Exhibit 10.2

TAX SHARING AGREEMENT

 

                This Tax Sharing Agreement (the “Agreement”) is dated as of
November 30, 2004 (the “Distribution Date”), by and between Kimberly-Clark
Corporation, a Delaware corporation (“KCC”), and Neenah Paper, Inc., a Delaware
corporation (“NPI”).

 

                WHEREAS, KCC, through its Neenah Paper and Technical Paper
divisions and through certain Canadian subsidiaries, is engaged in the business
of manufacturing and distributing a range of premium and specialty paper grades
and more than 700,000 metric tons of bleached kraft pulp per year (the
“Business”);

 

                WHEREAS, the Board of Directors of KCC has determined that it
would be advisable and in the best interests of KCC and its stockholders for KCC
to transfer the Business to NPI and to thereafter distribute all of the
outstanding shares of NPI’s common stock on a pro rata basis to the holders of
KCC’s common stock (the “Distribution”) pursuant to an agreement, dated as of
the date hereof, between KCC and NPI (the “Distribution Agreement”);

 

                WHEREAS, KCC and NPI intend that the contribution of assets by
KCC and certain of its subsidiaries to NPI and certain of its subsidiaries (the
“Contribution”) immediately prior to the Distribution will qualify as a transfer
made pursuant to a reorganization within the meaning of Section 368(a)(1)(D) of
the Code and the Distribution will qualify as a distribution described in
Section 355 of the Code;

 

                WHEREAS, KCC and NPI believe that it is in their mutual best
interests to set forth in this Agreement the rights and duties of each party
with respect to various tax matters relating to NPI and its subsidiaries and the
business which may arise as a result of the Distribution;

 

                NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                                       Definitions

 

(a)           Applicable Federal Rate. As used herein, the term “Applicable
Federal Rate” means a rate of interest equal to the Federal Long Term Rate
published pursuant to Section 1274(d) of the Code, compounded annually.

 

(b)           Audit.  As used herein, the term “Audit(s)” shall mean any audit
or examination undertaken by any Tax authority with respect to Taxes.

 

(c)           Code.  As used herein, the term “Code” means the United States
Internal Revenue Code of 1986, as amended.

 

(d)           Controversy.  As used herein, the term “Controversy(ies)” shall
mean any

 

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action involving a Tax authority before any administrative or judicial body
which results from a disagreed Tax adjustment proposed during the course of an
Audit.

 

(e)           Final Determination.  As used herein, “Final Determination” means
(i) a decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal or (ii) a closing agreement (whether or not
entered into under Section 7121 or 7122 of the Code) or any other binding
settlement agreement (whether or not with the Internal Revenue Service) entered
into in connection with or in contemplation of an administrative proceeding if a
judicial contest is not or is no longer available.

 

(f)            Incidental Costs.  As used herein, “Incidental Costs” means
reasonable legal fees and costs or expense incurred by a party hereto relating
to the investigation and defense of a claim for Taxes by a Tax authority.

 

(g)           KCC Company.  As used herein, “KCC Company(ies)” shall mean, for
any period, KCC, or an entity that is an affiliate of KCC after the Distribution
Date.  For purposes of the foregoing, “affiliate” means any entity that directly
or indirectly controls, is controlled by, or is under common control with, KCC.
For the purposes of this definition, the term “control” means the power to
direct the management of an entity, directly or indirectly, whether through the
ownership of voting securities, by contract, or otherwise; and the term
“controlled” has the meaning correlative to the foregoing.  Notwithstanding the
foregoing, for any period, NPI and KCC shall not be deemed to be under common
control for purposes hereof solely due to the fact that NPI and KCC have
(directly or indirectly) common stockholders.

 

(h)           KCC Tainting Act. As used herein, “KCC Tainting Act” shall mean:

 

                                (i)            any inaccuracy or breach of any
representation, warranty, or covenant that is made by KCC pursuant to Section
2(a) of this Agreement;

 

                                (ii)           any action (or failure to take
any reasonably available action) by any of the KCC Companies; or

 

                                (iii)          any acquisition or other
transaction involving KCC’s capital stock (other than the Distribution).

