Form 10-Q FUEL TECH, INC. For: Mar 31

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May 11, 2015 5:02 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33059

________________________________

FUEL TECH, INC.

(Exact name of registrant as specified in its charter)

________________________________



Delaware		20-5657551
(State or other jurisdiction of incorporation of organization)		(I.R.S. Employer Identification Number)

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, IL 60555-1617

630-845-4500

www.ftek.com

(Address and telephone number of principal executive offices)

________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On May 11, 2015 there were outstanding 23,065,162 shares of Common Stock, par value $0.01 per share, of the registrant.

FUEL TECH, INC.

Form 10-Q for the three-month period ended March 31, 2015

INDEX



		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	1

	Condensed Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2015 and 2014	2

	Condensed Consolidated Statements of Comprehensive Loss for the Three-Month Periods Ended March 31, 2015 and 2014	3

	Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2015 and 2014	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16

Item 4.	Controls and Procedures	16

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 6.	Exhibits	18

SIGNATURES		19

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FUEL TECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)



	March 31, 2015			December 31, 2014

Assets
Current assets:
Cash and cash equivalents	$	18,310		$	18,637
Marketable securities	36			36
Accounts receivable, net of allowance for doubtful accounts of $1,927 and $1,922, respectively	26,982			31,910
Inventories	1,645			1,111
Prepaid expenses and other current assets	4,130			4,094
Prepaid income taxes	1,534			597
Deferred income taxes	2,007			1,953
Total current assets	54,644			58,338
Property and equipment, net of accumulated depreciation of $21,899 and $21,925, respectively	13,239			13,527
Goodwill	2,116			2,116
Other intangible assets, net of accumulated amortization of $6,045 and $5,802, respectively	9,960			10,464
Deferred income taxes	5,140			5,649
Other assets	1,364			1,377
Total assets	$	86,463		$	91,471
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt	$	818		$	1,625
Accounts payable	6,363			7,310
Accrued liabilities:
Employee compensation	1,876			2,007
Other accrued liabilities	6,698			7,708
Total current liabilities	15,755			18,650
Other liabilities	487			520
Total liabilities	16,242			19,170
Commitments and Contingencies
Shareholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized, 23,287,540 and 23,027,704 shares issued, and 23,065,162, and 22,860,398 shares outstanding, respectively	233			230
Additional paid-in capital	134,890			134,985
Accumulated deficit	(63,406		)	(61,752		)
Accumulated other comprehensive loss	(609		)	(448		)
Nil coupon perpetual loan notes	76			76
Treasury stock, 222,378 and 167,306 shares, respectively, at cost	(963		)	(790		)
Total shareholders’ equity	70,221			72,301
Total liabilities and shareholders’ equity	$	86,463		$	91,471

See notes to condensed consolidated financial statements.

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per-share data)



	Three Months Ended March 31,
	2015			2014
Revenues	$	15,103		$	18,661
Costs and expenses:
Cost of sales	8,437			10,810
Selling, general and administrative	8,203			8,744
Research and development	872			244
	17,512			19,798
Operating loss	(2,409		)	(1,137		)
Interest expense	(27		)	(29		)
Interest income	7			11
Other expense	(96		)	(30		)
Loss before income taxes	(2,525		)	(1,185		)
Income tax benefit	871			99
Net loss	$	(1,654	)	$	(1,086	)
Net loss per common share:
Basic	$	(0.07	)	$	(0.05	)
Diluted	$	(0.07	)	$	(0.05	)
Weighted-average number of common shares outstanding:
Basic	22,927,000			22,641,000
Diluted	22,927,000			22,641,000

See notes to condensed consolidated financial statements.

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)



	Three Months Ended March 31,
	2015			2014
Net loss	$	(1,654	)	$	(1,086	)
Other comprehensive loss:
Foreign currency translation adjustments	(161		)	(509		)
Unrealized gains from marketable securities, net of tax	—			28
Total other comprehensive loss	(161		)	(481		)
Comprehensive loss	$	(1,815	)	$	(1,567	)

See notes to condensed consolidated financial statements.

FUEL TECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



	Three Months Ended March 31,
	2015			2014
Operating Activities
Net loss	$	(1,654	)	$	(1,086	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	520			493
Amortization	543			196
Gain on disposal of equipment	(25		)	—
Allowance for doubtful accounts	10			85
Deferred income taxes	(226		)	305
Stock-based compensation	272			424
Changes in operating assets and liabilities:
Accounts receivable	4,882			1,059
Inventories	(536		)	(474		)
Prepaid expenses, other current assets and other non-current assets	(35		)	(446		)
Accounts payable	(937		)	(409		)
Accrued liabilities and other non-current liabilities	(1,699		)	(1,988		)
Net cash provided by (used in) operating activities	1,115			(1,841		)
Investing Activities
Purchases of property, equipment and patents	(276		)	(322		)
Proceeds from the sale of equipment	25			—
Net cash used in investing activities	(251		)	(322		)
Financing Activities
Payments on short-term borrowings	(815		)	—
Proceeds from exercises of stock options	—			160
Excess tax benefit from exercises of stock options	—			12
Treasury shares withheld	(173		)	(261		)
Net cash used in financing activities	(988		)	(89		)
Effect of exchange rate fluctuations on cash	(203		)	(568		)
Net decrease in cash and cash equivalents	(327		)	(2,820		)
Cash and cash equivalents at beginning of period	18,637			27,738
Cash and cash equivalents at end of period	$	18,310		$	24,918

See notes to condensed consolidated financial statements.

FUEL TECH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(Unaudited)

(in thousands, except share and per-share data)

Note A: Nature of Business

Fuel Tech, Inc. (Fuel Tech or the Company or “we”, “us”, or “our”) is a fully integrated company that uses a suite of advanced technologies to provide boiler optimization, efficiency improvement and air pollution reduction and control solutions to utility and industrial customers worldwide. Originally incorporated in 1987 under the laws of the Netherlands Antilles as Fuel-Tech N.V., Fuel Tech became domesticated in the United States on September 30, 2006, and continues as a Delaware corporation with its corporate headquarters at 27601 Bella Vista Parkway, Warrenville, Illinois, 60555-1617. Fuel Tech maintains an Internet website at www.ftek.com. Fuel Tech’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as amended (Exchange Act), are made available through our website as soon as reasonably practical after electronically filed or furnished to the Securities and Exchange Commission. Also available on Fuel Tech’s website are the Company’s Corporate Governance Guidelines and Code of Ethics and Business Conduct, as well as the charters of the Audit, Compensation, and Nominating and Corporate Governance committees of the Board of Directors. All of these documents are available in print without charge to stockholders who request them. Information on our website is not incorporated into this report.

Fuel Tech’s special focus is the worldwide marketing of its nitrogen oxide (NOx) reduction and FUEL CHEM^® processes. The Air Pollution Control (APC) technology segment reduces NOx emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion sources by utilizing combustion optimization techniques and Low NOx and Ultra Low NOx Burners; Over-Fire Air systems, NOxOUT^® and HERT™ High Energy Reagent Technology™ SNCR systems; systems that incorporate ASCR™ (Advanced Selective Catalytic Reduction) technologies including NOxOUT-CASCADE^®, ULTRA™ and NOxOUT-SCR^® processes, Ammonia Injection Grid (AIG) and Graduated Straightening Grid (GSG™), as well as Electrostatic Precipitator rebuilds and Flue Gas Conditioning systems to control particulate emissions. The FUEL CHEM^® technology segment improves the efficiency, reliability and environmental status of combustion units by controlling slagging, fouling and corrosion, as well as the formation of sulfur trioxide, ammonium bisulfate, particulate matter (PM2.5), carbon dioxide, NOx and unburned carbon in fly ash through the addition of chemicals into the fuel or via TIFI^® Targeted In-Furnace Injection™ programs. Fuel Tech has other technologies, both commercially available and in the development stage, all of which are related to APC and FUEL CHEM technology segments or are similar in their technological base. We have expended significant resources in the research and development of new technologies in building our proprietary portfolio of products and services. Fuel Tech’s business is materially dependent on the continued existence and enforcement of worldwide air quality regulations.

Note B: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the balance sheet and results of operations for the periods covered have been included and all significant intercompany transactions and balances have been eliminated. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year.

The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission.

Note C: Revenue Recognition Policy

Revenues from the sales of chemical products are recorded when title transfers, either at the point of shipment or at the point of destination, depending on the contract with the customer.

Fuel Tech uses the percentage of completion method of accounting for equipment construction and license contracts that are sold within the Air Pollution Control technology segment. Under the percentage of completion method, revenues are recognized as work is performed based on the relationship between actual construction costs incurred and total estimated costs at completion. Construction costs include all direct costs such as materials, labor, and subcontracting costs, and indirect costs allocable to the particular contract such as indirect labor, tools and equipment, and supplies. Revisions in completion estimates and contract values

are made in the period in which the facts giving rise to the revisions become known and can influence the timing of when revenues are recognized under the percentage of completion method of accounting. Such revisions have historically not had a material effect on the amount of revenue recognized. The completed contract method is used for certain contracts that are not long-term in nature or when reasonably dependable estimates of the percentage of completion cannot be made. When the completed contract method is used, revenue and costs are deferred until the contract is substantially complete, which usually occurs upon customer acceptance of the installed product. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. As of March 31, 2015 and December 31, 2014, the Company had one contract in progress that was identified as a loss contract and a provision for loss in the amount of $5 and $4, respectively, was recorded in other accrued liabilities on the consolidated balance sheets.

Fuel Tech’s APC contracts are typically eight to sixteen months in length. A typical contract will have three or four critical operational measurements that, when achieved, serve as the basis for us to invoice the customer via progress billings. At a minimum, these measurements will include the generation of engineering drawings, the shipment of equipment and the completion of a system performance test.

As part of most of its contractual APC project agreements, Fuel Tech will agree to customer-specific acceptance criteria that relate to the operational performance of the system that is being sold. These criteria are determined based on mathematical modeling that is performed by Fuel Tech personnel, which is based on operational inputs that are provided by the customer. The customer will warrant that these operational inputs are accurate as they are specified in the binding contractual agreement. Further, the customer is solely responsible for the accuracy of the operating condition information; typically all performance guarantees and equipment warranties granted by us are voidable if the operating condition information is inaccurate or is not met.

Accounts receivable includes unbilled receivables, representing revenues recognized in excess of billings on uncompleted contracts under the percentage of completion method of accounting. At March 31, 2015 and December 31, 2014, unbilled receivables were approximately $9,836 and $9,904, respectively, and are included in accounts receivable on the consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted contracts were $2,792 and $2,994, at March 31, 2015 and December 31, 2014, respectively. Such amounts are included in other accrued liabilities on the consolidated balance sheets.

Fuel Tech has installed over 1,000 units with APC technology and normally provides performance guarantees to our customers based on the operating conditions for the project. As part of the project implementation process, we perform system start-up and optimization services that effectively serve as a test of actual project performance. We believe that this test, combined with the accuracy of the modeling that is performed, enables revenue to be recognized prior to the receipt of formal customer acceptance.

Note D: Cost of Sales

Cost of sales includes all internal and external engineering costs, equipment and chemical charges, inbound and outbound freight expenses, internal and site transfer costs, installation charges, purchasing and receiving costs, inspection costs, warehousing costs, project personnel travel expenses and other direct and indirect expenses specifically identified as project- or product line-related, as appropriate (e.g., test equipment depreciation and certain insurance expenses). Certain depreciation and amortization expenses related to tangible and intangible assets, respectively, are also allocated to cost of sales.

Note E: Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily include the following categories except where an allocation to the cost of sales line item is warranted due to the project- or product-line nature of a portion of the expense category: salaries and wages, employee benefits, non-project travel, insurance, legal, rent, accounting and auditing, recruiting, telephony, employee training, Board of Directors’ fees, auto rental, office supplies, dues and subscriptions, utilities, real estate taxes, commissions and bonuses, marketing materials, postage and business taxes. Departments comprising the selling, general and administrative line item primarily include the functions of executive management, finance and accounting, investor relations, regulatory affairs, marketing, business development, information technology, human resources, sales, legal and general administration.

Note F: Available-for-Sale Marketable Securities

At the time of purchase, marketable securities are classified as available-for-sale as management has the intent and ability to hold such securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell available-for-sale securities would be based on various factors, including, but not limited to asset/liability management strategies, changes in interest rates or prepayment risks, and liquidity needs. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in equity as a separate component of other comprehensive income (OCI). Our marketable securities consist of a single equity investment with a fair value of $36 and $36 and no cost basis at March 31, 2015 and December 31, 2014, respectively.

