10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

or

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

For the transition period from              to             

Commission file number: 001-33059

 ________________________________

FUEL TECH, INC.

(Exact name of registrant as specified in its charter)

  ________________________________

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

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, IL 60555-1617

630-845-4500

www.ftek.com

(Address and telephone number of principal executive offices)

  ________________________________

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

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

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

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

On May 12, 2014 there were outstanding 22,794,080 shares of Common Stock, par value $0.01 per share, of the registrant.

FUEL TECH, INC.

Form 10-Q for the three-month period ended March 31, 2014

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013	1
	Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2014 and 2013	2
	Consolidated Statements of Comprehensive Loss for the Three-Month Periods Ended March 31, 2014 and 2013	3
	Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2014 and 2013	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	17
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 6.	Exhibits	19
SIGNATURES		20

PART I.        FINANCIAL INFORMATION

Item 1.        Financial Statements

FUEL TECH, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

	March 31, 2014			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	24,918		$	27,738
Marketable securities	76			30
Accounts receivable, net of allowance for doubtful accounts of $1,269 and $1,189, respectively	35,638			36,974
Inventories	916			443
Prepaid expenses and other current assets	2,668			2,196
Prepaid income taxes	2,333			1,407
Deferred income taxes	590			477
Total current assets	67,139			69,265
Property and equipment, net of accumulated depreciation of $20,566 and $20,077, respectively	12,797			13,027
Goodwill	21,051			21,051
Other intangible assets, net of accumulated amortization of $5,304 and $5,108, respectively	4,167			4,305
Other assets	2,371			2,410
Total assets	$	107,525		$	110,058
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt	$	1,622		$	1,636
Accounts payable	9,453			9,920
Accrued liabilities:
Employee compensation	2,110			4,460
Other accrued liabilities	5,729			4,630
Total current liabilities	18,914			20,646
Deferred income taxes	489			59
Other liabilities	725			730
Total liabilities	20,128			21,435
Shareholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized, 22,951,121 and 22,701,613 shares issued, and 22,794,080 and 22,592,956 shares outstanding, respectively	230			227
Additional paid-in capital	133,395			132,796
Accumulated deficit	(45,113		)	(44,027		)
Accumulated other comprehensive (loss) income	(444		)	37
Nil coupon perpetual loan notes	76			76
Treasury stock, 157,041 and 108,657 shares in 2014 and 2013, respectively, at cost	(747		)	(486		)
Total shareholders’ equity	87,397			88,623
Total liabilities and shareholders’ equity	$	107,525		$	110,058

See notes to consolidated financial statements.

1

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

	Three Months Ended   March 31,
	2014			2013
Revenues	$	18,661		$	22,484
Costs and expenses:
Cost of sales	10,810			13,052
Selling, general and administrative	8,744			8,458
Research and development	244			933
	19,798			22,443
Operating (loss) income	(1,137		)	41
Interest expense	(29		)	—
Interest income	11			15
Other expense	(30		)	(80		)
Loss before income taxes	(1,185		)	(24		)
Income tax benefit	99			3
Net loss	$	(1,086	)	$	(21	)
Net loss per common share:
Basic	$	(0.05	)	$	0.00
Diluted	$	(0.05	)	$	0.00
Weighted-average number of common shares outstanding:
Basic	22,641,000			22,112,000
Diluted	22,641,000			22,112,000

See notes to consolidated financial statements.

2

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(in thousands)

	Three Months Ended   March 31,
	2014			2013
Net loss	$	(1,086	)	$	(21	)
Other comprehensive loss:
Foreign currency translation adjustments	(509		)	(263		)
Unrealized gains from marketable securities, net of tax	28			—
Total other comprehensive loss	(481		)	(263		)
Comprehensive loss	$	(1,567	)	$	(284	)

See notes to consolidated financial statements.

3

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Three Months Ended   March 31,
	2014			2013
Operating Activities
Net loss	$	(1,086	)	$	(21	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	493			538
Amortization	196			211
Allowance for doubtful accounts	85			207
Deferred income taxes	305			161
Stock-based compensation	424			329
Changes in operating assets and liabilities:
Accounts receivable	1,059			(7,494		)
Inventories	(474		)	(90		)
Prepaid expenses, other current assets and other non-current assets	(446		)	986
Accounts payable	(409		)	(1,106		)
Accrued liabilities and other non-current liabilities	(1,988		)	(2,121		)
Net cash used in operating activities	(1,841		)	(8,400		)
Investing Activities
Purchases of property, equipment and patents	(322		)	(555		)
Net cash used in investing activities	(322		)	(555		)
Financing Activities
Proceeds from exercises of stock options	160			—
Excess tax benefit from exercises of stock options	12			—
Treasury shares withheld	(261		)	(101		)
Net cash used in financing activities	(89		)	(101		)
Effect of exchange rate fluctuations on cash	(568		)	(240		)
Net decrease in cash and cash equivalents	(2,820		)	(9,296		)
Cash and cash equivalents at beginning of period	27,738			24,453
Cash and cash equivalents at end of period	$	24,918		$	15,157

See notes to consolidated financial statements.

4

FUEL TECH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)

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

Note A:        Nature of Business

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

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

Note B:        Basis of Presentation

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

The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission.

Note C:        Revenue Recognition Policy

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

Fuel Tech uses the percentage of completion method of accounting for equipment construction and license contracts that are sold within the Air Pollution Control technology segment. Under the percentage of completion method, revenues are recognized as work is performed based on the relationship between actual construction costs incurred and total estimated costs at completion. Construction costs include all direct costs such as materials, labor, and subcontracting costs, and indirect costs allocable to the particular contract such as indirect labor, tools and equipment, and supplies. Revisions in completion estimates and contract values are made in the period in which the facts giving rise to the revisions become known and can influence the timing of when revenues are recognized under the percentage of completion method of accounting. Such revisions have historically not had a material effect

5

on the amount of revenue recognized. The completed contract method is used for certain contracts that are not long-term in nature or when reasonably dependable estimates of the percentage of completion cannot be made. When the completed contract method is used, revenue and costs are deferred until the contract is substantially complete, which usually occurs upon customer acceptance of the installed product. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. As of March 31, 2014 and December 31, 2013, the Company had two and three contracts in progress, respectively, that were identified as a loss contracts and a provision for loss in the amount of $31 and $68, respectively, were recorded in other accrued liabilities on the consolidated balance sheets.

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

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

Accounts receivable includes unbilled receivables, representing revenues recognized in excess of billings on uncompleted contracts under the percentage of completion method of accounting. At March 31, 2014 and December 31, 2013, unbilled receivables were approximately $14,401 and $12,599, respectively, and are included in accounts receivable on the consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted contracts were $1,488 and $1,206, at March 31, 2014 and December 31, 2013, respectively. Such amounts are included in other accrued liabilities on the consolidated balance sheets.

Fuel Tech has installed over 800 units with APC technology and normally provides performance guarantees to our customers based on the operating conditions for the project. As part of the project implementation process, we perform system start-up and optimization services that effectively serve as a test of actual project performance. We believe that this test, combined with the accuracy of the modeling that is performed, enables revenue to be recognized prior to the receipt of formal customer acceptance.

Note D:        Cost of Sales

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

Note E:        Selling, General and Administrative Expenses

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

Note F:        Available-for-Sale Marketable Securities

At the time of purchase, marketable securities are classified as available-for-sale as management has the intent and ability to hold such securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell available-for-sale securities would be based on various factors, including, but not limited to asset/liability management strategies, changes in interest rates or prepayment risks, and liquidity needs. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in equity as a separate component of other comprehensive income (OCI). Our marketable securities consist of a single equity investment with a fair value of $76 and $30 and no cost basis at March 31, 2014 and December 31, 2013, respectively.

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in other income/(expense) in the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method. On a quarterly basis, we make an assessment to determine if there have been any events or circumstances to indicate whether a security with an unrealized loss is impaired on an other-than-temporary (OTTI) basis. This determination requires

6

significant judgment. OTTI is considered to have occurred (1) if management intends to sell the security; (2) if it is more likely than not we will be required to sell the security before recovery of its amortized cost basis; or (3)the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis. The credit-related OTTI, represented by the expected loss in principal, is recognized in non-interest income, while noncredit-related OTTI is recognized in OCI. For securities which we do expect to sell, all OTTI is recognized in earnings. Presentation of OTTI is made in the income statement on a gross basis with a reduction for the amount of OTTI recognized in OCI. Once an other-than-temporary impairment is recorded, when future cash flows can be reasonably estimated, future cash flows are re-allocated between interest and principal cash flows to provide for a level-yield on the security. We have not experienced any other-than-temporary impairments during the periods ended March 31, 2014 and 2013.

Note G:        Accumulated Other Comprehensive Income (Loss)

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

	Three Months Ended
	March 31,
	2014			2013
Foreign currency translation
Balance at beginning of period	$	18		$	(419	)
Other comprehensive loss:
Foreign currency translation adjustments (1)	(509		)	(263		)
Balance at end of period	$	(491	)	$	(682	)
Available-for-sale marketable securities
Balance at beginning of period	$	19		$	27
Other comprehensive income:
Net unrealized holding gain (2)	46			—
Deferred income taxes (2)	(18		)	—
Total other comprehensive income	28			—
Balance at end of period	$	47		$	27
Total accumulated other comprehensive loss	$	(444	)	$	(655	)

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

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

Note H:        Treasury Stock

Common stock held in treasury totaled 157,041 and 108,657 with a cost of $747 and $486 at March 31, 2014 and December 31, 2013, respectively. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that vested during 2014 and 2013.

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Note I:        Earnings per Share Data

Basic earnings per share excludes the dilutive effects of stock options, restricted stock units (RSUs), and the nil coupon non-redeemable convertible unsecured loan notes. Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is antidilutive. Out-of-money stock options are excluded from diluted earnings per share because they are anti-dilutive. At March 31, 2014 and 2013, basic earnings per share is equal to diluted earnings per share because all outstanding stock awards and convertible loan notes are considered anti-dilutive during periods of net loss. The following table sets forth the weighted-average shares used in calculating the earnings per share for the three-month periods ended March 31, 2014 and 2013.

	Three Months Ended   March 31,
	2014	2013
Basic weighted-average shares	22,641,000	22,112,000
Conversion of unsecured loan notes	—	—
Unexercised options and unvested RSUs	—	—
Diluted weighted-average shares	22,641,000	22,112,000

Fuel Tech had 2,458,000 and 2,516,000 weighted average equity awards outstanding at March 31, 2014 and 2013, respectively, that were not dilutive for the purposes of inclusion in the calculation of diluted earnings per share but could potentially become dilutive in future periods.

Note J:        Stock-Based Compensation

Fuel Tech has a stock-based employee compensation plan, referred to as the Fuel Tech, Inc. Incentive Plan (Incentive Plan), under which awards may be granted to participants in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance awards, bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plan may be Fuel Tech’s directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of Fuel Tech’s business. The amount of shares that may be issued or reserved for awards to participants under a 2004 amendment to the Incentive Plan is 12.5% of outstanding shares calculated on a diluted basis. At March 31, 2014, Fuel Tech had approximately 637,000 equity awards available for issuance under the Incentive Plan.

Stock-based compensation is included in selling, general, and administrative costs in our Consolidated Statements of Operations. The components of stock-based compensation for the three- month periods ended March 31, 2014 and 2013 were as follows:

	Three Months Ended   March 31,
	2014			2013
Stock options and restricted stock units	$	424		$	329
Tax benefit of stock-based compensation expense	(163		)	(120		)
After-tax effect of stock-based compensation	$	261		$	209

As of March 31, 2014, there was $3,196 of total unrecognized compensation cost related to all non-vested share-based compensation arrangements granted under the Incentive Plan.

Stock Options

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

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

8

expected life of the option; and (3) expected life of the option – an estimate based on historical experience including the effect of employee terminations.

Stock option activity for Fuel Tech’s Incentive Plan for the three- months ended March 31, 2014 was as follows:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding on January 1, 2014	1,688,500		$	11.88
Granted	—		—
Exercised	(30,000	)	5.35
Expired or forfeited	—		—
Outstanding on March 31, 2014	1,658,500		$	12.00	3.53	$	226
Exercisable on March 31, 2014	1,648,500		$	12.04	3.51	$	226

Non-vested stock option activity for the three months ended March 31, 2014 was as follows:

	Non-Vested Stock Options Outstanding	Weighted-Average Grant Date Fair Value
Outstanding on January 1, 2014	10,000	$	6.10
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding on March 31, 2014	10,000	$	6.10

As of March 31, 2014, there was $13 of total unrecognized compensation cost related to non-vested stock options granted under the Incentive Plan. This cost is expected to be recognized during 2014.

Restricted Stock Units

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

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

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

• The second type of RSU award contains a targeted number of RSUs to be granted based on the Company’s revenue growth relative to a specified peer group during a period of two calendar years. These awards vest 67% on the second anniversary of the Agreement date and 33% on the third anniversary of the Agreement date. We estimated the fair value of these performance-based RSU awards on the Agreement date using the trading price of the Company’s stock on the date of

9

determination and our estimate of the probability that the specified performance criteria will be met. For these revenue growth performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award.

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

At March 31, 2014, there is $3,183 of unrecognized compensation costs related to restricted stock unit awards to be recognized over a weighted average period of 2.19 years.

A summary of restricted stock unit activity for the three-month period ended March 31, 2014 is as follows:

	Shares		Weighted Average Grant Date Fair Value
Unvested restricted stock units at January 1, 2014	772,016		$	5.35
Granted	256,000		5.02
Forfeited	(11,166	)	4.98
Vested	(217,674	)	5.70
Unvested restricted stock units at March 31, 2014	799,176		$	5.15

Deferred Directors Fees

In addition to the Incentive Plan, Fuel Tech has a Deferred Compensation Plan for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech Common Stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards. In the three-month periods ended March 31, 2014 and 2013, Fuel Tech recorded no stock-based compensation expense under the Deferred Plan.

Note K:        Debt

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

The Facility contains several debt covenants with which the Company must comply on a quarterly or annual basis, including a maximum Funded Debt to EBITDA Ratio (or “Leverage Ratio”, as defined in the Facility) of 2.0:1.0 based on the four trailing quarterly periods. Maximum funded debt is defined as all borrowed funds, outstanding standby letters of credit and bank guarantees. EBITDA includes after tax earnings with add backs for interest expense, income taxes, depreciation and amortization, and stock-based compensation expenses. In addition, the Facility covenants include an annual capital expenditure limit of $10,000 and a minimum tangible net worth of $55,000, adjusted upward for 50% of net income generated and 100% of all capital issuances. At March 31, 2014, the Company was in compliance with all financial covenants specified by the Facility.

At March 31, 2014 and December 31, 2013, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $4,135 and $3,478, respectively, on its domestic credit facility in connection with contracts in process. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments. At March 31, 2014 and December 31, 2013, there were no cash borrowings under the domestic revolving credit facility and approximately $10,865 and $11,522, respectively, was available for future borrowings. The Company pays a commitment fee of 0.25% per year on the unused portion of the revolving credit facility.

On June 28, 2013, Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), a wholly-owned subsidiary of Fuel Tech, entered into a new revolving credit facility (the China Facility) agreement with JPM Chase for RMB 35 million (approximately $5,678), which expires on June 27, 2014. This credit facility replaced the previous RMB 35 million facility that

10

expired on June 28, 2013. The facility is unsecured, bears interest at a rate of 125% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by Fuel Tech. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As of March 31, 2014 and December 31, 2013, Beijing Fuel Tech has borrowings outstanding in the amount of $1,622 and $1,636, respectively. These borrowings were subject to interest rates of approximately 7.0% at March 31, 2014 and December 31, 2013, respectively.

At March 31, 2014 and December 31, 2013, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $841 and $646, respectively, on its Beijing Fuel Tech revolving credit facility in connection with contracts in process. At March 31, 2014 and December 31, 2013, approximately $3,215 and $3,443 was available for future borrowings.

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

Interest payments in the amount of $29 and $0 were made during the three-month periods ended March 31, 2014 and 2013.

Note L:        Business Segment and Geographic Disclosures

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

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

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

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

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

11

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

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

Three months ended March 31, 2013	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	12,947		$	9,537		$	—		$	22,484
Cost of sales	(8,583		)	(4,469		)	—			(13,052		)
Gross margin	4,364			5,068			—			9,432
Selling, general and administrative	—			—			(8,458		)	(8,458		)
Research and development	—			—			(933		)	(933		)
Operating income (loss)	$	4,364		$	5,068		$	(9,391	)	$	41

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

	Three Months Ended   March 31,
	2014		2013
Revenues:
United States	$	9,229	$	12,866
Foreign	9,432		9,618
	$	18,661	$	22,484

	March 31, 2014		December 31, 2013
Assets:
United States	$	80,008	$	83,464
Foreign	27,517		26,594
	$	107,525	$	110,058

Note M:        Contingencies

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

Changes in the warranty liability for the three months March 31, 2014, and 2013, are summarized below:

	Three Months Ended   March 31,
	2014			2013
Aggregate product warranty liability at beginning of period	$	596		$	776
Net aggregate expense related to product warranties	(50		)	(10		)
Aggregate reductions for payments	(14		)	(20		)
Aggregate product warranty liability at end of period	$	532		$	746

12

Note N:        Income Taxes

The Company’s effective tax rate of 8.4% and 12.5% for the three-month periods ended March 31, 2014 and 2013, respectively, differs from the statutory federal tax rate of 34% due primarily to state taxes, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, non-deductible commissions, and non-deductible meals and entertainment expenses.

Fuel Tech had unrecognized tax benefits as of March 31, 2014 and December 31, 2013 in the amount of $65, respectively, all of which, if ultimately recognized, will reduce Fuel Tech's annual effective tax rate.  

Note O:        Goodwill and Other Intangibles

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Fuel Tech has two reporting units which are reported in the FUEL CHEM^® technology segment and the APC technology segment. At March 31, 2014 and December 31, 2013, goodwill allocated to the FUEL CHEM technology segment was $1,723 while goodwill allocated to the APC technology segment was $19,328.

Goodwill is allocated to each of our reporting units after considering the nature of the net assets giving rise to the goodwill and how each reporting unit would enjoy the benefits and synergies of the net assets acquired. Our last annual fair value measurement test, performed as of October 1, 2013 revealed no indications of impairment. There were no indications of goodwill impairment in the three-month periods ended March 31, 2014 and 2013.

Fuel Tech reviews other intangible assets, which include customer lists and relationships, covenants not to compete, patent assets, tradenames, and acquired technologies, for impairment on a recurring basis or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated. There were no indications of intangible asset impairment in the three-month periods ended March 31, 2014 and 2013.

Note P:        Fair Value

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

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

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

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

The fair value of our marketable securities was $76 and $30 at March 31, 2014 and December 31, 2013, respectively, and was determined using quoted prices in active markets for identical assets (Level 1 fair value measurements). Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. We had no assets or liabilities that were valued using level 2 or level 3 inputs and therefore there were no transfers between levels of the fair value hierarchy during the three-month periods ended March 31, 2014 and 2013.

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

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Note Q:        Recently Added and Pending Accounting Pronouncements

On January 1, 2014, Fuel Tech adopted changes issued by the Financial Accounting Standards Board (FASB) to the accounting for obligations resulting from joint and several liability arrangements. These changes require an entity to measure such obligations for which the total amount of the obligation is fixed at the reporting date as the sum of (i) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and (ii) any additional amount the reporting entity expects to pay on behalf of its co-obligors. An entity will also be required to disclose the nature and amount of the obligation as well as other information about those obligations. Examples of obligations subject to these requirements are debt arrangements and settled litigation and judicial rulings. The adoption of these changes had no impact on the Consolidated Financial Statements, as Fuel Tech does not currently have any such arrangements.

On January 1, 2014, Fuel Tech adopted changes issued by the FASB to a parent entity’s accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. A parent entity is required to release any related cumulative foreign currency translation adjustment from accumulated other comprehensive income into net income in the following circumstances: (i) a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided; (ii) a partial sale of an equity method investment that is a foreign entity; (iii) a partial sale of an equity method investment that is not a foreign entity whereby the partial sale represents a complete or substantially complete liquidation of the foreign entity that held the equity method investment; and (iv) the sale of an investment in a foreign entity. The adoption of these changes had no impact on the Consolidated Financial Statements. This guidance will need to be considered in the event Fuel Tech initiates any of the transactions described above.

On January 1, 2014, Fuel Tech adopted changes issued by the FASB to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. These changes require an entity to present an unrecognized tax benefit as a liability in the financial statements if (i) a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or (ii) the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset to settle any additional income taxes that would result from the disallowance of a tax position. Otherwise, an unrecognized tax benefit is required to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. Previously, there was diversity in practice as no explicit guidance existed. The adoption of these changes did not result in a significant impact on the Consolidated Financial Statements.

Note R:        Subsequent Events

On April 28, 2014, Fuel Tech entered into, and on April 30, 2014 closed on a stock purchase transaction of 100% of the capital stock (“Shares”) of Cleveland Roll Forming Environmental Division, Inc. d/b/a PECO (“PECO”), an Ohio corporation. Pursuant to the stock purchase agreement, PECO became a wholly owned subsidiary of Fuel Tech. Fuel Tech paid to the Seller total cash consideration of $7.25 million. The stock purchase agreement contains customary representations, warranties and indemnities.

PECO specializes in electrostatic precipitator (ESP) rebuilds, retrofits and associated products and services. This acquisition broadens our APC product portfolio and grants us immediate access into the fast-growing particulate control market, creating opportunities both domestically and abroad.

We are currently in the process of determining the fair value of the assets acquired and liabilities assumed and calculating the purchase price allocation to these assets and liabilities. We have not presented pro-forma financial information related to the acquisition because this information is not currently available and therefore it is not practical to do so.

14

FUEL TECH, INC.

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

Results of Operations

Revenues for the three months ended March 31, 2014 and 2013 were $18,661 and $22,484, respectively, representing an 17% decrease versus the same period last year.

The Air Pollution Control (APC) technology segment generated revenues of $10,734 for the three-months ended March 31, 2014, a decrease of $2,213 or 17% from the prior period amount of $12,947.

Consolidated APC backlog at March 31, 2014 was $14,995 versus backlog at March 31, 2013 of $44,673. Our current backlog consists of US domestic projects totaling $2,413 and international projects totaling $12,582.

The FUEL CHEM^® technology segment generated revenues of $7,927 for the three-months ended March 31, 2014, a decrease of $1,610, or 17% versus the respective prior year period amount of $9,537. This segment continues to be affected by the soft electric demand market and low natural gas prices, which leads to fuel switching, unscheduled outages, and combustion units operating less than capacity.

Consolidated gross margin percentage for the three-month periods ended March 31, 2014 and 2013 was 42% for both respective periods. For the APC technology segment, the gross margin percentage increased slightly to 35% from 34% in the comparable prior-year period. For the FUEL CHEM technology segment, the gross margin percentage decreased slightly to 52% from 53% in the comparable prior-year quarter.

Selling, general and administrative expenses (SG&A) for the three-month periods ended March 31, 2014 and 2013 were $8,744 and $8,458, respectively. This represents an nine point increase in SG&A as a percentage of revenues to 47% from 38%. On a total dollar basis SG&A increased $286 for the quarter versus the prior year, which was the result of increases in professional fees of $218, outside consulting fees of $136, stock compensation of $95, and administrative costs associated with our foreign operations of $90, which were partially offset by a decrease in employee related costs of $254.

Research and development expenses for the three-month periods ended March 31, 2014 and 2013 were $244 and $933, respectively. The Company plans to continue focusing on increased R&D efforts in the pursuit of commercial applications for its technologies outside of its traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities.

Interest expense for the three-month periods ended March 31, 2014 and 2013 were $29 and $0, respectively, and relates to borrowings under the Beijing Fuel Tech Facility.

Income tax benefit for the three-months ended ended March 31, 2014 and 2013 were $99 and $3, respectively, and reflective of the Company's net loss for the respective quarters. The Company is projecting a consolidated effective tax rate of 13% for 2014.

Liquidity and Sources of Capital

At March 31, 2014, Fuel Tech had cash and cash equivalents and short-term investments on hand of $24,994 and working capital of $48,225 versus $27,768 and $48,619 at December 31, 2013, respectively.

Operating activities used cash of $1,841 during the three-month period ended March 31, 2014. This decrease in cash from operations was primarily due to cash used by our net loss of $1,086, an increase in inventories and prepaid expenses of $920 and a decrease in the outstanding accounts payable and accrued liabilities balances of $2,397, offset by non-cash expenses of $1,503, and a decrease in accounts receivable of $1,059.

Investing activities used cash of $322 during the three-month period ended March 31, 2014 due to purchases of equipment and patents.

Financing activities used cash of $89 as a result of cash used of $261 for the acquisition of common shares held in treasury that were withheld for taxes due by employees upon lapsing of restricted stock units, offset by $172 in cash proceeds and excess tax benefits from the exercise of stock options.

On June 30, 2013, Fuel Tech amended its existing revolving credit facility (the Facility) with JPMorgan Chase Bank, N.A (JPM Chase) to extend the maturity date through June 30, 2015. The total borrowing base of the facility is $15,000 and contains a

15

provision to increase the facility up to a total principal amount of $25,000 upon approval from JPM Chase. The Facility is unsecured, bears interest at a rate of LIBOR plus a spread range of 250 basis points to 375 basis points, as determined by a formula related to the Company’s leverage ratio, and has the Company’s Italian subsidiary, Fuel Tech S.r.l., as a guarantor. Fuel Tech can use this Facility for cash advances and standby letters of credit. As of March 31, 2014 and December 31, 2013, there were no outstanding borrowings on the credit facility.

The Facility contains several debt covenants with which the Company must comply on a quarterly or annual basis, including a maximum Funded Debt to EBITDA Ratio (or “Leverage Ratio”, as defined in the Facility) of 2.0:1.0 based on the four trailing quarterly periods. Maximum funded debt is defined as all borrowed funds, outstanding standby letters of credit and bank guarantees. EBITDA includes after tax earnings with add backs for interest expense, income taxes, depreciation and amortization, and stock-based compensation expenses. In addition, the Facility covenants include an annual capital expenditure limit of $10,000 and a minimum tangible net worth of $55,000, adjusted upward for 50% of net income generated and 100% of all capital issuances. At March 31, 2014, the Company was in compliance with all financial covenants specified by the Facility.

