Exhibit 10.10

ROTECH HEALTHCARE INC.

PERFORMANCE BONUS PLAN

1. Purpose. The purpose of the Rotech Healthcare Inc. Performance Bonus Plan
(the “Plan”) is to enhance the ability of Rotech Healthcare Inc. (the “Company”)
to attract, motivate and reward members of senior management and other key
employees, to strengthen their commitment to the success of the Company and to
align their interests with those of the Company’s stockholders by providing the
opportunity for additional compensation based on the achievement of
predetermined performance objectives. To this end, the Plan provides a means of
rewarding participants based on the performance of the Company.

2. Plan Administration. The Plan shall be administered by the compensation
committee (the “Committee”) of the Board of Directors of the Company (the
“Board”). The performance goals, target awards and other factors relating to
awards under the Plan shall be determined by the Committee in its discretion.

3. Eligible Employees. The employees eligible to participate in the Plan for a
given performance period shall be the members of senior management and other key
employees of the Company who are designated by the Committee in its sole
discretion (each, a “Participant”).

4. Maximum Bonus; Target Awards; Form and Timing of Payments. The maximum amount
of compensation that may be paid to a Participant pursuant to this Plan is
$3,000,000 per year. The Committee, in its sole discretion, shall establish a
target award for each Participant under the Plan for a given period; provided
that, any target awards established shall be consistent with a Participant’s
written agreement with the Company to the extent such written agreement covers
this subject matter. Such target award shall be expressed as a percentage of
such Participant’s Base Salary (as defined below) or a specific dollar amount,
as determined by the Committee and set forth in writing. All amounts payable
under the Plan with respect to a given calendar year or shorter performance
period ending within such year, as applicable, shall be paid in a lump sum cash
payment no later than (30) days after the Committee (or its designee) certifies
to the Board in writing as to the satisfaction of and compliance with the
performance goals and other material terms of the Plan for that period, or at
such other time as the Participant and the Committee may agree, but in all
events by no later than March 1 of the next following calendar year. “Base
Salary” means as to any calendar year, the Participant’s annualized salary rate
as in effect during the applicable calendar year. Such Base Salary shall be
before both (a) deductions for taxes or benefits, and (b) deferrals of
compensation pursuant to Company-sponsored plans.

5. Performance Goals. Awards to Participants will be based on predetermined
objective performance goals, which shall provide for a targeted level or levels
of achievement using one or more of the following measurements, in each case
where applicable determined on a Company-wide basis: (a) earnings (either in the
aggregate or on a per-share basis); (b) earnings before interest, taxes,
depreciation and amortization; (c) net income (before or after taxes);
(d) operating income or net operating income; (e) cash flow; (f) return measures
(including return on assets, equity or sales); (g) revenues; (h) share price of
Company stock (including growth measures and total stockholder return or
attainment by the shares of a specified value for a specified period of time);
(i) reductions in expense levels; (j) net economic value; (k) operating profit
or net operating profit; (l) quality of patient care (including results based on
patient surveys); or (m) any other objective and measurable criteria tied to the
Company’s performance. The performance goals may differ from Participant to
Participant and from award to award. The specific performance goals for a given
period will be established in writing by the Committee in its discretion after
consultation with the Chief Executive Officer. Awards under the Plan may include
payments that do not qualify as “performance-based compensation” within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”). For any award intended to qualify as performance-based compensation for
purposes of Code section 162(m), the Committee shall set the performance goals
at a time when the attainment of the goals is substantially uncertain and in any
event before 25% of the performance period has elapsed.

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6. Certification. Prior to payment of an award with respect to a particular
calendar year (or shorter performance period within such year), the Committee
must certify in writing (which may be by approval of the minutes in which the
certification was made) as to the satisfaction of and compliance with the
performance goals and other material terms of the Plan for that calendar year
(or shorter performance period within such year); provided, however, for any
award that is not intended to qualify as performance-based compensation for
purposes of Code section 162(m), the Committee may delegate to the Company’s
Chief Executive Officer or Chief Financial Officer the authority to determine
and certify whether performance goals have been attained.

