Exhibit 10.7


 


	
  

  



 


 


NEENAH PAPER


 


EXECUTIVE SEVERANCE PLAN


 





















 


NEENAH PAPER INC.


EXECUTIVE
SEVERANCE PLAN


 


TABLE OF CONTENTS


 


	
  ARTICLE
  I

  	
  ESTABLISHMENT
  AND PURPOSE OF THE PLAN

  	
   

  
	
  1.1

  	
  Establishment of the Plan

  	
   

  
	
  1.2

  	
  Background

  	
   

  
	
  1.3

  	
  Purpose of Plan

  	
   

  
	
  1.4

  	
  Type of Plan

  	
   

  
	
  1.5

  	
  Effective Date

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
  DEFINITIONS

  	
   

  
	
  2.1

  	
  Accounting Firm

  	
   

  
	
  2.2

  	
  Affiliate

  	
   

  
	
  2.3

  	
  Annual Bonus Amount

  	
   

  
	
  2.4

  	
  Board

  	
   

  
	
  2.5

  	
  Cause

  	
   

  
	
  2.6

  	
  Change of Control

  	
   

  
	
  2.7

  	
  Code

  	
   

  
	
  2.8

  	
  Committee

  	
   

  
	
  2.9

  	
  Company

  	
   

  
	
  2.10

  	
  Eligible Executive

  	
   

  
	
  2.11

  	
  Equity Plan

  	
   

  
	
  2.12

  	
  Excise
  Tax

  	
   

  
	
  2.13

  	
  Good Reason

  	
   

  
	
  2.14

  	
  Net After-Tax Receipt

  	
   

  
	
  2.15

  	
  Parachute Value

  	
   

  
	
  2.16

  	
  Participant

  	
   

  
	
  2.17

  	
  Payment

  	
   

  
	
  2.18

  	
  Plan
  Year

  	
   

  
	
  2.19

  	
  Qualified
  Termination of Employment

  	
   

  
	
  2.20

  	
  Reduced Amount

  	
   

  
	
  2.21

  	
  Relevant Date

  	
   

  
	
  2.22

  	
  Separation Payment

  	
   

  
	
  2.23

  	
  Severance Period

  	
   

  
	
  2.24

  	
  Value

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PARTICIPATION

  	
   

  
	
  3.1

  	
  Participation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  TERMINATION
  OF EMPLOYMENT OF PARTICIPANTS

  	
   

  
	
  4.1

  	
  Termination
  of Employment of Participants

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
  PAYMENTS
  UPON QUALIFIED TERMINATION OF EMPLOYMENT

  	
   

  
	
  5.1

  	
  Cash Severance Payment

  	
   

  
	
  5.2

  	
  Outplacement Services

  	
   

  



 





















 


	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
  CERTAIN
  REDUCTION OF PAYMENTS BY THE COMPANY

  	
   

  
	
  6.1

  	
  Determination of
  Need for Reduction

  	
   

  
	
  6.2

  	
  Participant
  Election of Reduced Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  CERTAIN
  ADDITIONAL PAYMENTS BY THE COMPANY

  	
   

  
	
  7.1

  	
  Gross-Up Payment

  	
   

  
	
  7.2

  	
  Determinations by
  Accounting Firm

  	
   

  
	
  7.3

  	
  Timing of Gross-Up Payment

  	
   

  
	
  7.4

  	
  Claims by Internal
  Revenue Service

  	
   

  
	
  7.5

  	
  Refunds of Excise Taxes

  	
   

  
	
  7.6

  	
  Tax Withholding

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
  RELEASE
  AND RESTRICTIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  OTHER TERMS AND
  CONDITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  NONASSIGNABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
  UNFUNDED
  PLAN

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
  MITIGATION
  AND SETTLEMENT OF CLAIMS

  	
   

  
	
  12.1

  	
  No Duty to Mitigate

  	
   

  
	
  12.2

  	
  Full Settlement

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII

  	
  TERMINATION
  AND AMENDMENT OF THIS PLAN

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  XIV

  	
  SUCCESSORS

  	
   

  



 


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NEENAH PAPER


EXECUTIVE SEVERANCE PLAN


 


ARTICLE I



ESTABLISHMENT AND PURPOSE OF THE PLAN


 


1.1                                 Establishment of the Plan.  Neenah Paper, Inc. (the “Company”) hereby
establishes a flexible benefits plan for its Eligible Employees, to be known as
the Neenah Paper Executive Severance Plan (the “Plan”), as set forth in this
document.