At March 31, 2014 and December 31, 2013, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $4,135,000 and $3,478, respectively, on its domestic credit facility in connection with contracts in process. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments. At March 31, 2014 and December 31, 2013, there were no cash borrowings under the domestic revolving credit facility and approximately $10,865,000 and $11,522, respectively, was available for future borrowings. The Company pays a commitment fee of 0.25% per year on the unused portion of the revolving credit facility.

On June 28, 2013, Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), a wholly-owned subsidiary of Fuel Tech, entered into a new revolving credit facility (the China Facility) agreement with JPM Chase for RMB 35 million (approximately $5,678), which expires on June 27, 2014. This credit facility replaced the previous RMB 35 million facility that expired on June 28, 2013. The facility is unsecured, bears interest at a rate of 125% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by Fuel Tech. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As of March 31, 2014 and December 31, 2013, Beijing Fuel Tech has borrowings outstanding in the amount of $1,622 and $1,636, respectively. These borrowings were subject to interest rates of approximately 7.0% at March 31, 2014 and December 31, 2013, respectively.

At March 31, 2014 and December 31, 2013, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $841 and $646, respectively, on its Beijing Fuel Tech revolving credit facility in connection with contracts in process. At March 31, 2014 and December 31, 2013, approximately $3,215 and $3,443 was available for future borrowings.

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

Contingencies and Contractual Obligations

Fuel Tech issues a standard product warranty with the sale of its products to customers as discussed in Note M. The warranty liability balance during the three-months ended March 31, 2014 decreased by approximately $64.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and reflect Fuel Tech’s current expectations regarding future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. Fuel Tech has tried to identify forward-looking statements by using words such as “anticipate,” “believe,” “plan,” “expect,” “estimate,” “intend,” “will,” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to Fuel Tech and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2013 in Item 1A under the caption “Risk Factors,” which could cause Fuel Tech’s actual growth, results of operations, financial condition, cash flows, performance and business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Fuel Tech undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in Fuel Tech’s filings with the Securities and Exchange Commission.

Item 3.        Quantitative and Qualitative Disclosures about Market Risk

16

Foreign Currency Risk Management

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

Fuel Tech is also exposed to changes in interest rates primarily due to its debt facilities (refer to Note K to the consolidated financial statements). A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not have a materially adverse effect on interest expense during the upcoming year ended December 31, 2014.

Item 4.        Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were changes as described below in Fuel Tech's internal control over financial reporting during the quarter to which this report relates that have materially affected, or are reasonably likely to materially affect Fuel Tech's internal control over financial reporting.

During the first quarter of 2014, Fuel Tech implemented a series of Epicor ERP modules, including a new general ledger and chart of accounts, new reporting and accounts payable and new procurement and materials management modules. The introduction of these ERP modules and the related workflow capabilities resulted in changes to Fuel Tech's financial reporting controls and procedures, with such changes identified during the implementation of the ERP modules. Therefore, as appropriate, Fuel Tech is modifying the design and documentation of internal control process and procedures relating to the new system to supplement and complement existing internal controls over financial reporting. The system changes were undertaken to integrate systems and consolidate information, and were not undertaken in response to any actual or perceived deficiencies in Fuel Tech's control over financial reporting.

17

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

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

Item 1A.        Risk Factors

The risk factors included in our Annual Report on Form 10-K for fiscal year ended December 31, 2013 have not materially changed.

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

None

18

Item 6.        Exhibits

a.	Exhibits (all filed herewith)
	10.1	Stock Purchase Agreement, dated April 28, 2014, between Fuel Tech, Inc. and Lawrence Ekey
	31.1	Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	31.2	Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	32	Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002
	101.1	INSXBRL Instance Document
	101.2	SCHXBRL Taxonomy Extension Schema Document
	101.3	CALXBRL Taxonomy Extension Calculation Linkbase Document
	101.4	DEFXBRL Taxonomy Extension Definition Linkbase Document
	101.5	LABXBRL Taxonomy Extension Label Linkbase Document
	101.6	PREXBRL Taxonomy Extension Prevention Linkbase Document

19

FUEL TECH, INC.

Signatures

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

Date: May 12, 2014	By:	/s/ Douglas G. Bailey
		Douglas G. Bailey
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 12, 2014	By:	/s/ David S. Collins
		David S. Collins
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

20

EX-10.1

STOCK PURCHASE AGREEMENT

between

Lawrence E. Ekey

and

Fuel Tech, Inc.

April 28, 2014

1

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS AND CONSTRUCTION            1

Section 1.1 Definitions                            1

Section 1.2 Construction                            9

ARTICLE 2 SALE AND TRANSFER OF SHARES; CLOSING10

Section 2.1 Shares                                 10

Section 2.2 Purchase Price10

Section 2.3 Closing10

Section 2.4 Closing Obligations10

Section 2.5 Adjustment Amount and Payment11

Section 2.6 Adjustment Procedure12

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER14

Section 3.1 Organization and Good Standing14

Section 3.2 Authority and Enforceability; No Conflict14

Section 3.3 Capitalization15

Section 3.4 Financial Statements16

Section 3.5 Books and Records16

Section 3.6 Real and Personal Property17

Section 3.7 Condition and Sufficiency of the Assets18

Section 3.8 Accounts Receivable18

Section 3.9 Inventories18

Section 3.10 No Undisclosed Liabilities19

Section 3.11 Taxes19

Section 3.12 No Material Adverse Change22

Section 3.13 Employee Benefits22

Section 3.14 Compliance with Legal Requirements; Governmental

Authorizations25

Section 3.15 Legal Proceedings; Orders26

Section 3.16 Absence of Certain Changes and Events27

Section 3.17 Contracts28

Section 3.18 Insurance30

Section 3.19 Environmental Matters33

Section 3.20 Employees and Consultants34

Section 3.21 Labor Disputes; Compliance35

Section 3.22 Intellectual Property Assets35

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Section 3.23 Foreign Corrupt Political Practices Act; Export Control40

Section 3.24 Relationships with Related Persons40

Section 3.25 Customers and Suppliers40

Section 3.26 Product Liabilities and Warranties40

Section 3.27 Brokers or Finders41

Section 3.28 Disclosure41

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER41

Section 4.1 Organization and Good Standing41

Section 4.2 Enforceability and Authority; No Conflict41

Section 4.3 Investment Intent42

Section 4.4 Certain Proceedings42

Section 4.5 Brokers or Finders42

ARTICLE 5 COVENANTS OF SELLER PRIOR TO CLOSING DATE42

Section 5.1 Access and Investigation42

Section 5.2 Operation of Company’s Business43

Section 5.3 Notice43

Section 5.4 Payment of Indebtedness by Related Persons    44

Section 5.5 Exclusive Dealing44

ARTICLE 6 COVENANTS OF BUYER PRIOR TO CLOSING DATE44

Section 6.1 Notice44

ARTICLE 7 POST-CLOSING COVENANTS45

Section 7.1 Cooperation and Proceedings; Access to Records45

Section 7.2 Non-Competition; Non-Solicitation

and Non-Disparagement45

Section 7.3 Confidentiality47

Section 7.4 Customer and Other Business Relationships48

Section 7.5 Work Product48

Section 7.6 Tax Returns; Benefit Plans49

Section 7.7 Dissolution of CRF Environmental, Inc49

Section 7.8 Sharing of Cost Savings49

Section 7.9 Audited Financial Statements    49

ARTICLE 8 CONDITIONS PRECEDENT TO BUYER’S

OBLIGATIONS TO CLOSE49

Section 8.1 Accuracy of Seller’s Representations49

Section 8.2 Seller’s Performance50

Section 8.3 Bring Down Certificate50

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Section 8.4 Consents50

Section 8.5 Government Authorizations50

Section 8.6 Additional Documents50

Section 8.7 No Proceedings51

Section 8.8 No Claim Regarding Stock Ownership or Sale

Proceeds51

Section 8.9 No Conflict51

Section 8.10 No Material Adverse Change51

Section 8.11 Closing of FGC Acquisition51

Section 8.12 Bailment Agreement51

ARTICLE 9 CONDITIONS PRECEDENT TO SELLER’S

OBLIGATIONS TO CLOSE52

Section 9.1 Accuracy of Buyer’s Representations    52

Section 9.2 Buyer’s Performance52

Section 9.3 Bring Down Certificate52

Section 9.4 Consents52

Section 9.5 Additional Documents52

Section 9.6 No Legal Prohibition52

ARTICLE 10 TERMINATION53

Section 10.1 Termination Events53

Section 10.2 Effect of Termination53

ARTICLE 11 INDEMNIFICATION; PAYMENT;

REIMBURSEMENT; REMEDIES54

Section 11.1 Survival; Remedies54

Section 11.2 Indemnification, Payment and Reimbursement

by Seller54

Section 11.3 Indemnification, Payment and Reimbursement

by Seller; Environmental Matters55

Section 11.4 Indemnification, Payment and Reimbursement

by Buyer56

Section 11.5 Time Limitations56

Section 11.6 Certain Limitations on Amount57

Section 11.7 Right of Setoff    57

Section 11.8 Third-Party Claims57

Section 11.9 Other Claims60

Section 11.10 Strict Liability or Indemnitee Negligence60

ARTICLE 12 MISCELLANEOUS61

Section 12.1 Expenses61

Section 12.2 Public Announcements61

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Section 12.3 Disclosure Letter61

Section 12.4 Further Assurances61

Section 12.5 Entire Agreement61

Section 12.6 Modification61

Section 12.7 Assignments and Successors61

Section 12.8 Exhibits and Schedules62

Section 12.9 No Third-Party Rights    62

Section 12.10 Governing Law62

Section 12.11 Jurisdiction and Service of Process62

Section 12.12 Waiver of Jury Trial62

Section 12.13 Attorney’s Fees62

Section 12.14 Enforcement of Agreement62

Section 12.15 NoWaiver    63

Section 12.16 Notices63

Section 12.17 Severability64

Section 12.18 Counterparts and Electronic Signatures64

INDEX OF EXHIBITS

Exhibit NumberExhibit Title

Exhibit 2.4(a)(iv)Form of Seller Release

Exhibit 2.4(a)(vi)Form of Escrow Agreement

Exhibit 2.4(a)(vii)Form of Lease Agreement

Exhibit 2.4(a)(viii)Form of Bailment Agreement

Exhibit 8.4Material Consents

Exhibit 11.2(h)Seller Cost of Completion Estimate

INDEX OF SELLER DISCLOSURE LETTER

PartSubject

Part 3.1Qualification To Do Business

Part 3.2(b)No Conflicts

Part 3.2(c)Required Consents

Part 3.3(a)Capitalization

Part 3.3(b)Equity Contracts

Part 3.5(c)Bank Accounts

Part 3.6(b)Leased Real Property

Part 3.6(c) Permitted Encumbrances (Real Estate)

Part 3.6(d)Permitted Encumbrances (Personal Property)

Part 3.8Accounts Receivable

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Part 3.9Inventory

Part 3.10Undisclosed Liabilities

Part 3.11(a)Taxes

Part 3.11(b)Tax Returns

Part 3.11(e)Tax Rulings

Part 3.13Employee Plans

Part 3.14(a)Compliance with Legal Requirements

Part 3.14(b)Governmental Authorizations

Part 3.15(a)Legal Proceedings

Part 3.15(b)Legal Orders

Part 3.15(c)Legal Notices

Part 3.16Absence of Changes

Part 3.17Applicable Contracts

Part 3.18Insurance

Part 3.19Environmental Matters

Part 3.20Employees and Consultants

Part 3.21(b)Labor Disputes; Compliance

Part 3.22(c)Patents

Part 3.22(d)Marks

Part 3.22(e)Copyrights

Part 3.22 (h)Net Names

Part 3.24Related Party Transactions

Part 3.25Customers and Suppliers

Part 3.26.2014Product Liability and Warranties

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STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (“Agreement”) is made on April 28, 2014 by Fuel Tech, Inc., a Delaware corporation (“Buyer”) and Lawrence E. Ekey, an individual (“Seller”).Each of Buyer and Seller are sometimes individually referred to as a “Party,” or, collectively, as the “Parties.”

RECITALS

Seller desires to sell, and Buyer desires to purchase, all issued and outstanding shares (the “Shares”) of capital stock of Cleveland Roll Forming Environmental Division, Inc., an Ohio corporation (the “Company”), for the consideration and on the terms set forth in this Agreement. The Parties, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS AND USAGE

1.1Definitions. For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1.1:

“Adjoining Property”-as defined in Section 3.19(e).

“Adjustment Amount”-as defined in Section 2.5(a).

“Agreement”-as defined in the first paragraph of this Agreement.

“Applicable Contract”-any Contract (a) under which Company has or could acquire any rights, (b) under which Company has or could become subject to any obligation or liability, or (c) by which Company or any assets owned or used by it is or could become bound.

“Balance Sheet Date”-as defined in Section 3.4.

“Breach”-any breach of, or any inaccuracy in, any representation or warranty or breach of, or failure to perform or comply with, any covenant or obligation in or of the Contract in question, or any event that with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy, or failure.

“Business Day”-any day other than (a) Saturday or Sunday or (b) any other day on which national banks in the State of Illinois are generally permitted or required to be closed.

“Buyer”-as defined in the first paragraph of this Agreement.

“Buyer Group”-as defined in Section 5.1.

“Buyer Indemnified Persons”-as defined in Section 11.2.

“Buyer’s Closing Documents”-the Escrow Agreement and the Lease Agreement.

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“Cleanup”-all actions to clean up, remove, treat, or in any other way address the presence, Release, or Threat of Release of any Hazardous Material whether or not any expense incurred in connection with such action constitutes a capital expenditure.

“Closing”-as defined in Section 2.3.

“Closing Balance Sheet”-as defined in Section 2.6(a).

“Closing Net Working Capital”-as defined in Section 2.5(a).

“Closing Date”-the date on which the Closing occurs.

“Closing Payment”-as defined in Section 2.2.

“COBRA”-as defined in Section 3.13(d).

“Code”-the Internal Revenue Code of 1986.

“Company”-as defined in the Recitals of this Agreement.

“Confidential Information”-as defined in Section 7.3(a).

“Consent”-any approval, consent, ratification, waiver, or other authorization.

“Contemplated Transactions”-the transactions contemplated by this Agreement.

“Contract”-any agreement, contract, lease, consensual obligation, promise, commitment, or undertaking (whether written or oral and whether express or implied), whether or not legally binding.

“Copyrights”-as defined in Section 3.22(a)(iii).

“Disclosure Letter”-the disclosure letter delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement.

“Employee Plan”-as defined in Section 3.13(a).

“Encumbrance”-any charge, claim, community or other marital property interest, condition, equitable interest, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal, or similar restriction, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.

“End Date”-as defined in Section 10.1(d).

“Environment”-soil, land surface and subsurface strata, surface waters (including navigable and non-navigable inland and ocean waters), groundwaters, drinking water supply, stream sediments, ambient air (indoor air), plant and animal life, and any other environmental medium or natural resource.

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Environmental, Health, and Safety Liability”-any Loss, obligation, or other responsibility resulting from or arising under an Environmental Law or an Occupational Safety and Health Law.

“Environmental Law”-any Legal Requirement that provides for or relates to:

(a)advising appropriate authorities, employees, or the public with respect to the use of any Hazardous Material, the Release or Threat of Release of Hazardous Material, violation of discharge or emission limits or other prohibitions, or any Hazardous Activity or any activity, such as resource extraction or construction, that could have a significant effect on the Environment;

(b)preventing or reducing to acceptable levels the Release of Hazardous Material into the Environment;

(c)reducing the quantities, or minimizing or controlling the hazardous characteristics, of Hazardous Material that are generated;

(d)assuring that products are designed, formulated, packaged, and used so that they do not present an unreasonable risk to human health or the Environment when used or disposed of;

(e)protecting the Environment;

(f)reducing the risks involved in the transportation of Hazardous Material;

(g)the cleanup of Hazardous Material that has been Released, preventing its Release, or addressing the Threat of Release, or paying the costs of such actions; or

(h)making a Person compensate any other Person for damage done to its health or property or the Environment or permitting self-appointed representatives of the public interest to recover for injuries done to public assets or resources.

“Equity Security”-in respect of any Person, (a) any capital stock or similar security, (b) any security convertible into or exchangeable for any security described in clause (a), (c) any option, warrant, or other right to purchase or otherwise acquire any security described in clauses (a), (b), or (c), and (d) any “equity security” within the meaning of the Exchange Act.

“ERISA”-the Employee Retirement Income Security Act of 1974.

“Escrow Agent”-as defined in the Escrow Agreement.

“Escrow Agreement”-as defined in Section 2.4(a)(vi).

“Escrow Funds”-as defined in Section 2.2(b).

“Exchange Act”-the Securities Exchange Act of 1934.

“Facilities”-any real property owned or operated or formerly owned or operated by Company and any buildings, plants, structures, or equipment (including motor vehicles, tank cars, and rolling stock) owned or operated or formerly owned or operated by Company.

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“Financial Statements”-as defined in Section 3.4.

“GAAP”-generally accepted accounting principles in the United States.

“Governmental Authorization”-any (a) Consent, license, registration, or permit issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.

“Governmental Body”-any:

(a)nation, state, county, city, town, borough, village, district, or other jurisdiction;

(b)federal, state, local, municipal, foreign, multinational, or other government;

(c)governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal, or other entity exercising governmental or quasi-governmental powers);

(d)body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power, whether local, national, or international; or

(e)official of any of the foregoing.

“Hazardous Activity”-the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment, or use of Hazardous Material and any other act, business, operation, or activity that increases the danger, or poses a risk of harm, to the Environment.

“Hazardous Material”-any substance, material, or waste that is or will foreseeably be regulated by any Governmental Body, including any material, substance, or waste that is defined or classified as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “pollutant,” “restricted hazardous waste,” “contaminant,” “toxic waste,” “pollutant,” or “toxic substance” under any provision of Environmental Law, including petroleum, petroleum products, asbestos, presumed asbestos-containing material or asbestos-containing material, urea formaldehyde, or polychlorinated biphenyls.

“Indemnified Person”-as defined in Section 11.8(a).

“Indemnifying Person”-as defined in Section 11.8(a).

“Independent Accountants”-as defined in Section 2.6(d).

“Intellectual Property Assets”-as defined in Section 3.22(a).

“Interim Balance Sheet”-as defined in Section 3.4.

“Interim Balance Sheet Date”-as defined in Section 3.4.

“Invention Disclosures”-as defined in Section 3.22(c)(i).

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“IRS”-the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

“Knowledge”-

(a)An individual will be deemed to have Knowledge of a particular fact or other matter if:

(i)that individual is actually aware of that fact or matter; or

(ii)a prudent individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonably comprehensive investigation regarding the accuracy of any representation or warranty in this Agreement.

(b)A Person (other than an individual) will be deemed to have Knowledge of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, manager, executor, or trustee of that Person (or in any similar capacity) has, or at any time had, Knowledge of that fact or other matter (as set forth in clauses (a)(i) and (ii) above).

“Lease Agreement”-as defined in Section 2.4(a)(vii).

“Leased Real Property”-as defined in Section 3.6(b).

“Legal Requirement”-any constitution, law, ordinance, principle of common law, code, rule, regulation, statute, act, treaty, or order of general applicability of any Governmental Body, including rules and regulations promulgated thereunder.

“Loss”-any cost, loss, liability, obligation, claim, cause of action, damage, deficiency, expense (including costs of investigation and defense and reasonable attorneys’ fees and expenses), fine, penalty, judgment, award, assessment, or diminution of value.

“Major Customers”-as defined in Section 3.26

“Major Suppliers”-as defined in Section 3.26.

“Marks”-as defined in Section 3.22(a)(i).

“Material Adverse Change”-with respect to Company, any event, change, development, or occurrence that, individually or together with any other event, change, development, or occurrence, is materially adverse to its business, condition (financial or otherwise), assets, results of operations, or prospects.

“Material Consents”-as defined in Section 8.4.

“Net Names”-as defined in Section 3.22(a)(vii).

“Net Working Capital” means (a) all of Company’s current assets (including current prepaid assets, work in process and current accounts net of allowances for doubtful accounts, but excluding

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cash and cash equivalents) arising in the ordinary course of business minus (b) all of Company’s current liabilities, in each case calculated in accordance with GAAP.

“Objection Notice”-as defined in Section 2.6(c).

“Occupational Safety and Health Law”-any Legal Requirement designed to promote safe and healthful working conditions and to reduce occupational safety and health hazards, including the Occupational Safety and Health Act, and any program, whether governmental or private (such as those promulgated or sponsored by industry associations and insurance companies), designed to promote safe and healthful working conditions.

“Order”-any order, injunction, judgment, decree, ruling, assessment, or arbitration award of any Governmental Body or arbitrator.

“Ordinary Course of Business”-an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action:

(a)is consistent in nature, scope, and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; and

(b)does not require authorization by the board of directors of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature.

“Organizational Documents”-(a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the certificate of formation and limited liability company agreement, operating agreement, or like agreement of a limited liability company; (c) the partnership agreement and any statement of partnership of a general partnership; (d) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (e) any charter or agreement or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (f) any amendment to or restatement of any of the foregoing.

“Owned Real Property”-as defined in Section 3.6(a).

“Patents”-as defined in Section 3.22(a)(ii).

“Permitted Encumbrances”-(a) Encumbrances for Taxes and other governmental charges and assessments (except assessments for public improvements levied, pending, or deferred against Owned Real Property) that are not yet due and payable, (b) Encumbrances of carriers, warehousemen, mechanics, and materialmen and other like Encumbrances arising in the Ordinary Course of Business (provided lien statements have not been filed or such Encumbrances otherwise perfected), (c) statutory Encumbrances in favor of lessors arising in connection with any property leased to Company, and (d) Encumbrances disclosed in the Financial Statements.

“Person”-an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture, other entity, or a Governmental Body.

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“Plan”-as defined in Section 3.13.

“Proceeding”-any action, arbitration, mediation, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, judicial, or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Promissory Notes”-as defined in Section 2.2(b).

“Purchase Price”-as defined in Section 2.2.

“Real Property”-as defined in Section 3.6(b).

“Record”-information that is inscribed on a tangible medium or that is stored in an electronic or other medium.

“Related Person”-

(a)With respect to an individual:

(i)each other member of such individual’s Family;

(ii)any Person that is directly or indirectly controlled by such individual or any one or more members of such individual’s Family;

(iii)any Person in which members of such individual’s Family hold (individually or in the aggregate) a Material Interest; and

(iv)any Person with respect to which one or more members of such individual’s Family serves as a director, officer, partner, manager, executor, or trustee (or in a similar capacity).

(b)With respect to a Person other than an individual:

(i)any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with, such specified Person;

(ii)any Person that holds a Material Interest in such specified Person;

(iii)each Person that serves as a director, officer, partner, manager, executor, or trustee of such specified Person (or in a similar capacity);

(iv)any Person in which such specified Person holds a Material Interest; and

(v)any Person with respect to which such specified Person serves as a general partner, manager, or a trustee (or in a similar capacity).

(c)For purposes of this definition:

(i)“control” (including “controlling,” “controlled by,” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause

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the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise, and shall be construed as such term is used in the rules promulgated under the Exchange Act;

(ii)the “Family” of an individual includes (A) the individual, (B) the individual’s spouse, (C) any other natural person who is related to the individual or the individual’s spouse within the second degree, and (D) any other natural person who resides with such individual; and

(iii)“Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or Equity Securities representing at least 10% of the outstanding equity interests in a Person.

“Release”-any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching, or migration on or into the Environment, or into or out of any property.

“Representative”-with respect to a particular Person, includes any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, or legal counsel of such Person.

“Securities Act”-the Securities Act of 1933.

“Seller”-as defined in the first paragraph of this Agreement.

“Seller’s Closing Documents”-the releases specified in Section 2.4(a)(v), the Escrow Agreement, and each other document to be executed or delivered by Seller at the Closing.

“Seller’s Knowledge”-Knowledge of Lawrence E. Ekey and the Knowledge of all employees of PECO as of the Closing Date following reasonable inquiry.

“Seller’s Releases”-as defined in Section 2.4.

“Shares”-as defined in the Recitals of this Agreement.

“Software”-as defined in Section 3.22(a)(v).

“Subsidiary”-with respect to any Person (the “Owner”), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than Equity Securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, “Subsidiary” means a Subsidiary of Company.

“Tax”-any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees’ income withholding, foreign or domestic withholding, Social Security, unemployment, disability, real property, personal property,

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sales, use, transfer, value added, concession, alternative, add-on minimum and other tax, fee, assessment, escheat, unclaimed property, levy, tariff, charge, or duty of any kind whatsoever and any interest, penalty, addition, or additional amount thereon imposed, assessed, or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

“Tax Return”-any return (including any information return), report, statement, schedule, notice, form, declaration, claim for refund, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.

“Third Party”-a Person that is not a Party to this Agreement.

“Third-Party Claim”-any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding.

“Threat of Release”-a reasonable possibility of a Release that could require action (including triggering notification or reporting under Environmental Law) in order to prevent or mitigate damage to the Environment that could result from such Release.

“Trade Secrets”-as defined in Section 3.22(a)(vi).

1.2Construction. Any reference in this Agreement to an “Article,” “Section,” “Exhibit” or “Schedule” refers to the corresponding Article, Section, Exhibit or Schedule of or to this Agreement, unless the context indicates otherwise. The table of contents and the headings of Articles and Sections are provided for convenience only and are not intended to affect the construction or interpretation of this Agreement. All words used in this Agreement are to be construed to be of such gender or number as the circumstances require. The words “including,” “includes,” or “include” are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as “without limitation” or “but not limited to” are used in each instance. Where this Agreement states that a party “shall,” “will” or “must” perform in some manner or otherwise act or omit to act, it means that the party is legally obligated to do so in accordance with this Agreement. Any reference to a statute is deemed also to refer to any amendments or successor legislation as in effect at the relevant time. Any reference to a Contract or other document as of a given date means the Contract or other document as amended, supplemented and modified from time to time through such date.