 

(i)            NPI Company.  As used herein, “NPI Company(ies)” shall mean, for
any period, NPI, or an entity that is an affiliate of NPI after the Distribution
Date.  For purposes of the foregoing, “affiliate” means any entity that directly
or indirectly controls, is controlled by, or is under common control with, NPI. 
For the purposes of this definition, the term “control” means the power to
direct the management of an entity, directly or indirectly, whether through the
ownership of voting securities, by contract, or otherwise; and the term
“controlled” has the meaning correlative to the foregoing.  Notwithstanding the
foregoing, for any period, NPI and KCC shall not be deemed to be under common
control for purposes

 

 

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hereof solely due to the fact that NPI and KCC have (directly or indirectly)
common stockholders.

 

(j)            NPI Tainting Act. As used herein, “NPI Tainting Act” shall mean:

 

                                (i)            any inaccuracy or breach of any
representation, warranty, or covenant that is made by NPI pursuant to Section
2(b) of this Agreement;

 

                                (ii)           any action (or failure to take
any reasonably available action) by any of the NPI Companies; or

 

                                (iii)          any acquisition or other
transaction involving NPI’s capital stock (other than the Distribution).

 

(k)           Pre-Distribution Period.  As used herein, “Pre-Distribution
Period” means any taxable year or other taxable period that ends on or before
the Distribution Date and, in the case of a Straddle Period, that portion of the
taxable period ending on the close of the Distribution Date.

 

(l)            Restructuring Taxes. As used herein, “Restructuring Taxes” means
any Taxes imposed and any Incidental Costs incurred as a result of a Final
Determination that the Distribution fails to qualify as tax-free due to the
application of Sections 355(d) or 355(e) of the Code.

 

(m)          Ruling Request.  As used herein, “Ruling Request” means the
original and supplemental requests or submissions filed by KCC with the Internal
Revenue Service with respect to the Distribution.

 

(n)           Straddle Period.  As used herein, “Straddle Period” means any
taxable year or other tax period for an NPI Company that begins before the
Distribution Date and ends after the Distribution Date.

 

(o)           Tax or Taxes.

 

(i)            As used herein, “Tax” or “Taxes” shall mean all taxes, however
denominated, including any interest, penalties or other additions that may
become payable in respect thereof, imposed by any governmental entity, or any
agency or political subdivision of any such governmental entity, including, but
not limited to, all income or profits taxes (including but not limited to any
U.S. federal income taxes, state and territorial income taxes and income taxes
imposed by any governmental entity other than the United States, its states,
territories and local jurisdictions), alternative or add on minimum tax, payroll
and employee withholding taxes, unemployment insurance, social security taxes,
production taxes, windfall profits taxes, sales and use taxes, ad valorem taxes,
excise taxes, franchise taxes, customs taxes, gross receipt taxes, business
license taxes, occupational taxes, real and personal property taxes, workers’
compensation, and other obligations of the same or of a similar

 

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nature to any of the foregoing.

 

(ii)           The term “Tax” or “Taxes” shall include any liability imposed
under Treas. Reg. §1.1502-6 of the Code (or any similar provision of state,
local or foreign law that imposes liability as a result of being a member of a
consolidated, combined or unitary group) or as a result of any tax sharing or
indemnity agreement.

 

(p)           Tax Return or Return.  As used herein, “Tax Return” or “Return”
shall mean any return, filing, questionnaire, information report, declaration or
estimated tax, or other document required to be filed, including amended returns
and claims for refund that may be filed, for any Tax period with any Tax
authority in connection with any Tax or Taxes (whether or not payment is
required to be made with respect to such filing).

 

2.             Representations and Warranties.

 

(a)           KCC hereby represents and warrants that: (i) it has examined the
Ruling Request and (ii) the facts set forth therein, and the representations
made therein, to the extent such facts and representations are descriptive of
the KCC Companies or the businesses conducted by them, and the representations
made therein regarding the corporate business purpose for the Distribution and
stating that the Distribution is not used principally as a device for the
distribution of the earnings and profits of KCC or NPI or both, were true,
correct and complete in all material respects on the Distribution Date.

 

(b)           NPI hereby represents and warrants that: (i) it has examined the
Ruling Request and (ii) the facts set forth therein, and the representations
made therein, to the extent descriptive of the NPI Companies or the Business
were, to its knowledge, information and belief, true, correct and complete in
all material respects on the Distribution Date.

 

 

3.                                       Preparation and Filing of Tax  Returns,
Payment of Taxes and Audits and Controversies.

 

(a)                                  Preparation and Filing of Returns.