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in other income/(expense) in the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification

method. On a quarterly basis, we make an assessment to determine if there have been any events or circumstances to indicate whether a security with an unrealized loss is impaired on an other-than-temporary (OTTI) basis. This determination requires significant judgment. OTTI is considered to have occurred (1) if management intends to sell the security; (2) if it is more likely than not we will be required to sell the security before recovery of its amortized cost basis; or (3)the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis. The credit-related OTTI, represented by the expected loss in principal, is recognized in non-interest income, while noncredit-related OTTI is recognized in OCI. For securities which we do expect to sell, all OTTI is recognized in earnings. Presentation of OTTI is made in the income statement on a gross basis with a reduction for the amount of OTTI recognized in OCI. Once an other-than-temporary impairment is recorded, when future cash flows can be reasonably estimated, future cash flows are re-allocated between interest and principal cash flows to provide for a level-yield on the security. We have not experienced any other-than-temporary impairments during the periods ended March 31, 2015 and 2014.

Note G: Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive (loss) income by component were as follows:



	Three Months Ended
	March 31,
	2015			2014
Foreign currency translation
Balance at beginning of period	$	(471	)	$	18
Other comprehensive loss:
Foreign currency translation adjustments (1)	(161		)	(509		)
Balance at end of period	$	(632	)	$	(491	)
Available-for-sale marketable securities
Balance at beginning of period	$	23		$	19
Other comprehensive income:
Net unrealized holding gain (2)	—			46
Deferred income taxes (2)	—			(18		)
Total other comprehensive income	—			28
Balance at end of period	$	23		$	47
Total accumulated other comprehensive loss	$	(609	)	$	(444	)


(1)	In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings.


(2)	In all periods presented, there were no realized holding gains or losses and therefore no amounts were reclassified to earnings.

Note H: Treasury Stock

Common stock held in treasury totaled 222,378 and 167,306 with a cost of $963 and $790 at March 31, 2015 and December 31, 2014, respectively. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that have vested since 2012.

Note I: Earnings per Share Data

Basic earnings per share excludes the dilutive effects of stock options, restricted stock units (RSUs), and the nil coupon non-redeemable convertible unsecured loan notes. Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is anti-dilutive. Out-of-money stock options are excluded from diluted earnings per share because they are anti-dilutive. For the three months ended March 31, 2015 and 2014, basic earnings per share is equal to diluted earnings per share because all outstanding stock awards and convertible loan notes are considered anti-dilutive during periods of net loss. The following table sets forth the weighted-average shares used in calculating the earnings per share for the three month periods ended March 31, 2015 and 2014.



	Three Months Ended March 31,
	2015	2014
Basic weighted-average shares	22,927,000	22,641,000
Conversion of unsecured loan notes	—	—
Unexercised options and unvested RSUs	—	—
Diluted weighted-average shares	22,927,000	22,641,000

Fuel Tech had 1,851,000 and 2,458,000 weighted average equity awards outstanding at March 31, 2015 and 2014, respectively, that were not dilutive for the purposes of inclusion in the calculation of diluted earnings per share but could potentially become dilutive in future periods.

Note J: Stock-Based Compensation

Fuel Tech’s 2014 Long-term Incentive Plan (2014 Plan) was adopted in May 2014, and replaced our prior incentive plan which was first approved by our stockholders in 1993 and subsequently amended and approved by our stockholders in 2004 (FTIP). No further grants will be made from the FTIP. The 2014 Plan and FTIP are referred to collectively as the Incentive Plans.

The 2014 Plan permits grants of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards (in the form of equity or cash bonuses), dividend equivalents on full value awards and other awards (which may be based in whole or in part on the value of our common stock or other property). Directors, salaried employees, and consultants of Fuel Tech and its commonly-controlled affiliates are eligible to participate in the 2014 Plan. The number of shares originally reserved for share-based awards under the 2014 Plan equaled 2,000,000 shares, less the number of share-based awards made under the FTIP between December 31, 2013 and the effective date of the 2014 Plan. As of March 31, 2015, Fuel Tech had 1,234,389 shares available for share-based awards under the 2014 Plan.

Stock-based compensation is included in selling, general, and administrative costs in our Consolidated Statements of Operations. The components of stock-based compensation for the three month periods ended March 31, 2015 and 2014 were as follows:



	Three Months Ended March 31,
	2015			2014
Stock options and restricted stock units	$	272		$	424
Tax benefit of stock-based compensation expense	(103		)	(163		)
After-tax effect of stock-based compensation	$	169		$	261

Stock Options

Stock options granted to employees under the Incentive Plans have a 10-year life and they vest as follows: 50% after the second anniversary of the award date, 25% after the third anniversary, and the final 25% after the fourth anniversary of the award date. Fuel Tech calculates stock compensation expense for employee option awards based on the grant date fair value of the award, less expected annual forfeitures, and recognizes expense on a straight-line basis over the four-year service period of the award. Stock options granted to members of our board of directors vest immediately. Stock compensation for these awards is based on the grant date fair value of the award and is recognized in expense immediately.

Fuel Tech uses the Black-Scholes option pricing model to estimate the grant date fair value of employee stock options. The principal variable assumptions utilized in valuing options and the methodology for estimating such model inputs include: (1) risk-free interest rate – an estimate based on the yield of zero–coupon treasury securities with a maturity equal to the expected life of the option; (2) expected volatility – an estimate based on the historical volatility of Fuel Tech’s Common Stock for a period equal to the expected life of the option; and (3) expected life of the option – an estimate based on historical experience including the effect of employee terminations.

Stock option activity for Fuel Tech’s Incentive Plans for the three months ended March 31, 2015 was as follows:



	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding on January 1, 2015	1,546,500		$	11.62
Granted	—		—
Exercised	—		—
Expired or forfeited	(5,000	)	6.51
Outstanding on March 31, 2015	1,541,500		$	11.63	3.23	$	—
Exercisable on March 31, 2015	1,541,500		$	11.63	3.23	$	—

As of March 31, 2015, there was no unrecognized compensation cost related to non-vested stock options granted under the Incentive Plans.

Restricted Stock Units

Restricted stock units (RSUs) granted to employees vest over time based on continued service (typically vesting over a three year period in equal installments). Such time-vested RSUs are valued at fair value based on the closing price on the date of grant. Compensation cost, adjusted for estimated forfeitures, is amortized on a straight-line basis over the requisite service period.

In addition to the time vested RSUs described above, commencing in 2011, on an annual basis the Company entered into performance-based RSU agreements (the Agreements) with each of the Company’s President/Chief Executive Officer, Treasurer/Chief Financial Officer, Executive Vice President of Marketing & Sales, and Executive Vice President and Chief Operating Officer. Commencing in 2013, the Company’s Senior Vice President, General Counsel, and Secretary also entered into an agreement. The Agreements provide each participating executive the opportunity to earn three types of awards with each award type specifying a targeted number of RSUs that may be granted to each executive based on either the individual performance of the executive or the Company’s relative performance compared to a peer group, as determined by the award type. The Compensation Committee of our Board of Directors (the Committee) determines the extent to which, if any, RSUs will be granted based on the achievement of the applicable performance criteria specified in the Agreement. This determination will be made following the completion of the applicable performance period (each a Determination Date). Such performance based awards include the following:

•

The first type of award is based on individual performance during the respective calendar year as determined by the Committee based on performance criteria specified in the Agreement. These awards will vest over a three year period beginning on the Determination Date. We estimated the fair value of these performance-based RSU awards on the date of the Agreement using the trading price of the Company’s stock and our estimate of the probability that the specified performance criteria will be met. The fair value measurement and probability estimate will be re-measured each reporting date until the Determination Date, at which time the final award amount will be known. For these job performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award.

•

The second type of RSU award contains a targeted number of RSUs to be granted based on the Company’s revenue growth relative to a specified peer group during a period of two calendar years. These awards vest 67% on the second anniversary of the Agreement date and 33% on the third anniversary of the Agreement date. We estimated the fair value of these performance-based RSU awards on the Agreement date using the trading price of the Company’s stock on the date of determination and our estimate of the probability that the specified performance criteria will be met. For these revenue growth performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award.

•

The third type of RSU award contains a targeted number of RSUs to be granted based on the total shareholder return (TSR) of the Company’s common stock relative to a specified peer group during a period of two calendar years. These awards vest 67% on the second anniversary of the Agreement date and 33% on the third anniversary of the Agreement date. We estimated the fair value of these market-based RSU awards on the Agreement date using a Monte Carlo valuation methodology and amortize the fair value over the requisite service period for each separately vesting tranche of the award. The principal variable assumptions utilized in valuing these RSUs under this valuation methodology include the risk-free interest rate, stock volatility, and correlations between our stock price and the stock prices of a peer group of companies.

At March 31, 2015, there is $3,018 of unrecognized compensation costs related to restricted stock unit awards to be recognized over a weighted average period of 2.33 years.

A summary of restricted stock unit activity for the three months ended March 31, 2015 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested restricted stock units at January 1, 2015	977,069		$	5.36
Granted	336,000		3.37
Forfeited	(180,000	)	4.67
Vested	(220,470	)	5.06
Unvested restricted stock units at March 31, 2015	912,599		$	4.84

Deferred Directors Fees

In addition to the Incentive Plans, Fuel Tech has a Deferred Compensation Plans for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech Common Stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards. In the three-month periods ended March 31, 2015 and 2014, Fuel Tech recorded no stock-based compensation expense under the Deferred Plan.

Note K: Debt

On June 30, 2013, Fuel Tech amended its existing revolving credit facility (the Facility) with JPMorgan Chase Bank, N.A (JPM Chase) to extend the maturity date through June 30, 2015. The Company intends to renew this credit facility upon its expiration. The total borrowing base of the facility is $15,000 and contains a provision to increase the facility up to a total principal amount of $25,000 upon approval from JPM Chase. The Facility is unsecured, bears interest at a rate of LIBOR plus a spread range of 250 basis points to 375 basis points, as determined by a formula related to the Company’s leverage ratio, and has the Company’s Italian subsidiary, Fuel Tech S.r.l., as a guarantor. Fuel Tech can use this Facility for cash advances and standby letters of credit. As of March 31, 2015 and December 31, 2014, there were no outstanding borrowings on the credit facility.

The Facility contains several debt covenants with which the Company must comply on a quarterly or annual basis, including a maximum Funded Debt to EBITDA Ratio (or “Leverage Ratio”, as defined in the Facility) of 2.0:1.0 based on the four trailing quarterly periods. Maximum funded debt is defined as all borrowed funds, outstanding standby letters of credit and bank guarantees. EBITDA includes after tax earnings with add backs for interest expense, income taxes, depreciation and amortization, and stock-based compensation expenses. This covenant was waived by our bank through the maturity date of the credit facility. In addition, the Facility covenants include an annual capital expenditure limit of $10,000 and a minimum tangible net worth of $50,000.

At March 31, 2015 and December 31, 2014, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $6,969 and $8,284, respectively, on its domestic credit facility in connection with contracts in process. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments. At March 31, 2015 and December 31, 2014, there were no cash borrowings under the domestic revolving credit facility and approximately $8,031 and $6,716, respectively, was available for future borrowings. The Company pays a commitment fee of 0.25% per year on the unused portion of the revolving credit facility.

On June 27, 2014, Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), a wholly-owned subsidiary of Fuel Tech, entered into a new revolving credit facility (the China Facility) agreement with JPM Chase for RMB 35 million (approximately $5,729), which expires on June 26, 2015. The Company intends to renew this credit facility upon its expiration. This credit facility replaced the previous RMB 35 million facility that expired on June 27, 2014. The facility is unsecured, bears interest at a rate of 125% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by Fuel Tech. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As of March 31, 2015 and December 31, 2014, Beijing Fuel Tech has borrowings outstanding in the amount of $818 and $1,625, respectively. These borrowings were subject to interest rates of approximately 7.0% at March 31, 2015 and December 31, 2014, respectively.

At March 31, 2015 and December 31, 2014, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $197 and $336, respectively, on its Beijing Fuel Tech revolving credit facility in connection with contracts in process. At March 31, 2015 and December 31, 2014, approximately $4,714 and $3,727 was available for future borrowings.

In the event of default on either the domestic facility or the China facility, the cross default feature in each allows the lending bank to accelerate the payments of any amounts outstanding and may, under certain circumstances, allow the bank to cancel the facility. If the Company were unable to obtain a waiver for a breach of covenant and the bank accelerated the payment of any outstanding amounts, such acceleration may cause the Company’s cash position to deteriorate or, if cash on hand were insufficient to satisfy the payment due, may require the Company to obtain alternate financing to satisfy the accelerated payment.

