UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934


Date of Report (Date of earliest event reported) February 26, 2020

FUEL TECH, INC.
(Exact name of registrant as specified in its charter)

Delaware
001-33059
20-5657551
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)


 
  Fuel Tech, Inc.
27601 Bella Vista Parkway
Warrenville, IL 60555-1617
630-845-4500

 
(Address and telephone number of principal executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision:


[ ]    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR    240.14d-2(b))

[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR     240.13e-4(c))








Item 5.02.
Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers
On February 26, 2020, based upon a recommendation from the Compensation Committee (the “Committee”) of the Board of Directors (“Board”) of Fuel Tech, Inc. (“Fuel Tech” or “Company”), the Board took the salary reduction action described below and the Committee took the other actions described below.
Base Salary Reductions. The Board implemented, effective March 1, 2020, a reduction in the salary of all of the Company’s officers, including its Named Executive Officers as identified in the Fuel Tech’s proxy statement for its 2019 Annual Meeting of Stockholders, pursuant to which the base salaries of all officers will be reduced by 10%. The Board may review, change or end the salary reduction program at its discretion in the future.
Set forth below is a summary of the base salary reductions, on an annualized basis, for Fuel Tech’s Named Executive Officers.
Name and Title
 
Current Base Salary
 
Reduced Base Salary
Vincent J. Arnone
President and Chief Executive Officer
 

$425,000

 

$382,500

William E. Cummings, Jr.
Senior Vice President, Sales
 

$240,000

 

$216,000

James M. Pach
Vice President, Controller and Treasurer
 

$190,000

 

$171,000

2020 Executive Performance RSU Award Agreements. The Committee authorized the Company to enter into a 2020 Executive Performance RSU Award Agreement (the “2020 Agreement”) with certain officers, including its President and Chief Executive Officer and Principal Financial Officer and Controller (each a “2020 Participating Executive”) pursuant to which each 2020 Participating Executive will have the opportunity to earn the amount of restricted stock units (RSUs) shown in the table below. The amount of RSUs awarded, if any, will be based on the Company’s achievement of varying levels of operating income before the impact of incentive pay (but including adjustments to reflect the payment of sales commissions) in fiscal 2020 (“Operating Income”), as determined by the Company, in its sole discretion. Nevertheless, no Participating Executive will be entitled to any such RSUs unless the Company achieves a minimum of $1 million in Operating Income in 2020. To the extent the Company achieves the specified levels of Operating Income set forth below, the amount of RSUs to be received by each Participating Executive are formulaic in nature, and do not involve the exercise of any discretion by the Board or Committee regarding such officer’s achievement of objectives or any other subjective, qualitative assessments. If awarded, such RSUs will vest in equal amounts. i.e., 1/3, 1/3 and 1/3, over three years commencing one year after the grant date based on continued service. Such time-vested RSUs are valued at the date of grant using the intrinsic value method based on the closing price of the Company’s common stock on the grant date. Each Participating Executive will enter into the Company’s standard 2020 Agreement for such awards.










Name and Title
 
$1 Million Operating Income RSUs Granted*
 
$2Million Operating Income RSUs Granted*
 
$3 Million Operating Income RSUs Granted*
Vincent J. Arnone
President and Chief Executive Officer
 
50,000
 
75,000
 
100,000
James M. Pach
Principal Financial Officer and Controller
 
20,000
 
30,000
 
40,000
 
*
The amount of RSUs shown represents the threshold or “target” number of RSUs to be granted upon achievement of the specified level of Operating Income. The actual amount of RSUs granted for each category incrementally increase with additional Operating Income achieved up to the next threshold.

