ASSET PURCHASE AGREEMENT

TABLE OF CONTENTS

This Asset Purchase Agreement (the “Agreement”) is made as of December 5, 2008, by and among Fuel Tech, Inc., a Delaware corporation (the “Purchaser”); Advanced Combustion Technology, Inc., a New Hampshire corporation (the “Seller”); Peter Marx, an individual (“Marx”); Robert Pickering, an individual (“Pickering”); and Charles Trippel, an individual (“Trippel”).  Each of Marx, Pickering and Trippel are sometimes individually referred  to as a “Shareholder,” or, collectively, as the “Shareholders.”

The Seller desires to sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser desires to purchase and acquire from the Seller substantially all of the assets of the Seller, and the Purchaser has agreed to assume the Assumed Liabilities (as defined below) in accordance with the provisions of this Agreement.  The Shareholders own all of the issued and outstanding capital stock of the Seller.

NOW, THEREFORE, intending to be legally bound and in consideration of the mutual provisions set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

Section 1.1      Definitions.  For the purposes of this Agreement and the Ancillary Agreements:

“Affiliate” means, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the specified Person.  In addition to the foregoing, if the specified Person is an individual, the term “Affiliate” also includes (a) the individual’s spouse, (b) the members of the immediate family (including parents, siblings and children) of the individual or of the individual’s spouse and (c) any corporation, limited liability company, general or limited partnership, trust, association or other business or investment entity that directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with any of the foregoing individuals.  For purposes of this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Ancillary Agreements” means, collectively, the Bill of Sale, the Assignment and Assumption Agreement, the Lease Assignment, the IP Assignments, the Employment Agreements and the Escrow Agreement.

“Closing Net Working Capital” means (a) all current assets of the Seller (including current prepaid assets, work in process and current accounts net of allowances for doubtful accounts, but excluding cash and cash equivalents) arising in the ordinary course of business minus (b) all current Liabilities of the Seller, in each case calculated as of the close of business on the Closing Date in accordance with GAAP, and reflecting the exclusion of the Excluded Assets and the Excluded Liabilities.

“Code” means the Internal Revenue Code of 1986.

“Confidential Information” means any information, in whatever form or medium, concerning the business or affairs of the Seller, including, without limitation, any information (whether or not specifically labeled or identified as “confidential”), in any form or medium, that relates to the business, services, techniques, know-how, processes, methods, formulations, investments, finances, operations, plans, research or development of the Seller, and that is not generally known outside of the Seller.  Confidential Information includes, but is not limited to: the identity and information concerning the needs and preferences of current, former, and prospective customers; performance, compensation, and other personnel data concerning employees of the Seller; business plans and strategies; plans for recruiting and hiring new personnel; trade secrets; and pricing strategies and policies.  Confidential Information does not include (i) the general skills, knowledge, and experience gained during any Shareholder’s employment, (ii) the general skills and knowledge common to others in the industry, (iii) information that is or becomes publicly available without any breach of this Agreement (iv) information that is received in good faith from a third party and is not subject to an obligation of confidentiality owed by the third party or (v) is required by law, regulation, or judicial or administrative process to be disclosed.

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

“Contract” means any contract, agreement, lease, license, commitment, understanding, franchise, warranty, guaranty, mortgage, note, bond, option, warrant, right or other instrument or consensual obligation, whether written or oral.

“Earn-out Lines of Business” means those products and services the sale of which result in Qualifying Gross Margin Dollars.

“Encumbrance” means any charge, claim, mortgage, servitude, easement, right of way, community or other marital property interest, covenant, equitable interest, license, lease or other possessory interest, lien, option, pledge, security interest, preference, priority, right of first refusal, restriction (other than any restriction on transferability imposed by federal or state securities Laws) or other encumbrance of any kind or nature whatsoever (whether absolute or contingent).