7. Effect of Termination of Employment. Except as otherwise provided in a
Participant’s written agreement with the Company, no amount shall be payable to
any Participant with respect to an award under the Plan unless he or she is an
employee of the Company on the date awards are paid, provided, however, if a
Participant’s employment with the Company is terminated after the beginning of a
performance period and before the payment date on account of death or
“disability” (as defined below) such Participant shall remain eligible to
receive his or her award under the Plan. Should a Participant who is entitled to
receive an award under the Plan die, said award shall be paid to his or her
estate. “Disability” shall mean a Participant’s inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to last for a continuous period of not
less than 12 months.

8. Amendment or Termination of Plan. The Committee may amend or terminate the
Plan at any time in its discretion; provided, however, that no amendment or
termination of the Plan may (i) adversely affect or impair any award paid or
that may become payable under the Plan for a performance period previously
established by the Committee or otherwise deprive any Participant of any right
or benefit to which he or she had become entitled under the Plan or (ii) change
any performance goal or Participant target award previously established by the
Committee for a given performance period under the Plan (except for changes
expressly contemplated by the Committee and set forth in writing when such
performance goals and/or target awards for the applicable performance period
were initially established by the Committee).

9. Stockholder Approval. In the sole discretion of the Committee, the Plan may
be submitted to the stockholders of the Company for approval, in accordance with
the requirements of Section 162(m) of the Code.

10. Books and Records; Expenses. The books and records to be maintained for
purposes of the Plan shall be maintained under the supervision and control of
the Committee. All calculations and financial accounting matters relevant to the
Plan shall be determined in accordance with GAAP, except as otherwise directed
by the Committee. All expenses of administering the Plan shall be paid by the
Company from the general funds of the Company.

11. No Attachment. To the extent permitted by law, the right of any Participant
in any benefit or to any payment hereunder shall not be subject in any manner to
attachment or other legal process for the debts of such Participant; and any
such benefit or payment shall not be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.

12. No Liability. No member of the Board or of the Committee and no officer or
employee of the Company shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan unless attributable to
his or her own fraud or willful misconduct; nor shall the Company be liable to
any person for any such action unless attributable to fraud or willful
misconduct on the part of a director, officer or employee of the Company.

13. No Fiduciary Relationship. Nothing contained herein shall be deemed to
create a trust of any kind or create any fiduciary relationship between the
Company, the Committee and/or any Participant.

14. No Guarantee of Employment. Nothing contained in the Plan shall be deemed to
give any Participant the right to be retained in the service of the Company or
to interfere with the right of the Company to discharge any Participant, for or
without cause, at any time, regardless of the effect which such discharge shall
have upon such individual as a Participant in the Plan.

 

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15. Governing Law. The Plan shall be construed in accordance with the laws of
the State of Delaware.

16. Interpretation of Plan. The Committee shall have sole and absolute
discretion and authority to interpret all provisions of the Plan and to resolve
all questions arising under the Plan; including, but not limited to, determining
whether any person is eligible under the Plan, whether any person shall receive
any payment pursuant to the Plan, and the amount of any payment to be made
pursuant to the Plan. Any interpretation, resolution or determination of the
Committee shall be final and binding upon all concerned and shall not be subject
to review.

17. No Deferred Compensation. The Plan is not intended to provide for deferred
compensation within the meaning of Section 409A of the Code and shall be
interpreted and applied in a manner to avoid the deferral of compensation. If
any provision in an award or this Plan would cause any amount to be considered
deferred compensation within the meaning of Code section 409A, such provision
shall be null and void.

18. Successors. All obligations of the Company under the Plan, with respect to
awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business or assets of the Company.

19. Withholding. The Company shall include all payments pursuant to the Plan in
determining each Participant’s compensation for services rendered and shall
reflect the value of such payments on such Participant’s W-2 form. The Company
shall withhold all taxes from all payments made under the Plan as required by
applicable federal, state and local income tax laws.

 

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