Interest payments in the amount of $27 and $29 were made during the three-month periods ended March 31, 2015 and 2014.

Note L: Business Segment and Geographic Disclosures

Fuel Tech segregates its financial results into two reportable segments representing two broad technology segments as follows:

•

The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion sources. These include Low and Ultra Low NOx Burners (LNB and ULNB), Over-Fire Air (OFA) systems, NOxOUT^® and HERT™ Selective Non-Catalytic Reduction (SNCR) systems, and Advanced Selective Catalytic Reduction (ASCR™) systems. The ASCR system includes ULNB, OFA, and SNCR components, along with a downsized SCR catalyst, Ammonia Injection Grid (AIG), and Graduated Straightening Grid (GSG™) systems to provide high NOx reductions at significantly lower capital and operating costs than conventional SCR systems. The NOxOUT CASCADE^® and NOxOUT-SCR^® processes are basic types of ASCR systems, using just SNCR and SCR catalyst components. ULTRA™ technology creates ammonia at a plant site using safe urea for use with any SCR application. Also included in this technology segment are Electrostatic Precipitator (ESP) rebuilds and retrofits and Flue Gas Conditioning systems, which are chemical injection systems used to enhance ESP and fabric filter performance in controlling particulate emissions.

•

The FUEL CHEM^® technology segment, which uses chemical processes in combination with advanced Computational Fluid Dynamics (CFD) and Chemical Kinetics Modeling (CKM) boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in furnaces and boilers through the addition of chemicals into the furnace using TIFI^® Targeted In-Furnace Injection™ technology.

The “Other” classification includes those profit and loss items not allocated by Fuel Tech to each reportable segment. Further, there are no intersegment sales that require elimination.

Fuel Tech evaluates performance and allocates resources based on reviewing gross margin by reportable segment. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (Note 1 in our annual report on Form 10-K). Fuel Tech does not review assets by reportable segment, but rather, in aggregate for Fuel Tech as a whole.

Information about reporting segment net sales and gross margin are provided below:



Three months ended March 31, 2015	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	6,857		$	8,246		$	—		$	15,103
Cost of sales	(4,321		)	(4,116		)	—			(8,437		)
Gross margin	2,536			4,130			—			6,666
Selling, general and administrative	—			—			(8,203		)	(8,203		)
Research and development	—			—			(872		)	(872		)
Operating income (loss)	$	2,536		$	4,130		$	(9,075	)	$	(2,409	)



Three months ended March 31, 2014	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	10,734		$	7,927		$	—		$	18,661
Cost of sales	(7,030		)	(3,780		)	—			(10,810		)
Gross margin	3,704			4,147			—			7,851
Selling, general and administrative	—			—			(8,744		)	(8,744		)
Research and development	—			—			(244		)	(244		)
Operating income (loss)	$	3,704		$	4,147		$	(8,988	)	$	(1,137	)

Information concerning Fuel Tech’s operations by geographic area is provided below. Revenues are attributed to countries based on the location of the customer. Assets are those directly associated with operations of the geographic area.



	Three Months Ended March 31,
	2015		2014
Revenues:
United States	$	12,575	$	9,229
Foreign	2,528		9,432
	$	15,103	$	18,661



	March 31, 2015		December 31, 2014
Assets:
United States	$	59,176	$	64,324
Foreign	27,287		27,147
	$	86,463	$	91,471

Note M: Contingencies

Fuel Tech issues a standard product warranty with the sale of its products to customers. Our recognition of warranty liability is based primarily on analyses of warranty claims experienced in the preceding years as the nature of our historical product sales for which we offer a warranty are substantially unchanged. This approach provides an aggregate warranty accrual that is historically aligned with actual warranty claims experienced.

Changes in the warranty liability for the three months March 31, 2015, and 2014, are summarized below:



	Three Months Ended March 31,
	2015			2014
Aggregate product warranty liability at beginning of period	$	268		$	596
Net aggregate expense (benefit) related to product warranties	2			(50		)
Aggregate reductions for payments	(2		)	(14		)
Aggregate product warranty liability at end of period	$	268		$	532

Note N: Income Taxes

The Company’s effective tax rate of 35% and 8% for the three-month periods ended March 31, 2015 and 2014, respectively, differs from the statutory federal tax rate of 34% due primarily to state taxes, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, non-deductible commissions, and non-deductible meals and entertainment expenses.

Fuel Tech had unrecognized tax benefits as of March 31, 2015 and December 31, 2014 in the amount of $117, respectively, all of which, if ultimately recognized, will reduce Fuel Tech's annual effective tax rate.

Note O: Goodwill and Other Intangibles

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Fuel Tech has two reporting units which are reported in the FUEL CHEM^® technology segment and the APC technology segment. At both March 31, 2015 and December 31, 2014 our entire goodwill balance of $2,116 was allocated to the FUEL CHEM technology segment.

Goodwill is allocated to each of our reporting units after considering the nature of the net assets giving rise to the goodwill and how each reporting unit would enjoy the benefits and synergies of the net assets acquired. There were no indications of goodwill impairment in the three months ended March 31, 2015 and 2014.

Fuel Tech reviews other intangible assets, which include customer lists and relationships, covenants not to compete, patent assets, tradenames, and acquired technologies, for impairment on a recurring basis or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated. There were no indications of intangible asset impairment in the three-month periods ended March 31, 2015 and 2014.

Note P: Fair Value

The Company applies authoritative accounting guidance for fair value measurements of financial and nonfinancial assets and liabilities. This guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis and clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:


•	Level 1 – Observable inputs to the valuation methodology such as quoted prices in active markets for identical assets or liabilities


•	Level 2 – Inputs to the valuation methodology including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets of liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means


•	Level 3 – Significant unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own estimates and assumptions or those expected to be used by market participants. Generally, these fair value measures are model-based valuation techniques such as discounted cash flows, option pricing models, and other commonly used valuation techniques

The fair value of our marketable securities was $36 and $36 at March 31, 2015 and December 31, 2014, respectively, and was determined using quoted prices in active markets for identical assets (Level 1 fair value measurements). Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. We had no assets or liabilities that were valued using level 2 or level 3 inputs and therefore there were no transfers between levels of the fair value hierarchy during the three-month periods ended March 31, 2015 and 2014.

The carrying amount of our short-term debt and revolving line of credit approximates fair value due to its short-term nature and because the amounts outstanding accrue interest at variable market-based rates.

FUEL TECH, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Revenues for the three-months ended March 31, 2015 and 2014 were $15,103 and $18,661,respectively, representing a current year decrease of $3,558 or 19%.

The Air Pollution Control (APC) technology segment generated revenues of $6,857 for the three-months ending March 31, 2015, a decrease of $3,877 or 36% from the prior year amount of $10,734. The decline in APC revenue was principally related to a year-over-year decrease of $3.4 million from a large international burner project.

Consolidated APC backlog at March 31, 2015 was $16,033 versus backlog at December 31, 2014 of $17,965. Our current backlog consists of US domestic projects totaling $10,362 and international projects totaling $5,671.

The FUEL CHEM^® technology segment generated revenues of $8,246 for the three-months ended March 31, 2015, representing an increase of $319 or 4% from the prior year amount of $7,927. This segment continues to be affected by the soft electric demand market and low natural gas prices, which leads to fuel switching, unscheduled outages, and combustion units operating at less than capacity.

Consolidated gross margin percentage for the three-months ended March 31, 2015 was 44%, up 2% from the prior year percentage of 42%. The gross margin percentage for the APC technology segment for the current quarter was 37%, up 2% from the prior year percentage of 35%. For the FUEL CHEM technology segment, the gross margin percentage for the current quarter decreased slightly to 50% from 52% in the prior year.

Selling, general and administrative expenses (SG&A) for the three months ended March 31, 2015 was $8,203, which represents a decrease of $541 from the prior year amount of $8,744. This change resulted from a decrease in employee related costs including stock-based compensation of $80, administrative costs associated with our foreign operations of $312, travel expenses of $205, and professional and consulting fees of $135, offset by an increase in marketing costs of $136. SG&A as a percentage of revenues increased to 54% in the current year from 47% in the prior year due to the decline in current year revenue.

Research and development expenses for the three months ended March 31, 2015 was $872, representing an increase of $628 over the prior year amount of $244. We plan to continue funding research projects in pursuit of new commercial applications for technologies outside of our traditional markets and in the development and analysis of new technologies that could represent incremental market opportunities.

Interest expense for the three months ended March 31, 2015 and 2014 were $27 and $29, respectively. This interest expense relates to borrowings made under the Beijing Fuel Tech credit facility.

Income tax benefit for the three months ended ended March 31, 2015 and 2014 were $871 and $99, respectively. The Company is projecting a consolidated effective tax rate of 35% for 2015 which is slightly higher than the federal income tax rate of 34% due to the effect of state income taxes, federal income tax credits and other permanent items including losses in foreign jurisdictions for which we do not anticipate a tax benefit.

Liquidity and Sources of Capital

At March 31, 2015, Fuel Tech had cash and cash equivalents and short-term investments on hand of $18,346 and working capital of $38,889 versus $18,673 and $39,688 at December 31, 2014, respectively.

Operating activities provided cash of $1,115 during the three months ended March 31, 2015. This increase in cash from operations was due to a decrease in accounts receivable of $4,882 and non-cash expenses of $1,094, offset by cash used as a result of our net

loss of $1,654, an increase in inventories and prepaid expenses of $571 and a decrease in the outstanding accounts payable and accrued liabilities balances of $2,636.

Investing activities used cash of $251 during the three months ended March 31, 2015 and related to net cash used for purchases of equipment and patents of $276 offset by proceeds from the sales of equipment of $25.

Financing activities used cash of $988 during the three months ended March 31, 2015 as a result of $173 in cash used for the acquisition of common shares held in treasury that were withheld for taxes due by employees upon lapsing of restricted stock units and $815 for payments made on short-term borrowings.

On June 30, 2013, Fuel Tech amended its existing revolving credit facility (the Facility) with JPMorgan Chase Bank, N.A (JPM Chase) to extend the maturity date through June 30, 2015. The total borrowing base of the facility is $15,000 and contains a provision to increase the facility up to a total principal amount of $25,000 upon approval from JPM Chase. The Facility is unsecured, bears interest at a rate of LIBOR plus a spread range of 250 basis points to 375 basis points, as determined by a formula related to the Company’s leverage ratio, and has the Company’s Italian subsidiary, Fuel Tech S.r.l., as a guarantor. Fuel Tech can use this Facility for cash advances and standby letters of credit. As of March 31, 2015 and December 31, 2014, there were no outstanding borrowings on the credit facility.

On June 27, 2014, Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), a wholly-owned subsidiary of Fuel Tech, entered into a new revolving credit facility (the China Facility) agreement with JPM Chase for RMB 35 million (approximately $5,729), which expires on June 26, 2015. This credit facility replaced the previous RMB 35 million facility that expired on June 27, 2014. The facility is unsecured, bears interest at a rate of 125% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by Fuel Tech. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As of March 31, 2015 and December 31, 2014, Beijing Fuel Tech has borrowings outstanding in the amount of $818 and $1,625, respectively. These borrowings were subject to interest rates of approximately 7.0% at March 31, 2015 and December 31, 2014, respectively.

Contingencies and Contractual Obligations

Fuel Tech issues a standard product warranty with the sale of its products to customers as discussed in Note M. The warranty liability balance during the three-months ended March 31, 2015 remained constant at $268 compared to the prior year.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect Fuel Tech’s current expectations regarding future growth, results of operations, cash flows, performance and

business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. Fuel Tech has tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “plan,” “expect,” “estimate,” “intend,” “will,” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to Fuel Tech and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2014 in Item 1A under the caption “Risk Factors,” which could cause Fuel Tech’s actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Fuel Tech undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in Fuel Tech’s filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk Management

Fuel Tech’s earnings and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. We do not enter into foreign currency forward contracts nor into foreign currency option contracts to manage this risk due to the immaterial nature of the transactions involved.

Fuel Tech is also exposed to changes in interest rates primarily due to its debt facilities (refer to Note K to the consolidated financial statements). A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not have a materially adverse effect on interest expense during the upcoming year ended December 31, 2015.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Fuel Tech maintains disclosure controls and procedures and internal controls designed to ensure (a) that information required to be disclosed in Fuel Tech’s filings under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (b) that such information is accumulated and communicated to management, including the principal executive and financial officer, as appropriate to allow timely decisions regarding required disclosure. Fuel Tech’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d -15(e) of the Exchange Act, as of the end of the period covered by this report, and they have concluded that these controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There has been no change in the Company's internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time involved in litigation incidental to our business. We are not currently involved in any litigation in which we believe an adverse outcome would have a material effect on our business, financial conditions, results of operations, or prospects.

