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<SEC-DOCUMENT>0001125282-04-001998.txt : 20040506
<SEC-HEADER>0001125282-04-001998.hdr.sgml : 20040506
<ACCEPTANCE-DATETIME>20040506150008
ACCESSION NUMBER:		0001125282-04-001998
CONFORMED SUBMISSION TYPE:	DEFR14A
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20040506
EFFECTIVENESS DATE:		20040506

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FUEL TECH N V
		CENTRAL INDEX KEY:			0000846913
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEFR14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-21724
		FILM NUMBER:		04784802

	BUSINESS ADDRESS:	
		STREET 1:		CASTORWEG 22-24
		CITY:			CURACAO NETHERLANDS
		STATE:			P7

	MAIL ADDRESS:	
		STREET 1:		C/O FUEL TECH INC
		STREET 2:		300 ATLANTIC ST
		CITY:			STAMFORD
		STATE:			CT
		ZIP:			06901
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEFR14A
<SEQUENCE>1
<FILENAME>b331603_defr14a.txt
<DESCRIPTION>FORM DEFR14A
<TEXT>
<PAGE>

                            SCHEDULE 14A INFORMATION

          Proxy Statement Pursuant to Section 14(a) of the Securities
                     Exchange Act of 1934 (Amendment No. 1)

Filed by the Registrant ( X )

Filed by a Party other than the Registrant (   )

Check the appropriate box:

(   )  Preliminary Proxy Statement     (   )  Confidential, for Use of the
                                              Commission Only (as permitted by
( X )  Definitive Proxy Statement             Rule 14a-6(e)(2))

(   )  Definitive Additional Materials

(   )  Soliciting Material Pursuant to Section 240.14a-11(c) or
       Section 240.14a-12

                                 Fuel-Tech N.V.
                ------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

    -------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

( X )   No fee required.

(   )   Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.

         (1) Title of each class of securities to which transaction applies:

         ---------------------------------------------------------------------

         (2) Aggregate number of securities to which transaction applies:

         -----------------------------------------------------

         (3) Per unit price or other underlying value of transaction computed
             pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
             the filing fee is calculated and state how it was determined):

         ---------------------------------------------------------------------

         (4) Proposed maximum aggregate value of transaction:

         ---------------------------------------------------------------------

         (5) Total fee paid:

         ---------------------------------------------------------------------
<PAGE>

(   )    Fee paid previously with preliminary materials.

(   )    Check box if any part of the fee is offset as provided by Exchange
         Act Rule 0-11 (a)(2) and identify the filing for which the offsetting
         fee was paid previously. Identify the previous filing by registration
         statement number, or the Form or Schedule and the date of its filing.

         (1)      Amount previously paid:

         ---------------------------------------------------------------------

         (2)      Form, Schedule or Registration Statement No.:

         ---------------------------------------------------------------------

         (3)      Filing Party:

         ---------------------------------------------------------------------

         (4)      Date Filed:

         ---------------------------------------------------------------------




                                Explanatory Note

         This Amendment No. 1 has been filed to revise the text under the
Caption "Executive Sessions" following the caption "Corporate Governance;" to
correct figures in paragraph three following the caption "Amendment of 1993
Incentive Plan;" to correct certain typographical errors; and to change the date
of the document to May 4, 2004.

<PAGE>
                                 FUEL-TECH N.V.

                 Castorweg 22-24, Curacao, Netherlands Antilles

                              --------------------

                Notice of Annual General Meeting of Shareholders
                            To be Held June 3, 2004

                              --------------------


To the Shareholders of Fuel-Tech N.V.:

   The Annual General Meeting (the "Meeting") of Shareholders of Fuel-Tech
N.V., a Netherlands Antilles limited liability company ("Fuel Tech"), will be
held Thursday, June 3, 2004, at the registered office of Fuel Tech, Castorweg
22-24, Curacao, Netherlands Antilles, at 10:00 a.m. local time, to consider
and vote on the following matters, each of which is explained more fully in
the following Proxy Statement. A proxy card for your use in voting is also
enclosed.

     1.   To approve the Annual Report of Management to Shareholders of Fuel
          Tech for the calendar year ended December 31, 2003 and the Financial
          Statements for said calendar year;

     2.   To elect seven (7) Managing Directors;

     3.   To ratify the reappointment of Ernst & Young LLP as Fuel Tech's
          independent auditors for the year 2004;

     4.   To approve an amendment to the Fuel Tech 1993 Incentive Plan to
          increase the allowable number of stock awards that may be granted
          and the allowable number of stock awards that may be granted in the
          form of incentive stock options; and

     5.   To transact any other business that may properly come before the
          meeting or at any adjournment thereof.

   Only common shareholders of record at the close of business on June 2, 2004
are entitled to vote at the Meeting. The presence in person or by proxy of
shareholders entitled to cast one-third of the total number of votes which may
be cast shall constitute a quorum for the transaction of business at the
Meeting.

   The Annual Report is enclosed with this Notice of Meeting and Proxy
Statement.

FUEL-TECH N.V.
Charles W. Grinnell
Secretary
May 4, 2004


WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON IT IS REQUESTED THAT
YOU PROMPTLY FILL OUT, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD.

FOR INTERNET OR TELEPHONE VOTING, PLEASE REFER TO THE INSTRUCTIONS ON THE
PROXY CARD OR THE VOTING INSTRUCTION FORM.
<PAGE>







































   The Company will provide without charge to each person being solicited by
this Proxy Statement, upon written request, a copy of the Annual Report of the
Company on Form 10-K for the year ended December 31, 2003, including the
financial statements and schedules thereto, as filed with the Securities and
Exchange Commission. All such requests should be directed to the Corporate
Secretary at the address of the Company set out below under the caption
"Shareholder Proposals."

   Statements in this Proxy Statement which are not historical facts, so-called
"forward-looking statements" are made pursuant to the safe harbor provisions
of the United States Private Securities Litigation Reform Act of 1995.
Stockholders are cautioned that all forward-looking statements involve risks
and uncertainties, including those detailed in the Company's filings with the
Securities and Exchange Commission.
<PAGE>
                                 FUEL-TECH N.V.

                                PROXY STATEMENT


   The enclosed proxy is solicited by the Board of Managing Directors (the
"Board") of Fuel-Tech N.V., a Netherlands Antilles limited liability company
("Fuel Tech"), in connection with the Annual Meeting of Shareholders of Fuel
Tech (the "Meeting") to be held at the registered offices of Fuel Tech,
Castorweg 22-24, Curacao, Netherlands Antilles, Thursday, June 3, 2004, at
10:00 a.m. local time, and at any adjournments of the meeting.

   The Record Date with respect to mailing this solicitation is April 5, 2004.
Under Netherlands Antilles law, however, all holders of Fuel Tech common stock
as of the close of business on June 2, 2004 are entitled to vote at the
Meeting. As of the Record Date, Fuel Tech had 19,510,705 shares of common
stock outstanding, according to the records of Mellon Investor Services, LLC,
Fuel Tech's transfer agent (the "Transfer Agent"). Each share is entitled to
one vote. Under the rules of The Nasdaq Stock Market, Inc., a quorum of one
third of the votes entitled to be cast is required for action on matters taken
up at the Meeting.