“Environmental Law” means any Law relating to the environment, natural resources, pollutants, contaminants, wastes, chemicals or public health and safety, including any Law pertaining to (a) treatment, storage, disposal, generation and transportation of toxic or hazardous substances or solid or hazardous waste, (b) air, water and noise pollution, (c) groundwater or soil contamination, (d) the release or threatened release into the environment of toxic or hazardous substances or solid or hazardous waste, including emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals, (e) manufacture, processing, use, distribution, treatment, storage, disposal, transportation or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or oil or petroleum products or solid or hazardous waste, (f) underground and other storage tanks or vessels, abandoned, disposed or discarded barrels, containers and other closed receptacles, (g) public health and safety or (h) the protection of wildlife, marine sanctuaries and wetlands, including all endangered and threatened species.

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

“ERISA Affiliate” means any other Person that, together with the Seller, would be treated as a single employer under Section 414 of the Code.

“GAAP” means generally accepted accounting principles in the United States as set forth in the opinions and pronouncements of the Financial Accounting Standards Board, applied on a basis consistent throughout the periods covered thereby.

“Governmental Authority” means any (a) nation, region, state, county, city, town, village, district or other jurisdiction, (b) federal, state, local, municipal, foreign or other government, (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department or other entity and any court or other tribunal), (d) multinational organization or (e) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

“Governmental Authorization” means any Consent, license, franchise, permit or registration issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Law.

“Hazardous Material” means any waste or other substance that is listed, defined, designated or classified as, or otherwise determined to be, hazardous, radioactive or toxic or a pollutant or a contaminant under any Environmental Law, including any admixture or solution thereof, and including petroleum and all derivatives thereof or synthetic substitutes therefor, asbestos or asbestos-containing materials in any form or condition and polychlorinated biphenyls.

“Indebtedness” means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments or debt securities and warrants or other rights to acquire any such instruments or securities and (c) all Indebtedness of others referred to in clauses (a) and (b) hereof guaranteed, directly or indirectly, in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered), (iv) to grant an Encumbrance on property owned or acquired by such Person, whether or not the obligation secured thereby has been assumed, or (v) otherwise to assure a creditor against loss.

“Intellectual Property” means all of the following anywhere in the world and all legal rights, title or interest in, under or in respect of the following arising under Law, whether or not filed, perfected, registered or recorded and whether now or later existing, filed, issued or acquired, including all renewals: (a) all patents and applications for patents and all related reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and continuations in part; (b) all copyrights, copyright registrations and copyright applications, copyrightable works and all other corresponding rights; (c) all mask works, mask work registrations and mask work applications and all other corresponding rights; (d) all trade dress and trade names, logos, Internet addresses and domain names, trademarks and service marks and related registrations and applications, including any intent to use applications, supplemental registrations and any renewals or extensions, all other indicia of commercial source or origin and all goodwill associated with any of the foregoing; (e) all inventions (whether patentable or unpatentable and whether or not reduced to practice), know how, technology, technical data, trade secrets, confidential business information, manufacturing and production processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, business and marketing plans, advertising and promotional materials, customer, distributor, reseller and supplier lists and information, correspondence, records, and other documentation, and other proprietary information of every kind; (f) all computer software (including source and object code), firmware, development tools, algorithms, files, records, technical drawings and related documentation, data and manuals; (g) all databases and data collections; (h) all other proprietary rights; and (i) all copies and tangible embodiments of any of the foregoing (in whatever form or medium).

“Internally Used Shrinkwrap Software” means software licensed to the Seller under generally available retail shrinkwrap or clickwrap licenses and used in the Seller’s business, but not incorporated into software, products or services licensed or sold, or anticipated to be licensed or sold, by the Seller to customers or otherwise resold or distributed by the Seller.

“IRS” means the Internal Revenue Service and, to the extent relevant, the Department of Treasury.

“Judgment” means any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Authority or arbitrator.

“Knowledge”:  (a) a Shareholder will be considered to have “Knowledge” of a fact or matter if the individual is actually aware of the fact or matter after due and diligent inquiry of such fact or matter with Seller’s employees; (b) the Seller will be considered to have “Knowledge” of a fact or matter if the Seller or any Shareholder has Knowledge of the fact or matter; and (c) Purchaser will be considered to have “Knowledge” of a fact or matter if John P. Graham or John F. Norris Jr. has actual knowledge of such fact or matter.

