Exhibit 10.10

KADANT INC.

CASH INCENTIVE PLAN

(Effective beginning with the 2007 Fiscal Year)

 

1. Purposes

The purposes of the Cash Incentive Plan of Kadant Inc. are (i) to enable the
Company to attract, retain, motivate and reward employees by providing an
opportunity to earn incentive compensation under the Plan related to the
performance of the Company and its subsidiaries and (ii) to qualify such
compensation paid as performance-based compensation within the meaning of
Section 162(m) of the Code, as required for employees subject to Section 162(m)
of the Code.

 

2. Definitions

Terms used in the Plan, and not otherwise defined, are defined as follows:

“Award” means a contingent award made to a Participant in accordance with the
Plan that provides the Participant with the opportunity to earn cash
compensation based on the relative level of attainment of Performance Goals
established by the Committee for a Performance Period and on such other terms
and conditions as the Committee shall determine.

“Board” means the Board of Directors of the Company.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board, or any other
committee appointed by the Board to administer the Plan, so long as the
committee is comprised of solely of two or more members of the Board who are
“outside directors” within the meaning of Section 162(m).

“Company” means Kadant Inc., a Delaware corporation, or any successor to all or
substantially all of the Company’s business.

“Eligible Employee” means each executive officer, officer, or other key employee
of the Company or any Subsidiary designated from time to time by the Committee
as eligible to participate in the Plan.

“Participant” means any Eligible Employee who receives an Award under the Plan
for a specified Performance Period.

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“Performance Goals” means any one or a combination of the following:
(i) earnings per share, (ii) return on average shareholders’ equity or average
assets, (iii) earnings, (iv) earnings or earnings per share growth, (v) earnings
before interest, taxes and amortization (EBITA), (vi) earnings before interest,
taxes, depreciation and amortization (EBITDA), (vii) operating income,
(viii) operating margins, (ix) division income, (x) revenues, (xi) expenses,
(xii) stock price, (xiii) market share, (xiv) return on sales, assets, equity,
or investment, (xv) achievement of balance sheet or income statement objectives,
(xvi) cash provided from operations, (xvii) stock price appreciation,
(xviii) shareholder return, (xix) strategic initiatives, (xx) cost control,
(xxi) net operating profit after tax, (xxii) pre-tax or after-tax income,
(xxiii) cash flow, (xxiv) financial ratios contained in the Company’s debt
instruments, and (xxv) any other objective goals established by the Committee,
with respect to Awards not required to qualify under Section 162(m).

“Performance Period” for an Award means the fiscal year of the Company, unless
another period of time for the measurement of the extent to which the applicable
Performance Goals are attained is designated by the Committee at the time the
Award is made.

“Plan” means the Kadant Inc. Cash Incentive Plan, as amended from time to time.

“Section 162(m)” means Section 162(m) of the Code.

“Subsidiary” means (i) a corporation or other entity with respect to which the
Company, directly or indirectly, has the power, whether through the ownership of
voting securities, by contract or otherwise, to elect at least a majority of the
members of such corporation’s board of directors or analogous governing body or
(ii) any other corporation or other entity in which the Company, directly or
indirectly, has at least a majority equity or similar interest.

 

3. Administration

The Plan shall be administered by the Committee which shall have full power and
authority, in its discretion, but subject to the express provisions of this
Plan, to:

 

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select Participants from Eligible Employees;

 

  •  

establish the terms and conditions of Awards, including the times at which
Awards are made, the Performance Period to which an Award relates, and the
Performance Goals to which an Award is subject;

 

  •  

determine the extent to which cash payments are actually earned pursuant to
Awards and the amounts to be paid;

 

  •  

prescribe, amend and rescind rules and regulations relating to the Plan; and

 

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  •  

interpret this Plan and make all determinations necessary or advisable for the
administration of the Plan.

The determinations of the Committee pursuant to its authority under the Plan
shall be conclusive, final and binding. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Award.

 

4. Eligibility

Awards may be granted to any Eligible Employee.

 

5. Awards

The Committee shall, in its sole discretion, determine which Eligible Employees
shall receive Awards and shall determine the Performance Period relating to each
Award. For each Performance Period applicable to an Award, the Committee shall
establish one or more Performance Goals, or any combination of Performance
Goals, applicable to such Award and the other terms and conditions of the Award.
Such Performance Goals and other terms and conditions shall be established by
the Committee in its sole discretion as it shall deem appropriate and in the
best interests of the Company and shall be established (i) within 90 days after
the first day of the Performance Period and (ii) before 25% of the Performance
Period has elapsed.