ARTICLE 2

SALE AND TRANSFER OF SHARES; CLOSING

2.1Shares. Subject to the terms and conditions of this Agreement, and in reliance upon the representations, warranties, and covenants contained in this Agreement, at the Closing, Buyer shall purchase the Shares from Seller, and Seller shall sell and transfer the Shares to Buyer, free and clear of any Encumbrance.

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2.2Purchase Price. The purchase price for the Shares (the “Purchase Price”) is Seven Million Two Hundred Fifty Thousand dollars ($7,250,000), plus or minus the Adjustment Amount. At the Closing, Buyer shall deliver as payment on account of the Purchase Price: (a) Six Million Fifty Thousand dollars ($6,050,000) (the “Closing Payment”) which shall be paid by wire transfer to the Seller pursuant to written wire transfer instructions delivered to Buyer by Seller at least three (3) Business Days prior to the Closing; and (b) One Million Two Hundred Thousand dollars ($1,200,000) paid by wire transfer to the Escrow Agent pursuant to the Escrow Agreement (the “Escrow Funds”). The Adjustment Amount shall be paid by Seller or Buyer, as the case may be, in accordance with Section 2.5.

2.3Closing. Subject to Article 10, the purchase and sale (the “Closing”) provided for in this Agreement will take place at the offices of Buyer at 27601 Bella Vista Parkway, Warrenville, Illinois 60555 commencing at 10:00 a.m. (local time) on April 30, 2014 or at such other date and time as Buyer and Seller may otherwise agree, provided that on or prior to that date all conditions set forth in Articles 8 and 9 have been satisfied or waived. If all conditions set forth in Articles 8 and 9 are not satisfied or waived by April 30, 2014, subject to Article 10, the Closing will take place upon the earlier of (a) five (5) Business Days following notice given by Buyer stating that all conditions set forth in Articles 8 and 9 have been satisfied or waived (other than conditions to be satisfied on the Closing Date), and (b) the End Date. The Closing will be deemed to be effective as of the close of business on the Closing Date for tax and accounting purposes.

2.4Closing Obligations. At the Closing:

(a) Seller shall deliver to Buyer:

(i) certificates representing the Shares, endorsed in blank (or accompanied by stock powers executed in blank) and otherwise in proper form for transfer;

(ii) the Organizational Documents of Company filed with any Governmental Body in connection with its organization, duly certified as of a recent date by the Ohio Secretary of State, together with a certificate dated as of the Closing Date from the Secretary of Company to the effect that no amendments to such Organizational Documents have been filed since the date referred to above;

(iii) certificates dated as of a date not more than five (5) days prior to the Closing Date as to the good standing of Company issued by the Ohio Secretary of State and each jurisdiction in which Company is licensed or qualified to do business as a foreign entity as specified in Part 3.1 of the Disclosure Letter;

(iv) releases in the form of Exhibit 2.4(a)(iv) executed by Seller;

(v) employment agreements in the form provided by Buyer, executed by each employee of the Company (other than Seller and Rachael Ekey) and Buyer;

(vi) an escrow agreement in the form of Exhibit 2.4(a)(vi), executed by Seller (the “Escrow Agreement”);

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(vii) a lease agreement in the form of Exhibit 2.4(a)(vii), executed by LVE Properties, Inc.;

(viii) a bailment agreement executed by D’Coil Steel, Inc. (the “Bailment Agreement”) in form and substance satisfactory to Buyer;

(ix) evidence of the Company’s termination of employment of Seller and Rachael Ekey, in form and substance satisfactory to Buyer;

(x) a resolution of the Company’s benefits committee terminating the Company’s 401(k) Plan, in form and substance satisfactory to Buyer; and

(viii) the certificate referred to in Section 8.3.

(b) Buyer shall deliver to Seller (or in the case of the Escrow Funds, to the Escrow Agent):

(i) the Closing Payment;

(ii) the Escrow Funds;

(iii) the Escrow Agreement, executed by Buyer and the Escrow Agent;

(iv) the Lease Agreement, executed by Buyer; and

(v) the certificate referred to in Section 9.3.

2.5 Adjustment Amount and Payment.

(a) The “Adjustment Amount” will be the difference, if any, between (i) the Net Working Capital of Company as of the Closing Date, as shown on the Closing Balance Sheet (the “Closing Net Working Capital”), and (ii) Five Hundred Thousand dollars ($500,000). If the Closing Net Working Capital is less than $500,000, the Purchase Price will be reduced by an amount equal to the amount obtained by subtracting the Closing Net Working Capital from $500,000.If the Closing Net Working Capital is greater than $500,000, the Purchase Price will be increased by an amount equal to the amountobtained by subtracting $500,000 from the Closing Net Working Capital.

(b) If the Adjustment Amount or, after giving effect to Section 11.7, any portion of the Adjustment Amount is to be paid by Buyer to Seller, the Adjustment Amount or such portion thereof shall be paid by Buyer by wire transfer to Seller to wire transfer instructions provided to Buyer by Seller prior to the due date for the payment set forth in Section 2.5(c). If the Adjustment Amount is to be paid by Seller to Buyer, the Adjustment Amount shall be paid by Seller by wire transfer to Buyer pursuant to wire transfer instructions provided by Buyer to Seller prior to the due date for the payment set forth in Section 2.5(c).

(c) Within three (3) Business Days after the Closing Balance Sheet and Adjustment Amount become binding on the Parties pursuant to Section 2.6, Seller or Buyer, as the case may be, shall make the payment provided for in this Section 2.5.

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2.6 Adjustment Procedure.

(a) Buyer shall prepare a consolidated balance sheet of Company as of the close of business on the Closing Date (the “Closing Balance Sheet”) in accordance with GAAP. Buyer shall deliver the Closing Balance Sheet and the determination of the Adjustment Amount to Seller within ninety (90) days following the Closing Date.

(b) Upon execution of such access letters as may be reasonably required by Buyer, Seller and its Representatives shall, during reasonable business hours, be given reasonable access to (and copies of) all Buyer’s and its Representatives’ books, records, and other documents, including work papers, worksheets, notes, and schedules, used in preparation of the Closing Balance Sheet and the determination of the Adjustment Amount, for the purpose of reviewing the Closing Balance Sheet and determination of the Adjustment Amount, in each case, other than certain work papers that Buyer considers proprietary, such as internal control documentation, engagement planning, time control and audit sign off, and quality control work papers.

(c) If within 30 days following delivery of the Closing Balance Sheet and the determination of the Adjustment Amount to Seller, Seller has not given Buyer notice of an objection as to any amounts set forth on the Closing Balance Sheet or the determination of the Adjustment Amount (which notice shall state in reasonable detail the basis of Seller’s objections and Seller’s proposed adjustments (the “Objection Notice”)), the Closing Balance Sheet and the determination of the Adjustment Amount as prepared by Buyer will be final, binding, and conclusive on the Parties.

(d) If Seller timely gives Buyer an Objection Notice and if Seller and Buyer fail to resolve the issues raised in the Objection Notice within 30 days after giving the Objection Notice, Seller and Buyer shall submit the issues remaining in dispute for resolution to an independent PCAOB registered accounting firm mutually selected by them and with respect to which no party hereto has had any relationship in the past three years (the “Independent Accountants”).

(e) The Parties shall negotiate in good faith in order to seek agreement on the procedures to be followed by the Independent Accountants, including procedures with regard to the presentation of evidence. If the Parties are unable to agree upon procedures within 10 days of the submission to the Independent Accountants, the Independent Accountants shall establish such procedures giving due regard to the intention of the Parties to resolve disputes as promptly, efficiently, and inexpensively as possible, which procedures may, but need not, be those proposed by either Buyer or Seller. The Independent Accountants shall be directed to resolve only those issues in dispute and render a written report on their resolution of disputed issues with respect to the Closing Balance Sheet and the resulting Adjustment Amount as promptly as practicable, but no later than 60 days after the date on which the Independent Accountants are engaged. The determination by the Independent Accountants will be based solely on written submissions of Buyer, on the one hand, and Seller, on the other hand, and will not involve independent review. Any determination of the Closing Balance Sheet or the Adjustment Amount by the Independent Accountants will not be outside

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the range established by the amounts in (i) the Closing Balance Sheet and the determination of the Adjustment Amount proposed by Buyer, and (ii) Seller’s proposed adjustments thereto. Such determination will be final, binding, and conclusive on the Parties as of the date of the determination notice sent by the Independent Accountants.

(f) If issues are submitted to the Independent Accountants for resolution:

(i) Seller and Buyer shall execute any agreement required by the Independent Accountants to accept their engagement pursuant to Section 2.6(d);

(ii) Seller and Buyer shall promptly furnish or cause to be furnished to the Independent Accountants such work papers and other documents and information relating to the disputed issues as the Independent Accountants may request and are available to that Party or its accountants or other Representatives, and shall be afforded the opportunity to present to the Independent Accountants, with a copy to the other Party, any other written material relating to the disputed issues;

(iii) The determination by the Independent Accountants, as set forth in a report to be delivered by the Independent Accountants to both Seller and Buyer, will include the revised Closing Balance Sheet and Adjustment Amount, reflecting the changes required as a result of the determination made by the Independent Accountants; and

(iv) Seller and Buyer shall each bear one-half of the fees and costs of the Independent Accountants; provided, however, that the engagement agreement referred to in Section 2.6(f)(i) above may require the Parties to be bound jointly and severally to the Independent Accountants for those fees and costs, and in the event Seller or Buyer pay to the Independent Accountants any amount in excess of one-half of the fees and costs of its engagement, the other Party agrees to reimburse Seller or Buyer, as applicable, upon demand, to the extent required to equalize the payments made by Seller and Buyer with respect to the fees and costs of the Independent Accountants.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer as follows:

3.1 Organization and Good Standing.

(a) Company is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, with full power and authority to conduct its business as it is being conducted, to own or use its assets, and to perform all its obligations under Applicable Contracts. Company is duly qualified to do business as a foreign entity and is in good standing under the laws of each jurisdiction that requires such qualification, each of which are listed in Part 3.1 of the Disclosure Letter.

(b) Seller has delivered to Buyer copies of the Organizational Documents of Company, and Company is not in default under or in violation of any of its Organizational Documents.

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(c) Company has not conducted business under or otherwise used, for any purpose or in any jurisdiction, any legal, fictitious, assumed, or trade name other than the names listed in Part 3.1 of the Disclosure Letter.

3.2 Enforceability and Authority; No Conflict.

(a) This Agreement has been duly executed and delivered by Seller and constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Upon the execution and delivery of Seller’s Closing Documents by Seller, Seller’s Closing Document will constitute the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms. Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver, and to perform its obligations under, this Agreement and Seller’s Closing Document to which he is a party.

(b) Except as set forth in Part 3.2(b) of the Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation or performance of any Contemplated Transaction will, directly or indirectly (with or without notice or lapse of time):

(i) contravene, conflict with, or violate (A) any Organizational Document of Company, or (B) any resolution adopted by the board of directors or the shareholders (or Persons exercising similar authority) of Company;

(ii) contravene, conflict with, or violate, or give any Governmental Body or other Person the right to challenge any Contemplated Transaction, or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Company or Seller, or any assets owned or used by the Seller, could be subject;

(iii) contravene, conflict with, violate, result in the loss of any benefit to which Company is entitled under, or give any Governmental Body the right to revoke, suspend, cancel, terminate, or modify, any Governmental Authorization held by Company or that otherwise relates to the business of, or any assets owned or used by, Company;

(iv) cause Buyer or Company to become subject to, or to become liable for payment of, any Tax;

(v) Breach, or give any Person the right to declare a default or exercise any remedy or to obtain any additional rights under, or to accelerate the maturity or performance of, or payment under, or cancel, terminate, or modify, any Applicable Contract or any Contract to which Seller or Company is a party;

(vii) result in the imposition or creation of any Encumbrance upon, or with respect to, any assets owned or used by Company; or

(viii) result in, or give any other Person the right or option to cause or declare: (A) a loss of any Intellectual Property Asset, (B) the release, disclosure, or delivery of any Intellectual Property Asset by or to any escrow agent or other Person, or (C) the grant, assignment, or transfer to any other Person of any license, Encumbrance, or other right or interest under, to, or in any Intellectual Property Asset.

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(c) Except as set forth in Part 3.2(c) of the Disclosure Letter, neither Seller nor Company is or shall be required to give notice to, or obtain Consent from, any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any Contemplated Transaction.

3.3 Capitalization.

(a) The authorized Equity Securities of Company consist of 750 shares of common stock, no par value per share, of which 100 shares, constituting the Shares, are issued and outstanding. Seller is the owner (of record and beneficially) of all of the Shares, free and clear of all Encumbrances, including any restriction on the right of Seller to transfer the Shares to Buyer pursuant to this Agreement. No claim has been made or, to Seller’s Knowledge, threatened against the Company asserting that any Person other than Seller is the holder or beneficial owner of, or has the right to acquire beneficial ownership of, any equity (including options) of, or any other voting, equity or ownership interest in the Company. The assignments, endorsements, stock powers, or other instruments of transfer to be delivered by Seller to Buyer at the Closing will be sufficient to transfer Seller’s entire interest in the Shares (of record and beneficially) owned by Seller. Upon transfer to Buyer of the certificates representing the Shares, Buyer will receive good, marketable and valid title to the Shares, free and clear of all Encumbrances. Part 3.3(a) of the Disclosure Letter lists the number of Shares held by Seller.

(b) All the outstanding Equity Securities of Company have been duly authorized and validly issued, and are fully paid and nonassessable. Except as set forth in Part 3.3(b) of the Disclosure Letter, there are no shareholder or other Contracts relating to any Equity Security of Company, including the sale, voting, or transfer thereof. No outstanding Equity Security or other security of Company was issued in violation of the Securities Act or any other Legal Requirement. Company has no outstanding subscription, option, warrant, call or exchange right, convertible security, or other Contract or other obligations in effect giving any Person the right to acquire (whether by preemptive rights or otherwise) any Equity Security of Company.

(c) Company neither owns nor has ever owned, or is a party to or bound by any Contract to acquire, any Equity Security or other security of any Person or any direct or indirect equity or ownership interest in any other business. Company is not obligated to provide funds to or make any investment (whether in the form of a loan, capital contribution, or otherwise) in any other Person.

3.4Financial Statements. Seller has delivered to Buyer: (a) unaudited consolidated balance sheets of Company as of December 31, 2013 (the “Balance Sheet Date”) and as of December 31, 2012, and the related unaudited consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the two fiscal years ended on such dates, , and (b) an unaudited consolidated balance sheet (the “Interim Balance Sheet”) of Company as of March 31, 2014 (the “Interim Balance Sheet Date”), and the related unaudited consolidated statements of income, changes in shareholders’ equity, and cash flows for the three months then ended (collectively, the “Unaudited Financial Statements”, and together with the Audited Financial Statements, the “Financial Statements”). Seller

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has delivered to Buyer an unaudited consolidated balance sheet (the “Interim Balance Sheet”) of Company as of March 31, 2014 (the “Interim Balance Sheet Date”), and the related unaudited consolidated statements of income, changes in shareholders’ equity, and cash flows for the three months then ended (collectively, the “Unaudited Financial Statements”, and together with the “Audited Financial Statements” to be delivered pursuant to Section 7.9 below, the “Financial Statements”). At the time of delivery to Buyer, the Financial Statements will (i) fairly present the consolidated financial condition and the results of operations, changes in shareholders’ equity, and cash flows of Company as at the respective dates of, and for the periods referred to in, the Financial Statements, and (ii) will have been prepared in accordance with GAAP, subject, in the case of the Unaudited Financial Statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be material) and the absence of notes (that, if presented, would not differ materially from those included in the Audited Financial Statements). The Financial Statements will reflect the consistent application of GAAP throughout the periods involved, except as disclosed in the notes to the Audited Financial Statements. No financial statements of any Person other than Company are required by GAAP to be included or reflected in the Financial Statements. The Financial Statements will be prepared from, and are consistent with, the accounting Records of Company. Seller has also delivered to Buyer copies of all letters from Company’s auditors to Company’s board of directors or audit committee thereof during the 36 months prior to the date of this Agreement, together with copies of all responses thereto.

3.5 Books and Records.

(a) The books of account as reflected in the Records of Company, all of which have been made available to Buyer, are complete and correct, represent actual, bona fide transactions, and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act (whether or not Company is subject to that Section). Company has implemented and maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(b) The minute books of Company contain complete and correct Records of all meetings held of, and actions taken by written consent of, the holders of voting securities, the board of directors or Persons exercising similar authority, and committees of the board of directors or such Persons of Company, and no meeting of any such holders, board of directors, Persons, or committee has been held, and no other action has been taken, for which minutes or other evidence of action have not been prepared and are not contained in such minute books. Company has at all times maintained complete and correct Records of all issuances and transfers of its Equity Securities. At the Closing, all such minute books and Records will be in the possession of Company at its corporate offices.

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(c) Neither Company nor Seller has engaged in any material transaction, maintained any bank account, or used any of its funds in the conduct of its business except for transactions, bank accounts and funds that have been and are reflected in the Records of Company. Part 3.5(c) of the Disclosure Letter lists all the bank accounts currently maintained by Company and the authorized signatories of each account.

3.6 Real and Personal Property.

(a) Company neither owns nor has ever owned, or is a party to or bound by any Contract to acquire, any real estate.

(b) Part 3.6(b) of the Disclosure Letter lists all real estate leased by Company as a lessee, sub-lessee, or assignee (the “Leased Real Property”), including a description of the premises leased. All Leased Real Property is leased pursuant to valid written leases listed in Part 3.17(a) of the Disclosure Letter. Such leases contain the entire agreement between the landlord of each of the leased premises and Company, and there is no other Contract between the landlord and Company affecting such Leased Real Property. Company does not relet any Leased Real Property as a lessor or sub-lessor.

(c) Company’s interest in the Leased Real Property is owned free and clear of all Encumbrances, variances, or limitations of any nature, other than Permitted Encumbrances and as set forth in Part 3.6(c) of the Disclosure Letter. All buildings, plants, and structures owned by Company lie wholly within the boundaries of the Leased Real Property and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person. There are no buildings, structures, fixtures, or other improvements primarily situated on adjoining property that encroach on any part of the Leased Real Property. Certificates of occupancy are in full force and effect for the Leased Real Property, and Company’s use thereof does not violate any applicable zoning, subdivision, land use, or other Legal Requirement. No Third Party has a right to acquire any interest in Company’s interests in the Leased Real Property.

(d) Company owns all tangible personal property reflected as owned in the Interim Balance Sheet free and clear of all Encumbrances, other than Permitted Encumbrances and as set forth in Part 3.6(d) of the Disclosure Letter. All the tangible personal property purchased or otherwise acquired by Company since the Interim Balance Sheet Date (other than inventory acquired and sold since the Interim Balance Sheet Date in the Ordinary Course of Business) is owned by Company free and clear of all Encumbrances, other than Permitted Encumbrances and as set forth in Part 3.6(d) of the Disclosure Letter. A copy of the fixed asset register of Company has been delivered to Buyer, and it contains a complete and correct list of Company’s fixed assets as of the date specified.

3.7 Condition and Sufficiency of Assets.

(a) The equipment and Leased Real Property owned or leased by Company are structurally sound, in good operating condition and repair, and adequate for the uses to which they are being put, and none of such equipment or Leased Real Property is in need of maintenance or repairs other than ordinary, routine maintenance that is not material in nature or cost.

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(b) The assets owned and leased by Company constitute all the assets used in connection with Company’s business. Such assets constitute all the assets necessary for Company to continue to conduct its business following the Closing as it is being conducted.

3.8Accounts Receivable. All accounts receivable of Company, whether or not reflected on the Interim Balance Sheet, represent valid obligations arising from sales actually made or services actually performed in the Ordinary Course of Business. Company’s accounts receivable are current and collectible net of the reserve shown on the Interim Balance Sheet (which reserve is adequate and calculated consistent with practice employed in the preparation of the Audited Financial Statements). Subject to such reserve, each of the accounts receivable either has been or will be collected in full, without any setoff, expense, or other reduction, within 90 days after the day on which it first becomes due and payable. There is no contest, claim, defense, or right of setoff, other than returns in the Ordinary Course of Business, with respect to any account receivable. Part 3.8 of the Disclosure Letter lists and sets forth the aging of all accounts receivable as of the Interim Balance Sheet Date.

3.9Inventories. All of Company’s inventories, whether or not reflected on the Interim Balance Sheet, consist of a quality and quantity usable and, with respect to finished goods, saleable, in the Ordinary Course of Business. Company is not in possession of any goods not owned by Company. Except as set forth in Part 3.9 of the Disclosure Letter, Company’s inventories (other than goods in transit) are located on the premises of Company. All inventories are valued at the lower of cost or [market] [net realizable] value on a [first-in, first-out] [last-in, first-out] basis consistent with past practice used in the preparation of the Financial Statements. The reserve for obsolescence with respect to inventories [as adjusted for the passage of time,] is adequate and calculated consistent with past practice. Inventories that were purchased after the Interim Balance Sheet Date were purchased in the Ordinary Course of Business at a cost not exceeding market prices prevailing at the time of purchase for items of similar quality and quantity. The quantities of each item of inventory are not excessive, but are reasonable for the continued operation of Company in the Ordinary Course of Business.

3.10No Undisclosed Liabilities. Except as set forth in Part 3.10 of the Disclosure Letter, Company has no liability or obligation of any nature (whether known or unknown and whether absolute, accrued, contingent, or otherwise) other than liabilities or obligations to the extent shown on the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business since the date of the Interim Balance Sheet (none of which relates to a breach of contract, breach of warranty, tort, infringement, environmental, health or safety matter, violation of a Legal Requirement or proceeding brought by a Governmental Body).

3.11 Taxes.

(a) Filed Returns and Tax Payments

(i) Company has filed or caused to be filed on a timely basis all Tax Returns that were required to be filed by or with respect to it, either separately or as a member of a group of corporations, pursuant to applicable Legal Requirements.

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(ii) Company has not requested any extension of time within which to file any Tax Return, except as to a Tax Return that has since been timely filed.

(iii) All Tax Returns filed by (or that include on a consolidated basis) Company are complete and correct and comply with applicable Legal Requirements.

(iv) Company has paid, or made provision for the payment of, all Taxes that have or could have become due for all periods covered by any Tax Return or otherwise, including pursuant to any assessment received by Seller or Company, except such Taxes, if any, that are listed in Part 3.11(a) of the Disclosure Letter and that are being contested in good faith by appropriate Proceedings and for which adequate reserves have been provided in the Interim Balance Sheet.

(v) Company has withheld or collected and paid to the proper Governmental Body or other Person all Taxes required to be withheld, collected, or paid by it.

(vi) Part 3.11(a) of the Disclosure Letter lists each Tax Return filed by Company since December 31, 2009, and Seller has delivered to Buyer copies of all such Tax Returns.

(vii) No claim has ever been made by any Governmental Body in a jurisdiction where Company does not file Tax Returns that it is or could be subject to taxation by that jurisdiction, nor is there any reasonable basis for such a claim.

(b) Audited or Closed Tax Years

(i) Except as set forth in Part 3.11(b) of the Disclosure Letter, all Tax Returns of Company have been audited by the IRS or other Governmental Body or are closed by the applicable statute of limitations for all taxable years through December 31, 2009.

(ii) Part 3.11(b) of the Disclosure Letter lists all audits of all Tax Returns, including a description of the nature and, if completed, the outcome of each audit since [date]. Seller has delivered copies of any reports, statements of deficiencies, or similar items with respect to such audits. Part 3.11(b) of the Disclosure Letter describes all adjustments to any Tax Return filed by or with respect to Company for all taxable years since December 31, 2009, and the resulting deficiencies proposed by the IRS or other Governmental Body. Part 3.11(b) of the Disclosure Letter lists all deficiencies proposed as a result of such audits, all of which have been paid or, as set forth in such Part 3.11(b), have been settled or are being contested in good faith by appropriate Proceedings. Except as set forth in Part 3.11(b) of the Disclosure Letter, to Seller’s Knowledge, no Governmental Body will assess any additional taxes for any period for which Tax Returns have been filed.

(iii) Except as set forth in Part 3.11(b) of the Disclosure Letter, no Tax Return of Company is under audit by the IRS or other Governmental Body, and no notice of such an audit has been received by Company. To Seller’s Knowledge, there are no threatened Proceedings for or relating to Taxes, and there are no matters under discussion with the IRS or other Governmental Body with respect to Taxes. Except as set forth in

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Part 3.11(b) of the Disclosure Letter, no issues relating to Taxes have been raised in writing by the IRS or other Governmental Body during any pending audit, and no issues relating to Taxes have been raised in writing by the IRS or other Governmental Body in any audit that could recur in a later taxable period. Except as set forth in Part 3.11(b) of the Disclosure Letter, there is no proposed Tax assessment against Company.

(iv) Except as set forth in Part 3.11(b) of the Disclosure Letter, no Proceedings are pending before the IRS or other Governmental Body with respect to the Taxes of any Company.

(v) Except as set forth in Part 3.11(b) of the Disclosure Letter, neither Seller nor Company has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Company or for which Company could be liable.

(vi) Except as set forth in Part 3.11(b) of the Disclosure Letter, no Encumbrance for Taxes exists with respect to any assets of Company, except statutory liens for Taxes not yet due.

(vii) No claim has ever been made by any Governmental Body in a jurisdiction where Company does not file Tax Returns that it is or could be subject to taxation by that jurisdiction, nor is there any reasonable basis for such a claim.

(c) Accruals and Reserves

The charges, accruals, and reserves with respect to Taxes on the accounting Records of Company are adequate and are at least equal to Company’s liability for Taxes.

(d) Company Status

(i) Company is not, and has not been within the five-year period preceding the date of this Agreement has been, an “S corporation” within the meaning of Section 1361(a)(1) of the Code.

(ii) Company has not been a member of any affiliated group of corporations which has filed a combined, consolidated, or unitary income Tax Return with any Governmental Body. Company is not liable for the Taxes of any Person under Treasury Regulation Section 1.1502-6 or any similar provision of any applicable Legal Requirement, as a transferee or successor, by contract, or otherwise.

