Exhibit 10.11


 


 


EXECUTION
COPY


 


ALLOCATION AND SERVICES AGREEMENT


 


THIS ALLOCATION AND SERVICES AGREEMENT (the “Agreement”), effective as
of April 30, 2005, is made by and between Escanaba Timber LLC (formerly
known as Maple Acquisition LLC), a Delaware limited liability company (“Escanaba”),
and NewPage Corporation, a Delaware corporation and an indirect wholly-owned
Subsidiary of Escanaba (“NewPage”).


 


WHEREAS, Escanaba and MeadWestvaco Corporation (“MWV”) have entered
into that certain Equity and Asset Purchase Agreement, dated as of January 14,
2005 (as amended, modified or supplemented from time to time, the “Purchase
Agreement”), which contemplates that MWV and its Subsidiaries will sell, assign
and transfer to Escanaba and/or one or more of its Designated Affiliates, and
that Escanaba and/or one or more of its Designated Affiliates will purchase and
acquire from MWV and its Subsidiaries, the Paper Business and Timber Business
of MWV and its Subsidiaries, in each case, upon the terms and subject to the conditions
set forth in the Purchase Agreement;


 


WHEREAS, in accordance with the Purchase Agreement, Escanaba has
designated itself to acquire the Timber Business from MWV and its Subsidiaries
and has designated NewPage and certain of its Subsidiaries to acquire the Paper
Business from MWV and its Subsidiaries;


 


WHEREAS, Escanaba and NewPage desire to operate their respective
businesses on a separate and independent basis and thereby establish a
mechanism by which the payment of the Closing Date Cash Consideration will be
allocated between Escanaba, as the purchaser of the Timber Business, and
NewPage, as the purchaser of the Paper Business, and how any post-Closing
adjustment payments made by or to MWV thereunder, as provided in the Purchase
Agreement, will be allocated among the Timber Business and the Paper Business;


 


WHEREAS, NewPage and its Subsidiaries will be providing certain
services to Escanaba from and after the closing of the transactions
contemplated by the Purchase Agreement, whether pursuant to one or more
Transition Agreements or otherwise, Escanaba will be providing certain services
to NewPage and its Subsidiaries, and NewPage and Escanaba desire to set forth
the terms and conditions on which such services will be provided, including the
allocation of costs to Escanaba and NewPage associated therewith; and


 


WHEREAS, capitalized terms used herein but not defined herein shall
have the meanings ascribed to such terms in the Purchase Agreement.


 


NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Escanaba and NewPage hereby agree
as follows:


 


1.                                       Allocation of Responsibilities.


 


a.                                       Escanaba and NewPage agree that the Closing
Date Cash Consideration payable to MWV on the Closing Date shall be allocated
and paid as follows: for the Timber Business, Escanaba shall pay $252,194,000
of the Closing Date Cash Consideration and for the Paper Business, NewPage
shall pay $1,985,113,000 of the Closing Date Cash


 





















 


Consideration. Escanaba and
NewPage agree that of the total Closing Date Cash Consideration, $37,307,000,
represented an upward adjustment to the Initial Cash Consideration based on the
estimates of Closing Date Cash, Assumed Indebtedness, Closing Working Capital
and Closing Capital Expenditures provided by MWV prior to Closing, allocated
between Escanaba and NewPage based on their good faith preliminary
determination of the amount of each of the foregoing estimates that were
attributable to the Timber Business and the Paper Business, in each case as set
forth on Exhibit 1a hereto. If, after the final determination of Final Closing
Date Cash, Final Assumed Indebtedness, Final Closing Date Working Capital and
Final Closing Date Capital Expenditures is made in accordance with Section 2.3
of the Purchase Agreement, the initial allocation of the adjustment to the
Initial Cash Consideration, as set forth in Exhibit 1a, are ultimately
incorrect, Escanaba and NewPage agree to pay the other, as applicable, within
five (5) Business Days of the final determinations under Section 2.3 of
the Purchase Agreement, the difference between the adjusted amount that was
actually paid to MWV based on the foregoing estimates and the amounts that
would have been paid had the parties been able to establish the final amounts
as of the Closing Date, plus simple interest thereon at a rate equal to 8% per
annum.