 


1.2                                 Background.  Effective as of November 30, 2004 (the “Distribution
Date”), a spin-off of the Company, then an affiliate of Kimberly-Clark
Corporation (“KC”), was effectuated by the distribution of Company shares to
Kimberly-Clark Corporation’s shareholders. 
In connection with the spin-off transaction, the Company agreed to
establish an executive severance plan similar to the Kimberly-Clark Corporation
Executive Severance Plan (the “KC Plan”) for the benefit of certain key executives
of the Company.


 


1.3                                 Purpose of Plan.  The purpose of this Plan is to assure the
Company that it will have the continued dedication of, and the availability of
objective advice and counsel from, key executives of the Company
notwithstanding the possibility, threat or occurrence of a change of control of
the Company.  In the event the Company
receives any proposal from a third person concerning a possible business
combination with the Company, or acquisition of the Company’s equity
securities, or otherwise considers or pursues a transaction that could lead to
a change of control, the Board of Directors of the Company believes it
imperative that the Company and the Board be able to rely upon key executives
to continue in their positions and be available for advice, if requested,
without concern that those individuals might be distracted by the personal
uncertainties and risks created by such a possibility.  Should the Company receive or consider any
such proposal or transaction, in addition to their regular duties, such key
executives may be called upon to assist in the assessment of the proposal or
transaction, to advise management and the Board as to whether the proposal or
transaction would be in the best interest of the Company and its stockholders,
and to take such other actions as the Board might determine to be appropriate.


 


1.4                                 Type of Plan.  This Plan is intended to be an employee
welfare benefit plan for severance benefits within the meaning of Section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended.


 


1.5                                 Effective Date.  The effective date of the Plan is December 1,
2004.


 





















 


ARTICLE
II



DEFINITIONS


 


As used in this plan, the following terms
shall have the following respective meanings:


 


2.1                                 Accounting Firm.  Deloitte & Touche LLP or such other
certified public accounting firm designated by the Company.


 


2.2                                 Affiliate.  The Company and any company, person or organization which, on the date of determination,
(A) is a member of a controlled group of corporations (as defined in Code
section 414(b)) which includes the Company; (B) is a trade or business (whether or not incorporated) which controls, is
controlled by or is under common control with (within the meaning of Code
section 414(c)) the Company; (C) is a member of an affiliated service
group (as defined in Code section 414(m)) which includes the Company; or (D) is
otherwise required to be aggregated with the Company pursuant to Code section
414(o) and regulations promulgated thereunder.


 


2.3                                 Annual Bonus Amount.  For any Participant, the target-level award
payable to the Participant for the year in which the Relevant Date occurred
(or, if such target-level award has not been established at that time, for the
preceding year) or, if higher, for any subsequent year that begins before the
Qualified Termination of Employment, under the Neenah Paper, Inc. Management
Achievement Award Program, as applicable, or any successor or additional plan.


 


2.4                                 Board.  The Board of Directors of the Company.


 


2.5                                 Cause.  Any of the following:


 


(A)                              Willful failure
to perform his duties and responsibilities;


 


(B)                                Embezzlement,
fraud, or misappropriation against or with respect to the Company, its
subsidiaries and/or their assets;


 


(C)                                Conviction of a
felony charge or a plea of guilty or nolo contendre
to a felony charge;


 


(D)                               Use of alcohol
and/or drugs (whether prescription or nonprescription) which impairs the
Participant’s ability to perform his duties and responsibilities;


 


(E)                                 Unlawful
trading in the securities of any corporation (including the Company) based on
information gained as a result of the Participant’s performance of services for
the Company;


 


(F)                                 Violation of
any of the corporate policies, work rules or standards of the Company,
including but not limited to the Code of Conduct, sexual harassment policy and
insider trading policy, or violation of any applicable statute, regulation, or
rule, or provision of any applicable code of professional ethics; or


 


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(G)                                Willful
disclosure to unauthorized persons of confidential information or trade secrets
of the Company.