   Each shareholder is entitled to appoint a representative at the Meeting
other than those named in the form of proxy. A shareholder desiring to appoint
some other person who need not be a shareholder may do so by completing
another proper form of proxy for use at the Meeting. All completed forms of
proxy should be mailed promptly in the enclosed return envelope for delivery
on or before 5:00 p.m. (local time at New York, N.Y.) June 2, 2004 to the
Transfer Agent.

   A shareholder giving a proxy may revoke such proxy by an instrument in
writing signed by the shareholder, by the shareholder's attorney-in-fact
authorized in writing, or, if the shareholder is a corporation, under its
corporate seal or by a duly authorized officer or attorney, and deposited with
the Transfer Agent or with the Chairman of the Meeting at the time of the
Meeting.

   If a proxy is signed and not revoked by the shareholder, the shares it
represents will be voted at the Meeting in accordance with the instructions of
the shareholder. Abstentions and broker non-votes are counted as present in
determining whether a quorum is present, but are not counted in the
calculation of the vote. If the proxy is signed and returned without
specifying choices, the shares will be voted in favor of each item on the
agenda in accordance with the recommendations of the Board. Members of the
Board and executive officers of Fuel Tech may solicit shareholders' proxies by
mail, telephone or facsimile. Fuel Tech will bear the cost of proxy
solicitation, if any.


                     ANNUAL REPORT AND FINANCIAL STATEMENTS

   Fuel Tech's Annual Report to Shareholders (the "Report"), contains the
report of Management on the business and administration of Fuel Tech for the
calendar year ended December 31, 2003 and financial statements reflecting the
financial position and results of operations of Fuel Tech for 2003 (the
"Financial Statements"). The Financial Statements are set forth in the Report
in consolidated form and, as required by Netherlands Antilles law, in
unconsolidated form. See Note 11 to the Financial Statements for the
unconsolidated Financial Statements. The Report and this Proxy Statement were
distributed together commencing in the week of May 3, 2004. The Report is
available for inspection at the office of Fuel Tech at the address written on
the Notice of Meeting and will be available for inspection at the Meeting.

   Resolutions will be presented at the Meeting for the approval of the Annual
Report and the Financial Statements. Fuel Tech understands that under
Netherlands Antilles law, approval of the Report and the Financial Statements
at the Meeting will have the effect of discharging the Managing Directors from
legal liability for their activities as directors for the year ended
December 31, 2003.

   The affirmative vote of a majority of the shares voting is required for the
approval of this proposal. The Board recommends a vote FOR this proposal.
<PAGE>
                             ELECTION OF DIRECTORS


   On recommendation of the Compensation and Nominating Committee, the Board
proposes the election of seven nominees as Managing Directors of Fuel Tech.
The term of office of each Managing Director is until the next Annual General
Meeting or until a successor shall have been duly elected. The nominees are
Douglas G. Bailey, Ralph E. Bailey, Miguel Espinosa, Charles W. Grinnell, John
D. Morrow Samer S. Khanachet and Thomas S. Shaw. Mr. Morrow is nominated for
the first time. Tarma Trust Management N.V., currently a Managing Director, is
not standing for reelection. In the opinion of the Board, Mr. Espinosa,
Mr. Khanachet, Mr. Morrow and Mr. Shaw satisfy the independence requirements
of NASD Rule 4200 (a) (15). Each of the nominees has consented to act, if
elected. Should one or more of these nominees become unavailable to accept
nomination or election, votes will be cast for a substitute nominee, if any,
designated by the Board on recommendation of the Compensation and Nominating
Committee. If no substitute nominee is designated prior to the Meeting, the
individuals named as proxies on the enclosed proxy card will exercise their
discretion in voting the shares that they represent. A motion will be
presented at the Meeting for the election as Managing Directors of the
foregoing seven nominees.

   The affirmative vote of a majority of the shares voting is required for the
election of directors. The Board recommends a vote FOR each of the nominees.

   The following table sets forth certain information with respect to each
person nominated and recommended to be elected as a Managing Director of Fuel
Tech.

<TABLE>
<CAPTION>
Name                                                        Age   Director Since
- ----                                                        ---   --------------
<S>                                                         <C>   <C>
Douglas G. Bailey ......................................    54         1998
Ralph E. Bailey ........................................    80         1998
Miguel Espinosa ........................................    63         2002
Charles W. Grinnell ....................................    67         1989
John D. Morrow .........................................    80           --
Samer S. Khanachet .....................................    53         2002
Thomas R. Shaw .........................................    57         2001
</TABLE>

Shareholders' Agreement

   Fuel Tech is party to a Shareholders' Agreement of April 30, 1998, as
amended, (the "Agreement") with certain Investors who acquired in 1998
4,750,000 shares and warrants to purchase 3,000,000 shares of Company common
stock. During the term of the Agreement the Investors have the right to
nominate three persons as Managing Directors of Fuel Tech one of whom shall be
an independent director. The Investors are Douglas G. Bailey, Ralph E. Bailey,
Nolan R. Schwartz and other persons who are or were associated with American
Bailey Corporation, a privately owned company of which Mr. Ralph E. Bailey is
Chairman and Mr. Douglas G. Bailey, his son, is President and Chief Executive
Officer. Notwithstanding the Agreement, each of the persons identified above
are the nominees of the Board for election as Managing Directors at the
Meeting, having been recommended by the Compensation and Nominating Committee.
The term of the Agreement is until April 30, 2008, unless before April 30,
2008 the Investors own less than 475,000 shares of Fuel Tech common stock.

Directors and Executive Officers of Fuel Tech and Fuel Tech, Inc.

   Vincent M. Albanese, 55, has been Vice President -- Air Pollution Control,
Sales and Marketing of Fuel Tech, Inc. since April, 1998 and Senior Vice
President since May 1, 2000. He was Vice President Sales and Marketing of
Nalco Fuel Tech, a joint venture between Fuel Tech, Inc. and Nalco Chemical
Company ("Nalco"), prior to joining Fuel Tech, Inc., and had served Nalco Fuel
Tech since 1990. Prior to his service with Nalco Fuel Tech, Mr. Albanese was a
market development specialist with Nalco, his employer since 1975.

   Steven C. Argabright, 61, has been a director and the President and Chief
Operating Officer of Fuel Tech, Inc. since April, 1998. He was President and
Chief Executive Officer of Nalco Fuel Tech from 1996 to April, 1998 and Vice
President of Nalco Fuel Tech from 1990 to 1996. Prior to the formation of
Nalco Fuel Tech, Mr. Argabright was a Regional Sales Manager of Nalco, his
employer since 1973.


                                       2
<PAGE>

   Vincent J. Arnone, 40, was Controller of Fuel Tech and Fuel Tech, Inc. from
May 24, 1999 until December 9, 2003 when he was appointed Vice President,
Treasurer and Chief Financial Officer of those companies. Previously Mr. Arnone
was Assistant Controller and Director of Finance for a division of American
National Can Company, now Rexam PLC, a multi-national packing company.

   Douglas G. Bailey has been a director of Fuel Tech and of Fuel Tech, Inc.
since April, 1998 and Deputy Chairman of Fuel Tech and of Fuel Tech, Inc.
since 2002. He became an employee of Fuel Tech Inc. effective January 1, 2004.
Mr. Bailey, who is the son of Ralph E. Bailey, has been the President and
Chief Executive Officer of American Bailey Corporation ("ABC"), a privately
owned business acquisition and development company, since 1984.