Item 1A. Risk Factors

The risk factors included in our Annual Report on Form 10-K for fiscal year ended December 31, 2014 have not materially changed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 6. Exhibits



a.	Exhibits (all filed herewith)

	10.1	2015 Executive Officer Incentive Plan of Fuel Tech, Inc.

	10.2	Fuel Tech, Inc. Form of 2014 Long-Term Incentive Plan Stock Option Agreement

	10.3	Fuel Tech, Inc. Form of 2015 Executive Performance RSU Award Agreement

	31.1	Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002

	31.2	Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002

	32	Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002

	101.1	INSXBRL Instance Document

	101.2	SCHXBRL Taxonomy Extension Schema Document

	101.3	CALXBRL Taxonomy Extension Calculation Linkbase Document

	101.4	DEFXBRL Taxonomy Extension Definition Linkbase Document

	101.5	LABXBRL Taxonomy Extension Label Linkbase Document

	101.6	PREXBRL Taxonomy Extension Prevention Linkbase Document

FUEL TECH, INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: May 11, 2015	By:	/s/ Vincent J. Arnone
		Vincent J. Arnone
		President and Chief Executive Officer
		(Principal Executive Officer)



Date: May 11, 2015	By:	/s/ David S. Collins
		David S. Collins
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

FUEL TECH, INC.

2015 Executive Officer Incentive Plan

1.THE PLAN

1.1 Objectives. The Executive Officer Incentive Plan (“EOIP”) of Fuel Tech, Inc., a Delaware corporation, (the “Company”), is designed to provide each Participant with financial incentives based upon Company financial results, measured in terms of Adjusted EBITDA, Revenues and APC Bookings. The EOIP is an annual bonus plan based on the Company’s fiscal performance in 2015. Capitalized terms not otherwise defined shall have the meanings set forth in Section 4 below.

1.2 Plan Supersedes All Prior Short-Term Incentive Compensation Programs for Participants. This EOIP supersedes and replaces all prior cash incentive compensation programs for all Participants.

2. ELIGIBILITY

2.1 Participants. The Company’s Executive Chairman; Chief Executive Officer; Chief Financial Officer; Senior Vice President, Fuel Conversion Marketing; and Senior Vice President and General Counsel and shall each be a Participant in the EOIP. The Committee, in its business discretion, may subjectively decide to designate additional full-time senior management employees of the Company to be Participants in the EOIP after consideration of the recommendations of the Company’s Chief Executive Officer. The addition of new full-time senior management employees to the EOIP would require modification to the EOIP’s formulaic funding or payout mechanics, subject to approval by the Committee.

Participants must be employed on the last day of a fiscal year (December 31) in order to be eligible for a payout under the EOIP based on that fiscal year’s performance. No amounts will be deemed earned or payable under the EOIP by any Participant whose employment with the Company ends on or before the last day of the fiscal year. A Participant deemed to be eligible for a payout in accordance with the provisions of the EOIP for a given fiscal year, need not be employed on the day of a bonus payout under this EOIP for such fiscal year in order to be eligible for the payout.

2.2 Involuntary Termination of Employment. Notwithstanding the preceding paragraph, if, during a fiscal year in which the EOIP is in effect, a Participant’s employment with the Company is involuntarily terminated: (a) not for cause by the Company, or (b) on account of the Participant’s death, or (c) on account of the Participant’s disability (as that term is defined below), then to the extent and at the time the Company determines there shall be a payout for that fiscal year under the EOIP, the affected Participant shall be eligible for a pro rata EOIP payment (or, in the case of death, to that employee’s estate) in accordance with the applicable calculations of Section 3, “EOIP Payouts” and subject to all the other provisions of the EOIP; provided, however, that only the normal employee wages paid to the affected employee (as determined by the Company in its sole discretion and excluding bonuses, allowances, paid leave, vacation or severance payments) through that Participant’s separation date from the Company shall be used in such pro rata allocations.

Any funds not paid out to a Participant under the EOIP, whether due to voluntary termination of employment, termination of employment for cause or otherwise, will automatically revert back to the Company.


3.	EOIP Payouts

3.1 Incentive Pool. EOIP payouts are based on the Company’s performance for three financial metrics – Adjusted EBITDA, Revenues and APC Bookings. An “Incentive Pool” may or may not be created dependent on the Company’s financial performance pertaining to all or some of those metrics during the fiscal year. If the Incentive Pool is created, each Participant is then awarded that Participant’s designated portion of the Incentive Pool on or before March 31, 2016. The methodology for calculating EOIP payouts to Participants is more fully described below.

3.2 Minimum Adjusted EBITDA Threshold. No amounts shall be payable under this EOIP for any fiscal year unless the Company has achieved the established minimum threshold of Adjusted EBITDA for such fiscal year. Accordingly, if the Company’s financial performance for the fiscal year falls below the established minimum threshold of Adjusted EBITDA, there is no payout under the EOIP of any kind, regardless of the annual Revenue or annual APC Bookings amounts achieved.

3.3 Funding and Payout.

3.3.1 A percentage of Adjusted EBITDA is set aside in an Incentive Pool with respect to each fiscal year to provide for bonus payments under this EOIP based on performance in the following three categories: (i) Adjusted EBITDA, (ii) Revenue and (iii) APC Bookings. The percentage of Adjusted EBITDA that is set aside based on the Company’s actual level attained in each of these three categories shall be determined by the Committee after consideration of the recommendations of the Company’s Chief Executive Officer.

3.3.2 Once the Company’s minimum threshold of Adjusted EBITDA is met, the percentage of Adjusted EBITDA set aside in the Incentive Pool rises pro rata incrementally based on actual Company performance in each of the Adjusted EBITDA, Revenues, and APC Bookings financial metrics subject to an overall Incentive Pool funding percentage upper limit cap, all as shown in the chart below. The payout formula for a Participant is shown in the chart below.

(Amounts shown in thousands)



Executive Officer Incentive Plan Mechanics
	Minimums		Funding Percentage		Incremental Value	Incremental Percentage		Percentage Cap
Adjusted EBITDA, as defined		$9,000	1.00	%	400	0.100	%	2.00	%
Revenue		$85,000	0.50	%	2,500	0.050	%	1.00	%
APC Bookings		$43,500	0.50	%	2,500	0.050	%	1.00	%
			2.00	%				4.00	%



Executive Officer Plan Incentive Participation % Summary
Title	Percentage of Pool
Executive Chairman	18.0	%
Chief Executive Officer	34.0	%
Chief Financial Officer	18.0	%
SVP, Fuel Conversion Marketing	12.0	%
SVP, General Counsel & Secretary	18.0%
	100.0	%


4.	DEFINITIONS

“Adjusted EBITDA” – means generally earnings before interest expense, taxes, depreciation and amortization, profit sharing plan contributions, stock compensation, fuel conversion business development initiative expenses up to the then current 2015 approved budgetary amount but in no event more than $2.5 million, incentive pay (excluding sales commissions) and other unusual or non-cash charges, but shall be as determined by the Company, in its sole discretion, with the assistance of its accountants. In calculating Adjusted EBITDA, the Company shall exclude the effects of any acquisition or divestiture undertaken by the Company for the fiscal year in which such event occurs.

“APC Bookings” – means generally to revenue (a) to which the Company has a legally binding, contractual right pursuant to a Sales Contract signed after December 31, 2014, and (b) which involves the sale of equipment or services associated with the Company’s APC product line, all as determined by the Company, in its sole discretion. For purposes of clarity, it is understood that APC Bookings shall not include revenue (i) for equipment or services included in the scope of work of contracts executed and entered into prior to January 1, 2015 and restated in newly executed contracts; (ii) revenues relating to work for which authorization to proceed from the customer is required but has not been obtained in writing; or (iii) revenues relating to any equipment or services the delivery of which has been cancelled by the customer.

“Committee” – means the Compensation Committee of the Company’s Board of Directors or such other committee as may from time to time succeed or perform the functions of that Committee.

"Disability” – means that a Participant, after exhausting any applicable leave available under the Company's policies, is unable because of physical or mental condition to perform the essential functions of such Participant's position, with or without a reasonable accommodation.

“Revenue” – means the Company’s net sales, as determined by the Company in its sole discretion.

“Sales Contract” – means a comprehensive set of executed, legally binding documents between the Company and a customer, in form and substance acceptable to the Company.


5.	OTHER CONDITIONS

5.1 No Alienation of Awards. Payouts under this EOIP may not be assigned or alienated, except that payouts earned and payable may be assigned under the laws of descent and distribution of the Participant’s domicile.

5.2 No Right of Employment. Neither the EOIP nor any action taken under the EOIP shall be construed, expressly or by implication, as either giving to any Participant the right to be retained in the employ of the Company or any affiliate, or altering or limiting the employment-at-will relationship between the Company and any Participant.

5.3 Taxes, Withholding. The Company or any affiliate shall have the right to deduct from any payout under the EOIP any applicable federal, state or local taxes or other amounts required by applicable law, rule, or regulation to be withheld with respect to such payment.

5.4 Code Section 409A. The EOIP is intended to be exempt from or comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

5.5 Plan Administration; Effectiveness for any Fiscal Year. The EOIP shall be administered by or under the authority of the Committee which shall have the full discretionary power to administer and interpret this EOIP and to establish rules for its administration.

5.6 Reservation of Rights; Governing Law; Contract Disclaimer. The Company reserves the right to amend or cancel the EOIP in whole or in part at any time without notice. There can be no guaranty that the EOIP will be in effect in any subsequent fiscal year. The Company also reserves the right to decide all questions and issues arising under the EOIP and its decisions are final. The EOIP shall be construed in accordance with and governed by the laws of the State of Illinois. The EOIP is a statement of the Company’s intentions and does not constitute a guarantee that any particular EOIP payment amount will be paid. It does not create a contractual relationship or any contractually enforceable rights between the Company or its wholly owned subsidiaries and the Participant.

2015 Executive Officer Incentive Plan

Final – March 26, 2015 1

FUEL TECH, INC.

2014 LONG-TERM INCENTIVE PLAN

EMPLOYEE NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

EMPLOYEE NON-QUALIFIED STOCK OPTION AWARD AGREEMENT dated as of ___________, 20__ (the “Grant Date”) between Fuel Tech, Inc., a Delaware corporation (the “Company”) and [Name] (the “Participant”). Capitalized terms not defined herein shall have the meanings set forth in the Plan.

WHEREAS, the Company desires to afford to the Participant an opportunity to purchase Shares pursuant to the grant of a Non-Qualified Stock Option Award under the Company’s 2014 Long-Term Incentive Plan (as may be amended, modified or restated from time to time, the “Plan”); and

WHEREAS, the Participant desires to obtain such opportunity.

NOW THEREFORE, the parties agree, as follows:

1.Option Grant. The Company grants to the Participant as of the Grant Date the right to purchase [NUMBER] (NUMBER) Shares at the exercise price per share of U.S.$___ (this “Option”). This Option and any Shares acquired through the exercise of this Option are subject, in all respects, to the terms and conditions of the Plan and to the following terms and conditions.

2. Vesting. This Option shall only be first exercisable (“vest”), in whole or in part, with respect to the Shares optioned, as to 50%, 75% and 100% of such shares, on the second, third and fourth anniversaries, respectively, of the Grant Date.

3. Term and Termination.

(a) The term of this Option shall be a period commencing on the Grant Date and ending on the tenth anniversary thereof (“Expiration Date”). Upon the termination of the Participant’s Continuous Service on account of:

(i) reasons other than Normal Retirement, death, Disability and Cause, such portion of this Option that has not then vested shall terminate immediately but such portion of this Option that has then vested shall continue and become non-exercisable immediately upon the date which is thirty (30) days after the date of such termination of the Participant’s Continuous Service;

(ii) death, Disability or Normal Retirement, such portion of this Option that has not then vested shall terminate immediately but such portion of this Option that has then vested may be exercised by the Participant or, pursuant to the Plan, the Participant’s beneficiary, at any time during the period ending on the earlier of (x) the Expiration Date (provided that this Option (or such portion thereof) would have been able to have been exercised according to its terms absent such death, Disability or Normal Retirement) or (y) the fifth anniversary of such death, or termination of Continuous Service due to Disability or Normal Retirement; or

(iii) Cause, in which case the entire Option granted hereunder shall terminate and be immediately non-exercisable.