 

(i)  The preparation and filing of any Tax Return for the NPI Companies for a
Tax period which ends on or prior to the Distribution Date shall be the
responsibility of KCC.

 

(ii)  The preparation and filing of any Tax Return for the NPI Companies for a
period which ends after the Distribution Date shall be the responsibility of
NPI.  Until the third anniversary of the Distribution Date, or unless consented
to by KCC in writing (which consent shall not be unreasonably withheld), NPI
shall prepare such Tax Returns in a manner consistent with the past practices
and methods used in preparing the Tax Returns for the Business for periods
ending on or prior to the Distribution Date (unless such practices or methods
are no longer permissible under the Code or any other applicable Tax law).  
Said consistency shall include, but not be limited to, tax depreciation method,
tax useful life, tax accounting methods and other tax elections previously made

 

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by KCC but shall not prohibit NPI from adopting a method different from that
utilized by KCC for determining its inventory.  Notwithstanding the foregoing,
NPI is free to take Tax positions on its Tax Returns, unless such positions
might reasonably affect the Tax liability of KCC for any Pre-Distribution
Period.  The parties shall cooperate in accordance with Section 6 below for
purposes of determining whether a KCC Tax position would be compromised by
positions taken by NPI on a Tax Return that NPI has responsibility for preparing
and filing.

 

(iii)  NPI shall prepare and deliver to KCC by overnight mail to KCC any
Straddle Period Tax Return for KCC’s review no later than twenty (20) days prior
to the due date or extended due date for filing such Straddle Period Tax
Return.   KCC shall provide any comments or objections to the draft Straddle
Period Tax Return to NPI no later than fifteen (15) days prior to the due date
or extended due date for filing such return.  If KCC disagrees with any material
item to be reported or reflected in such Tax Return, such dispute shall be
resolved as provided for under Section 7.

 

(iv)  NPI and KCC shall cooperate fully with respect to the preparation and
filing of any Tax Return hereunder, and each shall promptly make available to
the other, upon reasonable request, such records, documents, information and
other available data within each company’s possession or control which is
pertinent to such Return.

 

(v) All reasonable costs and expenses incurred in preparing and filing such
Straddle Period Tax Returns shall be paid by NPI; provided, however, that KCC
shall reimburse NPI for the portion of such costs that are apportioned to the
Pre-Distribution Period.  Such costs will be apportioned to the Pre-Distribution
Period by multiplying the total amount of such costs by a fraction, the
numerator of which is the number of days in the period covered by the Tax Return
falling within the Pre-Distribution Period and the denominator of which is the
total number of days in the period covered by the Tax Return.

 

(vi)  If for any taxable year beginning on or after the Distribution Date, the
NPI Companies recognize a net operating loss or a net capital loss which any
member of the NPI Companies, under applicable law, is permitted or required to
carry back to a prior taxable year of KCC or a KCC Company, then, KCC (or a KCC
Company) shall, at NPI’s sole cost and expense, file appropriate refund claims
within a reasonable period after being requested to do so by NPI.  KCC (or the
KCC Company receiving such refund) shall promptly remit to NPI any refunds it
receives with respect to any such net operating loss or net capital loss carried
back.  Notwithstanding the foregoing, a loss that is permitted, but not
required, to be carried back, shall only be carried back with the prior written
consent of KCC (which consent may be given or denied in the sole discretion of
KCC).

 

(b)                                 Liability for Taxes.

 

(i)            KCC shall be liable for and shall make payment of any Tax on
account of the NPI Companies for any period ending on or prior to the
Distribution Date.  Except as otherwise provided in Section 3(a)(vi) of this
Agreement, KCC shall be entitled to receive any  refund of such Taxes for any
such Tax periods.  All reasonable costs and expenses incurred in

 

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preparing and filing the Tax Returns reporting such Tax shall be paid by KCC. 
Refunds of Taxes paid by KCC, if any, received by NPI shall be remitted to KCC
within thirty (30) days following receipt.  KCC shall indemnify and hold
harmless NPI for the Taxes described in this Section 3(b)(i).

 

(ii)           NPI shall be liable for and shall make payment of any Tax on
account of the NPI Companies for any period beginning after the Distribution
Date.  NPI shall be entitled to receive any refund of such Taxes for any such
Tax periods.  Refunds of Taxes paid by NPI, if any, received by KCC shall be
remitted to NPI within thirty (30) days following receipt.  NPI shall indemnify
and hold harmless KCC for the Taxes described in this Section 3(b)(ii).

