KAI DEF 14A Report ended May 12, 2020

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1.	to elect two directors for a three-year term expiring in 2023;

2.	to approve the amendment and restatement of our amended and restated employees' stock purchase plan;

3.	to approve, by non-binding advisory vote, our executive compensation;

4.	to approve restricted stock unit grants to our non-employee directors;

5.	to ratify the selection of KPMG LLP by the audit committee of our board of directors as our company’s independent registered public accounting firm for the 2020 fiscal year; and

6.	to vote on such other business as may properly be brought before the meeting and any adjournment of the meeting.

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Election of Directors (Proposal 1) . The election of directors is determined by a majority of the votes cast in person or by proxy by the stockholders entitled to vote on the election of directors in an uncontested election. Under our bylaws, a nominee will be elected to the board of directors if the votes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election. Abstentions and broker non-votes are not counted as votes “for” or “against” a nominee and will have no effect upon the outcome of the vote on the election of directors. If an uncontested incumbent nominee receives a majority of votes “against” his election, the director must tender his or her resignation to the board of directors. The board of directors will then decide whether to accept the resignation within 90 days following certification of the stockholder vote. We will publicly disclose the board of directors’ decision and its reasoning regarding the offered resignation.

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All Other Matters: Approval of Amendment and Restatement of our ESPP (Proposal 2), Advisory Vote on Executive Compensation (Proposal 3), Approval of Restricted Stock Unit Grants to our Non-employee Directors (Proposal 4) and Ratification of the Selection of Our Independent Registered Public Accounting Firm (Proposal 5) . The approval of the amendment and restatement of the ESPP, the advisory vote on our executive compensation, the approval of restricted stock unit grants to our non-employee directors and the ratification of the selection of our independent registered public accounting firm are determined by a majority of the votes cast by the holders of the shares present or represented by proxy at the meeting and voting on each matter. Under our bylaws, abstentions and broker non-votes will have no effect on the determination of whether stockholders have approved these proposals.

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John M. Albertine

Dr. Albertine, 75, has been a member of our board of directors since June 2001, is the chairman of our compensation committee and is one of the board’s designated “audit committee financial experts.” Dr. Albertine has been the chairman and chief executive officer of Albertine Enterprises, Inc., a Washington, D.C.-based public policy consulting and merchant-banking firm, since 1990. He also has served since 2005 as a principal of JJ&B, LLC, a Washington, D.C.-based investment bank he founded that provides finance, public policy and legal assistance to clients, and since 2004 as the executive chairman of Global Delta, LLC, a Washington, D.C.-based government contractor specializing in advanced sensor radio frequency and electro-optical technologies. From 2008 to 2018, Dr. Albertine served as a director of Intersections Inc., a publicly-traded global provider of consumer and corporate identity risk management services, and served as chairman of its risk committee. Dr. Albertine also served for 10 years ending in 2013 as a trustee and vice-chairman of the Virginia Retirement System, a public pension fund; and as a member of the Governor’s Board of Economic Advisors for the State of Virginia for two terms ending in 2014. Dr. Albertine holds a Ph.D. in economics from the University of Virginia. We believe Dr. Albertine’s qualifications to serve on our board of directors include his knowledge of the economy, capital markets and diverse businesses, his service as a director on several other public company boards and as chairman of the board of two of those public companies during his business career, and his education as an economist.

Thomas C. Leonard

Mr. Leonard, 65, has been a member of our board of directors since June 2005, is the chairman of our audit committee and is one of the board’s designated “audit committee financial experts.” Mr. Leonard is a director of Dynasil Corporation of America (Dynasil), a publicly-traded company that develops and manufactures detection and analysis technology, precision instruments and optical components for homeland security, medical and industrial markets, and previously served as its chief financial officer and chief accounting officer from 2013 to 2016. He began serving as the chair of Dynasil's audit committee in 2019. From 2008 to 2012, Mr. Leonard was the senior vice president-finance, treasurer and chief financial officer of Pennichuck Corporation, a publicly-traded water utility holding company. From 2006 to 2008, he was a vice president of CRA International, a consulting firm, where he specialized in forensic accounting. He was previously a managing director specializing in forensic accounting and dispute resolution at Huron Consulting Group LLC, a publicly-traded management consulting firm, from 2002 to 2006. Previously, Mr. Leonard was a senior partner at Arthur Andersen LLP, an independent public accounting firm, from 1987 through 2002 and served as partner-in-charge of its New England assurance and business advisory practice. Mr. Leonard is a certified public accountant. We believe Mr. Leonard’s qualifications to serve on our board of directors include his expertise in finance and accounting and experience as a public company CFO.