(b) Notwithstanding the foregoing, where termination of the Participant’s Continuous Service shall not have been for Cause, of which the Committee shall be the sole judge, the Committee may in its sole discretion permit all or a portion of this Option to be exercised by the Participant at any time during the period ending not later than the Expiration Date as the Committee shall agree, provided all or such portion of this Option would have been able to have been exercised according to its terms absent termination.

(c) “Normal Retirement” shall mean a termination of Continuous Service due to the Participant’s resignation on or after attaining age sixty-five (65) or such earlier age as to which the Committee shall consent.

4. Method of Exercise. This Option may be exercised only by one or more notices from time to time in writing of the Participant’s intent to exercise this Option, or a portion thereof, delivered to the Equity Administration Department of the Company, accompanied by the Participant’s check or a bank check in the amount of the exercise price, or by delivery to the Company by the Participant of Shares previously owned equal in value to the exercise price as of the date of exercise, or by a request in the Participant’s notice of exercise that the Participant desires a “Net Issue” exercise of this Option. “Net Issue” means delivery to the Participant in complete satisfaction of the exercise, that number of Shares which shall be the number exercised less a number equal in value to the exercise price as of the date of exercise. Value for purposes of exercise by delivery of previously owned Shares or by a Net Issue exercise request shall be determined in the same manner as the determination of value under the Plan for the grant of Options.

5. Withholding Taxes. At the time of exercise of this Option and as a condition to the exercise of this Option, the Participant shall deliver to the Company, if required by the Company, a check payable to the Company equal, in the sole opinion of the Company, to the applicable National, State or Provincial and local income or other taxes and other pay-roll related items legally required to be withheld or paid by reason of such exercise. This Section 5 shall not limit the terms and conditions set forth in Section 16 of the Plan.

6. Notices. Notices given pursuant to this Agreement shall be in writing and shall be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery that provides a written confirmation of delivery. Notice to the Company shall be directed to:

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, Illinois 60555

Attention: Equity Administration Department (for notices of exercise only) or General Counsel (for all other notices)

Notices to or with respect to the Participant will be directed to the Participant, or to the Participant’s executors, personal representatives or distributees, if the Participant is deceased, or the assignees of the Participant, at the Participant’s most recent home address on the records of the Company. The Company or the Participant may change the person and/or address to which the other party must give notice under this Section 6 by giving the other party written notice of such change, in accordance with the procedures described above.

7. Securities Laws; Transferability; Governing Law; Venue. The Shares may only be purchased, if there is with respect to the Shares a registration statement or qualification in effect under applicable U.S. or State securities laws or an exemption therefrom. This Agreement shall be governed by the laws of the State of Delaware, without regard to conflicts of laws principles that would cause another jurisdiction’s laws to be applied. The Company and the Participant hereby irrevocably and unconditionally submit, for themselves and their property, to the nonexclusive jurisdiction of any Illinois State court or federal court of the United States of America sitting in the Northern District of Illinois and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment, and the Company and the Participant hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard and determined in any such Illinois State court or, to the extent permitted by law, in such federal court. This Option may not be transferred, assigned or pledged except in accordance with the Plan.

8. Entire Agreement; Counterparts. The terms of this Agreement and the Plan constitute the entire agreement between the Company and the Participant with respect to the subject matter hereof and supersede any and all previous agreements between the Company and the Participant. This Agreement may be signed in counterparts.

IN WITNESS WHEREOF, the Company and the Participant have each executed this Agreement, all as of the day and year first above written.

FUEL TECH, INC.

By:

(Vice) President Participant

Employee NQSO Award Agreement (v15.06.03)

2015 EXECUTIVE PERFORMANCE RSU AWARD AGREEMENT

This Executive Performance RSU Award Agreement (the “Agreement”) is hereby entered effective as of ___________, 2015 (the “Award Date”), by and between Fuel Tech, Inc. (the “Company” or “Fuel Tech” or “FTI”), and _________________ (the “Participant”). Any term capitalized but not defined in this Agreement will have the meaning set forth in the Fuel Tech, Inc. 2014 Long-Term Incentive Plan, as it may be amended, modified or restated from time to time (the “Plan”).

1.Purpose. The purpose of this Agreement is, among other things, to align the Participant’s interests with the interests of the Company and its stockholders in the long-term growth of the Company and to reward the Participant for his or her continued employment and service to the Company in the future and his or her compliance with the Company’s policies (including, without limitation, the Company’s Code of Business Ethics and Conduct), to protect the Company’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests. In view of these purposes, this Agreement, issued pursuant to Section 9 of the Plan, provides the Participant the opportunity to receive an executive performance RSU award in the manner and on the terms, conditions and amounts set forth in this Agreement (“Executive Performance RSU”).

2. Executive Performance RSU Award. For purposes of the Executive Performance RSU Award calculations set forth below in this Agreement, the Committee, in the exercise of its business judgment under the Plan, approved a total target number of executive performance RSUs made up of three target RSU amount components. The three components of the Executive Performance RSU Award (each of them an Award under the Plan) are: Look-Back RSUs, Revenue Growth RSUs, and TSR Performance RSUs (as those terms are defined below).

3. Look-Back RSUs. For purposes of this Agreement, the Committee approved a “Target Look-Back RSU Amount” of __________________ (________) RSUs. The Committee, in its sole discretion, shall award the Participant a number of RSUs of between zero and up to 150% of the Target Look-Back RSU Amount (“Look-Back RSUs”), on the Determination Date (as defined below).

(a) Performance Assessment. The Committee, in its business judgment, may approve the Company awarding none, some or all of the Target Look-Back RSU Amount to the Participant based on the Committee’s subjective, qualitative assessment of the Participant’s overall performance during the Performance Period. The determination and approval by the Committee of what portion, if any, of the Target Look-Back RSU Amount shall be awarded to the Participant may include a variety of factors considered by the Committee in its sole discretion, including one or more of the equity award determination factors listed in Exhibit A to this Agreement.

(b) Determination Date. All Look-Back RSU Awards will be granted on the Determination Date, subject to the terms and conditions of the Plan and this Agreement, including the vesting schedule set forth in Section 3(d) below, provided that the Participant’s Continuous Service has not terminated before the Determination Date (except as provided in subsections (c) and (e) below).

(c) Termination of Continuous Service. If the Participant’s Continuous Service with the Company terminates for any reason before the Determination Date, other than due to death or Disability, no Look-Back RSUs will be awarded to the Participant, except as provided in Section 3(e) below. If the Participant’s Continuous Service terminates before the Determination Date due to death or Disability, the Committee shall determine, in its sole discretion, whether to award none, some or all of the Target Look-Back RSUs to the Participant and any such RSUs will be awarded on the Distribution Date and will be fully-vested when they are awarded. If the Participant’s Continuous Service terminates on or after the Determination Date, but before the Look-Back RSUs have fully vested under Section 3(d) or (e) below:

(i) If the Participant’s Continuous Service is terminated by the Company for Cause, the Participant will forfeit all Look-Back RSUs, including any Look-Back RSUs that have vested under Section 3(d);

(ii) If the Participant Continuous Service terminates due to death or Disability, the Participant will vest in any Look-Back RSUs that have not vested under Section 3(d) or (e), and the Company will distribute Shares to the Participant equal to the full number of Look-Back RSUs that were awarded to the Participant in accordance with Section 6 below;

(iii) If the Participant’s Continuous Service is terminated other than (A) due to death or Disability, or (B) by the Company for Cause, the Participant will forfeit any Look-Back RSUs that have not vested under Section 3(d) or (e), and the Company will distribute Shares to the Participant equal to the number of Look-Back RSUs that already have vested in accordance with Section 6 below.

(d) Installment Vesting. Any Look-Back RSUs awarded on the Determination Date shall vest in three installments, as follows: (i) one-third of the total Look-Back RSUs awarded shall vest thirteen (13) months after the Determination Date, (ii) one-third shall vest on the second anniversary of the Determination Date, and (iii) the remaining one-third shall vest on the third anniversary of the Determination Date, in each case, provided that the Participant’s Continuous Service has not terminated before the applicable vesting date.

(e) Change in Control. In the event of a Change in Control before the Determination Date for Look-Back RSUs, the Committee shall determine, in its sole discretion, whether to award none, some or all the Target Look-Back RSUs to the Participant under this Agreement and whether to accelerate the vesting of those Look-Back RSUs it so awards. In the event of a Change in Control on or after the Determination Date for Look-Back RSUs, but before the Look-Back RSUs awarded to the Participant, if any, have fully vested under Sections 3(c) or (d), if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control, the Look-Back RSUs awarded to the Participant will fully vest immediately prior to the Change in Control, unless (i) the Company is the surviving entity and any adjustments necessary to preserve the value of the Participant’s outstanding Look-Back RSUs have been made, or (ii) the Company’s successor at the time of the Change in Control irrevocably assumes the Company’s obligations under the Plan and this Agreement or replaces the Participant’s outstanding Look-Back RSUs with an award of equal or greater value and having terms and conditions no less favorable to the Participant than those applicable to the Participant’s Look-Back RSUs immediately prior to the Change in Control; provided, that, if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control and the Participant’s Look-Back RSUs do not become fully vested upon the Change in Control because of the foregoing provisions of this paragraph (e), the Participant’s Look-Back RSUs nonetheless will become fully vested if, within two years after the effective date of the Change in Control, the Company or its successor terminates the Participant’s Continuous Service other than for Cause or the Participant terminates his or her Continuous Service for Good Reason (as defined below). If the Participant terminates Continuous Service following a Change in Control due to death or Disability, the Participant will vest in any Look-Back RSUs that have not previously vested.

(f) Deferral of Share Distribution. The Participant may elect to defer the receipt of Shares beyond the vesting date of the underlying Look-Back RSUs in Section 3(d) above, by written election on the Company’s then-current Deferral Election Form, filed within thirty (30) days of the Award Date. Any deferral period must be expressed as a number of whole years, not less than five (5) or more than ten (10), beginning on the Determination Date. Any such deferral election shall apply to the receipt of all Shares underlying the Look-Back RSUs under this Agreement; for example, a deferral period of seven (7) years would result in the Participant receiving all Shares underlying the vested Look-Back RSUs seven (7) years from the Determination Date regardless of the fact that the Look-Back RSUs under this Agreement may have vested at differing times. If a Participant elects a deferral period but thereafter the Participant’s Separation from Service occurs after the Look-Back RSUs vest but before the elected deferral period expires, then, subject to the forfeiture provisions of Sections 7 and 10, distribution of the Participant’s Shares underlying the Look-Back RSUs will occur in accordance with Section 6 below.

4. Revenue Growth RSUs. For purposes of this Agreement, the Committee approved a “Target Revenue Growth RSU Amount” of _________________________ (_______) RSUs. After the completion of the Performance Period the Committee shall award the Participant a number of RSUs of between zero and up to 150% of the Target Revenue Growth RSU Amount (“Revenue Growth RSUs”), on the Determination Date.

(a) Revenue Growth Measurement. During the Performance Period, the Company’s Revenue Growth will be measured against the Revenue Growth of the Peer Group Companies. As soon as practicable after the Peer Group Companies have reported their Revenue Growth for the Performance Period, the Committee shall compare the Company’s Revenue Growth for the Performance Period with that of the Peer Group Companies. The Peer Group Companies will be ranked by Revenue Growth and then divided into four quartiles. The Committee will evaluate the Company’s Revenue Growth performance in light of those rankings and shall approve the issuance to the Participant a number of Revenue Growth RSUs determined as follows:

(i) if the Company’s Revenue Growth performance places it in the fourth (lowest) quartile of the Peer Group Companies, no Revenue Growth RSUs will be awarded;

(ii) if the Company’s Revenue Growth performance places it in the third quartile of the Peer Group Companies, then a number of RSUs equal to 50% of the Target Revenue Growth RSU Amount will be awarded;

(iii) if the Company’s Revenue Growth performance places it in the second quartile of the Peer Group Companies, then a number of RSUs equal to 100% of the Target Revenue Growth RSU Amount will be awarded; and

(iv) if the Company’s Revenue Growth performance places it in the first (highest) quartile of the Peer Group Companies, then a number of RSUs equal to 150% of the Target Revenue Growth RSU Amount will be awarded.

(b) Determination Date. Any Revenue Growth RSU awards made as a result of the Company’s Revenue Growth performance will be made on the Determination Date, subject to the terms and conditions of the Plan and this Agreement, including the vesting schedule set forth in Section 4(d) below, provided that the Participant’s Continuous Service has not terminated before the Determination Date (except as provided in subsections (c) and (e) below).

