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                                LICENSE AGREEMENT


         This agreement ("Agreement") is between GAS RESEARCH INSTITUTE, an
Illinois Not-For Profit Corporation having an office at 8600 West Bryn Mawr
Avenue, Chicago, Illinois 60631 ("GRI"), and FUEL TECH, INC., a Massachusetts
corporation, having a principal place of business at 1001 Frontenac Road,
Naperville, Illinois 60563-1746 ("LICENSEE").

1        Background of Agreement.

1.1      Whereas, GRI is the owner, assignee, or licensee of certain
         intellectual property rights related to the FLGR(TM) Technology;

1.2      Whereas, LICENSEE desires to acquire a license for the FLGR(TM)
         Technology pursuant to the terms and conditions of this Agreement;

1.3      Whereas, GRI desires commercial exploitation of such intellectual
         property rights and is willing to grant a co-exclusive license to
         LICENSEE pursuant to the terms and conditions of this Agreement.

         Now, therefore, in consideration of the promises and covenants set
         forth below, GRI and LICENSEE (collectively the "Parties") agree as
         follows:

2        Definitions.

         For the purpose of this Agreement, the following terms shall have the
         meanings set forth below:

2.1      "GRI Patents" means those patent registrations and licensable patent
         applications, identified in Schedule A to which all right, title and
         interest has been assigned to GRI, including, where appropriate, all
         divisions, continuations, continuations-in-part, reissues,
         reexaminations, renewals and extensions thereof.

2.2      "GRI Technical Information" means the unpublished research and
         development information, unpatented manufacturing processes,
         specifications, operating procedures, unpatented commercial or
         industrial techniques, know-how and technical data, related to the
         FLGR(TM) Technology which are in GRI's possession and which are
         currently being evaluated for patentability.

2.3      "FLGR Technology" means a system of controlling Nitrogen Oxide
         emissions from coal fired boilers by the injection of natural gas in
         fuel-lean conditions as described in or that would infringe a claim of
         the GRI Patents and/or which embodies or incorporates GRI Technical
         Information.

2.4      "Effective Date" means the last date of signature of this Agreement by
         the Parties.

2.5      "Commercial Sale" means any sale, lease, or other transfer of a
         FLGR(TM) Technology system to an unaffiliated third party but excludes
         Demonstration Sales by LICENSEE.
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2.6      "Demonstration Sale" means any sale, lease, or other transfer of a
         FLGR(TM) Technology system to an unaffiliated third party which is
         intended by joint agreement between GRI and LICENSEE to demonstrate the
         commercial capability of FLGR(TM) Technology on different types of
         combustion units.

2.7      "Improvements" means all improvements, enhancements, and modifications
         of the GRI Patents, GRI Technical Information, and/or FLGR
         Technology made or conceived by LICENSEE during the life of this
         Agreement.

2.8      "Customer/Sublicense" means any sublicense which includes the right to
         perform and use FLGR(TM) Technology, including the GRI Patents and GRI
         Technical Information, but which grants no rights to sublicense or
         further distribute, copy, or create derivative works. A
         "Customer/Sublicensee" is any entity to whom LICENSEE grants a
         sublicense pursuant to this Agreement.

2.9      "Site License" means a Customer/Sublicense granted by LICENSEE to a
         Customer/Sublicensee which grants the right to use FLGR(TM) Technology
         only on the boiler specifically identified in the sublicense and which
         cannot be assigned or transferred to any other boiler.

2.10     "AEFLGR" means a systems of controlling Nitrogen Oxide emissions
         from coal fired boilers by the injection of natural gas in fuel-lean
         conditions in combination with amine as described in or that would
         infringe a claim of the GRI patents and patent applications and/or
         which embodies or incorporates GRI trade secrets or proprietary
         information, the licensing of which is subject to a separate agreement.

3        License Grant.

3.1      License. For the Term of this Agreement, GRI grants to LICENSEE a
         worldwide, royalty-bearing, revocable, co-exclusive license under GRI
         Patents and GRI Technical Information to make, use, offer to sell,
         sell, lease, otherwise dispose of, or import FLGR(TM) Technology and to
         grant Site Licenses to their Customer/Sublicensees.

3.2      This license shall be co-exclusive to FUEL TECH, INC. and one other
         Licensee. GRI agrees that it will not grant any other license for the
         GRI Patents, the GRI Technical Information, or the FLGR(TM) Technology
         to any entity other than FUEL TECH, INC. and one other Licensee unless
         LICENSEE fails to meet the minimum Royalty requirements set out in
         Schedule B to this Agreement or this Agreement is terminated by
         Licensee or terminated for cause by GRI. GRI may require, however, that
         LICENSEE or the other Licensee grant a sublicense under the GRI Patents
         and GRI Technical Information to at most one other entity.

3.3      LICENSEE may implement the sale and installation of the FLGR(TM)
         Technology through sublicensees under sublicense agreements which shall
         give sublicensees the right to license the FLGR(TM) Technology under
         the same terms and conditions, except for the Minimum Cumulative
         Megawatt requirement, as LICENSEE has agreed to with GRI in this
         Agreement. LICENSEE shall ensure that all sublicense agreements granted
         under this Agreement do not contain provisions which would conflict
         with any of the other provisions of this Agreement and do include a
         provision requiring the sublicensee to indemnify GRI to the same extent
         as required of LICENSEE in this Agreement.