   Ralph E. Bailey has been a director and Chairman of the Board and Chief
Executive Officer of Fuel Tech and Chairman and a director of Fuel Tech, Inc.
since April, 1998. He has been a director and Chairman of American Bailey
Corporation ABC since 1984. Mr. Bailey is the former Chairman and Chief
Executive Officer of Conoco Inc., an energy company, and a former Vice
Chairman of E.I. du Pont de Nemours & Co., a chemical company.

   Stephen P. Brady, 47, has been Vice President -- Fuel Chem of Fuel Tech,
Inc. since February, 1998 and Senior Vice President since January 1, 2002.
Prior to joining Fuel Tech, Inc., Mr. Brady was a Regional Sales Manager of
Nalco, his employer since 1980.

   Miguel Espinosa has been President and Chief Executive Officer of The
Riverview Group, LLC, a financial consulting company, since 2001. He retired
in 2001 as Treasurer of Conoco Inc., his employer since 1965. In addition to
corporate finance, Mr. Espinosa's responsibilities at Conoco involved
international operations, mergers and acquisitions and joint ventures.
Mr. Espinosa has a Masters in Business Administration degree from the
University of Texas.

   Charles W. Grinnell has been Vice President, General Counsel and Corporate
Secretary of Fuel Tech since 1988 and a director of Fuel Tech and Fuel Tech,
Inc. since September, 1989. Mr. Grinnell is a director of Clean Diesel
Technologies, Inc., a specialty chemical and energy technology company, and
has also been engaged in the private practice of corporate law in Stamford,
Connecticut since 1992.

   Samer S. Khanachet has been President of United Gulf Management, Inc.
("UGM"), an investment management company, since 1991 where his
responsibilities include private equity and real estate investments for UGM's
parent company, Kuwait Projects Company (Holding) and clients. Mr. Khanachet
has a Masters in Business Administration degree from Harvard University.

   John D. Morrow, formerly a director of Fuel Tech, Inc. from 1985 to 1987, is
the retired Chief Financial Officer and director of Conoco Inc.

   Nolan R. Schwartz, 53, has been director of Fuel Tech, Inc. since 1998 and
became an employee of Fuel Tech, Inc. effective January 1, 2004, as Vice
President, Corporate Development. Previously Mr. Schwartz had been a Principal
of American Bailey Corporation, his employer since 1988.

   Thomas S. Shaw, Jr. has been Executive Vice President of Pepco Holdings,
Inc. ("PHI") since August 1, 2002 when PHI acquired Conectiv, an electric
power generating and distribution company. Mr. Shaw remains as President and
Chief Operating Officer of Conectiv and has been since September, 2000 and
previously had been employed by its predecessor Delmarva Power and Light
Company ("Delmarva") for over 25 years where he had been President of its
subsidiary Delmarva Capital Investments, Inc. from 1991 until 1995 and was
Executive Vice President of Delmarva and Conectiv from 1997 until September,
2000.

   William H. Sun, 47, has been Vice President and Chief Technology Officer of
Fuel Tech, Inc. since December 9, 2003. Previously he was Vice President,
Engineering and Technology of Fuel Tech, Inc. since April, 1987 and had been
Director of Process Engineering of Nalco Fuel Tech since 1990.

   Tarma Trust Management, N.V., ("Tarma"), a Managing Director of Fuel Tech
since April, 1998, is a Netherlands Antilles limited liability company in
Curacao specializing in company management and representation. Tarma is not
standing for reelection at the Meeting.

   There are no family relationships between any of the directors or executive
officers, except as stated above.


                                       3
<PAGE>
Committees of the Board

   The Board has an Audit Committee of which the members are Mr. Espinosa
(Chairman), Mr. Khanachet, Mr. Shaw and Mr. R. E. Bailey (ex officio).
Mr. Espinosa, Mr. Khanachet and Mr. Shaw are independent members of this
committee as defined by NASD Rule 4350(d). The Board has also determined that
Mr. Espinosa and Mr. Khanachet are audit committee financial experts as
defined in applicable Securities and Exchange Commission regulations: both
have formal training in finance and Mr. Espinosa has been Treasurer of a major
energy company and Mr. Khanachet is the President of an investment company.

   The Board also has a Compensation and Nominating Committee of which the
members are Mr. Shaw (Chairman), Mr. Espinosa, Mr. Khanachet and Mr. R.E.
Bailey (ex officio). Mr. Shaw, Mr. Espinosa and Mr. Khanachet are independent
directors of this committee as defined by NASD Rule 4200(a)(15). This
committee was constituted on February 24, 2004 and replaced the Compensation
Committee of Fuel Tech, Inc.

   Mr. R. E. Bailey as an ex officio member of these committees does not vote
or attend executive sessions.

Audit Committee

   The Audit Committee is responsible for review of audits, financial reporting
and compliance, and accounting and internal controls policy. For audit
services, the Audit Committee is responsible for the engagement and
compensation of independent auditors, oversight of their activities and
evaluation of their independence. The Audit Committee has instituted
procedures for receiving reports of improper recordkeeping, accounting or
disclosure. The Board has also constituted the Audit Committee as a Qualified
Legal Compliance Committee in accordance with Securities and Exchange
Commission regulations. A copy of the Audit Committee Charter will be
available for inspection on the Fuel Tech web site at www.fueltechnv.com.

Compensation and Nominating Committee

   The Compensation and Nominating Committee reviews and approves executive
compensation, stock options and similar awards, and adoption or revision of
benefit, welfare and executive compensation plans and also determines the
identity of director nominees for election to fill a vacancy on the Board of
Managing Directors of Fuel Tech. Nominees are approved by the Board on
recommendation of the Committee. Mr. Morrow was recommended as a nominee to
the Committee by Messrs. R. E. Bailey, Espinosa and Grinnell. Mr. R. E. Bailey
is a holder of 24.1% of the issued and outstanding shares of Fuel Tech.

   In evaluating nominees, the Committee particularly seeks candidates of high
ethical character with significant business experience at the senior
management or Board level who have the time and energy to attend to Board
responsibilities. Candidates should also satisfy such other particular
requirements that the Committee may consider important to Fuel Tech's business
at the time. When a vacancy occurs on the Board, the Committee, in
consultation with the Chairman, will consider nominees from all sources,
including shareholders, nominees recommended by other parties, and candidates
known to the Managing Directors or to Fuel Tech management. The Committee may,
if appropriate, make use of a search firm and pay a fee for services in
identifying candidates. The best candidate from all evaluated will be
recommended to the Board to consider for nomination.

   Shareholders who wish to recommend candidates for consideration as nominees
should before January 1 in each year furnish in writing detailed biographical
information concerning the candidate to the Committee addressed in care of the
Corporate Secretary, Fuel Tech, Inc., 695 East Main Street, Stamford, CT
06901.

   The Charter of the Compensation and Nominating Committee will be available
for viewing on the Fuel Tech web site www.fueltechnnv.com.