The form of 2020 Executive Performance RSU Award Agreement approved by the Committee is attached as Exhibit 10.1 to this Current Report on Form 8-K.
2020 Corporate Incentive Plan. The Committee adopted a 2020 Corporate Incentive Plan (the “2020 CIP”) to provide all of the Company’s U.S. or Canadian based employees (excluding sales personnel) that Fuel Tech designates to participate in the CIP with the opportunity to earn an annual cash bonus based upon employee performance and Fuel Tech’s achievement of certain level of operating income as discussed below. As such, Messrs. Arnone and Pach are each participants in the 2020 CIP. Potential cash awards under the 2020 CIP are designed to focus employees on the achievement of both positive earnings growth for Fuel Tech as well as on their own individual performance. A copy of the 2020 CIP is attached as Exhibit 10.2 to this Current Report on Form 8-K.
The 2020 CIP is structured as follows:
•    2020 CIP payouts are based on Fuel Tech’s ability to realize Operating Income in fiscal 2020. For purposes of the 2020 CIP, “Operating Income” means Fuel Tech’s operating income before the impact of incentive pay (but including adjustments to reflect the payment of sales commissions), as determined by the Committee in its sole discretion. An “Incentive Pool” might be created dependent on Fuel Tech’s obtaining specified levels of Operating Income during the fiscal year. If the Incentive Pool is created, each participant will be awarded his or her designated portion of the Incentive Pool. The focus on Operating Income provided an objective measurement of Fuel Tech’s financial performance to directly tie any payout to the overall financial performance of Fuel Tech across all business lines.
•    No amounts will be payable under the 2020 CIP unless Fuel Tech achieves a minimum of $250,000 in Operating Income for fiscal 2020. Accordingly, if Fuel Tech’s Operating Income financial performance for 2020 falls below $250,000, there will be no payout under the 2020 CIP.
•    If Fuel Tech generates $250,000 of Operating Income in fiscal 2020, the percentage of Operating Income to be funded into the Incentive Pool will equal 25% of all Operating Income.
•    The aggregate size of the potential Incentive Pool is “capped” at $3 million. In order for the full $3 million to be funded into the Incentive Pool for fiscal 2020 Fuel Tech will need to achieve $12 million in Operating Income as explained in the funding metrics described above.





•    The 2020 CIP contemplates that incentive payments to individual employees will be based on the amount of the Incentive Pool; the employee’s 2020 base wages; the employee’s target bonus factor (a percentage assigned to each employee based on such employee’s job level and contribution) and, for all employees below the level of Senior Vice President, the employee’s achievement percentage (an overall job performance multiplier factor that can range from 0% to 100%, and represents the employee’s achievement of individual objectives in 2020) .
•    The target bonus factor for Mr. Arnone under the 2020 CIP is 50% and for Mr. Pach, 30%. In addition, the 2020 CIP provides that the achievement percentage assigned to Fuel Tech’s Principal Executive Offer (Mr. Arnone), Principal Financial Officer (Mr. Pach), and any executive or senior vice president will automatically equal 100%.
•    The actual amounts of fiscal 2020 cash bonuses earned, if any, for any 2020 Named Executive Officer who is a participant in the 2020 CIP will be reported in Fuel Tech’s proxy statement for its 2021 Annual Meeting of Stockholders.
Item 9.01
Financial Statements and Exhibits.
(d) Exhibits

Exhibits
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 hereunto duly authorized.



Date: March 2, 2020

 
 
Fuel Tech, Inc. (Registrant)

 
 
By: /s/ Albert G. Grigonis
 
 
Albert G. Grigonis
 
 
Senior Vice President, General Counsel and Secretary

    




2020 EXECUTIVE PERFORMANCE RSU AWARD AGREEMENT
This Executive Performance RSU Award Agreement (the “Agreement”) is hereby entered effective as of _____________, 2020 (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 of ________ (“Target RSU Amount”). The Committee shall award the Participant a number of RSUs from zero and up to 133.33% of the Target RSU Amount on the Determination Date (which, for clarification, is after the completion of the Performance Period) based on the Operating Income for the Performance Period (as defined in Section 21).
(a)    Operating Income Measurement. Following the completion of the Performance Period, the Committee will determine the Operating Income for the Performance Period and shall approve the issuance to the Participant a number of Executive Performance RSUs, determined as follows:
(i)    If the Company’s Operating Income for the Performance Period is less than $1,000,000, no Executive Performance RSUs will be awarded.
(ii)    If the Company’s Operating Income for the Performance Period is at least $1,000,000 and less than $2,000,000, then a number of Executive Performance RSUs equal to two-thirdsof the Target RSU Amount will be awarded.
(iii)    If the Company’s Operating Income for the Performance Period is at least $2,000,000 and less than $3,000,000, then a number of Executive Performance RSUs equal to 100% of the Target RSU Amount will be awarded.