 


b.                                      Escanaba and NewPage agree that all fees,
costs and expenses incurred by the Purchaser in connection with the
negotiation, diligence, execution and financing of the transactions
contemplated by the Purchase Agreement, to the extent related to the
acquisition and financing of the Timber Business, shall be borne exclusively by
Escanaba and, to the extent related to the acquisition and financing of the
Paper Business, shall be borne exclusively by NewPage. To the extent any such
fees, costs and expenses cannot be classified as part of the acquisition and
financing of the Timber Business or the Paper Business exclusively, or the
parties cannot agree on the proper classification of any such fees, costs and
expenses, the parties agree that such fees, costs and expenses shall be
allocated based on the following percentages: 10.8% shall be allocated to
Escanaba as the purchaser of the Timber Business and 89.2% shall be allocated
to NewPage as the purchaser of the Paper Business, subject to reallocation as
set forth in the immediately succeeding sentence. In the event there is any
dispute between Escanaba and NewPage as to the proper classification of any
such fees, costs and expenses, the parties agree to submit such matter to
binding arbitration in accordance with Section 5 hereof.


 


c.                                       Escanaba and NewPage agree to cooperate and
coordinate in good faith in the preparation and delivery of the Closing Date
Working Capital Statement and all other calculations and deliverables required
to be delivered to MWV by the Purchaser under Section 2.3 of the Purchase
Agreement (the “Section 2.3 Deliverables”). Any statements or other items prepared
and delivered to MWV that constitute Section 2.3 Deliverables shall
include an allocation showing the classification of each item into two
categories – one relating to the Timber Business and one relating to the Paper
Business. For purposes of each of the Section 2.3 Deliverables, Escanaba
shall control all calculations, determinations and resolution of all disputes
relating to the Timber Business and NewPage shall control all calculations, determinations
and resolutions of all disputes relating to the Paper Business. In the event
any payments are to be made to MWV under Section 2.3 of the Purchase
Agreement, Escanaba shall be solely responsible for such payments as they
relate to the Timber Business and NewPage shall be solely responsible for all
payments as they relate to the Paper Business.  In the event any


 


2





















 


payments
are to be made by MWV under Section 2.3 of the Purchase Agreement,
Escanaba shall be entitled to all such payments as they relate to the Timber
Business and NewPage shall be entitled to all such payments as they relate to
the Paper Business. To the extent any items subject to determination under Section 2.3
of the Purchase Agreement cannot be classified as part of the Timber Business
or the Paper Business or the parties cannot agree on the proper classification
of any such items, the parties agree that the item shall be allocated based on
the following percentages: 10.8% shall be allocated to Escanaba as the
purchaser of the Timber Business and 89.2% shall be allocated to NewPage as the
purchaser of the Paper Business, subject to reallocation as set forth in the
immediately succeeding sentence. In the event there is any dispute between
Escanaba and NewPage as to the proper classification of any item that
constitutes a Section 2.3 Deliverable, the parties agree to submit such
matter to binding arbitration in accordance with Section 5 hereof.


 


d.                                      In addition to and not by way of limitation
of the foregoing provisions of this Section 1, the parties acknowledge and
agree that, except as they may otherwise mutually agree in writing, (i) all
rights, assets, benefits, properties, liabilities, responsibilities and
obligations Related to the Timber Business (including any of the foregoing under
the Purchase Agreement, including indemnification obligations under Article XI
thereof, the Exhibits and the other agreements or instruments referenced
therein) shall be solely for the benefit of and the responsibility of Escanaba
and (b) all rights, assets, benefits, properties, liabilities, responsibilities
and obligations Related to the Paper Business (including any of the foregoing
under the Purchase Agreement, including indemnification obligations under Article XI
thereof, the Exhibits and the other agreements or instruments referenced
therein) shall be solely for the benefit of and the responsibility of NewPage
(or the Subsidiary of NewPage that acquires all or any portion of the Paper
Business pursuant to the Purchase Agreement).