Corporate Governance

Meetings

   During the year ended December 31, 2003, there were four meetings of the
Board of Directors of Fuel Tech, four meetings of its Audit Committee and four
meetings of the Compensation Committee of Fuel Tech, Inc. Each director of
Fuel Tech attended at least 75% of Board and committee meetings of which he
was a member during

                                       4
<PAGE>
the period of his directorship. Tarma Trust Management N.V., which represents
and acts for Fuel Tech in the Netherlands Antilles, does not normally attend
Company Board meetings outside of the Antilles and did not attend any meetings
in 2003 except for the 2003 Annual General Meeting of Shareholders. The
Directors did not attend the annual meeting of Shareholders in 2003 because in
satisfaction of Netherlands Antilles law, that meeting is held annually in
Curacao, Netherlands Antilles, and is conducted by proxy.

Executive Sessions

   The Board will hold not less than two executive sessions of the independent
directors annually in connection with regularly scheduled meetings. The
committees of the Board will hold executive sessions when appropriate. Members
of management and non-independent Managing Directors will not attend executive
sessions. The executive sessions of the Board will be chaired by the
independent Managing Directors in rotation by alphabetical order.

Code of Business Ethics and Conduct

   On the recommendation of the Audit Committee, the Board has adopted a Code
of Business Ethics and Conduct which will be available for viewing on the Fuel
Tech web site www.fueltechnv.com. Changes to or waivers of the requirements of
the Code will be posted to the web site.


                    RATIFICATION OF APPOINTMENT OF AUDITORS


   The Audit Committee has reappointed the firm of Ernst & Young LLP, Certified
Public Accountants ("Ernst & Young"), to be Fuel Tech's auditors for the year
2004 and submits that reappointment to the shareholders for ratification.
Ernst & Young has served in this capacity since 1990 and is knowledgeable
about Fuel Tech's operations and accounting practices and is well qualified to
act in the capacity of independent accountants. In making the appointment, the
Audit Committee reviewed Ernst & Young's performance in prior years along with
its reputation for integrity and overall competence in accounting and
auditing. Representatives of Ernst & Young will not be present in Curacao at
the Meeting.

Audit Fees

   Fees for professional services provided by Ernst & Young in each of the last
two fiscal years by category were:

<TABLE>
<CAPTION>
                                                                       2003        2002
                                                                     --------    --------
         <S>                                                         <C>         <C>
         Audit Fees ..............................................   $113,500    $101,900
         Audit-Related Fees ......................................     24,000          --
         Tax Fees ................................................         --          --
         All Other Fees ..........................................      1,500          --
                                                                     --------    --------
                                                                     $139,000    $101,900
</TABLE>

   Fees for audit services include fees associated with the annual audit and
reviews of Fuel Tech's quarterly reports on Form 10-Q. Audit-related fees were
in connection with Fuel Tech's review of its internal controls. All other fees
were $1,500 in 2003 for a subscription to an on line accounting newsletter.
These services were approved in advance by the Audit Committee.

Pre-Approval Policies and Procedures

   Fuel Tech's policy and procedure is that each engagement for an audit or
non-audit service is approved in advance by Audit Committee.

   The affirmative vote of a majority of the shares voting is required for the
approval of this proposal. The Board recommends a vote FOR this proposal.


                                       5
<PAGE>
Report of the Audit Committee

   Management is responsible for Fuel Tech's internal controls and its
financial reporting. The independent auditors are responsible for performing
an audit of Fuel Tech's financial statements in accordance with auditing
standards generally accepted in the United States and for expressing an
opinion on those financial statements based on their audit. The Audit
Committee reviews these processes. In such context, the Committee has reviewed
and discussed the audited financial statements contained in the 2003 Annual
Report on Form 10-K with Fuel Tech's management and its independent auditors.

   The Committee has discussed with the independent auditors the matters
required to be discussed by the Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended.

   The Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as amended, and has
discussed with the independent auditors their independence. The Committee has
also considered whether the provision of the services described above under
the caption "Audit Fees" is compatible with maintaining the independence of
the independent auditors.

   Based on the review and discussions referred to above, the Committee
recommended to the Board of Managing Directors that the audited financial
statements be included in Fuel Tech's Annual Report on Form 10-K for the year
ended December 31, 2003 filed with the Securities and Exchange Commission.

   By the Audit Committee:

      M. Espinosa, Chairman,
      S.S. Khanachet and T.S. Shaw


                        AMENDMENT OF 1993 INCENTIVE PLAN


The Proposed Amendment

   In 1993, the Fuel Tech Board adopted and the shareholders approved the
Company's 1993 incentive Plan (the "Plan"). The Plan is intended to provide a
flexible structure within which the Company may utilize various compensation
devices to recruit and retain the services of such key persons as may be
required to manage and carry out the Company's business. The Board desires to
continue to utilize the Plan for this purpose.

   The aggregate limitation on the number of shares that may be subject to
stock awards under the Plan is 12.5% of issued shares, less the number of
outstanding awards. At December 31, 2003, 12.5% of issued shares was 2,452,687
shares and, after giving effect to then outstanding options for which
2,447,050 shares were required to be reserved, there were available only 5,637
shares for further grant of awards.

   The Board on the recommendation of the Compensation and Nominating Committee
proposes to amend the Plan by providing that the aggregate limitation on the
number of shares that may be subject to awards shall be 12.5% of the shares
issued and outstanding, but on a fully-diluted basis, less the number of
shares reserved for outstanding awards. For this purpose "fully-diluted" will
be calculated on a share for share basis and not on the "Treasury" basis used
to calculate fully diluted shares for balance sheet purposes. If this proposal
had been in effect on December 31, 2003, the limitation would have been
3,078,882 shares and, therefore, an additional 626,194 shares would have been
available for awards. The Board estimates that the normal process of exercises
and expirations of awards will, under this amended formula, maintain a
reasonable number of shares for awards year to year. Awards in 2003, 2002 and
2001 to directors and employees were, respectively, 475,500, 424,000 and
472,500 shares.

   Also under Section 422 of the Internal Revenue Code, the number of shares
that may be issued as incentive shares on exercise of incentive stock options
is limited to a fixed number approved by shareholders. That number was
previously approved by shareholders in 1998 as one million shares. While to
date 114,090 shares have issued as incentive shares on exercise of incentive
stock options, nevertheless the aggregate number of incentive stock options
outstanding at December 31, 2003 under Fuel Tech incentive stock options is
2,157,050 shares. The Board believes that it is advantageous for recruiting
and retention purposes to offer incentive stock options.


                                       6
<PAGE>
Incentive stock options will not subject the holder to ordinary income tax on
exercise, if the exercise follows certain minimum time periods and the
acquired shares are in turn held for certain minimum time periods.

   Accordingly, the Board proposes to increase the limitation on incentive
stock options to three million shares from one million. This three million
share incentive option limitation will be subject to the aggregate limitation
described above and will not increase the number of stock awards available
under the plan, but merely their form.

General Features of the Plan

   The Plan is administered by the Compensation and Nominating Committee (the
"Administrator") which is a committee of independent Managing Directors. Other
than with respect to Director Options, the Administrator shall have sole
authority to grant Awards and interpret the Plan.

   Participants in the Plan may be such of Fuel Tech's directors, officers,
employees, consultants or advisors as the Administrator shall determine are
key to the continued success of Fuel Tech's business. Consultants and advisors
shall not include those rendering services in connection with the offer or
sale of Fuel Tech securities in a capital raising transaction. "Company" for
this purpose also includes Fuel Tech's subsidiaries and affiliates, so long as
the Company owns, directly or indirectly, at least fifty percent of the stock
or interest therein.

