or change in information
previously  furnished by such  Transferor to Headwaters or of the  occurrence of
any event in either  case as a result of which any  prospectus  relating to such
registration  contains an untrue  statement of a material  fact  regarding  such
Transferor or the  distribution of such Headwaters  Shares or omits to state any
material fact regarding such  Transferor or the  distribution of such Headwaters
Shares required to be stated therein or necessary to make the statements therein
not  misleading in light of the  circumstances  then  existing,  and promptly to
furnish to Headwaters any additional  information required to correct and update
any previously  furnished  information or required so that such prospectus shall
not  contain,  with  respect  to such  Transferor  or the  distribution  of such
Headwaters  Shares,  an untrue  statement of a material  fact or omit to state a
material fact required to be stated  therein or necessary to make the statements
therein,  in light of the  circumstances  then existing,  not  misleading.  Each
Transferor shall execute all consents,  powers of attorney,  and other documents
reasonably  required  to be  signed  by  him  or  her in  order  to  cause  such
registration  statement to become effective.  Each Transferor covenants that, in
disposing  of his or her  Headwaters  Shares,  he or she  will  comply  with all
applicable securities laws, including the prospectus delivery requirements under
the Securities Act.

                  (d) Registration  Expenses.  All Registration Expenses will be
borne by Headwaters.  Any broker's fee,  underwriting  discount,  and commission
applicable to the sale of Headwaters  Shares shall be borne by the holder of the
Headwaters Shares to which such broker's fee, discount,  or commission  relates,
and each Transferor  shall be responsible for all fees and expenses  incurred by
such Transferor in connection with any registration  under this Article IX other
than Registration Expenses.  For purposes of this Section 5.1(d),  "Registration
Expenses"  shall mean all expenses  incident to  Headwaters'  performance  of or
compliance with Section 5.1, including, without limitation, all registration and
filing fees,  messenger and delivery expenses  incurred by Headwaters,  internal
expenses incurred by Headwaters (including, without limitation, all salaries and
expenses of its officers and employees  performing legal or accounting  duties),
all  expenses  relating  to  the  preparation,   printing,   distribution,   and
reproduction  of the  registration  statement and the  prospectus,  the fees and
expenses  incurred in  connection  with the listing of the shares of  Headwaters
Common

                                       17
<PAGE>

Stock  on any  securities  exchange,  fees  and  disbursements  of  counsel  for
Headwaters  and  of  its  independent  public  accountants,  and  the  fees  and
disbursements  of one counsel  for the  Transferors  who are selling  Headwaters
Shares pursuant to the Registration Statement.

                  (e) Indemnification.

                           (i) Headwaters  agrees to indemnify and hold harmless
each  Transferor who has sold  Headwaters  Shares  pursuant to the  Registration
Statement from and against any and all losses, claims, damages, liabilities, and
expenses  (including  reasonable costs of investigation and defense) arising out
of or based upon any untrue  statement or alleged untrue statement of a material
fact contained in the Registration  Statement or the final prospectus  contained
therein or in any  amendment or supplement  thereto,  or arising out of or based
upon any omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages,  liabilities,  or expenses arise
out of, or are based upon,  any such untrue  statement or omission or allegation
thereof  based upon  information  furnished  in writing  to  Headwaters  by such
Transferor or on such Transferor's behalf expressly for use therein.

                           (ii) Each  Transferor  agrees to  indemnify  and hold
harmless  Headwaters,  its officers,  directors,  and agents and each person, if
any,  who  controls  Headwaters  within the meaning of either  Section 15 of the
Securities  Act or Section 20 of the Exchange  Act, from and against any and all
losses, claims, damages,  liabilities,  and expenses (including reasonable costs
of investigation  and defense) arising out of or based upon any untrue statement
or alleged untrue  statement of a material fact by such Transferor  contained in
the  Registration  Statement  or  the  prospectus  contained  therein  or in any
amendment or supplement thereto, or arising out of or based upon any omission or
alleged omission by such Transferor to state therein a material fact required to
be stated  therein or necessary to make the statements  therein not  misleading,
provided that such losses, claims, damages,  liabilities,  or expenses arise out
of, or are based upon,  any such  untrue  statement  or  omission or  allegation
thereof  based upon  information  furnished  in writing  to  Headwaters  by such
Transferor  or  on  such   Transferor's   behalf   expressly  for  use  therein.
Notwithstanding the foregoing, no Transferor shall be obligated to pay hereunder
more  than  the net  proceeds  realized  by him or her  upon  his or her sale of
Headwaters Shares included in the Registration Statement.

                           (iii)  The  provisions  of  Section  9.3 (but not the
liability  limitations in Section 9.1) shall apply to any actions or proceedings
subject to the indemnification provisions of this Section 5.1.

         5.2 Transfer  Restrictions.  Each  Transferor  agrees that,  so long as
required by law, the Exchanged Shares and any securities  issued in exchange for
or in respect thereof shall be subject to a transfer  restriction  substantially
to the  following  effect,  which shall be  conspicuously  stamped or  otherwise
imprinted on each certificate evidencing Exchanged Shares:

         THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  UNDER THE  UNITED  STATES
         SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
         SECURITIES OR BLUE SKY LAWS OF ANY STATE, AND MAY NOT BE OFFERED, SOLD,
         PLEDGED,  TRANSFERRED,  OR OTHERWISE  DISPOSED OF EXCEPT PURSUANT TO AN

                                       18
<PAGE>

         EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES ACT AND OTHER
         APPLICABLE  LAWS OR PURSUANT TO AN EXEMPTION FROM THE SECURITIES ACT OR
         OTHER LAWS.

         5.3 Legal  Requirements.  Each of Headwaters,  HTI, and the Transferors
will take all reasonable  actions necessary or desirable to comply promptly with
all  legal  requirements  which  may be  imposed  on them  with  respect  to the
consummation  of  the  transactions  contemplated  by  this  Exchange  Agreement
(including  furnishing all information  required in connection with approvals of
or filings with any Governmental Entity, and prompt resolution of any litigation
prompted hereby) and will promptly cooperate with and furnish information to any
Party  necessary in connection  with any such  requirements  imposed upon any of
them or their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Exchange Agreement.

         5.4  Notification  of  Certain  Matters.   Subject  to  the  terms  and
provisions of this Exchange Agreement, each Party will give prompt notice to the
other  Parties  of the  occurrence,  or failure  to occur,  of any event,  which
occurrence  or  failure  to occur  would be  reasonably  likely to cause (a) any
representation or warranty  contained in this Exchange Agreement to be untrue or
inaccurate  in any material  respect at any time from the date of this  Exchange
Agreement to the Closing Date, or (b) any material failure of such Party, as the
case may be, or of any officer, director,  employee, or agent thereof, to comply
with or satisfy any  covenant,  condition,  or agreement to be complied  with or
satisfied by him, her, or it under this Exchange Agreement.  Notwithstanding the
above,  the  delivery of any notice  pursuant to this  section will not limit or
otherwise  affect the remedies  available  hereunder to the Party receiving such
notice.

         5.5 Commercially Reasonable Efforts and Further Assurances.  Subject to
the respective  rights and obligations of Headwaters and the  Transferors  under
this  Exchange  Agreement,  each  of  the  Parties  will  use  its  commercially
reasonable  efforts  to  effectuate  the  Exchanges  and the other  transactions
contemplated  hereby and to fulfill and cause to be fulfilled the  conditions to
Closing under this Exchange Agreement.  Each Party, at the reasonable request of
another  Party,  will  execute and  deliver  such other  instruments  and do and
perform  such  other  acts and  things  as may be  necessary  or  desirable  for
effecting completely the consummation of the transactions contemplated hereby.

         5.6 Purchaser Representative and Representative.

                  (a) Each  Transferor  expressly  designates  and  appoints the
individuals  comprising  the  Representative  as  his  or her  true  and  lawful
attorney-in-fact  and agent and expressly  authorizes the  Representative (i) to
execute and deliver,  in his or her name,  the Escrow  Agreement in such form as
the  Representative  deems  desirable  or  appropriate,  the  execution  of such
agreement to be conclusive evidence of such determination,  and (ii) to take all
actions  and carry out all  responsibilities  of the  Representative  under this
Exchange  Agreement,  the  Escrow  Agreement,  and the Merger  Agreement,  which
actions  shall  include,  without  limitation,  (A)  receiving  a portion of the
Exchange  Consideration  pursuant to Section  1.3(g) hereof and paying from such
amount any expenses  incurred in connection  with this Exchange  Agreement,  the
Escrow Agreement,  or the Merger Agreement,  and (B) acting on his or her behalf
in  connection  with any disputes or  disagreements  arising under this Exchange
Agreement   (including  without  limitation  Section  1.3

                                       19
<PAGE>

hereof),  the Escrow  Agreement,  or the Merger  Agreement,  including,  without
limitation, agreeing to any resolution thereof.

