Exhibit 10.3

Execution Version

EMPLOYEE MATTERS AGREEMENT

This Employee Matters Agreement (“Agreement”), dated as of October 31, 2014, is
between Kimberly-Clark Corporation (“Kimberly-Clark”), a Delaware corporation,
and Halyard Health, Inc. (“Halyard”), a Delaware corporation.

RECITALS

1. Kimberly-Clark and Halyard have entered into a Distribution Agreement dated
as of October 31, 2014 (the “Distribution Agreement”) pursuant to which all of
the outstanding shares of Halyard’s common stock will be distributed on a pro
rata basis to the holders of Kimberly-Clark’s common stock (the “Distribution”).

2. Pursuant to the Distribution Agreement, Kimberly-Clark will transfer, or
cause its subsidiaries to transfer, to Halyard certain assets and liabilities
prior to the Distribution.

3. In connection with the Distribution, Kimberly-Clark and Halyard desire to
enter into this Employee Matters Agreement.

In consideration of the mutual agreements contained herein and in the
Distribution Agreement, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth
below. Capitalized terms used but not defined herein shall have the meanings set
forth in the Distribution Agreement.

1.01 “Automatic Transfer Employee” means a Business Employee (other than an
Isolated Employee) whose employment transfers or will transfer from
Kimberly-Clark to Halyard as a result of the implementation of the Distribution
Agreement and/or by operation of any Automatic Transfer Law.

1.02 “Automatic Transfer Law” means any law which provides for the transfer of
an employee from Kimberly-Clark to Halyard automatically by operation of law
(including, without limitation, the EU’s Acquired Rights Directive (Council
Directive 2001/23/EC) and any implementing legislation in respect thereof).

1.03 “Business Employee” means any and all of the following: (i) an individual
employed at any time on or prior to the Distribution Date by Kimberly-Clark who
has, as of the Distribution Date, or who, immediately prior to his or her
termination of employment with Kimberly-Clark, had employment duties primarily
related to the Halyard Business; (ii) the Isolated Employees; and (iii) the
administrative and functional support personnel to be agreed upon between
Kimberly-Clark and Halyard.

1.04 “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as codified at Part 6 of Subtitle B of Title I of ERISA and at section 4980B of
the Code.

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1.05 “Domestic Business Employee” means a Business Employee who is employed by
Kimberly-Clark in the United States.

1.06 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, 29 U.S.C. §1001, et. seq.

1.07 “Foreign Business Employee” means a Business Employee employed by
Kimberly-Clark outside the United States.

1.08 “Isolated Employee” means a Business Employee employed by Kimberly-Clark or
a third party leasing agency or other entity on behalf of Kimberly-Clark on or
prior to the Distribution Date in a jurisdiction where Halyard does not intend
to have a legal entity presence following the Distribution Date, and to be
agreed upon between Kimberly-Clark and Halyard.

1.09 “Isolated Employer” means the employee leasing agency or other third party
entity by whom an Isolated Employee is employed on or before the Distribution
Date, or where the context requires, after the Distribution Date, as agreed upon
between Kimberly-Clark and Halyard.

1.10 “Non-Automatic Transfer Employee” means a Business Employee who is not an
Automatic Transfer Employee and not an Isolated Employee.

1.11 “Non-ERISA Benefit Arrangement” means each contract, agreement, policy,
practice, program, plan, trust or arrangement, other than a Pension Plan or
Welfare Plan, providing for benefits, perquisites or compensation of any nature
to any Business Employee, or to any family member, dependent or beneficiary of
any such Business Employee, including, without limitation, disability,
severance, health, dental, life, accidental death and dismemberment, travel and
accident, tuition reimbursement, supplemental unemployment, vacation, sick,
personal or bereavement days, holidays, retirement, deferred compensation,
profit sharing, bonus, stock-based compensation or other forms of incentive
compensation.

1.12 “Pension Plan” means any pension plan as defined in section 3(2) of ERISA,
without regard to sections 4(b)(4) or 4(b)(5) of ERISA.

1.13 “Transferred Employee” means any Automatic Transfer Employee described in
Section 2.01(a) or any Non-Automatic Transfer Employee described in
Section 2.01(b) who is employed by Halyard immediately following the Effective
Time (or as soon thereafter as is legally permissible or practicable or such
other time as is specified in Section 2.01). Where applicable, the term also
includes the Isolated Employees agreed upon between Kimberly-Clark and Halyard.

1.14 “Welfare Plan” means any employee welfare plan as defined in section 3(1)
of ERISA, without regard to sections 4(b)(4) or 4(b)(5) of ERISA

1.15 Any reference in this Agreement to an individual’s employment or engagement
by Kimberly-Clark or by Halyard (and any reference to any related benefit
provided by such entity), shall, where the context requires, be deemed to be a
reference to the employment or engagement of that individual (or the provision
of such a benefit) by any relevant Kimberly-Clark or Halyard subsidiary or
Affiliate.

 

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1.16 Any reference in this Agreement to “substantially similar terms and
conditions” or any equivalent phrase shall mean substantially similar terms and
conditions of employment for the employee or other service provider in question
(relating, where relevant, to salary, wages, incentive pay opportunity, equity
compensation, employee welfare benefits, retirement benefits, or other terms and
conditions of employment, or where the context indicates, any combination
thereof), as in effect at Kimberly-Clark (or, where relevant, an Isolated
Employer) on the Distribution Date, but subject to the exceptions set forth
herein or agreed upon between Kimberly-Clark and Halyard.

ARTICLE II

TRANSFERRED EMPLOYEE MATTERS

2.01 Employment.

(a) Automatic Transfer Employees. The Automatic Transfer Employees shall
transfer from Kimberly-Clark to Halyard by operation of law, effective as of the
Distribution Date. Except to the extent set out in this Agreement or otherwise
agreed between the parties, such employees shall be employed by Halyard on terms
and conditions as required by the relevant Automatic Transfer Law.

(b) Non-Automatic Transfer Employees. On or before the Distribution Date (or
(i) as soon thereafter as is legally permissible, taking into account the timing
of the formation of the local Halyard subsidiaries, immigration laws and other
applicable requirements, or (ii) such later time as provided in the Transition
Services Agreement or other agreement between the parties), Halyard shall
(unless otherwise expressly agreed between the parties in respect of any one or
more individual, including without limitation, any individual on worker’s
compensation in a jurisdiction where an employment transfer would cause loss of
such benefits) employ or (if already employed) continue to employ each
Non-Automatic Transfer Employee who, as of the day immediately prior thereto is
employed by Kimberly-Clark, including any such employee who is then an inactive
employee on approved medical, non-medical or short-term disability, long-term
disability or weekly indemnity leave of absence or absent from active employment
due to occupational illness or injury covered by workers’ compensation (with the
employees on disability or leave, to Kimberly-Clark’s best knowledge as of
September 30, 2014, agreed upon between Kimberly-Clark and Halyard). Except to
the extent set out or scheduled in this Agreement or otherwise agreed between
the parties, such employee shall initially be employed by Halyard on terms and
conditions substantially similar in the aggregate to the terms and conditions of
such employee’s last day of employment with Kimberly-Clark.

(c) Isolated Employees. Except to the extent they agree otherwise, the parties
shall use their respective reasonable endeavors to ensure that any Isolated
Employees being employed by Kimberly-Clark or an Isolated Employer on or before
the Distribution Date are employed or offered employment by Halyard or a 3rd
party staffing agency providing staffing services to Halyard (or other 3rd party
employer) as agreed upon between Kimberly-Clark and Halyard opposite the name of
each Isolated Employee associated with such employer,

 

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on such initial terms and conditions substantially similar in the aggregate to
the terms and conditions of such employee’s last day of employment with
Kimberly-Clark or the relevant Isolated Employer.