 


e.                                       (i)                                     In furtherance of the foregoing, except as to
matters covered by any other agreement between Escanaba, on the one hand, and
NewPage, NewPage Holding Corporation (“NewPage Holdings”) and their respective
Subsidiaries, on the other hand, Escanaba agrees to indemnify and hold NewPage,
NewPage Holding and their respective Subsidiaries, together with their
successors and assigns, and their officers, directors, employees and agents
harmless from and against any and all claims, judgments, causes of action,
liabilities, obligations, damages, losses, deficiencies, costs, penalties,
interest and expenses (including the reasonable fees and expenses of counsel)
(collectively, “Losses”) arising out of or resulting from or relating to the
Timber Business, including, without limitation, claims made by MWV under the
Purchase Agreement to the extent related to the Timber Business.


 


(ii)                                  Except as to matters covered by any other
agreement between Escanaba, on the one hand, and NewPage, NewPage Holdings and
their respective Subsidiaries, on the other hand, NewPage agrees to indemnify
and hold Escanaba and, together with its successors and assigns, and their
officers, directors, employees and agents harmless from and against any and all
Losses arising out of or resulting from or relating to the Paper Business,
including, without limitation, claims made by MWV under the Purchase Agreement
to the extent related to the Paper Business.


 


2.                                       Wrong-Pockets. Subject to the terms of this Agreement, to
the extent that at any time or from time to time after the Closing Date,
Escanaba receives payments in respect of


 


3





















 


any
services performed by or products delivered by NewPage or any of its
Subsidiaries or that are attributable to the Paper Business (whether performed
or delivered before, on or after the date hereof), Escanaba shall be deemed to
have received such payment for the account of NewPage and shall promptly remit
such payment to NewPage. Subject to the terms of this Agreement, to the extent
that at any time or from time to time after the Closing Date, NewPage or any of
its Subsidiaries receives payments in respect of any services performed by or
products delivered by Escanaba or that are attributable to the Timber Business
(whether performed or delivered before, on or after the date hereof), NewPage
(or its relevant Subsidiary) shall be deemed to have received such payment for
the account of Escanaba and shall promptly remit such payment to Escanaba.


 


3.                                       Transition Services.


 


a.                                       The parties acknowledge and agree that
NewPage shall enter into with MWV, effective as of the Closing Date, a General
Transition Services Agreement, an Information Technology Transition
Services Agreement and a Human Resources Services Agreement (collectively, the “Basic
Transition Agreements”), pursuant to which MWV will provide certain services to
NewPage and its Subsidiaries (the “Basic Transition Services”) on and subject
to the terms and conditions contained therein. NewPage and Escanaba agree that NewPage
shall or shall cause MWV to provide those Basic Transition Services described
on Exhibit 3a hereto (the “Designated Basic Transition Services”) to Escanaba.
The provision of such services to Escanaba shall be on the same terms and
conditions as such Designated Basic Transition Services are provided to NewPage
under the Basic Transition Services Agreements and all terms and conditions
regarding the provision of such Basic Transition Services, including terms and
conditions regarding payments, notifications, termination rights, performance standards,
limitations on liability and dispute resolution shall apply mutatis mutandis with respect to the Basic
Transition Services provided to Escanaba hereunder. The costs of such Basic
Transition Services to Escanaba shall be as set forth on Exhibit 3a hereto.


 


b.                                      In addition to the Designated Basic
Transition Services provided under Section 3a above, NewPage shall provide
to Escanaba the services described in Exhibit 3b hereto (the “Additional
NewPage Services”) for the time, manner and costs described in Exhibit 3b
hereto. Except as otherwise provided in Exhibit 3b, the Additional NewPage
Services shall be provided in the same manner and upon the same terms and
conditions that services are provided to NewPage under the Basic Transition
Services Agreement and all terms and conditions regarding the provision of such
Additional NewPage Services, including regarding payments, termination rights,
performance standards, limitations on liability and dispute resolution shall
apply mutatis mutandis with
respect to the Additional NewPage Services provided to Escanaba hereunder.


 


c.                                       Escanaba shall provide to NewPage
and its Subsidiaries the services described in Exhibit 3c hereto (the “Escanaba
Services”) for the time, manner and costs described in Exhibit 3c hereto.
Except as otherwise provided in Exhibit 3c, the Additional NewPage Services
shall be provided in the same manner and upon the same terms and conditions that
services are provided to NewPage under the Basic Transition Services Agreement
and all terms and conditions regarding the provision of such Escanaba Services,
including regarding payments, termination rights, performance standards,
limitations on liability and dispute


 


4





















 


resolution
shall apply mutatis mutandis with
respect to the Escanaba Services provided to NewPage hereunder.