                  (b) The  Transferors  agree that the Purchaser  Representative
and the individuals comprising the Representative will not be liable for any act
done or omitted as Purchaser  Representative  or  Representative,  respectively,
hereunder  while  acting  in good  faith  and such act is not an act of  willful
misconduct in the performance of his, her or its obligation.

                  (c)  Headwaters   shall  pay  up  to  forty  thousand  dollars
($40,000) of the costs of retaining the Purchaser Representative.  The remainder
of such costs, if any, shall be borne by HTI and shall constitute a reduction to
the Cash Consideration.

         5.7 Treatment of Exchanges  and Merger as a Qualifying  Reorganization.
Each of HTI and the Transferors  shall (a) treat the Exchanges and the Merger as
a  reorganization  under Section 368 of the Code, (b) report the Exchanges,  the
Merger, and all related transactions  consistently  therewith in any and all Tax
Returns filed by him, her, or it, (c) take all such actions as may be reasonably
required  to cause the  Exchanges  and the Merger to be treated as a  qualifying
reorganization,  and (d) take no action which could disqualify the Exchanges and
the Merger from reorganization status under Section 368 of the Code.

                                   ARTICLE VI
             CONDITIONS TO OBLIGATIONS OF HEADWATERS AND MERGER SUB

         The  obligations  of Headwaters and Merger Sub hereunder are subject to
the  satisfaction,  or waiver  thereof  by  Headwaters  and Merger  Sub,  of the
following conditions:

         6.1 No Actions or Proceeding.  No judgment,  writ,  order,  injunction,
award,  or decree of or by any  Governmental  Entity shall have been issued that
would,  and no action or proceeding  shall have been instituted by or before any
Governmental  Entity  seeking  to,  enjoin or prevent  the  consummation  of the
transactions contemplated hereby and under the Merger Agreement. Notwithstanding
the  generality of the foregoing,  no person shall have (i) commenced,  or shall
have  notified  either HTI,  Headwaters,  or any  Transferor  that it intends to
commence,  an action or  proceeding or (ii)  provided  HTI,  Headwaters,  or any
Transferor  with  notice,  in  either  case  which  allege(s)  that  any  of the
intellectual  property presently embodied,  or proposed to be embodied, in HTI's
products or design environments infringes or otherwise violates the intellectual
property  rights of such person or is available for  licensing  from a potential
licensor  providing the notice, or otherwise alleges that HTI does not otherwise
own or have the right to exploit such intellectual property.

         6.2 Representations and Warranties.  The representations and warranties
of the Transferors  shall be true and correct in all material respects on and as
of the Closing  Date,  with the same effect as though such  representations  and
warranties  had  been  made  on and as of such  date,  and  each  and all of the
agreements of the  Transferors  to be performed or complied with pursuant to the
terms of this  Exchange  Agreement  shall have been duly  performed and complied
with in all material respects.

                                       20
<PAGE>

         6.3 No Material Adverse Effect.  No event shall have occurred since the
date of this Exchange  Agreement that has had or would reasonably be expected to
have a Material Adverse Effect on HTI.

         6.4 Merger Agreement.  Each of the conditions  precedent to the closing
under Article V of the Merger  Agreement  shall have been satisfied or waived by
Headwaters.

         6.5  Exchanges.  Transferors  shall  have  offered,  pursuant  to  this
Exchange Agreement, to exchange at least ninety percent (90%) of the outstanding
shares of HTI Common Stock.

                                  ARTICLE VII
                  CONDITIONS TO OBLIGATIONS OF THE TRANSFERORS

         The  obligations  of  the  Transferors  hereunder  are  subject  to the
satisfaction, or waiver thereof by each Transferor, of the following conditions:

         7.1 No Actions or Proceedings.  No judgment,  writ, order,  injunction,
award,  or decree of or by any  Governmental  Entity shall have been issued that
would,  and no action or proceeding  shall have been instituted by or before any
Governmental  Entity  seeking  to,  enjoin or prevent  the  consummation  of the
transactions contemplated hereby.

         7.2 Representations and Warranties.  The representations and warranties
of Headwaters and Merger Sub shall be true and correct in all material  respects
on  and  as  of  the  Closing  Date,   with  the  same  effect  as  though  such
representations  and warranties had been made on and as of such date, except for
changes which, in the aggregate, would not have a material adverse effect on the
financial condition,  properties,  business, prospects, or results of operations
of Headwaters and its  subsidiaries,  taken as a whole,  and each and all of the
agreements  of  Headwaters  and  Merger Sub to be  performed  or  complied  with
pursuant to the terms of this Exchange  Agreement shall have been duly performed
and complied with in all material respects.

         7.3 Merger Agreement.  Each of the conditions  precedent to the closing
under Article VI of the Merger  Agreement shall have been satisfied or waived by
HTI.

                                  ARTICLE VIII
                   SURVIVAL OF REPRESENTATIONS AND WARRANTIES

         Notwithstanding  any  investigation  made by or on behalf of Headwaters
and Merger Sub or the  Transferors,  the  representations  and warranties of the
Transferors  and of  Headwaters  and  Merger  Sub  contained  in  this  Exchange
Agreement shall be continuing  representations  and warranties and shall survive
the Closing Date until the second anniversary thereof.

                                   ARTICLE IX
                             INDEMNITY OF HEADWATERS

         9.1  Indemnification  of  Headwaters.  Each  of the  Transferors  shall
jointly,  but not severally,  indemnify,  defend, and hold harmless  Headwaters,
Merger Sub,  and the  Surviving  Corporation,  and their  respective  employees,
officers,   directors,   stockholders,   controlling   persons,

                                       21
<PAGE>

and affiliates (collectively, the "Indemnified Persons") from and against his or
her pro rata share of any claims, damages, costs (including, without limitation,
interest on any loss from the date thereof to the date of payment),  or expenses
(including,    without   limitation,    attorneys'   fees   and   disbursements)
(collectively,  the  "Losses")  arising out of (i) any  misrepresentation  in or
breach of the  representations,  warranties,  or  covenants  of the  Transferors
contained   herein  or  made  to  Headwaters  or  Merger  Sub  in  any  exhibit,
certificate, or other instrument or document furnished or to be furnished by the
Transferors  pursuant  to this  Exchange  Agreement  or in  connection  with the
transactions  contemplated herein and (ii) any misrepresentation in or breach of
the  representations,  warranties,  or covenants of HTI  contained in the Merger
Agreement or made to  Headwaters or Merger Sub in any exhibit,  certificate,  or
other instrument or document furnished or to be furnished by HTI pursuant to the
Merger  Agreement or in connection with the transactions  contemplated  therein;
provided, however, that, (A) the liability of all of the Transferors, other than
officers and directors of HTI as of the Signing  Date,  pursuant to this Section
9.1 shall not  exceed  the sum of (i) the  amounts  in the  Escrow  Account  (as
defined in the Escrow  Agreement) and (ii) any future  Contingent  Payments that
ultimately are earned; and (B) the liability of any Transferor who is an officer
or director of HTI as of the  Signing  Date shall not exceed the total  Exchange
Consideration  he or she  has  received,  including  his or her  portion  of any
amounts  in the  Escrow  Account,  plus  any  future  Contingent  Payments  that
ultimately are earned.  Notwithstanding the foregoing, no payments shall be made
pursuant  to this  Section  9.1  unless and until the  aggregate  amount of such
Losses exceeds  $150,000 (the  "Threshhold"),  in which case Headwaters shall be
entitled to the full amount of the Losses in excess of $150,000, after deducting
any amounts  otherwise to be paid with respect to Dissenting  Shares pursuant to
Section 1.7 of the Merger Agreement.  Notwithstanding the immediately  preceding
sentence,  Losses  resulting  from any  misrepresentation  in or  breach  of the
representations and warranties in Section 2.2 of the Merger Agreement,  relating
to HTI's capital structure, shall not be subject to the Threshhold.

         9.2  Indemnification  for Dissenting  Shares.  The Indemnified  Persons
shall be indemnified  from and against any Losses as a result of claims asserted
against  Headwaters  by holders of  Dissenting  Shares (as defined in the Merger
Agreement),  and shall be entitled  to recover  the full amount of such  Losses,
after deducting any amounts otherwise to be paid with respect to such Dissenting
Shares  pursuant to Section 1.3(c)  hereof;  provided that any such Losses shall
first be  satisfied  from  Merger  Consideration  that,  in the  absence  of the
exercise  of  dissenters'  rights,  would  have been paid with  respect  to such
shares.