(d) Terms and Conditions of Transferred Employees. In respect of each
Transferred Employee, the terms and conditions of that employee’s employment
with Halyard (i) shall be communicated to each such Transferred Employee prior
to the Distribution Date in a form mutually satisfactory to Halyard and
Kimberly-Clark, (ii) except as otherwise provided herein, shall include credit,
for all purposes, for all years of service credited by Kimberly-Clark (other
than under retiree medical or retiree life plans), (iii) shall include credit
for all hours worked for or paid by Kimberly-Clark for overtime, leave of
absence and unemployment compensation purposes, and (iv) may include a
requirement to execute one or more agreements dealing with confidentiality,
non-competition, non-solicitation, or other similar obligations, between such
Transferred Employee and Halyard. To the extent legally possible, Business
Employees temporarily seconded to Halyard shall remain Kimberly-Clark employees
until actually transferred to Halyard and the provisions herein relating to
Transferred Employees shall not apply until such transfer of employment occurs.
Such employees to be seconded will be agreed upon between Kimberly-Clark and
Halyard. Similarly, Business Employees who are not transferred or moved to
Halyard until after the Distribution Date (either pursuant to the terms of the
Transition Services Agreement or otherwise) shall remain Kimberly-Clark
employees and shall not become Transferred Employees until actually transferred
or moved to Halyard, and the provisions herein relating to Transferred Employees
shall not apply until such transfer or movement of employment occurs.

2.02 Severance. It is not intended that any Transferred Employee or other
Business Employee will be eligible for termination or severance payments or
benefits from Kimberly-Clark as a result of the transfer or change of employment
from Kimberly-Clark to Halyard (or, in the case of an Isolated Employee, the
change of employment from Kimberly-Clark to an Isolated Employer).
Notwithstanding the preceding sentence, in the event that any such termination
or severance payments or benefits become payable on account of such transfer,
change or the refusal of a Business Employee to accept employment with Halyard
(or, with respect to an Isolated Employee, to accept employment with an Isolated
Employer), Halyard shall indemnify Kimberly-Clark for the amount of such
termination or severance payments or benefits. Halyard shall be liable, and
indemnify Kimberly-Clark for any termination or severance obligations owed to
Business Employees on or after the Distribution Date.

2.03 Employment Solicitation. For a period of 12 months following the
Distribution Date, neither Kimberly-Clark nor Halyard may, and will not permit
any of their respective subsidiaries, Affiliates or agents to, solicit or
recruit for employment any then current employees of the other company or its
subsidiaries or Affiliate, without the prior written consent of the other
company. Nothing in this Section 2.03 shall be construed so as to (i) prohibit
the hiring by either company or its subsidiaries or Affiliates of any employee
of the other company who initiated contact for the purpose of seeking employment
without prior contact initiated by any employee or agent of the company where
employment is sought, or (ii) prohibit the hiring of any person who applied for
employment with either company in response to any public advertising medium.

 

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2.04 Personnel Records. Subject to applicable law, all information and records
regarding employment, global mobility and personnel matters (including
immigration records but not including medical files) of Transferred Employees
will be transferred to and/or retained after the Distribution Date (or after the
effective date of such Transferred Employee’s move to Halyard, as the case may
be) by Halyard in accordance with all laws relating to the collection, storage,
retention, privacy, and disclosure of such records. Access to such records after
the transfer will be provided to Kimberly-Clark in accordance with this Article
2, the Transition Services Agreement and the Distribution Agreement.
Notwithstanding anything to the contrary in the foregoing, Kimberly-Clark shall
retain reasonable access (either through retaining copies or Halyard sharing
such information with Kimberly-Clark upon request) to those records necessary to
(i) Kimberly-Clark’s continued administration of any plans or programs on behalf
of Transferred Employees after the date of transfer of such records for so long
as said administration continues pursuant to this Agreement or the Transition
Services Agreement (and Kimberly-Clark and Halyard agree to enter into any
ancillary or additional agreements necessary for such purpose, including a HIPAA
Business Associate Agreement in a form agreed upon between Kimberly-Clark and
Halyard), and (ii) as needed for any litigation, investigation, charge or other
employment matter relating to a Transferred Employee or any employee benefit
plan or other employment matter. Kimberly-Clark shall also retain copies of all
confidentiality, non-competition, non-solicitation, or other similar agreements
with any Business Employee in which Kimberly-Clark has an interest. Personnel
files for Business Employees who are not Transferred Employees shall be retained
by Kimberly-Clark with provision for access by Halyard in accordance with this
Article 2, the Transition Service Agreement and the Distribution Agreement.

2.05 Consultation Issues. To the extent required by law, the parties have and
shall continue to cooperate with each other in respect of any obligations they
may have to consult with Transferred Employees and/or their representatives, and
to the parties knowledge, all such consultations as of the date hereof have been
satisfactorily completed in accordance with applicable law. Each party shall
indemnify the other in respect of any claims, liabilities and demands that may
arise from their respective failures to so cooperate and consult.

2.06 Relocation Agreements. Halyard shall have the right to enforce and receive
any payments pursuant to any relocation agreement previously entered into by
Kimberly-Clark and any Transferred Employee that provides for reimbursement or
penalties if the Transferred Employee voluntarily terminates employment with
Kimberly-Clark or Halyard before the end of the applicable repayment period. The
relocation agreements with Business Employees currently in force will be agreed
upon between Kimberly-Clark and Halyard. To the extent that Halyard is unable
directly to enforce such relocation agreement provisions, Kimberly-Clark shall
take all reasonable steps to provide assistance to Halyard to do so or to
receive the benefit of having done so, including (without limitation) novating
or assigning such relocation agreement to Halyard or taking reasonable steps to
recover any such payment (to be paid, net of all recovery costs including
attorney’s fees, to Halyard).

 

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ARTICLE III

WELFARE PLANS

The provisions of Section 3.01 — 3.07 shall apply only to Transferred Employees
(or where relevant, Business Employees) who are Domestic Business Employees.
Provisions with regard to Transferred Employees (or where relevant, Business
Employees) who are not Domestic Business Employees are set forth in
Section 3.08.

3.01 Cessation of Participation in Kimberly-Clark Welfare Plans.

(a) 2014 Transition. Effective as of the Effective Time, Halyard shall (i) adopt
the Kimberly-Clark Flexible Plan and underlying Welfare Plans to be agreed upon
between Kimberly-Clark and Halyard as an additional adopting employer for the
remainder of the 2014 Plan Year, and (ii) establish its own Section 125
Cafeteria Plan for the purpose of effectuating the Transferred Employees’
continued salary deferrals to pay the employee portion of the premiums under the
Kimberly-Clark Welfare Plans. Except as otherwise provided in this Agreement or
as required by the terms of any Kimberly-Clark Welfare Plan or by COBRA or any
comparable state or federal law, participation in the Kimberly-Clark Welfare
Plans by all Transferred Employees and all Business Employees who are no longer
employed by Kimberly-Clark as of the Distribution Date, will cease as of 11:59
P.M. on December 31, 2014. Halyard shall pay and/or reimburse Kimberly-Clark for
the cost of such Transferred Employees’ and Business Employees’ continued
coverage in the Kimberly Clark Welfare Plans on and after the Distribution Date
through 11:59 P.M. on December 31, 2014 (both for the actual benefit costs and
the reasonably necessary administration costs, including, without limitation,
for the services and costs detailed in the Transition Services Agreement).

(b) Continued Participation in Kimberly-Clark Welfare Plans. Notwithstanding the
above (i) Domestic Business Employees receiving Kimberly-Clark long-term
disability insurance benefits as of the Distribution Date shall remain on such
insurance and Halyard shall reimburse Kimberly-Clark for any post-Distribution
Date costs incurred by Kimberly-Clark associated therewith (including, without
limitation, the Employer’s share of any federal and state employment taxes
associated therewith); and (ii) Business Employees participating in or eligible
for Kimberly-Clark Retiree Medical Plan and/or Retiree Life Insurance benefits
as of the Distribution Date shall retain such participation and/or eligibility
pursuant to the terms of such plans, and Halyard shall not be responsible for
such costs.