3.4      Any sublicense granted under Paragraph 3.3 above will require prior GRI
         approval. LICENSEE shall send the request for approval, including the
         proposed sublicense agreement, directly to GRI's Manager of Contract
         and License Management. Notwithstanding any such consent or
         concurrence, (1) GRI shall not bear any liability to LICENSEE or to any
         Sublicensee arising out of any act or omission of LICENSEE or any
         Sublicensee, and (2) any sublicensing by LICENSEE shall not relieve
         LICENSEE of any responsibility for the performance of the terms of this
         Agreement. Notwithstanding this Paragraph 3.4, LICENSEE does not need
         GRI approval to grant a Site License to a Customer/Sublicensee.

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3.5      GRI agrees that the license granted to the other co-exclusive Licensee
         will be on the same terms as are specified in this Agreement. GRI
         agrees that it will not enter into another agreement granting a license
         to another party for the GRI Patents, the GRI Technical Information, or
         the FLGR(TM) Technology on more favorable terms than those specified in
         this Agreement. If, at any time during the Term of this Agreement, GRI
         enters into another agreement granting a license to another party for
         the GRI Patents, the GRI Technical Information, or the FLGR(TM)
         Technology on more favorable terms than those specified in this
         Agreement, then GRI shall promptly notify LICENSEE of the grant of such
         other license in writing, and LICENSEE shall have the option,
         exercisable by written election to GRI within sixty (60) days of such
         written notice, to adopt the more favorable terms of such other
         Agreement; provided, however, that such new terms shall be effective
         only after LICENSEE's written election to adopt such new agreement
         terms.

3.6      LICENSEE agrees that this license is limited to the rights expressly
         granted herein, and any rights not expressly granted herein are
         expressly reserved to GRI. Nothing contained within this section or
         elsewhere in this Agreement shall be construed as granting by
         implication, estoppel, or otherwise, any licenses or rights under
         patents of GRI other than GRI Patents and GRI Technical Information,
         except as expressly granted in this Agreement.

4        Confidentiality.

4.1      LICENSEE agrees that all GRI Patents and GRI Technical Information
         shall remain the property of GRI. LICENSEE agrees to keep all GRI
         patent applications and GRI Technical Information confidential.
         LICENSEE will advise each employee to whom it discloses GRI patent
         applications and GRI Technical Information as to the confidential
         nature of the GRI patent applications and GRI Technical Information.

4.2      LICENSEE agrees that all GRI Patents and GRI Technical Information
         shall not be disclosed to anyone outside of LICENSEE without the prior
         written consent of GRI, except to the extent necessary to
         Customer/Sublicensees of LICENSEE and/or third parties under written
         obligations of confidentiality. Upon a reasonable request by LICENSEE,
         GRI will not unreasonably withhold its consent to such disclosure.

4.3      The obligations of Paragraphs 4.1 and 4.2 above shall not apply to GRI
         Patents and GRI Technical Information which:

         (a) otherwise is or becomes publicly known through no fault of
             LICENSEE; or

         (b) was in LICENSEE's possession prior to its disclosure by GRI and not
             subject to an obligation of confidentiality; or

         (c) comes into LICENSEE's possession, without covenants of secrecy,
             from another party who is under no confidentiality obligation to
             GRI;



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         (d) is independently developed by LICENSEE, including application
             research data owned by FUEL TECH, INC.;

         (e) is furnished to a third party by GRI without any obligation of
             confidentiality;

         (f) is explicitly approved for release by written authorization of GRI;
             or

         (g) is ordered to be disclosed by a court, government agency, or other
             entity of competent jurisdiction, provided LICENSEE gives timely
             written notice to GRI of such order.

4.4      GRI Patents or GRI Technical Information shall not be deemed to be
         within the foregoing exceptions merely because (1) it is specific and
         embraced by more general information in the public domain or in
         LICENSEE's possession; or (2) it is a combination which can be pieced
         together to reconstruct the GRI Patents or GRI Technical Information
         from multiple sources of information in the public domain, none of
         which shows the whole combination, its principle of operation, or its
         method of use.

5        Royalties.

5.1      In consideration for the license rights granted to LICENSEE by GRI
         pursuant to this Agreement, LICENSEE shall pay GRI a Royalty on all
         Commercial Sales (but not on Demonstration Sales) in accordance with
         Schedule B of this Agreement.

5.2      It is in the best interests of the Parties to maximize the commercial
         exploitation of the GRI Patents and GRI Technical Information licensed
         to LICENSEE pursuant to Section 3 of this Agreement. GRI agrees to
         cooperate with LICENSEE in the promotion of FLGR(TM) Technology at
         industry meetings, conventions, and individual customer visits, as well
         as in the preparation of brochures, pamphlets and other advertising
         materials, including web site references. In particular, GRI agrees
         that it will assist LICENSEE in the identification and choosing of
         sites suitable for implementation of the FLGR(TM) Technology and that
         it will share with LICENSEE its expertise in projecting fuel prices.
         GRI further agrees that it will designate John Pratapas to provide
         technical assistance to LICENSEE for so long as John Pratapas works for
         GRI and that if John Pratapas ceases to work for GRI, then GRI will
         designate a person with equivalent credentials to provide technical
         assistance to LICENSEE.