 “Law” means any federal, state, local, municipal, foreign, international, multinational, or other constitution, law, statute, treaty, rule, regulation, ordinance, or code.

“Liability” means liabilities, debts or other obligations of any nature, whether known or unknown, absolute, accrued, contingent, liquidated, unliquidated, due or to become due, and whether or not required to be reflected on a balance sheet prepared in accordance with GAAP.

“Loss” means any loss, Proceeding, Judgment, damage, fine, penalty, expense (including reasonable attorneys’ or other professional fees and expenses and court costs), injury, diminution of value, Liability, Tax, Encumbrance or other cost, expense or adverse effect whatsoever, whether or not involving the claim of another Person; provided, however, that for all purposes other than a determination of the Purchaser’s Losses due to a breach of Section 8.8 hereof by the Seller or any Shareholder, Losses shall not include any punitive, special, consequential, indirect or incidental damages of any kind or nature, including lost profits.

“Material Adverse Effect” means any event, change, circumstance, effect or other matter that has, or could reasonably be expected to have, either individually or in the aggregate with all other events, changes, circumstances, effects or other matters, with or without notice, lapse of time or both, a material adverse effect on (a) the business, assets, Liabilities, properties, condition (financial or otherwise), operating results, operations or prospects of the Seller or Purchaser, as the case may be taken as a whole or (b) the ability of the Seller, Purchaser or any Shareholder to perform its obligations under this Agreement or to consummate timely the transactions contemplated by this Agreement; provided, however, that in no event shall any of the following be deemed, either alone or in combination, to constitute, nor shall any of the following be taken into account in determining whether there has been, a Material Adverse Effect: (i) any effect that results from changes in general economic conditions or changes in securities markets in general, or (ii) any effect that results from general changes in the industries in which the Seller operates.  

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

 “Person” means an individual or an entity, including a corporation, limited liability company, general or limited partnership, trust, association or other business or investment entity, or any Governmental Authority.

“Proceeding” means any action, arbitration, audit, examination, investigation, hearing, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, and whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority or arbitrator.

“Seller Plan” means any “employee benefit plan” (as defined in Section 3(3) of ERISA) for the benefit of any current or former director, officer, employee or consultant of the Seller or any ERISA Affiliate, or with respect to which the Seller or any ERISA Affiliate has or may have any Liability, including any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and any other written or oral plan, Contract or arrangement involving direct or indirect compensation or benefits, including insurance coverage, severance or other termination pay or benefits, change in control, retention, performance, holiday pay, vacation pay, fringe benefits, disability benefits, pension, retirement plans, profit sharing, deferred compensation, bonuses, stock options, stock purchase, restricted stock or stock units, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation, maintained or contributed to by the Seller or any ERISA Affiliate (or that has been maintained or contributed to in the last six years by the Seller or any ERISA Affiliate) for the benefit of any current or former director, officer, employee or consultant of the Seller or any ERISA Affiliate, or with respect to which the Seller or any ERISA Affiliate has or may have any Liability.

“Tax” means (a) any federal, state, local, foreign or other tax, charge, fee, duty (including customs duty), levy or assessment, including any income, gross receipts, net proceeds, alternative or add-on minimum, corporation, ad valorem, turnover, real property, personal property (tangible or intangible), sales, use, franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel, excess profits, profits, occupational, premium, interest equalization, windfall profits, severance, license, registration, payroll, environmental (including taxes under Section 59A of the Code), capital stock, capital duty, disability, estimated, gains, wealth, welfare, employee’s income withholding, other withholding, unemployment or social security or other tax of whatever kind (including any fee, assessment or other charges in the nature of or in lieu of any tax) that is imposed by any Governmental Authority, (b) any interest, fines, penalties or additions resulting from, attributable to, or incurred in connection with any items described in this paragraph or any related contest or dispute and (c) any items described in this paragraph that are attributable to another Person but that the Seller is liable to pay by Law, by Contract or otherwise, whether or not disputed.