3.02 Halyard’s Welfare Plans. Except with respect to the long-term disability,
retiree medical and retiree life insurance benefits referenced in Section 3.01
above, effective as of January 1, 2015, Halyard shall adopt and establish for
the benefit of Transferred Employees (and any otherwise eligible Business
Employees who are no longer employed by Kimberly-Clark as of the Distribution
Date) and their respective eligible dependents, health (including medical,
vision and dental), disability, life insurance, and other Welfare Plans
substantially similar in the aggregate (except as otherwise agreed upon between
Kimberly-Clark and Halyard) to the Welfare Plans maintained by Kimberly-Clark in
which such individuals were eligible to participate immediately prior thereto.
Except with respect to the long-term disability, retiree medical and retiree
life insurance benefits referenced in Section 3.01 above, Transferred Employees
(and, as applicable, otherwise eligible Business Employees who are no longer
employed by Kimberly-Clark thereof as of the Distribution Date) shall be
eligible to participate in the Halyard Welfare Plans as of January 1, 2015 on
the same basis on which they were eligible to participate in the Kimberly-Clark
Welfare Plans immediately prior thereto.

 

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Notwithstanding the above, Halyard shall not be required to establish or
maintain any post-employment health or life insurance benefits, other than as
may be required under COBRA or other applicable law. Effective as of January 1,
2015, all Business Employees on COBRA coverage under a Kimberly-Clark Welfare
Plan shall either (a) be transferred to an applicable Halyard Welfare Plan, and
Halyard shall be solely responsible for such COBRA liability, or (b) at
Kimberly-Clark’s election, certain Business Employees who elected COBRA prior to
the Distribution Date shall remain on Kimberly-Clark’s Health Plan and Halyard
shall reimburse Kimberly-Clark to the extent that Kimberly-Clark pays any health
benefits or other cost or liability (including plan administration costs) for
any such COBRA participant in excess of his or her COBRA premiums. For avoidance
of doubt, the parties understand that (i) the transfer of employment from
Kimberly-Clark to Halyard in connection with the Spin-Off is not intended to be
a qualifying event under COBRA, and (ii) all COBRA liability for current and
former Business Employees and their qualified beneficiaries on and after the
Distribution Date will be the liability of Halyard, either through reimbursing
Kimberly-Clark for coverage provided under a K-C Healthcare Plan (including both
benefit costs in excess of the COBRA premiums and administration costs) or
directly by Halyard under a Halyard Healthcare Plan, and Halyard hereby holds
harmless and indemnifies Kimberly-Clark with respect thereto.

3.03 Welfare Plan Liabilities.

(a) Halyard Liabilities. Except as provided in this Agreement, as of the
Effective Time, Halyard shall assume, and either be responsible for paying or,
to the extent incurred by Kimberly-Clark under a Kimberly-Clark Plan, for
reimbursing Kimberly-Clark for (i) all Welfare Plan liabilities incurred by
Halyard or Kimberly-Clark, as the case may be, with respect to any Business
Employee after the Effective Time; and (ii) all COBRA and long-term disability
benefit costs or liabilities incurred by Kimberly-Clark with respect to any
Business Employee who is participating in a Kimberly-Clark-sponsored
continuation plan as of the Effective Time (provided that any post Distribution
Date benefits for claims incurred prior to the Effective Time pursuant to the
terms of a fully insured plan maintained by Kimberly-Clark shall be paid
pursuant to such plan and reimbursed by Halyard).

(b) Kimberly-Clark Liabilities. Kimberly-Clark shall continue to be responsible
after the Effective Time for employer liabilities under its Welfare Plans with
respect to the following:

(1) Retirees. Any Domestic Business Employee whose employment terminated on or
prior to the Effective Time due to retirement and who elected or is eligible to
elect retiree medical and/or retiree life insurance benefits under the
Kimberly-Clark Retiree Medical and/or Retiree Life Insurance Plan.

(2) Pre-Distribution Claims. All claims for welfare benefits incurred by
Business Employees prior to the Effective Time that remain unpaid as of such
date, shall be paid from the appropriate Kimberly-Clark Welfare Plan and an
appropriate reimbursement or accrual charged to Halyard. Claims for health
benefits shall be considered to be incurred prior to the Effective Time if the
services related to such claims were provided prior to the Effective Time.
Claims for all other welfare benefits shall be considered to be incurred prior
to the Effective Time if the date of loss occurred prior to the Effective Time.
Notwithstanding the above, Halyard shall be responsible for the Welfare Plan
costs as set forth in Sections 2.02, 3.04 and 3.07.

(3) Long-Term Disability. Any Domestic Business Employee receiving fully insured
benefits on a Kimberly-Clark long-term disability insurance plan as of the
Distribution Date shall continue to be covered under such policy (pursuant to
the terms thereof) but subject to reimbursement by Halyard as provided in
Sections 3.01(b) and 3.03(a).

 

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3.04 Flexible Spending Accounts. Effective as of the Effective Time, Halyard
shall adopt the Kimberly-Clark Flexible Spending Account Plan, as an additional
adopting employer, for the remainder of the 2014 calendar year (and with respect
to any permitted grace period for claims incurred by March 15, 2015). Halyard
shall effect the Transferred Employees’ continued flexible spending account
salary deferrals into the Kimberly-Clark Flexible Spending Account Plan for the
remainder of the 2014 calendar year under its own Section 125 Cafeteria Plan.
For the 2014 calendar year, Transferred Employees shall maintain their existing
eligibility, participation status and account balances under the flexible
spending account plan maintained by Kimberly-Clark. Salary reduction elections
made by Transferred Employees shall continue to apply through the end of the
2014 calendar year and Halyard shall promptly transfer all such 2014
post-Effective Date Flexible Spending Account deferrals to Kimberly-Clark. After
the end of the 2014 Plan Submission / Reconciliation Report Period (typically,
July 15, 2015), Kimberly-Clark shall calculate the positive or negative
remaining flexible spending account balances of all Transferred Employee’s in
the aggregate. Kimberly-Clark shall pay, or cause to have paid, to Halyard any
net positive balance, and Halyard shall pay, or cause to have paid, to
Kimberly-Clark any net negative balance. Halyard shall establish its own
Flexible Spending Account Plan as of January 1, 2015.

3.05 Kimberly-Clark Assets. Kimberly-Clark shall retain all claim reserves, bank
accounts, trust funds or other balances maintained by or on behalf of
Kimberly-Clark’s Welfare Plans.

3.06 Flex Days. Halyard shall assume and be responsible for paying the remaining
2014 Flex Days (as provided under the Kimberly-Clark Flexible Plan and/or
Kimberly-Clark Time-Off Policy) for all Transferred Employees that have not yet
been taken as of the Effective Time in accordance with this Section 3.06. That
is, with respect to Transferred Employees, Halyard shall administer and pay any
Flex Days taken on or after the Effective Time, and shall honor any previously
banked but not yet used Flex Days with respect to the 2014 calendar year (which
shall be rolled over to Halyard). Kimberly-Clark shall either transfer cash to
Halyard or provide Halyard with an accrual, in an amount equal to the
Transferred Employees’ prior 2014 Flex Day deferrals not yet taken as paid
vacation (or other Paid Time Off) as of the Effective Time. Thus, Halyard shall
credit Transferred Employees for any previously accrued (but unused) Flex Days,
and Kimberly-Clark shall either reimburse Halyard or provide Halyard an
appropriate accrual for the 2014 Flex Day benefits accrued and paid for by the
Transferred Employees under the Kimberly-Clark Flex Days Plan but paid out
post-Effective Date under the Halyard Plan. Unless otherwise provided by local
law, any Flex Days owed to any Transferred Employees not used on or before
December 31, 2014 shall be forfeited effective as of January 1, 2015, and such
forfeited amounts shall be equitably divided such that Halyard shall transfer
10/12 of such amounts to Kimberly-Clark and shall retain 2/12 of such forfeited
amounts.

 

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3.07 Disability.

(a) Weekly Indemnity/Short-Term Disability Benefits. Halyard shall be
responsible for all claims for weekly indemnity and short-term disability
benefits payable to Business Employees on or after the Distribution Date.
Kimberly-Clark shall continue to be responsible after the Distribution Date for
all claims for weekly indemnity benefits incurred by a Business Employee prior
to the Distribution Date which are payable under an insured weekly indemnity
plan, and Halyard shall reimburse Kimberly-Clark for any ongoing costs
associated therewith. Periods of active work or disability absence for any
Business Employee credited under any Kimberly-Clark disability plan shall count
as work days or disability absence under the Halyard disability plans.