(iv)    If the Company’s Operating Income for the Performance Period equals or exceeds $3,000,000, then a number of Executive Performance RSUs equal to 133.33% of the Target RSU Amount will be awarded.
(v)    The number of Executive Performance RSUs awarded pursuant to this Section 2(a) will be determined based on straight line interpolation if the Operating Income for the Performance Period is between the amounts listed above (e.g., if Operating Income is $1,500,000, then a number of Executive Performance RSUs equal to 83.335% of the Target RSU Amount will be awarded).
(b)    Determination Date. Any Executive Performance RSU awards made as a result of the Company’s Operating Income 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 2(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.
(i)    If the Participant’s Continuous Service terminates for any reason before the Determination Date, other than the Participant’s (A) termination by the Company without Cause, (B) death, or (C) Disability, no Executive Performance RSUs will be awarded to the Participant, except as provided in Section 2(e) below.
(ii)    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 Executive Performance RSUs on the Distribution Date equal to the product obtained by multiplying “X” by “Y” where “X” equals the number of Executive Performance RSUs such Participant would have been entitled to receive had such Participant remained in Continuous Service until the Determination Date and “Y” equals a fraction, the numerator of which is the number of days 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 365.
(iii)    If the Participant’s Continuous Service terminates on or after the Determination Date, but before the Executive Performance RSUs have fully vested under Section 2(d) or (e) below:
A.If the Participant’s Continuous Service is terminated by the Company for Cause, the Participant will forfeit all Executive Performance RSUs, including any Executive Performance RSUs that have vested under Section 2(d).
B.    If the Participant terminates Continuous Service due to death or Disability, the Participant will vest in any Executive Performance RSUs that have not vested under Section 2(d) or (e), and the Company will distribute Shares to the Participant equal to the full number of Executive Performance RSUs that were awarded to the Participant in accordance with Section 3 below.
C.    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 Executive Performance RSUs that have not vested under Section 2(d) or (e), and the Company will distribute Shares to the Participant equal to the number of Executive Performance RSUs that already have vested in accordance with Section 3 below.
(d)    Installment Vesting. Any Executive Performance RSUs awarded on the Determination Date shall vest in three installments, as follows: (i) one-third of the total Executive Performance RSUs awarded shall vest on the first anniversary of the Award Date, (ii) one-third of the total Executive Performance RSUs awarded shall vest on the second anniversary of the Award Date, and (iii) the remaining one-third of the total Executive Performance RSUs awarded shall vest on the third anniversary of the Award 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 Executive Performance RSUs, the Committee shall determine, in its sole discretion, whether to award none, some or all of the Target 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 Executive Performance RSUs it so awards; provided that, in no event shall the Participant be awarded a number of vested Executive Performance RSUs that is less than the number determined as follows: (A) (1) the Company’s Operating Income from the beginning of the Performance Period through the calendar quarter ending immediately prior to the Change in Control shall be multiplied by a fraction, the numerator of which is four (4) and the denominator of which is the number of full calendar quarters ending prior to the Change in Control, and (2) a number of Executive Performance RSUs shall be determined according to the metrics of Section 2(a) above based on the above calculation of the annualized operating income, then (B) the Company shall multiply that number of Executive Performance RSUs 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 Executive Performance RSUs awarded to the Participant, if any, have fully vested under Sections 2(c) or (d), if the Participant’s Continuous Service has not terminated before the effective date of the Change in Control, the Executive 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 Executive 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 Executive 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 Executive 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 Executive Performance RSUs do not become fully vested upon the Change in Control because of the foregoing provisions of this paragraph (e), the Participant’s Executive 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 (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 Executive 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 Executive Performance RSUs in Section 2(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 Award Date. Any such deferral election shall apply to the receipt of all Shares underlying the Executive 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 Executive Performance RSUs seven (7) years from the Award Date regardless of the fact that the Executive 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 Executive 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 Executive Performance RSUs will occur in accordance with Section 3 below).
3.    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 4 and 7 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 this Executive Performance RSU Award including but not limited to voting rights or dividends, if and when the Company declares same.
4.    Adjustment of Executive Performance RSU Award. In the event that the Company 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 4 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.
5.    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.
6.    Non-transferability. 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.
7.    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 7, 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 7 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 7, 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 7. In the event that the Participant is found to have breached any provision set forth in this Section 7 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.
8.    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.
9.    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.
10.    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.
11.    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.
12.    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.
13.    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.
14.    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 14 by giving the other party written notice of such change, in accordance with the procedures described above.
15.    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.
16.    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.
17.    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.
18.    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.
19.    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 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 15th day of the third month of the calendar year following the calendar year in which the Performance Period ends (e.g., in the event of the Participant’s termination due to Disability on December 15, 2020, the Performance Period, by definition, shall end on December 15, 2020 and the Shares shall be distributed no later than March 15, 2021). Also, with respect to each 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.
20.    Counterparts. This Agreement may be executed in one or more counterparts, all of which together shall constitute but one Agreement.
21.    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 19(a)). For clarification, this Section 21(c) shall not apply in circumstances in which the Participant receives RSUs pursuant to Sections 2(c) or 2(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 date on which the underlying RSUs vest; 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 19(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)    Operating Income” means the Company’s operating income for the Performance Period, before the impact of incentive pay (but including adjustments to reflect the payment of sales commissions), as determined by the Committee in its sole discretion.
(g)    Performance Period” means the 2020 calendar year.
(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)    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.
(m)    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).