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Erin L. Russell	Term Expires May 2021

William P. Tully	Term Expires May 2021

Jonathan W. Painter	Term Expires May 2022

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Jeffrey L. Powell	Term Expires May 2022

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(1)	Consists of 73,661 shares of our common stock to be issued upon exercise of outstanding options under our Amended and Restated 2006 Equity Compensation Plan, as amended, and 134,918 shares of our common stock issuable upon the vesting of restricted stock units and performance-based restricted stock units under such plan.

(2)	Consists of the weighted average exercise price of the 73,661 stock options outstanding on December 28, 2019. The 134,918 shares of restricted stock units and performance-based restricted stock units outstanding on December 28, 2019 had a weighted average grant date fair value of $86.11.

(3)	Includes an aggregate of 28,130 shares of common stock issuable under our ESPP in connection with current and future offering periods under the plan.

•	Cash compensation in the form of base salary and an annual performance-based cash incentive opportunity (bonus). We use objective financial measures based on earnings per share growth and return on average stockholders’ equity to determine our executives’ annual performance-based bonus.

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Equity compensation to reward performance and retain key personnel. We annually award performance-based restricted stock units that use objective financial measures based on adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA). All performance-based awards are subject to additional time-based vesting periods once the performance goals have been met. We also may use equity compensation in other forms that are intended to promote retention of our key personnel, and for this purpose have used time-based restricted stock units and in past years stock options.

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All our named executive officers are employees-at-will. All of our current named executive officers are employees-at-will and do not have an employment agreement or severance agreement other than an agreement that provides benefits upon termination of employment following a change in control, and in the case of Mr. Painter, a transition agreement entered into in connection with the succession plan adopted by our board of directors in 2019 (Succession Plan). See “Executive Compensation - Potential Payments Upon Termination or Change in Control” for more information on the change in control agreements and Mr. Painter's transition agreement.

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•	receives, or has a family member that receives, less than $120,000 in direct compensation from our company for services rendered, excluding director and committee fees or deferred compensation for prior service;

•	is an executive officer of another company that does business with our company, unless the annual sales to, or purchases from, our company account for more than the greater of $1 million or 2% of the annual consolidated gross revenues of the company of which the director is an executive officer;

•	is an executive officer of another company that is indebted to our company, or to which our company is indebted, unless the total amount of either company’s indebtedness to the other is more than 1% of the total consolidated assets of the company of which the director is an executive officer; or

•	is an officer, director or trustee of a charitable organization, unless our company’s discretionary charitable contributions to the organization are more than the greater of $1 million or 2% of the organization’s total annual charitable receipts. For this purpose, the automatic matching of employee charitable contributions, if any, is not included in the amount of our company’s contributions.

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•	integrity;

•	business acumen, experience and judgment;

•	knowledge of our company’s business and industry;

•	ability to understand the interests of various constituencies of our company and to act in the interests of all our stockholders;

•	potential conflicts of interest; and

•	contribution to diversity on our board of directors.

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•	Corporate Governance and Ethics and Compliance. We are committed to strong corporate governance practices that ensure Kadant is managed for the long-term benefit of our stockholders and other stakeholders.

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Our executive leadership team is responsible for the day-to-day management of the risks that our company faces, while the board of directors, acting as a whole and through its committees, has responsibility for the oversight of risk management. The risk oversight and sustainability committee assists the board of directors in fulfilling its responsibilities regarding the identification, evaluation, management, and monitoring of our company’s critical enterprise risks, including major strategic, operational, and reputational risks inherent in our business. The risk oversight and sustainability committee meets regularly with our chief executive officer and senior management to discuss enterprise risk management and sustainability.

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Several central policies and guidelines serve as the foundation of our commitment to our values, and clearly delineate what we expect of our employees and senior leadership of the company. We have a CEO message on corporate responsibility posted on our website. Our policies and guidelines include our board of directors' corporate governance guidelines, our code of business conduct and ethics, ethics and compliance hotline, anti-harassment policy, insider trading policy, foreign corrupt practices act policy, global supplier code of conduct, conflict minerals policy, and global export control policy.

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Supply Chain Sustainability. As a multi-national company that sources from hundreds of suppliers from around the world, we recognize the need for our suppliers to abide by and exceed various environmental, social, and economic regulations and standards both from an international perspective, for example human rights, and a country by country basis for countries where our suppliers operate. We manage these risks and regulatory issues in our supply chain primarily through our global supplier code of conduct, in which we have outlined our expectations of our suppliers and subcontractors.