(b) Long-Term Disability Benefits. Kimberly-Clark shall continue to be
responsible after the Effective Time for all claims for long-term disability
incurred prior to the Effective Time by any Business Employee who is absent from
active employment due to a disability, as defined in the Kimberly-Clark
disability plan, on or prior to the Effective Time to the extent that such
long-term disability benefits are provided under an insured Welfare Plan.
Kimberly-Clark shall also remain responsible for long-term disability benefits
for any Transferred Employee who is receiving weekly indemnity or short-term
disability benefits as of the Effective Time and who becomes eligible for
long-term disability benefits thereafter, provided that the disability relates
to the same condition for which weekly indemnity or short-term disability
benefits were paid and, provided further, that such long-term disability
benefits are payable under an insured Welfare Plan. Notwithstanding the above,
Halyard shall reimburse Kimberly-Clark for any post-Effective Time costs that
Kimberly-Clark incurs by virtue of the continued long-term disability coverage
provided under this Section 3.07(b). Halyard shall assume and be solely
responsible for all other claims for long-term disability payable after the
Effective Time with respect to any Business Employee. Periods of active work or
disability absence for any Business Employee credited under any Kimberly-Clark
disability plan shall count as work days or disability absence under the Halyard
disability plans.

3.08 Special Provision for Foreign Welfare Plans and Benefits. Except as may
otherwise be agreed upon between Kimberly-Clark and Halyard or as required under
any state or provincial law, effective as of the Distribution Date,
(i) participation in all Kimberly-Clark foreign (i.e., non U.S.) Welfare Plans
by all Transferred Employees and other Business Employees who are no longer
employed by Kimberly-Clark as of the Distribution Date, will cease as of the
Effective Time; (ii) Halyard shall adopt and establish Welfare Plans for Foreign
Business Employees with substantially similar terms and conditions to the
Kimberly-Clark Welfare Plans in which Foreign Business Employees were eligible
to participate immediately prior to the Distribution Date, with immediate
participation in such plans by all Foreign Business Employees who are
Transferred Employees, with no waiting period, evidence of insurability or
preexisting condition limitations, and with the participants being credited for
all 2014 out-of-pocket expenses incurred to date; and (iii) Kimberly-Clark shall
retain all claim reserves, bank accounts, trust funds or other balances
maintained by or on behalf of the Kimberly-Clark foreign Welfare Plans.

 

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ARTICLE IV

COMPENSATION MATTERS

AND NON-ERISA BENEFIT ARRANGEMENTS

4.01 Cessation of Participation in Kimberly-Clark Non-ERISA Benefit
Arrangements. Except as otherwise provided in this Agreement or as required by
the terms of any Kimberly-Clark Non-ERISA Benefit Arrangement, or by state,
federal, foreign, provincial or other applicable law, participation in
Kimberly-Clark Non-ERISA Benefit Arrangements will cease for all Transferred
Employees and all Business Employees who are not Transferred Employees as of the
Effective Time.

4.02 Assumption of Certain Employee Related Obligations. To the extent not
otherwise provided for by law and subject to the specific provisions set out
below, effective as of the Effective Time, Kimberly-Clark shall assign, and/or
Halyard shall assume the rights and obligations in respect of (with
Kimberly-Clark not retaining any further liability for), the following
agreements, obligations and liabilities; provided, however, that (i) this
section shall only apply to agreements, obligations and liabilities to the
extent Kimberly-Clark would otherwise have been responsible for them, and
(ii) if any such agreement, obligation or liability cannot be assumed by Halyard
for a reason beyond the reasonable control of the parties hereto (including
where Halyard may assume the same but Kimberly-Clark retains any residual
liability), including the refusal of a third party to agree to such an
assumption, then Halyard shall indemnify Kimberly-Clark and hold it harmless
with respect to such agreement, obligation or liability, as though it had been
assumed by Halyard.

(a) Agreements entered into between Kimberly-Clark and Transferred Employees,
including without limitation any employment agreements and severance or
executive severance agreements, including, without limitation, those agreements
to be identified and agreed upon between Kimberly-Clark and Halyard, but not
including any Kimberly-Clark equity plan agreements; provided, however,
notwithstanding the above, that with respect to any retention agreements
provided by Kimberly-Clark in contemplation of or in connection with the
Distribution, Kimberly-Clark shall transfer the accrual to Halyard and Halyard
shall pay the same from the Halyard payroll. Effective as of the Effective Time,
Halyard shall enter into new Executive Severance Agreements, in a form
substantially comparable to the existing Kimberly-Clark Executive Severance
Agreements (except as otherwise agreed upon between Kimberly-Clark and Halyard),
with the Halyard officers and key personnel to be agreed between Kimberly-Clark
and Halyard.

(b) Agreements entered into between Kimberly-Clark and its independent
contractors providing services to the Halyard Business, in a manner to be agreed
upon between Kimberly-Clark and Halyard (except to the extent the parties agree
that such agreements should instead be terminated by Kimberly-Clark and/or
replaced by new agreements with Halyard, as shall be agreed upon between
Kimberly-Clark and Halyard).

(c) All confidentiality, non-competition, non-solicitation and other similar
agreements between Kimberly-Clark and Transferred Employees, including without
limitation those referenced by jurisdiction and to be agreed upon between
Kimberly-Clark and Halyard; provided, however, that Kimberly-Clark shall retain
(and may enforce) all confidentiality and similar agreements relating to any
Domestic Business Employee. Halyard may enter into new restricted covenant and
confidentiality agreements with the Transferred Employees.

 

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(d) To the extent required by applicable law, all collective bargaining
agreements and collective agreements entered into between Kimberly-Clark, its
subsidiaries or Affiliates and any union, works council or similar
representative body representing a Transferred Employee, including without
limitation, the collective bargaining and collective agreements to be identified
and agreed upon between Kimberly-Clark and Halyard.

(e) All wages, salary, incentive compensation, commissions, bonuses, (including
13th month compensation and legally mandated compensation), overtime payments
and other remuneration and allowances payable to Business Employees after the
Effective Time (whether referable to the period before or after the Distribution
Date), subject to the following,

(1) The accrual for Business Employees under the Kimberly-Clark Executive
Officer Achievement Award Program, the Kimberly-Clark Management Achievement
Award Program and the Kimberly-Clark Achievement Incentive Plan for the portion
of the 2014 calendar year occurring prior to the Effective Time shall be
transferred to Halyard on the Distribution Date, and Halyard shall pay the same
in February 2015 based on actual results and performance ratings. The Europe
(EBP), Asia (PIP) and Latin America (LIP) incentive plans will be administrated
and paid the same way as the U.S. incentive plans described in the immediately
preceding sentence.

(2) September and October 2014 U.S. Healthcare-related sales incentives /
commissions earned by Transferred Employees will be paid by Halyard in Nov and
Dec 2014, and Kimberly-Clark shall either transfer the accrual or reimburse
Halyard therefor;

(3) The Lexington Mill Quarterly Incentive Bonus for the 4th quarter 2014 will
be payable by Halyard in Jan 2015. The accrual for the portion thereof relating
to the pre-Effective Time (i.e., the accrual for October 2014) will be
transferred to Halyard as of the Distribution Date. A reasonable estimate of the
Oct bonus accrual will be determined by looking at the prior four quarters
actual results

(4) Kimberly-Clark shall either transfer the accrual or reimburse Halyard for
the pre-Distribution Date overtime payments paid by Halyard, to the extent
agreed upon between Kimberly-Clark and Halyard.

Except as required by law or other agreement between the parties, Halyard shall
make relevant payments (agreed in advance with Kimberly-Clark) to any
Transferred Employee under (1) through (4) and, to the extent specified above,
Kimberly-Clark shall provide Halyard with an appropriate accrual or
reimbursement therefor. Effective as of the Effective Time, Halyard shall adopt
and establish annual incentive, commission or other variable remuneration plans
for the remainder of 2014 substantially comparable in the aggregate to the
Kimberly-Clark annual incentive plans.