 


d.                                      Escanaba shall have the right to terminate
its receipt of any Basic Transition Services at any time but only to the extent
(and in the same manner, including the provision of notice) that such Basic
Transition Service is capable of being terminated by NewPage under the
applicable Basic Transition Services Agreement without NewPage incurring any
additional costs relating to such termination (unless NewPage otherwise agrees
or Escanaba agrees to bear sole responsibility for any such costs). With
respect to Additional NewPage Services, Escanaba shall be entitled to terminate
any or all such Additional NewPage Services at any time but only to the extent
such Additional NewPage Service could be terminated if it were part of the
services provided by MWV to NewPage under the General Transition Services Agreement.
With respect to Escanaba Services, NewPage shall be entitled to terminate any
or all such Escanaba Services at any time but only to the extent such Escanaba
Service could be terminated if it were part of the services provided by MWV to
NewPage under the General Transition Services Agreement.


 


e.                                       Escanaba and NewPage agree that, unless such
services have been previously terminated by Escanaba in accordance with the
terms of this Section 3, NewPage shall continue to provide to Escanaba all
Basic Transition Services and Additional Services following termination or
expiration of the Basic Transition Services Agreement. The terms of the Basis
Transition Services Agreement and this Agreement shall continue to apply with
respect to the continuation of such services as if such agreements had not
expired or terminated, subject to Escanaba’s right to terminate any or all of
such Basic Transition Services and Additional Services in accordance with the
terms hereof and thereof; provided that the cost of such Basic Transition
Services shall be mutually agreed by NewPage and Escanaba at the time such services are terminated or expire under the applicable Basic Transition Services
Agreement, it being understood and agreed that the cost allocated to Escanaba
is intended to be the proportionate cost to NewPage of providing such services
to Escanaba, which may be more or less than the cost for such services as
provided by MWV under the Basic Transition Services Agreements. For the avoidance
of doubt, upon the expiration or termination of any Basic Transition Services Agreement,
Escanaba shall have the right to terminate the provision of all or some of the applicable
services at such time upon written notice delivered to NewPage not less than 10
days prior to the expiration of the applicable Basic Transition Services
Agreement.


 


f.                                         Until such time as Escanaba has notified
NewPage in writing of its intention to terminate all of the Designated Basic
Transition Services, NewPage agrees that it shall not terminate prior to the
expiration of its term or amend the Basic Transition Service Agreements in a
manner that adversely affects Escanaba without the prior written consent of Escanaba,
which consent shall not be unreasonably withheld, conditioned or delayed.
NewPage agrees that it will consult with Escanaba as to the extension of the
term of the provision of any services to NewPage under the Basic Transition
Services Agreements and, unless and until NewPage is capable of providing any
such services directly to Escanaba (to the extent not previously terminated by
Escanaba), it shall seek to extend the term of provision of such services by
MWV to the maximum extent provided under the applicable Basic Transition
Services Agreement.


 


5





















 


4.                                       Term and Termination.  Except
as otherwise provided herein, the term of this Agreement shall be indefinite
unless terminated by consent of both parties hereto.


 


5.                                       Dispute Resolution.  Disputes
under this Agreement shall be resolved as follows, it being understood that
each party shall work in good faith at each step of the process to try to
resolve the dispute as expeditiously and fairly as possible:


 


a.                                       Each of Escanaba and NewPage
shall designate an appropriate individual to meet and seek amicably to resolve
all disputes under this Agreement.


 


b.                                      If any difference remains unresolved five (5)
Business Days after the start of the process referenced in Subsection 5a,
or such longer period as the persons referenced in subsection 5a
shall have agreed, then the parties shall submit such matter to arbitration,
pursuant to the Rules of Commercial Arbitration of the American Arbitration Association,
which arbitration shall take place in New York City, New York, unless otherwise
mutually agreed to by the parties. Any such arbitration shall be conducted by a
single arbitrator, whose decision shall be final. The parties shall first
attempt to agree on the selection of the arbitrator, and, if they cannot agree
within five (5) days after it becomes necessary to submit the dispute to
arbitration, either party may request the American Arbitration Association to
appoint the arbitrator. In all cases, the parties shall ensure that the
arbitrator shall be a person knowledgeable about the matters subject to the
dispute. The arbitrator shall be instructed to schedule all proceedings so
that, if possible, a decision may be reached and communicated to the parties
within twenty (20) days after the appointment of the arbitrator. All expenses
of the arbitration shall be divided equally between the parties, except that
each party shall bear the expense of its own counsel and the expense of the
preparation of its presentation. The parties shall provide to the arbitrator
such information as the arbitrator shall reasonably request to facilitate the
determinations to be made by the arbitrator hereunder.