         9.3 Notice. Promptly after service of notice of any claim or of process
on any Indemnified  Person by any third person in any matter in respect of which
indemnity  may be  sought  pursuant  to  Section  5.1(e)  or  this  Article  IX,
Headwaters shall notify the Transferors at the Transferors'  addresses set forth
on the signature pages attached  hereto.  The Transferors  may, at their option,
assume  the  defense  of any  such  claim  or  process  or  settlement  thereof.
Regardless  of whether any such  third-party  claim is defended by Headwaters or
the Transferors,  the defending Party(ies) shall (i) settle or defend such claim
or proceeding with reasonable  diligence;  (ii) cooperate with the other Parties
in the investigation and analysis of such claim or proceeding;  (iii) afford the
other Parties  reasonable access to such relevant  information as he, she, or it
may have in its possession;  and (iv) keep the other Parties reasonably informed
regarding   such  claim  or   proceeding.   The   generality  of  the  foregoing
notwithstanding,  the Transferors  shall not settle any such claim or proceeding
without the  consent of  Headwaters,  which  consent  shall not be  unreasonably
withheld;

                                       22
<PAGE>

provided that if Headwaters shall withhold such consent,  the Transferors  shall
continue to defend such claim or proceeding  and all defense costs from the date
of such refusal to consent onward shall be payable by the  Transferors,  subject
to  the  maximum  limits  of  such  indemnity  under  this  Article  IX.  If the
Transferors   shall  become   obligated  to  indemnify  and  hold  harmless  any
Indemnified  Person  pursuant to this  Article IX, such  obligation  will be the
joint, and not several,  obligation of the Transferors only and in no event will
the Transferors be entitled to any contribution  from the Surviving  Corporation
with respect to such  indemnity  obligation  of the  Transferors,  nor shall the
Transferors  assert any claim  against the  Surviving  Corporation,  whether for
contribution or otherwise,  with respect to any such indemnity obligation of the
Transferors.

         9.4  Survival  of  Indemnification   Obligation.   The  indemnification
provided  in this  Article IX shall  survive  the  Closing  Date for the periods
specified Article VIII with respect to the representations and warranties of the
Transferors  herein,  and for the periods specified in Article VII of the Merger
Agreement with respect to the representations and warranties of HTI therein, and
for any additional period required to resolve any claim under this Article IX.

         9.5 Notice of Claim.

                  (a) At any time  prior to the end of the period  specified  in
Article VIII,  Headwaters may give the Transferors a written notice which states
the general nature of a claim for indemnity  ("Claim")  pursuant to this Article
IX with  reasonable  detail  as to the  alleged  basis  of the  indemnity  claim
("Notice of Claim"),  together with notice that Headwaters  intends to apply all
or part of the escrow to the payment of the Losses  specified  in such Notice of
Claim.  In  the  event  that a Loss  has  not  been  liquidated  or  determined,
Headwaters may, at any time prior to the end of the period  specified in Article
IX, give the Representative a Notice of Claim in which Headwaters  describes the
general nature of the Claim and makes a good faith estimate of the Loss.

                  (b) If the  Representative  does not give  written  notice  to
Headwaters  within  thirty  (30) days after the  receipt of such Notice of Claim
that he  protests  the Claim set forth in the Notice of Claim,  then  Headwaters
shall be entitled to  indemnification  for such Claim and all Losses  hereunder,
including the right of offset as set forth in Section 9.5(d) below.

                  (c)  If  the  Representative   does  give  written  notice  to
Headwaters  within 30 days  after the  receipt  of such  Notice of Claim that he
protests  the  Claim,  Headwaters  and the  Representative  will use their  best
efforts to resolve such  disagreement  amicably  prior to initiating  use of the
Dispute Resolution procedures specified in Section 12.4. Upon resolution of such
dispute,  Headwaters shall be entitled to indemnification for such Claim and all
Losses  hereunder,  including the right of offset as set forth in Section 9.5(d)
below.

                  (d) Any  indemnification  of Headwaters shall be applied first
against the Headwaters Common Stock in the Escrow Account, valued at the Signing
Price (as defined in the Merger Agreement),  then against the cash in the Escrow
Account.  Notwithstanding  the  foregoing,  the  Representative,   at  its  sole
discretion,  may determine to have any indemnification Claim satisfied by having
cash in the Escrow Account paid in lieu of, or before,  Headwaters Common Stock.
Any person required by Article IX to indemnify  Headwaters from funds other than
amounts in the Escrow  Account or future  Contingent  Payments  may satisfy such
obligations in cash or in Headwaters

                                       23
<PAGE>

Common Stock, valued at the Signing Price (as defined in the Merger Agreement).

         9.6 No Limitation of Remedies.  Notwithstanding  anything  contained in
this  Exchange  Agreement  to the  contrary,  nothing  shall  preclude  or limit
Headwaters'  rights to exercise any other remedy  Headwaters  may have in law or
equity  regarding  intentional  misrepresentation  or any remedies  available to
Headwaters under the Non-Compete  Agreement (as defined in the Merger Agreement)
with any HTI  Founder,  provided,  however,  that  other  than  for  intentional
misrepresentation,  or as provided in any other  agreement,  Headwaters'  or the
Surviving  Corporation's  sole remedy hereunder shall be limited to Sections 9.1
and 9.2 of this Exchange Agreement.

                                   ARTICLE X
                           COSTS INCIDENT TO AGREEMENT

         Except as otherwise expressly provided herein, each of the Parties will
pay all the costs incurred by such Party incident to the preparation, execution,
or  delivery of this  Exchange  Agreement  or the  performance  of such  Party's
obligations hereunder, including, without limitation, the fees and disbursements
of its attorneys,  accountants,  investment bankers,  consultants,  brokers, and
persons providing other services.

                                   ARTICLE XI
                                   TERMINATION

         11.1  Termination.  Except as  provided  in Section  11.2  below,  this
Exchange Agreement and the Merger Agreement may be terminated and the Merger and
the Exchanges abandoned at any time prior to the Closing:

                  (a) upon termination of the Merger Agreement;

                  (b) by  Headwaters,  if it is not in  material  breach  of its
obligations under this Exchange  Agreement or the Merger Agreement and there has
been a breach of any representation,  warranty, covenant, or agreement contained
in this  Agreement on the part of HTI or a  Transferor,  and as a result of such
breach  the  conditions  set forth in Section  6.2 would not then be  satisfied;
provided,  however,  that if such  breach is curable  by HTI or such  Transferor
within  thirty (30) days through the exercise of its  reasonable  best  efforts,
then,  for  so  long  as HTI or  such  Transferor  continues  to  exercise  such
reasonable best efforts, Headwaters may not terminate this Exchange Agreement or
the Merger  Agreement under this Section 11.1(b) unless such breach is not cured
within thirty (30) days (but no cure period shall be required for a breach which
by its nature cannot be cured); or

                  (c) by  HTI  or a  Transferor,  if  he,  she,  or it is not in
material breach of its obligations  under this Exchange  Agreement or the Merger
Agreement,  and  there  has  been  a  breach  of any  representation,  warranty,
covenant,  or  agreement  contained  in this  Exchange  Agreement  or the Merger
Agreement  on the part of  Headwaters  or  Merger  Sub,  and as a result of such
breach  the  conditions  set forth in Section  7.2 would not then be  satisfied;
provided,  however,  that if such breach is curable by  Headwaters or Merger Sub
within  thirty (30) days through the exercise of its  reasonable

                                       24
<PAGE>

best  efforts,  then,  for so long as  Headwaters  or Merger  Sub  continues  to
exercise such reasonable best efforts,  HTI or such Transferor may not terminate
this Exchange  Agreement  and the Merger  Agreement  under this Section  11.1(c)
unless  such  breach is not cured  within  thirty  (30) days (but no cure period
shall be required for a breach which by its nature cannot be cured).

         Where  action is taken to terminate  this  Exchange  Agreement  and the
Merger  Agreement  pursuant to Section  11.1,  it shall be  sufficient  for such
action to be authorized by the Board of Directors (as  applicable)  of the party
taking such action.

         11.2  Effect  of  Termination.  In the  event  of  termination  of this
Exchange  Agreement as provided in Section 11.1,  this Exchange  Agreement shall
forthwith  become void and there shall be no liability or obligation on the part
of Headwaters,  Merger Sub, HTI, or any of the Transferors,  or their respective
officers,  directors,  or  stockholders,  provided  that the  provisions of this
Article XI shall remain in full force and effect and survive any  termination of
this Exchange Agreement.

         11.3  Amendment.  Except as is otherwise  required by  applicable  law,
prior to the Closing,  this Exchange  Agreement may be amended by the Parties at
any time by execution of an instrument in writing signed by  Headwaters,  Merger
Sub,  HTI, and a majority in interests of the  Transferors  who have signed this
Exchange Agreement. Except as is otherwise required by applicable law, after the
Closing,  this  Exchange  Agreement may be amended by the Parties at any time by
execution of an instrument in writing signed by Headwaters, Merger Sub, HTI, and
a majority  in  interests  of the  Transferors  who have  signed  this  Exchange
Agreement.