 

(iii)          NPI shall file all Straddle Period Tax Returns and pay any Tax
shown as due and owing thereon.  In the case of any Straddle Period, KCC and NPI
will elect, to the extent permitted under applicable law, to treat the
Distribution Date as the last day of the taxable period of the relevant entity
and the liability for Taxes shall be apportioned to the Pre-Distribution Period
based on the “closing of the books” method described in Treas. Reg.
§1.1502-76(b)(2)(i) or any similar provision of state, local or foreign law.  In
any case where applicable law does not permit the parties to treat the
Distribution Date as the last day of the taxable year or period, any Taxes
arising out of or relating to a Straddle Period will be apportioned to the
Pre-Distribution Period based on a closing of the books of the relevant entity;
provided, however, that (a) exemptions, allowances or deductions that are
calculated on an annualized basis (including depreciation, amortization and
depletion deductions) will be apportioned on a daily pro rata basis and
(b) solely for purposes of determining the marginal tax rate applicable to
income during such period in a jurisdiction in which such tax rate depends upon
the level of income, annualized income will be taken into account. 
Notwithstanding the foregoing, Taxes imposed on a periodic basis (e.g., property
taxes) will be apportioned to the Pre-Distribution Period by multiplying the
Taxes by a fraction, the numerator of which is the number of days in the period
falling within the Pre-Distribution Period and the denominator of which is the
total number of days in the period upon which the Tax is imposed.  KCC shall
indemnify NPI for those Taxes that are apportioned to the Pre-Distribution
Period, and shall be entitled to any refunds thereof.  NPI shall pay the Tax due
on all Straddle Period Tax Returns, but will be entitled to receive any refund
of those Taxes to the extent they are not owed to KCC.

 

(iv)          With respect to any Straddle Period Tax Returns to be filed by NPI
after the Distribution Date pursuant to Section 3(a)(iii) of this Agreement, NPI
shall provide KCC with a written request showing in reasonable detail the
calculation of the amount of KCC’s Taxes (and any other amounts) owing by KCC to
NPI pursuant to this Agreement 30 days prior to the due date for filing the
Return.  KCC shall provide its comments to NPI and shall pay to NPI any amount
not in dispute at least 15 days prior to the due date for filing the Return.  In
the event that KCC disagrees with a position taken on the Return, the parties
shall resolve their dispute in accordance with Section 7 of this Agreement;
provided, however, that any matter in dispute 10 days prior to filing the Return
shall be submitted to a third party in accordance with Section 7 of this
Agreement for resolution before the due date of the Return.

 

(v)           Notwithstanding the foregoing, and notwithstanding anything in
Sections 8 and 9 of this Agreement, to the contrary:

 

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(A)          KCC shall be liable for Restructuring Taxes imposed solely as a
result of a KCC Tainting Act;

 

(B)           NPI shall be liable for Restructuring Taxes imposed solely as a
result of an NPI Tainting Act; and

 

(C)           KCC and NPI shall each bear 50% of the liability for Restructuring
Taxes in the event there is both a KCC Tainting Act and an NPI Tainting Act.

 

(c)           Tax Consequences of Payments.  To the extent permitted by
applicable law, the parties hereto shall treat any payment made pursuant to this
Agreement as a capital contribution or a distribution, as the case may be,
immediately prior to the Distribution Date and, accordingly, as not includible
in the taxable income of the recipient.  Notwithstanding the immediately
preceding sentence, if any such payment (or portion thereof) causes, directly or
indirectly, an increase in the taxable income of the recipient (or one of its
subsidiaries) the payor’s payment obligation (or portion thereof) shall be
grossed up to take into account the additional Tax owed by the recipient (or any
of its subsidiaries), assuming the highest aggregate marginal statutory federal,
state, local or foreign Tax rates in effect at the time of payment.

 

(d)                                 Audits and Controversies.

 

(i)            All Audits with respect to Taxes for taxable periods ending on or
before the Distribution Date shall be under the exclusive control and direction
of KCC.

 

(ii)           Except as provided in Section 3(d)(iii) of this Agreement, all
Audits, with respect to Taxes for a taxable period of an NPI Company which
begins after the Distribution Date, shall be under the exclusive control and
direction of NPI.