 “Tax Return” means any report, return, declaration, claim for refund, or information return or statement related to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Section 1.2      Additional Defined Terms.  For purposes of this Agreement and the Ancillary Agreements, the following terms have the meanings specified in the indicated Section of this Agreement:

Section 1.3      Construction.  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.

Section 2.1      Purchase and Sale of Purchased Assets.  In accordance with the provisions of this Agreement and except as set forth in Section 2.2, at the Closing (as defined below), the Seller will sell, convey, assign, transfer and deliver to the Purchaser, and the Purchaser will purchase and acquire from the Seller, free and clear of all Encumbrances, all of the Seller’s right, title and interest in and to all of the Seller’s properties and assets of every kind and description existing on the Closing Date, whether real, personal or mixed, tangible or intangible, and wherever located (collectively, the “Purchased Assets”), including the following:

(a)      all accounts receivable, including all trade accounts receivable and other rights to payment from customers, and the full benefit of all security for such accounts or rights to payment;

(b)      all inventories, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used in the production of finished goods;

(c)      all rights, including Intellectual Property rights, in and to products sold or leased (including products hereafter sold, returned or repossessed and all rights of rescission, replevin, reclamation and rights to stoppage in transit);

(d)      all rights, including Intellectual Property rights, in and to products under research and development prior to the Closing;

(e)      all rights under all Contracts to which the Seller is a party, by which the Seller or any of the Purchased Assets is bound or affected or pursuant to which the Seller is an obligor or a beneficiary (including all outstanding offers, proposals or solicitations made by or to the Seller to enter into any such Contract), including those set forth on Schedule 2.1(e);

(f)      all machinery, equipment, furniture, furnishings, computer hardware, materials, vehicles, tools, dies, molds and other items of tangible personal property of every kind, and the full benefit of all express or implied warranties by the manufacturers or sellers or lessors of any item or component part thereof to the extent such warranties are transferable to the Purchaser;

(g)      all rights in respect of the Leased Real Property;

(h)      all Intellectual Property owned by the Seller at the Closing Date (collectively, the “Purchased Intellectual Property”), and all other intangible rights, including all goodwill associated with the Seller’s business or the Purchased Assets;

(i)      all Governmental Authorizations and all pending applications therefor or renewals thereof, in each case to the extent transferable to the Purchaser;

(j)      all books, records, files, studies, manuals, reports and other materials (in any form or medium), including all advertising materials, catalogues, price lists, mailing lists, distribution lists, client and customer lists, referral sources, supplier and vendor lists, purchase orders, sales and purchase invoices, correspondence, production data, sales and promotional materials and records, purchasing materials and records, research and development files, records, data, Intellectual Property disclosures, manufacturing and quality control records and procedures, service and warranty records, equipment logs, operating guides and manuals, drawings, product specifications, engineering specifications, blueprints, financial and accounting records, litigation files, personnel and employee benefits records to the extent transferable under applicable Law, and copies of all other personnel records described in Section 2.2(b) to the extent the Seller is legally permitted to provide copies of such records to the Purchaser;

(k)      all rights and interests under all certificates for insurance, binders for insurance policies and insurance under which the Seller, its business or any of the Purchased Assets is or has been insured to the extent such rights or interests arise from or relate to any of the Assumed Liabilities or any casualty or Liability affecting the Seller’s business or any of the Purchased Assets;

(l)      all claims, rights, credits, causes of actions, defenses and rights of set-off against third parties relating to or arising from the Purchased Assets or Assumed Liabilities, in each case, whether accruing before or after the Closing; and

(m)    all rights relating to deposits and prepaid expenses, claims for refunds and rights of offset that are not excluded under Section 2.2(f).

Notwithstanding the foregoing, the transfer of the Purchased Assets pursuant to this Agreement does not include the assumption of any Liability related to the Purchased Assets unless the Purchaser expressly assumes that Liability pursuant to Section 2.3.