         11.4 Extension;  Waiver. At any time prior to the Closing,  Headwaters,
Merger Sub, HTI, and a majority in interests of the  Transferors who have signed
this Exchange Agreement may, to the extent legally allowed,  (i) extend the time
for the performance of any of the  obligations of another Party,  (ii) waive any
inaccuracies in the  representations and warranties made to such Party contained
herein or in any document  delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such Party contained
herein.  Any  agreement  on the part of a Party to any such  extension or waiver
shall be valid only if set forth in an  instrument  in  writing  signed by or on
behalf of such Party.

                                  ARTICLE XII
                                  MISCELLANEOUS

         12.1 Successors and Assigns.  This Exchange  Agreement shall be binding
upon  the  Parties,  their  legal   representatives,   successors  in  interest,
assignees,  transferees,  creditors  (including  judgment  creditors),  trustees
(including trustees in bankruptcy),  receivers,  including,  without limitation,
assignees,  transferees,  pledgees,  holders of security  interests in and liens
upon any of such stock, and trustees,  and all persons with notice or knowledge,
or chargeable with notice or knowledge,  of the provisions hereof. This Exchange
Agreement cannot be amended or modified except by a written  agreement  executed
by the Parties. This Exchange Agreement and the rights,  duties, and obligations
hereunder may not be assigned by any Party without the prior written  consent of
the other  Parties;  provided,  however,  that this  Exchange  Agreement  may be
assigned  by  Headwaters  on behalf of itself and Merger Sub to any  directly or
indirectly wholly-owned  subsidiary

                                       25
<PAGE>

of  Headwaters,  provided that  Headwaters  and Merger Sub shall  continue to be
bound by this Exchange Agreement after such assignment.

         12.2 Notices. Any notices or other communications required or permitted
hereunder  shall be in writing  and shall be deemed  sufficiently  given only if
delivered in person or sent by telegram, telecopy, or telex or by first-class or
air mail or by recognized air courier service, postage or other charges prepaid,
addressed as follows:

         If to a  Transferor,  to the  address  listed  on the  signature  pages
hereto.

                  If to HTI:
                           Hydrocarbon Technologies, Inc.
                           1501 New York Avenue
                           Lawrenceville, NJ 08648
                           Attention:  Alfred G. Comolli, President

                  Copy to:
                           Richard J. Pinto
                           Smith, Stratton, Wise, Heher & Brennan
                           600 College Road East
                           Princeton, NJ 08540
                           Facsimile Number:  (609) 987-6651

                  If to Headwaters or Merger Sub:
                           Headwaters Incorporated
                           11778 S. Election Drive
                           Suite 210
                           Draper, UT 84020
                           Attention:  Kirk A. Benson, Chief Executive Officer
                           Facsimile Number:  (801) 984-9410

                  Copy to:
                           Linda C. Williams, Esq.
                           Pillsbury Winthrop LLP
                           50 Fremont Street
                           San Francisco, CA  94105
                           Facsimile Number:  (415) 983-1200

or to such other address as the  addressee  may have  specified in a notice duly
given to the sender as provided  herein.  Such notice or  communication  will be
deemed to have been given as of the date so delivered, telegraphed,  telecopied,
telexed, mailed, or sent by courier.

         12.3  Entire  Agreement.   This  Exchange   Agreement  and  the  Merger
Agreement, including the Exhibits and Schedules attached hereto and thereto, and
the Headwaters  Disclosure  Letter  constitute the entire  understanding  of the
Parties  relating  to the  subject  matter  hereof and  supersede

                                       26
<PAGE>

all prior and  contemporaneous  agreements and  understandings,  whether oral or
written, relating to the subject matter hereof.

         12.4 Dispute  Resolution.  In the event of any dispute relating to this
Exchange Agreement, the parties to the dispute,  including the Representative in
his capacity as Representative, shall first use their reasonable best efforts to
resolve the dispute amicably.  If, after ten (10) days, they have been unable to
do  so,  the  Chief  Executive   Officer  of  Headwaters  shall  meet  with  the
Representative  and the Chief  Executive  Officer of the  Surviving  Corporation
within ten (10) days to attempt to resolve  the  dispute.  If such  dispute  has
still not been resolved after such meeting, the Board of Directors of Headwaters
shall  meet with the  Representative  within ten (10) days to attempt to resolve
the dispute.  Only after such dispute  resolution  procedures have been followed
may any Party (or the  Representative  acting in his capacity of Representative)
initiate litigation.

         12.5 Remedies.  In the event of a breach,  or a threatened or attempted
breach,  of any  provision of this  Exchange  Agreement by any Party,  any other
Party shall, in addition to all other  remedies,  be entitled to (i) a temporary
or permanent injunction against such breach without the necessity of showing any
actual  damages and (ii) a decree for the specific  performance  of the Exchange
Agreement.

         12.6  Adjustments.All  references  to  shares  of HTI  Common  Stock or
Headwaters  Common Stock herein shall be adjusted to reflect fully the effect of
any stock split,  reverse stock split, stock dividend (including any dividend or
distribution  of  securities  convertible  into  Headwaters  Common Stock or HTI
Common  Stock),  reorganization,  recapitalization,  or other like  change  with
respect to Headwaters Common Stock or HTI Common Stock occurring on or after the
date hereof.

         12.7 Waiver.  The waiver by any Party of the breach of any of the terms
and  conditions  of, or any right under,  this Exchange  Agreement  shall not be
deemed to  constitute  the  waiver of any other  breach of the same or any other
term or  condition or of any similar  right.  No such waiver shall be binding or
effective  unless  expressed  in  writing  and signed by the Party  giving  such
waiver.

         12.8  Governing Law. This Exchange  Agreement  shall be governed by and
construed in accordance with the laws of the State of New Jersey.

                                       27
<PAGE>

         IN WITNESS  WHEREOF,  the parties  hereto have  executed  this Exchange
Agreement as of the day and year first above written.

                                    HEADWATERS INCORPORATED

                                    By: /s/ Kirk A. Benson
                                        ---------------------------------------
                                        Kirk A. Benson, Chief Executive Officer

                                    HYDROCARBON TECHNOLOGIES, INC.

                                    By: /s/ Alfred G. Comolli
                                        ---------------------------------------
                                        Alfred G. Comolli, President

                                    HEADWATERS SUB CORPORATION

                                    By: /s/ Kirk A. Benson
                                        -----------------------------
                                    Title: President

                                       28
<PAGE>

                                    "TRANSFERORS"

                                    Signature:

                                    /s/ Alfred G. Comolli

                                    Printed Name:

                                    Alfred G. Comolli

                                    Address:
                                    1128 University Dr.
                                    Yardley, PA
                                    19067

                                    Number of Shares of HTI Common Stock Owned:

                                    319,555

                                    Number of Options to Acquire HTI Common
                                    Stock Owned:

                                    72,000

                                    I represent that I am an "accredited
                                    investor" (see Article III of the Agreement)

                                                  Yes [X]   No [ ]

                                    Date:    5/1/01

                                       29
<PAGE>

                                    "TRANSFERORS"

                                    Signature:

                                    /s/ David C. Tanner

                                    Printed Name:

                                    David C. Tanner

                                    Address:
                                    233 Andover Pl
                                    Robbinsville, NJ
                                    08691

                                    Number of Shares of HTI Common Stock Owned:

                                    145,677

                                    Number of Options to Acquire HTI Common
                                    Stock Owned:

                                    28,500

                                    I represent that I am an "accredited
                                    investor" (see Article III of the Agreement)

                                         Yes  [X]             No [ ]

                                    Date:    5/1/01

                                       30
<PAGE>

                                    "TRANSFERORS"

                                    Signature:

                                    /s/ Lap-Keung (Theo) Lee

                                    Printed Name:

                                    Lap-Keung (Theo) Lee

                                    Address:
                                    12 East Kincaid Dr.
                                    West Windsor, NJ
                                    08550

                                    Number of Shares of HTI Common Stock Owned:

                                    227,879

                                    Number of Options to Acquire HTI Common
                                    Stock Owned:

                                    39,000

                                    I represent that I am an "accredited
                                    investor" (see Article III of the Agreement)

                                             Yes [X]             No [ ]

                                     Date:    May 1, 2001

                                       31
<PAGE>

                                    "TRANSFERORS"

                                    Signature:

                                    /s/ Michael T. Kelley

                                    Printed Name:

                                    Michael T. Kelley

                                    Address:
                                    7800 Foxhound Rd.
                                    McLean, VA
                                    22102-2448

                                    Number of Shares of HTI Common Stock Owned:

                                    87,246

                                    Number of Options to Acquire HTI Common
                                    Stock Owned:

                                    0

                                    I represent that I am an "accredited
                                    investor" (see Article III of the Agreement)

                                    Yes  [X]             No [ ]

                                    Date:    May 1, 2001

                                       32<PAGE>

                                                                     Exhibit 4.1

                                    WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL,
WHICH OPINION AND WHICH COUNSEL SHALL BE REASONABLY SATISFACTORY TO
COOLSAVINGS.COM INC., QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.