 


2.6                                 Change of Control.  Any of the following events:


 


(A)                              Acquisition of
Substantial Percentage.  The
acquisition by any Person of Beneficial Ownership of thirty percent (30%) or
more of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of Directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
Section, the following acquisitions shall not constitute a Change in Control:  (i) any acquisition by a Person who on the Effective
Date is the Beneficial Owner of thirty percent (30%) or more of the Outstanding
Company Voting Securities, (ii) any acquisition directly from the Company,
including without limitation, a public offering of securities, (iii) any
acquisition by the Company, (iv) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any of its Affiliates,
or (v) any acquisition by any corporation pursuant to a transaction which
complies with subparagraphs (i), (ii), and (iii) of Section 2.6(C) hereof;


 


(B)                                Change in
Majority of Board Members.  During
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board, provided that any individual
becoming a Director whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the Directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election or removal of the Directors of the Company or other actual or
threatened solicitation of proxies of consents by or on behalf of a Person
other than the Board;


 


(C)                                Reorganization,
Merger or Consolidation.  Consummation
of a reorganization, merger, or consolidation to which the Company is a party
or a sale or other disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case unless, following such
Business Combination: (i) all or substantially all of the individuals and
entities who were the Beneficial Owners of Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than sixty percent (60%) of the combined voting
power of the outstanding voting securities entitled to vote generally in the
election of Directors of the Company resulting from the Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more Affiliates) (the “Successor
Entity”) in substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company Voting
Securities; and (ii) no Person (excluding any Successor Entity or any employee
benefit


 


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plan, or related trust, of the Company or such
Successor Entity) beneficially owns, directly or indirectly, thirty percent
(30%) or more of the combined voting power of the then outstanding voting
securities of the Successor Entity, except to the extent that such ownership
existed prior to the Business Combination; and (iii) at least a majority of the
members of the board of directors of the Successor Entity were members of the
Incumbent Board (including persons deemed to be members of the Incumbent Board
by reason of the proviso to paragraph (b) of this Section) at the time of the
execution of the initial Participation Agreement or of the action of the Board
providing for such Business Combination; or


 


(D)                               Liquidation or
Dissolution.  Approval by
the shareholders of the Company of a complete liquidation or dissolution of the
Company.


 


2.7                                 Code.  The Internal Revenue Code of 1986, as amended
from time to time, and as construed and interpreted by valid regulations or rulings
issued thereunder.


 


2.8                                 Committee.  The Compensation Committee of the Board.


 


2.9                                 Company.  Neenah Paper, Inc., a Delaware corporation.


 


2.10                           Eligible Executive.  Those key executives of the Company and its Affiliates
who are from time to time designated by the Chief Executive Officer as eligible
to participate in the Plan and are so designated on Exhibit “A” hereto.  Notwithstanding the above, the Committee may
approve criteria for the Chief Executive Officer to use for eligibility purposes
of the Plan and shall approve participation in the Plan by the executive
officers of the Company.


 


2.11                           Equity Plan.  The Neenah Paper, Inc. 2004 Omnibus Stock and
Incentive Plan, and any successor or additional plans under which a Participant
receives stock options, restricted stock or other equity-based compensation.


 


2.12                           Excise Tax.  The excise tax imposed by Section 4999 of the
Code, together with any interest or penalties imposed with respect to such
excise tax.


 


2.13                           Good Reason.  Any of the following:


 


(A)                              the assignment
to the Participant of any duties inconsistent with the Participant’s position as
a key executive officer of the Company or a substantial adverse alteration in
the nature of the Participant’s responsibilities and position from those in effect
immediately prior to the Change of Control, other than such alteration
primarily attributable to the fact that the Company is no longer a public company;


 


(B)                                a reduction by
the Company of the Participant’s annual base salary by five percent (5%) or
more as in effect immediately prior to the Change of Control, except for
across-the-board salary reductions similarly affecting all key executives of
the Company;


 


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(C)                                without the
express written agreement of the Participant, any assignment or change in
duties that would require the relocation of the Participant’s work place to a
location that is more than fifty (50) miles from the Participant’s work place
immediately prior to a Change in Control of the Company; provided however, the
relocation of the Participant’s work place must also increase the regular commute
distance between the Participant’s residence and work place by more than fifty miles (one-way).