Section 2.2      Excluded Assets.   Notwithstanding anything to the contrary in Section 2.1 or elsewhere in this Agreement, the following assets of the Seller (collectively, the “Excluded Assets”) are excluded from the Purchased Assets, and are to be retained by the Seller as of the Closing:

(a)      all cash or cash equivalents of the Seller, including any notes or loans receivable,  cash and cash equivalents held in any  bank or brokerage accounts of the Seller;

(b)      the corporate charter of Seller, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of Seller as a corporation;

(c)      the shares of the capital stock of the Seller held in treasury;

(d)      all certificates for insurance, binders for insurance policies and insurance, and claims and rights thereunder and proceeds thereof, other than as described in Sections 2.1(k) and 2.1(l);

(e)      all of the Contracts set forth on Schedule 2.2(e);

(f)      all claims, deposits, refunds, causes of action, choses in action, rights of recovery, rights of set off, and rights of recoupment respecting any asset, obligation or liability of the Company which directly relate  to the Excluded  Assets or  obligations or liabilites not assumed by the Purchaser;

(g)      all claims arising out of or relating to former directors, officers, employees, agents, advisors, consultants or other representatives of Seller;

(h)      all claims for refund of Taxes and other governmental charges of whatever nature arising out of the Seller’s operation of its business or ownership of the Purchased Assets prior to the Closing;

(i)      the assets, properties and rights specifically set forth on Schedule 2.2(g);

(j)      all rights of the Seller under this Agreement or any of the Ancillary Agreements to which the Seller is a party; and

(k)      all assets of any Seller Plan.

Section 2.3      Assumed Liabilities.  In accordance with the provisions of this Agreement, at the Closing, the Purchaser will assume and pay or perform when due only the following Liabilities of the Seller (collectively, the “Assumed Liabilities”):

(a)      all current Liabilities of Seller, exclusive of Indebtedness, reflected in Schedule 2.3(a) attached or incurred by the Seller in the ordinary course of business and in accordance with the provisions of this Agreement, including Section 5.2, between the date of the Interim Balance Sheet and the Closing (other than Liabilities payable to any Shareholder or any Affiliate of the Seller); and

(b)      all Liabilities of the Seller arising after the Closing under the Contracts included in the Purchased Assets, including warranty commitments (except, in each case, for any Liability arising out of or relating to (A) any breach of, or failure to comply with, prior to the Closing, any covenant or obligation in any such Contract other than a breach of warranty claim or (B) any event that occurred prior to the Closing which, with or without notice, lapse of time or both, would constitute such a breach or failure) other than a breach of warranty claim; and

(c)      all bonding commitments of the Seller set forth on Schedule 2.3(c).

Section 2.4      Excluded Liabilities.  Notwithstanding any other provision of this Agreement or any other writing to the contrary, and regardless of any information disclosed to the Purchaser, the Purchaser does not assume and has no responsibility for any Liabilities of the Seller other than the Assumed Liabilities specifically listed in Section 2.3 (such unassumed Liabilities, the “Excluded Liabilities”).  Without limiting the preceding sentence, the following is a non-exclusive list of Excluded Liabilities that the Purchaser does not assume and that the Seller will remain bound by and liable for, and will pay, discharge or perform when due:

(a)      all Liabilities arising out of or relating to any Excluded Asset;

(b)      all Liabilities under any Contract not assumed by the Purchaser under Section 2.3;

(c)       all Liabilities other than warranty commitments under any Contract assumed by the Purchaser pursuant to Section 2.3(b) that arise after the Closing but that arise out of or relate to (i) any breach of, or failure to comply with, prior to the Closing, any covenant or obligation in any such Contract or (ii) any event that occurred prior to the Closing which, with or without notice, lapse of time or both, would constitute such a breach or failure;

(d)      all Liabilities arising out of or relating to Indebtedness incurred by the Seller, including, without limitation, all of the Seller’s Indebtedness to any Shareholder;

(e)      all Liabilities for Taxes arising as a result of the operation of the Seller’s business or ownership of the Purchased Assets prior to the Closing, including any Taxes that arise as a result of the sale of the Purchased Assets pursuant to this Agreement and any deferred Taxes of any nature;