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

By:                   
Its:                   

Exhibit A
to
2020 Executive Performance RSU Award Agreement

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 Vincent J. Arnone (“the Participant” or “you”), who became eligible to receive an award of RSUs under the Fuel Tech, Inc. 2014 Long-Term Incentive Plan, as amended (the “Plan”) and a 2020 Executive Performance RSU Award Agreement (the “Agreement”), which Agreement was legally effective ____________, 2020. 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
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 Award Date.
Any such deferral must apply to receipt of all Shares underlying the of RSU award. For example, if you were to elect a deferral period of seven (7) years for any Executive Performance RSUs, this would result in you receiving Shares underlying the entire Executive Performance RSUs award seven (7) years from the Award Date regardless of the fact that the Executive Performance 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 19(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 the 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 Executive Performance RSUs until ___________, 20__.
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 14 of the Agreement.
__________________________________________
        
Date: ____________________________________




1

2020 Executive Performance RSU Award Agreement
EXHIBIT102IMAGE1.JPG


FUEL TECH, INC.

2020 Corporate Incentive Plan

1.    THE PLAN

1.1    Objectives. This Corporate Incentive Plan of Fuel Tech, Inc. a Delaware corporation (the “Company”) is designed to provide Eligible Employees with an annual cash bonus incentive based on both Company financial results and, to the extent and in the manner set forth in Sections 3 and 4 below, the applicable Eligible Employee’s overall job performance contribution to achieving those results. Capitalized terms not otherwise defined herein shall have the meanings set forth in Section 4 of this Incentive Plan.

1.2    General. The Incentive Plan is an annual bonus plan commencing January 1, 2020, with payouts based on the Company’s financial performance in 2020. For Eligible Employees, this Incentive Plan supersedes and replaces all prior annual bonus incentive compensation programs for all regular, full-time and part-time U.S. or Canadian based employees of the Company.

2.    ELIGIBILITY

2.1    Eligible Employees. Except as provided in Section 2.2 and subject to Section 5.5, Eligible Employees must be employed on the last day of a fiscal year (December 31) in order to be eligible for a payout under the Incentive Plan based on that fiscal year’s performance. No amounts will be deemed earned or payable under the Incentive Plan by any employee whose employment with the Company ends on or before the close of business on the last day of the fiscal year. An Eligible Employee deemed to be eligible for a payout in accordance with the provisions of the Incentive Plan for a given fiscal year, need not be employed on the day of a bonus payout under this Incentive Plan 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 Incentive Plan is in effect, an Eligible Employee’s employment with the Company is involuntarily terminated: (a) not for cause by the Company, or (b) on account of the Eligible Employee’s death, or (c) on account of the Eligible Employee’s Disability, then to the extent and at the time the Company determines there shall be a payout for that fiscal year under the Incentive Plan, the affected Eligible Employee shall be eligible for a pro rata Incentive Plan payment (or, in the case of death, to that employee’s estate) in accordance with the applicable calculations of Section 3, “Incentive Plan Payouts” and subject to all the other provisions of the Incentive Plan. Such pro rata payment shall equal the payout amount for the affected Eligible Employee determined in accordance with Section 3 below; 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 Eligible Employee’s separation date from the Company shall be used in such pro rata allocations.