                             COOLSAVINGS.COM INC.

                         Common Stock Purchase Warrant

          coolsavings.com inc., a Michigan corporation (the "Company"), hereby
                                                             -------
certifies that, for value received, Landmark Communications, Inc. or its assigns
(the "Holder"), is entitled, subject to the terms set forth below, to purchase
      ------
from the Company, at any time and from time to time during the period beginning
on July 30, 2001 and ending on July 30, 2009 (the "Expiration Date"), in whole
                                                   ---------------
or in part, the Warrant Shares (defined in Section 1.1 below) of fully paid and
non-assessable shares of the Common Stock of the Company at the Purchase Price
(defined in Section 1.1 below). The Purchase Price and the number and character
of such Warrant Shares are subject to the adjustments provided below, and the
term "Common Stock" shall mean, unless the context otherwise requires, the stock
      ------------
or other securities or property at the time deliverable upon the exercise of
this Warrant. This Warrant is herein called the "Warrant."
                                                 -------

          1.   EXERCISE OF WARRANT.

          1.1  The Holder of this Warrant is entitled to purchase at a purchase
price of $0.01 per share ("Purchase Price") 7,818,731 shares (the "Warrant
                           --------------                          -------
Shares") of Common Stock; provided, however, that, upon consummation of the
------                    --------  -------
First Tranche Closing (as defined in that certain Securities Purchase Agreement,
dated as of July 30, 2001, by and among the Holder, Landmark Ventures VI, LLC,
and the Company, such agreement, the "Securities Purchase Agreement"), the
Warrant Shares that the Holder is entitled to purchase under this Warrant shall
be adjusted to equal 10,000,000 shares of Common Stock (the "Base Shares") plus
the PIK Shares (defined below) and the Purchase Price of such Warrant Shares and
PIK Shares shall be increased to $0.50 (and further to $0.75 from and after July
30, 2005); provided, further, that in the event of a termination of the
           --------  -------
Securities Purchase Agreement, the terms of Section 1.6 shall apply.

          1.2  After the First Tranche Closing, in addition to the Base Shares,
the Holder of this Warrant shall be entitled to purchase, at a Purchase Price
per share of $0.50 ($0.75 from
<PAGE>

and after July 30, 2005), two (2) additional shares of Common Stock (adjusted
for dividends, splits, combinations and the like) (the "PIK Shares") for every
dollar of interest accrued, compounded and added after the date of the First
Tranche Closing to the Original Principal Amount (defined below) of the Initial
Loan (defined below) on a quarterly basis. The "Initial Loan" is the "Initial
Loan" defined in and described under that certain Amended and Restated Loan and
Security Agreement dated July 30, 2001 between the Holder and the Company (the
"Loan Agreement"), which is further evidenced by the Senior Secured Note (as
defined in and attached to the Loan Agreement). The "Original Principal Amount"
is the Original Principal Amount of $5,000,000 as defined in the Loan Agreement.
Such PIK Shares are part of the Company's obligation to pay the interest
accruing under the Initial Loan "in kind"; specifically, the Company is
obligated to pay the interest by delivering additional notes and warrants and,
in lieu of delivering separately certificated warrants, the Company has agreed
to add the PIK Shares (as the warrant portion of the "in kind" payment) to the
Base Shares that may be purchased hereunder. The Base Shares and all PIK Shares
are collectively the Warrant Shares hereunder. Within ten (10) days of each
Quarterly Payment Date (as defined in the Loan Agreement) through the Expiration
Date, or as reasonably requested by the Holder, the Company shall issue to the
Holder a certificate executed by the Company's chief financial officer or other
executive officer setting forth the number of PIK Shares as of such date and the
amount of the interest accrued, compounded and added to the Initial Loan.

          1.3  For the purposes hereof, the term "Fully Diluted Basis" shall
                                                  -------------------
mean the outstanding capital stock of the Company on a fully diluted basis
assuming as outstanding (a) any shares reserved for issuance under any option
plans of the Company, provided that such options in respect of such shares have
been issued, (b) shares underlying any warrants including warrants issued in
connection with the issuance of the Series C Convertible Preferred Stock, no par
value per share (but excluding this Warrant), (c) all securities (excluding
shares of the Company's Series B Convertible Preferred Stock (the "Series B
Preferred Stock")) convertible into or exercisable for capital stock of the
Company regardless of the conversion or exercise price, or (d) any capital stock
issued or issuable under any agreement of the Company.

          1.4  Other than in the event of a termination of the Securities
Purchase Agreement (as set forth in Section 1.6 hereto), in the event that the
Warrants issued hereunder at any time prior to the First Tranche Closing equal
or exceed 20% of the Common Stock (or any securities convertible into or
exercisable for Common Stock) or 20% or more of the outstanding voting power of
the Company prior to the date hereof as such terms are defined and referenced in
NASD Rule 4350(i)(1)(D), the number of Warrants issued hereunder shall be
adjusted to be just less than such 20% (for example 19.999%) of such Common
Stock or outstanding voting power of the Company prior to the date hereof.
Furthermore, in the event that the Warrants issued hereunder at any time prior
to the First Tranche Closing or the SPA Termination Date are less than 19.99% of
the Common Stock (or any securities convertible into or exercisable for Common
Stock) or less than 19.99% of the outstanding voting power of the Company prior
to the date hereof as such terms are defined and referenced in NASD Rule
4350(i)(1)(D), the number of Warrants issued hereunder shall be adjusted to
equal at least 19.99% of such Common Stock or outstanding voting power of the
Company at such First Tranche Closing or SPA Termination Date.

                                      -2-
<PAGE>

          1.5  The Holder hereof agrees that it shall not exercise the Warrant
prior to the First Tranche Closing unless (i) the Securities Purchase Agreement
is terminated in any manner whatsoever, (ii) there has been an Event of Default
(as such term is defined under the Loan and Security Agreement dated as of the
date hereof between the parties hereto) under the Loan and Security Agreement or
failure to pay interest in kind (including any Warrant Shares) under the Senior
Secured Note, or (iii) the Board of Directors of the Company fails to call a
meeting of shareholders of the Company or fails to recommend the proposed
transactions as contemplated in the Transaction Documents. In the event the
Holder is entitled to exercise the Warrant pursuant to this Section 1.5, then
Section 1.4 hereto shall be of no further force and effect upon such exercise
and Section 1.6 shall apply.

          1.6  Notwithstanding the foregoing, if the Securities Purchase
Agreement is terminated at any time and in any manner whatsoever, then the
Warrant Shares that the Holder is entitled to purchase under this Warrant shall
be adjusted to equal 19.9% of the outstanding capital stock of the Company, as
calculated on a Fully Diluted Basis (defined above) regardless of NASD Rule
4350(i)(1)(D) as of the date of such termination (the "SPA Termination Date")
and the Purchase Price shall remain $0.01 per share.

          1.7  Until such time as this Warrant is exercised in full or expires,
the Warrant Shares issuable upon exercise and the Purchase Price shall be
subject to the further adjustments set forth below.

          1.8  The purchase rights evidenced by this Warrant shall be exercised
by the Holder surrendering this Warrant, with the form of subscription at the
end hereof duly executed by the Holder, to the Company at its office at 360 N.
Michigan Avenue, 19th Floor, Chicago, IL 60601, accompanied by payment, of an
amount (the "Exercise Payment") equal to the Purchase Price multiplied by the
number of shares being purchased pursuant to such exercise, payable as follows:
(a) by payment to the Company in cash, by certified or official bank check, or
by wire transfer of the Exercise Payment, (b) by offset, at the Holder's
request, of that portion of any promissory note, indebtedness or cash obligation
of the Company to the Holder equal to the Exercise Payment, (c) by surrender to
the Company for cancellation of securities of the Company having a Market Price
(defined below) on the date of exercise equal to the Exercise Payment; or (d) by
a combination of the methods described in clauses (a), (b) and (c) above. For
purposes hereof, the term "Market Price" shall mean, with respect to any day,
the average closing price of a share of Common Stock for the 15 consecutive
trading days preceding such day on the principal national securities exchange on
which the shares of Common Stock or securities are listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the average of the reported bid and asked prices during such 15 trading day
period in the over-the-counter market as furnished by the National Quotation
Bureau, Inc., or, if such firm is not then engaged in the business of reporting
such prices, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by the Company or, if the shares of Common
Stock or securities are not publicly traded, the Market Price for such day shall
be the fair market value thereof determined jointly by the Company and the
holder of this Warrant; provided, however, that if such parties are unable to
                        --------  -------
reach agreement within a reasonable period of time, the Market Price shall be
determined in good faith by the independent investment banking firm selected
jointly by the Company and the holder of this Warrant or, if

                                      -3-
<PAGE>

that selection cannot be made within 15 days, by an independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules. In no event may this Warrant be exercised at any time after the
Expiration Date.