(iii) Company is not, and has never been, a “real property holding company” for purposes of Section 897 of the Code.

(e) Miscellaneous

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(i) There is no tax sharing agreement, tax allocation agreement, tax indemnity obligation, or similar agreement, arrangement, understanding, or practice, oral or written, with respect to Taxes that will require any payment by Company.

(ii) Company is not party to any Contract that could result separately or in the aggregate in any payment (A) of an “excess parachute payment” within the meaning of Section 280G of the Code, or (B) that would not be deductible as a result of the application of Section 404 of the Code.

(iii) Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any period ending after the Closing Date as a result of (i) any change in method of accounting prior to the Closing Date, (ii) any “closing agreement” as described in section 7121 of the Code (or any corresponding or similar provision of state, local or foreign law) executed on or prior to the Closing Date, (iii) any intercompany transactions or any excess loss account described in section 1.1502-19 of the Treasury Regulations (or any corresponding or similar provision of state, local or foreign law), (iv) the installment method of accounting, the completed contract method of accounting or the cash method of accounting with respect to a transaction that occurred prior to the Closing Date, (v) any prepaid amount received on or prior to the Closing Date or (vi) the discharge of any indebtedness on or prior to the Closing Date under section 108(i) of the Code.

(iv) Except as set forth in Part 3.11(e) of the Disclosure Letter, Company has not received, been the subject of, or requested a written ruling of a Governmental Body relating to Taxes, and Company has not entered into a Contract with a Governmental Body relating to Taxes that would have a continuing effect after the Closing Date.

(vi) Company has disclosed on its federal income Tax Returns all positions taken by it that could give rise to substantial understatement of federal income Tax within the meaning of Section 6662 of the Code.

(vii) Company has never distributed stock of another Person or had its stock distributed by another Person, in a transaction that purported or was intended to be governed in whole or in part by Code Section 355 or Code Section 361.

(viii) Company has not participated in any “reportable transaction” as defined in Treasury Regulation Section 1.6011-4(b).

3.12No Material Adverse Change. Since the Balance Sheet Date, Company has not suffered any Material Adverse Change and no event has occurred, and no circumstance exists, that can reasonably be expected to result in a Material Adverse Change.

3.13 Employee Benefits.

(a) Part 3.13(a) of the Disclosure Letter identifies as such any Employee Plan that is (x) a plan intended to meet the requirements of Section 401(a) of the Code or (y) a plan subject to Title IV of ERISA. Other than Company, no corporation or trade or business has ever been controlled by, controlling, or under common control with Seller within the meaning of

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Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA.Part 3.13(a) of the Disclosure Letter lists each “employee benefit plan” as defined by Section 3(3) of ERISA, and all specified fringe other employee benefit plans as defined in Section 6039D of the Code, and including all other bonus, incentive-compensation, deferred-compensation, profit-sharing, stock-option, stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership, savings, severance, change-in-control, supplemental-unemployment, layoff, salary-continuation, retirement, pension, health, life-insurance, disability, flexible spending, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit, or welfare plan, and any other employee compensation or benefit plan, policy, practice, or Contract (whether qualified or nonqualified, effective or terminated, written or unwritten) and any trust, escrow, or other Contract related thereto that (i) is or has been during the six (6) year period immediately preceding the date hereof maintained or contributed to by Company and (ii) provides benefits to, or describes policies or procedures applicable to, any current or former director, officer, employee, or service provider of Company, or the dependents of any thereof, regardless of how (or whether) liabilities for the provision of benefits are accrued or assets are acquired or dedicated with respect to the funding thereof (each, an “Employee Plan”). Part 3.13(a) of the Disclosure Letter identifies as such any Employee Plan that is (x) a plan intended to meet the requirements of Section 401(a) of the Code or (y) a plan subject to Title IV of ERISA. Other than Company, no corporation or trade or business has ever been controlled by, controlling, or under common control with Seller within the meaning of Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA.

(b) Seller has delivered to Buyer copies of (i) the documents comprising each Employee Plan (or, with respect to an Employee Plan which is unwritten, a detailed written description of eligibility, participation, benefits, funding arrangements, assets, and any other matters that relate to the obligations of Company thereunder); (ii) all trust agreements, insurance contracts, or any other funding instruments related to each Employee Plan; (iii) all rulings, determination letters, no-action letters, or advisory opinions from the IRS, the United States Department of Labor, or any other Governmental Body that pertain to each Employee Plan and any open requests therefor; (iv) the three (3) most recent actuarial and financial reports (audited and/or unaudited) and the annual reports filed with any Governmental Body with respect to each Employee Plan during the current year and each of the three preceding years; (v) all Contracts with third-party administrators, actuaries, investment managers, consultants, or other independent contractors that relate to each Employee Plan; and (vi) all summary plan descriptions, summaries of material modifications and memoranda, employee handbooks, and other written communications regarding each Employee Plan.

(c) Except as set forth in Part 3.13(c) of the Disclosure Letter, all amounts owed by Company under the terms of any Employee Plan have been timely paid in full. Except as set forth in Part 3.13(c) of the Disclosure Letter, each Employee Plan that provides health or welfare benefits is fully insured, and any incurred but not reported claims under each such Employee Plan that is not fully insured have been properly accrued. Company has paid in full all required insurance premiums, subject only to normal retrospective adjustments in the Ordinary Course of Business, with regard to each Employee Plan.

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(d) Company has complied with the applicable continuation requirements for each Employee Plan, including (i) Section 4980B of the Code (as well as its predecessor provision, Section 162(k) of the Code) and Sections 601 through 608, inclusive, of ERISA (“COBRA”) and (ii) any applicable state Legal Requirements mandating welfare benefit continuation coverage for employees.

(e) The form of each Employee Plan is in compliance with the applicable terms of ERISA, the Code, and any other applicable Legal Requirement, including the Americans with Disabilities Act of 1990, the Family Medical Leave Act of 1993, and the Health Insurance Portability and Accountability Act of 1996, and each Employee Plan has been operated in compliance with such Legal Requirements and the written Employee Plan documents. Neither Company nor fiduciary of an Employee Plan has violated the requirements of Section 404 of ERISA. Each required report and description of an Employee Plan (including IRS Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions, and Summaries of Material Modifications) have been (to the extent required) timely filed with the IRS, the United States Department of Labor, or other Governmental Body and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with respect to each Employee Plan have been appropriately given. Company has no unfunded liability with respect to any deferred compensation, retirement, or other Employee Plan.

(f) Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has received, or is based on a form of plan that has received, a favorable determination letter from the IRS, which is current. To Seller’s Knowledge, no circumstance exists that could result in revocation of any such favorable determination letter. Each trust created under any such Employee Plan has been determined to be exempt from taxation under Section 501(a) of the Code, and, to Seller’s Knowledge, no circumstance exists that could result in a revocation of such exemption. No Employee Plan is intended to meet the requirements of Code Section 501(c)(9). No circumstance exists that could give rise to a loss of any intended tax consequence or to any Tax under Section 511 of the Code with respect to any Employee Plan.

(g) There has never been any Proceeding relating to any Employee Plan and, to Seller’s Knowledge, no such Proceeding is threatened. To Seller’s Knowledge, no event has occurred or circumstance exists that could give rise to or serve as a basis for the commencement of any such Proceeding. Neither Company nor any fiduciary of an Employee Plan has engaged in a transaction with respect to any Employee Plan that could subject Company or Buyer to a Tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of ERISA or a violation of Section 406 of ERISA. Neither the execution and delivery of this Agreement nor the consummation or performance of any Contemplated Transaction will, directly or indirectly (with or without notice or lapse of time), result in the assessment of a Tax or penalty under Section 4975 of the Code or Section 502(l) of ERISA or result in a violation of Section 406 of ERISA.

(h) Neither the execution and delivery of this Agreement nor the consummation or performance of any Contemplated Transaction will, directly or indirectly (with or without notice or lapse

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of time), obligate Company to pay any separation, severance, termination, or similar benefit to, or accelerate the time of vesting for, change the time of payment to, or increase the amount of compensation due to, any director, employee, officer, former employee, or former officer of Company. There is no Contract providing for payments that could subject any Person to liability under Section 4999 of the Code.

(i) Other than the continuation coverage requirements of COBRA, Company has no obligation or potential liability for benefits to employees, former employees, or their dependents following termination of employment or retirement under any Employee Plan.

(j) Neither the execution and delivery of this Agreement nor the consummation or performance of any Contemplated Transaction will, directly or indirectly (with or without notice or lapse of time), result in an amendment, modification, or termination of any Employee Plan. No written or oral representation has been made to any employee or former employee of Company promising or guaranteeing any employer payment or funding for the continuation of medical, dental, life, or disability coverage for any period of time beyond the end of the current plan year (except to the extent of coverage required under COBRA). No written or oral representation has been made to any employee or former employee of Company concerning the employee benefits of Buyer.

(k) Company does not contribute to nor has any obligation to contribute to, or has any liability with respect to, any “employee pension benefit plan” within the meaning of Section 3(2) of ERISA that is a “defined benefit plan” within the meaning of Section 3(35) of ERISA.

(l) Company does not contribute to nor has any obligation to contribute to, or has any liability with respect to, a “multiemployer plan” within the meaning of Section 3(37) of ERISA or Section 414(f) of the Code or a plan that has two or more contributing sponsors, at least two of whom are not under common control within the meaning of Section 413(c) of the Code.

(m) Except as set forth in Part 3.13(m) of the Disclosure Letter, no Employee Plan is subject to Section 409A of the Code. Each Employee Plan subject to Section 409A of the Code (“Deferred Compensation Plan”) complies in all material respects with Section 409A of the Code. Company has not (i) granted to any Person an interest in any Deferred Compensation Plan that is, or upon the lapse of a substantial risk of forfeiture with respect to such interest will be, subject to the Tax imposed by Section 409A(a)(1)(B) or (b)(4)(A) of the Code, or (ii) materially modified any Deferred Compensation Plan in a manner that could cause an interest previously granted under such plan to become subject to the Tax imposed by Section 409A(a)(1)(B) or (b)(4) of the Code.

3.14 Compliance with Legal Requirements; Governmental Authorizations.

(a) Except as set forth in Part 3.14(a) of the Disclosure Letter:

(i) Company has at all times been in compliance with each Legal Requirement that is or was applicable to it or the conduct of its business or the ownership or use of any of its assets;

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(ii) no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) could constitute or result in a violation by Company of, or a failure on the part of Company to comply with, any Legal Requirement, or (B) could give rise to any obligation on the part of Company to undertake, or to bear all or any portion of the cost of, any remedial action;

(iii) Company has not received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, or potential obligation on the part of Company to undertake, or to bear all or any portion of the cost of, any remedial action; and

(iv) no proposed Legal Requirement could have an adverse consequence on Company or could require an expenditure of $25,000 or more by Company to comply with such Legal Requirement.

(b) Part 3.14(b) of the Disclosure Letter lists each Governmental Authorization that is held by Company or that otherwise relates to the business of, or to any assets owned or used by, Company. Each Governmental Authorization listed in Part 3.14(b) is valid and in full force and effect. Except as set forth in Part 3.14(b)of the Disclosure Letter:

(i) Company has at all times been in compliance with each Governmental Authorization;

(ii) no event has occurred or circumstance exists that could (with or without notice or lapse of time) (A) constitute or result, directly or indirectly, in a violation of, or a failure on the part of Company to comply with, any Governmental Authorization listed in Part 3.14(b)of the Disclosure Letter, or (B) result, directly or indirectly, in the revocation, suspension, cancellation, termination, or modification of any Governmental Authorization;

(iii) Company has received no notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, or potential violation of, or failure to comply with, any Governmental Authorization, or (B) any actual, proposed, or potential revocation, suspension, cancellation, termination, or modification of any Governmental Authorization; and

(iv) all applications required to have been filed for the renewal or reissuance of the Governmental Authorizations listed in Part 3.14(b) of the Disclosure Letter have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies.

(c) The Governmental Authorizations listed in Part 3.14(b) of the Disclosure Letter constitute all Governmental Authorizations necessary to permit Company lawfully to continue to conduct its business in the manner in which it conducts such business and to own and use its assets in the manner in which it owns and uses such assets.

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3.15 Legal Proceedings; Orders.

(a) Except as set forth in Part 3.15(a)of the Disclosure Letter, since January 1, 2012 there has not been, and there is not pending or, to Seller’s Knowledge, threatened, any Proceeding:

(i) by or against Company or that otherwise relates to or could affect the business of, or any assets owned or used by, Company; or

(ii) by or against Seller that relates to the Shares; or

(iii) that challenges, or that could have the effect of preventing, delaying, making illegal, imposing limitations or conditions on, or otherwise interfering with, any Contemplated Transaction.

To Seller’s Knowledge, no event has occurred or circumstance exists that could give rise to or serve as a basis for the commencement of any such Proceeding. Seller has delivered to Buyer copies of all pleadings, correspondence, and other documents relating to each pending or threatened Proceeding listed in Part 3.15(a)of the Disclosure Letter. None of the pending or threatened Proceedings listed in Part 3.15(a)of the Disclosure Letter, individually or in the aggregate, will or could reasonably be expected to result in an adverse consequence to Company or in Company incurring Losses of $25,000 or more or being subjected to any Order.

(b) Except as set forth in Part 3.15(b)of the Disclosure Letter, there is no Order to which Company, or any assets owned or used by Company, is subject, and Seller is not subject to any Order that relates to the business of, or any assets owned or used by, Company.

(c) Except as set forth in Part 3.15(c)of the Disclosure Letter, neither Company nor Seller has at any time received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, or potential violation of, or failure to comply with, any Order to which (A) Company, or any assets owned or used by Company, is subject, or (B) Seller is subject that relates to the business of, or any assets owned or used by, Company.

3.16Absence of Certain Changes and Events. Except as set forth in Part 3.16of the Disclosure Letter, since the Balance Sheet Date, Company has conducted its business only in the Ordinary Course of Business, and there has not been any:

(a) issuance of or change in the authorized or issued Equity Securities of Company; purchase, redemption, retirement, or other acquisition by Company of any Equity Security of Company; or declaration or payment of any dividend or other distribution or payment in respect of the Equity Securities of Company;

(b) amendment to the Organizational Documents of Company;

(c) other than any payments by Company of bonuses, salaries, benefits, or other compensation in the Ordinary Course of Business, payment, increase or decrease by Company of any bonus, salary, benefit, or other compensation to any holder of an Equity Security, director,

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manager, officer, employee, or consultant or entry into or amendment of any employment, severance, bonus, retirement, loan, or other Contract with any holder of any Equity Security, director, manager, officer, employee, or consultant;

(d) adoption of, amendment to, or material increase or decrease in the payments to or benefits under any Employee Plan;

(e) damage to or destruction or loss of any asset owned or used by Company, whether or not covered by insurance;

(f) entry into, modification, termination, or expiration of, or receipt of notice of termination of, any Applicable Contract listed in Part 3.17(a)of the Disclosure Letter;

(g) sale (other than sales of inventory in the Ordinary Course of Business), lease, other disposition of, or imposition of an Encumbrance on any asset owned or used by Company;

(h) release or waiver of any claim or right of Company with a value in excess of $10,000;

(i) change in the accounting methods used by Company;

(j) capital expenditure (or series of related capital expenditures) by Company either involving more than $10,000 or outside the Ordinary Course of Business;

(k) capital investment in, loan to, or acquisition of the securities or assets of, any Person (or series of related capital investments, loans, and acquisitions) by Company either involving more than $10,000 or outside the Ordinary Course of Business or acquisition (by merger, exchange, consolidation, acquisition of Equity Securities or assets, or otherwise) of any Person by Company;

(l) note, bond, debenture, or other indebtedness for borrowed money issued, created, incurred, assumed, or guaranteed (including advances on existing credit facilities) involving more than $10,000 individually or $25,000 in the aggregate by Company;

(m) Contract by Company or Seller to do any of the foregoing; or

(n) other material occurrence, event, action, failure to act, or transaction outside the Ordinary Course of Business involving Company.

3.17 Contracts.

(a) Part 3.17(a) of the Disclosure Letter lists, and Seller has delivered to Buyer a copy of, each Applicable Contract:

(i) involving the performance of services, delivery of goods or materials, or payments by Company of an amount or value in excess of $10,000;

(ii) involving the performance of services, delivery of goods or materials, or payments to Company of an amount or value in excess of $10,000;

(iii) that was not entered into in the Ordinary Course of Business;

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(iv) affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property;

(v) with respect to Intellectual Property Assets, including Contracts with current or former employees, consultants, or contractors regarding the ownership, use, protection, or nondisclosure of any of the Intellectual Property Assets;

(vi) with any labor union or other employee representative of a group of employees relating to wages, hours, or other conditions of employment;

(vii) involving any joint venture, partnership, or limited liability company agreement involving a sharing of profits, losses, costs, Taxes, or other liabilities by Company with any other Person;

(viii) containing covenants that in any way purport to restrict the right or freedom of Company or any other Person for the benefit of Company to (A) engage in any business activity, (B) engage in any line of business or compete with any Person, or (C) solicit any Person to enter into a business or employment relationship, or enter into such a relationship with any Person;

(ix) providing for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods;

(x) containing an effective power of attorney granted by Company;

(xi) containing or providing for an express undertaking by Company to be responsible for consequential, special, or liquidated damages or penalties or to indemnify any other party;

(xii) that does not contain a limitation of liability provision that limits the amount of the Company’s liability;

(xiii) for capital expenditures in excess of $25,000;

(xiv) involving payments to or from Company that are not denominated in U.S. dollars;

(xv) involving the settlement, release, compromise, or waiver of any material rights, claims, obligations, duties, or liabilities;

(xvi) relating to indebtedness of Company;

(xvii) relating to the employment of any employee of Company;

(xviii) relating to a distributor, reseller, OEM, dealer, manufacturer’s representative, broker, finder’s, sales agency, advertising agency, manufacturing, assembly, or product design and development relationship with Company;

(ixx) under which Company has loaned to, or made an investment in, or guaranteed the obligations of, any Person;

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(xx) relating to any bond or letter of credit;

(xxi) containing any obligation of confidentiality or nondisclosure between Company and any other Person for the benefit of Company or such other Person; and

(xxii) constituting an amendment, supplement, or modification (whether oral or written) in respect of any of the foregoing.

(b) Except as set forth in Part 3.17(b)of the Disclosure Letter:

(i) each Applicable Contract listed in Part 3.17(a)of the Disclosure Letter is in full force and effect, and is valid and enforceable in accordance with its terms;

(ii) the completion or performance of each Applicable Contract for the sale of goods or services by Company listed in Part 3.17(a) of the Disclosure Letter will not result in less than normal profit margins to Company; and

(iii) the completion or performance of each Applicable Contract listed in Part 3.17(a) of the Disclosure Letter will not result in an adverse consequence to Company.

(c) Except as set forth in Part 3.17(c)of the Disclosure Letter:

(i) Company has been in compliance with each Applicable Contract since the effective date of such Applicable Contract;

(ii) each other Person that has any obligation or liability under any Applicable Contract has been in compliance with such Applicable Contract since the effective date of such Applicable Contract;

(iii) no event has occurred or circumstance exists that (with or without notice or lapse of time) could result in a Breach of, or give Company or other Person the right to declare a default or exercise any remedy under, or accelerate the maturity or performance of or payment under, or cancel, terminate, or modify, any Applicable Contract;

(iv) no event has occurred or circumstance exists under or by virtue of any Applicable Contract that (with or without notice or lapse of time) would cause the creation of any Encumbrance affecting any assets owned or used by Company; and

(v) Company has not given to, or received from, any other Person any notice or other communication (whether oral or written) regarding any actual, alleged, or potential Breach of any Applicable Contract.

(d) There is no renegotiation of, attempt to renegotiate, or outstanding rights to renegotiate any Applicable Contract with any Person, and no Person has made written demand for such renegotiation.

(e) Each Applicable Contract relating to the sale, design, manufacture, or provision of products or services by Company has been entered into in the Ordinary Course of Business and

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without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, in violation of any Legal Requirement.

3.18 Insurance.

(a) Seller has delivered to Buyer:

(i) copies of all policies of insurance (and correspondence relating to coverage thereunder) to which Company is a party, an insured, or a beneficiary, or under which Company, or any director, officer, or manager of Company in his or her capacity as such, is or has been covered at any time since January 1, 2009, a list of which is included in Part 3.18(a)of the Disclosure Letter;

(ii) copies of all pending applications for policies of insurance; and

(iii) any written statement by the auditor of Company or any consultant or risk management advisor provided to or in the possession of Company with regard to the adequacy of its coverage or its reserves for actual or potential claims.

(b) Part 3.18(b) sets forth:

(i) any self-insurance or retention arrangement by or affecting Company, including any reserves established thereunder;

(ii) any Contract, other than a policy of insurance, for the transfer or sharing of any risk by Company; and

(iii) all obligations of Company to third parties with respect to insurance coverage (including such obligations under leases and service agreements) and identifying the policy under which such coverage is provided.

(c) Part 3.18(c)of the Disclosure Letter sets forth for the current policy year and each of the preceding five policy years by year:

(i) a summary of the loss experience under each policy of insurance;

(ii) a statement describing each claim under a policy of insurance for an amount in excess of $10,000, which sets forth:

(A) the name of the claimant;

(B) a description of the policy by insurer, type of insurance, and period of coverage; and

(C) the amount and a brief description of the claim; and

(iii) a statement describing the loss experience for all claims that were self-insured, including the number and aggregate cost of such claims.

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(d) Except as set forth in Part 3.18(d)of the Disclosure Letter:

(i) all policies of insurance to which Company is a party, an insured, or a beneficiary or that provide coverage to Seller in Seller’s capacity as a shareholder of Company, or any director, officer, or manager of Company in such capacity:

(A) are valid, outstanding, and enforceable;

(B) are issued by an insurer that is financially sound and reputable;

(C) taken together, provide adequate insurance coverage for the assets and the operations of Company for all risks normally insured against by a Person carrying on the same business or businesses as Company;

(D) are sufficient for compliance with applicable Legal Requirements and all Applicable Contracts to which Company is a party or by which it is bound;

(E) will continue in full force and effect following the consummation and performance of the Contemplated Transactions; and

(F) do not provide for any retrospective premium adjustment or other experience-based liability on the part of Company;

(ii) since January 1, 2009, neither Seller nor Company has received:

(A) any refusal of insurance coverage or any notice that a defense will be afforded with reservation of rights; or

(B) any notice of cancellation or any other indication that any policy of insurance is no longer in full force or effect or will not be renewed or that the issuer of any policy of insurance is not willing or able to perform its obligations thereunder;

(iii) Company has paid all premiums due, and has otherwise performed its obligations, under each policy of insurance to which it is a party or that provides coverage to it or to any of its directors, officers, or managers, in their capacity as such;

(iv) Company has given notice to the insurer of all insured claims; and

(v) neither Company nor Seller has received any notice of any, and to Seller’s Knowledge there are no, planned or proposed increases in the premiums or any other adverse change in the terms of any policy of insurance covering Company, Seller in such Seller’s capacity as a shareholder of Company, or any officer, director, or manager of Company in his or her capacity as such.

(e) Company has not provided any information to any insurer in connection with any application for insurance that could result in (i) cancellation of any insurance policy or bond for the

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benefit of Company or (ii) denial of coverage for a risk otherwise covered by any such insurance policy or bond.

(f) Part 3.18(f) of the Disclosure Letter describes the manner in which Company insures or self-insures with respect to workers’ compensation liability. Part 3.18(f) of the Disclosure Letter lists each incident or claim that creates or could create a workers’ compensation liability of Company since January 1, 2009, and the related disposition and accrual with respect to such incident or claim. Company has not received any notice that, and Seller has no reason to believe, based on its incident or claim experience that, Company’s workers’ compensation insurance premiums or expenses will increase in the next 12 months, or, if self-insured, that it will not be permitted to continue to self-insure without increase in any related bonds, letters of credit, or other form of financial security.

3.19Environmental Matters.

Except as set forth in Part 3.19of the Disclosure Letter:

(a) Company has at all times complied with all Environmental Laws including, without limitation, all Legal Requirements or Government Authorizations associated with the Seller’s execution of this Agreement and consummation of the Contemplated Transactions.

(b) Neither Seller or Company, or any other Person for whose conduct either of them is or could be held responsible has received any Order, notice, or other communication (written or oral) relating to any actual, alleged, or potential violation of or failure to comply with any Environmental Law, or any actual or potential Environmental, Health, and Safety Liability.

(c) There are no pending or, to Seller’s Knowledge, threatened claims or Encumbrances resulting from any Environmental, Health, and Safety Liability or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Facilities or any other asset owned or used by Company or in which it has or had an interest.

(d) Neither Seller or Company, or any other Person for whose conduct any of them is or could be held responsible, has any Environmental, Health, and Safety Liability, and no event has occurred or circumstance exists that (with or without notice or lapse of time) could result in Company or any other Person for whose conduct it is or could be held responsible (i) having any Environmental, Health and Safety Liability or (ii) violating any Environmental Law.

(e) There is no Hazardous Material present on or under the Facilities or, to Seller’s Knowledge, any geographically, geologically, hydraulically or hydro-geologically adjoining property (“Adjoining Property”). Neither Seller or Company, nor any other Person for whose conduct either of them is or could be held responsible, or, to Seller’s Knowledge, any other Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other asset in which Company has or had an interest.

(f) None of the Facilities and, to Seller’s Knowledge, no Adjoining Property, contains any (i) above-ground or underground storage tanks or (ii) landfills, surface impoundments, or disposal areas.

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(g) Seller has delivered to Buyer copies of all reports, studies, analyses, or tests initiated by or on behalf of or in the possession of Seller or Company pertaining to the environmental condition of, Hazardous Material or Hazardous Activity in, on, or under, the Facilities or any Adjoining Property, or concerning compliance by Company or any other Person for whose conduct it is or could be held responsible, with Environmental Laws.

3.20 Employees and Consultants.

(a) Part 3.20(a)of the Disclosure Letter lists the following information for each employee of Company, including each employee on leave of absence or layoff status: employer, name, job title, date of hiring, date of commencement of employment, details of leave of absence or layoff, rate of compensation, bonus arrangement, and any change in compensation or bonus since January 1, 2013, vacation, sick time, and personal leave accrued as of the Closing Date, and service credited for purposes of vesting and eligibility to participate under any Employee Plan.