6        Patent Procurement, Maintenance and Improvements.

6.1      GRI shall have the initial right, with respect to domestic patent
         filings, to file, prosecute, control and maintain all of the GRI
         Patents and shall have the initial right to determine whether or not,
         and where, to file a patent application, to abandon the prosecution of
         any patent or patent application, file reissue or reexamination
         applications or to discontinue the maintenance of any patent or patent
         applications. GRI agrees that it will advise and consult with LICENSEE
         on and keep LICENSEE fully informed of the status of all of the GRI
         Patents and any and all patent applications filed by GRI on the GRI
         Technical Information and that it will give LICENSEE reasonable
         opportunity to make suggestions with regard to the filing, prosecution,
         and maintenance of patents and patent applications. If GRI elects not
         to file, prosecute, or maintain any patent or patent application, then
         GRI will give timely written notice to LICENSEE of its decision;
         LICENSEE and the other co-exclusive Licensee will then consult with one
         another and agree between themselves on which one will have the right
         to file, prosecute, and maintain any such patent or patent application
         or whether they will jointly file, prosecute, and maintain any such
         patent or patent application. If LICENSEE and the other co-exclusive
         Licensee cannot agree as to which one will have the right to file,
         prosecute, and maintain any such patent or patent application, then
         they shall have the right to jointly file, prosecute and maintain any
         such patent or patent application. GRI will cooperate with LICENSEE in
         the filing, prosecution, and maintenance of any such patents or patent
         applications.

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6.2      LICENSEE and the other co-exclusive Licensee have the right to file
         patent applications in the European Patent Office for select countries
         within NATO Europe. LICENSEE and the other co-exclusive Licensee will
         consult with one another and agree between themselves as to which one
         will have the right to file, prosecute, maintain, and control those
         foreign patent applications. If LICENSEE and the other co-exclusive
         Licensee cannot agree as to which one will have the right to file,
         prosecute, maintain, and control any such foreign patent application,
         then they shall have the right to jointly file, prosecute, maintain,
         and control any such foreign patent application. LICENSEE will advise
         GRI within ninety days of the Effective Date of this Agreement for
         which countries it will file patent applications.

6.3      GRI agrees that any improvements, enhancements, and modifications of
         the GRI Patents, GRI Technical information, and/or FLGR(TM) Technology
         that it makes after the Effective Date of this Agreement, whether
         patented or unpatented, will be deemed automatically included within
         the license granted to LICENSEE by this Agreement. GRI and LICENSEE
         agree to consider an additional royalty to provide GRI a commercially
         reasonable return on its additional investment in any such improvement,
         enhancement, or modification to the extent that the same demonstrably
         adds commercial value to the rights licensed under this Agreement.

6.4      LICENSEE shall retain all of the right and title in and interest to any
         Improvements made by LICENSEE, and LICENSEE shall have the sole right
         to file, prosecute, maintain, and control any patent or patent
         applications on such Improvements. LICENSEE hereby grants a
         non-exclusive license to GRI and the other co-exclusive Licensee under
         any Improvements made by LICENSEE. The co-exclusive Licensee shall have
         the right to sublicense any Improvements licensed to it under this
         provision to its Customer/Sublicensees in its Site Licenses for a
         royalty that would provide LICENSEE a reasonable return on its
         additional investment in such Improvement to the extent that the same
         demonstrably adds commercial value to the rights licensed under this
         Agreement. GRI shall have the right to sublicense any Improvements
         licensed to GRI under this provision for a royalty that would provide
         LICENSEE a reasonable return on its additional investment in such
         Improvement to the extent that the same demonstrably adds commercial
         value to the rights licensed under this Agreement. As long as this
         License Agreement remains co-exclusive or exclusive, GRI shall not
         sublicense any such LICENSEE Improvements.

7        Acknowledgment of GRI, Patent Marking, Publicity.

7.1      Acknowledgement. LICENSEE shall include the following acknowledgment,
         or its functional equivalent, in its FLGR(TM)Technology literature,
         and/or marketing , and/or specification sheets: "This (insert name of
         product and/or process, etc.) was developed with the assistance of Gas
         Research Institute."

7.2      Patent Marking. LICENSEE shall identify the applicable patent number(s)
         of all GRI Patents on all FLGR(TM) Technology literature and
         specification sheets immediately upon issuance of the patent. If any
         patent applications are pending, LICENSEE shall place "Patent Pending"
         on all FLGR(TM) Technology literature and specification sheets until
         the last currently pending GRI patent applications have issued or are
         abandoned.

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7.3      Publicity. LICENSEE may use the term "GRI LICENSEE" to describe or
         refer to its activities under this Agreement. LICENSEE shall use the
         term "GRI LICENSEE" only to designate or indicate to its
         Customer/Sublicensees that it is a LICENSEE of GRI Patents and GRI
         Technical Information and for no other purpose.

8        Warranty, Guarantee, and Limitation of Liability.

8.1      GRI warrants that it has title to the GRI Patents, that it has the
         requisite authority to convey the rights granted in the Agreement, and
         that, through the Effective Date of the Agreement, it has not abandoned
         any of the GRI Patents.

8.2      GRI warrants that a FLGR(TM) Technology system designed and installed
         in accordance with GRI Patents and/or GRI Technical Information will be
         free from claims of infringement of the United States and Canadian
         patents of any third party. GRI MAKES NO OTHER WARRANTIES, WHETHER
         EXPRESSED OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS FOR PURPOSE
         OF FLGR(TM) TECHNOLOGY OR A FLGR(TM) TECHNOLOGY SYSTEM.

8.3      LICENSEE shall immediately notify GRI in writing of all infringement
         claims made and infringement suits commenced against LICENSEE because
         of its exercising any rights granted under this Agreement. So long as
         LICENSEE timely tenders to GRI the defense of any such claim or suit,
         GRI shall defend any such claim or suit that may be instituted for the
         alleged infringement, provided that LICENSEE cooperates fully with GRI
         in such defense. GRI agrees to indemnify LICENSEE against all costs of
         suit, attorneys' fees, or judgments that may be incurred by or entered
         against LICENSEE as a result of any such claim or suit. GRI shall have
         the right to control the defense and resolution of any such claim or
         suit. GRI shall not be bound by any compromise or settlement made in
         such claims or suits without its written consent. The indemnification
         and defense rights granted in this subparagraph are strictly limited to
         the rights granted in this Agreement and shall not apply to
         intellectual property developed by LICENSEE or a third party or
         controlled by LICENSEE through license with a third party.