3.    INCENTIVE PLAN PAYOUTS

3.1    Incentive Pool Funding.

3.1.1    Payout Threshold and Funding Cap.

(a)    Notwithstanding anything to the contrary contained in this Incentive Plan, no Incentive Plan payout will be made to any Eligible Employee unless the Company has achieved the established minimum threshold of Operating Income of $250,000. Accordingly, if the Company fails to achieve the established minimum threshold of Operating Income, there is no payout under the Incentive Plan of any kind, regardless of the Company’s financial performance or the Eligible Employee’s achievement of his or her personal performance goals.

(b)    Notwithstanding anything to the contrary contained in this Incentive Plan, the maximum amount that may be funded into the Incentive Pool pursuant to Section 3.1.2 below is $3 million.

3.1.2    Funding Based on Company Performance.

(a)    Subject to Section 5.5, the Company will set aside a percentage of Operating Income in an Incentive Pool to provide for bonus payments under this Incentive Plan based on the amount of Operating Income earned by the Company in 2020. The percentage of Operating Income that is set aside based on the Company’s financial performance shall be determined by the Committee after consideration of the recommendations of the Company’s Chief Executive Officer.

(b)    Once the Company’s minimum threshold of Operating Income is met (as described in Section 3.1.1 above), the percentage of Operating Income set aside in the Incentive Pool will be 25% of all Operating Income.

By way of illustration, if the Company earned $1.0 million in Operating Income in fiscal 2020, the amount of Operating Income funded into the Incentive Pool would equal $250,000


By way of further illustration, if the Company earned $100,000 in Operating Income in fiscal 2020, no amount would be funded into the Incentive Pool because the $250,000 payout threshold described in Section 3.1.1 above would not have been met.



3.2    Incentive Pool Allocation. The Incentive Pool shall be allocated among Eligible Employees in the manner set forth set forth below:

B x C x D
Payout =    A    x     E

“A” equals the total amount of the Incentive Pool.

“B” equals the Eligible Employee’s Base W-2 Wages (as defined in Section 4).

“C” equals the Eligible Employee’s Target Bonus Factor (as defined in Section 4).

“D” equals the Eligible Employee’s Realization Percentage (as defined in Section 4).

“E” equals the aggregate total sum reached by adding together the products obtained by multiplying (a) the Base W-2 Wages of each Eligible Employee times (b) such Eligible Employee’s respective Target Bonus Factor times (c) such Eligible Employee’s respective Realization Percentage.

4.    DEFINITIONS

Operating Income” – means Operating Income before the impact of incentive pay (but including adjustments to reflect the payment of sales commissions), as determined by the Company, in its sole discretion.

Base W-2 Wages” – means, with respect to each Eligible Employee, such Eligible Employee’s respective normal W-2 base wages paid in 2020 (excluding overtime or other compensation including, without limitation, bonuses, allowances, paid leave, or vacation).

“China/Pacific Rim Group” – means each United States employee of the Company or its People’s Republic of China subsidiary whom the Company selects to be members of that group.

“Incentive Plan” or “CIP” – means the 2020 Corporate Incentive Plan of Fuel Tech, Inc., as amended from time to time.

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

"Disability” – means that an applicable Eligible Employee, 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 the Employee's position, with or without a reasonable accommodation.
    
“Eligible Employee” – means, subject to the employee non-eligibility exceptions stated below, each regular, full-time and part-time U.S. or Canadian based employee of the Company. Notwithstanding the foregoing, the following employees of the Company are not eligible to participate in the Incentive Plan: (a) each employee of the Company or its subsidiaries who is designated by the Company to be a member of one of the following groups: the Sales Group, the China/Pacific Rim Group or the Europe/Western Asia Group; and (b) any employee who has agreed to ineligibility via a separate written agreement with the Company.

“Europe/Western Asia Group” – means each United States employee of the Company or any of the Company’s European subsidiaries whom the Company selects to be a member of that group.

“Individual Objectives” means the individual performance objectives established for applicable Eligible Employee (including the weighting given to the realization of each Individual Objective in the determination of such Eligible Employee’s “Realization Percentage” (as defined in Section 4 below)) and communicated to the applicable Eligible Employee no later than April 15, 2020.