(b) Part 3.20(b) of the Disclosure Letter lists the following information for every independent contractor, consultant, or sales agent of Company: name, responsibilities, date of engagement, and compensation. Each such independent contractor, consultant, or sales agent qualifies as an independent contractor in relation to Company for purposes of all applicable Legal Requirements, including those relating to Taxes, insurance, and employee benefits.

(c) Except as set forth in Part 3.20(c)of the Disclosure Letter, to Seller’s Knowledge, (i) no director, officer, or other key employee of Company intends to terminate such Person’s employment with Company, and (ii) no independent contractor, consultant, or sales agent intends to terminate such Person’s arrangement with Company.

(d) Part 3.20(d) of the Disclosure Letter lists the following information for each retired employee or director of Company, or their dependents, receiving benefits or scheduled to receive benefits from Company in the future: name, pension benefits, pension option election, retiree medical insurance coverage, retiree life insurance coverage, and other benefits.

(e) Part 3.20(e) of the Disclosure Letter states the number of employees terminated or laid off by Company since January 1, 2013, and contains a list of the following information for each employee of Company who has been terminated or laid off, or whose hours of work have been reduced by more than 50% by Company, in the six months prior to the date of this Agreement: (i) the date of such termination, layoff, or reduction in hours; (ii) the reason for such termination, layoff, or reduction in hours; and (iii) the location to which the employee was assigned.

(f) Company has not violated the Worker Adjustment and Retraining Notification Act or any similar state or local Legal Requirement.

(g) To Seller’s Knowledge, no director, officer, employee, agent, consultant, or independent contractor of Company is bound by any Contract or subject to any Order that purports to limit the ability of such director, officer, employee, agent, consultant, or independent

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contractor (i) to engage in or continue or perform any conduct, activity, duties, or practice relating to the business of Company or (ii) to assign to Company any rights to any invention, improvement, or discovery. No former or current employee of Company is a party to, or is otherwise bound by, any Contract that in any way adversely affected, affects, or could affect the ability of Company to continue to conduct its business as conducted.

3.21 Labor Disputes; Compliance.

(a) Company has at all times complied with all Legal Requirements relating to employment practices, terms, and conditions of employment, equal employment opportunity, nondiscrimination, sexual harassment, immigration, wages, hours, benefits, collective bargaining and similar requirements, the payment of Social Security and similar Taxes, and occupational safety and health. Company is not liable for the payment of any Taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements.

(b) Except as set forth in Part 3.21(b)of the Disclosure Letter:

(i) Company is not and has never been a party to any collective bargaining agreement or other labor contract;

(ii) since January 1, 2011, there has not been, there is not pending or existing, and, to Seller’s Knowledge, there is not threatened, any strike, slowdown, picketing, work stoppage, employee grievance process, organizational activity, or other labor dispute involving Company;

(iii) to Seller’s Knowledge, no event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute;

(iv) since January 1, 2011, there has not been, and there is not pending or, to Seller’s Knowledge, threatened against or affecting Company any Proceeding relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed with the National Labor Relations Board or any comparable Governmental Body;

(v) no application or petition for an election or for certification of a collective bargaining agent is pending;

(vi) since January 1, 2011, there has not been, and there is not pending or, to Seller’s Knowledge, threatened, any lockout of any employees by Company; and

(vii) since January 1, 2011, there has not been, and there is not pending or, to Seller’s Knowledge, threatened, against Company any charge of discrimination or sexual harassment filed with the Equal Employment Opportunity Commission or similar Governmental Body, and no event has occurred or circumstances exist that could provide the basis for any such charge.

3.22 Intellectual Property Assets.

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(a) Definition of Intellectual Property Assets

The term “Intellectual Property Assets” means all intellectual property owned, licensed (as licensor or licensee), or used by Company, including:

(i) the name of Company, assumed, fictional, business and trade names, registered and unregistered trademarks, service marks, and logos, and trademark and service mark applications (collectively, “Marks”);

(ii) patents, patent applications (collectively, “Patents”), and Invention Disclosures;

(iii) registered and unregistered copyrights in both published works and unpublished works (collectively, “Copyrights”);

(iv) all rights in mask works (as defined in Section 901 of the Copyright Act of 1976);

(v) software (including firmware and other software embedded in hardware devices), software code (including source code and executable or object code), subroutines, interfaces, including APIs, and algorithms (collectively “Software”);

(vi) all know-how, trade secrets, confidential or proprietary information, customer lists, technical information, data, process technology, plans, drawings, inventions, and discoveries, whether or not patentable (collectively, “Trade Secrets”);

(vii) to the extent not included in Section 3.22(a)(i)-(vi) above, all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) which relates to Company or any of its Related Party’s actual or anticipated business, research and development or existing or future products or services and which have been conceived, developed or made by Seller (whether or not during usual business hours or on the premises of Company or any Related Party thereof and whether or not alone or in conjunction with any other person) while retaining an ownership interest in, employed by, or while engaged as a consultant by, Company together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing (collectively, the “Work Product”); and

(viii) all rights in Internet websites, Internet domain names, and keywords held by Company (collectively “Net Names”).

(b) Nature of Intellectual Property Assets

(i) The Intellectual Property Assets owned by Company, together with the Intellectual Property Assets licensed by Company and listed in Part 3.17(a)(v)of the Disclosure Letter, are all those used in or necessary for the conduct of the business of Company as it is being conducted. Company is the sole owner of each of the owned Intellectual Property Assets, free and clear of any Encumbrance, and has the right to use them

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without payment to any Person. Company is not bound by, and none of the owned Intellectual Property Assets is subject to, any Contract that in any way limits or restricts the ability of Company to use, exploit, assert, or enforce any such Intellectual Property Asset anywhere in the world.

(ii) All former and current employees or independent contractors of Company have executed written Contracts with Company that assign to Company all rights to any inventions, improvements, discoveries or information, and works of authorship of such employee or independent contractor relating to the business of that Company.

(iii) No funding, facilities, or personnel of any Governmental Body, any educational institution, or any other Person (other than Company) were used, directly or indirectly, to develop or create, in whole or in part, any owned Intellectual Property Asset.

(iv) Since January 1, 2009, Company has not assigned or otherwise transferred any interest in, or agreed to assign or otherwise transfer any interest in, any Intellectual Property Asset to any other Person, except pursuant to nonexclusive licenses without a right of sublicense and for a limited use in the Ordinary Course of Business.

(v) Company is not nor ever has been a member or promoter of, or a contributor to, any industry standards body or other organization that could require or obligate Company to grant or offer to any other Person any license or right to any Intellectual Property Asset.

(c) Patents

(i) Part 3.22(c)of the Disclosure Letter lists all Patents and invention disclosures relating to inventions conceived or reduced to practice by one or more officers, employees, independent contractors, or other parties with whom Company may have collaborated in connection with developments on behalf of Company’s business (“Invention Disclosures”).

(ii) All Patents are in compliance with all applicable Legal Requirements (including payment of filing, examination, and maintenance fees, and proofs of working or use), are valid and enforceable, and are not subject to any maintenance fees, taxes, or actions falling due within 90 days after the Closing Date. No Invention Disclosure describes any invention that has been publicly disclosed or offered for sale, creating a bar to filing patent applications within 90 days after the Closing.

(iii) No Patent has been or is involved in any interference, reissue, reexamination, or opposition Proceeding, and, to Seller’s Knowledge, no such Proceeding is threatened. To Seller’s Knowledge, there is no potentially interfering patent or patent application of any Person with respect to any Patent.

(iv) No Patent is or has been infringed or has been challenged or, to Seller’s Knowledge, no such challenge is threatened. None of the products manufactured or sold, or any

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process or know-how used, by Company infringes or is alleged to infringe any patent or other proprietary right of any other Person.

(v) All products made, used, or sold under the Patents have been marked with the proper patent notice.

(d) Marks

(i) Part 3.22(d)of the Disclosure Letter lists all Marks owned or used by Company.

(ii) Except as set forth in Part 3.22(d)of the Disclosure Letter, all Marks have been registered with the United States Patent and Trademark Office and foreign countries where Company conducts substantial business related to the goods or services associated with such Marks, are in compliance with all applicable Legal Requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees, taxes, or actions falling due within 90 days after the Closing Date.

(iii) No Mark has been or is involved in any dispute, opposition, invalidation, or cancellation Proceeding and, to Seller’s Knowledge, no such Proceeding is threatened.

(iv) To Seller’s Knowledge, there is no potentially interfering trademark or trademark application of any Person with respect to any Mark.

(v) No Mark is or has been infringed or has been challenged and, to Seller’s Knowledge, no such challenge is threatened. None of the Marks used by Company infringes or is alleged to infringe any trade name, trademark, or service mark of any Person.

(vi) All products and materials containing a registered Mark bear the proper federal registration notice where permitted by law.

(e) Copyrights

(i) Part 3.22(e) of the Disclosure Letter lists all registered Copyrights and all material unregistered Copyrights used in connection with the products or services provided by Company.

(ii) All registered Copyrights are in compliance with all applicable Legal Requirements, and all the Copyrights listed in Part 3.22(e) of the Disclosure Letter are valid and enforceable, and are not subject to any maintenance fees, taxes, or actions falling due within 90 days after the Closing Date.

(iii) No Copyright listed in Part 3.22(e) of the Disclosure Letter is or has been infringed or has been challenged, and, to Seller’s Knowledge, no such challenge is threatened. None of the subject matter of any Copyright infringes or is alleged to infringe any

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copyright of any Person or is a derivative work based upon the work of any other Person.

(iv) All works encompassed by the Copyrights listed in Part 3.22(e) of the Disclosure Letter have been marked with the proper copyright notice.

(f) Trade Secrets and Work Product

(i) The documentation relating to each Trade Secret and Work Product has been provided to Buyer for review, is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual.

(ii) Company has taken all reasonable precautions to protect the secrecy, confidentiality, and value of each Trade Secret and Work Product(including the enforcement by Company of a policy requiring each employee or contractor to execute proprietary information and confidentiality agreements substantially in Company’s standard form, and all current and former employees and independent contractors of Company have executed such an agreement).

(iii) No Trade Secret is part of the public knowledge or literature or has been used, divulged, or appropriated either for the benefit of any Person (other than Company) or to the detriment of Company. No Trade Secret or Work Product is subject to any adverse claim or has been challenged, and, to Seller’s Knowledge, no such challenge is threatened. No Trade Secret or Work Product infringes or is alleged to infringe any intellectual property right of any Person.

(g) Software

All Software owned, licensed, or used by Company (other than commonly available, noncustomized third-party software licensed to Company for internal use on a nonexclusive basis) is listed in Parts 3.22(c), (e), or (f) or 3.17(a)(v)of the Disclosure Letter. Company has all rights necessary to use all copies of all Software used by Company.

(h) Net Names

(i) Part 3.22(h)of the Disclosure Letter lists all Net Names, including the name of Company that owns or uses such Net Name.

(ii) All Net Names have been registered in Company’s name and are in compliance with all applicable Legal Requirements.

(iii) No Net Name has been or is involved in any dispute, opposition, invalidation, or cancellation Proceeding and, to Seller’s Knowledge, no such Proceeding is threatened.

(iv) To Seller’s Knowledge, there is no domain name application pending of any other Person which would or would potentially interfere with or infringe any Net Name.

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(v) No Net Name is or has been infringed or has been challenged and, to Seller’s Knowledge, no such challenge is threatened. No Net Name infringes or is alleged to infringe the trademark, copyright, or domain name of any other Person.

3.23Foreign Corrupt Practices Act, Export Control and Anti-Boycott Laws. Neither Company or any Representative of Company in its capacity as such has violated the Foreign Corrupt Practices Act or the anticorruption laws of any jurisdiction where Company does business. Company has at all times complied with all Legal Requirements relating to export control and trade sanctions or embargoes. Company has not violated the anti-boycott prohibitions contained in 50 U.S.C. Sections 2401 et seq. or taken any action that can be penalized under Section 999 of the Code.

3.24Relationships with Related Persons. Neither Seller nor any Related Person of Seller or of Company has, any interest in any asset owned or used by Company. Neither Seller nor any Related Person of Seller or of Company is a Related Party of or the owner (of record or beneficially) of any Equity Security or any other financial or profit interest in, a Person that has (a) had business dealings or a material financial interest in any transaction with Company or (b) engaged in competition with Company, other than ownership of less than one percent of the outstanding capital stock of a Person that is listed on any national or regional securities exchange. Except as set forth in Part 3.24of the Disclosure Letter, neither Seller nor any Related Person of Seller or of Company is a party to any Applicable Contract with, or has any claim or right against, Company.

3.25Customers and Suppliers. Part 3.25of the Disclosure Letter lists for each of the five years ending December 31 2009, 2010, 2011, 2012 and 2013, respectively, the names of the respective customers that were, in the aggregate, the five largest customers in terms of dollar value of products or services, or both, sold by Company (“Major Customers”). Part 3.25 of the Disclosure Letter also lists for each such year, the names of the respective suppliers that were, in the aggregate, the five largest suppliers in terms of dollar value of products or services, or both, to Company (“Major Suppliers”). Except as set forth in Part 3.25of the Disclosure Letter, no Major Customer or Major Supplier has given Company notice (written or oral) terminating, canceling, reducing the volume under, or renegotiating the pricing terms or any other material terms of any Applicable Contract or relationship with Company or threatening to take any of such actions, and, to Seller’s Knowledge, no Major Customer or Major Supplier intends to do so.

3.26 Product Liabilities and Warranties.

(a) Except as set forth in Part 3.26(a)of the Disclosure Letter, Company has not incurred any Loss as a result of any defect or other deficiency (whether of design, materials, workmanship, labeling, instructions, or otherwise) with respect to any product designed, manufactured, sold, leased, licensed, or delivered, or any service provided by Company, whether such Loss is incurred by reason of any express or implied warranty (including any warranty of merchantability or fitness), any doctrine of common law (tort, contract, or other), any other Legal Requirement, or otherwise. No Governmental Body has alleged that any product designed, manufactured, sold, leased, licensed, or delivered by Company is defective or unsafe or fails to meet any product warranty or any standards promulgated by any such Governmental Body. No product designed, manufactured, sold, leased, licensed, or delivered by Company has been recalled, and Company has not received any notice of recall

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(written or oral) of any such product from any Governmental Body. No event has occurred or circumstance exists that (with or without notice or lapse of time) could result in any such liability or recall.

(b) Except as set forth in Part 3.26(b)of the Disclosure Letter, Company has not given to any Person any product or service guaranty or warranty, right of return, or other indemnity relating to the products manufactured, sold, leased, licensed, or delivered, or services performed, by Company. Company has legally excluded liability for all special, incidental, punitive, and consequential damages to any customer, dealer, or distributor of Company or customer of any such dealer or distributor.

3.27Brokers or Finders. Neither Seller nor Company, and none of their respective Representatives, has incurred any obligation or liability, contingent or otherwise, for any brokerage or finder’s fee or agent’s commission or other similar payment in connection with this Agreement or the Contemplated Transactions.

3.28Disclosure. No representation or warranty or other statement made by Seller in this Agreement, the Disclosure Letter, any supplement to the Disclosure Letter, the certificate delivered pursuant to Section 8.3, or otherwise in connection with the Contemplated Transactions contains any untrue statement of material fact or omits to state a material fact necessary to make the statements in this Agreement or therein, in light of the circumstances in which they were made, not misleading.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

4.1Organization and Good Standing. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

4.2 Enforceability and Authority; No Conflict.

(a) The execution, delivery, and performance by Buyer of this Agreement and Buyer’s Closing Documents have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon execution and delivery of Buyer’s Closing Documents by Buyer, each of Buyer’s Closing Documents will constitute the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and Buyer’s Closing Documents and to perform its obligations under this Agreement and Buyer’s Closing Documents.

(b) Except as set forth in Part 4.2of the Disclosure Letter, neither the execution and delivery of this Agreement nor the consummation or performance of any Contemplated Transaction will directly or indirectly (with or without notice or lapse of time):

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(i) contravene, conflict with, or violate (A) any Organizational Document of Buyer, or (B) any resolution adopted by the board of directors or the shareholders of Buyer;

(ii) contravene, conflict with, or violate, or give any Governmental Body or other Person the right to challenge any Contemplated Transaction, or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which Buyer, or any assets owned or used by Buyer, is subject; or

(iii) Breach, or give any Person the right to declare a default or exercise any remedy or to obtain any additional rights under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate, or modify, any Contract to which Buyer is a party.

(c) Except as set forth in Part 4.2of the Disclosure Letter, Buyer is not required to give notice to or obtain Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any Contemplated Transaction.

4.3Investment Intent. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act.

4.4Certain Proceedings. There is no Proceeding pending against Buyer that challenges, or could have the effect of preventing, delaying, making illegal, imposing limitations or conditions on, or otherwise interfering with, any Contemplated Transaction. To Buyer’s Knowledge, no such Proceeding has been threatened.

4.5Brokers or Finders. Neither Buyer nor any of its Representatives has incurred any obligation or liability, contingent or otherwise, for any brokerage or finder’s fee, agent’s commission, or other similar payment in connection with this Agreement or the Contemplated Transactions.

ARTICLE 5

COVENANTS OF SELLER PRIOR TO CLOSING DATE

5.1Access and Investigation. Prior to the Closing Date, and upon reasonable notice from Buyer, Seller shall, and shall cause Company to, (a) afford Buyer and its Representatives and prospective lenders and their Representatives (collectively, “Buyer Group”) full and free access, during regular business hours, to Company’s personnel, assets, Contracts, and Records, (b) furnish Buyer Group with copies of all such Contracts and Records as Buyer may reasonably request, (c) furnish Buyer Group with such additional financial, operating, and other relevant data and information as Buyer may reasonably request, and (d) otherwise cooperate and assist, to the extent reasonably requested by Buyer, with Buyer’s investigation of the business, condition (financial or otherwise), assets, results of operations, or prospects of Company including, without limitation, access to customers of the Company. In addition, Buyer shall have the right to have the Leased Real Property and the tangible personal property of Company inspected by Buyer Group, at Buyer’s sole cost and expense.

5.2Operation of Company’s Business. Prior to the Closing Date, Seller shall, and shall cause Company to:

(a) conduct the business of Company only in the Ordinary Course of Business;

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(b) use its best efforts to preserve intact Company’s current business organization, keep available the services of the officers, employees, and agents of Company, and maintain its relations and goodwill with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with Company;

(c) confer with Buyer prior to implementing operational decisions of a material nature;

(d) report to Buyer at such times as Buyer may reasonably request concerning the status of the business, condition (financial or otherwise), assets, results of operations, or prospects of Company;

(e) make no changes in the personnel of Company;

(f) maintain the assets owned or used by Company in a state of repair and condition that complies with Legal Requirements and Contracts and is consistent with the requirements and normal conduct of the business of Company;

(g) keep in full force and effect, without amendment, all material rights relating to the business of Company;

(h) comply with all Legal Requirements applicable to, and all Applicable Contracts of, Company;

(i) continue in full force and effect the insurance coverage under the policies set forth in Part 3.18 of the Disclosure Letter or substantially equivalent policies;

(j) except as required to comply with ERISA or to maintain qualification under Section 401(a) of the Code, not amend, modify, or terminate any Employee Plan and, except as required under the provisions of any Employee Plan, not make any contributions to or with respect to any Employee Plan;

(k) maintain all Company’s records consistent with past practice; and

(l) take no action, or fail to take any reasonable action within its control, as a result of which any of the changes or events listed in Section 3.16 would be likely to occur.

5.3 Notice.

(a) Prior to the Closing Date, Seller shall promptly provide notice to Buyer of any Breach of any representation or warranty of Seller or any fact or circumstance that would or would reasonably be likely to cause or constitute a Breach of any such representation or warranty had that representation or warranty been made as of the time of the occurrence of such fact or circumstance. Should any such Breach relate to the Disclosure Letter, Seller shall promptly deliver to Buyer a supplement to the Disclosure Letter. No such notice or delivery will be deemed to have cured any Breach of any representation or warranty or affect any right or remedy of Buyer under this Agreement.

(b) Prior to the Closing Date, Seller shall promptly provide notice to Buyer of any Breach of any covenant of Seller in this Article 5 or any fact or circumstance that could make the

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satisfaction of any condition in Article 8 impossible or unlikely and of all corrective actions undertaken, or to be undertaken, by Seller with respect thereto. No such notice will be deemed to have cured any Breach of any covenant or affect any right or remedy of Buyer under this Agreement.

5.4Payment of Indebtedness by Related Persons. Seller shall cause all indebtedness owed to Company by Seller or any Related Person of Seller to be paid in full prior to Closing.

5.5Exclusive Dealing. Until this Agreement shall have been terminated pursuant to Section 10.1, Seller shall not, and shall cause Company and each of its respective Representatives not to, directly or indirectly, solicit, initiate, encourage, or entertain any inquiries or proposals from, discuss or negotiate with, provide any nonpublic information to, or consider the merits of any inquiries or proposals from any Person (other than Buyer) relating to any business combination transaction involving Seller or Company, however structured, including the sale of the business or assets (other than in the Ordinary Course of Business) of Company, or any Equity Security of Company, or any merger, consolidation, or similar transaction or arrangement. Seller shall notify Buyer of any such inquiry or proposal within 24 hours of receipt thereof by Seller, Company, or any of their respective Representatives.

ARTICLE 6

COVENANTS OF BUYER PRIOR TO THE CLOSING DATE

6.1Notice.

(a) Prior to the Closing Date, Buyer shall promptly provide notice to Seller of any Breach of any representation or warranty of Buyer or any fact or circumstance that would or would reasonably be likely to cause or constitute a Breach of any such representation or warranty had that representation or warranty been made as of the time of the occurrence of such fact or circumstance. No such notice will be deemed to have cured any Breach of any representation or warranty or affect any right or remedy of Seller under this Agreement.

(b) Prior to the Closing Date, Buyer shall provide notice to Seller of any Breach of any covenant of Buyer in this Article 6 or any fact or circumstance that could make the satisfaction of any condition in Article 9 impossible or unlikely and of all corrective actions undertaken, or to be undertaken, by Buyer with respect thereto. No such notice will be deemed to have cured any Breach of any covenant or affect any right or remedy of Seller under this Agreement.

ARTICLE 7

POST-CLOSING COVENANTS

7.1 Cooperation and Proceedings; Access to Records.

(a) After the Closing, Seller shall cooperate with Buyer and its counsel and make himself and his Representatives available to Buyer and Company in connection with the institution or defense of any Proceeding, whether existing, threatened, or anticipated, involving or relating

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to the Contemplated Transactions, Buyer, Seller, or Company, including providing testimony, Records, and other information.

(b) Seller and Buyer will make available to the other any Records in the nonrequesting party’s custody or control for the purpose of preparing any financial statement or Tax Return or preparing for or defending any tax-related examination of the requesting Party or Company by any Governmental Body. The Party requesting such Records will reimburse the nonrequesting Party for the reasonable out-of-pocket costs and expenses incurred by the nonrequesting Party. The nonrequesting Party will afford access to such Records during normal business hours, upon reasonable advance notice given by the requesting Party, and subject to such reasonable limitations as the nonrequesting Party may impose to delete competitively sensitive or privileged information.

7.2 Non-competition; Non-solicitation, and Non-disparagement.

(a) For a period of five years after the Closing Date (the “Non-Competition Period”):

(i) Seller shall not, and Seller shall cause his Related Persons not to, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in or represent any business within any Restricted Territory that is competitive with the businesses, products and/or services of Company, Buyer, or their respective Related Persons as such businesses, products and/or services exist or are in the process of being formed or acquired from and after the Closing Date. As used in this Agreement, the term “Restricted Territory” means (A) the State of Ohio; (B) any other state in the continental United States; (C) Alaska and Hawaii; (D) any other territory or possession of the United States; and (E) any other country in which any product, process, good or service has been manufactured, provided, sold or offered or promoted for sale by Company, Buyer or any of their respective Related Persons on or prior to the date of the expiration of the Non-Competition Period or with respect to which Company, Buyer or any of their respective Related Persons has devoted substantial expense in anticipation of launching into such geographic area a portion of their business. Notwithstanding the foregoing, Seller may acquire or otherwise own less than 1% of the outstanding capital stock of a Person that is listed on any national securities exchange.

(ii) Seller shall not, directly or indirectly, (A) cause, induce, or attempt to cause or induce any employee, agent, or independent contractor of Company or Buyer to terminate such relationship; (B) in any way interfere with the relationship between Company or Buyer and any of its employees, agents, or independent contractors; or (C) hire, retain, employ, or otherwise engage or attempt to hire, retain, employ, or otherwise engage as an employee, independent contractor, or otherwise, any employee, agent, or independent contractor of Company or Buyer.

(iii) Seller shall not, directly or indirectly, (A) solicit, induce, or otherwise cause, or attempt to solicit, induce, or otherwise cause, any customer, supplier, licensor, licensee, or any prospective customer, supplier, licensor, or licensee that has been contacted or targeted for contact by Company on or before the Closing Date, or any

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other person engaged in a business relationship with Company or Buyer, to (1) terminate, curtail, or otherwise modify its relationship with Company or Buyer or (2) engage in business with a competitor of Company or Buyer, or (B) interfere in any way with the relationship between Company or Buyer, and any of its customers, suppliers, licensors, licensees, or any such prospective customers, suppliers, licensors, or licensees, or any other Person engaged in a business relationship with Company.

(b) Seller shall not make any disparaging statement, either orally or in writing, regarding Buyer, Company, the business, products, or services thereof, or any of their respective shareholders, directors, officers, employees, or agents.

(c) For a period from the date of this Agreement until two years after the Closing Date, within 10 days after Seller enters into an employment, consulting engagement, independent contractor engagement, partnership, or other business association with any Person, Seller shall advise Buyer of the identity and address of such Person. Buyer may notify each such Person that Seller is bound by this Section 7.2 and may furnish each such Person with a copy of applicable provisions of this Agreement.

(d) Seller agrees that this Section 7.2, including the provisions relating to duration, geographical area, and scope, is reasonable and necessary to protect and preserve Buyer’s and Company’s legitimate business interests and the value of the Shares and Company’s business, and to prevent an unfair advantage from being conferred on Seller.