8.4      Subject to the indemnification provision of Paragraph 8.3 above,
         LICENSEE's sole remedy for the breach by GRI of the above warranty
         shall be, at GRI's sole discretion, either: (i) the redesign of the
         FLGR(TM) Technology system to avoid any patent infringement claims;
         (ii) the purchase of any rights from a third party necessary for
         LICENSEE to continue to practice FLGR(TM) Technology; (iii) the
         bringing of an action to invalidate any patent claims of third parties
         upon which an infringement by FLGR(TM) Technology is alleged; or (iv)
         the return of any royalties paid to GRI by LICENSEE for FLGR(TM)
         Technology.

8.5      Performance Guarantee. If LICENSEE finds it necessary to guarantee the
         performance of FLGR(TM) Technology when applied to a
         Customer/Sublicensee's boiler of a type which has had limited FLGR(TM)
         Technology application experience, then, upon review by GRI of
         LICENSEE's proposal to the Customer/Sublicensee and GRI's agreement to
         the level of performance guaranteed, GRI will share equally with
         LICENSEE the cost of any such performance guarantee, including any
         payments LICENSEE is required to make on a letter of credit, a
         performance bond, and/or contract damages owed to a
         Customer/Sublicensee, up to a maximum commitment by GRI of eighty
         percent (80%) of GRI's portion of the Site License Fee for such boiler.


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8.6      IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY
         THIRD PARTY FOR ANY CONSEQUENTIAL, SPECIAL, PUNITIVE, OR INCIDENTAL
         DAMAGES, INCLUDING BUT NOT LIMITED TO, LOST PROFITS OR OTHER ECONOMIC
         LOSS, WHETHER ARISING FROM BREACH OF CONTRACT, TORT, NEGLIGENCE, STRICT
         LIABILITY, OR OTHERWISE.

9        Indemnification.

9.1.     LICENSEE agrees to indemnify and save GRI harmless from and against any
         and all claims of any kind, including but not limited to liability for
         injury to persons and/or damage to property (including without
         limitation, environmental damage) and/or violations of law, arising out
         of or in connection with LICENSEE's manufacture, use, sale or other
         transfer of any FLGR(TM) Technology, including any and all expenses,
         costs, attorneys' fees, settlement, judgments, or awards incurred by
         GRI in the defense of any such claim or lawsuit, except as otherwise
         affirmatively assumed by GRI hereunder.

9.2      LICENSEE shall maintain appropriate liability insurance policies in an
         amount and for such time period as are required to fully satisfy the
         foregoing obligations of indemnification.

10       Infringement by Third Parties.

10.1     Notification. Each Party shall immediately notify the other Party in
         writing of suspected infringement(s) or misappropriation(s) of the GRI
         Patents and/or GRI Technical Information and shall inform the other
         Party of any evidence of such infringement(s) or misappropriation(s).

10.2     GRI shall have the first option and right to bring an action to enjoin
         the infringement and to recover damages against any third party against
         whom GRI has evidence of patent infringement. LICENSEE shall cooperate
         as necessary with GRI. All costs and expenses for such suit shall be
         borne by GRI, and GRI shall be entitled to retain all damages or other
         relief recovered in such litigation.

10.3     If GRI chooses not to bring such an action, GRI shall notify LICENSEE
         of its decision within thirty (30) days of receiving evidence of an
         infringement, after which LICENSEE and the other co-exclusive Licensee
         shall have the second option to bring an action to enjoin the
         infringement and to recover damages. GRI shall cooperate as necessary
         with LICENSEE. All costs and expenses for such suit shall be borne by
         LICENSEE, and LICENSEE shall be entitled to retain all damages or other
         relief recovered in such litigation.

10.4     No Party may compromise or settle with an infringer or misappropriator
         without prior notice to and prior written consent of the other Party,
         which consent shall not be unreasonbly withheld.

11       Term and Termination.

11.1     The Term of this Agreement shall begin from the Effective Date of this
         Agreement and shall continue for a period of five (5) years. LICENSEE
         has the option to extend the Term of this Agreement for an additional
         seven (7) years upon the negotiation of an additional minimum Royalty
         agreeable to both Parties.


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11.2     LICENSEE may terminate this Agreement at any time upon sixty (60) days
         prior written notice to GRI.

11.3     If LICENSEE fails to pay the minimum Royalties required by Schedule B
         of this Agreement, then, upon written notice to LICENSEE, GRI has the
         option either to terminate this Agreement in its entirety or to convert
         the license granted in Section 3 of this Agreement from a co-exclusive
         license to a non-exclusive license.

11.4     If any Party shall be adjudged bankrupt, or become insolvent, or make
         an assignment for the benefit of creditors, or be placed in the hands
         of a receiver or a trustee in bankruptcy, the other Party may terminate
         this Agreement by giving sixty (60) days prior written notice to the
         other Party specifying the basis for termination. If within sixty (60)
         days after receipt of such notice, the Party who received notice shall
         remedy the condition forming the basis for termination, such notice
         shall cease to be operative, and this Agreement shall continue in full
         force.