          Notwithstanding any provision herein to the contrary, if the Market
Price of one share of Common Stock is greater than the Purchase Price (at the
date of calculation as set forth below), the Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares of
Common Stock equal to the value (as determined below) of this Warrant or any
portion hereof by the surrender of this Warrant or such portion to the Company,
with the net issue election notice annexed hereto duly executed, at the office
of the Company. Thereupon, the Company shall issue to the Holder such number of
fully paid and nonassessable shares of Common Stock as is computed using the
following formula:

                                  X = Y (A-B)
                                      -------
                                         A

where X = the number of shares of Common Stock to be issued to the Holder.

      Y = the number of shares of Common Stock covered by this Warrant in
          respect of which the net issue election is made pursuant to this
          Section 1.2.

      A = the Market Price of one share of Common Stock, as determined in
          accordance with the provisions of this Section 1.2.

      B = the Purchase Price in effect under this Warrant at the time the net
          issue election is made pursuant to this Section 1.2.

          1.9  Partial Exercise. This Warrant may be exercised for less than the
               ----------------
full number of shares of Common Stock, in which case the number of shares
receivable upon the exercise of this Warrant as a whole, and the sum payable
upon the exercise of this Warrant as a whole, shall be proportionately reduced.
Upon any such partial exercise, the Company at its expense will forthwith issue
to the Holder a new Warrant or Warrants of like tenor calling for the number of
shares of Common Stock as to which rights have not been exercised, such Warrant
or Warrants to be issued in the name of the Holder hereof or his or its nominee
(upon payment by the Holder of any applicable transfer taxes).

          2.   DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and payment of the Purchase
Price, and in any event within ten (10) days thereafter, the Company, at its
expense, will cause to be issued in the name of and delivered to the Holder a
certificate or certificates for the number of fully paid and non-assessable
shares or other securities or property to which the Holder shall be entitled
upon such exercise, plus, in lieu of any fractional share to which the Holder
would otherwise be entitled, cash in an amount determined in accordance with
Paragraph 3.9 hereof. The Company agrees that the shares so purchased shall be
deemed to be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares as aforesaid.

                                      -4-
<PAGE>

          3.   ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to
prevent dilution of the rights granted hereunder, the Purchase Price shall be
subject to adjustment from time to time in accordance with this Paragraph 3.
Upon each adjustment of the Purchase Price pursuant to this Paragraph 3, the
registered Holder of this Warrant shall thereafter be entitled to acquire upon
exercise, at the Purchase Price resulting from such adjustment, the number of
shares of Common Stock obtainable by multiplying the Purchase Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable immediately prior to such adjustment and dividing the product thereof
by the Purchase Price resulting from such adjustment.

          3.1  Adjustment for Issue or Sale of Common Stock at Less than
               ---------------------------------------------------------
Purchase Price. Except as provided in Paragraph 3.2 or 3.5 below, if and
--------------
whenever on or after the date hereof (the "Initial Issuance Date"), the Company
shall issue or sell or shall be deemed to have issued or sold any shares of its
Common Stock (or in case the Company at any time shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or any stock or other securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities")) for a consideration per share less than the Purchase Price in
effect immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale (the "Triggering Transaction"), the Purchase Price shall be
reduced to the price at which the Common Stock, Options or Convertible
Securities were issued or deemed to have been issued in such Triggering
Transaction.

          For purposes of determining the adjusted Purchase Price under this
Paragraph 3.1, the following subsections (1) to (9), inclusive, shall be
applicable:

               (1)  In case the Company at any time shall in any manner grant
          (whether directly or by assumption in a merger or otherwise) any
          rights to subscribe for or to purchase, or any options for the
          purchase of, Common Stock or any stock or other securities convertible
          into or exchangeable for Common Stock (such rights or options being
          herein called "Options" and such convertible or exchangeable stock or
          securities being herein called "Convertible Securities"), whether or
          not such Options or the right to convert or exchange any such
          Convertible Securities are immediately exercisable and the price per
          share for which the Common Stock is issuable upon exercise, conversion
          or exchange (determined by dividing (x) the total amount, if any,
          received or receivable by the Company as consideration for the
          granting of such Options, plus the minimum aggregate amount of
          additional consideration payable to the Company upon the exercise of
          all such Options, plus, in the case of such Options which relate to
          Convertible Securities, the minimum aggregate amount of additional
          consideration, if any, payable upon the issue or sale of such
          Convertible Securities and upon the conversion or exchange thereof, by
          (y) the total maximum number of shares of Common Stock issuable upon
          the exercise of such Options or the conversion or exchange of such
          Convertible Securities) shall be less than the Purchase Price in
          effect immediately prior to the time of the granting of such

                                      -5-
<PAGE>

          Option, then the total maximum amount of Common Stock issuable upon
          the exercise of such Options, or, in the case of Options for
          Convertible Securities, upon the conversion or exchange of such
          Convertible Securities, shall (as of the date of granting of such
          Options) be deemed to be outstanding and to have been issued and sold
          by the Company for such price per share. No adjustment of the Purchase
          Price shall be made upon the actual issue of such shares of Common
          Stock or such Convertible Securities upon the exercise of such
          Options, except as otherwise provided in subparagraph (3) below.

               (2)  In case the Company at any time shall in any manner issue
          (whether directly or by assumption in a merger or otherwise) or sell
          any Convertible Securities, whether or not the rights to exchange or
          convert thereunder are immediately exercisable, and the price per
          share for which Common Stock is issuable upon such conversion or
          exchange (determined by dividing (x) the total amount received or
          receivable by the Company as consideration for the issue or sale of
          such Convertible Securities, plus the minimum aggregate amount of
          additional consideration, if any, payable to the Company upon the
          conversion or exchange thereof, by (y) the total maximum number of
          shares of Common Stock issuable upon the conversion or exchange of all
          such Convertible Securities) shall be less than the Purchase Price in
          effect immediately prior to the time of such issue or sale, then the
          total maximum number of shares of Common Stock issuable upon
          conversion or exchange of all such Convertible Securities shall (as of
          the date of the issue or sale of such Convertible Securities) be
          deemed to be outstanding and to have been issued and sold by the
          Company for such price per share. No adjustment of the Purchase Price
          shall be made upon the actual issue of such Common Stock upon exercise
          of the rights to exchange or convert under such Convertible
          Securities, except as otherwise provided in subparagraph (3) below.

               (3)  If the purchase price provided for in any Option referred to
          in subparagraph (1) or the rate at which any Convertible Securities
          referred to in subparagraphs (1) or (2) are convertible into or
          exchangeable for Common Stock, shall be reduced at any time under or
          by reason of provisions with respect thereto designed to protect
          against dilution, then in case of the delivery of Common Stock upon
          the exercise of any such Option or upon conversion or exchange of any
          such Convertible Security, the Purchase Price then in effect hereunder
          shall forthwith be adjusted to such respective amount as would have
          been obtained had such Option or Convertible Security never been
          issued as to such Common Stock and had adjustments been made upon the
          issuance of the shares of Common Stock delivered as aforesaid, but
          only if as a result of such adjustment the Purchase Price then in
          effect hereunder is hereby reduced.

               (4)  On the expiration or earlier termination of any Option or
          the termination of any right to convert or exchange any Convertible
          Securities, the Purchase Price then in effect hereunder shall
          forthwith be increased to the Purchase Price which would have been in
          effect at the time of such expiration or

                                      -6-
<PAGE>

          termination had such Option or Convertible Securities, to the extent
          outstanding immediately prior to such expiration or termination, never
          been issued.

               (5)  In case any Options shall be issued in connection with the
          issue or sale of other securities of the Company, together comprising
          one integral transaction in which no specific consideration is
          allocated to such Options by the parties thereto, such Options shall
          be deemed to have been issued without consideration unless otherwise
          recorded on the Company's financial statements in accordance with
          generally accepted accounting principles.

               (6)  In case any shares of Common Stock, Options or Convertible
          Securities shall be issued or sold or deemed to have been issued or
          sold for cash, the consideration received therefor shall be deemed to
          be the amount received by the Company therefor. In case any shares of
          Common Stock, Options or Convertible Securities shall be issued or
          sold for a consideration other than cash, the amount of the
          consideration other than cash received by the Company shall be the
          fair value of such consideration as determined in good faith by the
          Board of Directors of the Company. In case any shares of Common Stock,
          Options or Convertible Securities shall be issued in connection with
          any merger in which the Company is the surviving corporation, the
          amount of consideration therefor shall be deemed to be the fair value
          of such portion of the net assets and business of the non-surviving
          corporation as shall be attributed by the Board of Directors of the
          Company in good faith to such Common Stock, Options or Convertible
          Securities, as the case may be.