(c) Termination of Continuous Service. If the Participant’s Continuous Service terminates for any reason before the Determination Date, other than the Participant’s (i) termination by the Company without Cause, (ii) death, or (iii) Disability, no Revenue Growth RSUs will be awarded to the Participant, except as provided in Section 4(e) below. If, before the Determination Date, the Participant’s Continuous Service is terminated by the Company without Cause, or due to death or Disability, the Participant will be awarded a number of vested Revenue Growth RSUs on the Distribution Date, determined as follows: (A) the Company shall determine the number of Revenue Growth RSUs that would have been awarded to the Participant as a percentage of the Target Revenue Growth RSU Amount, based on the Company’s Revenue Growth as of the calendar quarter ending immediately prior to his or her termination of Continuous Service measured against the Revenue Growth of the Peer Group Companies on that date, according to the metrics of Section 4(a) above, then (B) the Company shall multiply that number by a fraction, the numerator of which is the number of months of Continuous Service during the Performance Period the Participant had completed as of the date of his or her termination of Continuous Service and the denominator of which is thirty-six (36). If the Participant’s Continuous Service terminates on or after the Determination Date, but before the Revenue Growth RSUs have fully vested under Section 4(d) or (e) below:

(i) If the Participant’s Continuous Service is terminated by the Company for Cause, the Participant will forfeit all Revenue Growth RSUs, including any Revenue Growth RSUs that have vested under Section 4(d);

(ii) If the Participant terminates Continuous Service due to death or Disability, the Participant will vest in any Revenue Growth RSUs that have not vested under Section 4(d) or (e), and the Company will distribute Shares to the Participant equal to the full number of Revenue Growth RSUs that were awarded to the Participant in accordance with Section 6 below;

(iii) If the Participant’s Continuous Service is terminated other than (A) due to death or Disability, or (B) by the Company for Cause, the Participant will forfeit any Revenue Growth RSUs that have not vested under Section 4(d) or (e), and the Company will distribute Shares to the Participant equal to the number of Revenue Growth RSUs that already have vested in accordance with Section 6 below.

(d) Installment Vesting. Any Revenue Growth RSUs awarded on the Determination Date shall vest in two installments, as follows: (i) two-thirds of the total Revenue Growth RSUs awarded shall immediately vest on the Determination Date, and (ii) the remaining one-third shall vest on the first anniversary of the Determination Date, in each case provided that the Participant’s Continuous Service has not terminated before the applicable vesting date.

(e) Change in Control. In the event of a Change in Control before the Determination Date for Revenue Growth RSUs, the Committee shall determine, in its sole discretion, whether to award none, some or all of the Target Revenue Growth RSU Amount to the Participant under this Agreement, which awards shall be made within thirty (30) days of the Change in Control, and whether to accelerate the vesting of those Revenue Growth RSUs it so awards; provided that, in no event shall the Participant be awarded a number of vested Revenue Growth RSUs that is less than the number determined as follows: (A) the Company shall determine the number of Revenue Growth RSUs that would have been awarded to the Participant as a percentage of the Target Revenue Growth RSU Amount, based on the Company’s Revenue Growth as of the calendar quarter ending immediately prior to the Change in Control measured against the Revenue Growth of the Peer Group Companies on that date, according to the metrics of Section 4(a) above, then (B) the Company shall multiply that number by a fraction, the numerator of which is the number of months of Continuous Service during the Performance Period the Participant had completed as of the date of the Change in Control and the denominator of which is thirty-six (36). In the event of a Change in Control on or after the Determination Date, but before the Revenue Growth RSUs awarded to the Participant, if any, have fully vested under Sections 4(c) or (d), if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control, the Revenue Growth RSUs awarded to the Participant will fully vest immediately prior to the Change in Control, unless (i) the Company is the surviving entity and any adjustments necessary to preserve the value of the Participant’s outstanding Revenue Growth RSUs have been made, or (ii) the Company’s successor at the time of the Change in Control irrevocably assumes the Company’s obligations under the Plan and this Agreement or replaces the Participant’s outstanding Revenue Growth RSUs with an award of equal or greater value and having terms and conditions no less favorable to the Participant than those applicable to the Participant’s Revenue Growth RSUs immediately prior to the Change in Control; provided, that, if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control and the Participant’s Revenue Growth RSUs do not become fully vested upon the Change in Control because of the foregoing provisions of this paragraph (e), the Participant’s Revenue Growth RSUs nonetheless will become fully vested if, within two years after the effective date of the Change in Control, the Company or its successor terminates the Participant’s Continuous Service other than for Cause or the Participant terminates his or her Continuous Service for Good Reason (as defined below). If the Participant terminates Continuous Service following a Change in Control due to death or Disability, the Participant will vest in any Revenue Growth RSUs that have not previously vested.

(f) Deferral of Share Distribution. The Participant may elect to defer the receipt of Shares beyond the vesting date of the underlying Revenue Growth RSUs in Section 4(d) above, by written election on the Company’s then-current Deferral Election Form, filed within thirty (30) days of the Award Date. Any deferral period must be expressed as a number of whole years, not less than five (5) or more than ten (10), beginning on the Determination Date. Any such deferral election shall apply to the receipt of all Shares underlying the Revenue Growth RSUs under this Agreement; for example, a deferral period of seven (7) years would result in the Participant receiving all Shares underlying the vested Revenue Growth RSUs seven (7) years from the Determination Date regardless of the fact that the Revenue Growth RSUs under this Agreement may have vested at differing times. If a Participant elects a deferral period but thereafter the Participant’s Separation from Service occurs after the Revenue Growth RSUs vest but before the elected deferral period expires, then, subject to the forfeiture provisions of Sections 7 and 10, distribution of the Participant’s Shares underlying the Revenue Growth RSUs will occur in accordance with Section 6 below).

5. TSR Performance RSUs. For purposes of this Agreement, the Committee approved a “Target TSR Performance RSU Amount” of _________________ (_________) RSUs. After the completion of the Performance Period the Committee shall award the Participant a number of RSUs of between zero and up to 150% of the Target TSR Performance RSU Amount (“TSR Performance RSUs”), on the Determination Date (as defined below).

(a) TSR Performance Measurement. During the Performance Period, the Company’s TSR performance will be measured against the TSR performance of the Peer Group Companies. As soon as practicable after the Peer Group Companies have reported their TSR performance for the Performance Period, the Committee shall compare the Company’s TSR performance for the Performance Period with that of the Peer Group Companies. The Peer Group Companies will be ranked by TSR performance, and then divided into four quartiles. The Committee will evaluate the Company’s TSR performance in light of those rankings and shall approve the issuance to the Participant a number of TSR performance RSUs determined as follows:

(iv) if the Company’s TSR performance places it in the fourth (lowest) quartile of the Peer Group Companies, no RSUs will be awarded;

(v) if the Company’s TSR performance places it in the third quartile of the Peer Group Companies, then a number of RSUs equal to 50% of the Target TSR Performance RSU Amount will be awarded;

(vi) if the Company’s TSR performance places it in the second quartile of the Peer Group Companies, then a number of RSUs equal to 100% of the Target TSR Performance RSU Amount will be awarded; and

(vii) if the Company’s TSR performance places it in the first (highest) quartile of the Peer Group Companies, then a number of RSUs equal to 150% of the Target TSR Performance RSU Amount will be awarded.

(b) Determination Date. Any TSR Performance RSU awards made as a result of the Company’s TSR performance will be made on the Determination Date, subject to the terms and conditions of the Plan and this Agreement, including the vesting schedule set forth in Section 5(d) below, provided that the Participant’s Continuous Service has not terminated before the Determination Date (except as provided in subsections (c) and (e) below).

(c) Termination of Continuous Service. If the Participant’s Continuous Service terminates for any reason before the Determination Date, other than the Participant’s (i) termination by the Company without Cause, (ii) death, or (iii) Disability, no TSR Performance RSUs will be awarded to the Participant, except as provided in Section 5(e) below. If, before the Determination Date, the Participant’s Continuous Service is terminated by the Company without Cause, or due to death or Disability, the Participant will be awarded a number of vested TSR Performance RSUs on the Distribution Date, determined as follows: (A) the Company shall determine the number of RSUs that would have been awarded to the Participant as a percentage of the Target TSR Performance RSU Amount, based on the Company’s TSR Performance as of the calendar quarter ending immediately prior to his or her termination of Continuous Service measured against the TSR Performance of the Peer Group Companies on that date, according to the metrics of Section 5(a) above, then (B) the Company shall multiply that number by a fraction, the numerator of which is the number of months of Continuous Service during the Performance Period the Participant had completed as of the date of his or her termination of Continuous Service and the denominator of which is thirty-six (36). If the Participant’s Continuous Service terminates on or after the Determination Date, but before the TSR Performance RSUs have fully vested under Section 5(d) or (e) below:

(i) If the Participant’s Continuous Service is terminated by the Company for Cause, the Participant will forfeit all TSR Performance RSUs, including any TSR Performance RSUs that have vested under Section 5(d);

(ii) If the Participant terminates Continuous Service due to death or Disability, the Participant will vest in any TSR Performance RSUs that have not vested under Section 5(d) or (e), and the Company will distribute Shares to the Participant equal to the full number of TSR Performance RSUs that were awarded to the Participant in accordance with Section 6 below;

(iii) If the Participant’s Continuous Service is terminated other than (A) due to death or Disability, or (B) by the Company for Cause, the Participant will forfeit any TSR Performance RSUs that have not vested under Section 5(d) or (e), and the Company will distribute Shares to the Participant equal to the number of TSR Performance RSUs that already have vested in accordance with Section 6 below.

(d) Installment Vesting. Any TSR Performance RSUs awarded on the Determination Date shall vest in two installments, as follows: (i) two-thirds of the total TSR Performance RSUs awarded shall immediately vest on the Determination Date, and (ii) the remaining one-third shall vest on the first anniversary of the Determination Date, in each case, provided that the Participant’s Continuous Service has not terminated before the applicable vesting date.

(e) Change in Control. In the event of a Change in Control before the Determination Date for TSR Performance RSUs, the Committee shall determine, in its sole discretion, whether to award none, some or all of the Target TSR Performance RSU Amount to the Participant under this Agreement, which awards shall be made within thirty (30) days of the Change in Control, and whether to accelerate the vesting of those TSR Performance RSUs it so awards; provided that, in no event shall the Participant be awarded a number of vested TSR Performance RSUs that is less than the number determined as follows: (A) the Company shall determine the number of TSR Performance RSUs that would have been awarded to the Participant as a percentage of the Target TSR Performance RSU Amount, based on the Company’s TSR Performance as of the calendar quarter ending immediately prior to the Change in Control measured against the TSR Performance of the Peer Group Companies on that date, according to the metrics of Section 5(a) above, then (B) the Company shall multiply that number by a fraction, the numerator of which is the number of months of Continuous Service during the Performance Period the Participant had completed as of the date of the Change in Control and the denominator of which is thirty-six (36). In the event of a Change in Control on or after the Determination Date, but before the TSR Performance RSUs awarded to the Participant, if any, have fully vested under Sections 5(c) or (d), if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control, the TSR Performance RSUs awarded to the Participant will fully vest immediately prior to the Change in Control, unless (i) the Company is the surviving entity and any adjustments necessary to preserve the value of the Participant’s outstanding TSR Performance RSUs have been made, or (ii) the Company’s successor at the time of the Change in Control irrevocably assumes the Company’s obligations under the Plan and this Agreement or replaces the Participant’s outstanding TSR Performance RSUs with an award of equal or greater value and having terms and conditions no less favorable to the Participant than those applicable to the Participant’s TSR Performance RSUs immediately prior to the Change in Control; provided, that, if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control and the Participant’s TSR Performance RSUs do not become fully vested upon the Change in Control because of the foregoing provisions of this paragraph (e), the Participant’s TSR Performance RSUs nonetheless will become fully vested if, within two years after the effective date of the Change in Control, the Company or its successor terminates the Participant’s Continuous Service other than for Cause or the Participant terminates his or her Continuous Service for Good Reason. If the Participant terminates Continuous Service following a Change in Control due to death or Disability, the Participant will vest in any TSR Performance RSUs that have not previously vested.

(f) Deferral of Share Distribution. The Participant may elect to defer the receipt of Shares beyond the vesting date of the underlying TSR Performance RSUs in Section 5(d) above, by written election on the Company’s then-current Deferral Election Form, filed within thirty (30) days of the Award Date. Any deferral period must be expressed as a number of whole years, not less than five (5) or more than ten (10), beginning on the Determination Date. Any such deferral election shall apply to the receipt of all Shares underlying the TSR Performance RSUs under this Agreement; for example, a deferral period of seven (7) years would result in the Participant receiving all Shares underlying the vested TSR Performance RSUs seven (7) years from the Determination Date regardless of the fact that the TSR Performance RSUs under this Agreement may have vested at differing times. If a Participant elects a deferral period but thereafter the Participant’s Separation from Service occurs after the TSR Performance RSUs vest but before the elected deferral period expires, then, subject to the forfeiture provisions of Sections 7 and 10, distribution of the Participant’s Shares underlying the TSR Performance RSUs will occur in accordance with Section 6 below.