 

(iii)          With respect to Straddle Periods:

 

(A)          NPI shall notify KCC of any such Audit and shall provide KCC with
all material information concerning such Audits as it may affect KCC within
thirty (30) days after such information becomes known to NPI; and

 

(B)           No proposed resolution between the appropriate Tax authority and
NPI of any Audit adjustment relating to such Taxes shall be accepted by NPI
unless NPI shall have first notified KCC, in writing, of such proposed
resolution if the proposed resolution could affect KCC’s indemnification
obligations under this Agreement.  KCC shall then have thirty (30) days from the
date of receipt of notice to object to the resolution in writing and to provide
NPI with any additional support or proof with respect to its portion of such
adjustment or be bound by the adjustment as agreed to by NPI.  In the event KCC
shall so object, and NPI agrees, which agreement shall not be unreasonably
withheld, that such additional support and proof is relevant to the Audit
adjustment, NPI will use all reasonable efforts to resolve such Audit adjustment
with the Tax authority giving due regard to such additional support or proof.

 

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(iv)          Notwithstanding the foregoing, if the United States taxing
authorities assert on Audit of a KCC Tax Return that a Tax is due with respect
to the Distribution for which NPI may be obligated to indemnify KCC pursuant to
this Agreement, KCC shall notify NPI of any such Audit and shall provide NPI
with all material information concerning such Audit as it may affect NPI within
thirty (30) days after such information becomes known to KCC.  The party that is
liable for such Tax with respect to the Distribution and acknowledges such
liability in writing shall control the Audit or the Controversy to the extent it
relates to such Tax.  In the event that neither party acknowledges its liability
in writing or in the event that both parties are liable for the aforementioned
Tax, KCC shall control the Audit or Controversy; provided, however, that KCC
shall: (i) take reasonable steps to ensure that NPI is notified of any
developments in the Audit or Controversy to the extent it relates to such Tax,
(ii) provide NPI with copies of any written materials relating to such Audit or
Controversy as far as it relates to such Tax, (iii) consult with NPI and offer
NPI a reasonable opportunity to comment before submitting any written materials
to any Tax authority in connection with such Audit or Controversy to the extent
it relates to such Tax, and (iv) defend (or settle) such Audit or Controversy in
good faith.

 

(e)           Termination of Tax Sharing Agreements.  Except as set forth in
this Agreement or the Distribution Agreement, and in consideration for the
mutual indemnities and other obligations of this Agreement, any and all Tax
sharing agreements between any of the KCC Companies, on the one hand, and the
NPI Companies, on the other hand, shall be terminated as of the Distribution
Date.

 

4.                                       Certain Tax Adjustments.

 

Notwithstanding anything herein to the contrary, the parties recognize that
during the course of an Audit or Controversy certain adverse Tax adjustments
imposed on KCC or NPI, in any Tax period, may have an unintended beneficial
effect with respect to NPI or KCC, respectively, in the same or another Tax
period.  Accordingly, the parties agree it is appropriate to provide for the
following:

 

(a)           KCC’s Tax Detriment.  If, during any twelve month period which
ends on December 31, as a result of one or more Audit(s) or Controversy(ies),
additional Taxes in excess of $50,000 are imposed upon KCC with respect to any
Tax period (a “Tax Detriment”) which causes less Tax to be incurred by NPI in
any Tax period for which NPI is liable under this Agreement which has not been
closed (a “Tax Benefit”), whether preceding or subsequent to or concurrent with
the Tax period in which KCC suffers the Tax Detriment, NPI shall pay to KCC,
upon thirty (30) days written notice and demand, in U.S. currency and subject to
the proviso set forth below, an amount equal to the value of such Tax Benefit,
based on the following assumptions:

 

(i)            NPI will have sufficient income to use such Tax Benefit in the
earliest open Tax period or periods it otherwise would be entitled to use such
Tax Benefit whether or not NPI does in fact have such income;

 

(ii)           the applicable Tax rates for NPI will equal the highest statutory

 

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marginal Tax rates in effect for the Tax period in which the additional Taxes
were imposed upon KCC; and

 

(iii)          any such Tax Benefit to NPI, if for a Tax period subsequent to
the date of demand by KCC, shall be discounted back to the date of payment using
a discount rate equal to the Applicable Federal Rate, compounded annually, as in
effect at the date of such demand by KCC; provided, however, NPI shall have the
right to elect to defer the payment of such Tax Benefit to KCC until the
earliest Tax period or periods (“KCC’s Tax Benefit Period”) in which KCC could
have used such Tax Benefit had KCC not distributed NPI to its shareholders. 
Such election by NPI shall be in writing and transmitted to KCC within thirty
(30) days following written notice and demand from KCC for such payment. 
Payment shall be made on or before April 15 of the year following KCC’s Tax
Benefit Period.