(f)       all Liabilities arising from or under any Environmental Law or Occupational Safety and Health Law arising out of or relating to the operation of the Seller’s business or the Seller’s leasing, ownership or operation of real property prior to the Closing;

(g)      all Liabilities arising under claims by employees or former employees of the Seller relating in any way to compensation, bonuses, incentive compensation, benefits (including workers’ compensation and unemployment benefits), termination or continuation of their employment, or lack or delay of any notice relating to their employment with the Seller prior to the Closing;

(h)      all Liabilities arising under or in connection with any Seller Plan (including any Seller Plan that may also be a Contract), or any termination, continuation, amendment or other acts or omissions in connection with any Seller Plan;

(i)       all professional, financial advisory, broker, finder or other fees incurred by the Seller; and

(j)       all Liabilities of the Seller arising out of or incurred in connection with this Agreement, the transactions contemplated by this Agreement, or any other document executed in connection with the transactions contemplated by this Agreement, including the Seller’s disclosures to or negotiations with creditors or Shareholders, or other legal obligations of the Seller.

In the event of any conflict between the second sentence of this Section 2.4 and Section 2.3 above, Section 2.3 will be deemed to control.

Section 2.5      Consideration.  The consideration for the Purchased Assets consists of (a) the payment at the Closing of $22,000,000, as adjusted immediately prior to Closing pursuant to Section 2.6 (the “Initial Purchase Price”), subject to further adjustment post-Closing in accordance with Section 2.7, (b) the earn-out payments contemplated by Section 2.8 below (together with the Initial Purchase Price, the “Purchase Price”), and (c) the assumption of the Assumed Liabilities.

Section 2.6      Pre-Closing Adjustment.

(a)      No later than three business days prior to the Closing Date, the Seller will prepare and deliver to the Purchaser an unaudited balance sheet of the Seller prepared on an estimated basis as of the close of business on the Closing Date (the “Estimated Closing Balance Sheet”).  The Estimated Closing Balance Sheet will be prepared in accordance with the Purchaser’s current accounting policies, including percentage of completion accounting, and GAAP.   The Seller will deliver with the Estimated Closing Balance Sheet (i) a statement setting forth the Seller’s calculation of the Closing Net Working Capital based on the Estimated Closing Balance and reflecting the exclusion of the Excluded Assets and Excluded Liabilities (including, without limitation, Indebtedness) (the “Estimated Closing Net Working Capital”) and (ii) a certification executed by the Shareholders that the Estimated Closing Balance Sheet fairly presents the financial condition and results of operations of the Seller as of the Closing Date.  

(b)      If the Estimated Closing Net Working Capital is less than $2,000,000, the Initial Purchase Price will be reduced by an amount equal to the sum obtained by subtracting the Estimated Closing Net Working Capital from $2,000,000. If the Estimated Closing Net Working Capital is greater than $4,000,000, the Initial Purchase Price will be increased by an amount equal to the sum obtained by subtracting $4,000,000 from the Estimated Closing Net Working Capital.

(a)      Within 180 days after the Closing Date, the Purchaser will prepare and deliver to the Seller written notice (the “Adjustment Notice”) containing (i) an unaudited balance sheet of the Seller as of the close of business on the Closing Date (the “Closing Balance Sheet”), (ii) the Purchaser’s calculation of the Closing Net Working Capital based on the Closing Balance Sheet and reflecting the exclusion of the Excluded Assets and Excluded Liabilities (the “Final Closing Net Working Capital”) and (iii) the Purchaser’s calculation of the amount of any payments required pursuant to Section 2.7(e) (the “Adjustment Calculation”).  The Closing Balance Sheet will be prepared in accordance with GAAP, and the Purchaser shall have caused the Closing Balance Sheet to have been reviewed or audited by its independent public accounting firm.   Upon receipt of the Adjustment Calculation, the Seller and/or its attorneys or accountants will have the right upon not less than two (2) business days prior written notice and during normal business hours to inspect and copy any or all of Purchaser’s records related to the Closing Balance Sheet, the Final Closing Net Working Capital and the Adjustment Calculation, including all accountant work papers.  Any inspection of Purchaser’s records requested by the Seller Representative shall be conducted at the expense of the Sellers, and Purchaser shall provide in advance (at no cost to Sellers except for reasonable copying and mailing costs) copies of all accounting reports of Purchaser bearing on the subject and related accountants work papers.