   The Plan is designed so that Awards may be settled in the form of Fuel
Tech's shares and in a manner complying with applicable United States
securities laws, including Rule 16b-3 of the Securities Exchange Act of 1934,
as amended. Certain Awards may also be settled in cash. Under the Plan, as
amended, the Administrator may grant Awards to participants in the form of
Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Shares, Performance Awards, Bonuses or any other form of
share based or non-share based Award or any combination of these Awards. No
Stock Option may be outstanding for more than ten years. Share based Awards
shall at the time of grant have an exercise price of or be valued at not less
than 100% of the fair market value of the shares on the date of grant (110% in
the case of an Incentive Stock Option granted to Ten-Percent Stockholder).
Unless otherwise provided in the Award agreement, Awards generally may not be
assigned or transferred other than by will or pursuant to the laws of descent
and distribution and, during the life of the holder of an Award, an Award is
exercisable only by the holder, by the holder's guardian or legal
representative or pursuant to a "qualified domestic relations order" as
defined by the Code (or any such similar order).

   The Plan provides for annual grants of stock options to nonemployee Fuel
Tech directors. Under the Plan, a non-qualified stock option in respect of
10,000 shares will be granted to each nonemployee Director on the first
business day after the annual meeting of the Company's shareholders ("Director
Options"). Director Options vest immediately upon grant. Director options have
a term of ten years. Director options are intended to constitute formula
awards under Rule 16b-3 of the Securities Exchange Act of 1934, as amended.

   To date under the Plan awards have been granted only as non-qualified or
incentive stock options. Neither a non-qualified nor an incentive stock option
is taxable when granted because awards are made at market value under the
Plan. On exercise of a non-qualified option a participant is taxable at
ordinary income tax rates on the spread between the exercise price and the
market value on the date of exercise. But, an incentive stock option
participant will not be taxed on this spread so long as the shares acquired on
exercise are held for a period of at least two years after the grant of the
option and one year after exercise; if not held for such periods, there is
considered to be a disqualifying disposition and the spread is taxed at
ordinary income tax rates. When the spread on exercise of an incentive stock
option is not subject to ordinary income tax treatment, it is nevertheless a
preference item for purposes of the Alternative Minimum Tax. See also Schedule
I attached to this Proxy Statement for a more detailed description of the IRS
Section 422 requirements for incentive stock options.

   Subject to the limitations set forth above and other than with respect to
Director Options, the Administrator shall determine the types of Awards, the
related performance criteria, the number of shares, if any, subject to Awards,
the manner and time of exercise, and terms of vesting, and shall make such
other determinations which in its discretion appear to be fitting and proper.

   Awards shall be evidenced by written agreements. Each agreement may contain
such provisions as the Administrator shall determine to be appropriate for the
adjustment of the number or classes of shares or other consideration subject
to and purchasable upon the exercise of, or to be delivered pursuant to, an
Award and the


                                       7
<PAGE>
Award price, in the event of changes in the outstanding shares of the Company
by reason of stock dividends, spin-offs, recapitalizations, mergers,
consolidations, combinations or exchanges of shares and other like events. In
the event of a Change of Control of Fuel Tech, Awards will become immediately
vested. "Change of Control" shall mean (i) 51% of Fuel Tech's voting
securities shall have become beneficially owned, directly or indirectly, by a
person or entity or associated group of persons or entities, (ii) in any two
year period, persons being a majority of the board shall cease to be so unless
the nomination of the new directors during such period was approved by at
least a majority of the directors then still in office who were directors at
the beginning of the period, (iii) a consolidation or merger of Fuel Tech in
which Fuel Tech is not the surviving company and pursuant to which Fuel Tech's
shares are converted to cash, securities or other property, but in no event a
merger where shareholders of Fuel Tech prior to the merger have substantially
the same proportionate ownership after the merger or (iv) the approval by the
shareholders of the Company of any plan for liquidation or dissolution of Fuel
Tech, not otherwise involving a transaction described in (iii) above.

   The Board is authorized to amend or terminate the Plan without the approval
of shareholders, unless such approval is required by law, and only with
respect to shares that are not subject to outstanding Awards, The Board is
authorized to amend the Plan to obtain the benefits of relevant U.S. or other
national securities laws and regulations or exemptions therefrom, including
such amendments as may limit the number of shares to be awarded with respect
to particular types of Awards, either as an absolute number or as a percentage
of outstanding shares. The foregoing summary of the Plan is subject to the
more detailed text thereof, a copy of which will be available at the Meeting
and also shall be provided by the Company upon request, without charge, to any
person to whom a copy of this proxy statement is delivered, upon written or
oral notice to the Company at its principal executive offices. Any capitalized
term that is not defined in this summary shall have the meaning ascribed to
such term under the Plan.

   Further information concerning stock awards under the Plan is set forth
below under the captions "Principal Stockholders and Stock Ownership of
Management" and Executive Compensation" and also in Note 5 to the Financial
Statements.

   A resolution will be presented at the Meeting for the approval of the Plan,
as amended, which is described above. The Directors recommend a vote FOR this
proposal.


                                       8
<PAGE>
            PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT


   The following table sets forth information regarding the beneficial
ownership of Common Stock as of April 5, 2004 by (i) each person known to Fuel
Tech to own beneficially more than five percent of the outstanding Common
Stock; (ii) each director or nominee of Fuel Tech; (iii) the Named Executive
Officers; and (iv) all directors and executive officers as a group.

<TABLE>
<CAPTION>
Name and Address(1)                             No. of Shares(2)   Percentage(3)
- -------------------                             ----------------   -------------
<S>                                             <C>                <C>
Beneficial Owners
Winslow Management Co. .....................       1,910,900             9.9%
Morgens Waterfall Vintiadis & Co., Inc. ....       1,000,000             5.1%
RIT Capital Partners plc ...................       1,028,882             5.3%
Directors and Named
Executive Officers
Vincent M. Albanese (4)(5) .................         167,500             1.0%
Steven C. Argabright (5) ...................         320,000             1.6%
Douglas G. Bailey (5) ......................       1,772,000             8.4%
Ralph E. Bailey (5)(6) .....................       4,710,000            24.1%
Stephen P. Brady (5) .......................         152,500             1.0%
Miguel Espinosa (5) ........................          21,500               *
Charles W. Grinnell (5) ....................          86,089               *
John D. Morrow (6) .........................           3,000               *
Samer S. Khanachet (5) .....................          20,000               *
Scott M. Schecter (5) ......................         215,327             1.1%
Thomas S. Shaw (5) .........................          30,000               *
William H. Sun (5) .........................         103,750             1.0%
Tarma Trust Management N.V. ................              --              --
All Directors and Officers as a Group (13
  persons)(3)(4) (5)(6).....................       8,047,604            35.5%
</TABLE>