6. Distribution of Shares. On the Distribution Date, the Company may either (i) issue to the Participant or the Participant’s personal representative or beneficiary a Share certificate, (ii) deposit Shares with an online broker or other service provider contracted by the Company for such purpose, or (iii) handle such Shares according to the terms of a Change in Control, subject to the forfeiture provisions of Sections 7 and 10 below, but in each instance subject to compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with such issuance and with the requirements hereof and of the Plan. The Company will pay to the Participant in cash an amount in lieu of any fractional RSU, based on the Fair Market Value Per Share of the fractional Share. Until such time as Shares have been issued to the Participant under this Section, the Participant shall not have any rights as a holder of the Shares underlying any component of this Executive Performance RSU Award including but not limited to voting rights or dividends, if and when the Company declares same.

7. Adjustment of Executive Performance RSU Award. In the event that the Company or one or more of the Peer Group Companies is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws the Committee, in good faith and subject to its sole discretion, may reduce or increase the number of RSUs awarded to the Participant under this Agreement to reflect the number of RSUs that would have been awarded to the Participant under the accounting restatement. At all times and regardless of the date of adoption any RSU target amounts established, RSUs awarded and Shares distributed under this Agreement shall be subject to any compensation recovery policy adopted by the Company to comply with applicable law or to comport with good corporate governances practices as determined by the Committee in its sole discretion, as such policy may be amended from time to time. The Company’s remedies and rights under this Section 7 shall be in addition to any other remedies or rights that the Company shall have, and any penalties or restrictions that may apply, under state or federal law, or any employment or other agreement.

8. Changes in Capital or Corporate Structure. In the event of any change in the outstanding Shares or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Award Date, the RSUs granted hereunder will be equitably adjusted or substituted pursuant to Section 13 of the Plan.

9. Nontransferability. RSUs awarded under this Agreement, and any rights and privileges pertaining thereto, may not be transferred, assigned, pledged or hypothecated in any manner, by operation of law or otherwise, other than as set forth in Section 22.2 of the Plan.

10. Non-Competition; Non-Solicitation and Confidentiality Restrictive Covenants. In order to protect the Confidential Information (as defined below), customer relationships, and other legitimate business interests of the Company, during the Participant’s Continuous Service and for twelve (12) months following the termination of his or her Continuous Service, the Participant will not, directly or indirectly, as an employee, agent, member, director, partner, consultant or contractor or in any other individual or representative capacity: (a) solicit any Protected Individual (as defined below) for other employment or engagement, induce or attempt to induce any Protected Individual to terminate his or her employment, hire or engage any Protected Individual, or otherwise interfere or attempt to interfere in any way in the relationship between the Company and such Protected Individual; or (b) solicit or provide competitive products or services to any Customer (as defined below) or Prospective Customer (as defined below) or otherwise interfere or attempt to interfere in any way in the relationship between the Company and any Customer or Prospective Customer. Because the Company’s business is global in scope, the Participant understands and agrees that these restrictions apply worldwide. The Participant further agrees that at all times both during his or her Continuous Service and after his or her Continuous Service terminates, the Participant will not, without the Company’s express written permission, use Confidential Information for the Participant’s own benefit or the benefit of any other person or entity or disclose Confidential Information to any person other than (i) in the case of disclosures made during Participant’s Continuous Service, to persons to whom disclosure is required in connection with the performance of Participant’s duties for the Company or (ii) any disclosure requested by a court or regulatory authority with jurisdiction over the subject matter, in which event Participant agrees promptly to notify the Company in advance of and cooperate with the Company in any efforts to suppress or limit such disclosure.

The Participant agrees that in the event of a breach or threatened breach of any of the covenants contained in this Section 10, in addition to any other penalties or restrictions that may apply under any employment agreement, state law, or otherwise, the Participant shall forfeit, upon written notice to such effect from the Company: (i) any rights to receive an Executive Performance RSU Award under this Agreement, (ii) any and all RSUs awarded to him or her under the Plan and this Agreement, including vested RSUs or Shares; (iii) any Shares acquired under this Award, and (iv) any profit the Participant has realized on the vesting or sale of any Shares acquired under this Award, which the Participant shall be required to repay to the Company). The forfeiture provisions of this Section 10 shall continue to apply, in accordance with their terms, after the provisions of any employment or other agreement between the Company and the Participant have lapsed. The Participant consents and agrees that if the Participant violates or threatens to violate any provisions of this Section 10, the Company or its successors in interest shall be entitled, in addition to any other remedies that they may have, including money damages, to an injunction to be issued by a court of competent jurisdiction restraining the Participant from committing or continuing any violation of this Section 10. In the event that the Participant is found to have breached any provision set forth in this Section 10 or elsewhere in this Agreement, the time period provided for in that provision shall be deemed tolled (i.e., it will not continue to run) for so long as the Participant was in violation of that provision.

11. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns.

12. Tax Consequences and Withholding. Nothing contained herein shall be construed as a promise, guarantee, or other representation by the Company of any particular tax effect nor shall the Company be liable for any taxes, penalties, or other amounts incurred by the Participant. Without limiting the terms and conditions set forth in Section 16 of the Plan, the Company may withhold from any Shares that it is required to deliver under this Agreement the number of Shares sufficient to satisfy applicable withholding requirements under any applicable federal, state, local or foreign law, rule or regulation if any. The Participant acknowledges that he or she has had sufficient opportunity to review with his or her own tax advisors the federal, state, local, and foreign tax consequences of the transactions contemplated by this Agreement. The Participant acknowledges he or she must rely solely on such advisors and not on any statement or representations of the Company or any of its agents. The Participant understands that he or she (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by the Agreement.

13. No Limitation on the Company’s Rights. The awarding of RSUs shall not in any way affect the Company’s right or power to make adjustments, reclassifications or changes in its capital or business structure or to merge, consolidate, reincorporate, dissolve, liquidate or sell or transfer all or any part of its business or assets. The terms and provisions of this Agreement that provide for the Participant to forfeit Executive Performance RSUs in the event of a termination for Cause, shall be in addition to any other remedies or rights that the Company shall have, and any penalties or restrictions that may apply, under state or federal law, or any employment or other agreement.

14. Plan and Agreement Not a Contract of Employment or Service. Without limiting the terms and conditions set forth in Section 15 of the Plan, neither the Plan nor this Agreement is a contract of employment or service, and no terms of the Participant’s employment or service will be affected in any way by the Plan, this Agreement or related instruments, except to the extent specifically expressed therein. Neither the Plan nor this Agreement will be construed as conferring any legal rights to the Participant to continue in service with the Company or any subsidiary or affiliate thereof.

15. Entire Agreement and Amendment. This Agreement is the entire Agreement between the parties to it, and all prior oral and written representations are merged in this Agreement. This Agreement may be amended, modified or terminated only by written agreement between the Participant and the Company, provided, that the Company may amend this Agreement without further action by the Participant as set forth in Section 20 of the Plan.

16. Headings. The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof.

17. Notices. Notices given pursuant to this Agreement shall be in writing and shall be deemed received when personally delivered, or on the date of written confirmation of receipt by (i) overnight carrier, (ii) facsimile, (iii) registered or certified mail, return receipt requested, addressee only, postage prepaid, or (iv) such other method of delivery that provides a written confirmation of delivery. Notice to the Company shall be directed to:

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, Illinois 60555

Attention: Equity Administration Department

Notices to or with respect to the Participant will be directed to the Participant, or to the Participant’s executors, personal representatives or distributees, if the Participant is deceased, or the assignees of the Participant, at the Participant’s most recent home address on the records of the Company. The Company or the Participant may change the person and/or address to which the other party must give notice under this Section 17 by giving the other party written notice of such change, in accordance with the procedures described above.

18. Compliance with Laws. Without limiting the terms and conditions set forth in Section 19 of the Plan, no certificate for Shares distributable pursuant to the Plan or this Agreement shall be issued and delivered unless the issuance of such certificate complies with all applicable legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended from time to time or any successor statute, the Exchange Act and the requirements of the exchanges on which Shares may, at the time, be listed, and the provisions of any foreign securities laws or the rules of foreign securities exchanges, where applicable.

19. Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of the Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

20. Incorporation of the Plan. The Plan, as it exists on the date of the Agreement and as amended from time to time, is hereby incorporated by reference and made a part hereof, and the Executive Performance RSU Award and the Agreement shall be subject to all terms and conditions of the Plan. In the event of any conflict between the provisions of the Agreement and the provisions of the Plan, the terms of the Plan shall control, except with respect to the vesting provisions set forth herein.

21. Governing Law; Venue. The laws of the State of Delaware shall govern the validity, interpretation, construction, and performance of this Agreement, without regard to the conflict of laws principles thereof that would cause another jurisdiction’s laws to be applied. The Company and the Participant hereby irrevocably and unconditionally submit, for themselves and their property, to the nonexclusive jurisdiction of any Illinois State court or federal court of the United States of America sitting in the Northern District of Illinois and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment, and the Company and the Participant hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard and determined in any such Illinois State court or, to the extent permitted by law, in such federal court.

22. Code Section 409A. It is intended that this Agreement and the Plan be designed and operated within the requirements of Code Section 409A (including any applicable exemptions). Any provision that is required by Section 409A to appear in the Plan or Agreement that is not expressly set forth therein shall be deemed to be set forth therein, and the Plan shall be administered in all respects as if such provision was expressly set forth herein. Any reference in the Plan or Agreement to Section 409A or a Treasury Regulation Section shall be deemed to include any similar or successor provisions thereto.

(a) The Executive Performance RSU Award including each component RSU Award part thereof is intended to be exempt from Code Section 409A under the short-term deferral exception set forth in Code Section 409A or, in the alternative, to comply with the requirements of Section 409A. With respect to all or any portion of the RSU Award for which a deferral election is not in effect (i.e., which is intended to be exempt from Code Section 409A under the short-term deferral exception set forth in Code Section 409A), then notwithstanding the definition of Distribution Date or any other provision in this Agreement to the contrary, the distribution of Shares shall occur no later than the 15^th day of the third month of the calendar year following the calendar year in which Performance Period ends (e.g., in the event of the Participant’s termination due to Disability on December 15, 2015, the Performance Period, by definition, shall end on December 15, 2015 and the Shares shall be distributed no later than March 15, 2016). Also, with respect to each component RSU Award, the Determination Date shall not be later than the first anniversary of the last day of the Performance Period.

(b) Notwithstanding anything in the Plan or Agreement to the contrary, if the Participant should become subject to the 6-month delay rule of Treasury Regulation Section 1.409A-1(c)(3)(v), then to the extent that the Executive Performance RSU award, in whole or in part, is subject to Section 409A and the Participant is a Specified Employee (as defined below) as of the date of Separation from Service (as defined below), distributions with respect to any RSUs that have been deferred may not be made before the date that is six (6) months after the date of Separation from Service or, if earlier, the date of the Participant’s death.

(c) Whenever a payment or distribution under this Agreement specifies a payment or distribution period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the Change in Control”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

(d) Whenever a payment or distribution under this Agreement specifies a payment or distribution “as soon as practicable” following a payment or distribution event, such payment or distribution shall be made as soon as practicable after such event, but not later than the fifteenth day of the third month following the calendar year in which such event occurred, and the actual date of payment within such period shall be within the sole discretion of the Company.

23. Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute but one Agreement.

24. Definitions. Where used in this Agreement, the following capitalized terms shall have the following meanings:

(a) “Confidential Information” means any information (whether or not specifically labeled or identified as “confidential”), in any form or medium, that is disclosed to, developed, or learned by the Participant during his or her Continuous Service, that relates to the business, services, techniques, know-how, processes, methods, formulations, investments, finances, operations, plans, research or development of the Company, and that is not generally known outside of the Company. Confidential Information includes, but is not limited to: the identity and information concerning the needs and preferences of current, former, and prospective customers; performance, compensation, and other personnel data concerning employees of the Company; business plans and strategies; plans for recruiting and hiring new personnel; trade secrets; and pricing strategies and policies. Confidential Information does not include the general skills, knowledge, and experience gained during the Participant’s Continuous Service and common to others in the industry or information that is or becomes publicly available without any breach by the Participant of this Agreement.