 


(D)                               the failure of
the Company to pay as soon as administratively feasible, after notice from the
Participant, any portion of the Participant’s current compensation;


 


(E)                                 the failure of
the Company to continue in effect any compensation plan in which the
Participant participates immediately prior to the Change of Control which is
material to the Participant’s total compensation, including but not limited to
the Company’s stock option, incentive compensation, and bonus plans, or any
substitute plans adopted prior to the Change of Control, unless an equitable
arrangement (which is embodied in an ongoing substitute or alternative plan but
which need not provide the Participant with equity-based incentives) has been
made with respect to such plan, or the failure by the Company to continue the
Participant’s participation therein (or in such substitute or alternative plan)
on a basis not materially less favorable than the benefits provided to other participants;


 


(F)                                 the failure by
the Company to continue to provide the Participant with benefits substantially
similar to those enjoyed by the Participant under any of the Company’s pension,
life insurance, medical, health and accident, or disability plans in which the
Participant was participating at the time of the Change of Control, the taking
of any action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Participant of any material fringe
benefit enjoyed by the Participant at the time of the Change of Control, or the
failure by the Company to provide the Participant with the number of paid
vacation days to which the Participant is entitled on the basis of years of
service with the Company in accordance with the Company’s normal vacation
policy in effect at the time of the Change of Control.


 


The Participant’s right to terminate the
Participant’s employment for Good Reason shall not be affected by the
Participant’s incapacity due to physical or mental illness.  However, in order to terminate employment for
Good Reason, (1) the Participant must give the Company a notice setting forth
the circumstances of the act or failure to act alleged to constitute Good
Reason within 30 days after the Participant first has actual notice of such act
or failure, and stating that the Participant has determined that such act or
failure constitutes “Good Reason” hereunder, (2) the Company must fail to
correct such act or failure within 30 days after it receives such notice from
the Participant, and (3) the Participant must actually terminate his or her
employment during the period of 30 days beginning 30 days after the Company
receives such notice.


 


2.14                           Net After-Tax Receipt.  The Value of a Payment, net of all taxes imposed
on a Participant with respect thereto under Sections 1 and 4999 of the Code,
determined by applying the


 


5





















 


highest marginal rate under Section 1 of the Code
which applied to the Participant’s taxable income for the immediately preceding
taxable year.


 


2.15                           Parachute Value.  With respect to a Payment, the present value
as of the date of the Change of Control for purposes of Code Section 280G of
the portion of such Payment that constitutes a “parachute payment” under Code Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.


 


2.16                           Participant.  An Eligible Executive who is a party to a
Participation Agreement which has not been terminated in accordance with the
terms of this Plan.


 


2.17                           Payment.  Any payment or distribution in the nature of
compensation (within the meaning of Code Section 280G(b)(2)) to or for the
benefit of a Participant, whether paid or payable pursuant to this Plan or otherwise.


 


2.18                           Plan Year.  The short period beginning on the Effective
Date and ending on December 31, 2004; and thereafter, each twelve calendar
month period beginning on January 1 and ending on the following December 31.


 


2.19                           Qualified Termination of Employment.  The termination of a Participant’s employment
with the Company and/or its Affiliates either:


 


(A)                              within the two
(2) year period following a Change of Control of the Company due to the
following:  (i) by the Company without
Cause, or (ii) by the Participant with Good Reason;


 


(B)                                by the Company
without Cause before a Change of Control, if a Change of Control occurs within
one year after such termination and it is reasonably demonstrated by the
Participant that such termination of employment was at the request of a third
party that had taken steps reasonably calculated to effect a Change of Control
or otherwise arose in connection with or in anticipation of a Change of Control.


 


A transfer of employment for administrative
purposes among the Company and its Affiliates shall not be deemed a Qualified
Termination of Employment, but if such a transfer results in the occurrence of
Good Reason, the affected Participant shall have the right to terminate
employment for Good Reason and such termination shall be a Qualified
Termination of Employment.


 


2.20                           Reduced Amount.  With respect to a Participant, the greatest
aggregate amount of Separation Payments which (a) is less than the sum of all
Separation Payments and (b) results in aggregate Net After Tax Receipts which
are equal to or greater than the Net After Tax Receipts which would result if
the Participant were paid the sum of all Separation Payments.


 


2.21                           Relevant Date.  In the case of a Qualified Termination of
Employment as described in subsection (B) of the definition of “Qualified
Termination of Employment,” the date of


 


6





















 


such Qualified Termination of Employment, and, in
all other cases, the date of the Change of Control.


 


2.22                           Separation Payment.  With respect to a Participant, a Payment paid
or payable to the Participant pursuant to this Plan (disregarding Article VII of
this Plan).