- ---------------
*   Less than one percent (1.0%)
(1) The address of Winslow Management Company is 60 State Street, Boston, MA
    02109; RIT Capital Partners plc is 27 St. James Place, London, England SW1A
    1NR and Morgens Waterfall Vintiadis & Co., Inc. is 10 East 50th Street, New
    York, NY 10022. The address of each of the above management beneficial
    owners is c/o Fuel Tech, Inc., 695 East Main Street, Stamford, Connecticut
    06901, except Tarma Trust Management N.V. which is Castorweg 22-24,
    Curacao, Netherlands Antilles.
(2) Except for 4,000 of the shares indicated for Mr. Argabright, which are
    owned by his spouse, the owners of all shares are believed by Fuel Tech to
    have sole ownership and investment control of such shares.
(3) The percentages in each case are of the outstanding common at April 5, 2004
    and all warrants or options exercisable within 60 days thereafter.
(4) Does not include 2,000 shares owned by Mr. Albanese's spouse as to which he
    disclaims beneficial ownership.
(5) Includes shares subject to options and warrants exercisable presently and
    within 60 days for Mr. Albanese, 163,750 shares; Mr. Argabright, 305,000
    shares; Mr. D. G. Bailey, 1,697,000 shares; Mr. R. E. Bailey, 60,000
    shares; Mr. Brady, 142,500 shares; Mr. Espinosa, 20,000 shares;
    Mr. Khanachet, 20,000 shares; Mr. Grinnell, 60,000 shares; Mr. Schecter,
    181,250 shares; Mr. Shaw, 30,000 shares; Mr. Sun, 68,750 shares and, for
    all directors and officers as a group, 3,143,438 shares.
(6) Does not include for Mr. R. E. Bailey 25,193 Units accrued at December 31,
    2003 under the Directors Deferred Compensation Plan. Also, does not include
    170,000 shares for Mr. Morrow held in trust for his family members as to
    which he disclaims beneficial ownership.


                                       9
<PAGE>
                             EXECUTIVE COMPENSATION


   The table below sets forth for the calendar years ending December 31, 2003,
2002 and 2001, the compensation of Fuel Tech's Chief Executive Officer, the
four most highly compensated current executive officers and one former
executive officer.


                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                      Long-Term
                                                                                                     Compensation
                                                                                                     ------------
                                                                                                        Shares
                                                                    Annual Compensation               Underlying
                                                          ---------------------------------------      Options
                                                                                       Other           Granted         All Other
Name and Principal Position                       Year    Salary(1)   Bonus(2)    Compensation(3)       (#)(4)      Compensation(5)
- ---------------------------                       ----    ---------   --------    ---------------    ------------   ---------------
<S>                                               <C>     <C>         <C>         <C>                <C>            <C>
Vincent M. Albanese ...........................   2003    $169,432          --             --           25,000          $ 7,901
Senior Vice President                             2002     166,999     $19,260         20,000            9,331
                                                  2001     159,799      10,000             --           25,000            4,794
Steven C. Argabright ..........................   2003     225,000          --             --           40,000            8,072
President and Chief                               2002     220,000      40,922             --           35,000           10,544
Operating Officer                                 2001     205,917      20,000              -           50,000            5,100
Stephen P. Brady ..............................   2003     180,049           -             --           25,000            8,041
Senior Vice President                             2002     168,800      19,188             --           25,000            9,779
                                                  2001     156,371      15,000        180,000           40,000            5,100
Ralph E. Bailey ...............................   2003          --          --             --           10,000           24,000
Chairman and Chief                                2002          --          --             --           10,000           19,933
Executive Officer                                 2001          --          --             --           10,000           10,000
Scott M. Schecter .............................   2003     222,430          --             --               --            8,072
Vice President, Treasurer                         2002     219,237      25,284             --           25,000           10,544
and Chief Financial                               2001     209,800      12,500             --           25,000            5,100
Officer
William H. Sun ................................   2003     135,002          --             --           20,000            5,941
Vice President and                                2002     132,813      12,212             --           15,000            7,649
Chief Technology                                  2001     125,860      12,500             --           15,000            3,776
Officer
</TABLE>

- ---------------
(1) Mr. Bailey is not an employee of Fuel Tech or of Fuel Tech, Inc. Effective
    January 1, 2004 Douglas G. Bailey and Nolan R. Schwarz became employees of
    Fuel Tech, Inc. at annual salaries, respectively, of $275,000 and $200,000.
    On December 9, 2003, Mr. Schecter was replaced as Vice President, Treasurer
    and Chief Financial Officer by Mr. Arnone and Mr. Sun was elected as Vice
    President and Chief Technology Officer of Fuel Tech, Inc.
(2) Bonus payments for 2002 were for participating employees in the Fuel Tech
    Management Incentive Program ("MIP"). No MIP bonuses were payable for 2003
    and 2001. Special bonuses, however, were paid in 2002 to recognize 2001
    achievements.
(3) The amount of $180,000 designated as "Other Compensation" for Mr. Brady was
    payment to him in February 2001, the third anniversary of his employment
    with Fuel Tech, as a "Stay Bonus" under his employment agreement as
    reimbursement for loss of benefits under a previous employer's defined
    benefit plan.
(4) With the exception of the options granted to Mr. Bailey, which were Non-
    Qualified Stock Options, the options granted were Incentive Stock Options.
    The options do not include stock appreciation rights.


                                       10
<PAGE>
(5) The amounts designated "Other Compensation" for Mr. Bailey were directors'
    fees which for 2003, 2002 and 2001, respectively, were deferred under the
    Directors' Deferred Compensation Plan as 5,839, 4,225 and 3,432 Units; and,
    for Messrs. Albanese, Argabright, Brady and Schecter, Company profit
    sharing and matching contributions to the Fuel Tech, Inc. 401(k) Plan. No
    profit sharing contributions were made for 2001.

Directors' Compensation

   Fuel Tech provides an annual cash retainer of $15,000 payable quarterly in
arrears to each director and, in addition, $2,000 for each committee Chairman
of Fuel Tech and, for each regular or special meeting of the Board, a meeting
fee of $1,200 and, for meetings of committees. The Fuel Tech Board has
generally four regularly scheduled meetings per year. Non-executive directors
are entitled under Fuel Tech's Directors Deferred Compensation Plan to defer
fees in either cash with interest or share equivalent "Units" until fixed
dates, including the date of retirement from the Board, when the deferred
amounts will be distributed in cash.

   Directors employed by Fuel Tech or its subsidiaries receive compensation
other than directors' fees but receive no compensation for their service as
directors.

   Under Fuel Tech's 1993 Incentive Plan, each non-executive director of Fuel
Tech or of Fuel Tech, Inc. receives as of the first business day following the
annual meeting a non-qualified stock option award of 10,000 shares for a term
of 10 years vesting immediately. In 2003 such 10,000 share options were
granted to Messrs. D. G. and R. E. Bailey, Espinosa, Khanachet, Schwartz and
Shaw at the exercise price of $4.195 per share.

Indemnification

   Under the Fuel Tech Articles of Association, indemnification is afforded
Fuel Tech's directors and executive officers to the fullest extent permitted
by the laws of the Netherlands Antilles. Such indemnification also includes
payment of any costs which an indemnitee incurs because of claims against the
indemnitee. Fuel Tech is, however, not obligated to provide indemnity and
costs where it is adjudicated that the indemnitee did not act in good faith in
the reasonable belief that the indemnitee's actions were in the best interests
of Fuel Tech, or, in the case of a settlement of a claim, such determination
is made by the Board of Directors of Fuel Tech.

   Fuel Tech carries insurance providing indemnification, under certain
circumstances, to all of its and its subsidiaries' directors and officers for
claims against them by reason of, among other things, any act or failure to
act in their capacities as directors or officers. The current annual premium
for this policy is $192,000. No sums have been paid for such indemnification
to any past or present director or officer by Fuel Tech or under any insurance
policy.