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Innovation . Innovation and continuous improvement are central to our organization. From our earliest years, we have focused on engineering products and processes that help our customers improve operating efficiency, reduce the consumption of resources and energy, and increase productivity. Engineering innovative products and processes is an intrinsic element of our culture. We are committed to focusing on our customers’ wants and needs and innovation is how we deliver on this commitment.

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Health, Safety and Wellness. We work to minimize the risks associated with the tasks our employees perform, and we take our responsibility for our employees’ health and safety very seriously. Our businesses follow an occupational health and safety management system that covers employees, who receive appropriate and necessary safety trainings to both protect their own health and safety as well as the people, equipment, and environment around them.

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Learning and Development. The training and education of our employees is crucial for our continued success as a company. Employee learning programs include business wide training plans, tuition reimbursement policies and paid certifications and trainings. The effectiveness of our training programs is assessed through our safety records, feedback we collect from participants, and the capabilities that our employees possess and demonstrate to the organization.

•	Equal Opportunity and Non-Discrimination. We are an equal opportunity employer and we work hard to ensure the diversity of our organization. We are pleased with our progress made with respect to gender diversity, particularly with our management team and our board of directors. We are also cognizant of and sensitive to the issue of pay equity.

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Energy, Emissions and Climate Change. We have taken a variety of steps to minimize our energy usage and reduce the resulting greenhouse gas emissions. We also believe our most significant opportunity to lessen our environmental impact is by delivery of products that allow our customers to reduce waste and energy use and maximize yield from the natural resources that they use. By shifting the market toward greater efficiency and the use of more renewable resources, we are playing our part in protecting the environment and ensuring a more sustainable future.

•	Effluents, Waste and Recycling. Within our own operations, our efforts to reduce waste and increase recycling and reusability are extensive. Our equipment and products can also reduce the waste streams of our customers, making their processes more efficient and positively impacting their business models.

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•	those persons we know to beneficially own more than 5% of the outstanding shares of our common stock based on our review of filings made with the SEC;

•	each of our directors;

•	each of our executive officers named in the Summary Compensation Table under the heading “Executive Compensation;” and

•	all of our directors and executive officers as a group.

(1)

The number of shares beneficially owned by each stockholder is determined under the rules of the SEC, and the information provided is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated, as determined under such rules, each stockholder has sole investment and voting power (or shares such power with his or her spouse) with respect to the shares reported in this table. The inclusion of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of such shares.

(2)

Shares beneficially owned by the following individuals or group include the following shares underlying restricted stock units (RSUs) that will vest or become distributable within 60 days after March 2, 2020: Ms. Krause (1,816), Mr. Langevin (6,533), Mr. McKenney (4,689), Mr. Painter (24,333), Mr. Powell (11,148), Mr. Flynn (815) and all directors and current executive officers as a group (51,236). Shares beneficially owned by the following individuals or group include the following shares underlying employee stock options that are vested and unexercised as of March 2, 2020 or will vest within 60 days after March 2, 2020: Mr. Langevin (35,424), Mr. McKenney (8,972), Mr. Powell (29,265), and all directors and current executive officers as a group (73,661). Shares beneficially owned by Mr. Painter include three shares held in a custodial account for the benefit of his son.

(3)	The address of Wasatch Advisors, Inc. is 505 Wakara Way, Salt Lake City, Utah 84108. The information about Wasatch Advisors, Inc. is based on its Schedule 13G/A filed with the SEC on February 10, 2020, and is as of December 31, 2019.

(4)

The address of BlackRock, Inc. is 55 East 52nd Street New York, NY 10055. BlackRock, Inc. filed as the parent holding company of BlackRock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Asset Management Ireland Limited, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, and BlackRock Investment

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(5)	The address of Brown Brothers Harriman & Co. is 140 Broadway, New York, NY 10005. The information about Brown Brothers Harriman & Co. is based on its Schedule 13G/A filed with the SEC on February 14, 2020, and is as of December 31, 2019.

(6)	The address of Royce & Associates, LP is 745 Fifth Avenue, New York, NY 10151. The information about Royce & Associates, LP is based on its Schedule 13G/A filed with the SEC on January 23, 2020, and is as of December 31, 2019.