 


2.23                           Severance Period.  The period of two (2) years beginning on the
date of the Qualified Termination of Employment.


 


2.24                           Value.  With respect to a Payment, the economic
present value of a Payment as of the date of the Change of Control for purposes
of Code Section 280G, as determined by the Accounting Firm using the discount
rate required by Code Section 280G(d)(4).


 


ARTICLE
III



PARTICIPATION


 


3.1                                 Participation.  Upon designation as an Eligible Executive,
the Executive shall be offered a Participation Agreement in the Plan and upon
execution and delivery thereof by the Eligible Executive evidencing such
Eligible Executive’s agreement not to voluntarily leave the employ of the
Company and its Affiliates and to continue to render services during the period
of any threatened Change of Control of the Company, such Eligible Executive
shall become a Participant in the Plan. 
A Participant shall cease to be a Participant in the Plan upon the
termination of the Participant’s Participation Agreement or the termination of
the Plan.


 


ARTICLE IV



TERMINATION OF EMPLOYMENT OF PARTICIPANTS


 


4.1                                 Termination of Employment of
Participants.  Nothing in this Plan shall be deemed to
entitle a Participant to continued employment with the Company and its
Affiliates and the rights of the Company to terminate the employment of a
Participant shall continue as fully as though this Plan were not in effect,
provided that any Qualified Termination of Employment shall entitle the
Participant to the benefits herein provided. 
In addition, nothing in this Plan shall be deemed to entitle a Participant
under this Plan to any rights, or to payments under this Plan, with respect to
any plan in which the Participant was not a participant prior to a Qualified
Termination of Employment.


 


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ARTICLE V



PAYMENTS UPON QUALIFIED TERMINATION OF EMPLOYMENT


 


5.1                                 Cash Severance Payment.  Subject to Article VIII hereof, in the event
of a Qualified Termination of Employment of a Participant, a lump sum cash
payment shall be made to such Participant as compensation for services
rendered, in an amount (subject to any applicable payroll or other taxes
required to be withheld) equal to the sum of the amounts specified in subsections
(A) through (F) below.  Payment shall be
made to the Participant within fifteen (15) days following the last day of employment
with the Company, except (i) to the extent any amount is not then calculable,
such portion shall be paid as soon as practicable following the ability to calculate
the amount; (ii) to the extent amounts are payable under subsections (C), (D)
and/or (E), such amounts shall not be payable until the date following six (6)
months after the last day of employment; and (iii) to the extent otherwise as
may be required by law:


 


(A)                              Salary Plus
Incentive Compensation.  A
lump sum amount equal to two (2) times the sum of (a) the Participant’s annual
base salary at the rate in effect immediately prior to the Relevant Date or, if
higher, immediately before the Qualified Termination of Employment, plus (b)
the Annual Bonus Amount;


 


(B)                                Equity Plan.  All grants and awards that were granted to the
Participant under the Company’s Equity Plan, including but not limited to any
substitute plans adopted prior to the Relevant Date (or any successor or additional
plan), that were outstanding both on the Relevant Date and on the date immediately
before the Qualified Termination of Employment, shall be governed by and subject
to the provisions of the Equity Plan.


 


(C)                                Neenah Paper
401(k) Retirement Plan.  A
lump sum amount equal to any benefits under the Neenah Paper 401(k) Retirement Plan
(or any successor or additional plan) that the Participant forfeits as a result
of his or her termination of employment, based upon the value of the
Participant’s account as of the most recent valuation date before the date of
the Qualified Termination of Employment; provided that this benefit shall be
payable from the general assets of the Company;


 


(D)                               Neenah Paper
Retirement Contribution Plan.  A lump sum amount equal to (a) in the case of
a Participant, the Participant’s annual Retirement Contributions under the Neenah
Paper Company Retirement Contribution Plan (or any successor or additional
plans) and the Neenah Paper Supplemental Retirement Contribution Plan (or any successor
or additional plans) (collectively, the “Retirement Contribution Plan”) to
which the Participant would have been entitled if he had remained employed by
the Company for the Severance Period at the rate of annual compensation
specified in Section 5.1(A) above except
that the Annual Bonus Amount shall be treated as earned for the year in which
termination occurred and the balance of the Severance Period and no award
actually earned in, and paid for, the year in which termination occurred shall
be considered, plus (b) for all Participants, an amount equal to any benefits
under the Retirement Contribution Plan