(f) Effective as of the Effective Time, (i) Halyard shall establish for
Transferred Employees, Severance and Executive Severance Plans substantially
comparable to

 

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the Kimberly-Clark Severance and Executive Severance Plans, and
(ii) Kimberly-Clark shall have no further liability for any Business Employee
under the Kimberly-Clark Severance Plan or Executive Severance Plan.

(g) All commitments under the Kimberly-Clark Global Assignment Program with
respect to Business Employees.

(h) All moving expenses incurred by Transferred Employees and Isolated Employees
in connection with the Distribution, in accordance with the terms of the
Kimberly-Clark employee relocation program.

(i) All immigration-related rights, obligations and liabilities related to
Transferred Employees (including liabilities relating both to employees
transferred to the U.S. and employees transferred to foreign jurisdictions, but
excluding any fines or assessments for pre-Distribution noncompliance),
including but not limited to, all obligations, liabilities and undertakings of
any immigration related applications filed with any governmental agency. For
avoidance of doubt, Halyard shall reimburse Kimberly-Clark for any costs
associated with filing applications to transfer L-1 Visas to Halyard, whether
prior to, on or after the Distribution Date.

(j) All liabilities and obligations whatsoever of the Halyard Business with
respect to claims made by or with respect to Business Employees or any other
persons who at any time prior to the Distribution Date had employment duties
primarily related to the Halyard Business relating to Non-ERISA Benefit
Arrangements with respect to the Halyard Business and not otherwise retained or
assumed by Kimberly-Clark pursuant to this Agreement, including such liabilities
relating to actions or omissions of or by Halyard or any officer, director,
employee or agent thereof on or prior to the Distribution Date, as further
detailed in the Distribution Agreement; provided, however, that if the
Distribution Agreement assigns a liability to Kimberly-Clark (such as Director
and Officer Insurance Policy claims), the Distribution Agreement shall control.

(k) All liabilities and obligations whatsoever in recognition of the Transferred
Employees years of service and seniority.

(l) With regard to the Kimberly-Clark Employee Referral Bonus Program,
Kimberly-Clark shall be solely responsible for payment of any amounts due to a
Kimberly-Clark employee based on a referral made on or before the Distribution
Date, and Halyard shall be solely responsible for payment of any amounts due to
a Business Employee based on a referral made on or before the Distribution Date,
regardless of whether the referred person is or becomes a Kimberly-Clark
employee or a Transferred Employee.

4.03 Equity Compensation Plans. The following shall apply in respect of the
Transferred Employees and Isolated Employees, to the extent allowed by any
provincial or other applicable law.

(a) Halyard 2014 Plan. Effective as of the Effective Time, Halyard shall adopt
and establish the Halyard Health Inc. Equity Participation Plan (“Halyard 2014
Plan”), which Plan shall have terms and conditions substantially similar to the
Kimberly-Clark 2011 Equity Participation Plan (“Kimberly-Clark 2011 Plan”). The
Halyard 2014 Plan shall be

 

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approved by the Halyard Board of Directors and by Kimberly-Clark Corporation, as
the sole stockholder of Halyard, prior to the Distribution Date. Halyard shall
file a Form S-8 Registration Statement with the SEC with respect to the Halyard
2014 Plan and shall be responsible for compliance with applicable securities
laws in respect of the operation of the plan.

(b) Unexercisable Options. As of the Effective Time, each outstanding option to
purchase Kimberly-Clark common stock, other than an option granted under the
Kimberly-Clark Corporation SharePlus Plan, that is held by a Transferred
Employee (a “K-C Option”) shall, to the extent such K-C Option is not
exercisable as of the Effective Time and the Transferred Employee is under age
55, be cancelled and replaced with a substitute option to purchase shares of
Halyard common stock (“Halyard Option”), granted by Halyard under the Halyard
2014 Plan. The substitute Halyard Option shall have the same intrinsic value as
the forfeited K-C Option, such that (i) the exercise price of such Halyard
Option will be decreased by multiplying the exercise price of the K-C Option
immediately prior to the Effective Time by a fraction (the “Halyard Ratio”), the
numerator of which is the fair market value of Halyard common stock immediately
following the Effective Time and the denominator of which is the fair market
value of Kimberly-Clark common stock immediately prior to the Effective Time,
and (ii) the number of Halyard shares purchasable under each Halyard Option will
be increased by dividing the number of K-C Option Shares that were forfeited at
the Effective Time by the Halyard Ratio. Employment or service credited by
Kimberly-Clark shall be taken into account in determining when such substitute
Halyard Options become exercisable, and when they terminate. Except as otherwise
provided herein, each substitute Halyard Option shall be exercisable upon the
same terms and conditions as were applicable under the related K-C Option
immediately prior to the Effective Time. For purposes of this Section 4.03(b),
(i) the fair market value of Kimberly-Clark common stock immediately prior to
the Effective Time shall equal the closing price of Kimberly-Clark’s common
stock on The New York Stock Exchange for the day prior to the first day in which
Halyard common stock is traded on a regular way basis, and (ii) the fair market
value of Halyard common stock immediately following the Effective Time shall
equal the volume-weighted average price of Halyard’s common stock on The New
York Stock Exchange for the first five (5) days in which the Halyard common
stock is traded on a regular way basis.

(c) Exercisable Options. As of the Effective Time, pursuant to the terms of the
Kimberly-Clark 2011 Plan, (i) any vested K-C Option held by any Transferred
Employee under age 55 will be exercisable for the lesser of three (3) months or
the remaining term of the K-C Option, and (ii) any unvested K-C Option held by a
Transferred Employee who is age 55 or older will vest and, together with all
otherwise vested K-C Options held by Transferred Employees age 55 or older,
shall remain exercisable for the lesser of five (5) years or the remaining term
of the K-C Option. All such vested K-C Options held by Transferred Employees
shall remain options to purchase Kimberly-Clark common stock and will be
adjusted to maintain their intrinsic value, such that (i) the exercise price of
each such K-C Option will be decreased by dividing the pre-Distribution Date
exercise price of the K-C Option by a fraction (the “K-C Ratio”), the numerator
of which is the closing price of Kimberly-Clark common stock on The New York
Stock Exchange on the Distribution Date, and the denominator of which is the
opening price of Kimberly-Clark common stock on The New York Stock Exchange on
the first trading day immediately following the Distribution, and (ii) the
number of Kimberly-Clark shares purchasable under each such K-C Option will be
increased by multiplying the number of such K-C Options by the K-C Ratio.

 

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(d) Restricted Stock Units Held by Participants under age 55. As of the
Effective Time, with respect to Transferred Employees under age 55 on the
Distribution Date;

(1) any unvested performance-based restricted share units granted under the
Kimberly-Clark 2011 Plan (“K-C PRSUs”) that have been outstanding more than 6
months from date of grant will vest pro-rata, based on the number of full years
of employment from the grant date to the Effective Time, but to be paid out (in
the form of K-C common stock) only at the end of the relevant performance period
and (A) only to the extent the performance criteria are satisfied at that time,
after adjusting the ROIC and Net Sales as reported metrics to take into account
the Distribution, as determined in the sole discretion of the Kimberly-Clark
Management Development and Compensation Committee, and (B) the number of such
vested K-C PRSUs shall be increased by the Dividend Equivalent on the pro-rata
vested PRSUs, with such Dividend Equivalent being equal, for each pro-rata
vested PRSU, to the fair market value of the fractional amount of Halyard common
stock received in the Distribution for each share of K-C common stock, with such
fair market value being equal to the opening price of Halyard common stock on
the New York Stock Exchange on the first trading day immediately following the
Distribution, multiplied by the fractional amount of Halyard common stock
received in the Distribution for each share of Kimberly-Clark common stock
(“Dividend Equivalent”). The Dividend Equivalent will be reinvested in
additional K-C PRSUs at the opening price of Kimberly-Clark’s common stock on
The New York Stock Exchange on the first trading day immediately following the
Distribution. The additional K-C PRSUs credited by virtue of such Dividend
Equivalent will be accumulated and paid only if, when and to the extent that the
underlying K-C PRSUs outstanding immediately prior to the Distribution vest,
achieve their performance goals and are paid.