(e) If any provision of this Section 7.2 would be held to be excessively broad as to duration, geographical area, scope, activity, or subject, for any reason, such provision shall be modified, by limiting and reducing it, so as to be enforceable to the extent allowed by applicable Legal Requirements.

(f) Seller acknowledges that any Breach of this Section 7.2 would result in serious and irreparable injury to Buyer, Buyer could not be adequately compensated by monetary damages alone, and Buyer’s remedy at law would not be adequate. Therefore, Seller acknowledges and agrees that, in the event of a Breach by Seller, Buyer shall be entitled, in addition to any other remedy at law or in equity to which Buyer may be entitled, to equitable relief against Seller, including temporary restraining orders and preliminary and permanent injunctions to restrain Seller from such Breach and to compel compliance with the obligations of Seller, and Seller waives the posting of a bond or undertaking as a condition to such relief.

7.3 Confidentiality.

(a) As used in this Section 7.3, the term “Confidential Information” includes any of the following information held or used by or relating to Company:

(i) all information that is a Trade Secret or Work Product;

(ii) all information concerning product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples,

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inventions and ideas, past, current, and planned research and development, current and planned manufacturing or distribution methods and processes, computer hardware, Software and computer software, database technologies, systems, structures and architectures; and

(iii) all information concerning the business and affairs of Company, including historical and current financial statements, financial projections and budgets, tax returns and accountants’ materials, historical, current, and projected sales, capital spending budgets and plans, business plans, strategic plans, marketing and advertising plans, publications, client and customer and prospect lists and files, current and anticipated customer requirements, price lists, market studies, Contracts, the names and backgrounds of key personnel and personnel training techniques and materials, however documented.

(b) Seller acknowledges the confidential and proprietary nature of the Confidential Information and agrees that Seller shall, except to the extent required for Seller who is employed by Company to fulfill his or her duties in the course of such employment, from and after the Closing: (i) keep the Confidential Information confidential and deliver promptly to Buyer, or immediately destroy at Buyer’s option, all embodiments and copies of the Confidential Information that are in such Seller’s possession; (ii) not use the Confidential Information for any reason or purpose; and (iii) without limiting the foregoing, not disclose the Confidential Information to any Person, except with Buyer’s Consent.

(c) Section 7.3(b) does not apply to that part of the Confidential Information that becomes generally available to the public other than as a result of a Breach of this Section 7.3 by Seller. Confidential Information shall not be deemed “generally available to the public” merely because it is included or incorporated in more general information that is publicly available or because it combines features which individually may be publicly available.

(d) If Seller becomes compelled in any Proceeding to make any disclosure that is prohibited by this Section 7.3, Seller shall, to the extent legally permissible, provide Buyer with prompt notice of such compulsion so that Buyer may seek an appropriate protective order or other appropriate remedy or waive compliance with the provisions of this Section 7.3. In the absence of a protective order or other remedy, Seller may disclose that portion (and only that portion) of the Confidential Information that, based upon the opinion of Seller’s counsel, Seller is legally compelled to disclose; provided, however, that Seller shall use its best efforts to obtain written assurance that any Person to whom any Confidential Information is so disclosed shall accord confidential treatment to such Confidential Information.

(e) Nothing in this Section 7.3 will diminish the protections and benefits under applicable Legal Requirements to which any Trade Secret or Work Product of Company is entitled. If any information that Company asserts to be a Trade Secret under applicable Legal Requirements is found by a court of competent jurisdiction not to be such a Trade Secret, such information will nonetheless be considered Confidential Information of Company for purposes of this Section 7.3.

7.4 Customer and Other Business Relationships.

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(a) After the Closing, Seller shall cooperate with Buyer and Company in their efforts to continue and maintain for the benefit of Buyer and Company those business relationships of Company and of Seller relating to the business of Company, including relationships with any customers, suppliers, licensors, licensees, lessors, employees, regulatory authorities, and others. Seller shall refer to Buyer and Company all inquiries and communications received by such Seller relating to Company after the Closing.

(b) After the Closing, Seller shall not take any action, either directly or indirectly, that could diminish the value of Company or interfere with the business of Company and/or Buyer.

(c) After the Closing, Seller shall upon Buyer’s request, for no more than a total of forty (40) hours during the first one hundred eighty (180) days following Closing, assist Buyer in his capacity as an independent contractor with respect to post-closing integration, business planning or sales related activities at such times as mutually agreed upon by Buyer and Seller.

7.5 Work Product. Seller agrees that all Work Product previously developed by Seller or developed in the future in any consulting capacity belongs in all instances to Company. Seller agrees that he promptly shall disclose such Work Product to Buyer and perform all actions reasonably requested by Buyer (whether during or after the employment or consulting period and at Buyer’s expense) to establish and confirm Company’s ownership of such Work Product (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide reasonable assistance to Company or any of its Related Persons in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. If Company is unable, after reasonable effort, to secure the signature of Seller on any such papers, any executive officer of Company shall be entitled to execute any such papers as the agent and the attorney-in-fact of Seller, and Seller hereby irrevocably designates and appoints each executive officer of Company as his agent and attorney-in-fact to execute any such papers on his behalf, and to take any and all actions as Company may deem necessary or desirable in order to protect its rights and interests in any Work Product, under the conditions described in this sentence.

7.6 Tax Returns; Benefit Plan Returns. Promptly following the Closing, Seller shall prepare and file all applicable Tax returns required to be filed with respect to the period from January 1, 2014 through and including the Closing Date. In addition, by July 31, 2014, Seller will file a Form 5500 with respect to the Company’s 401(k) Plan relating to the 2013 calendar year, and by December 31, 2014 Seller will file a Form 5500 with respect to the Company’s 401(k) Plan relating to the period between January 1, 2014, and the Closing Date.

7.7 Dissolution of CRF Environmental, Inc. Within sixty (60) days of the Closing Date, Seller will take all actions necessary to cause the dissolution and winding-up of the business and affairs of CRF Environmental, Inc.

7.8 Sharing of Cost-Savings.Within thirty (30) days of April 30, 2016, Buyer shall calculate the actual aggregate costs of completion for the projects listed on Exhibit 11.2(h) attached hereto. If such actual aggregate costs of completion for the projects listed on Exhibit 11.2

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(h) are less than the estimated aggregate costs of completion of such projects as set forth in Exhibit 11.2(h), Buyer and Seller shall share equally in the costs savings and Buyer shall promptly remit to Seller its share of the cost savings.

7.9 Audited Financial Statements. Within fifteen (15) days of the Closing Date, Seller shall deliver to to Buyer audited consolidated balance sheets of Company as of December 31, 2013 (the “Balance Sheet Date”) and as of December 31, 2012, and the related audited consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the two fiscal years ended on such dates, including the notes thereto, together with the report thereon of Company’s independent public accountants, (collectively, the “Audited Financial Statements”).

ARTICLE 8

CONDITIONS PRECEDENT TO BUYER’s OBLIGATIONS TO CLOSE

Buyer’s obligations to purchase the Shares and to take the other actions required pursuant to this Agreement to be taken by Buyer at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in whole or in part by Buyer):

8.1 Accuracy of Seller’s Representations.

(a) Subject to Section 8.1(b), each of Seller’s representations and warranties in this Agreement will have been accurate in all material respects as of the date of this Agreement and will be accurate in all material respects as of the Closing Date as if then made, without giving effect to any supplement to the Disclosure Letter.

(b) Each of Seller’s representations and warranties in Sections 3.2(a), 3.3, 3.4, 3.12, and 3.29, and each of the representations and warranties in this Agreement that contains an express materiality qualification, will have been accurate in all respects as of the date of this Agreement and will be accurate in all respects as of the Closing Date as if then made, without giving effect to any supplement to the Disclosure Letter.

8.2Seller’s Performance. The covenants and obligations that Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing will have been duly performed and complied with in all material respects.

8.3Bring Down Certificate. Buyer will have received a certificate executed by Seller confirming (a) the accuracy of its representations and warranties as of the date of this Agreement and as of the Closing Date in accordance with Section 8.1 and (b) the performance of and compliance with its covenants and obligations to be performed or complied with at or prior to the Closing in accordance with Section 8.2.

8.4Consents. Each of the Consents identified in Exhibit 8.4 (the “Material Consents”) will have been obtained in form and substance satisfactory to Buyer and will be in full force and effect. Copies of the Material Consents will have been delivered to Buyer.

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8.5Governmental Authorizations. Buyer will have received such Governmental Authorizations as are necessary or which it considers desirable to allow Buyer to acquire and own the Shares and for Company and Buyer to own and operate the business of Company from and after the Closing.

8.6Additional Documents. Each of the items to be delivered pursuant to Section 2.4(a) and each of the following documents will have been delivered (or tendered subject only to Closing) to Buyer:

(a) pay-off letters, termination agreements, termination statements, and other releases to be delivered against repayment by Company at or prior to the Closing of the indebtedness of Company as Buyer shall have reasonably requested and reasonably satisfactory to Buyer;

(b) duly executed releases (including UCC-3 termination statements) of all Encumbrances on Company’s assets in form and substance reasonably satisfactory to Buyer and its counsel;

(c) such resignations of directors and officers of Company as Buyer may request;

(d) written confirmation, in form and substance satisfactory to Buyer, of the termination of employment of Seller and Rachel Ekey;

(e) written confirmation, in form and substance satisfactory to Buyer, that Seller has purchased from the Company the two Company-owned automobiles previously provided for his use; and

(f) such other documents as Buyer may reasonably request, each in form and substance satisfactory to Buyer, and, if necessary, executed by Seller or Company, for the purpose of:

(i) evidencing the accuracy of any of Seller’s representations and warranties;

(ii) evidencing the performance by Seller of, or the compliance by Seller with, any covenant or obligation required to be performed or complied with by Seller;

(iii) evidencing the satisfaction of any condition referred to in this Article 8; or

(iv) otherwise facilitating the consummation or performance of any Contemplated Transaction.

8.7No Proceedings. Since the date of this Agreement, there will not have been commenced or threatened against Buyer, or against any Related Person of Buyer, any Proceeding (a) involving any challenge to, or seeking relief (monetary or otherwise) in connection with, any Contemplated Transaction or (b) that could have the effect of preventing, delaying, making illegal, imposing limitations or conditions on, or otherwise interfering with, any Contemplated Transaction.

8.8No Claim Regarding Stock Ownership or Sale Proceeds. There will not have been made or threatened by any Third Party any claim asserting that such Third Party (a) is the holder or the beneficial owner of any Equity Security of Company or (b) is entitled to all or any portion of the Purchase Price.

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8.9No Conflict. Neither the consummation nor the performance of any Contemplated Transaction will, directly or indirectly (with or without notice or lapse of time), contravene, conflict with, or violate, or cause Buyer or any Related Person of Buyer to suffer any adverse consequence under, (a) any applicable Legal Requirement or Order or (b) any Legal Requirement or Order that has been published, introduced, or otherwise proposed by or before any Governmental Body.

8.10No Material Adverse Change. Since the date of this Agreement, Company shall not have suffered any Material Adverse Change and no event will have occurred, and no circumstance will exist, that could result in a Material Adverse Change.

8.11Closing of FGC Acquisition. Simultaneously with the Closing, Buyer shall acquire all of the equity securities of FGC Corporation in accordance with the terms and conditions set forth in the Stock Purchase Agreement among Buyer, Seller and Elliott M. Drysdale, dated April 28, 2014.

8.12Bailment Agreement. Buyer shall have entered into a bailment agreement with D’Coil Steel, Inc. in form and substance acceptable to Buyer.

ARTICLE 9

CONDITIONS PRECEDENT TO SELLER’s OBLIGATIONS TO CLOSE

Seller’s obligations to sell the Shares and to take the other actions required pursuant to this Agreement to be taken by Seller at the Closing are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived in whole or in part by Seller):

9.1Accuracy of Buyer’s Representations. Each of Buyer’s representations and warranties in this Agreement will have been accurate in all material respects as of the date of this Agreement and will be accurate in all material respects as of the Closing Date as if then made.

9.2Buyer’s Performance. The covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing will have been duly performed and complied with in all material respects.

9.3Bring Down Certificate. Seller will have received a certificate executed by Buyer confirming (a) the accuracy of its representations and warranties as of the date of this Agreement and as of the Closing Date in accordance with Section 9.1 and (b) the performance of and compliance with its covenants and obligations to be performed or complied with at or prior to the Closing in accordance with Section 9.2.

9.4Additional Documents. Each of the items to be delivered pursuant to Section 2.4(b) and each of the following documents will have been delivered (or tendered subject only to Closing) to Seller:

(a) such other documents as Seller may reasonably request, each in form and substance satisfactory to Seller, and, if necessary, executed by Buyer, for the purpose of:

(i) evidencing the accuracy of any of Buyer’s representations and warranties;

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(ii) evidencing the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer;

(iii) evidencing the satisfaction of any condition referred to in this Article 9; or

(iv) otherwise facilitating the consummation or performance of any Contemplated Transaction.

9.5No Legal Prohibition. There will not be in effect any Legal Requirement or Order that prohibits the sale of the Shares by Seller to Buyer or the consummation of any of the other Contemplated Transactions.

ARTICLE 10

TERMINATION

10.1Termination Events. Subject to Section 10.2, by notice given prior to or at the Closing, this Agreement may be terminated as follows:

(a) by mutual consent of Buyer and Seller;

(b) by Buyer if a material Breach of any provision of this Agreement has been committed by Seller;

(c) by Seller if a material Breach of any provision of this Agreement has been committed by Buyer;

(d) by Buyer if satisfaction of any condition in Article 8 by May 15, 2014 or such later date as the Parties may agree upon (the “End Date”) becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement);

(e) by Seller if satisfaction of any condition in Article 9 by the End Date becomes impossible (other than through the failure of Seller to comply with its obligations under this Agreement);

(f) by Buyer if the Closing has not occurred on or before the End Date, unless Buyer is then in material Breach of this Agreement; or

(g) by Seller if the Closing has not occurred on or before the End Date, unless Seller is then in material Breach of this Agreement.

10.2Effect of Termination.

(a) Each Party’s right of termination under Section 10.1 is in addition to any other right it may have under this Agreement (including under Section 12.14) or otherwise, and the exercise of a Party’s right of termination will not constitute an election of remedies. If this Agreement is terminated pursuant to Section 10.1, this Agreement will be of no further force or effect; provided, however, that (i) this Section 10.2 and Article 12 will survive the termination of this Agreement and will remain in full force and effect, and (ii) the termination of this

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Agreement will not relieve any Party from any liability for any Breach of this Agreement occurring prior to termination.

(b) If this Agreement is terminated by Buyer pursuant to the provisions of Section 10.1(b), Section 10.1(d) or Section 10.1(f) above, and within 180 days after the date of such termination, Seller or Company signs a letter of intent or other agreement relating to the acquisition of a material portion of Company’s assets, business or securities, in whole or in part, whether directly or indirectly, through purchase, merger, consolidation, or otherwise (other than sales of inventory or immaterial portions of Company’s assets in the ordinary course) and such transaction is ultimately consummated, then, immediately upon the closing of such transaction, Seller shall be obligated to pay, and will pay to Buyer, the amount of Three Hundred Sixty-Two Thousand Five Hundred Dollars ($362,500) in immediately available funds to an account designated by Buyer.

ARTICLE 11

INDEMNIFICATION; PAYMENT; REIMBURSEMENT; REMEDIES

11.1 Survival; Remedies.

(a) All representations, warranties, covenants, and obligations in this Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, and any certificate, document, or other writing delivered pursuant to this Agreement will survive the Closing and the consummation and performance of the Contemplated Transactions.

(b) The right to indemnification, payment, reimbursement, or other remedy based upon any such representation, warranty, covenant, or obligation will not be affected by any investigation conducted or any Knowledge acquired at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of, or compliance with, such representation, warranty, covenant, or obligation.

(c) The waiver of any condition relating to any representation, warranty, covenant, or obligation will not affect the right to indemnification, payment, reimbursement, or other remedy based upon such representation, warranty, covenant, or obligation.

11.2Indemnification, Payment and Reimbursement by Seller. Seller shall indemnify and hold harmless Buyer, Company and their respective Representatives, shareholders, and Related Persons (collectively, the “Buyer Indemnified Persons”) from, and shall pay to Buyer Indemnified Persons the amount of any Loss that Buyer Indemnified Persons or any of them may suffer, sustain, or become subject to, as a result of, in connection with, or relating to:

(a) any Breach of any representation or warranty made by Seller in (i) this Agreement or the Disclosure Letter, (ii) the certificate delivered pursuant to Section 8.3, or (iii) any other certificate, document, or other writing delivered by Seller pursuant to this Agreement;

(b) any Breach of any covenant or obligation of Seller in this Agreement or in any certificate, document, or other writing delivered by Seller pursuant to this Agreement;

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(c) any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made, by any such Person with Seller or Company (or any Person acting on their behalf) in connection with any Contemplated Transaction;

(d) (i) any Taxes of Company not reflected on the Closing Date Balance Sheet relating to periods (or portions thereof) ending on or prior to the Closing Date, and (ii) any liability of Company for Taxes of any other Person, as a transferee or successor, by Contract or otherwise;

(e) any product shipped or manufactured by, or any services provided by, Company, in whole or in part, prior to the Closing Date;

(f) Company’s Tax reporting methodology and related accounting practices for long-term construction contracts and associated revenue recognition for periods prior to the Closing Date (it being understood and agreed that Buyer contemplates, following the Closing Date, a change in Company’s Tax reporting methodology);

(g) the termination of employment and extension of insurance benefits by Company to Devin Olijar; or

(h) the extent to which, as determined by Buyer on April 30, 2016, the actual aggregate costs of completion for the projects listed on Exhibit 11.2(h) exceed an amount equal to the estimated aggregate costs of completion for such projects as set forth in Exhibit 11.2(h) plus $500,000; provided, however, that Seller’s indemnification obligation under this Section 11.2(h) will only apply to the extent (i) such increased costs of completion do not include an allocation of overhead by the Buyer for engineering or administrative support; (ii) such increased costs of completion do not involve changes to the scope of such projects agreed to by Buyer or Company in writing after the Closing; (iii) such increased costs of completion do not involve a change in supplier of goods and services initiated by Buyer from the supplier that was used as the basis for the cost estimates included in Exhibit 11.2(h); and (iv) Buyer or Company does not otherwise receive compensation for such costs from the applicable customer.

11.3Indemnification, Payment and Reimbursement by Seller: Environmental Matters. In addition to the provisions of Section 11.2, Seller shall indemnify and hold harmless Buyer Indemnified Persons from, and shall pay to Buyer Indemnified Persons the amount of any Loss (including all costs and expenses of any Cleanup (including, without limitation, soil testing, engineering evaluations, fees of experts and reasonable attorneys’ fees) that Buyer Indemnified Persons or any of them may suffer, sustain, or become subject to, as a result of, in connection with, or relating to:

(a) any Environmental, Health, and Safety Liability arising out of or relating to:

(i) (A) the ownership, operation, or condition at any time on or prior to the Closing Date of the Facilities, or (B) any Hazardous Material that was present on or at the Facilities at any time on or prior to the Closing Date; or

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(ii) (A) any Hazardous Material, wherever located, that was generated, transported, stored, treated, Released, or otherwise handled by Company at any time on or prior to the Closing Date, or (B) any Hazardous Activity that was conducted by Company or by any other Person for whose conduct they are or may be held responsible; or

(b) any bodily injury (including illness, disability, and death, and regardless of when any such bodily injury occurred or manifested itself), property damage (including trespass, nuisance, wrongful eviction, and deprivation of the use of real property), or other damage of or to any Person, including any employee or former employee of Company, in any way arising from or allegedly arising from any Hazardous Activity conducted with respect to the Facilities or the operation of Company on or prior to the Closing Date or from Hazardous Material that was:

(i) present on or prior to the Closing Date on or at the Facilities (or present on or at any other property, if such Hazardous Material emanated or allegedly emanated from any of the Facilities on or prior to the Closing Date), or

(ii) Released by Seller or Company or any other Person for whose conduct they are or may be held responsible, at any time on or prior to the Closing Date.

Section 11.8 notwithstanding, Buyer shall be entitled (at its election) to control any Cleanup, any related Proceeding, and, except as provided in the following sentence, any other Proceeding with respect to which relief may be sought under this Section 11.3. The procedure described in Section 11.8, however, will apply to any Third-Party Claim solely for monetary damages relating to a matter covered by this Section 11.3.

11.4Indemnification, Payment and Reimbursement by Buyer. Buyer shall indemnify and hold harmless Seller from, and shall pay to Seller the amount of, or reimburse Seller for, any Loss that Seller may suffer, sustain, or become subject to, as a result of, in connection with, or relating to:

(a) any Breach of any representation or warranty made by Buyer in (i) this Agreement, (ii) the certificate delivered pursuant to Section 9.3, or (iii) in any other certificate, document, or other writing delivered by Buyer pursuant to this Agreement;

(b) any Breach of any covenant or obligation of Buyer in this Agreement or in any certificate, document, or other writing delivered by Buyer pursuant to this Agreement; or

(c) any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made, by any such Person with Buyer (or any Person acting on its behalf) in connection with any Contemplated Transaction.

11.5 Time Limitations.

(a) If the Closing occurs, Seller shall have liability under Section 11.2(a) with respect to any Breach of a representation or warranty (other than those in Sections 3.1, 3.2, 3.3, 3.11, 3.13, 3.19, 3.24, or 3.28, as to which a claim may be made at any time), only if on or before the

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date that is three years after the Closing Date, Buyer notifies Seller of a claim, specifying the factual basis of the claim in reasonable detail to the extent known by Buyer.

(b) If the Closing occurs, Buyer shall have liability under Section 11.4(a) with respect to any Breach of a representation or warranty (other than those in Sections 4.1, 4.2, and 4.5, as to which a claim may be made at any time), only if on or before the date that is three years after the Closing Date, Seller notifies Buyer of a claim specifying the factual basis of the claim in reasonable detail to the extent known by Seller.

11.6 Certain Limitations on Amount.

(a) If the Closing occurs, Seller shall have no liability with respect to claims under Section 11.2(a) until the aggregate of all Losses suffered by all Buyer Indemnified Persons with respect to such claims exceeds $40,000; provided, however, that if the aggregate of all such Losses exceeds $40,000, Seller shall be liable for all such Losses. In addition, if the Closing occurs, the aggregate liability of Seller with respect to Losses for claims under Section 11.2(a) shall not exceed $7,250,000. However, this Section 11.6(a) will not apply to any Breach of which Seller has Knowledge at any time at or prior to the date on which such representation and warranty was made, to any Breach of any representation or warranty in Sections 3.1, 3.2, 3.3, 3.11, 3.13, 3.19, 3.24, or 3.28 or in the case of fraud.

(b) If the Closing occurs, Seller’s maximum aggregate liability for all claims under Section 11.2 (h) above shall be limited to $1,000,000.

(c) If the Closing occurs, Buyer shall have no liability with respect to claims under Section 11.4(a) until the aggregate of all Losses suffered by all Seller Indemnified Persons with respect to such claims exceeds $40,000; provided, however, that if the total of all such Losses exceeds $40,000, Buyer shall be liable for all such Losses. In addition, if the Closing occurs, the aggregate liability of Buyer with respect to Losses for claims under Section 11.4(a) shall not exceed $7,250,000. However, this Section 11.6(b) will not apply to any Breach of which Buyer has Knowledge at any time at or prior to the date on which such representation and warranty was made, to any Breach of any representation or warranty in Section 4.1, 4.2, or 4.5 or in the case of fraud.

11.7Right of Setoff. Upon notice to Seller specifying in reasonable detail the basis therefor, Buyer may set off any amount to which it claims to be entitled from Seller, including any amounts that may be owed under this Article 11 or otherwise, against amounts otherwise payable under any provision of this Agreement. The exercise of such right of setoff by Buyer in good faith, whether or not ultimately determined to be justified, will not constitute a default under this Agreement, regardless of whether Seller disputes such setoff claim, or whether such setoff claim is for a contingent or an unliquidated amount. Neither the exercise of, nor the failure to exercise, such right of setoff or give notice of a claim under the Escrow Agreement will constitute an election of remedies or limit Buyer in any manner in the enforcement of any other remedies that may be available to it.

11.8 Third-Party Claims.

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(a) A Person benefited by Section 11.2, 11.3 (solely to the extent provided in the last sentence of Section 11.3), or 11.4 (an “Indemnified Person”) shall give notice of the assertion of a Third-Party Claim to Seller or Buyer (an “Indemnifying Person”), as the case may be; provided, however, that no failure or delay on the part of an Indemnified Person in notifying an Indemnifying Person will relieve the Indemnifying Person from any obligation under this Article 11 except to the extent that the failure or delay materially prejudices the defense of the Third-Party Claim by the Indemnifying Person.

(b) (i)Except as provided in Section 11.8(c), if the amount in dispute in connection with such Third-Party Claim is not, when aggregated with the amount of all other indemnification claims for Losses then pending, in excess of the amount then constituting the Escrow Funds, the Indemnifying Person may elect to assume the defense of the Third-Party Claim with counsel satisfactory to the Indemnified Person (for which approval will not be unreasonably withheld) by (A) giving notice to the Indemnified Person of its election to assume the defense of the Third-Party Claim and (B) giving the Indemnified Person evidence acceptable to the Indemnified Person that the Indemnifying Person has adequate financial resources to defend against the Third-Party Claim and fulfill its obligations under this Article 11, in each case no later than 10 days after the Indemnified Person gives notice of the assertion of a Third-Party Claim under Section 11.8(a).