 

(b)           NPI’s Tax Detriment.  If, during any twelve month period which
ends on December 31, as a result of one or more Audit(s) or Controversy(ies),
NPI suffers a Tax Detriment in excess of $50,000 with respect to any Tax period
which provides KCC with a Tax Benefit in any Tax period which has not been
closed, whether preceding or subsequent to or concurrent with the Tax period in
which NPI suffers the Tax Detriment, KCC shall pay to NPI, upon thirty (30) days
written notice and demand, in U.S. currency and subject to the proviso set forth
below, an amount equal to the value of such Tax Benefit, based on the following
assumptions:

 

(i)            KCC will have sufficient income to use such Tax Benefit in the
earliest open Tax period or periods it otherwise would be entitled to such Tax
Benefit whether or not KCC does in fact have such income;

 

(ii)           the applicable Tax rates for KCC will equal the highest statutory
marginal Tax rates in effect for the Tax period in which the additional Taxes
were imposed upon NPI; and

 

(iii)          any such Tax Benefit to KCC, if for a Tax period subsequent to
the date of demand by NPI, shall be discounted back to the date of payment using
a discount rate equal to the Applicable Federal Rate, compounded annually, as in
effect at the date of such demand by NPI; provided, however, KCC shall have the
right to elect to defer the payment of such Tax Benefit to NPI until the
earliest Tax period or periods (“NPI’s Tax Benefit Period”) in which NPI
suffered such Tax Detriment.  Such election by KCC shall be in writing and
transmitted to NPI within thirty (30) days following written notice and demand
from NPI for such payment.  Payment shall be made on or before April 15 of the
year following NPI’s Tax Benefit Period.

 

5.             Tax Attributes.

 

Any Tax attribute generated by the NPI Companies shall, to the extent permitted
by the applicable law of the Tax jurisdiction in question, remain with the NPI
Companies.  In any case where the applicable law of the Tax jurisdiction in
question requires such Tax attribute to be allocated between KCC and NPI, such
allocation shall be made as provided by the law of such jurisdiction.

 

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                6.             Cooperation between Parties.

 

The parties to this Agreement recognize that cooperation must be undertaken by
them in numerous circumstances involving Tax matters, including the preparation
of Tax Returns, the filing thereof, the defense of Audits, prosecution of
Controversies with Tax authorities before administrative or judicial bodies, Tax
rulings regarding the Tax consequences of certain transactions from appropriate
Tax authorities, including the Internal Revenue Service, and other efforts with
respect to Tax consequences involving the mutual interests of KCC and NPI,
including administrative and legislative matters.  Accordingly, the parties
hereby agree that they will cooperate with one another with respect to the
following:

 

(a)           Requests for Information.  Upon request, a party shall assist the
other party with respect to books, records, information, documents and any other
appropriate data reasonably requested by one party in writing to the other. 
Response to such request shall be accomplished within a reasonable period of
time, but in no event more than thirty (30) days after receipt of such request
unless unusual or special circumstances exist for such delay.

 

(b)           Availability of Personnel.  The representatives of one party shall
be available to collect and interpret books, records, information, documents and
other appropriate data at the reasonable request of the other party.  The
personnel of one party shall also be reasonably available to assist the other
party with respect to Audits and Controversies.  Response to such request for
personnel assistance shall be accomplished within a reasonable period of time,
but in no event more than thirty (30) days after receipt of such request unless
unusual or special circumstances exist for such delay.

 

(c)           Notification of Adjustments.  Notwithstanding the materiality of
an item or whether the other party participates in an Audit, written
notification of any adjustment in a Tax Return of the party responsible for an
Audit, which adjusts an item which affects the other party, shall be furnished
to the other party upon final resolution of the Audit.