(7)

This information is based on a Schedule 13G/A filed jointly by Macquarie Group Limited, Macquarie Bank Limited, Macquarie Investment Management Holdings Inc, Macquarie Investment Management Business Trust, and Macquarie Investment Management Austria Kapitalanlage AG (collectively, Macquarie). The principal business address of Macquarie Group Limited and Macquarie Bank Limited is 50 Martin Place Sydney, New South Wales, Australia. The principal business address of Macquarie Investment Management Holdings Inc. and Macquarie Investment Management Business Trust is 2005 Market Street, Philadelphia, PA 19103. The principal business address of Macquarie Investment Management Austria Kapitalanlage AG is L3, Kaerntner Strasse 28, Vienna C4 1010. The information about Macquarie is based on its Schedule 13G/A filed with the SEC on February 13, 2020, and is as of December 31, 2019.

•	Cash compensation in the form of base salary and an annual performance-based cash incentive opportunity (bonus). We use objective financial measures based on earnings per share growth and return on average stockholders’ equity to determine our executives’ annual performance-based bonuses.

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Equity compensation to reward performance and retain key personnel. We annually award performance-based restricted stock units that use objective financial measures based on EBITDA. All performance-based awards are subject to additional time-based vesting periods once the performance goals have been met. We also use equity compensation in other forms that are intended to promote retention of our key personnel, and for this purpose have used time-based restricted stock units and in past years stock options.

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All our current named executive officers are employees-at-will. All of our current named executive officers are employees-at-will and do not have an employment agreement or severance agreement other than an agreement that provides benefits upon termination of employment following a change in control, and in the case of Mr. Painter, the Transition Agreement entered into in connection with the Succession Plan. See “Executive Compensation - Potential Payments Upon Termination or Change in Control” for more information on the change in control agreements and Mr. Painter's Transition Agreement.

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•	Revenues of $705 million in 2019 , compared to $634 million in 2018 , an increase of 11%;

•	GAAP diluted earnings per share (EPS) of $4.54 in 2019 , compared to $5.30 in 2018 , a decrease of 14%;

•	Adjusted diluted EPS of $5.36 in 2019 , compared to $5.34 in 2018 , a slight increase;

•	Net income attributable to Kadant of $52 million in 2019 , compared to $60 million in 2018 , a decrease of 14%;

•	Adjusted EBITDA of $127 million in 2019 , compared to $115 million in 2018 , an increase of 10%;

•	Cash flows from operations of $97 million, an increase of 55%; and

•	Free cash flow of $87 million, an increase of 88%.

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•	annual cash compensation, consisting of base salary and cash incentive compensation opportunities;

•	long-term (equity) incentive compensation, consisting of a performance-based element and a retention element; and

•	other elements of compensation, including retirement and 401(k) plans, health and welfare benefits and change in control agreements.

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•	The adjusted EPS metric measures performance from -30% to 40% growth compared to the average of the prior two fiscal years, with a target established at 10% growth (at which an incentive equal to 100% of the reference bonus for that metric would be earned) and a bonus factor assigned using a scale of zero to 2.5;

•	The adjusted return on average stockholders’ equity metric measures performance from 4% to 12%, with a target established at an 8% return on average stockholders’ equity (at which an incentive equal to 100% of the reference bonus for that metric would be earned) and a bonus factor assigned using a scale of zero to 2.5;

•	The two metrics (growth in adjusted diluted EPS and adjusted return on average stockholders’ equity) are weighted equally; and

•	Each performance metric is translated into a bonus factor ranging from zero to 2.5 using the following linear scales:

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The linear scale used for the adjusted EPS growth metric has two slopes: from -30% to 10%, the bonus factor is calculated on a linear progression from zero to one; and from 10% to 40%, the bonus factor is calculated on a linear progression from one to 2.5. In addition, for purposes of the comparison to prior years, the performance metric used cannot be lower than -30% or higher than 40% and the maximum bonus factor that can be earned is 2.5.

•	The linear scale used for the adjusted return on average stockholders’ equity metric has two slopes: from 4% to 8%, the bonus factor is calculated on a linear progression from zero to one; and from 8% to 12%, the bonus factor is calculated on a linear progression from one to 2.5 and the maximum bonus factor that can be earned is 2.5.

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(1)

Represents the aggregate grant date fair value for equity awards made to our named executive officers in fiscal years 2017 , 2018 and 2019 . The amounts reported in this table do not reflect whether the named executive officer has actually realized a financial benefit from the award. Grant date fair value of equity awards is computed in accordance with Accounting Standards Codification Topic 718 (ASC Topic 718). For a discussion of the assumptions and methodologies used to calculate grant date fair value in this proxy statement, please refer to Note 3 of the financial statements in our annual report on Form 10-K for the year ended December 28, 2019. For performance-based RSU awards, these amounts reflect the grant date fair value of such awards based upon actual outcome of awards earned in 2019 . The maximum potential value of the performance-based RSU awards (assuming the highest level of performance achievement) that could have been earned in 2019 was: Mr. Powell - $1,583,741; Mr. McKenney - $527,871; Mr. Langevin - $563,165; and Ms. Krause - $254,562. Neither Mr. Painter nor Mr. Flynn received a performance-based RSU award for 2019. The RSU award to Mr. Painter vested in full on March 10, 2020.