 


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(or any successor or additional plan) that the
Participant forfeits as a result of his or her termination of employment, based
upon the value of the Participant’s account as of the most recent valuation
date before the date of the Qualified Termination of Employment, provided that
this benefit shall be payable from the general assets of the Company;


 


(E)                                 Neenah Paper Pension
Plan.  In the case of a Participant
who participates in the Neenah Paper Pension Plan, a lump sum retirement
benefit, in addition to any benefits received under the to the Neenah Paper
Supplemental Pension Plan (or any successor or additional plans) and (the “Supplemental
Plan”) and the Neenah Paper Pension Plan (or any successor or additional plans)
(the “Pension Plan”), in an amount equal to the difference between (a) the
benefits under the Pension Plan and the Supplemental Plan to which the
Participant would have been entitled if such Participant had remained employed
by the Company for the Severance Period, at the rate of annual compensation
specified in Section 5.1 (A) above except that the Annual Bonus Amount shall be
treated as earned for the year in which termination occurred and the balance of
the Severance Period and no award actually earned in, and paid for, the year in
which termination occurred shall be considered, minus (b) the benefits to which
the Participant would actually have been entitled under the Pension Plan and
the Supplemental Plan; provided that this benefit shall be equal to the actuarial
present value of a straight life annuity without level income option; and
provided further that this benefit shall be payable from the general assets of
the Company; and


 


(F)                                 Medical and
Dental Benefits.  A lump sum
amount equal to the amount of the monthly premiums that the Participant would
be required to pay, if he or she elected “COBRA” continuation coverage under
the medical and dental plans of the Company in which the Participant was
participating immediately before the Qualified Termination of Employment, based
upon the premium rates in effect as of the date of the Qualified Termination of
Employment, times 24.  In addition, the
Participant shall receive a cash payment for his or her accrued retiree medical
credits (with no additional age or service provided and no additional enhanced
access to retiree medical).


 


5.2                                 Outplacement Services.  In addition to the cash Payments described in
Section 5.1, the Participant shall be entitled to receive professional
outplacement services for up to the lesser of (i) two (2) years or (ii) a total
of $50,000 cost, by an outplacement service provider selected by the Company.


 


ARTICLE VI



CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY


 


6.1                                 Determination of Need for Reduction.  Notwithstanding anything in this Plan or any
Participation Agreement to the contrary, in the event that the Accounting Firm shall
be determined


 


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that (i) any Payment to a Participant would be
subject to the Excise Tax, but (ii) the Parachute Value of all Payments to the
Participant does not exceed 110% of the Safe Harbor Amount, then the Accounting
Firm shall determine the amount of the necessary reduction of the Participant’s
Separation Payments in order to meet the definition of a Reduced Amount.  All fees payable to the Accounting Firm with
respect to this Section shall be paid solely by the Company.


 


6.2                                 Participant Election of
Reduced Payments.


 


(A)                              Notice and
Election by Participant.  If
the Accounting Firm determines that aggregate Separation Payments should be reduced
to the Reduced Amount, the Company shall promptly give the Participant notice
to that effect and a copy of the detailed calculation thereof, and the
Participant may then elect, in his or her sole discretion, which and how much
of the Separation Payments shall be eliminated or reduced (as long as after
such election the Value of the aggregate Separation Payments equals the Reduced
Amount), and shall advise the Company in writing of his or her election within
ten (10) days of his receipt of notice.


 


(B)                                Failure of
Participant to Make Election.  If no such election is made by the
Participant within such ten-day period, the Company shall elect which of such
Separation Payments shall be eliminated or reduced (as long as after such
election the Value of the aggregate Separation Payments equals the Reduced
Amount) and shall notify the Participant promptly of such election.


 


(C)                                Binding
Determinations by Accounting Firm.  All determinations made by the Accounting
Firm under this Section shall be binding upon the Company and the Participant
and shall be made within sixty (60) days of a termination of employment of the
Participant.


 


(D)                               Timing of
Payment.  As promptly as practicable
following such determination of the Reduced Amount, the Company shall pay to or
distribute for the benefit of the Participant such Separation Payments as are
then due to the Participant under this Plan.