 

(d)           Retention of Records.  Unless an original is specifically
requested in writing and in good faith, KCC shall transfer to NPI copies of all
books, records, information, documents and any other appropriate data with
respect to Taxes which may affect NPI in subsequent Tax periods.  NPI shall
retain, in a readily accessible location, all books, records, information,
documents, and any other appropriate data which relate to Taxes that may affect
KCC for any Tax period for as long as KCC may be subject to assessment for Tax
for any such Tax period for which it may be liable under this Agreement, unless
NPI shall have first obtained the written consent of KCC to destroy any such
books, records, information, documents and other appropriate data.  KCC will
notify NPI of any Tax period for which it is no longer subject to assessment,
within a reasonable period of time after the statute of limitation and any
extensions thereof for the Tax period have lapsed.

 

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                7.             Disputes.

 

                If the parties disagree as to the interpretation of any Tax
provision or the requirements of any Tax law, the parties shall attempt in good
faith to resolve such dispute.  If such dispute is not resolved within thirty
(30) days, the parties shall jointly retain the services of a nationally
recognized accounting or law firm (“Arbitrator”) acceptable to each of the
parties to resolve the dispute.  The fees of the Arbitrator shall be borne
equally by the parties having the dispute, and the decision of the Arbitrator
shall be final and binding on all parties involved.  Following the decision of
the Arbitrator, the parties shall each take or cause to be taken any action that
is necessary or appropriate to implement such decision of the Arbitrator,
including, without limitation, the prompt payment of Taxes as directed by the
Arbitrator.

 

                8.             NPI’s Assurances with Respect to Certain
Undertakings.

 

                NPI covenants as follows:

 

(a)           Restrictions on Transfer.  NPI shall not transfer its business
operations or transfer any subsidiary to any related or unrelated party until
the earliest of the first to occur:

 

(i)  the second anniversary of the Distribution Date;

 

(ii)  a favorable ruling from the Internal Revenue Service to the effect that
such transfer will not adversely affect the tax free nature of the Distribution;

 

(iii)  the receipt of a written consent from KCC with respect to such transfer,
which consent shall not be unreasonably withheld; or

 

(iv)  an opinion of tax counsel chosen by KCC and paid for by NPI to the effect
that such transfer will not adversely affect the tax-free nature of the
Distribution.

 

(b)           No Inconsistent Actions.  Until the second anniversary of the
Distribution Date, NPI, and its subsidiaries and affiliates, shall take no
action inconsistent with Sections 351, 355 and 368(a)(1)(D) of the Code and the
Regulations thereunder which is ultimately held to cause the formation of NPI,
the contribution of KCC assets to NPI, or the Distribution to be a taxable
transaction; provided, however, to the extent Sections 8(a)(ii), (iii) or (iv)
of this Agreement has been complied with, this covenant shall not have been
breached.

 

(c)           Breach of Covenants.  NPI shall indemnify KCC against, the full
amount of any Taxes and Incidental Costs (on an after-Tax basis assuming the
highest aggregate marginal statutory federal and state Tax rates in effect at
the time of payment of such damages) suffered as a result of any breach by NPI
of any of the covenants set forth in Section 8(a) or (b) of this Agreement.

 

                9.             Mutual  Assurances with Respect to Certain
Undertakings.

 

                                (a)           NPI shall indemnify KCC against
the full amount of any Taxes and Incidental

 

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Costs (on an after-Tax basis assuming the highest aggregate marginal statutory
federal and state Tax rates in effect at the time of payment of such damages)
suffered as a result of any breach by NPI of any representation made by NPI in
connection with any Tax opinion provided by Baker & McKenzie with respect to the
qualification of the Distribution as a distribution described in Section 355 of
the Code.

 

                                (b)           KCC shall indemnify NPI against
the full amount of any Taxes and Incidental Costs (on an after-Tax basis
assuming the highest aggregate marginal statutory federal and state Tax rates in
effect at the time of payment of such damages) suffered as a result of any
breach by KCC of any representation made by KCC in connection with any Tax
opinion provided by Baker & McKenzie with respect to the qualification of the
Distribution as a distribution described in Section 355 of the Code.

 

10.           Representation as to Present Intention.

 

NPI represents to KCC that neither it nor any of its officers or directors is
aware of any negotiations or intentions to sell or otherwise dispose of all or
substantially all of NPI’s assets or business operations (including any
subsidiary or the assets or business operations thereof) in a transaction or
series of transactions which would give rise to a gain or loss for Tax
purposes.  In the event of a breach of such representation by NPI, NPI shall
indemnify KCC against, the full amount of damages suffered as a result of such
breach on an after-Tax basis (assuming the highest aggregate marginal statutory
federal and state Tax rates in effect at the time of payment of such damages).