(2)	Represents amounts earned for 2017 , 2018 , and 2019 under our annual cash incentive plan. Our 2019 cash incentive plan awards are described above under “Compensation Discussion and Analysis – Annual Cash Compensation.”

(3)

Our Retirement Plan and the Restoration Plan were each frozen and terminated effective December 29, 2018, with no further accruals of benefits during the year ended December 28, 2019, as further described below under the heading “Pension Benefits in Fiscal 2019.” Benefits under the Retirement Plan were settled in December 2019 and accordingly there are no remaining liabilities under the Retirement Plan. The annual change in value for Messrs. Painter, McKenney and Langevin is attributable to the effect of changes in actuarial assumptions utilized in the prior year.

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(4)

Represents the total amount of all other compensation provided to our named executive officers, and for 2019 includes (a) employer contributions under our 401(k) savings plan made on behalf of the named executive officer, (b) employer payments to cover premiums for life insurance policies for the benefit of the named executive officer, and (c) in the case of Mr. Flynn, housing and relocation expenses of $34,820 related to his temporary relocation from our subsidiary Kadant Black Clawson LLC (KBC) in Lebanon, Ohio to our corporate headquarters in Westford, Massachusetts in connection with his promotion to vice president of Kadant Inc. and $6,372 in perquisites received as president of KBC in the first half of the year. In 2019 , our employer contribution made under our 401(k) savings plan was $12,600 for each named executive officer. In 2019 , our life insurance policies provided coverage of two times an executive’s base salary up to a maximum of $1 million, and the premiums paid by us on behalf of the named executive officers were as follows: Mr. Painter - $660; Mr. Powell - $1,320; Mr. McKenney - $1,192; Mr. Langevin - $1,191; Ms. Krause - $887 and Mr. Flynn - $1,130. Prior to 2019, the total amount of all other compensation to our named executive officers included employer costs of a leased car or a car allowance payment.

(5)	Represents the total salary earned by Mr. Painter in 2019. Mr. Painter began 2019 as our president and chief executive officer with an annual salary of $735,000. Upon his transition to the position of executive chairman of the board of directors effective July 1, 2019 and pursuant to the terms of his Transition Agreement, his annual salary was $380,000.

(6)	Represents the total salary earned by Mr. Powell in 2019. Mr. Powell began 2019 as our executive vice president and co-chief operating officer, with an annual salary of $459,000. Upon his transition to the position of president and chief executive officer effective July 1, 2019, his annual salary was $675,000.

(7)	Represents a discretionary cash bonus paid to Mr. McKenney in recognition of his performance during the 2017 fiscal year.

(8)	Ms. Krause began 2018 with a salary of $275,000, but received an increase in salary to $290,000 upon becoming our vice president, general counsel and secretary on July 1, 2018 in accordance with the terms of her offer letter. Ms. Krause joined our company in 2017 and was not a named executive officer in such year.

(9)	Mr. Flynn was not a named executive officer in 2017 or 2018. His compensation is therefore only disclosed for the year ended December 28, 2019.

(10)	Represents the total salary earned by Mr. Flynn in 2019. He began 2019 as the president of KBC and upon his transition to the position of vice president of Kadant Inc. effective July 1, 2019, his annual salary was $345,000.

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(1)

Represents the cash amount earned in 2019 pursuant to an award under our cash incentive plan. In granting the award, our compensation committee established performance goals for the 2019 fiscal year as described in “Compensation Discussion and Analysis – Annual Cash Compensation – Cash Incentive Compensation.” In February 2020, our compensation committee determined the level of achievement of the performance goals resulting in the payout of awards at the level disclosed in this table. See “Compensation Discussion and Analysis – Annual Cash Compensation.”

(2)	Represents the grant date fair value of performance-based RSUs or time-based RSUs awarded to our named executive officers in 2019 . The per share grant date fair value was $86.19, except the grant date fair value for Mr. Painter's award was $87.07.