(ii) If the Indemnifying Person elects to assume the defense of a Third-Party Claim:

(A) it shall diligently conduct the defense and, so long as it diligently conducts the defense, shall not be liable to the Indemnified Person for any Indemnified Person’s fees or expenses subsequently incurred in connection with the defense of the Third-Party Claim other than reasonable costs of investigation;

(B) the election will conclusively establish for purposes of this Agreement that the Indemnified Person is entitled to relief under this Agreement for any Loss arising, directly or indirectly, from or in connection with the Third-Party Claim (subject to the provisions of Section 11.6);

(C) no compromise or settlement of such Third-Party Claim may be effected by the Indemnifying Person without the Indemnified Person’s consent unless (I) there is no finding or admission of any violation by the Indemnified Person of any Legal Requirement or any rights of any Person, (II) the Indemnified Person receives a full release of and from any other claims that may be made against the Indemnified Person by the Third Party bringing the Third-Party Claim, and (III) the sole relief provided is monetary damages that are paid in full by the Indemnifying Person; and

(D) the Indemnifying Person shall have no liability with respect to any compromise or settlement of such claims effected without its consent.

(iii) If the Indemnifying Person does not assume the defense of a Third-Party Claim in the manner and within the period provided in Section 11.8(b)(i), or if the

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Indemnifying Person does not diligently conduct the defense of a Third-Party Claim, the Indemnified Person may conduct the defense of the Third-Party Claim at the expense of the Indemnifying Person and the Indemnifying Person shall be bound by any determination resulting from such Third-Party Claim or any compromise or settlement effected by the Indemnified Person.

(c) Notwithstanding the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a Third-Party Claim may adversely affect it or any Related Party other than as a result of monetary damages for which it would be entitled to relief under this Agreement or establish an adverse precedent, the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive right to defend, compromise, or settle such Third-Party Claim.

(d) Notwithstanding the provisions of Section 12.11, Seller consents to the nonexclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Person for purposes of determining any claim that an Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein.

(e) With respect to any Third-Party Claim subject to this Article 11:

(i) any Indemnified Person and any Indemnifying Person, as the case may be, shall keep the other Person fully informed of the status of such Third-Party Claim and any related Proceeding at all stages thereof where such Person is not represented by its own counsel; and

(ii) both the Indemnified Person and the Indemnifying Person, as the case may be, shall render to each other such assistance as they may reasonably require of each other and shall cooperate in good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim.

(f) In addition to Section 7.34, with respect to any Third-Party Claim subject to this Article 11, the Parties shall cooperate in a manner to preserve in full (to the extent possible) the confidentiality of all Confidential Information and the attorney-client and work-product privileges. In connection therewith, each Party agrees that:

(i) it shall use its best efforts, in respect of any Third-Party Claim in which it has assumed or participated in the defense, to avoid production of Confidential Information (consistent with applicable law and rules of procedure); and

(ii) all communications between any Party and counsel responsible for or participating in the defense of any Third-Party Claim shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege.

(g) Any claim under this Article 11 for any matter involving a Third-Party Claim shall be indemnified, paid, or reimbursed promptly. If the Indemnified Person shall for any reason assume the defense of a Third-Party Claim, the Indemnifying Person shall reimburse the Indemnified Person on a monthly basis for the costs of investigation and the reasonable fees and expenses of counsel retained by the Indemnified Person. Buyer may elect in its discretion

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to have payment or reimbursement made from the Escrow Funds pursuant to the terms of the Escrow Agreement, by setoff against amounts otherwise payable under the Promissory Notes or otherwise pursuant to Section 11.7, or in any other manner.

11.9Other Claims. A claim under this Article 11 for any matter not involving a Third-Party Claim may be made by notice to Seller or Buyer, as the case may be, and shall be indemnified, paid, or reimbursed promptly after such notice. Buyer may elect in its discretion to have payment or reimbursement made from the Escrow Funds pursuant to the terms of the Escrow Agreement, or otherwise pursuant to Section 11.7, or in any other manner.

11.10STRICT LIABILITY OR INDEMNITEE NEGLIGENCE. THE PROVISIONS IN THIS ARTICLE 11 SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT, OR FUTURE ACTS, CLAIMS, OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT, OR FUTURE ENVIRONMENTAL LAW, OCCUPATIONAL SAFETY AND HEALTH LAW, OR PRODUCTS LIABILITY, SECURITIES, OR OTHER LEGAL REQUIREMENT) AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM RELIEF IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY, OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING RELIEF, OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING RELIEF.

ARTICLE 12

MISCELLANEOUS

12.1 Expenses.

(a) Except as otherwise provided in this Agreement or the other documents to be delivered pursuant to this Agreement, each Party will bear its respective fees and expenses incurred in connection with the preparation, negotiation, execution, and performance of this Agreement and the consummation and performance of the Contemplated Transactions, including all fees and expenses of its Representatives. Buyer will pay one-half and Seller will pay one-half of the fees and expenses of the Escrow Agent under the Escrow Agreement. Company has not incurred, and Seller will cause Company not to incur, any fees or expenses in connection with this Agreement and the Contemplated Transactions; provided, however, that to the extent such fees and expenses have been incurred by Company, Seller will reimburse Company for such fees and expenses prior to the Closing. The obligation of each Party to bear its own fees and expenses will be subject to any rights of such Party arising from a Breach of this Agreement by another Party.

(b) All stamp, documentary, and other transfer Taxes (including any penalties and interest) incurred in connection with this Agreement, whether pertaining to the Shares or any assets and properties of Company, will be paid by Seller. Seller will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such Taxes.

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12.2Public Announcements. Notwithstanding any confidentiality obligation to which Buyer is subject, any public announcement, including any press release, communication to employees, customers, suppliers, or others having dealings with Company, or similar publicity with respect to this Agreement or any Contemplated Transaction, will be issued, at such time, in such manner, and containing such content as Buyer determines.

12.3 Disclosure Letter.

(a) In the event of any inconsistency between the statements in this Agreement and those in the Disclosure Letter (other than an exception expressly set forth as such in the Disclosure Letter with respect to a specifically identified representation or warranty), the statements in this Agreement will control.

(b) Notwithstanding anything to the contrary contained in the Disclosure Letter or any supplement to the Disclosure Letter, the statements in the Disclosure Letter, and those in any supplement thereto, relate only to the provisions in the Sections of this Agreement to which they expressly relate and not to any other provision in this Agreement.

12.4Further Assurances. The Parties will (a) execute and deliver to each other such other documents and (b) do such other acts and things as a Party may reasonably request for the purpose of carrying out the intent of this Agreement, the Contemplated Transactions, and the documents to be delivered pursuant to this Agreement.

12.5Entire Agreement. This Agreement supersedes all prior agreements, whether written or oral, between the Parties with respect to its subject matter (including any letter of intent and, upon the Closing, any confidentiality obligation to which Buyer is subject) and constitutes (along with the Disclosure Letter, the exhibits, and the other documents to be delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to the subject matter of this Agreement.

12.6Modification. This Agreement may only be amended, supplemented, or otherwise modified by a writing executed by the Buyer and the Seller.

12.7Assignments and Successors. No Party may assign any of its rights or delegate any of its obligations under this Agreement without the prior consent of the other parties. Notwithstanding the foregoing, Buyer may (i) assign its rights under this Agreement to one or more of its Related Persons; (ii) designate one or more of its Related Persons to perform its obligations hereunder; (iii) assign its rights under this Agreement to any purchaser of all or substantially all of the assets of Buyer after the Closing, and /or (iv) collaterally assign its rights under this Agreement to the lenders or financing sources of Buyer. Any purported assignment of rights or delegation of obligations in violation of this Section 12.7 will be void. Subject to the foregoing, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the heirs, executors, administrators, legal representatives, successors, and permitted assigns of the Parties.

12.8No Third-Party Rights. Other than the Indemnified Persons and the Parties, no Person will have any legal or equitable right, remedy, or claim under or with respect to this Agreement. This

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Agreement may be amended or terminated, and any provision of this Agreement may be waived, without the consent of any Person who is not a Party to the Agreement.

12.9Remedies Cumulative. The rights and remedies of the Parties are cumulative and not alternative.

12.10Governing Law. All matters relating to or arising out of this Agreement or any Contemplated Transaction and the rights of the Parties (whether sounding in contract, tort, or otherwise) will be governed by and construed and interpreted under the laws of the State of Illinois without regard to conflicts of laws principles that would require the application of any other law.

12.11Jurisdiction; Service of Process. Except as otherwise provided in this Agreement, any Proceeding arising out of or relating to this Agreement or any Contemplated Transaction shall be brought in the courts of the State of Illinois, County of DuPage, or, if it has or can acquire jurisdiction, in the United States District Court for the Northern District of Illinois, and each of the Parties irrevocably submits to the exclusive jurisdiction of each such court in any such Proceeding, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of such Proceeding shall be heard and determined only in any such court, and agrees not to bring any Proceeding arising out of or relating to this Agreement or the Contemplated Transactions in any other court. Each Party acknowledges and agrees that this Section 12.11 constitutes a voluntary and bargained-for agreement between the Parties. Process in any Proceeding referred to in the first sentence of this Section or in Section 11.8(d) may be served on any Party anywhere in the world, including by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 12.16. Nothing in this Section 12.11 will affect the right of any Party to serve legal process in any other manner permitted by law or at equity.

12.12Waiver of Jury Trial. EACH PartY, KNOWINGLY, VOLUNTARILY, and INTENTIONALLY, waiveS ITS right to trial by jury in any proceeding arising out of or relating to this Agreement or any Contemplated Transaction, whether sounding in contract, tort, or otherwise.

12.13Attorneys’ Fees. In the event any Proceeding is brought in respect of this Agreement or any of the documents referred to in this Agreement, the prevailing Party will be entitled to recover reasonable attorneys’ fees and other costs incurred in such Proceeding, in addition to any relief to which such Party may be entitled.

12.14Enforcement of Agreement. Seller acknowledges and agrees that Buyer would be irreparably harmed if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any Breach of this Agreement by Seller could not be adequately compensated in all cases by monetary damages alone. Accordingly, Seller agrees that, in addition to any other right or remedy to which Buyer may be entitled at law or in equity, Buyer shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to obtain temporary, preliminary, and permanent injunctive relief to prevent Breaches or threatened Breaches, without posting any bond or giving any other undertaking.

12.15No Waiver. Neither any failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or any of the documents referred to in this Agreement will operate

60

as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable Legal Requirements, (a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be waived by a Party, in whole or in part, unless made in a writing signed by such Party or Seller on behalf of Seller; (b) a waiver given by a Party will only be applicable to the specific instance for which it is given; and (c) no notice to or demand on a Party will (i) waive or otherwise affect any obligation of that Party or (ii) affect the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

12.16Notices. All notices and other communications required or permitted by this Agreement shall be in writing and will be effective, and any applicable time period shall commence, when (a) delivered to the following address by hand or by a nationally recognized overnight courier service (costs prepaid) addressed to the following address or (b) transmitted electronically to the following facsimile numbers marked to the attention of the Person (by name or title) designated below (or to such other address, facsimile number, or Person as a Party may designate by notice to the other Party):

Seller:

Lawrence E. Ekey

1400 Queen Anne’s Gate

Westlake, Ohio 44145

61

with a copy to:

Jay Marcie, Esq.

1001 Jaycox Road

Avon, Ohio 44011ý

Fax no.:

Buyer:

Fuel Tech, Inc.

27601 Bella Vista Parkway

Warrenville, Illinois 60555

Attention: Legal Department

Fax no.: 630.845.4501

12.17Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

12.18 Counterparts and Electronic Signatures.

(a) This Agreement and other documents to be delivered pursuant to this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy and all of which, when taken together, will be deemed to constitute one and the same agreement or document, and will be effective when counterparts have been signed by each of the Parties and delivered to the other Parties.

(b) A manual signature on this Agreement or other documents to be delivered pursuant to this Agreement, an image of which shall have been transmitted electronically, will constitute an original signature for all purposes. The delivery of copies of this Agreement or other documents to be delivered pursuant to this Agreement, including executed signature pages where required, by electronic transmission will constitute effective delivery of this Agreement or such other document for all purposes.

62

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.

FUEL TECH, INC. By: /s/ Vincent J. Arnone Name: Vincent J. Arnone Title: Executive Vice President and Chief Operating Officer

SELLER: /s/ Lawrence E. Ekey Lawrence E. Ekey

SPOUSAL CONSENT The spouse of the Seller is fully aware of, understands, and fully consents and agrees to the provisions of this Stock Purchase Agreement and its binding effect upon any community property interests she may now or hereafter own, and agrees that the termination of her marital relationship with the Seller for any reason shall not affect in any way the rights and obligations of the Seller under the Stock Purchase Agreement and that her understanding, consent and agreement with the Stock Purchase Agreement is evidenced by her execution of this Consent. /s/ Valerie A. Ekey Valerie A. Ekey, wife of Lawence E. Ekey, an individual

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EX-31.1

Exhibit 31.1

I, Douglas G. Bailey, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 12, 2014	By:	/s/ Douglas G. Bailey
		Douglas G. Bailey
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, David S. Collins, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 12, 2014	By:	/s/ David S. Collins
		David S. Collins
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-32

Exhibit 32

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

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

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

Date: May 12, 2014	By:	/s/ Douglas G. Bailey
		Douglas G. Bailey
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 12, 2014	By:	/s/ David S. Collins
		David S. Collins
		President and Chief Executive Officer
		(Principal Executive Officer)

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

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

XML

Earnings per Share Data (Detail) - Basic Earnings Per Share	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Basic weighted-average shares	22,641,000	22,112,000
Conversion of unsecured loan notes	0	0
Unexercised options and unvested RSUs	0	0
Diluted weighted-average shares	22,641,000	22,112,000

XML

Subsequent Events (Details) (Cleveland Roll Forming Environmental Division, Inc. d/b/a PECO [Member], Subsequent Event [Member], USD $) In Millions, unless otherwise specified	0 Months Ended
	Apr. 28, 2014
Cleveland Roll Forming Environmental Division, Inc. d/b/a PECO [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Interest in capital stock (as a percent)	100.00%
Cash consideration	$ 7.25

XML

Business Segment and Geographic Disclosures (Detail) - Operations by Geographic Area (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues:
Revenues	$ 18,661	$ 22,484
United States
Revenues:
Revenues	9,229	12,866
Foreign
Revenues:
Revenues	$ 9,432	$ 9,618

XML

Business Segment and Geographic Disclosures (Detail)	3 Months Ended
	Mar. 31, 2014 segment
Segment Reporting [Abstract]
Number of reportable segments	2

XML

Contingencies (Tables)

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Product Warranty Liability

Changes in the warranty liability for the three months March 31, 2014, and 2013, are summarized below:

	Three Months Ended   March 31,
	2014			2013
Aggregate product warranty liability at beginning of period	$	596		$	776
Net aggregate expense related to product warranties	(50		)	(10		)
Aggregate reductions for payments	(14		)	(20		)
Aggregate product warranty liability at end of period	$	532		$	746

XML

Revenue Recognition Policy (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Revenue Recognition, Policy

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

Fuel Tech uses the percentage of completion method of accounting for equipment construction and license contracts that are sold within the Air Pollution Control technology segment. Under the percentage of completion method, revenues are recognized as work is performed based on the relationship between actual construction costs incurred and total estimated costs at completion. Construction costs include all direct costs such as materials, labor, and subcontracting costs, and indirect costs allocable to the particular contract such as indirect labor, tools and equipment, and supplies. Revisions in completion estimates and contract values are made in the period in which the facts giving rise to the revisions become known and can influence the timing of when revenues are recognized under the percentage of completion method of accounting. Such revisions have historically not had a material effect on the amount of revenue recognized. The completed contract method is used for certain contracts that are not long-term in nature or when reasonably dependable estimates of the percentage of completion cannot be made. When the completed contract method is used, revenue and costs are deferred until the contract is substantially complete, which usually occurs upon customer acceptance of the installed product. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined.

A typical contract will have three or four critical operational measurements that, when achieved, serve as the basis for us to invoice the customer via progress billings. At a minimum, these measurements will include the generation of engineering drawings, the shipment of equipment and the completion of a system performance test.

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

Accounts receivable includes unbilled receivables, representing revenues recognized in excess of billings on uncompleted contracts under the percentage of completion method of accounting.

XML

Contingencies (Detail) - Warranty Liability (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Change in Warranty Liability
Aggregate product warranty liability at beginning of period	$ 596	$ 776
Net aggregate expense related to product warranties	(50)	(10)
Aggregate reductions for payments	(14)	(20)
Aggregate product warranty liability at end of period	$ 532	$ 746

XML

Stock-Based Compensation (Detail) - Stock Option Activity (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Number of Options (in shares):
Beginning balance	1,688,500
Granted	0
Exercised	(30,000)
Expired or forfeited	0
Ending balance	1,658,500
Exercisable (in shares)	1,648,500
Weighted-Average Exercise Price (in dollars per share):
Beginning balance	$ 11.88
Granted	$ 0.00
Exercised	$ 5.35
Expired or forfeited	$ 0.00
Ending balance	$ 12.00
Exercisable (in Dollars per share)	$ 12.04
Outstanding, Weighted Average Remaining Contractual Term	3 years 6 months 11 days
Exercisable, Weighted Average Remaining Contractual Term	3 years 6 months 4 days
Outstanding, Aggregate Intrinsic Value	$ 226
Exercisable, Aggregate Intrinsic Value	$ 226

XML

Treasury Stock (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Equity [Abstract]
Treasury stock (in Shares)	157,041	108,657
Cost of common stock held in treasury	$ 747	$ 486

XML

Goodwill and Other Intangibles (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 reporting_unit	Dec. 31, 2013
Number of reporting units	2
Goodwill	$ 21,051	$ 21,051
Fuel Chem Technology Segment [Member]
Goodwill	1,723	1,723
APC Technology Segment [Member]
Goodwill	$ 19,328	$ 19,328

XML

Business Segment and Geographic Disclosures (Detail) - Reporting Segment Net Sales and Gross Margin (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues from external customers	$ 18,661	$ 22,484
Cost of sales	(10,810)	(13,052)
Gross margin	7,851	9,432
Selling, general and administrative	(8,744)	(8,458)
Research and development	(244)	(933)
Operating (loss) income	(1,137)	41
Air Pollution Control Segment
Revenues from external customers	10,734	12,947
Cost of sales	(7,030)	(8,583)
Gross margin	3,704	4,364
Selling, general and administrative	0	0
Research and development	0	0
Operating (loss) income	3,704	4,364
FUEL CHEM Segment
Revenues from external customers	7,927	9,537
Cost of sales	(3,780)	(4,469)
Gross margin	4,147	5,068
Selling, general and administrative	0	0
Research and development	0	0
Operating (loss) income	4,147	5,068
Other
Revenues from external customers	0	0
Cost of sales	0	0
Gross margin	0	0
Selling, general and administrative	(8,744)	(8,458)
Research and development	(244)	(933)
Operating (loss) income	$ (8,988)	$ (9,391)

XML

Revenue Recognition Policy

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Revenue Recognition Policy

Revenue Recognition Policy

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

Fuel Tech uses the percentage of completion method of accounting for equipment construction and license contracts that are sold within the Air Pollution Control technology segment. Under the percentage of completion method, revenues are recognized as work is performed based on the relationship between actual construction costs incurred and total estimated costs at completion. Construction costs include all direct costs such as materials, labor, and subcontracting costs, and indirect costs allocable to the particular contract such as indirect labor, tools and equipment, and supplies. Revisions in completion estimates and contract values are made in the period in which the facts giving rise to the revisions become known and can influence the timing of when revenues are recognized under the percentage of completion method of accounting. Such revisions have historically not had a material effect on the amount of revenue recognized. The completed contract method is used for certain contracts that are not long-term in nature or when reasonably dependable estimates of the percentage of completion cannot be made. When the completed contract method is used, revenue and costs are deferred until the contract is substantially complete, which usually occurs upon customer acceptance of the installed product. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. As of March 31, 2014 and December 31, 2013, the Company had two and three contracts in progress, respectively, that were identified as a loss contracts and a provision for loss in the amount of $31 and $68, respectively, were recorded in other accrued liabilities on the consolidated balance sheets.

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

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

Accounts receivable includes unbilled receivables, representing revenues recognized in excess of billings on uncompleted contracts under the percentage of completion method of accounting. At March 31, 2014 and December 31, 2013, unbilled receivables were approximately $14,401 and $12,599, respectively, and are included in accounts receivable on the consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted contracts were $1,488 and $1,206, at March 31, 2014 and December 31, 2013, respectively. Such amounts are included in other accrued liabilities on the consolidated balance sheets.

Fuel Tech has installed over 800 units with APC technology and normally provides performance guarantees to our customers based on the operating conditions for the project. As part of the project implementation process, we perform system start-up and optimization services that effectively serve as a test of actual project performance. We believe that this test, combined with the accuracy of the modeling that is performed, enables revenue to be recognized prior to the receipt of formal customer acceptance.

XML

Stock-Based Compensation (Detail) - Non-vested Stock Option Activity (USD $)	3 Months Ended
	Mar. 31, 2014
Non-Vested Stock Options Outstanding (in shares)
Beginning balance	772,016
Vested	(217,674)
Forfeited	(11,166)
Ending balance	799,176
Weighted Average Grant Date Fair Value (in dollars per share)
Beginning balance	$ 5.35
Forfeited	$ 4.98
Vested	$ 5.70
Ending balance	$ 5.15
Non-Vested Stock Options [Member]
Non-Vested Stock Options Outstanding (in shares)
Beginning balance	10,000
Granted	0
Vested	0
Forfeited	0
Ending balance	10,000
Weighted Average Grant Date Fair Value (in dollars per share)
Beginning balance	$ 6.10
Granted	$ 0.00
Forfeited	$ 0.00
Vested	$ 0.00
Ending balance	$ 6.10

XML

Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

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

	Three Months Ended
	March 31,
	2014			2013
Foreign currency translation
Balance at beginning of period	$	18		$	(419	)
Other comprehensive loss:
Foreign currency translation adjustments (1)	(509		)	(263		)
Balance at end of period	$	(491	)	$	(682	)
Available-for-sale marketable securities
Balance at beginning of period	$	19		$	27
Other comprehensive income:
Net unrealized holding gain (2)	46			—
Deferred income taxes (2)	(18		)	—
Total other comprehensive income	28			—
Balance at end of period	$	47		$	27
Total accumulated other comprehensive loss	$	(444	)	$	(655	)

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

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

XML

Available-for-Sale Marketable Securities (Policies)

3 Months Ended

Mar. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Marketable Securities, Available-for-sale Securities, Policy

Available-for-Sale Marketable Securities

At the time of purchase, marketable securities are classified as available-for-sale as management has the intent and ability to hold such securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell available-for-sale securities would be based on various factors, including, but not limited to asset/liability management strategies, changes in interest rates or prepayment risks, and liquidity needs. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in equity as a separate component of other comprehensive income (OCI). Our marketable securities consist of a single equity investment with a fair value of $76 and $30 and no cost basis at March 31, 2014 and December 31, 2013, respectively.

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in other income/(expense) in the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method. On a quarterly basis, we make an assessment to determine if there have been any events or circumstances to indicate whether a security with an unrealized loss is impaired on an other-than-temporary (OTTI) basis. This determination requires significant judgment. OTTI is considered to have occurred (1) if management intends to sell the security; (2) if it is more likely than not we will be required to sell the security before recovery of its amortized cost basis; or (3)the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis. The credit-related OTTI, represented by the expected loss in principal, is recognized in non-interest income, while noncredit-related OTTI is recognized in OCI. For securities which we do expect to sell, all OTTI is recognized in earnings. Presentation of OTTI is made in the income statement on a gross basis with a reduction for the amount of OTTI recognized in OCI. Once an other-than-temporary impairment is recorded, when future cash flows can be reasonably estimated, future cash flows are re-allocated between interest and principal cash flows to provide for a level-yield on the security. We have not experienced any other-than-temporary impairments during the periods ended March 31, 2014 and 2013.

XML

Stock-Based Compensation (Detail) - Restricted Stock Unit Activity (USD $)	3 Months Ended
	Mar. 31, 2014
Shares (in shares)
Beginning balance	772,016
Forfeited	(11,166)
Vested	(217,674)
Ending balance	799,176
Weighted Average Grant Date Fair Value (in Dollars per share)
Beginning balance	$ 5.35
Forfeited	$ 4.98
Vested	$ 5.70
Ending balance	$ 5.15
Restricted Stock [Member]
Shares (in shares)
Granted	256,000
Weighted Average Grant Date Fair Value (in Dollars per share)
Granted	$ 5.02

XML

Earnings per Share Data (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth the weighted-average shares used in calculating the earnings per share for the three-month periods ended March 31, 2014 and 2013.

	Three Months Ended   March 31,
	2014	2013
Basic weighted-average shares	22,641,000	22,112,000
Conversion of unsecured loan notes	—	—
Unexercised options and unvested RSUs	—	—
Diluted weighted-average shares	22,641,000	22,112,000

Fuel Tech had 2,458,000 and 2,516,000 weighted average equity awards outstanding at March 31, 2014 and 2013, respectively, that were not dilutive for the purposes of inclusion in the calculation of diluted earnings per share but could potentially become dilutive in future periods.

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The components of stock-based compensation for the three- month periods ended March 31, 2014 and 2013 were as follows:

	Three Months Ended   March 31,
	2014			2013
Stock options and restricted stock units	$	424		$	329
Tax benefit of stock-based compensation expense	(163		)	(120		)
After-tax effect of stock-based compensation	$	261		$	209

Schedule of Share-based Compensation, Stock Options, Activity

Stock option activity for Fuel Tech’s Incentive Plan for the three- months ended March 31, 2014 was as follows:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding on January 1, 2014	1,688,500		$	11.88
Granted	—		—
Exercised	(30,000	)	5.35
Expired or forfeited	—		—
Outstanding on March 31, 2014	1,658,500		$	12.00	3.53	$	226
Exercisable on March 31, 2014	1,648,500		$	12.04	3.51	$	226

Schedule of Nonvested Share Activity

Non-vested stock option activity for the three months ended March 31, 2014 was as follows:

	Non-Vested Stock Options Outstanding	Weighted-Average Grant Date Fair Value
Outstanding on January 1, 2014	10,000	$	6.10
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding on March 31, 2014	10,000	$	6.10

Schedule of Nonvested Restricted Stock Units Activity

A summary of restricted stock unit activity for the three-month period ended March 31, 2014 is as follows:

	Shares		Weighted Average Grant Date Fair Value
Unvested restricted stock units at January 1, 2014	772,016		$	5.35
Granted	256,000		5.02
Forfeited	(11,166	)	4.98
Vested	(217,674	)	5.70
Unvested restricted stock units at March 31, 2014	799,176		$	5.15

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Basis of Presentation

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

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

The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission.