               (7)  The number of shares of Common Stock outstanding at any
          given time shall not include shares owned, held by or for the account
          of the Company or cancelled, and the disposition of any shares so
          owned or held shall be considered an issue or sale of Common Stock for
          the purpose of this Paragraph 3.1.

               (8)  In case the Company shall declare a dividend or make any
          other distribution upon the stock of the Company payable in Options or
          Convertible Securities, then in such case any Options or Convertible
          Securities, as the case may be, issuable in payment of such dividend
          or distribution shall be deemed to have been issued or sold without
          consideration.

               (9)  For purposes of this Paragraph 3.1, in case the Company
          shall take a record of the holders of its Common Stock for the purpose
          of entitling them (x) to receive a dividend or other distribution
          payable in Common Stock, Options or in Convertible Securities, or (y)
          to subscribe for or purchase Common Stock, Options or Convertible
          Securities, then such record date shall be deemed to be the date of
          the issue or sale of the shares of Common Stock deemed to have been
          issued or sold upon the declaration of such dividend or the making of
          such other distribution or the date of the granting of such right or
          subscription or purchase, as the case may be.

                                      -7-
<PAGE>

          3.2  Dividends Not Paid Out of Earnings or Earned Surplus. In the
               ----------------------------------------------------
event the Company shall declare a dividend upon the Common Stock (other than a
dividend payable in Common Stock) payable otherwise than out of earnings or
earned surplus, determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then, as soon as possible after the exercise of this Warrant, the
Company shall pay to the person exercising such Warrant an amount equal to the
aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Stock which would have been issued at
the time of such earlier exercise and all other securities which would have been
issued with respect to such Common Stock by reason of stock splits, stock
dividends, mergers or reorganizations, or for any other reason). For the
purposes of this Paragraph 3.2, a dividend other than in cash shall be
considered payable out of earnings or earned surplus only to the extent that
such earnings or earned surplus are charged an amount equal to the fair value of
such dividend as determined in good faith by the Board of Directors of the
Company.

          3.3  Subdivisions and Combinations. In case the Company shall at any
               -----------------------------
time (i) subdivide the outstanding Common Stock or (ii) issue a stock dividend
on its outstanding Common Stock, the Purchase Price in effect immediately prior
to such subdivision or dividend shall be proportionately reduced by the same
ratio as the subdivision or dividend. In case the Company shall at any time
combine its outstanding Common Stock, the Purchase Price in effect immediately
prior to such combination shall be proportionately increased by the same ratio
as the combination.

          3.4  Reorganization, Reclassification, Consolidation, Merger or Sale
               ---------------------------------------------------------------
of Assets. If any capital reorganization or reclassification of the capital
---------
stock of the Company, or consolidation or merger of the Company with or into
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or other property with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the Holder shall have the right to
acquire and receive, upon exercise of this Warrant, such shares of stock,
securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect to
or in exchange for such number of outstanding shares of the Common Stock as
would have been received upon exercise of this Warrant at the Purchase Price
then in effect. The Company will not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument mailed or
delivered to the Holder at the last address of the Holder appearing on the books
of the Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the Holder
may be entitled to purchase. If a purchase, tender or exchange offer is made to
and accepted by the holders of more than 50% of the outstanding shares of Common
Stock of the Company, the Company shall not effect any consolidation, merger or
sale with the person having made such offer or with any Affiliate of such
person, unless prior to the consummation of such consolidation, merger or sale
the Holder shall have been given a reasonable opportunity to then elect to
receive upon the exercise of this Warrant either the stock,

                                      -8-
<PAGE>

securities or assets then issuable with respect to the Common Stock or the
stock, securities or assets, or the equivalent, issued to previous holders of
the Common Stock in accordance with such offer. For purposes hereof the term
"Affiliate" with respect to any given person shall mean any person controlling,
controlled by or under common control with the given person.

          3.5  No Adjustment for Exercise of Certain Options, Warrants, Etc. The
               ------------------------------------------------------------
provisions of this Section 3 shall not apply to any Common Stock issued,
issuable or deemed outstanding under subparagraphs 3.1(1) to (8) inclusive in
respect of: (i) options issued under any Approved Plan as such term is defined
in the Company's Articles of Incorporation (as amended) or Certificate of
Incorporation, as applicable, or if not so defined therein as defined in the
Securities Purchase Agreement (provided that when determining whether there are
any options remaining for issuance under an Approved Plan, all shares issued and
outstanding under such Approved Plan regardless of exercise price must be
considered in such calculation), (ii) Options, Convertible Securities and
conversion rights in existence on the date hereof, (iii) conversion of the
Series B Preferred Stock, the Series C Preferred Stock or this Warrant, (iv) any
issuance of additional shares of Series B Preferred Stock as a dividend, and (v)
any issuance of additional shares of Series B Preferred Stock in accordance with
Section 2.4 of the Securities Purchase Agreement.

          3.6  Notices of Record Date, Etc.  In the event that:
               ---------------------------

               (1)  the Company shall declare any cash dividend upon its Common
          Stock, or

               (2)  the Company shall declare any dividend upon its Common Stock
          payable in stock or make any special dividend or other distribution to
          the holders of its Common Stock, or

               (3)  the Company shall offer for subscription pro rata to the
          holders of its Common Stock any additional shares of stock of any
          class or other rights, or

               (4)  there shall be any capital reorganization or
          reclassification of the capital stock of the Company, including any
          subdivision or combination of its outstanding shares of Common Stock,
          or consolidation or merger of the Company with, or sale of all or
          substantially all of its assets to, another corporation, or

               (5)  there shall be a voluntary or involuntary dissolution,
          liquidation or winding up of the Company;

then, in connection with such event, the Company shall give to the Holder:

               (ii) at least twenty (20) days' prior written notice of the date
     on which the books of the Company shall close or a record shall be taken
     for such dividend, distribution or subscription rights or for determining
     rights to vote in respect of any such reorganization, reclassification,
     consolidation, merger, sale, dissolution, liquidation or winding up; and

                                      -9-
<PAGE>

               (iii)  in the case of any such reorganization, reclassification,
     consolidation, merger, sale, dissolution, liquidation or winding up, at
     least twenty (20) days' prior written notice of the date when the same
     shall take place. Such notice in accordance with the foregoing clause (i)
     shall also specify, in the case of any such dividend, distribution or
     subscription rights, the date on which the holders of Common Stock shall be
     entitled thereto, and such notice in accordance with the foregoing clause
     (ii) shall also specify the date on which the holders of Common Stock shall
     be entitled to exchange their Common Stock for securities or other property
     deliverable upon such reorganization, reclassification consolidation,
     merger, sale, dissolution, liquidation or winding up, as the case may be.
     Each such written notice shall be given by first class mail, postage
     prepaid, addressed to the Holder at the address of the Holder as shown on
     the books of the Company.

          3.7  Grant, Issue or Sale of Options, Convertible Securities, or
               -----------------------------------------------------------
Rights. If at any time or from time to time on or after the date of issuance
hereof, the Company shall grant, issue or sell any Options, Convertible
Securities or rights to purchase property (the "Purchase Rights") pro rata to
                                                ---------------
the record holders of any class of Common Stock and such grants, issuances or
sales do not result in an adjustment of the Purchase Price under Paragraph 3.1
hereof, then the Holder shall be entitled to acquire (within thirty (30) days
after the receipt by such holder of the notice concerning Purchase Rights to
which such holder shall be entitled under Paragraph 3.6) and upon the terms
applicable to such Purchase Rights either:

               (i)  the aggregate Purchase Rights which the Holder could have
     acquired if it had held the number of shares of Common Stock acquirable
     upon exercise of this Warrant immediately before the grant, issuance or
     sale of such Purchase Rights; provided that if any Purchase Rights were
     distributed to holders of Common Stock without the payment of additional
     consideration by such holders, corresponding Purchase Rights shall be
     distributed to the exercising Holder as soon as possible after such
     exercise and it shall not be necessary for the Holder specifically to
     request delivery of such rights; or

               (ii) in the event that any such Purchase Rights shall have
     expired or shall expire prior to the end of said thirty (30) day period,
     the number of shares of Common Stock or the amount of property which the
     Holder could have acquired upon such exercise at the time or times at which
     the Company granted, issued or sold such expired Purchase Rights.

          3.8  Adjustment by Board of Directors.  If any event occurs as to
               --------------------------------
which, in the opinion of the Board of Directors of the Company, the provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the rights of the Holder in accordance with the essential
intent and principles of such provisions, then the Board of Directors in good
faith shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights as aforesaid, but in no event shall any adjustment have the effect of
increasing the Purchase Price as otherwise determined pursuant to any of the
provisions of this Section 3 except in the case of a

                                      -10-
<PAGE>

combination of shares of a type contemplated in Paragraph 3.3 and then in no
event to an amount larger than the Purchase Price as adjusted pursuant to
Paragraph 3.3.