(3)

Represents a performance-based RSU award granted in 2019 under our 2006 equity incentive plan. These RSU awards were subject to performance goals for the 2019 performance period that our compensation committee determined were met for the 2019 performance period and reflect the grant date fair value based upon actual outcome of awards earned in 2019 . See “Compensation Discussion and Analysis – Long-Term Incentive Compensation.” The maximum potential value of the performance-based RSU awards (assuming the highest level of performance achievement) that could have been earned in 2019 was: Mr. Powell - $1,583,741; Mr. McKenney - $527,871; Mr. Langevin - $563,165; and Ms. Krause - $254,562. Once the performance goals are determined to have been met, the RSUs are subject to additional time-based vesting, with one-third of each RSU award vesting on March 10, beginning with the year following the grant, provided that the named executive officer remains employed with our company on each vesting date. The vesting of the RSUs is accelerated upon death, disability or a change in control of our company.

(4)

Represents a time-based RSU award granted in 2019 under our 2006 equity incentive plan. Except for Mr. Painter's RSU award, one-third of the RSUs vest on each anniversary of March 10, beginning on March 10, 2020, provided the named executive officer remains employed with our company on each vesting date. The vesting of the RSUs is accelerated upon death, disability or a change-in-control of our company. Mr. Painter's RSU award vested in full on March 10, 2020.

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(1)

Represents the number of our shares underlying RSU awards granted in March of 2017, 2018 and 2019, provided that the named executive officer remains employed with our company through the applicable vesting dates. For time-based RSU awards, one-third of each award vests on each of the first, second and third anniversaries of March 10 of the year of grant, with the exception of Mr. Painter's RSU award granted in March 2019, which vested in full on March 10, 2020. For performance-based RSU awards, once the performance criteria is met, one-third of each award vests on each of the first, second and third anniversaries of March 10 of the year of grant. The vesting of RSU awards is accelerated upon death, disability or a change in control of our company.

(2)	Based upon the closing price of our common stock of $105.76 on December 27, 2019, the last trading day before the end of our fiscal year.

(3)	These awards vested over a three-year period in equal tranches and became fully vested on March 9, 2014.

(4)	These awards vested over a three-year period in equal tranches and became fully vested on March 7, 2015.

(5)	These awards vested over a three-year period in equal tranches and became fully vested on March 6, 2016.

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(1)	Determined by multiplying the number of shares vesting by $85.97, the closing price of our common stock on March 8, 2019, the last trading day prior to the March 10, 2019 vesting date.

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(1)	The number of years of credited service under the Retirement Plan is not applicable due to the freeze, termination and settlement of such plan.

(2)	Because of the settlement that occurred in December 2019, the "present value of accumulated benefit" for the Retirement Plan for each participant was zero as of December 28, 2019 for all participants.

(3)	Payments under the Retirement Plan represent the values of the annuity premiums paid to settle the named executive officer’s benefit under such plan as part of the group annuity contract purchased in December 2019 to settle the remainder of the plan’s liability. Payments of lump sum amounts to settle obligations under the Restoration Plan were made in January 2020.

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•	the acquisition by any person of 20% or more of our outstanding common stock or voting securities;

•	the failure of our incumbent directors to constitute a majority of our board of directors, with “incumbent directors” meaning directors who are members of our board of directors on the date of the agreement and members who are subsequently nominated or elected by a majority of the incumbent directors;

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the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange, or the sale or other disposition of all or substantially all of our assets, unless immediately after such transaction (a) the holders of our common stock immediately prior to the transaction own more than 80% of the outstanding voting securities of the resulting or acquiring corporation in substantially the same proportions as their ownership immediately prior to such transaction and (b) no person after the transaction owns 20% or more of the outstanding voting securities of the resulting or acquiring corporation; or

•	approval by our stockholders of a plan to completely liquidate or dissolve our company.

•	his or her salary through the date of termination;

•	any cash incentives earned but not yet paid for the most recently completed fiscal year; and

•	a pro rata cash incentive for the year in which his or her employment terminates based on the higher of the individual’s current target bonus or cash incentive for the most recently completed fiscal year (a “pro rata bonus”).

•	salary through the date of termination;

•	any bonus earned but not yet paid for the most recently completed fiscal year;

•	a pro rata bonus (calculated as above);

•	a lump sum severance payment equal to two times the sum of the highest annual salary and bonus (or current year reference bonus if higher) within the five years prior to the year of termination;

•	continuation of health, welfare and other fringe benefits applicable immediately prior to termination for a period of two years;

•	additional age and length of service equal to two years in calculating the pension and supplemental retirement benefits payable to the named executive officers under our Retirement Plan and Restoration Plan; and

•	a cash payment to be used toward outplacement services equal to $20,000.