(b) “Customer” means any Person (as defined below) who or which is or was a customer of the Company and with whom the Participant had business contact during his or her tenure as a Participant hereunder or about whom the Participant received Confidential Information; provided that a former customer will only be considered a “Customer” for twelve (12) months after the last date on which the Company provided products or services to such Person.

(c) “Determination Date” means the actual date on which the Company awards RSUs to the Participant under this Agreement, which typically shall be within one hundred and twenty (120) days following the end of the applicable Performance Period (subject to Section 22(a)). For clarification, this Section 24(c) shall not apply in circumstances in which the Participant receives RSUs pursuant to Sections 3(c), 3(e), 4(c), 4(e), 5(c) or 5(e) (e.g., in the event of the Participant’s death or termination due to Disability, or in certain instances of a termination of Continuous Service without Cause or Change in Control).

(d) “Distribution Date” means the date that is within thirty (30) days following the Determination Date or, in the case of RSUs awarded pursuant to Sections 3(c), 3(e), 4(c), 4(e), 5(c) and 5(e) (e.g., in the event of the Participant’s death or termination due to Disability, or in certain instances of a termination of Continuous Service without Cause or Change in Control), the date that is within ninety (90) days following the last day of the Performance Period; provided, that the Distribution Date for a Participant who elects to defer the distribution of his or her Shares beyond the date on which the applicable RSU vests will be the earlier of (i) the date of the Participant’s Separation from Service (subject to Section 22(b)), or (ii) the end of the deferral period specified by the Participant in his or her deferral election.

(e) “Good Reason” shall have the meaning set forth in any employment, consulting, or other written agreement between the Participant and the Company and, if there is no employment, consulting, or other written agreement between the Company and the Participant or if such agreement does not define “Good Reason” then for purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following, without the Participant’s prior written consent:

(i) Any material diminution in the Participant’s assigned duties, responsibilities and/or authority;

(ii) Any material reduction in the Participant’s base compensation;

(iii) The Company requires the Participant to be based at a location that is more than thirty-five (35) miles further from the Participant’s residence than the location of the Participant’s principal job location or office immediately prior to the Change in Control (except for required travel on Company’s business to an extent substantially consistent with the Participant’s then present business travel obligations); or

(iv) Any other action or inaction that constitutes a material breach by the Company of any agreement under which the Participant provides services to the Company.

Notwithstanding the foregoing, Good Reason shall not exist unless the Participant gives the Company written notice thereof within sixty (60) days after its occurrence and the Company shall not have remedied the action or omission within thirty (30) days after such written notice.

(f) “Peer Group Companies” means, as of the first day of the Performance Period, the following companies:

Active Power, ADA-ES, American Superconductor, Amerigon, Ballard Power Systems, Capstone Turbine, CECO Environmental, Clean Energy Fuels, FuelCell Energy, Fuel Systems Solutions, Peerless Manufacturing, Plug Power, Power Integrations, Quantum Fuel Systems, RenTech.

During the Performance Period, the Committee shall review the companies in the Peer Group Companies and the Committee may remove any company from the category of Peer Group Companies if the Committee determines, in good faith and subject to its sole discretion, that such company should no longer be part of the Peer Group Companies due to merger, acquisition, disposition, change in ownership, growth, contraction, or any other event or circumstance affecting the Company or one of the Peer Group Companies, which the Committee determines, in good faith and subject to its sole discretion, is appropriate.

(g) “Performance Period” means, for the Look-Back RSUs, the 2015 calendar year, and for the Revenue Growth RSUs and the TSR Performance RSUs, the two-year period commencing January 1, 2015 and ending on the earlier of (i) December 31, 2016, or (ii) to the extent provided in Section 4(c), 4(e), 5(c) or 5(e), the calendar quarter ending immediately prior to the event specified in such section (i.e., the Participant’s termination of Continuous Service due to death or Disability, or a Change in Control).

(h) “Person” means an individual or any type of business entity.

(i) “Prospective Customer” means any Person, other than a Customer, toward whom or which the Company directed specific and material business development efforts, such as, but not limited to, a detailed proposal or bid, and with whom the Participant had business contact during his or her tenure as a Participant hereunder or about whom the Participant received Confidential Information; provided that such Person will only be considered a “Prospective Customer” for twelve (12) months after the last date on which such efforts were undertaken by the Company.

(j) “Protected Individual” means an individual who is or was an employee, consultant or advisor of the Company and with whom the Participant had business contact at any time during the Participant’s employment or other retention by the Company or about whom the Participant received Confidential Information; provided that such a former employee, consultant or advisor will only be considered a “Protected Individual” for six (6) months after the last date he or she was employed by or provided services to the Company.

(k) “Restricted Stock Unit” or “RSU” means a Restricted Stock Unit as defined in the Plan that is payable only in Shares.

(l) “Revenue Growth” means, with respect to the Company and each of the Peer Group Companies, the Revenue Growth reported on Form 10-K (or 10-Q, if applicable) for the Company and each of the Peer Group Companies, respectively, coinciding with the Performance Period.

(m) “Separation from Service” shall have the meaning given in Code Section 409A, and references to termination of Continuous Service, as they relate to any deferral election or Distribution Date, shall be deemed to refer to a Separation from Service. All references in this Agreement to “termination of employment” or “employment termination” shall be deemed to refer to a Separation from Service. [Note to draft: If someone reduces their services by more than 50% of his/her average over the past three years, FTEK will need to evaluate the situation and all deferral forms (since the earlier forms hardwired one of the 409A alternatives) to determined whether a “Separation from Service” has occurred for each of the deferred RSUs.]

(n) “Specified Employee” has the meaning given to that term in Code Section 409A and Treasury Regulation §1.409A-1(i) (or any similar or successor provisions).

(o) “Total Shareholder Return” or “TSR” means, with respect to the Company and each of the Peer Group Companies, the reporting company’s total return to stockholders per share of stock as reported on Form 10-K (or 10-Q, if applicable) for the Company and each of the Peer Group Companies, respectively, coinciding with the Performance Period.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the Award Date.



	Fuel Tech, Inc.
_______________________________ PARTICIPANT	By: Its:

Exhibit A

2015 Executive Performance RSU Award Agreement

Equity Award Factors

The determination and approval of proposed equity awards by the Company’s Compensation Committee are based on a variety of factors that may include:


•	historical equity awards, by employee, by year;


•	intrinsic values for each equity award, or, when applicable, the fair value of each equity award using the Black-Scholes option pricing model;


•	the number of equity award units available for issuance under the Plan;


•	supervisor recommendations for employee equity awards; the estimate of expected intrinsic value (e.g., equity award compensation expense) of the aggregate equity award;


•	net income (before or after taxes);


•	basic or diluted earnings per share (before or after taxes);


•	gross revenue, net revenue, gross revenue growth or net revenue growth;


•	sales of particular products or services;


•	gross profit, gross profit growth, net profit or net operating profit (before or after taxes);


•	earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization, incentive pay, contributions to 401(k) or other employee benefit plans, or items of income or expense not occurring in the normal course of business, whether or not on continuing operations or on an aggregate or per share basis (basic or fully diluted);


•	return on assets, capital, invested capital, equity, or sales (discounted or otherwise);


•	cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);


•	one or more operating ratios such as earnings before or after interest, taxes and/or depreciation and/or amortization;


•	gross or operating margins;


•	improvements in capital structure;


•	budget and expense management or cost targets;


•	productivity ratios;


•	economic value added or other value added measurements;


•	share price (including, but not limited to, growth measures and total stockholder return);


•	book value;


•	financing and other capital raising transactions (including sales of our equity or debt securities;


•	operating efficiency;


•	working capital targets;


•	enterprise value;


•	completion of acquisitions, business expansion, reorganizations or divestitures (in whole or in part);


•	borrowing levels, leverage ratios or credit rating;


•	regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of us or a third-party manufacturer) and validation of manufacturing processes (whether ours or a third-party manufacturer’s);


•	strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property);


•	establishing relationships with commercial entities with respect to the marketing, distribution and sale of our products (including with group purchasing organizations, distributors and other vendors);


•	supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of our products);


•	co-development, co-marketing, profit sharing, joint venture or other similar arrangements;


•	economic value-added models or equivalent metrics;


•	implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, succession and hiring projects, or expansions of specific business operations;


•	timely completion of new product roll-outs;


•	timely launch of new facilities;


•	sales or licenses of our assets, including its intellectual property, whether in a particular jurisdiction or territory or globally, or through partnering transactions);


•	royalty income;


•	exceptional and innovative individual performance;


•	individual contribution to a strategic goal;


•	teamwork;


•	leadership accomplishments; and


•	employee job level

EXECUTIVE PERFORMANCE RSU DEFERRAL ELECTION FORM

Deferral election must be made within thirty (30) days of the Award Date

This Executive Performance RSU Deferral Election Form (“Deferral Election Form”) is entered into by and between Fuel Tech, Inc. (the “Company”) and ______________________ (“the Participant” or “you”), who became eligible to receive an award of Look-Back RSUs, Revenue Growth RSUs and/or TSR Performance RSUs under the Fuel Tech, Inc. 2014 Long-Term Incentive Plan, as amended (the “Plan”) and a 2015 Executive Performance RSU Award Agreement (the “Agreement”), which Agreement was legally effective ___________, 2015. The provisions of the Plan and the Agreement are incorporated herein by reference in their entirety and supersede any conflicting provisions contained in this Deferral Election Form. Neither this Deferral Election Form nor the Plan or the Agreement shall be construed as giving the Participant any right to continue to be employed by or perform services for the Company or any subsidiary or affiliate thereof.

1. Deferral of RSUs

You may file a separate deferral election with respect to each form of RSUs you may be awarded under the Agreement; that is, a deferral election for any Look-Back RSUs, a deferral election for any Revenue Growth RSUs, and/or a deferral election for any TSR Performance RSUs. Any deferral period must be expressed as a number of whole years, not less than five (5) or more than ten (10), beginning on the Determination Date.

Any such deferral must apply to receipt of all Shares underlying that form of RSU award; for example, if you were to elect a deferral period of seven (7) years for any Revenue Growth RSUs, this would result in you receiving Shares underlying the entire Revenue Growth RSUs award seven (7) years from the Determination Date regardless of the fact that the Revenue Growth RSUs may have vested at differing times.

All Deferrals are subject to the terms of the Agreement. The Agreement generally provides for distribution of all vested Shares within thirty (30) days following your Separation From Service (subject to the six (6)-month delay described in Section 22(b) of the Agreement which applies to certain Participants in the Plan) if your Separation From Service occurs prior to the deferral date below.

If no deferral period is specified on the Deferral Election Form or if the Company does not receive from you, a signed and dated Deferral Election Form within the required election period applicable to any form of RSUs, Shares underlying those RSUs will be issued as described in the Agreement as soon as practicable upon vesting of the RSUs.


□	No deferral. I wish to receive Shares upon vesting of each installment of RSUs.


□	I wish to defer receipt of all Shares underlying any Look-Back RSUs until ____ years (minimum of 5) after the Determination Date.


□	I wish to defer receipt of all Shares underlying any Revenue Growth RSUs until ____ years (minimum of 5) after the Determination Date.


□	I wish to defer receipt of all Shares underlying any TSR Performance RSUs until ____ years (minimum of 5) after the Determination Date.

2. Deferral Election Effective Date, Revision of Election During Election Period

This Deferral Election Form must be received by the Company within thirty (30) days of the Award Date and will become irrevocable on such date. You may revise this Deferral Election with respect to the deferral period no later than this due date, by contacting the Company’s Equity Administration Department in writing in accordance with the Notice provision set forth in Section 17 of the Agreement.


______________________________	Date: _____________________, 20___

Participant

{01704849; 11; 2365-1 }

Exhibit 31.1

I, Vincent J. Arnone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Fuel Tech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: May 11, 2015	By:	/s/ Vincent J. Arnone
		Vincent J. Arnone
		President and Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

I, David S. Collins, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Fuel Tech, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date: May 11, 2015	By:	/s/ David S. Collins
		David S. Collins
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32

The undersigned in their capacities as Chief Executive Officer and Principal Financial Officer of the Registrant do hereby certify that:

(i) this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and for, the periods presented in the report.



Date: May 11, 2015	By:	/s/ Vincent J. Arnone
		Vincent J. Arnone
		President and Chief Executive Officer
		(Principal Executive Officer)



Date: May 11, 2015	By:	/s/ David S. Collins
		David S. Collins
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the “Act”) this certification accompanies the Report and shall not, except to the extent required by the Act, be deemed filed by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Fuel Tech, Inc. and will be retained by Fuel Tech, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Form 10-Q FUEL TECH, INC. For: Mar 31

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