(b)      Within 30 days after delivery of the Adjustment Notice, the Seller will deliver to the Purchaser a written response in which the Seller will either:

(i)      agree in writing with the Adjustment Calculation, in which case such calculation will be final and binding on the parties for purposes of Section 2.7(e); or

(ii)      dispute the Adjustment Calculation by delivering to the Purchaser a written notice (a “Dispute Notice”) setting forth in reasonable detail the basis for each such disputed item and certifying that all such disputed items are being disputed in good faith.

(c)      If the Seller fails to take either of the foregoing actions within 30 days after delivery of the Adjustment Notice, then the Seller will be deemed to have irrevocably accepted the Adjustment Calculation, in which case, the Adjustment Calculation will be final and binding on the parties for purposes of Section 2.7(e).

(d)      If the Seller timely delivers a Dispute Notice to the Purchaser, then the Purchaser and the Seller will attempt in good faith, for a period of 30 days, to agree on the Adjustment Calculation for purposes of Section 2.7(e).  Any resolution by the Purchaser and the Seller during such 30-day period as to any disputed items will be final and binding on the parties for purposes of Section 2.7(e).  If the Purchaser and the Seller do not resolve all disputed items by the end of 30 days after the date of delivery of the Dispute Notice, then the Purchaser and the Seller will resolve the remaining items in dispute in accordance with Section 2.9 below.

(e)      If the Final Closing Net Working Capital as finally determined pursuant to this Section 2.7 is less than $3,000,000, then the Seller will pay to the Purchaser the amount of such difference in cash less the amount, if any, of any reduction in the Initial Purchase Price pursuant to Section 2.6(b) above.  If the Final Closing Net Working Capital as finally determined pursuant to this Section 2.7 is greater than $3,000,000, then the Purchaser will pay to the Seller the amount of such difference in cash less the amount, if any, of any increase in the Initial Purchase Price pursuant to Section 2.6(b) above.

(f)      Any payment to the Purchaser pursuant Section 2.7(e) may be satisfied in the first instance by amounts deposited in escrow in connection with the determination of the Estimated Closing Net Working Capital pursuant to Section 2.6(b) and, any payment amount in excess of such escrow deposit shall be effected by wire transfer of immediately available funds to an account designated by the Purchaser.  Any payment to the Seller pursuant to Section 2.7(e) will be effected by wire transfer of immediately available funds to an account designated by the Seller.  Such payments will be made within five business days following the final determination of the Final Closing Net Working Capital in accordance with this Section 2.7.

(g)      The purpose of this Section 2.7 is to determine the final Initial Purchase Price to be paid by the Purchaser under this Agreement.  Accordingly, any adjustment pursuant hereto will neither be deemed to be an indemnification pursuant to Article 9, nor preclude the Purchaser from exercising any indemnification rights pursuant to Article 9; provided, however, that in no event will the Seller or the Shareholders be obligated to indemnify any Purchaser Indemnified Party for any Loss as a result of, or based upon or arising from, any Liability, to the extent, but only to the extent, such Liability is reflected in the calculation of the Final Closing Net Working Capital as finally determined pursuant to this Section 2.7.  Any payment made pursuant to this Section 2.7 will be treated by the parties for all purposes as an adjustment to the Initial Purchase Price and will not be subject to offset for any reason.

