Document:

FTEK-2015.03.31-EX10.1 EOIP Plan

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    1FTEK-2015.03.31-EX10.2 EE NQ Stock Option Agreement

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)

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