“Realization Percentage” – means a percentage representing the extent to which, if any, an applicable Eligible Employee has achieved his or her Individual Objectives for 2020, as determined by the Company in its sole and absolute discretion and communicated to such Eligible Employee after December 31, 2020; provided, however, that notwithstanding anything to the contrary contained herein, with respect to any Eligible Employee that is serving as an executive vice president, senior vice president or has been designated as the Company’s Principal Executive Officer or Principal Financial Officer (as defined under the Securities Exchange Act of 1934, as amended), such Eligible Employee’s Realization Percentage will automatically and without further action by the Company equal 100%.

“Sales Group” – means the Senior Vice President, Sales, the National Sales Manager, APC Sales and each United States employee of the Company whom the Company selects to participate in the Company’s then current FUEL CHEM Employee Commission Plan, APC Employee Commission Plan, Aftermarket Commission Plan and Business Development Commission Plan.

“Target Bonus Factor” – means a percentage assigned to each Eligible Employee on the basis of such Eligible Employee’s job level and contribution as determined by the Company in its sole and absolute discretion. Each Eligible Employee’s Target Bonus Factor shall be communicated to such employee no later than April 15, 2020.

5.    OTHER CONDITIONS

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

5.2    No Right of Employment. Neither the Incentive Plan nor any action taken under the Incentive Plan 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 employee.

5.3    Taxes, Withholding. The Company (or any subsidiary or affiliate of the Company) shall have the right to deduct from any payout under the Incentive Plan 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 Incentive Plan 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    Administration. The Incentive Plan shall be administered by or under the authority of the Committee which shall have the full discretionary power to administer and interpret this Incentive Plan and to establish rules for its administration. Notwithstanding anything to the contrary contained herein, the authority of the Committee under this Section 5.5 shall include, without limitation, the right at any time during the pendency of the Incentive Plan to amend or cancel the Incentive Plan, in whole or in part, to change the criteria for Eligible Employees, to change the incentive pool funding metrics or payout percentages and any other change the Committee determines advisable in its sole and absolute discretion. Any and all such actions shall not be subject to challenge by any Eligible Employee.5.6    Effectiveness. The Incentive Plan will not be deemed effective for any fiscal year until such time, if any, as the determination of the Incentive Plan financial performance metrics and Incentive Pool allocations contemplated by Section 3 above have been released for communication to Incentive Plan participants, which date shall be no later than March 31st of each fiscal year.

6.    RESERVATION OF RIGHTS; GOVERNING LAW; CONTRACT DISCLAIMER.

6.1    FOR UNITED STATES-BASED ELIGIBLE EMPLOYEES: The Company reserves the right to amend or cancel the Incentive Plan in whole or in part (including, without limitation, to change the criteria for Eligible Employees, to change the incentive pool funding metrics or payout percentages and any other change the Company determines advisable in its sole and absolute discretion) at any time without notice. There can be no guaranty that the Incentive Plan will be in effect in any subsequent fiscal year. The Company also reserves the right to decide all questions and issues arising under the Incentive Plan and its decisions are final. The Incentive Plan shall be construed in accordance with and governed by the laws of the State of Illinois. The Incentive Plan is a statement of the Company’s intentions and does not constitute a guarantee that any particular Incentive Plan 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 employee.

6.2    FOR ELIGIBLE EMPLOYEES BASED OUTSIDE THE UNITED STATES: This Incentive Plan is only valid for the year 2020. As indicated above, the Company reserves the right in its sole discretion to adopt or not adopt a new incentive plan in 2020, but, if adopted, with features, terms and conditions to be communicated to non-U.S. based Eligible Employees by March 31, 2021. However, there is no guarantee that in 2021 or in subsequent years an Incentive Plan or similar plan shall be adopted. The Company also reserves the right to decide all questions and issues arising under the Incentive Plan and its decisions are final. The Incentive Plan shall be construed in accordance with and governed by the laws applicable to the affected Eligible Employee’s place of work. The adoption of this Incentive Plan for 2020 does not constitute a guaranty that any particular Incentive Plan payout amount will be paid even if incentive compensation has previously consistently been granted for a certain period of time. It does not create a contractual relationship or any contractually enforceable rights between the Company and any Eligible Employee.

Fuel Tech, Inc. 2020 Corporate Incentive Plan
Effective January 1, 2020
Fuel Tech, Inc.
Confidential         1