          3.9  Fractional Shares.  The Company shall not issue fractions of
               -----------------
shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof.
If any fraction of a share of Common Stock would, except for the provisions of
this Section 3.9, be issuable upon exercise of this Warrant, the Company shall
in lieu thereof pay to the person entitled thereto an amount in cash equal to
such fraction, calculated to the nearest one-hundredth (1/100) of a share,
multiplied by the Market Price for the Common Stock, determined as of the date
of exercise; provided, however, that if the Market Price is to be determined by
the Company and the Holder and the parties are unable to reach agreement after a
reasonable period of time, the Market Price shall be determined by the Company's
Board of Directors in good faith rather than by an independent investment
banking firm.

          3.10 Officers' Statement as to Adjustments.  Whenever the Purchase
               -------------------------------------
Price shall be adjusted as provided in Section 3 hereof, the Company shall
forthwith file at each office designated for the exercise of this Warrant, a
statement, signed by the Chairman of the Board, the President, any Vice
President or Treasurer of the Company, showing in reasonable detail the facts
requiring such adjustment and the Purchase Price that will be effective after
such adjustment. The Company shall also cause a notice setting forth any such
adjustments to be sent by mail, first class, postage prepaid, to the record
Holder at his or its address appearing on the stock register. If such notice
relates to an adjustment resulting from an event referred to in Paragraph 3.6,
such notice shall be included as part of the notice required to be mailed and
published under the provisions of Paragraph 3.6 hereof.

          4.   NO DILUTION OR IMPAIRMENT.  The Company will not, by amendment of
its articles of incorporation or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company will not increase the par
value of any shares of stock receivable upon the exercise of this Warrant above
the amount payable therefor upon such exercise, and at all times will take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable stock upon the exercise
of this Warrant.

          5.   RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
Company shall at all times reserve and keep available out of its authorized but
unissued stock, solely for the issuance and delivery upon the exercise of this
Warrant and other similar Warrants, such number of its duly authorized shares of
Common Stock as from time to time shall be issuable upon the exercise of this
Warrant and all other similar Warrants at the time outstanding.

          6.   REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this

                                      -11-
<PAGE>

Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of
like tenor.

          7.   REMEDIES.  The Company stipulates that the remedies at law of the
Holder in the event of any default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will not be
adequate, and that the same may be specifically enforced.

          8.   NEGOTIABILITY, ETC.  This Warrant is issued upon the following
terms, to all of which each taker or owner hereof consents and agrees:

          (a)  Subject to the legend appearing on the first page hereof and
               applicable federal securities laws, title to this Warrant may be
               transferred by endorsement (by the Holder executing the form of
               assignment at the end hereof including guaranty of signature) and
               delivery in the same manner as in the case of a negotiable
               instrument transferable by endorsement and delivery.

          (b)  Any person in possession of this Warrant properly endorsed is
               authorized to represent himself as absolute owner hereof and is
               granted power to transfer absolute title hereto by endorsement
               and delivery hereof to a bona fide purchaser hereof for value;
               each prior taker or owner waives and renounces all of his
               equities or rights in this Warrant in favor of every such bona
               fide purchaser, and every such bona fide purchaser shall acquire
               title hereto and to all rights represented hereby.

          (c)  Until this Warrant is transferred on the books of the Company,
               the Company may treat the registered Holder as the absolute owner
               hereof for all purposes without being affected by any notice to
               the contrary.

          (d)  Prior to the exercise of this Warrant, the Holder shall not be
               entitled to any rights of a shareholder of the Company with
               respect to shares for which this Warrant shall be exercisable,
               including, without limitation, the right to vote, to receive
               dividends or other distributions or to exercise any preemptive
               rights, and shall not be entitled to receive any notice of any
               proceedings of the Company, except as provided herein.

          (e)  The Company shall not be required to pay any Federal or state
               transfer tax or charge that may be payable in respect of any
               transfer involved in the transfer or delivery of this Warrant or
               the issuance or conversion or delivery of certificates for Common
               Stock in a name other than that of the registered Holder or to
               issue or deliver any certificates for Common Stock upon the
               exercise of this Warrant until any and all such taxes and charges

                                      -12-
<PAGE>

               shall have been paid by the Holder or until it has been
               established to the Company's satisfaction that no such tax or
               charge is due.

          9.   SUBDIVISION OF RIGHTS.  This Warrant (as well as any new warrants
issued pursuant to the provisions of this paragraph) is exchangeable, upon the
surrender hereof by the Holder, at the principal office of the Company for any
number of new warrants of like tenor and date representing in the aggregate the
right to subscribe for and purchase the number of shares of Common Stock which
may be subscribed for and purchased hereunder.

          10.  MAILING OF NOTICES, ETC.  All notices and other communications
from the Company to the Holder shall be mailed by first-class certified mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing.

          11.  HEADINGS, ETC.  The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.

          12.  CHANGE, WAIVER, ETC.  Neither this Warrant nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought which, in the case of holders
of the Warrant, shall be evidenced by the approval of a majority of the total
Warrant Shares issued or issuable under this Warrant.

          13.  GOVERNING LAW.  THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                                   COOLSAVINGS.COM INC.

                                   By /s/ Matthew Moog
                                     ------------------------------

Dated: July 30, 2001
       -------------

Attest:

       John Adams
------------------------------

                                      -13-
<PAGE>

                 [To be signed only upon exercise of Warrant]

                                EXERCISE NOTICE
                                ---------------

coolsavings.com inc.
360 N. Michigan Avenue, 19/th/ Floor
Chicago, IL 60601
Attention: Chief Financial Officer

The undersigned hereby elects to purchase, pursuant to the provisions of the
Common Stock Purchase Warrant to purchase shares of common stock, no par value
per share, issued by coolsavings.com inc. (the "Company") and held by the
                                                -------
undersigned, the original of which is attached hereto, and (check the applicable
box):

[_]  Tenders herewith payment of the Exercise Payment (as defined in the
     Warrant) in full in the form of cash, certified check, official bank check
     or wire transfer or check in the amount of $__________________ for
     _______________ such securities.

[_]  Confirms that payment of the Exercise Payment (as defined in the Warrant)
     in full by means of a wire transfer in the amount of $__________________
     for _______________ such securities has been made to the Company.

[_]  Elects to surrender to the Company for cancellation securities of the
     Company having Market Price (as defined in the Warrant) on the date hereof
     equal to the Exercise Payment.

                                      -14-
<PAGE>

     The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.

        The undersigned requests that the certificates for such shares be issued
in the name of, and be delivered to, ___________________________,whose address
is ______________________________.

Dated:

_________________________________

                                              __________________________________

(Signature must conform in all respects to name of Holder as specified on the
face of the Warrant)

                                              __________________________________
                                                            Address

                                      -15-
<PAGE>

                 [To be signed only upon transfer of Warrant]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________ the right represented by the within Warrant to
purchase __________________ shares of Common Stock of coolsavings.com inc. to
which the within Warrant relates, and appoints ____________________ attorney to
transfer said right on the books of coolsavings.com inc., with full power of
substitution in the premises.

Dated:

_________________________

                                                  ___________________________

                                     (Signature must conform in all respects to
name of Holder as specified on the face of the Warrant)

                                                  ___________________________
                                                            Address

In the presence of:

___________________________

Transferee hereby represents and warrants to coolsavings.com inc. that
Transferee is an "accredited investor" as defined in Rule 501(a) of the Rules
and Regulations promulgated under the Securities Act of 1933, as amended.

                                                  ---------------------------
                                                  Transferee

                                                  ---------------------------
                                                  Dated

                                      -16-
<PAGE>

           [To be signed only on net issue exercise of the Warrant]

                              NET ISSUE ELECTION
                              ------------------

coolsavings.com inc.
360 N. Michigan Avenue, 19/th/ Floor
Chicago, IL 60601
Attention: Chief Financial Officer

The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant with respect to ____________ shares of Common Stock of
coolsavings.com inc. pursuant to the net issuance provisions set forth in
Section 2.1 of this Warrant and requests that the certificates for the number of
shares of Common Stock issuance pursuant to said Section 2.1 after application
of the net issuance formula to such ______________ shares to be issued in the
name of, and delivered to _____________________________________________________,
federal taxpayer identification number ______________________, whose address is

_______________________________________________________________________________.

Dated:______________________

                              __________________________________________________
                              (Signature must conform to the name of holder as
                              specified on the face of the Warrant)

                              __________________________________________________

                              __________________________________________________
                              (Address)

                                      -17-

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