 

11.           Binding Effect.

 

(a)           Due Authorization.  KCC and NPI acknowledge and agree that certain
rights and obligations are imposed by this Agreement on their respective foreign
subsidiaries and affiliates which are not direct parties to this Agreement.  KCC
and NPI therefore respectively represent and warrant that they are each:

 

(i)            duly authorized to act on behalf of their respective subsidiaries
and affiliates for all purposes under this Agreement;

 

(ii)           responsible for the rights and obligations of their respective
subsidiaries and affiliates under this Agreement; and

 

(iii)          fully liable for any and all amounts due from their respective
subsidiaries and affiliates which may arise under this Agreement.

 

(b)           Binding Effect.  This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.

 

(c)           Governing Law.  This Agreement shall be interpreted under and
pursuant to the laws of the State of Delaware.

 

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12.           Notices.

 

All notices, approvals, consents, or other communications required to be given
pursuant to this Agreement shall be addressed to the parties as follows:

 

 

If to KCC:

Kimberly-Clark Corporation

 

 

 

 

 

 

 

Riverview Plaza

 

 

 

Post Office Box 349

 

 

 

Neenah, WI 54957-0349

 

 

 

ATTN: Dave Bernard

 

 

 

Vice-President - Taxes

 

 

 

 

 

 

 

and

 

 

 

 

 

 

 

351 Phelps Drive

 

 

 

Irving, TX 75039

 

 

 

ATTN: General Counsel

 

 

 

 

 

 

If to NPI:

Neenah Paper, Inc.

 

 

 

Preston Ridge III

 

 

 

3460 Preston Ridge Road, Suite 600

 

 

 

Alpharetta, GA 30005

 

 

 

ATTN: General Counsel

 

 

 

 

 

 

 

and

 

 

 

 

 

 

 

Preston Ridge III

 

 

 

3460 Preston Ridge Road, Suite 600

 

 

 

Alpharetta, GA 30005

 

 

 

ATTN: John Herson, Vice-President - Taxes

 

 

                All notices, approvals, consents, or other communications shall
be in writing and shall be sent first class mail, postage prepaid, return
receipt requested, unless otherwise specified herein.  All consents by KCC shall
be given only by KCC’s senior tax officer.

 

                13.           Miscellaneous.

 

(a)           Entire Agreement.  This Agreement constitutes the entire agreement
of the parties concerning the subject matter hereof and supersedes all other
agreements, whether or not written, in respect of any Tax between or among the
KCC Companies, on the one hand, or the NPI Companies, on the other hand.  All
such agreements are hereby cancelled and any rights or obligations existing
thereunder are hereby fully and finally settled without any payment by any party
thereto.

 

(b)           Amendments.  This Agreement may not be amended except by an
agreement in

 

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writing, signed by the parties hereto.

 

(c)           Transfer Taxes.  Notwithstanding anything in this Agreement to the
contrary, the Distribution Agreement shall govern liabilities related to sales,
transfer, use or other taxes payable in connection with the transfer of assets
contemplated by the Distribution Agreement.

 

                (d)           Counterparts.  This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.  The
Agreement may be delivered by facsimile transmission of a signed copy thereof.

 

                (e)           Assignment.  This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.  Except with
respect to a merger of a party, neither this Agreement nor any of the rights or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld or delayed; provided, however, that KCC and NPI may assign their
respective rights, interests, duties liabilities and obligations under this
Agreement to any other KCC Company, or NPI Company, respectively, but such
assignment shall not relieve KCC or NPI of its obligations hereunder.

 

                (f)            Severability.  Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.  Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

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                IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be effective as of the date first above written.

 

 

 

KIMBERLY-CLARK CORPORATION

 

 

By:

/s/ Mark A. Buthman

 

 

Name:

Mark A. Buthman

 

 

Title:

Senior Vice President and Chief

 

Financial Officer

 

 

 

 

 

 

 

 

NEENAH PAPER, INC.

 

 

By:

/s/ Sean T. Erwin

 

 

Name:

Sean T. Erwin

 

 

Title:

Chief Executive Officer

 

 

 

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