Compensation Committee Interlocks and Insider Participation

   Mr. R. E. Bailey, who is not an employee of Fuel Tech or of Fuel Tech, Inc.,
is Chairman and Chief Executive Officer of Fuel Tech and is an ex offico
member of the Fuel Tech Compensation and Nominating Committee (the
"Committee") but does not vote or attend executive sessions. Mr. R. E. Bailey
is Chairman and a shareholder of ABC and Mr. D. G. Bailey is President, Chief
Executive Officer and an employee and shareholder of ABC, in which
relationships they enjoyed a direct material interest in the management
services fees set forth below under the caption "Management Services
Agreement," an arrangement which was terminated as of December 31, 2003.


                                       11
<PAGE>
                   OPTION GRANTS IN THE LAST FISCAL YEAR (1)
                          TO NAMED EXECUTIVE OFFICERS


<TABLE>
<CAPTION>
                                                                                                                     Potential
                                                                                                                     Realizable
                                                                                                                  Value of Assumed
                                                  Number of      % of Total                                       Annual Rates of
                                                    Shares        Options                                              Stock
                                                  Underlying     Granted to    Exercise or                       Price Appreciation
                                                   Options      Employees in    Base Price                              for
Name                                             Granted (#)        2003          ($/Sh)      Expiration Date       Option Term
- ----                                             -----------    ------------   -----------    ---------------    ------------------
                                                                                                                   5%         10%
                                                                                                                 -------   --------
<S>                                              <C>            <C>            <C>            <C>                <C>       <C>
Vincent M. Albanese ..........................      25,000          6.02%         $ 3.80          12/9/14        $59,745   $151,406
Steven C. Argabright .........................      40,000          9.63%         $ 3.80          12/9/14        $95,592   $242,249
Ralph E. Bailey ..............................      10,000          2.41%         $4.195           6/6/14        $26,382   $ 66,858
Stephen P. Brady .............................      25,000          6.02%         $ 3.80          12/9/14        $59,745   $151,406
Scott M. Schecter ............................          --            --              --               --             --         --
William H. Sun ...............................      20,000          4.81%         $ 3.80          12/9/14        $47,796   $121,124
</TABLE>

- ---------------
(1)  Except the options granted to Mr. Bailey which are immediately
    exercisable, 50% of the above stock option awards are first exercisable on
    the second anniversary of grant and 25% of the awards on each of the third
    and fourth anniversaries of grant. Fuel Tech has not historically and did
    not in 2003 grant stock appreciation rights.


                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                            AND FY-END OPTION VALUES
                          OF NAMED EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
                                                  Shares                    Number of Securities
                                                 Acquired                  Underlying Unexercised          Value of Unexercised
                                                    on        Value           Options at Fiscal            in-the-Money Options
Name                                             Exercise    Realized             Year-End                  at Fiscal Year-End
- ----                                             --------    --------    ---------------------------    ---------------------------
                                                                        Exercisable    Unexercisable    Exercisable   Unexercisable
                                                                        -----------    -------------    -----------   -------------
<S>                                              <C>         <C>        <C>            <C>              <C>           <C>
Vincent M. Albanese ..........................     3,750     $ 16,088     163,750          41,250        $257,114        $13,031
Steven C. Argabright .........................    10,000     $ 25,000     305,000          70,000        $485,338        $26,063
Ralph E. Bailey ..............................        --           --      60,000              --        $ 47,550             --
Stephen P. Brady .............................        --           --     142,500          47,500        $227,300        $20,850
Scott M. Schecter ............................    25,000     $ 76,503     181,250          18,750        $279,944        $13,031
William H. Sun ...............................    35,000     $104,825      68,750          31,250        $ 97,696        $ 7,819
</TABLE>


           REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION


Compensation Policies

   Fuel Tech's executive compensation policies are to pay competitive salaries
and annual incentive compensation, if earned, and to grant stock option awards
in appropriate amounts. Competitive salaries are based on Management's
knowledge of market conditions supplemented by salary surveys as well as the
position of each employee within the business, and historical practice.
Incentive compensation, intended to encourage performance, may be in the form
of discretionary bonuses or participation by managers in the Fuel Tech, Inc.
Management Incentive Program ("MIP"). Company stock option awards are made to
provide a long term incentive to employees and to create a common interest
between the employees and its shareholders generally.

Compensation of Executive Officers -- 2003

   The key components of Fuel Tech's executive compensation program during the
last fiscal year were base salary and stock option awards under the 1993 Plan
in the amounts shown above under the caption "Executive Compensation." Base
salaries are fixed by the Board in its discretion based upon historical
levels, performance, ranking within the officer group, amounts being paid by
comparable companies, and Fuel Tech's financial


                                       12
<PAGE>
position. Incentive compensation awards, when earned, are based upon Fuel
Tech's achievement of a minimum level of performance under an annual profit
plan and the individual officer's allocated percentage of an amount determined
by the Board to be the MIP "pool," if minimum financial performance target is
achieved. Such performance was not achieved in 2003. The stock options are
designed to provide additional incentives to executive officers to maximize
stockholder value. Through the use of vesting periods, the option program
encourages executives to remain in the employ of Fuel Tech. In addition,
because the exercise prices of such options are set at the fair market value
of the stock on the date of grant of the option, executives can only benefit
from such options if the trading price of Fuel Tech's shares increases, thus
aligning their financial interests with those of the shareholders.

Compensation of Chief Executive Officer -- 2003

   The Chairman and Chief Executive Officer, Ralph E. Bailey, is not an
employee of Fuel Tech or of Fuel Tech, Inc. and received directors' fees and
stock option awards for service in his capacity as a director only. See also
the text below under the caption "Management Services Agreement" concerning
payments by Fuel Tech to American Bailey Corporation.

   In 2003, Mr. Argabright, President and Chief Operating Officer of Fuel Tech,
Inc., was paid a competitive base salary. A significant portion of
Mr. Argabright's annual compensation in 2003 was to be based on incentive
compensation with a maximum target percentage of 40% of base salary, under the
2003 MIP formula. Because Fuel Tech did not achieve its minimum financial
performance target in 2003, Mr. Argabright did not receive an incentive
compensation award for that year. Stock option awards to Mr. Argabright in
2003 were 40,000 shares at the exercise price of $3.80 per share.

   By the Compensation and Nominating Committee

      T. S. Shaw, Chairman
      M. Espinosa
      S. S. Khanachet

   This compensation report and the following performance graph shall not be
deemed incorporated by reference into any filing by Fuel Tech under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent Fuel Tech specifically incorporates such report.


                                       13
<PAGE>
                       FUEL-TECH STOCK PERFORMANCE GRAPH


   The following line graph compares (i) Fuel Tech's total return to
shareholders per share of Common Stock for the five years ended December 31,
2003 to that of (ii) the Russell 2000 index, and (iii) the Dow Jones Pollution
Control Index.