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Business Segment and Geographic Disclosures (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

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

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

Three months ended March 31, 2013	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	12,947		$	9,537		$	—		$	22,484
Cost of sales	(8,583		)	(4,469		)	—			(13,052		)
Gross margin	4,364			5,068			—			9,432
Selling, general and administrative	—			—			(8,458		)	(8,458		)
Research and development	—			—			(933		)	(933		)
Operating income (loss)	$	4,364		$	5,068		$	(9,391	)	$	41

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area

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

	Three Months Ended   March 31,
	2014		2013
Revenues:
United States	$	9,229	$	12,866
Foreign	9,432		9,618
	$	18,661	$	22,484

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country

	March 31, 2014		December 31, 2013
Assets:
United States	$	80,008	$	83,464
Foreign	27,517		26,594
	$	107,525	$	110,058

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Stock-Based Compensation (Detail) (USD $) Share data in Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Percentage of shares that may be issued or reserve for awards to participants as a percentage of outstanding shares calculated on a diluted basis	12.50%
Number of shares available for grant	637
Unrecognized compensation cost	$ 3,196,000
Share-based compensation expense	424,000	329,000
Stock Options [Member]
Award vesting period	10 years
Award service period (in years)	4 years
Stock Options [Member] | Second Anniversary of Award Date [Member]
Percent of options vesting	50.00%
Stock Options [Member] | Third Anniversary of Award Date [Member]
Percent of options vesting	25.00%
Stock Options [Member] | Fourth Anniversary of Award Date [Member]
Percent of options vesting	25.00%
Non-Vested Stock Options [Member]
Unrecognized compensation cost	13
Restricted Stock Units (RSUs) [Member]
Unrecognized compensation cost	$ 3,183
Award vesting period	3 years
Unrecognized compensation cost, period of recognition	2 years 2 months 9 days
Restricted Stock Units (RSUs) [Member] | Second Anniversary of Award Date [Member]
Peer company review period (in years)	2 years
Percentage of restricted stock units vesting	67.00%
Restricted Stock Units (RSUs) [Member] | Third Anniversary of Award Date [Member]
Percentage of restricted stock units vesting	33.00%
Restricted Stock Units TSR [Member] | Second Anniversary of Award Date [Member]
Peer company review period (in years)	2 years
Percentage of restricted stock units vesting	67.00%
Restricted Stock Units TSR [Member] | Third Anniversary of Award Date [Member]
Percentage of restricted stock units vesting	33.00%

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Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Marketable securities	$ 76	$ 30

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 24,918	$ 27,738
Marketable securities	76	30
Accounts receivable, net of allowance for doubtful accounts of $1,269 and $1,189, respectively	35,638	36,974
Inventories	916	443
Prepaid expenses and other current assets	2,668	2,196
Prepaid income taxes	2,333	1,407
Deferred income taxes	590	477
Total current assets	67,139	69,265
Property and equipment, net of accumulated depreciation of $20,566 and $20,077, respectively	12,797	13,027
Goodwill	21,051	21,051
Other intangible assets, net of accumulated amortization of $5,304 and $5,108, respectively	4,167	4,305
Other assets	2,371	2,410
Total assets	107,525	110,058
Current liabilities:
Short-term debt	1,622	1,636
Accounts payable	9,453	9,920
Accrued liabilities:
Employee compensation	2,110	4,460
Other accrued liabilities	5,729	4,630
Total current liabilities	18,914	20,646
Deferred income taxes	489	59
Other liabilities	725	730
Total liabilities	20,128	21,435
Shareholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized, 22,951,121 and 22,701,613 shares issued, and 22,794,080 and 22,592,956 shares outstanding, respectively	230	227
Additional paid-in capital	133,395	132,796
Accumulated deficit	(45,113)	(44,027)
Accumulated other comprehensive (loss) income	(444)	37
Nil coupon perpetual loan notes	76	76
Treasury stock, 157,041 and 108,657 shares in 2014 and 2013, respectively, at cost	(747)	(486)
Total shareholders’ equity	87,397	88,623
Total liabilities and shareholders’ equity	$ 107,525	$ 110,058

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Debt (Detail)	3 Months Ended		3 Months Ended		3 Months Ended									3 Months Ended		0 Months Ended
	Mar. 31, 2014 USD ($) quarter	Dec. 31, 2013 USD ($)	Mar. 31, 2014 Domestic Line of Credit [Member] USD ($)	Dec. 31, 2013 Domestic Line of Credit [Member] USD ($)	Mar. 31, 2014 China Facility [Member] USD ($)	Mar. 31, 2013 China Facility [Member] USD ($)	Dec. 31, 2013 China Facility [Member] USD ($)	Jun. 28, 2013 China Facility [Member] USD ($)	Jun. 28, 2013 China Facility [Member] CNY	Mar. 31, 2014 Standby Letters of Credit [Member] USD ($)	Dec. 31, 2013 Standby Letters of Credit [Member] USD ($)	Jun. 30, 2013 Amount Available for Increase Upon Approval of Lender [Member] USD ($)	Jun. 30, 2013 Amended Amount [Member] USD ($)	Mar. 31, 2014 Minimum [Member]	Mar. 31, 2014 Maximum [Member]	Jun. 28, 2013 People's Bank of China Base Rate [Member] China Facility [Member]
Line of credit, maximum borrowing capacity								$ 5,678,000	35,000,000			$ 25,000,000	$ 15,000,000
Basis spread on variable rate (as percent)														2.50%	3.75%	125.00%
Line of credit, amount outstanding	0	0			1,622,000		2,000
Maximum funded deb to EBITA ratio , debt	2.0
Maximum funded to debt to EBITDA ratio, EBITDA	1.0
Number of Quarters (in quarters)	4
Annual capital expenditure limit	10,000,000
Minimum tangible net worth	55,000,000
Percentage of net income	50.00%
Percentage of capital issuances	100.00%
Letters of credit, amount outstanding			4,135,000	3,478,000	0		0			841,000	646,000
Line of Credit Facility, Interest Rate at Period End (as a percent)					7.00%		7.00%
Line of credit, remaining borrowing capacity			10,865,000	11,522,000						3,215,000	3,443,000
Line of credit, commitment fee percentage			0.25%
Interest Paid					$ 29,000	$ 0

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Operating Activities
Net loss	$ (1,086)	$ (21)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	493	538
Amortization	196	211
Allowance for doubtful accounts	85	207
Deferred income taxes	305	161
Stock-based compensation	424	329
Changes in operating assets and liabilities:
Accounts receivable	1,059	(7,494)
Inventories	(474)	(90)
Prepaid expenses, other current assets and other non-current assets	(446)	986
Accounts payable	(409)	(1,106)
Accrued liabilities and other non-current liabilities	(1,988)	(2,121)
Net cash used in operating activities	(1,841)	(8,400)
Investing Activities
Purchases of property, equipment and patents	(322)	(555)
Net cash used in investing activities	(322)	(555)
Financing Activities
Proceeds from exercises of stock options	160	0
Excess tax benefit from exercises of stock options	12	0
Treasury shares withheld	(261)	(101)
Net cash used in financing activities	(89)	(101)
Effect of exchange rate fluctuations on cash	(568)	(240)
Net decrease in cash and cash equivalents	(2,820)	(9,296)
Cash and cash equivalents at beginning of period	27,738	24,453
Cash and cash equivalents at end of period	$ 24,918	$ 15,157

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Available-for-Sale Marketable Securities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Investments, Debt and Equity Securities [Abstract]
Marketable securities, fair value	$ 76	$ 30

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Fair Value

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

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

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

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

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

The fair value of our marketable securities was $76 and $30 at March 31, 2014 and December 31, 2013, respectively, and was determined using quoted prices in active markets for identical assets (Level 1 fair value measurements). Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. We had no assets or liabilities that were valued using level 2 or level 3 inputs and therefore there were no transfers between levels of the fair value hierarchy during the three-month periods ended March 31, 2014 and 2013.

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

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Accumulated Other Comprehensive Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013		Dec. 31, 2013
Foreign currency translation
Balance at beginning of period	$ 18		$ (419)
Other comprehensive loss:
Foreign currency translation adjustments	(509)	[1]	(263)	[1]
Balance at end of period	(491)		(682)
Available-for-sale marketable securities
Balance at beginning of period	19		27
Other comprehensive income:
Net unrealized holding gain (loss)	46	[2]	0	[2]
Deferred income taxes	(18)	[2]	0	[2]
Total other comprehensive income	28		0
Balance at end of period	47		27
Total accumulated other comprehensive loss	$ (444)		$ (655)		$ 37

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

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

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Subsequent Events (Notes)

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

On April 28, 2014, Fuel Tech entered into, and on April 30, 2014 closed on a stock purchase transaction of 100% of the capital stock (“Shares”) of Cleveland Roll Forming Environmental Division, Inc. d/b/a PECO (“PECO”), an Ohio corporation. Pursuant to the stock purchase agreement, PECO became a wholly owned subsidiary of Fuel Tech. Fuel Tech paid to the Seller total cash consideration of $7.25 million. The stock purchase agreement contains customary representations, warranties and indemnities.

PECO specializes in electrostatic precipitator (ESP) rebuilds, retrofits and associated products and services. This acquisition broadens our APC product portfolio and grants us immediate access into the fast-growing particulate control market, creating opportunities both domestically and abroad.

We are currently in the process of determining the fair value of the assets acquired and liabilities assumed and calculating the purchase price allocation to these assets and liabilities. We have not presented pro-forma financial information related to the acquisition because this information is not currently available and therefore it is not practical to do so.

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Nature of Business

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

Nature of Business

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

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

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 1,269	$ 1,189
Property and equipment, accumulated depreciation	20,566	20,077
Other intangible assets, accumulated amortization	$ 5,304	$ 5,108
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in Shares)	40,000,000	40,000,000
Common stock, shares issued (in Shares)	22,951,121	22,701,613
Common stock outstanding (in Shares)	22,794,080	22,592,956
Treasury stock (in Shares)	157,041	108,657

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Debt

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Debt

Debt

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

The Facility contains several debt covenants with which the Company must comply on a quarterly or annual basis, including a maximum Funded Debt to EBITDA Ratio (or “Leverage Ratio”, as defined in the Facility) of 2.0:1.0 based on the four trailing quarterly periods. Maximum funded debt is defined as all borrowed funds, outstanding standby letters of credit and bank guarantees. EBITDA includes after tax earnings with add backs for interest expense, income taxes, depreciation and amortization, and stock-based compensation expenses. In addition, the Facility covenants include an annual capital expenditure limit of $10,000 and a minimum tangible net worth of $55,000, adjusted upward for 50% of net income generated and 100% of all capital issuances. At March 31, 2014, the Company was in compliance with all financial covenants specified by the Facility.

At March 31, 2014 and December 31, 2013, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $4,135 and $3,478, respectively, on its domestic credit facility in connection with contracts in process. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments. At March 31, 2014 and December 31, 2013, there were no cash borrowings under the domestic revolving credit facility and approximately $10,865 and $11,522, respectively, was available for future borrowings. The Company pays a commitment fee of 0.25% per year on the unused portion of the revolving credit facility.

On June 28, 2013, Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), a wholly-owned subsidiary of Fuel Tech, entered into a new revolving credit facility (the China Facility) agreement with JPM Chase for RMB 35 million (approximately $5,678), which expires on June 27, 2014. This credit facility replaced the previous RMB 35 million facility that expired on June 28, 2013. The facility is unsecured, bears interest at a rate of 125% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by Fuel Tech. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As of March 31, 2014 and December 31, 2013, Beijing Fuel Tech has borrowings outstanding in the amount of $1,622 and $1,636, respectively. These borrowings were subject to interest rates of approximately 7.0% at March 31, 2014 and December 31, 2013, respectively.

At March 31, 2014 and December 31, 2013, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $841 and $646, respectively, on its Beijing Fuel Tech revolving credit facility in connection with contracts in process. At March 31, 2014 and December 31, 2013, approximately $3,215 and $3,443 was available for future borrowings.

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

Interest payments in the amount of $29 and $0 were made during the three-month periods ended March 31, 2014 and 2013.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 12, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	FUEL TECH, INC.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		22,794,080
Amendment Flag	false
Entity Central Index Key	0000846913
Entity Filer Category	Accelerated Filer
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus (Q1,Q2,Q3,FY)	Q1

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Business Segment and Geographic Disclosures

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Business Segment and Geographic Disclosures

Business Segment and Geographic Disclosures

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

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

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

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

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

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

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

Three months ended March 31, 2013	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	12,947		$	9,537		$	—		$	22,484
Cost of sales	(8,583		)	(4,469		)	—			(13,052		)
Gross margin	4,364			5,068			—			9,432
Selling, general and administrative	—			—			(8,458		)	(8,458		)
Research and development	—			—			(933		)	(933		)
Operating income (loss)	$	4,364		$	5,068		$	(9,391	)	$	41

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

	Three Months Ended   March 31,
	2014		2013
Revenues:
United States	$	9,229	$	12,866
Foreign	9,432		9,618
	$	18,661	$	22,484

	March 31, 2014		December 31, 2013
Assets:
United States	$	80,008	$	83,464
Foreign	27,517		26,594
	$	107,525	$	110,058

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Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Income Statement [Abstract]
Revenues	$ 18,661	$ 22,484
Costs and expenses:
Cost of sales	10,810	13,052
Selling, general and administrative	8,744	8,458
Research and development	244	933
Costs and Expenses	19,798	22,443
Operating (loss) income	(1,137)	41
Interest expense	(29)	0
Interest income	11	15
Other expense	(30)	(80)
Loss before income taxes	(1,185)	(24)
Income tax benefit	99	3
Net loss	$ (1,086)	$ (21)
Net loss per common share:
Basic (in Dollars per share)	$ (0.05)	$ 0.00
Diluted (in Dollars per share)	$ (0.05)	$ 0.00
Weighted-average number of common shares outstanding:
Basic (in Shares)	22,641,000	22,112,000
Diluted (in Shares)	22,641,000	22,112,000

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Available-for-Sale Marketable Securities

3 Months Ended

Mar. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Available-for-Sale Marketable Securities

Available-for-Sale Marketable Securities

At the time of purchase, marketable securities are classified as available-for-sale as management has the intent and ability to hold such securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell available-for-sale securities would be based on various factors, including, but not limited to asset/liability management strategies, changes in interest rates or prepayment risks, and liquidity needs. Available-for-sale securities are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in equity as a separate component of other comprehensive income (OCI). Our marketable securities consist of a single equity investment with a fair value of $76 and $30 and no cost basis at March 31, 2014 and December 31, 2013, respectively.

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in other income/(expense) in the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method. On a quarterly basis, we make an assessment to determine if there have been any events or circumstances to indicate whether a security with an unrealized loss is impaired on an other-than-temporary (OTTI) basis. This determination requires significant judgment. OTTI is considered to have occurred (1) if management intends to sell the security; (2) if it is more likely than not we will be required to sell the security before recovery of its amortized cost basis; or (3)the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis. The credit-related OTTI, represented by the expected loss in principal, is recognized in non-interest income, while noncredit-related OTTI is recognized in OCI. For securities which we do expect to sell, all OTTI is recognized in earnings. Presentation of OTTI is made in the income statement on a gross basis with a reduction for the amount of OTTI recognized in OCI. Once an other-than-temporary impairment is recorded, when future cash flows can be reasonably estimated, future cash flows are re-allocated between interest and principal cash flows to provide for a level-yield on the security. We have not experienced any other-than-temporary impairments during the periods ended March 31, 2014 and 2013.

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Selling, General and Administrative Expenses

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Selling, General and Administrative Expenses

Selling, General and Administrative Expenses

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

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Recently Adopted and Pending Accounting Pronouncements

3 Months Ended

Mar. 31, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recently Added and Pending Accounting Pronouncements

Recently Added and Pending Accounting Pronouncements

On January 1, 2014, Fuel Tech adopted changes issued by the Financial Accounting Standards Board (FASB) to the accounting for obligations resulting from joint and several liability arrangements. These changes require an entity to measure such obligations for which the total amount of the obligation is fixed at the reporting date as the sum of (i) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and (ii) any additional amount the reporting entity expects to pay on behalf of its co-obligors. An entity will also be required to disclose the nature and amount of the obligation as well as other information about those obligations. Examples of obligations subject to these requirements are debt arrangements and settled litigation and judicial rulings. The adoption of these changes had no impact on the Consolidated Financial Statements, as Fuel Tech does not currently have any such arrangements.

On January 1, 2014, Fuel Tech adopted changes issued by the FASB to a parent entity’s accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. A parent entity is required to release any related cumulative foreign currency translation adjustment from accumulated other comprehensive income into net income in the following circumstances: (i) a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided; (ii) a partial sale of an equity method investment that is a foreign entity; (iii) a partial sale of an equity method investment that is not a foreign entity whereby the partial sale represents a complete or substantially complete liquidation of the foreign entity that held the equity method investment; and (iv) the sale of an investment in a foreign entity. The adoption of these changes had no impact on the Consolidated Financial Statements. This guidance will need to be considered in the event Fuel Tech initiates any of the transactions described above.

On January 1, 2014, Fuel Tech adopted changes issued by the FASB to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. These changes require an entity to present an unrecognized tax benefit as a liability in the financial statements if (i) a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, or (ii) the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset to settle any additional income taxes that would result from the disallowance of a tax position. Otherwise, an unrecognized tax benefit is required to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. Previously, there was diversity in practice as no explicit guidance existed. The adoption of these changes did not result in a significant impact on the Consolidated Financial Statements.

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Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

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

Changes in the warranty liability for the three months March 31, 2014, and 2013, are summarized below:

	Three Months Ended   March 31,
	2014			2013
Aggregate product warranty liability at beginning of period	$	596		$	776
Net aggregate expense related to product warranties	(50		)	(10		)
Aggregate reductions for payments	(14		)	(20		)
Aggregate product warranty liability at end of period	$	532		$	746

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Earnings per Share Data

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings per Share Data

Earnings per Share Data

Basic earnings per share excludes the dilutive effects of stock options, restricted stock units (RSUs), and the nil coupon non-redeemable convertible unsecured loan notes. Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is antidilutive. Out-of-money stock options are excluded from diluted earnings per share because they are anti-dilutive. At March 31, 2014 and 2013, basic earnings per share is equal to diluted earnings per share because all outstanding stock awards and convertible loan notes are considered anti-dilutive during periods of net loss. The following table sets forth the weighted-average shares used in calculating the earnings per share for the three-month periods ended March 31, 2014 and 2013.

	Three Months Ended   March 31,
	2014	2013
Basic weighted-average shares	22,641,000	22,112,000
Conversion of unsecured loan notes	—	—
Unexercised options and unvested RSUs	—	—
Diluted weighted-average shares	22,641,000	22,112,000

Fuel Tech had 2,458,000 and 2,516,000 weighted average equity awards outstanding at March 31, 2014 and 2013, respectively, that were not dilutive for the purposes of inclusion in the calculation of diluted earnings per share but could potentially become dilutive in future periods.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2014

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income (Loss)

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

	Three Months Ended
	March 31,
	2014			2013
Foreign currency translation
Balance at beginning of period	$	18		$	(419	)
Other comprehensive loss:
Foreign currency translation adjustments (1)	(509		)	(263		)
Balance at end of period	$	(491	)	$	(682	)
Available-for-sale marketable securities
Balance at beginning of period	$	19		$	27
Other comprehensive income:
Net unrealized holding gain (2)	46			—
Deferred income taxes (2)	(18		)	—
Total other comprehensive income	28			—
Balance at end of period	$	47		$	27
Total accumulated other comprehensive loss	$	(444	)	$	(655	)

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

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

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Treasury Stock

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

Treasury Stock

Treasury Stock

Common stock held in treasury totaled 157,041 and 108,657 with a cost of $747 and $486 at March 31, 2014 and December 31, 2013, respectively. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that vested during 2014 and 2013.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Stock-Based Compensation

Fuel Tech has a stock-based employee compensation plan, referred to as the Fuel Tech, Inc. Incentive Plan (Incentive Plan), under which awards may be granted to participants in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance awards, bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plan may be Fuel Tech’s directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of Fuel Tech’s business. The amount of shares that may be issued or reserved for awards to participants under a 2004 amendment to the Incentive Plan is 12.5% of outstanding shares calculated on a diluted basis. At March 31, 2014, Fuel Tech had approximately 637,000 equity awards available for issuance under the Incentive Plan.

Stock-based compensation is included in selling, general, and administrative costs in our Consolidated Statements of Operations. The components of stock-based compensation for the three- month periods ended March 31, 2014 and 2013 were as follows:

	Three Months Ended   March 31,
	2014			2013
Stock options and restricted stock units	$	424		$	329
Tax benefit of stock-based compensation expense	(163		)	(120		)
After-tax effect of stock-based compensation	$	261		$	209

As of March 31, 2014, there was $3,196 of total unrecognized compensation cost related to all non-vested share-based compensation arrangements granted under the Incentive Plan.

Stock Options

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

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

Stock option activity for Fuel Tech’s Incentive Plan for the three- months ended March 31, 2014 was as follows:

	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding on January 1, 2014	1,688,500		$	11.88
Granted	—		—
Exercised	(30,000	)	5.35
Expired or forfeited	—		—
Outstanding on March 31, 2014	1,658,500		$	12.00	3.53	$	226
Exercisable on March 31, 2014	1,648,500		$	12.04	3.51	$	226

Non-vested stock option activity for the three months ended March 31, 2014 was as follows:

	Non-Vested Stock Options Outstanding	Weighted-Average Grant Date Fair Value
Outstanding on January 1, 2014	10,000	$	6.10
Granted	—	—
Vested	—	—
Forfeited	—	—
Outstanding on March 31, 2014	10,000	$	6.10

As of March 31, 2014, there was $13 of total unrecognized compensation cost related to non-vested stock options granted under the Incentive Plan. This cost is expected to be recognized during 2014.

Restricted Stock Units

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

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

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

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

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

At March 31, 2014, there is $3,183 of unrecognized compensation costs related to restricted stock unit awards to be recognized over a weighted average period of 2.19 years.

A summary of restricted stock unit activity for the three-month period ended March 31, 2014 is as follows:

	Shares		Weighted Average Grant Date Fair Value
Unvested restricted stock units at January 1, 2014	772,016		$	5.35
Granted	256,000		5.02
Forfeited	(11,166	)	4.98
Vested	(217,674	)	5.70
Unvested restricted stock units at March 31, 2014	799,176		$	5.15

Deferred Directors Fees

In addition to the Incentive Plan, Fuel Tech has a Deferred Compensation Plan for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech Common Stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards. In the three-month periods ended March 31, 2014 and 2013, Fuel Tech recorded no stock-based compensation expense under the Deferred Plan.

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Revenue Recognition Policy (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014 unit contract	Dec. 31, 2013 contract
Number of contracts in progress that were identified as a loss contract (in contracts)	2	3
Loss on contract termination	$ 31	$ 68
Unbilled receivables, current	14,401	12,599
Billings in excess of cost, current	$ 1,488	$ 1,206
Number of units with APC technology (in units)	800
Minimum [Member]
Contract term (in months)	8 months
Critical operational measurements (in measurements)	3
Maximum [Member]
Contract term (in months)	16 months
Critical operational measurements (in measurements)	4

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Income Taxes (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Effective Income Tax Rate (as a percent)	8.40%	12.50%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate (as a percent)	34.00%	34.00%
Unrecognized Tax Benefits (in Dollars)	$ 65		$ 65

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Goodwill and Other Intangibles

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles

Goodwill and Other Intangibles

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Fuel Tech has two reporting units which are reported in the FUEL CHEM^® technology segment and the APC technology segment. At March 31, 2014 and December 31, 2013, goodwill allocated to the FUEL CHEM technology segment was $1,723 while goodwill allocated to the APC technology segment was $19,328.

Goodwill is allocated to each of our reporting units after considering the nature of the net assets giving rise to the goodwill and how each reporting unit would enjoy the benefits and synergies of the net assets acquired. Our last annual fair value measurement test, performed as of October 1, 2013 revealed no indications of impairment. There were no indications of goodwill impairment in the three-month periods ended March 31, 2014 and 2013.

Fuel Tech reviews other intangible assets, which include customer lists and relationships, covenants not to compete, patent assets, tradenames, and acquired technologies, for impairment on a recurring basis or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated. There were no indications of intangible asset impairment in the three-month periods ended March 31, 2014 and 2013.

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Cost of Sales (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Cost of Sales, Policy

Cost of Sales

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

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Business Segment and Geographic Disclosures (Detail) - Assets by Geographic Area (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Assets
Assets	$ 107,525	$ 110,058
United States
Assets
Assets	80,008	83,464
Foreign
Assets
Assets	$ 27,517	$ 26,594

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Stock-Based Compensation (Detail) - Stock-Based Compensation (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock options and restricted stock units	$ 424	$ 329
Tax benefit of stock-based compensation expense	(163)	(120)
After-tax effect of stock-based compensation	$ 261	$ 209

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Statement of Comprehensive Income [Abstract]
Net loss	$ (1,086)		$ (21)
Other comprehensive loss:
Foreign currency translation adjustments	(509)	[1]	(263)	[1]
Unrealized gains from marketable securities, net of tax	28		0
Total other comprehensive loss	(481)		(263)
Comprehensive loss	$ (1,567)		$ (284)

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

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Cost of Sales

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Cost of Sales

Cost of Sales

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

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Selling, General and Administrative Expenses (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Selling, General and Administrative Expenses, Policy

Selling, General and Administrative Expenses

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

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Earnings per Share Data (Detail) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share	2,458	2,516

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s effective tax rate of 8.4% and 12.5% for the three-month periods ended March 31, 2014 and 2013, respectively, differs from the statutory federal tax rate of 34% due primarily to state taxes, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, non-deductible commissions, and non-deductible meals and entertainment expenses.

Fuel Tech had unrecognized tax benefits as of March 31, 2014 and December 31, 2013 in the amount of $65, respectively, all of which, if ultimately recognized, will reduce Fuel Tech's annual effective tax rate.