11.5     Upon termination of this Agreement, LICENSEE agree: (1) that it will
         not use or sell FLGR(TM) Technology systems until expiration of the
         last of the GRI Patents, except that LICENSEE may sublicense the
         FLGR(TM) Technology from others, and (2) that it will promptly transfer
         to GRI all documents containing unpublished GRI Technical Information
         in its possession (including but not limited to videotapes, computer
         media, printed documents, and prototypes).

11.6     Effect of Termination. Termination of this Agreement shall not release
         LICENSEE from its obligation to pay GRI any unpaid Royalties which have
         accrued prior to the termination or which may accrue to GRI after the
         effective date of the termination from Commercial Sales made prior to
         the date of the termination.

12       Compliance with Export Restrictions.

12.1     LICENSEE acknowledges that the FLGR(TM) Technology system, and
         non-patented items and all related GRI Technical Information and
         materials referenced in this Agreement may be subject to export control
         under U. S. Export Administration Regulations. LICENSEE accepts and
         assumes all responsibility for compliance with United State and
         Territory export regulations with respect to their exportation.
         LICENSEE covenants and agrees to comply strictly with these
         regulations, to cooperate fully with GRI in any official or unofficial
         audit or inspection that relates to said regulations, and not to
         export, re-export, divert, transfer or disclose directly or indirectly,
         or permit the export of any item, component, or combination of an
         FLGR(TM) Technology system and/or non-patented items and/or GRI
         Technical Information and/or derivative products of non-patented items
         to any country for which the United States Export Administration Act of
         1979 and the regulations issued thereunder, or any other United States
         law or regulation, requires export or re-export authorization or
         approval under a validated export license. LICENSEE will bear the
         expense of its compliance with all applicable United States laws and
         regulations in this connection without reimbursement or offset.

13       Taxes and Customs Duties, Storage and Transportation Charges.

13.1     LICENSEE acknowledges and agrees that GRI has no responsibility or
         liability for taxes or customs duties, harbor fees or storage or
         transportation charges, related in any way to FLGR(TM) Technology,
         non-patented items, or GRI's services or revenue, except that GRI shall
         bear all income taxes imposed on it with respect to the Royalty
         payments to be made pursuant to this Agreement. LICENSEE agrees to
         assume all responsibility for collection and/or payment of other taxes,
         including, without limitation, for value added taxes, sales taxes, use
         taxes, excise taxes, service taxes, customs duties, customs storage
         fees, without reimbursement by GRI or offset against Royalty payments
         to GRI, but excluding income taxes imposed on GRI with respect to the
         Royalty payments to be made pursuant to this Agreement.

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14       General Provisions.

14.1     Force Majeure. Anything contained in this Agreement to the contrary
         notwithstanding, the obligations of the Parties shall be subject to all
         laws, both present and future, of any Government having jurisdiction
         over either Party, and to orders or regulations of any such Government,
         or any department, agency, or court thereof, and acts of war, acts of
         public enemies, strikes, or other labor disturbances, fires, floods,
         acts of God, or any causes of like kind beyond the control of the
         Parties, and the Parties shall be excused from any failure to perform
         any obligation under this Agreement to the extent such failure is
         caused by any such law, order, regulation, or contingency, but only so
         long as said law, order, regulation, or contingency continues.

14.2     Assignment. This Agreement may not be assigned in whole or in part by
         either Party without the prior written consent of the other Party,
         except that this Agreement may be assigned to a wholly-owned subsidiary
         of a Party. Any assignment made without such consent, other than an
         assignment to a wholly-owned subsidiary of a Party, shall be considered
         void ab initio.

14.3     Notices. All notices and demands required or permitted to be given
         under this Agreement shall be in writing and shall be served by
         facsimile, personal service, or by mail at the address of the receiving
         Party set forth below (or at such different address as may be
         designated by such Party by written notice to the other Party). All
         notices or demands by mail shall be by first class, certified or
         registered mail, return receipt requested, or by nationally-recognized
         private express courier, and shall be deemed received within five (5)
         days of mailing by the other Party.

         (a)  Gas Research Institute
              8600 West Bryn Mawr Avenue
              Chicago, IL 60631
                       Attn: Janice E. Pastryk
                             Contract and License Management

         (b)  Fuel Tech, Inc.,
              1001 Frontenac Road
              Naperville, Illinois 60563-1746
                       Attn: Roy A. Johnson
                             Vice President of Business Development

14.4     Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
         ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, EXCLUDING ITS
         CONFLICT OF LAW PRINCIPLES. GRI and LICENSEE shall attempt to settle
         any claim or controversy arising out of this Agreement through
         consultation and negotiation in the spirit of mutual friendship and
         cooperation. If such attempts fail, then the dispute shall first be
         submitted to a mutually acceptable neutral advisor for mediation,
         fact-finding, or other form of alternate dispute resolution (ADR)
         selected by the Parties. No Party may unreasonably withhold acceptance
         of such an advisor, and his or her selection must be made within 45
         days after written notice by one Party demanding the use of ADR. The
         cost of such mediation or other ADR procedure shall be shared equally
         among GRI and LICENSEE. Any dispute which the Parties cannot resolve
         within six months of the date of the initial demand by any Party for
         mediation or another ADR procedure shall be finally determined by a
         court of competent jurisdiction located within the State of Illinois.
         The use of an ADR procedure under this section shall not be construed
         (under such doctrines as laches, waiver, or estoppel) to have affected
         adversely any Party's ability to pursue its legal remedies, and nothing
         in this section shall prevent any Party from resorting to judicial
         proceedings if (1) good faith efforts to resolve a dispute under these
         procedures have been unsuccessful or (2) interim resort to a court is
         necessary to prevent serious and irreparable injury to any Party or to
         others.