(2) the K-C PRSUs not pro rata vested pursuant to (1) above (either because not
held for 6 months or because they consist of the remaining portion not vested in
the pro-rata vesting) shall be forfeited and Halyard shall issue replacement
Halyard Time-Based Restricted Stock Units (“ Halyard TRSU’s”) as of the
Effective Time, on the same terms and conditions as the forfeited K-C PRSUs,
except that the Halyard TRSUs shall vest at the end of the original performance
period, subject to the participant’s continued employment through that date, and
taking into account service with Kimberly-Clark, and except that the number of
replacement Halyard TRSUs shall be determined by dividing the number of K-C
PRSUs that were forfeited at the Effective Time (calculated as if the
performance requirement is met at the “target” level) by the Halyard Ratio.

(3) any unvested TRSUs granted under the Kimberly-Clark 2011 Plan (the “K-C
TRSUs”) will vest pro-rata, based on the number of full years of employment from
the grant date to the Effective Time, but only paid out (in the form of K-C
common stock) on the normal vesting date, and the number of such pro-rata vested
K-C TRSUs shall be increased by the Dividend Equivalent on such pro-rated vested
K-C TRSUs; and

 

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(4) the K-C TRSUs not pro rata vested pursuant to (3) above shall be forfeited
and Halyard shall issue replacement Halyard TRSUs as of the Effective Time, on
the same terms and conditions as the forfeited K-C TRSUs and taking into account
service with Kimberly-Clark, except that the number of replacement Halyard TRSUs
shall be determined by dividing the number if K-C TRSUs that were forfeited at
the Effective Time by the Halyard Ratio.

Moreover, to the extent that any K-C PRSUs or K-C TRSUs become vested after the
Record Date, and therefore did not receive the dividend distribution in the
spin-off, K-C shall increase the number of such K-C PRSUs or K-C TRSUs by the
Dividend Equivalent on such vested K-C PRSUs and K-C TRSUs, to make them whole.

(e) Restricted Stock Units Held by Participants at or over age 55. As of the
Effective Time, with respect to Transferred Employees at or over age 55 on the
Distribution Date, (i) any unvested K-C PRSUs outstanding more than six months
after the date of grant will vest and be payable (in the form of K-C common
stock) at the end of the performance period, based on the attainment of the
performance goals, with the number of such K-C PRSUs being increased by the
Dividend Equivalent on such K-C PRSUs (based on the same principles as detailed
in Section 4.03(d)(1) above), and the ROIC and Net Sales as reported performance
metrics criteria being adjusted for the Distribution as determined in the sole
discretion of the Kimberly-Clark Management Development and Compensation
Committee; (ii) any K-C PRSUs not outstanding for more than six months from the
date of grant shall be forfeited and Halyard shall issue replacement Halyard
TRSUs in the same manner as detailed in (d)(2) above; (iii) any unvested K-C
TRSUs will vest pro-rata, based on the number of full years of employment from
the grant date to the Effective Time, but only paid out on the normal vesting
date, and the number of such pro-rata vested K-C TRSUs shall be increased by the
Dividend Equivalent on such pro-rata vested K-C TRSUs; and (iv) the K-C TRSUs
not vested pursuant to (iii) above shall be forfeited and Halyard shall issue
replacement Halyard TRSUs as of the Effective Time in the same manner as
detailed in (d)(4) above.

(f) Kimberly-Clark SharePlus Plans. Business Employees participating in the
SharePlus Plans shall be treated the same as terminated employees. Halyard shall
not be required to establish any new SharePlus Plans for its employees.

(g) Other Equity Awards. To the extent not addressed above in this Section 4.03
or in any agreement between Kimberly-Clark and Halyard, all other outstanding
equity compensation awards held by Business Employees under any Kimberly-Clark
equity compensation plan shall be subject to the terms of such plan and
applicable award agreements. For avoidance of doubt, any equity awards related
to Kimberly-Clark stock and vested hereunder shall remain the liability of
Kimberly-Clark.

4.04 Workers’ Compensation.

(a) U.S. Employees. Except as provided herein, Halyard shall be solely
responsible for all claims for workers’ compensation reported by a Transferred
Employee employed in the U.S. on or after the Distribution Date. Kimberly-Clark
shall continue to be responsible after the Distribution Date for administering
all claims for workers’ compensation

 

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reported by a Domestic Business Employee prior to the Distribution Date under
the terms of any Kimberly-Clark workers’ compensation policy or plan; however,
Halyard shall reimburse, and shall indemnify Kimberly-Clark, or its subsidiaries
or Affiliates, for any amounts payable under such claims. In accordance with
Section 6.05, Kimberly-Clark shall transfer, or cause to have transferred, to
Halyard the amount of any reserves related to such claims which have been set
aside by Kimberly-Clark or its subsidiaries or Affiliates prior to the
Distribution Date.

(b) Foreign Employees. Halyard shall be solely responsible, and shall indemnify
Kimberly-Clark for all outstanding claims for workers’ compensation reported by
a Foreign Business Employee before the Distribution Date, and for any such new
claims reported by a Foreign Business Employee on or after the Distribution
Date. Notwithstanding the foregoing, in the event any such claims are covered by
an insurance policy held or maintained by Kimberly-Clark which cannot be
assigned to the benefit of Halyard, then (i) Halyard shall reimburse and
indemnify Kimberly-Clark for any amounts payable under such claims; (ii) any
amounts received by or for the benefit of Kimberly-Clark pursuant to such
insurance policy shall be offset against Halyard’s indemnification obligation;
and (iii) any experience refunds which relate to such claims shall be paid to
Halyard, or if received by Kimberly-Clark, paid by Kimberly-Clark to Halyard.
Halyard shall be solely responsible for, and shall indemnify Kimberly-Clark for
any experience surcharges which relate to such claims.

4.05 Accrued Vacation Days Off. Halyard shall recognize and assume all liability
for all vacation, holiday, Flex Days (subject to Section 3.06 above), personal
days and other Paid Time-Off, including long-service leave entitlements and
banked vacation, accrued but untaken or not otherwise paid or satisfied for any
Transferred Employees as of the Effective Time, and Halyard shall credit each
Transferred Employee with such days off accrual as of the date of the movement
of such Transferred Employee to Halyard.

4.06 Leaves of Absence. Halyard shall establish leave of absence policies which
are substantially similar to the leave of absence policies maintained by
Kimberly-Clark immediately prior to the Distribution Date and will continue to
apply such policies to inactive Transferred Employees who are on an approved
leave of absence as of the Distribution Date. Transferred Employees shall be
eligible for leaves of absence after the Distribution Date to the same extent
they would have been had they remained employed by Kimberly-Clark, its
subsidiaries or Affiliates. Leaves of absence taken by Transferred Employees
prior to the Distribution Date shall be deemed to have been taken as employees
of Halyard under such policies. For avoidance of doubt, Halyard shall recognize
and honor all approved leaves of absence granted to any Transferred Employee
prior to the Distribution Date or Effective Time. For avoidance of doubt, for
purposes of this Section 4.06, the term “leave of absence” shall not include
absences covered by any long-term disability insurance policy maintained by
Kimberly-Clark.

4.07 Past Service Credit. Halyard shall credit Transferred Employees with all
years of service credited to such Transferred Employees by Kimberly-Clark and
its subsidiaries and Affiliates for all purposes relating to Halyard ’s
Non-ERISA Benefit Arrangements. Kimberly-Clark shall provide Halyard with copies
of any records available to Kimberly-Clark to document such service. For
avoidance of doubt, this Section 4.07 does not obligate Halyard to be
responsible for any costs related to retiree medical or retiree life insurance
benefits referenced in Section 3.01 above.

4.08 Kimberly-Clark Assets. Kimberly-Clark shall retain all reserves, bank
accounts, trust funds or other balances maintained with respect to
Kimberly-Clark’s Non-ERISA Benefit Arrangements.