                                 Fuel-Tech N.V.
                            Stock Performance Graph
                              12/31/98 - 12/31/03


                              [PERFORMANCE GRAPH]


                                                                  Dow Jones
                      Fuel-Tech N.V.        Russell 2000      Pollution Control
                       Stock Price             Index                Index
                      --------------        ------------      -----------------
12/31/98                   100                  100                  100
12/31/99                   110                  120                   55
12/29/00                    84                  115                   78
12/31/01                   303                  116                   87
12/31/02                   210                   91                   68
12/31/03                   178                  132                   91


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Relationships With American Bailey Corporation

   Ralph E. Bailey is Chairman and Douglas G. Bailey is President and CEO of
ABC; both are directors and shareholders of ABC.

   Under a Management Services Agreement of April 30, 1998, as amended, between
Fuel Tech, Inc. and ABC, ABC provided management services to Fuel Tech, Inc.
and, on request, to Fuel Tech. Payments under this agreement to ABC by Fuel
Tech, Inc. were $350,000 in 2003, $308,334 in 2002 and $208,332 in 2001. This
agreement was terminated effective December 31, 2003.

   Under an agreement between Fuel Tech, Inc. and ABC, effective as of
January 1, 2004, Douglas G. Bailey will devote 75% of his time to Fuel Tech
and 25% to ABC until March 31, 2004 when he will then devote 90%of his time to
Fuel Tech and 10% to ABC. ABC will reimburse Fuel Tech, Inc. for 25% or 10%,
as the case may be, of Mr. Bailey's compensation.


                                       14
<PAGE>
   Under a lease dated January 29, 2004, Fuel Tech, Inc. leased new space in
Stamford, Connecticut for its executive offices. Annual rent for the space
will be $257,328 commencing December 1, 2004. ABC will sublease a portion of
this space and pay rent to Fuel Tech on an allocation of use basis presently
estimated as approximately one third of Fuel Tech, Inc.'s leasehold costs.

Clean Diesel Technologies, Inc. Management Services Agreement

   Under an August 3, 1995 Management and Services Agreement with Clean Diesel
Technologies, Inc. ("CDT"), $69,000, $69,000 and $73,000 was paid to Fuel
Tech, Inc. in 2003, 2002 and 2001 by CDT as reimbursement principally for
legal services provided to CDT by Mr. Grinnell, an employee of Fuel Tech, Inc.
and Managing Director of Fuel Tech and a Director and Officer of CDT. Fuel
Tech has an 11.6% equity ownership interest in CDT's issued and outstanding
shares. Mr. Grinnell will recuse himself from consideration of any
transactions between Fuel Tech and Clean Diesel that may be, or may appear to
be, material to either Company.

Employment Agreements

   Messrs. Albanese, Argabright, Brady and Schecter have employment agreements
with Fuel Tech, Inc. effective January 17, 1994 for Mr. Schecter, March 30,
1998 for Mr. Albanese, February 6, 1998 for Mr. Argabright and February 1,
1998 for Mr. Brady. These agreements are for indefinite terms, provide for
disclosure and assignment of inventions to Fuel Tech, Inc., protection of
proprietary data, covenants against certain competition and arbitration of
disputes. Under Mr. Schecter's agreement, he is required to provide two months
notice on resignation and, if his employment is terminated by Fuel Tech, Inc.
for reasons other than "just cause" (as defined in the agreement), Fuel Tech
must continue Mr. Schecter's then base salary and benefits until he finds
other comparable employment but not for a period in excess of one year.
Mr. Schecter commenced salary and benefits continuation under his Agreement
effective March 31, 2004.


                                    GENERAL


Section 16(a) Beneficial Ownership Reporting Compliance

   Fuel Tech believes that all reports required to be filed under Section 16(a)
of the Securities and Exchange Act of 1934 for the year 2003 were timely filed
except that a report due for Mr. Argabright on December 11 was filed on
December 12; a report due for Mr. D. G. Bailey on August 4 was filed August 6;
reports due for Messrs. R. E. Bailey, Espinosa, Khanachet, Schwartz and Shaw
on June 2 were filed June 6; and a report due for Mr. William Sun, due
December 11 was filed January 9, 2004.

Other Business

   Management knows of no other matters that may properly be, or are likely to
be, brought before the meeting other than those described in this proxy
statement.

Shareholder Proposals

   If other proper matters are introduced at the Meeting, the individuals named
as Proxies on the enclosed Proxy Card will vote in their discretion the shares
represented by the Proxy Card. In order to be presented for action at the
Meeting, such matters must, under the Articles of Fuel Tech, be in writing and
received by the Board of Managing Directors at the above address of Fuel Tech
or to the Secretary at Fuel Tech, Inc., 695 East Main Street, Stamford, CT
06901 USA not later than the close of business on May 21, 2004 in order to be
presented for consideration at the Meeting.

   Proposals of shareholders intended for inclusion in the proxy statement and
proxy to be mailed to all shareholders entitled to vote at the Annual General
Meeting of Shareholders to be held in the year 2005 must be received in
writing addressed to the Board of Directors at the above address of Fuel Tech
or to the Secretary at Fuel Tech, Inc., 695 East Main Street, Stamford CT
06901 USA on or before December 27, 2004 and, if not received by such date,
may be excluded from the proxy materials.


                                       15
<PAGE>
Communications With the Board of Managing Directors

   Any shareholder desiring to send a communication to the Board of Managing
Directors, or any individual Managing Director, may forward such communication
to the Corporate Secretary to the address provided above for shareholder
proposals. Under procedures fixed from time to time by the independent
directors, the Corporate Secretary will collect and organize all such
communications and forward them to the Board or individual Managing Director.


FUEL-TECH N.V.

Charles W. Grinnell
Secretary

May 4, 2004


                                       16
<PAGE>
                                                                     SCHEDULE I


                            Incentive Stock Options


   Incentive Stock Options ("ISOs") must meet the requirements of Internal
Revenue Code ("Code") Section 422, which provides:

   1. An ISO may be granted only to an employee of the issuing company, its
parent, or a subsidiary of the issuing parent.

   2. An ISO must be granted pursuant to a written plan that specifies the
aggregate number of shares that may be issued under options and the employees
or class of employees eligible to receive options. The plan must be approved
by company shareholders within 12 months before or after the date that the
plan is adopted.

   3. The maximum exercise period for an ISO cannot exceed ten years, but if
the executive eligible for the plan owns more than 10 percent of the total
combined voting power of all classes of stock in the company, the maximum
exercise period for that executive's ISO cannot exceed five years.

   4. An ISO cannot be transferable by the optionee during the optionee's
lifetime.

   5. The exercise price of an ISO cannot be less than the fair market value
of the stock on the date of grant. If the executive eligible for the stock
option grant owns more than 10 percent of the total combined voting power of
all classes of stock in the company, the exercise price for an ISO cannot be
less than 110 percent of the fair market value of the stock on the date of
grant.

   6. The executive cannot sell shares purchased under an ISO within two years
from the date the option is granted, or within one year from the date the
option is exercised.

   7. An executive cannot be granted ISOs that have an aggregate fair market
value (number of shares multiplied by the fair market value at the time of
grant) that exceeds $100,000 during the calendar year when the options are
first exercisable.

   8. The owner of an ISO must exercise the option within three months of
termination from active employment.

   9. The terms of an ISO cannot be amended or changed in the future in a way
that would give the option holder a material increase in benefits available:
otherwise, the ISO will be considered a new grant under Code Section 422 (and
will qualify as an ISO only if the exercise price is not less than the fair
market value of the shares on the date of the modification).


                                       17


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