exv10w1



 





Exhibit 10.1




TAX SHARING AGREEMENT




     This Tax Sharing Agreement (the “Agreement”) is dated as of           , 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 to NPI
(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 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 hereof solely due to the fact that
NPI and KCC have (directly or indirectly) common stockholders.



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          (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 nature to any of the foregoing.



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                     (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 by KCC but shall not prohibit NPI from adopting a method different from that utilized by KCC for



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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 preparing and filing
the Tax Returns reporting such Tax shall be paid by KCC. Refunds of Taxes



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



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                         (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, or



                         (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, or



                         (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 writing, signed by the parties hereto.



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     (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:  	 	 
	 	 	Name:  	Rodney G. Olsen 	 
	 	 	Title:  	Vice President - Finance 	 
	 


	 	 	 	 	 
	 	NEENAH PAPER, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Sean T. Erwin 	 
	 	 	Title:  	Chief Executive Officer 	 
	 





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