 

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ARTICLE V

PENSION PLANS

5.01 Foreign Retirement Benefit Plans. Effective as of the Distribution Date,
Halyard shall establish supplemental employee retirement plans or other
registered and/or non-registered pension plans that are substantially similar to
the Kimberly-Clark supplemental employee retirement plans and pension plans in
which Foreign Business Employees participate immediately prior to the
Distribution Date. Halyard shall assume and be solely responsible for any
liabilities arising from or in connection with all such Foreign Business
Employees under such plans. To the extent not addressed in this Section 5 or in
any other agreement between Kimberly-Clark and Halyard, or as required by the
terms of any state or provincial law, participation in the Kimberly-Clark
supplemental employee retirement plans and pension plans in which Foreign
Business Employees participate by all Transferred Employees and all Business
Employees who are no longer employed by Kimberly-Clark as of the Distribution
Date, will cease as of the Effective Time, and Kimberly-Clark shall retain all
claim reserves, bank accounts, trust funds or other balances maintained by or on
behalf of such plans.

5.02 U.S. Defined Contribution Plans.

(a) Employees’ 401(k) Plan.

(1) Establishment of Halyard 401(k) Plan. Effective as of the Distribution Date,
(i) participation in the Kimberly-Clark Corporation 401(k) and Profit Sharing
Plan will cease for all Transferred Employees and other Business Employees, and
(ii) Halyard shall adopt and establish a Pension Plan and trust qualified under
sections 401(a), 401(k) and 501(a) of the Code (the “Halyard 401(k) Plan”) that
is substantially similar (except as may be agreed upon between Kimberly-Clark
and Halyard) to the Kimberly-Clark Corporation 401(k) and Profit-Sharing Plan
and trust immediately prior to the Distribution Date (the “K-C 401(k) Plan”).
Halyard shall assume and thereafter be solely responsible for all then existing
or future employer liabilities related to Transferred Employees and other
Business Employees under the Halyard 401(k) Plan and the administration thereof.
As soon as practicable after the adoption of the Halyard 401(k) Plan, Halyard
shall submit an application to the IRS for a determination regarding the
qualification of the Halyard 401(k) Plan and shall take any actions not
inconsistent with Halyard’s other general commitments contained in this
Agreement and make any amendments necessary to receive a favorable determination
letter. All existing participant elections for Transferred Employees and other
Business Employees (and their beneficiaries and alternate payees) under the K-C
401(k) Plan, including without limitation, beneficiary designations, deferral
elections, investment elections and form of payment elections shall continue in
full force and effect under the Halyard 401(k) Plan, until otherwise changed
pursuant to the terms of the Halyard 401(k) Plan, except that any investment
election for the Employer Stock Fund shall be deemed instead to be an election
for the Target Date Fund, until otherwise changed by the participant.

 

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(2) Transfer of Account Balances. As soon as administratively practicable after
the Distribution Date, there shall be transferred to the Halyard 401(k) Plan
assets having a value as of the applicable valuation date that are equal to the
value of the account balances of, and liabilities with respect to, all
Transferred Employees and other Business Employees (other than seconded
employees described in Section 2.01(d)) with an account balance under the K-C
401(k) Plan as of such valuation date. Such transferred assets shall be in cash
and in-kind transfers of investment fund units (except for any promissory notes
evidencing outstanding loan balances of Transferred Employees), and shall be in
accordance with section 414(l) of the Code. Liabilities under any qualified
domestic relations orders (as defined in section 414(p) of the Code) received
with respect to any assets transferred to the Halyard 401(k) Plan shall be
transferred to Halyard (along with such qualified domestic relations orders and
administrative instructions) at the time such assets are transferred.
Kimberly-Clark shall transfer to Halyard, and Halyard shall accept any
promissory notes including outstanding loan balances of Business Employees, and
Halyard shall continue to process any plan loans transferred from the K-C 401(k)
Plan to the Halyard 401(k) Plan.

(3) Employer Stock. By virtue of the Distribution, participants in the K-C
401(k) Plan who have investments in the K-C Employer Stock Fund will receive
shares of Halyard stock for each share of Kimberly-Clark stock held in their
account, based on the Distribution Ratio. With respect to K-C 401(k) Plan
participants who are not Business Employees, the Halyard Stock allocated to
their accounts shall be automatically sold and reinvested in K-C stock within
the K-C Employer Stock Fund. With respect to Business Employees, both the K-C
stock and Halyard Stock allocated to their accounts shall be automatically sold
as of a date determined by the K-C 401(k) Plan Administrator and the cash
proceeds transferred to the Halyard 401(k) Plan and reinvested in the Target
Date Fund thereunder, until otherwise changed pursuant to the terms of the
Halyard 401(k) Plan. Kimberly-Clark and Halyard shall co-operate in providing
appropriate notice to Business Employees with respect to the above.

(4) 2014 Employer Contributions. Kimberly-Clark shall make the 2014
Profit-Sharing Contribution to the K-C 401(k) Plan, with respect to the
participants’ pre-Distribution Date Eligible Earnings (as defined in the K-C
401(k) Plan) for those K-C 401(k) Plan participants who are at or over age 55 on
the Distribution Date, as per the terms of the K-C 401(k) Plan. The Halyard
401(k) Plan shall provide for a one-time 2014 Profit-Sharing Contribution for
all Transferred Employees who are participants in the Halyard 401(k) Plan and
who did not receive a 2014 Profit Sharing Contribution to the K-C 401(k) Plan,
equal to 3% of their 2014 pre-Distribution Date Eligible Earnings (including,
for avoidance of doubt, both their base compensation and their 2013 bonus or
other incentive compensation paid in 2014).

In addition, the Halyard 401(k) Plan shall provide for a “true-up” Company Match
Contribution for the 2014 Plan Year for any Transferred Employee participating
in the Halyard 401(k) Plan who would have received a true-up Company

 

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Match Safe Harbor Contribution under the K-C 401(k) Plan had he or she been a
participant in the K-C 401(k) Plan for the entire 2014 Plan Year, due to his or
her total 2014 Company Match Safe Harbor Contributions under the K-C 401(k) Plan
and Halyard 401(k) Plan being limited to less than it otherwise would have been
by virtue of the Code Section 401(a)(17) or 402(g) limits being reached before
Plan Year end. The amount of the true-up contribution shall be equal to the
difference between 4.33% of the Participant’s 2014 combined Eligible Earnings
for both Kimberly-Clark and Halyard (or if less, his actual combined
Contributions to both the K-C 401(k) Plan and the Halyard 401(k) Plan for the
2014 Plan Year) and the amount of Company Match Safe Harbor Contributions
allocated to his account under the K-C 401(k) Plan and the Halyard 401(k) Plan
for such 2014 Plan Year.

Kimberly-Clark shall transfer the appropriate accruals to Halyard with respect
to (i) the above-described Profit-Sharing Contributions, (ii) the
above-described Company Match True-Up Contributions, and (iii) 4% of the Company
Safe Harbor Match Contribution for that portion of the 2014 bonus or other
incentive compensation that is transferred to and payable by Halyard in 2015
that is attributed to pre-Distribution Date service.

(b) Supplemental 401(k) Plan. Effective as of the Distribution Date,
(i) participation in the Kimberly-Clark Corporation Supplemental Retirement
401(k) and Profit Sharing Plan (“K-C Supplemental 401(k) Plan”) will cease for
all Transferred Employees and other Business Employees, and (ii) Halyard shall
adopt and establish a Supplemental 401(k) Plan (“Halyard Supplemental 401(k)
Plan”) that is substantially similar (except as may be agreed upon between
Kimberly-Clark and Halyard) to the K-C Supplemental 401(k) Plan immediately
prior to the Distribution Date. All existing elections by Transferred Employees
and other Business Employees under the K-C Supplemental 401(k) Plan, including
salary deferral, investments, beneficiaries, and forms and timing of payment,
shall continue under the Halyard Supplemental 401(k) Plan, until otherwise
changed pursuant to the terms of the Halyard Supplemental 401(k) Plan. Effective
as of the Distribution Date, Kimberly-Clark shall transfer to Halyard, and
Halyard shall assume and thereafter be solely responsible for all then existing
or future liabilities related to Transferred Employees and other Business
Employees under either the K-C Supplemental 401(k) Plan or the Halyard
Supplemental 401(k) Plan and the administration thereof. However, given that the
K-C Supplemental 401(k) Plan is an unfunded plan, there shall be no assets
transferred from Kimberly-Clark or the K-C Supplemental 401(k) Plan to Halyard
or the Halyard Supplemental 401(k) Plan (including, without limitation, any
assets held in a grantor or so-called rabbi trust).