•	The threshold for an acquisition in the definition of “change of control” has been increased to 40% or more of our outstanding common stock or voting securities (from 20%); and

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In the definition of “change of control”, in the stated requirements for a consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange, or the sale or other disposition of all or substantially all of our assets, the ownership threshold of outstanding voting securities of a resulting or acquiring corporation for holders of our common stock immediately prior to a transaction in the definition of “change of control” has been decreased to 60% (from 80%).

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•	salary and unpaid accrued vacation pay through the date of termination;

•	any bonus earned but not yet paid for the most recently completed fiscal year;

•	a pro rata bonus (calculated as above);

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a lump sum severance payment equal to two times the sum of (x) the greater of the executive officer’s highest annual salary in effect in the 12-month period ending on the change of control date or termination date and (y) the greater of average annual bonus within the three years prior to the year of termination or the executive’s reference bonus (the higher of the reference bonus for the year of the change in control or the year of the termination date);

•	COBRA premiums for coverage under our group health and dental insurance the named executive officer would have received if employment had not been terminated (less the named executive officer’s portion of the premiums) for a period of 18 months;

•	matching contributions we would have made to the named executive officer’s 401(k) if he or she had contributed at the same rate and under the same matching formula for a period of two years;

•	reimbursement for any unpaid business expenses submitted prior to the named executive officer's termination date; and

•	a cash payment to be used toward outplacement services equal to $20,000.

(1)

Represents equity incentives in the form of RSUs and the incremental value of in-the-money stock options that would vest assuming a change in control event and employment termination on December 28, 2019, the last day of our 2019 fiscal year, and that are valued using $105.76 per share, the closing price of our common stock on December 27, 2019, the last trading day before the end of our 2019 fiscal year. These amounts do not include awards granted after December 28, 2019.

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(2)

The Retirement Plan and the Restoration Plan were terminated effective December 29, 2018. Each of Mr. Painter, Mr. McKenney and Mr. Langevin was entitled to receive his accrued benefit pursuant to the terms of such plans as a result of the termination of such plans, and a change of control event would not impact such benefits. Payouts under such plans are described above under "Pension Benefits in Fiscal 2019".

(3)

Represents the estimated benefits which would continue to be provided for the period covered by the executive retention agreement, based on the 2019 amount reported for “All Other Compensation” in the Summary Compensation Table. This amount includes (a) employer contributions under our 401(k) savings plan made on behalf of the named executive officer, and (b) employer payments to cover premiums for life insurance policies for the benefit of the named executive officer. In addition, this amount also includes the aggregate amount of premiums we currently pay on behalf of the named executive officer for health and welfare benefits, which would continue to be provided for the period covered by the executive retention agreement. We paid the following in premiums in 2019 for each named executive officer: Mr. Painter - $15,010; Mr. Powell - $9,908; Mr. McKenney - $15,340; Mr. Langevin - $15,340; Ms. Krause - $15,340; and Mr. Flynn - $5,139.

(4)

The estimated compensation that would have been payable to Ms. Krause in the event of a change in control event that occurred as of December 28, 2019 and the termination of Ms. Krause’s employment for good reason by her or without cause by us on that date would exceed the limit for excess parachute payments under Section 280G. Therefore, the cash severance payment values shown for Ms. Krause in this table reflect the amounts after a cutback of her benefits is applied pursuant to the terms of her Current Retention Agreement, as discussed above.

•	An annual retainer of $50,000.

•	An additional annual retainer for the non-employee chairman of the board of $60,000.

•	An additional annual retainer for chairmen of the following committees: audit committee - $10,000; compensation committee - $7,500; nominating and corporate governance committee - $5,000; risk oversight and sustainability committee - $5,000.

•	Reimbursement of out-of-pocket expenses incurred in attending or participating in meetings of our board of directors or its committees.

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(1)	The amounts reported in this column are for annual board and chairman retainers earned in 2019 . During 2019, Dr. Tully served as the chair of the nominating and corporate governance committee and the risk oversight and sustainability committee. In March 2020, Ms. Russell was appointed chair of the risk oversight and sustainability committee, of which Dr. Tully remains a member.

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(2)	Represents the grant date fair value of the 1,858 RSUs granted to each of our non-employee directors, other than Mr. Rainville, in 2019 , which was $88.33 per share, computed in accordance with ASC Topic 718.

(3)	Represents the grant date fair value of the 935 RSUs granted Mr. Rainville, in 2019 , which was $87.61 per share, computed in accordance with ASC Topic 718.

(4)	Mr. Rainville ceased serving as non-employee chairman and a member of our board of directors on May 16, 2019. His fees are prorated for five months of service in 2019.