 


(E)                                 Overpayments
and Underpayments.  While it is
the intention of the Company to reduce the amounts payable or distributable to
a Participant hereunder only if the aggregate Net After Tax Receipts to the
Participant would thereby be increased, as a result of the uncertainty in the
application of Code Section 4999 at the time of the initial determination by
the Accounting Firm hereunder, it is possible that amounts will have been paid
or distributed by the Company to or for the benefit of a Participant pursuant
to this Plan which should not have been so paid or distributed (“Overpayment”)
or that additional amounts which will have not been paid or distributed by the
Company to or for the benefit of a Participant pursuant to this Plan could have
been so paid or distributed (“Underpayment”), in each case, consistent with the
calculation of the Reduced Amount hereunder.


 


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(F)                                 Overpayment.  In the event that the Accounting Firm
determines that an Overpayment has been made, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the
Participant which the Accounting Firm believes has a high probability of
success, any such benefit of a Participant shall be treated for all purposes as
a loan to the Participant which the Participant shall repay to the Company
together with interest at the applicable federal rate provided for in Code Section
7872(f)(2); provided, however, that no such loan shall be deemed to have been
made and no amount shall be payable by a Participant to the Company if and to
the extent (i) such deemed loan and payment would not either reduce the amount
on which the Participant is subject to tax under Code Sections 1 and 4999
or generate a refund of such taxes, or (ii) such deemed loan would violate any
applicable laws or regulations.


 


(G)                                Underpayment.  In the event that the Accounting Firm, based
upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Participant together with interest at the
applicable federal rate provided for in Code Section 7872(f)(2).


 


ARTICLE VII



CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY


 


7.1                                 Gross-Up Payment.  Notwithstanding anything in this Plan or any
Participation Agreement to the contrary, in the event that the Accounting Firm shall
determine that (i) any Payment to a Participant would be subject to the Excise
Tax, and (ii) the Parachute Value of all Payments to the Participant exceeds
110% of the Safe Harbor Amount, then the Participant shall be entitled to
receive an additional payment (the “Gross-Up Payment”) in an amount such that,
after payment by the Participant of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes and Excise Tax imposed upon the Gross-Up Payment, the Participant retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.  If it shall be determined that
(i) any Payment to a Participant would be subject to the Excise Tax, but the Parachute
Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no
Gross-Up Payment shall be made to the Participant and the provisions of Article
VI of this Plan shall apply to that Participant.  The Company’s obligation to make Gross-Up
Payments under this Article VII shall be conditioned upon the Participant’s
termination of employment.


 


7.2                                 Determinations by Accounting Firm.  Subject to the provisions of Section 7.4,
all determinations required to be made under this Article VII, including
whether and when a Gross-Up Payment is required, the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by the Accounting Firm. 
The Accounting Firm shall provide detailed supporting calculations both
to the Company and the Participant within fifteen (15) business days of the
receipt of notice


 


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from the Participant that there has been a Payment
or such earlier time as is requested by the Company.  All fees and expenses of the Accounting Firm
shall be borne solely by the Company.  Any
determination by the Accounting Firm shall be binding upon the Company and the
Participant.  As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (an “Underpayment”), consistent with the calculations required to be made
hereunder.  In the event the Company
exhausts its remedies pursuant to Section 7.4 and the Participant thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Participant.


 


7.3                                 Timing of Gross-Up Payment.  Any Gross-Up Payment, as determined pursuant
to this Article, shall be paid by the Company to or for the benefit of the
applicable Participant within five (5) days of the receipt of the Accounting
Firm’s determination.


 


7.4                                 Claims by Internal Revenue Service.  Each Participant shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.  Such notification shall be given as soon as
practicable, but no later than ten (10) business days after the Participant is
informed in writing of such claim.  The
Participant shall apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. 
The Participant shall not pay such claim prior to the expiration of the
30-day period following the date on which the Participant gives such notice to
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). 
If the Company notifies the Participant in writing prior to the
expiration of such period that the Company desires to contest such claim, the
Participant shall:


 


(A)                              give the
Company any information reasonably requested by the Company relating to such
claim,


 


(B)                                take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected
by the Company,


 


(C)                                cooperate with
the Company in good faith in order effectively to contest such claim, and


 


(D)                               permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest, and shall indemnify and hold the Participant harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties)
imposed as a result of such representation and payment of costs and
expenses.  Without limitation of the
foregoing provisions of this Section 7.4, the Company


 


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shall control all proceedings taken in connection
with such contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
discretion, either pay the tax claimed to the appropriate taxing authority on
behalf of the Participant and direct the Participant to sue for a refund or
contest the claim in any permissible manner, and the Participant agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that, if the Company directs the Participant
to pay such claim and directs the Participant to sue for a refund, the Company
shall indemnify and hold the Participant harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties) imposed with respect
to such payment or with respect to any imputed income in connection with such
payment; and provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Participant
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Participant shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing authority.