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14.5     No Waiver For Failure to Enforce Other Rights, Cumulative Remedies. The
         failure of either Party to give notice of nonperformance or to enforce
         or exercise any covenant, right or remedy at law or equity, will not
         constitute a waiver of the covenant, right or remedy, or preclude
         either Party from exercising same thereafter.

14.6     Schedule. All schedules to this Agreement, previously designated as
         Schedule A and B respectively, are incorporated herein and expressly
         made a part of this Agreement.

14.7     Severability. If any provision or part of any provision of this
         Agreement is adjudged by a court to be invalid, void, or unenforceable,
         it shall be deemed omitted and the Parties agree that the remainder of
         the Agreement shall not be affected and shall remain in force and
         effect.

14.8     Rule of Construction. The Parties acknowledge that both have
         contributed to this Agreement's contents and they agree that no
         provision of this Agreement should be construed against either Party as
         the drafter.

14.9     Survival of Certain Provisions. The warranties, indemnification,
         confidentiality, obligation to pay accrued Royalties, limitation of
         liability, and choice of law obligations set forth in this Agreement
         shall survive the termination of the Agreement by either Party for any
         reason.

14.10    Headings. The titles and headings of the various sections and
         paragraphs in this Agreement are intended solely for convenience of
         reference and are not intended for any other purpose to explain, modify
         or place any construction upon any of the provisions of this Agreement.

14.11    Relationship of the Parties. Nothing herein shall be deemed to create a
         joint venture or partnership or agency relationship between the
         Parties. No Party shall have the authority to make any statements,
         representations, or commitments of any kind, or to take any action,
         which shall be binding on the other, except as provided for in this
         Agreement or as authorized in writing by a duly authorized agent of the
         Party to be bound.

14.12    All Amendments in Writing. It is agreed that no supplement,
         modification, or amendment of this Agreement shall be binding unless
         executed in writing by duly authorized representatives of both Parties
         to this Agreement.

14.13    Entire Agreement. The Parties have read this Agreement and agree to be
         bound by its terms, and further agree that it constitutes the complete
         and entire agreement of the Parties and supersedes all previous
         communications, oral or written, express or implied and all other
         communications between them relating to the license and to the subject
         matter. No representatives or statements of any kind made by either
         Party, which are not expressly stated, shall be binding on such Party.

                                       10
<PAGE>


IN WITNESS WHEREOF, the Parties have executed the foregoing Agreement.


FUEL TECH, INC.                             GAS RESEARCH INSTITUTE


By: /s/ Steven C. Argabriight                By: /s/ W. H. Kockenmeister
    --------------------------                   ---------------------------
    Steven C. Argabright                         Willian H. Kockenmeister
    President                                    Vice President and
                                                 General Counsel

     November 16, 1998                              11/18/98
   ---------------------------                   ---------------------------
        Date Signed                                     Date Signed

(66382/pgc)


                                       11
<PAGE>

                                   SCHEDULE A

                                   GRI PATENTS

         GRI Patents include the following list of U.S. and Canadian Patents and
         Pending Patent applications, as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                   Patents and Patent Applications (7/23/98)
----------------------------------------------------------------------------------------------------------------
        Patent/application #         Title and Description
----------------------------------------------------------------------------------------------------------------
<S>     <C>                          <C>
1       US 4,779,545 (1988)          Apparatus and Method of Reducing Nitrogen Oxide Emission
----------------------------------------------------------------------------------------------------------------
        CA 1,316,329                 Pulse Injection of fuel to form fuel-rich eddies where NO is reduced.
                                     Injection 2100-2400F.  No OFA. This is the earliest patent establishing a
                                     basis for the FLGR approach.
----------------------------------------------------------------------------------------------------------------
2       US 5,078,064 (1992)          Apparatus and Method of Lower NOx Emission Using Diffusion Process
----------------------------------------------------------------------------------------------------------------
        CA 2,038,796                 Pulses of 4,779,545 patent not required.  Effect can be achieved through
                                     diffusion processes.   Recently reexamined at GRI's request.  CIP filed
                                     to modify language.
----------------------------------------------------------------------------------------------------------------
3       US 5,181,475 (1993)          Apparatus and Process for Control of Nitric Oxide Emission from
                                     Combustion Devices Using Vortex Rings and the Like
----------------------------------------------------------------------------------------------------------------
        CA appl                      Describes the use of vortex rings to control mixing in process described
        2,088,659                    in 064 patent
----------------------------------------------------------------------------------------------------------------
4       US appl 07/608,718 and CIP   Apparatus and Method for Reducing NOx Emissions
        appls
        08/697,338 and  09/087,074
----------------------------------------------------------------------------------------------------------------
        CA appl 2,036,612            Various nozzles and gas injection methods for affecting diffusion of the
                                     natural gas for FLGR process
----------------------------------------------------------------------------------------------------------------
5       US 5,655,899  (1997)         Apparatus and Method for NOx Reduction By Controlled Mixing of Fuel Rich
                                     Jets in Flue Gas
----------------------------------------------------------------------------------------------------------------
                                     Device for introducing gas and controlling jet momentum
----------------------------------------------------------------------------------------------------------------
6       US appl 08/507,928           Apparatus and Method for NOx Reduction by Selective Injection of Natural
        Filed 7/95                   Gas Jets in Flue Gas
----------------------------------------------------------------------------------------------------------------
                                     Beneficial NOx reduction by injecting hydrocarbon fuel in high NOx
                                     regions of furnace. NOA 9/97. Was supposed to be transferred from CNG to
                                     GRI originally. Unavoidably abandoned. CNG petitioned to revive 4/98.
----------------------------------------------------------------------------------------------------------------
7       US appl 08/908,824 Filed     Nitrogen Oxide Reduction by Gaseous Fuel Injection in Low Temperature,
        8/8/97                       Overall Fuel-Lean Flue Gas
----------------------------------------------------------------------------------------------------------------
                                     teaches application of FLGR process originally disclosed in US 5,078,064
----------------------------------------------------------------------------------------------------------------
</TABLE>

         By jointly signed amendment to this Agreement the Parties may add or
         delete patents to those initially listed above.

