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


 





















 


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 


 


13





















 


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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