(1)	Audit fees consist of fees for the audit of our annual consolidated financial statements (including an assessment of our internal control over financial reporting), the review of interim consolidated financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or

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(2)

Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or the review of our financial statements and are not reported under “Audit Fees.” Audit-related services provided by KPMG in 2019 represented fees for assistance with the use of its eXtensible Business Reporting Language (XBRL) software at one of our foreign subsidiaries for its annual statutory financial statement filing.

(3)

Tax fees consist of fees for tax compliance, tax advice and tax planning services. Tax compliance services relate to the preparation of original and amended tax returns, claims for refunds and tax payment-planning services. Tax advice and tax planning services relate primarily to assistance with tax audits and appeals, due diligence, and international tax planning. The tax fees in 2019 represented fees for international tax planning services.

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(a)	Includes discrete tax items related to the exercise of employee stock options in 2019 and adjustments to the provisional amounts recognized due to the U.S. tax legislation enacted in December 2017 and the reversal of tax reserves associated with uncertain tax positions in 2018.

(b)	Includes an intangible asset impairment charge of $2.3 million ($1.8 million after tax) and a restructuring charge of $0.2 million ($0.1 million after tax) in 2019 related to our Wood Processing Systems segment’s timber-harvesting product line and a restructuring charge of $1.7 million ($1.3 million after tax) in 2018 related to our Papermaking Systems segment’s stock-preparation product line.

(c)	Includes a settlement loss of $5.9 million ($6.4 million after tax) in 2019 and a curtailment loss of $1.4 million ($1.1 million after tax) in 2018 associated with the termination of benefit plans at one of our U.S. operations.

(d)	Adjusted Diluted EPS was calculated using the reported weighted average diluted shares as reported in each of the fiscal years presented.

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1.	Definitions . As used in this Employees' Stock Purchase Plan of Kadant Inc., the following terms shall have the meanings respectively assigned to them below:

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2.	Purpose of the Plan. The Plan is intended to encourage ownership of Company Stock by Eligible Employees and to provide additional incentive for them to promote the success of the business of the Company. It is intended that the Plan shall be an “employee stock purchase plan” within the meaning of Section 423.

3.	Effective Date . The Plan became effective on November 1, 1993 and was amended and restated effective December 8, 2009 and as of January 1, 2021.

4.

Administration of the Plan . The Plan shall be administered by the Board, which shall determine (i) whether to grant Options and, if Options are to be granted, (ii) the Grant Dates and Exercise Dates for such Options and all other terms relating to such Options, including the terms under which Compensation may be withheld to purchase shares of Company Stock under such Options; provided , that the maximum aggregate percentage of each Participant's Compensation which may be withheld for the purpose of purchasing shares of stock under this Plan and all other employee stock purchase plans (as defined in Section 423) administered by a Related Corporation and in which the Participant may participate shall not exceed ten percent (10%) of the Participant's Compensation. The Board shall have authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms of Options granted under the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The Board may appoint a committee of the Board to administer the Plan and may, in its sole and absolute discretion, delegate any or all of the functions specified herein regarding administration of the Plan to such committee or to officers or other representatives of the Company.

5.

Termination and Amendment of Plan. The Board may terminate or amend the Plan at any time; provided , however , that no amendment, unless approved by the stockholders of the Company as required under Treasury Regulations Section 1.423-2(c), shall effect any change for which stockholder approval would be required under that regulation. For the avoidance of doubt, Section 9.8, rather than the foregoing sentence, shall apply to Board actions taken in connection with Covered Transactions. Upon termination of this Plan, all amounts in the accounts of participating employees shall be promptly refunded.

6.

Shares of Stock Subject to the Plan. No more than an aggregate of 114,935 shares of Company Stock may be issued or delivered pursuant to the exercise of Options after January 1, 2021 under the Plan (such number of shares representing the number of shares authorized by stockholders to be issued under the Plan, after giving effect to adjustments made in accordance with Section 9.8) minus the number of shares issued or delivered pursuant to the exercise of Options on December 31, 2020, subject to further adjustments made in accordance with Section 9.8. Option Shares may be either shares of Company Stock which are authorized but unissued or shares of Company Stock held by the Company in its treasury. If an Option expires or terminates for any reason without having been exercised in full, the unpurchased Option Shares shall become available for other Options granted under the Plan. The Company shall, at all times during which Options are outstanding, reserve and keep available shares of Company Stock sufficient to satisfy such Options and shall pay all fees and expenses incurred by the Company in connection therewith.

7.	Persons Eligible to Receive Options .

8.	Dates for Granting Options. Options shall be granted on such date or dates as are designated by the Board.

9.	Terms and Conditions of Options .

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Note:

Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

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