             THIS INFORMATION IS CONFIDENTIAL AND SHOULD BE TREATED
                 ACCORDINGLY UNTIL THE RESPECTIVE PATENTS ISSUE.

<PAGE>

                                   SCHEDULE B


                                    ROYALTIES


1.  In consideration of the license grant set forth in Section 3 of this
    Agreement, LICENSEE shall pay to GRI a royalty ("Royalty") from the
    Commercial Sale of FLGR(TM) Technology equal to * percent ( * %) of the Site
    License Fee calculated pursuant to the Site License Fee Schedule set forth
    below. LICENSEE shall retain the remaining * percent ( * %) of the Site
    License Fee.

                            Site License Fee Schedule

--------------------------------------------------------------------------------
                       Utility Boiler Site License Fees
--------------------------------------------------------------------------------
                 Boiler Size                                 FLGR
--------------------------------------------------------------------------------
                  <= 100 MW                                 $ * /KW
--------------------------------------------------------------------------------
                  101-200 MW                                $ * /KW
--------------------------------------------------------------------------------
                  201-300 MW                                $ * /KW
--------------------------------------------------------------------------------
                 301- 400 MW                                $ * /KW
--------------------------------------------------------------------------------
                  401-500 MW                                $ * /KW
--------------------------------------------------------------------------------
                  => 501 MW                                 $ * /KW
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                      Industrial Boiler Site License Fees
--------------------------------------------------------------------------------
                 Boiler Size                                 FLGR
--------------------------------------------------------------------------------
                 Minimum Fee                                  $ *
--------------------------------------------------------------------------------
               <= 250 MMBTU/HR                           $ * /MMBTU/hr
--------------------------------------------------------------------------------
              251 - 500 MMBTU/hr                         $ * /MMBTU/hr
--------------------------------------------------------------------------------
             501 - 1000 MMBTU/hr                         $ * /MMBTU/hr
--------------------------------------------------------------------------------
             1001 - 2000 MMBTU/hr                        $ * /MMBTU/hr
--------------------------------------------------------------------------------
             2001 - 3000 MMBTU/hr                        $ * /MMBTU/hr
--------------------------------------------------------------------------------
             3001 - 4000 MMBTU/hr                        $ * /MMBTU/hr
--------------------------------------------------------------------------------
             4001 - 5000 MMBTU/hr                        $ * /MMBTU/hr
--------------------------------------------------------------------------------
            5001 - 10000 MMBTU/hr                        $ * /MMBTU/hr
--------------------------------------------------------------------------------

*   INFORMATION OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT: SUCH
    INFORMATION HAS BEEN FILED SEPARATELY.

2.  For the purposes of computing Site License Fees under the Site License Fee
    Schedule, multiple boilers for the same Customer/Sublicensee may be grouped
    together for purposes of sizing the applicable Site License Fee if the
    Customer/Sublicensee contracts to buy more than one Site License and the
    FLGR(TM) Technology systems are built and the applicable Site License Fees
    paid within a period of three years. If, however, the Customer/Sublicensee
    does not build or pay the applicable Site License fee within a period of
    three years, then the Customer/Sublicensee will become obligated to pay the
    difference between the discounted Site License Fee and the Site License Fee
    that the Customer/Sublicensee would have paid had it committed only to the
    number of FLGR(TM) Technology systems it actually built.


<PAGE>

3.  *
    * INFORMATION OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT: SUCH
    INFORMATION HAS BEEN FILED SEPARATELY.

4.  Notwithstanding the Site License Fee Schedule set out above, LICENSEE may,
    from time to time, recommend to GRI that a Customer/Sublicensee be offered
    the option of paying for FLGR(TM) Technology pursuant to an alternate
    Royalty calculation and not pursuant to the Site License Fee Schedule, and
    GRI agrees to consider such alternate Royalty calculations. LICENSEE will
    recommend an alternative Royalty calculation only when, in LICENSEE's
    reasonable commercial judgment, the Customer/Sublicensee is unlikely to
    consider buying FLGR(TM) Technology unless offered such an alternative.

5.  GRI agrees that when a Customer/Sublicensee has already purchased and
    installed as of the date of this Agreement Fuel Tech Inc.'s
    NOxOUT(R)technology, GRI will receive a Royalty from a Commercial Sale of
    FLGR(TM) Technology to that Customer/Sublicensee that is equal to fifty
    percent (50%) of the Site License Fee calculated pursuant to the Site
    License Fee Schedule and the Customer/Sublicensee will receive a Site
    License to operate its system as either a FLGR(TM)Technology system or an
    AEFLGR(TM)Technology system. After the effective date of this Agreement, if
    a Customer/Sublicensee installs a NOxOUT(R)system from LICENSEE and installs
    a FLGR(TM)Technology system within eighteen (18) months thereafter of
    installing that NOxOUT(R)system, and if the Customer/Sublicensee intends to
    operate the system as taught by GRI's AEFLGR(TM)patent(s), then GRI shall
    receive a royalty for the sale of the FLGR(TM)Technology system to that
    Customer/Sublicensee that is calculated on the basis of the Site License Fee
    Schedule contained in the AEFLGR(TM)License Agreement, and the
    Customer/Sublicensee will receive a Site License to operate its system as
    either a FLGR(TM)Technology system or an AEFLGR(TM)Technology system. If a
    Customer/Sublicensee installs a NOxOUT(R)system from LICENSEE and installs a
    FLGR(TM)Technology system more than eighteen (18) months after installing
    that NOxOUT(R)system, then GRI shall receive a royalty for the sale of the
    FLGR(TM)Technology system to that Customer/Sublicensee that is calculated on
    the basis of the Site License Fee Schedule contained in this License
    Agreement, and the Customer/Sublicensee will receive a Site License to
    operate its system as either a FLGR(TM)Technology system or an
    AEFLGR(TM)Technology system.