 


7.5                                 Refunds of Excise Taxes.  If, after the receipt by a Participant of a
Gross-Up Payment or payment by the Company of an amount on the Participant’s
behalf pursuant to Section 7.4, the Participant becomes entitled to
receive any refund with respect to the Excise Tax to which such Gross-Up
Payment relates or with respect to such claim, the Participant shall (subject
to the Company’s complying with the requirements of Section 7.4, if applicable)
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto).  If, after payment by the Company of an amount
on the Participant’s behalf pursuant to Section 7.4, a determination is made
that the Participant shall not be entitled to any refund with respect to such
claim and the Company does not notify the Participant in writing of its intent
to contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then the amount of such payment shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.


 


7.6                                 Tax Withholding.  Notwithstanding any other provision of this
Plan, the Company may, in its sole discretion, withhold and pay over to the
Internal Revenue Service or any other applicable taxing authority, for the
benefit of a Participant, all or any portion of any Gross-Up Payment, and by
signing an Participation Agreement, the Participant shall consent to such withholding.


 


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ARTICLE VIII



RELEASE AND RESTRICTIVE COVENANTS


 


Any and all Payments and other benefits
provided under this Plan are contingent upon, and shall not become payable
until, the Participant executes an agreement providing for a general release of
all claims against the Company, as well as noncompete, nondisclosure,
nonsolicitation of customers and employers and nondisparagement provisions upon
his or her termination of employment.


 


ARTICLE IX



OTHER TERMS AND CONDITIONS


 


The Participation Agreement to be entered
into pursuant to this Plan shall contain such other terms, provisions and
conditions not inconsistent with this Plan as shall be determined by the
Board.  Where appearing in this Plan or
the Participation Agreement, the masculine shall include the feminine and the
plural shall include the singular, unless the context clearly indicates otherwise.


 


ARTICLE
X



NONASSIGNABILITY


 


Each Participant’s rights under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution.


 


ARTICLE
XI



UNFUNDED PLAN


 


The Plan shall be unfunded and all costs of
the Plan shall be paid from the Company’s general assets.  Neither the Company nor the Board shall be
required to segregate any assets that may at any time be represented by
benefits under the Plan.  Neither the
Company nor the Board shall be deemed to be a trustee of any amounts to be paid
under the Plan.  Any liability of the
Company to any Participant with respect to any benefit shall be based solely
upon any contractual obligations created by the Plan and the Participation
Agreement; no such obligation shall be deemed to be secured by any pledge or
any encumbrance on any property of the Company.


 


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ARTICLE XII



MITIGATION AND SETTLEMENT OF CLAIMS


 


12.1                           No Duty to Mitigate.  In no event shall any
Participant be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Participant under any of the
provisions of this Plan, and such amounts shall not be reduced whether or not
the Participant obtains other employment.


 


12.2                           Full Settlement.  In the event that a
Participant contests the Company’s interpretation of any provision of this Plan
or the value of any Payment hereunder, and such Participant prevails through
legal arbitration proceedings on at least a major point or significant portion
of such contest, the Company agrees to reimburse the Participant, to the full
extent permitted by law, all legal fees reasonably incurred by the Participant
in such contest, up to a maximum of $50,000.


 


ARTICLE XIII



TERMINATION AND AMENDMENT OF THIS PLAN


 


The Board shall have power at any time, in
its discretion, to amend or terminate this Plan, in whole or in part; except
that no amendment or termination shall impair or abridge the obligations of the
Company under any Participation Agreements previously entered into pursuant to
this Plan except as expressly permitted by the terms of such Participation
Agreements.


 


ARTICLE
XIV



SUCCESSORS


 


The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of its business and/or assets to assume expressly
and agree to perform this Plan and the Participation Agreements in the same manner
and to the same extent that the Company would be required to perform them if no
such succession had taken place.


 


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IN WITNESS WHEREOF, the Company has caused
this Plan to be executed by its duly authorized officer.


 


	
   

  	
  NEENAH
  PAPER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
							



 


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