 


c.                                       Notwithstanding the existence of a dispute or
the progress of the arbitration proceeding, the parties shall continue to
perform their respective obligations under this Agreement during such period.
This Section 5 shall not preclude any party from seeking injunctive relief
or such other interim equitable remedies as may be required to preserve any claims
hereunder.


 


6.                                       General Provisions.


 


a.                                       Entire Agreement.  This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any and all prior agreements
between them relating to the subject matter hereof, and may not be amended
except in a writing signed by the party to be bound.


 


b.                                      Waiver of Provisions.  The
terms, of this Agreement may be waived only by a written instrument executed by
the party waiving compliance. The failure of any party at any time or times to
require performance of any provision of this Agreement shall in no manner
affect the right at a later date to enforce the same. No waiver by any party of
any condition or the breach of any provision contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed
to be or construed as a further or


 


6





















 


continuing
waiver of any such condition or of the breach of any other provision of this Agreement.


 


c.                                       Law Governing.  This
Agreement shall be governed by, construed and enforced in accordance with the
laws of the State of New York, without regard to conflicts of law principles
applicable thereto.


 


d.                                      Captions.  The captions of paragraphs of
this Agreement are for convenience
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.


 


e.                                       Assignment.  This Agreement shall be
legally binding upon and inure to the benefit of the parties hereto and their
respective permitted successors and assigns. The parties may not assign,
delegate or subcontract this Agreement or any of its obligations hereunder
without the other parties’ express prior written consent; provided, however,
that each of Escanaba and NewPage may, without the consent of the other, grant
a security interest in its respective rights under this Agreement to one of
more lenders or noteholders, or agents or trustees for their benefit, in
connection with the financing for the acquisition contemplated by the Purchase
Agreement (or any refinancing thereof). Any purported assignment, subcontract
or delegation in violation of this Agreement shall be void.


 


f.                                         Severability.  If
any provision of this Agreement or portion thereof shall be held void or
unenforceable, all other provisions and portions thereof shall
continue in full force and effect.


 


g.                                      Counterparts.  This
Agreement may be executed simultaneously in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original, but all
of which counterparts shall together constitute but one agreement.


 


h.                                      Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally or by overnight mail or to the extent receipt is confirmed, facsimile
or other electronic transmission service, or five calendar days after being
mailed by registered mail, return receipt requested, to a party at the
following address (or to such other address as such party may have specified by
notice given to the other parties pursuant to this Section):


 


If to Escanaba, to:


 


Escanaba Timber LLC


P.O. Box 1008


Escanaba, Michigan 49829


Attention: Brad Homeier


Fax: (906) 789-3276


 


With a copy to:


 


c/o Cerberus Capital Management, L.P.


 


7





















 


299 Park Avenue, 22nd Floor


New York, New York 10022


Attention: Lenard Tessler


Fax: (212) 421-2958


 


If to NewPage, to:


 


NewPage Corporation


Courthouse Plaza NE


Dayton, OH 45463


Attention: President and General Counsel


Fax: (937) 495-9228


 


8





















 


IN WITNESS WHEREOF, the parties
hereto have executed this Agreement through a duly authorized officer.


 


 


	
  ESCANABA
  TIMBER LLC

  
	
   

  
	
   

  
	
  /s/ Linda Sheffield

  	
   

  
	
  Name:

  	
  Linda Sheffield

  
	
  Title:

  	
  Treasurer

  
	
   

  
	
   

  
	
  NEWPAGE
  CORPORATION

  
	
   

  
	
   

  
	
  /s/ Linda Sheffield

  	
   

  
	
  Name:

  	
  Linda Sheffield

  
	
  Title:

  	
  Treasurer