6.  For each calendar year indicated below, LICENSEE agrees to use its
    reasonable best efforts to sell, lease, or otherwise transfer sufficient
    FLGR(TM) Technology systems for the following Minimum Cumulative Megawatts
    (based on the boiler nameplate megawatt capacity, excluding Demonstration
    Sales, to which the FLGR(TM) Technology is applied):


         Year                               Minimum Cumulative Megawatts
         ----                               ----------------------------

         1999                                        *
         2000                                        *
         2001                                        *
         2002                                        *
         2003                                        *

*   INFORMATION OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT: SUCH
    INFORMATION HAS BEEN FILED SEPARATELY.

                                       2
<PAGE>

     The Minimum Cumulative Megawatts are a cumulative total, running from year
     to year, of all boiler nameplate megawatt capacity to which the FLGR(TM)
     Technology is applied, through sale, lease, or other transfer, excluding
     Demonstration Sales, by LICENSEE. LICENSEE shall receive credit towards the
     calculation of the Minimum Cumulative Megawatts required under the terms of
     this Agreement for the boiler nameplate megawatt capacity of an AEFLGR(TM)
     Technology system sold under FUEL TECH INC.'s AEFLGR(TM) Technology license
     from GRI.

 7.  At the end of each calendar year during the term of this Agreement,
     LICENSEE shall pay to GRI a minimum Royalty equivalent to the difference
     between the Minimum Cumulative Megawatts indicated above and the actual
     cumulative megawatts sold through the current year of the Agreement. If
     LICENSEE fails to pay the minimum Royalty as required, then, upon written
     notice to LICENSEE, the license granted in Section 3 of this Agreement
     shall terminate.

 8.  It is in the best interests of the Parties to maximize the commercial
     exploitation of the GRI Patents and the GRI Technical Information. To
     achieve the most effective commercial exploitation of the FLGR(TM)
     Technology, LICENSEE shall propose appropriate Demonstration Sales of the
     FLGR(TM)Technology. GRI shall not unreasonably withhold its approval of the
     proposed Demonstration Sales. No Royalty payments shall be due on such
     Demonstration Sales. LICENSEE and GRI agree that such Demonstration Sales
     shall include new and different applications of the FLGR(TM)Technology,
     including but not limited to the application of the FLGR(TM) Technology to
     the following types of boilers: a cyclone boiler with over-fire air, a
     wet-bottom boiler, a wall-fired boiler, a tangentially-fired boiler, an
     opposed-wall-fired boiler, and a boiler with a total megawatt capacity of
     500 MW or above.

 9.  Notwithstanding anything to the contrary in this Agreement, if the GRI
     Patents are invalidated, then LICENSEE's obligation to make Royalty
     payments shall cease and this Agreement shall terminate.

10.  Within forty-five (45) days of the close of each fiscal quarter of
     LICENSEE, beginning with the first close of a fiscal quarter following the
     Effective Date, LICENSEE shall make the Royalty payments due under this
     Agreement to GRI for all Site License Fees received by LICENSEE during that
     quarter on Commercial Sales of the FLGR(TM)Technology, or LICENSEE shall
     certify to GRI that it has made no Commercial Sales of the FLGR(TM)
     Technology. All Royalty payments shall be made in U.S. dollars. LICENSEE
     shall attach a statement to its payment indicating the size and location of
     the boiler to which each Customer/Sublicense applies, the applicable Site
     License Fee per boiler, the total megawatts for the number of
     FLGR(TM)Technology systems sold, leased, or otherwise transferred to date
     by year, and such other information as GRI may reasonably request from time
     to time.

11.  Interest on Late Payments. Royalty payments provided for in this Agreement,
     when overdue, shall bear interest at a rate per annum equal to two percent
     (2%) in excess of the "Prime Rate" published by "The Wall Street Journal"
     on the due date for such Royalty payment. This interest charge shall
     commence on the day after the due date and shall continue until payment is
     received by GRI. The foregoing notwithstanding, if a royalty payment is
     more than sixty (60) days past due, GRI may, at its sole option, deem such
     late payment to be a material breach of this Agreement.

12.  Records, Audit. LICENSEE agrees to maintain adequate books and accounting
     records relating to the Royalties due. Such books and records shall be
     available for GRI to audit and analyze by GRI's internal accountants, or at
     GRI's discretion by GRI's independent accounting firm. These audits will be
     paid for by GRI. Any such audit shall be permitted during business hours
     within thirty (30)days of receipt of GRI's written request. GRI may conduct
     such an audit on an annual basis but not more than once a year. LICENSEE
     must maintain such records during the term of this Agreement and for a
     period of two (2) years thereafter. LICENSEE shall incorporate a similar
     provision into all sublicense agreements, permitting GRI to conduct
     reasonable and periodic audits of the sublicensee's books and records.

                                       3