Section 2.8      Earn-out Provisions. The Purchaser undertakes to pay to the Seller, as additional consideration for the Purchased Assets, the amounts contemplated by this Section 2.8 as follows:

(a)      Within ninety (90) days after the end of each of the three consecutive twelve-month periods commencing on January 1, 2009 and ending December 31, 2011 (each, an “Annual Earn-out Period”), the Purchaser shall prepare and deliver to the Selling Parties’ Representative an “earn-out” calculation in accordance with Schedule 2.8(a) for each such prior Annual Earn-out Period (each, an “Earn-out Calculation”), together with all relevant work papers and supporting calculations and any other such information as Seller may reasonably request in writing to able to assess the accuracy of the calculation.  The Earn-out Calculation shall be accompanied by a statement certified by an officer of the Purchaser that said Earn-out Calculation is true, accurate and complete.  The Purchaser shall be entitled to defer the delivery of each such Earn-out Calculation for up to thirty (30) days if Purchaser has not received its audited annual financial statements and accompanying opinion letter from its accountants for such Annual Earn-out Period. The Earn-out Calculation shall be prepared in accordance with the Purchaser’s current accounting policies in accordance with GAAP, including percentage of completion accounting and the principles and terms described on Schedule 2.8(a) attached hereto.

(b)      Within forty-five (45) days after the Earn-out Calculation has been delivered to the Selling Parties’ Representative pursuant to Section 2.8(a), the Selling Parties’ Representative shall deliver to the Purchaser either (i) a written acknowledgment accepting the Earn-out Calculation or (ii) a written report setting forth in reasonable detail any proposed adjustments to the Earn-out Calculation (the “Earn-out Adjustment Report”). If the Selling Parties’ Representative fails to respond to the Purchaser within such 45-day period, the Seller shall be deemed to have accepted and agreed to the Earn-out Calculation as delivered pursuant to Section 2.8(a). The Selling Parties’ Representative and/or his attorneys and accountants shall have the right, upon not less than two (2) business days prior written notice, to inspect and copy the books and records, including the accountants work papers, of the Purchaser during normal business hours in order to verify the accuracy of any Earn-out Calculation.

(c)      In the event that the Selling Parties’ Representative and the Purchaser fail to agree on any of the Selling Parties’ Representative’s proposed adjustments set forth in the Earn-out Adjustment Report within thirty (30) days after the Purchaser receives the Earn-out Adjustment Report, the Seller and the Purchaser agree that any such dispute shall be resolved the manner contemplated by Section 2.9 below.

(d)      No later than fifteen (15) days after the date on which each Earn-out Calculation is finally determined pursuant to this Section 2.8 for each respective Annual Earn-out Period, the Purchaser shall pay to the Seller the amount, if any, specified in the Earn-out Calculation (each an “Annual Earn-out Payment”). Any payment to the Seller pursuant to Section 2.8 will be effected by wire transfer of immediately available funds to an account designated by the Seller together with interest thereon for the period commencing ninety (90) days from the end of the Earn-out Period until the date paid at a rate per annum equal to the “Prime Rate” as published in the Midwestern Edition of the Wall Street Journal from time to time.  

(e)      The Purchaser and the Seller agree that until the expiration of the final Earn-out Period, the Purchaser shall require any successor (whether direct or indirect and either by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Purchaser’s business and/or assets to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Purchaser would be required to perform it in the absence of a succession.

(f)      Notwithstanding anything to the contrary contained in this Agreement, Annual Earn-out Payments shall be subject to reduction as follows:

(i)      If any Shareholder’s employment with the Purchaser is terminated prior to the expiration of the second Annual Earn-out Period by the Shareholder without “Good Reason” or by the Purchaser for “Cause,” as defined in both instances by such Shareholder’s Employment Agreement, (each, a “Leaving Shareholder”), then for each such Leaving Shareholder, the Annual Earn-out Payment payable by the Purchaser to the Seller for the Earn-out Period during which such termination occurs (and all subsequent Earn-out Periods) will be reduced by an amount equal to twenty-five percent (25%) of the Annual Earn-out Payment that would have otherwise been payable for such period up to a maximum reduction of seventy-five percent (75%) (not including any deductions for set-off amounts pursuant to Section 2.8(g) below)  

Section 2.12          Closing Deliveries.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE SHAREHOLDERS