(c) Deferred Compensation Plan. Following the Effective Time, Business Employees
shall be considered to have incurred a Termination of Service as defined under
the Kimberly-Clark Corporation Deferred Compensation Plan (which is a
grandfathered plan exempt from Code Section 409A), and shall be entitled to a
distribution therefrom pursuant to the terms of such Plan. Halyard shall not be
required to establish a similar plan.

 

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5.03 U.S. Pension Plan.

(a) K-C Pension Plan. Halyard shall not be required to adopt a U.S. defined
benefit pension plan and shall not assume any liabilities under the
Kimberly-Clark Corporation Pension Plan. Effective as of the Effective Time,
Business Employees shall be deemed to have incurred a Termination of Employment
as defined under the Kimberly-Clark Corporation Pension Plan (“K-C Pension
Plan”), and shall be entitled to a distribution therefrom pursuant to its terms
and conditions.

(b) K-C Supplemental Pension Plans. Halyard shall not be required to adopt any
U.S. supplemental pension plans and shall not assume any liabilities under the
Supplemental Benefit Plan to the Kimberly-Clark Corporation Pension Plan (“K-C
Supplemental Pension Plan”) or the Second Supplemental Benefit Plan to the
Kimberly-Clark Corporation Pension Plan (“K-C Second Supplemental Pension
Plan”). Effective as of the Effective Time, Business Employees shall be deemed
to have incurred a Termination of Employment (as defined under the K-C
Supplemental Pension Plan and the K-C Second Supplemental Pension Plan) under
the Grandfathered Portions (i.e., those portions of the Plan exempt from Code
Section 409A) of the K-C Supplemental Pension Plan and the K-C Second
Supplemental Pension Plan, and shall be entitled to distributions therefrom
pursuant to their terms and conditions. Business Employee Participants in the
non-Grandfathered Portions of the K-C Supplemental Pension Plan and K-C Second
Supplemental Pension Plan shall not be considered to have incurred a Separation
from Service (as defined in Code Section 409A) from Kimberly-Clark by virtue of
the Distribution, and thus shall not be entitled to any distribution from such
non Grandfathered Portions of such Plans by virtue of the Distribution. Rather,
Business Employee Participants shall be considered to have incurred a Separation
from Service under the non-Grandfathered Portions of such Plans when they incur
a Separation from Service with Halyard, and Halyard shall notify Kimberly-Clark
of the same, so that Kimberly-Clark can comply with the automatic payment
provisions thereunder.

5.04 Past Service Credit. With respect to all Business Employees, Halyard shall
recognize all service, plan participation and membership recognized under the
(i) K-C 401(k) Plan, (ii) K-C Supplemental 401(k) Plan, and (iii) any foreign
retirement or pension plan assumed or transferred to Halyard or any of whose
assets or liabilities are assumed by or transferred to Halyard or to a Halyard
retirement or pension plan, in each case for purposes of determining benefit
eligibility, participation, vesting, and calculation of benefits under Halyard
retirement plans and programs including the Halyard 401(k) Plan, the Halyard
Supplemental 401(k) Plan, any foreign retirement or pension plan sponsored or
maintained by Halyard, and non-pension fringe benefit plans (but not including
any retiree medical or retiree life insurance plan). Kimberly-Clark will provide
to Halyard copies of any records available to Kimberly-Clark to document such
service, plan participation and membership and cooperate with Halyard to resolve
any discrepancies or obtain any missing data for purposes of determining benefit
eligibility, participation, vesting and calculation of benefits with respect to
such Business Employees.

 

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ARTICLE VI

GENERAL PROVISIONS

6.01 Miscellaneous. All Miscellaneous Matters contained in Article XIII of the
Distribution Agreement are fully applicable hereto and are incorporated herein
by reference.

6.02 Preservation of Rights to Amend. The rights of Kimberly-Clark or Halyard to
amend or terminate any plan referred to herein shall not be limited in any way
by this Employee Matters Agreement.

6.03 Applicability to Subsidiaries and Affiliate. The obligations of Halyard in
this Agreement shall also be applicable to any subsidiary or Affiliate of
Halyard, and Halyard shall cause its subsidiaries or Affiliates to comply with
such obligations. The obligation of Kimberly-Clark in this Agreement shall also
be applicable to any subsidiary or Affiliate of Kimberly-Clark, and
Kimberly-Clark shall cause its subsidiaries and Affiliates to comply with such
obligations. Further, any reference in this Agreement to a person being employed
or engaged by a party, shall be construed as including a reference to that
person being employed or engaged by a subsidiary or an Affiliate of the party,
as the case may require.

6.04 Administrative Complaints/Litigation. As of and after the Distribution
Date, Halyard shall assume, and be solely liable for, the handling,
administration, investigation, and defense of actions (whether arising before,
on or after the Distribution Date), including, without limitation, ERISA,
occupational safety and health, employment standards, union grievances, wrongful
dismissal, discrimination or human rights and unemployment compensation claims,
that are outstanding on the Distribution Date or asserted on or after the
Distribution Date against Kimberly-Clark or Halyard by any Business Employee or
any other person arising out of or relating to employment with the Halyard
Business or Halyard. Any Losses arising from such actions shall be deemed
Assumed Liabilities under the Distribution Agreement. Kimberly-Clark reserves
the right to participate in the investigation, defense or settlement of any
matter to the extent it deems reasonably necessary. Notwithstanding the above,
this Section 6.04 shall not apply to any claims covered by the Kimberly-Clark
Director and Officer Liability Insurance Policy that Kimberly-Clark retains
pursuant to the terms of the Distribution Agreement.

6.05 Reimbursement and Indemnification. The parties hereto agree to reimburse
each other, within 30 days of receipt from the other party of appropriate
verification, for all costs and expenses which each may incur on behalf of the
other as a result of any of the Welfare Plans, Pension Plans and Non-ERISA
Benefit Arrangements and, as contemplated by Section 2.02, any termination or
severance payments or benefits. All liabilities retained, assumed or indemnified
against by Halyard pursuant to this Agreement shall be deemed Assumed
Liabilities, and all liabilities retained, assumed or indemnified against by
Kimberly-Clark pursuant to this Agreement shall be deemed Retained Liabilities,
and in each case shall be subject to the indemnification provisions of the
Distribution Agreement.

6.06 No Third Party Beneficiaries. No Transferred Employee, Business Employee,
or other current or former employee of Kimberly-Clark or Halyard or any
subsidiary or Affiliate of either (or his/her spouse, dependent or beneficiary),
or any other Person not a party to this Agreement, shall be entitled to assert
any claim hereunder. This Agreement shall be binding

 

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upon and inure to the benefit only of the parties hereto and their respective
successors. Notwithstanding any other provisions to the contrary except with
respect to such successors, this Agreement is not intended and shall not be
construed for the benefit of any third party or any Person not a signatory
hereto. In no event shall this Agreement constitute a third party beneficiary
contract. Notwithstanding the above, any reference to a “party” or “parties” in
this Section 6.06 shall also include the subsidiaries and Affiliates, excluding
for these purposes individuals who are Affiliates, of such party or parties.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
their names by a duly authorized officer as of the date first written above.

 

KIMBERLY-CLARK CORPORATION By:  

/s/ Mark A. Buthman

Name:   Mark A. Buthman Title:   Chief Financial Officer HALYARD HEALTH, INC.
By:  

/s/ Steven E. Voskuil

Name:   Steven E. Voskuil Title:   Senior Vice President and Chief Financial
Officer

 

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