Performance Goals may take the form of absolute goals or goals relative to past
performance of the Company or the current or past performance of one or more
other companies comparable or similarly situated to the Company or of an index
covering multiple companies. To the extent not inconsistent with qualification
for an exemption from the deduction limit under Section 162(m), the Committee
may specify that the Performance Goals exclude or be adjusted to reflect any one
or more of (i) extraordinary items or other unusual or non-recurring items,
(ii) discontinued operations, (iii) gains or losses on the dispositions of
operations, (iv) effects of changes in accounting principles, (v) the write down
of any asset or other impairment, (vi) the effect of foreign currency
fluctuations, and (vii) charges for restructuring and rationalization programs.
The Committee may establish Performance Goals that are particular to a
Participant, or the department, branch, line of business, subsidiary, segment or
other unit in which the Participant is employed or for which the Participant has
supervisory responsibility and may cover such Performance Period as specified by
the Committee.

After the end of each Performance Period for which the Committee has granted
Awards, the Committee shall certify in writing the extent to which the
Performance Goals established by the Committee for the Performance Period have
been achieved and shall authorize the Company to make Award payments to
Participants in accordance with the terms of the Awards. In no event shall the
amount paid to a Participant in accordance with the terms of an Award by reason
of Performance Goal achievement exceed $5,000,000 in any calendar year. Award
payments shall be made to a Participant only upon the achievement of the
applicable Performance Goals, except that the Committee

 

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may waive the achievement of Performance Goals in the event of the death,
disability, a change in control of the Company or, for Awards not required to
qualify under Section 162(m), such other event as the Committee may deem
appropriate.

The Committee may at any time, in its sole discretion, cancel an Award or
eliminate or reduce (but not increase) the amount payable pursuant to the terms
of an Award without the consent of a Participant.

The Committee shall have the power to impose such other restrictions on Awards
as it may deem necessary or appropriate to ensure that such Awards satisfy all
requirements for “performance-based compensation” within the meaning of
Section 162(m)(4)(C), or any successor provision to such section of the Code.

 

6. Transferability

Awards shall not be subject to the claims of creditors and may not be assigned,
alienated, transferred or encumbered in any way other than by will or the laws
of descent and distribution.

 

7. Withholding Taxes

The Company may withhold or cause to be withheld from any and all cash payments
made under this Plan such amounts as are necessary to satisfy all U.S. federal,
state and local withholding tax requirements related to Awards or in accordance
with the Company’s payroll practices as from time to time in effect.

 

8. Amendment and Termination

The Committee may amend, modify or terminate the Plan in any respect at any time
without the consent of Participants, provided that (i) no amendment or
termination of the Plan may adversely affect any previously-granted Award
without the consent of the affected Participant, except to the extent necessary
to comply with Section 409A of the Code, and (ii) no amendment which would
require shareholder approval under Section 162(m) may be effected without such
shareholder approval.

 

9. Effective Date and Term of the Plan

This Plan shall be effective for the 2007 fiscal year of the Company, which
begins December 31, 2006; provided however, that the Plan shall be void ab
initio unless approved by a vote of the Company’s Shareholders at the annual
shareholders’ meeting of the Company following adoption of the Plan by the Board
and Committee.

Unless terminated earlier by action of the Board, the Plan shall expire on the
date of the annual meeting of the Company’s shareholders held in 2012, unless
the Plan is extended and reapproved by a vote of the Company’s shareholders at
the annual shareholders’ meeting held in 2012. Expiration of the Plan shall not
affect any Awards outstanding on

 

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the date of the expiration and such Awards shall continue to be subject to the
terms of the Plan, notwithstanding its termination. Upon expiration of the Plan,
no further Awards may be granted under the Plan.

 

10. Miscellaneous

(a) No Rights to Awards or Employment. This Plan is not an employment contract
between the Company and an Eligible Employee or Participant. No Eligible
Employee shall have any claim or right to receive Awards under the Plan. Nothing
in the Plan shall confer upon any employee of the Company any right to continued
employment with the Company or any Subsidiary or interfere in any way with the
right of the Company or a Subsidiary to terminate the employment of any of its
employees at any time, with or without cause, including, without limitation, any
individual who is then a Participant in the Plan.

(b) Other Compensation. Nothing in this Plan shall preclude or limit the ability
of the Company to pay any compensation to a Participant under any other
additional compensation and benefits plans, programs and arrangements,
including, without limitation, any employee benefit plan, equity plan, or bonus
plan, program or arrangement.

(c) Severability. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not included in the Plan. In addition, if any provision of this
Plan would cause Awards not to constitute “qualified performance-based
compensation” under Section 162(m), that provision shall be severed from, and
shall be deemed not to be part of, the Plan, but the other provisions hereof
shall remain in full force and effect. Any specific action by the Committee that
would violate Section 162(m) and regulations thereunder shall be void.

(d) Governing Law. The Plan and all actions taken under the Plan shall be
governed by and construed in accordance with the laws of the State of Delaware.

 

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