EXHIBIT 10.4
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
     THIS AGREEMENT, made as of the 1st day of November, 2005, by and between
Bowater Incorporated, a Delaware corporation having a mailing address of 55 East
Camperdown Way, P.O. Box 1028, Greenville, South Carolina 29602 (the
“Corporation”), and William C. Morris of 165 Green Valley Road, Greenville, SC
29617 (the “Executive”).
     WHEREAS, the Corporation and the Executive have previously entered into a
Change in Control Agreement for the purpose of reinforcing and encouraging the
continued attention and dedication of members of the Corporation’s management,
including the Executive, to their assigned duties in the event of a Change in
Control or potential Change in Control of the Corporation; and
     WHEREAS, the Board of Directors of the Corporation (the “Board”) has
determined that certain changes should be made to the Change in Control
Agreement to better achieve its objectives, and the Executive has agreed to such
changes in consideration of the Executive’s appointment to a new position;
     NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend and restate the
previous Change in Control Agreement as follows:

1.   DEFINITIONS

     The following terms shall have the meanings assigned to them below:

  (a)   “Accrued Compensation” shall mean all amounts earned or accrued through
the Termination Date but not paid as of the Termination Date including (i) the
Base Amount, (ii) reimbursement for reasonable and necessary expenses incurred
by the Executive on behalf of the Corporation during the period ending on the
Termination Date, (iii) vacation pay, and (iv) any bonus award with respect to
the Corporation’s fiscal year ended prior to the Termination Date.     (b)  
“Acquiring Person” shall mean the Beneficial Owner, directly or indirectly, of
securities representing 20% or more of the combined voting power of the
Corporation’s then outstanding securities, not including (except as provided in
clause (i) of the next sentence) securities of such Beneficial Owner acquired
pursuant to an agreement allowing the acquisition of up to and including 50% of
such voting power approved by two-thirds of the members of the Board who are
Board members before the Person becomes Beneficial Owner, directly or
indirectly, of securities representing 5% or more of the combined voting power
of the Corporation’s then outstanding securities. Notwithstanding the foregoing,
(i) securities acquired pursuant to an agreement described in the preceding
sentence will be included in determining whether a Beneficial Owner is an

 

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      Acquiring Person if, subsequent to the approved acquisition, the
Beneficial Owner acquires 5% or more of such voting power other than pursuant to
such an agreement so approved; and (ii) a Person shall not be an Acquiring
Person if such Person is eligible to and files a Schedule 13G under the Exchange
Act with respect to such Person’s status as a Beneficial Owner of all securities
of the Corporation of which the Person is a Beneficial Owner.

  (c)   “Affiliate” and “Associate” shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.     (d)   “Base Amount” shall
mean the greater of (i) the Executive’s annual base salary at the rate in effect
immediately prior to the Change in Control and (ii) the Executive’s annual base
salary at the rate in effect on the Termination Date.     (e)   “Beneficial
Owner” of securities shall mean (i) a Person who beneficially owns such
securities, directly or indirectly, or (ii) a Person who has the right to
acquire such securities (whether such right is exercisable immediately or only
with the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, warrants, options or otherwise.     (f)   “Bonus
Amount” shall mean an amount equal to the Executive’s target amount (100% times
salary grade bonus percentage times base salary) under the Corporation’s annual
or other short term cash incentive plans in effect immediately prior to the
Change in Control for the fiscal year in which the Change in Control occurred
or, if higher, the target amount under such plans in effect at the Termination
Date based on the Executive’s then base salary and position.     (g)   “Cause”
shall mean and be limited to the Executive’s gross negligence, willful
misconduct or conviction of a felony, which has a demonstrable and material
adverse effect upon the Corporation; provided that if Cause exists by virtue of
the Executive’s gross negligence or willful misconduct that is capable of being
cured, the Corporation shall give the Executive written notice of the alleged
negligence or misconduct and if the Executive cures the negligence or misconduct
within thirty (30) days after receipt of the notice, such Cause shall cease to
exist and the Corporation shall not terminate the Executive’s employment
therefor. The Executive shall be deemed to have been terminated for Cause as of
the effective date stated in a Notice of Termination delivered by the
Corporation to the Executive, which shall not be delivered before the end of the
thirty (30) day period described in the preceding sentence, if applicable. The
Notice of Termination must be accompanied by a certified copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of
the membership of the Board after reasonable notice to the Executive and an
opportunity for the Executive, with the Executive’s counsel present, to be heard
before the Board, finding that, in the good faith opinion of the Board, the

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      Executive was guilty of conduct constituting Cause hereunder and setting
forth in reasonable detail the facts and circumstances claimed to provide the
basis for the Executive’s termination.

  (h)   “Change in Control” shall be deemed to have occurred upon:

  (i)   the date that any Person is or becomes an Acquiring Person;     (ii)  
the date that the Corporation’s stockholders approve a merger, consolidation or
reorganization of the Corporation with another corporation or other Person,
unless, immediately following such merger, consolidation or reorganization,
(A) at least 50% of the combined voting power of the outstanding securities of
the resulting entity would be held in the aggregate by the stockholders of the
Corporation as of the record date for such approval (provided that securities
held by any individual or entity that is an Acquiring Person, or who would be an
Acquiring Person if 5% were substituted for 20% in the definition of such term,
shall not be counted as securities held by the stockholders of the Corporation,
but shall be counted as outstanding securities for purposes of this
determination), or (B) at least 50% of the board of directors or similar body of
the resulting entity are Continuing Directors;     (iii)   the date the
Corporation sells or otherwise transfers all or substantially all of the
Corporation’s assets to another corporation or other Person, unless, immediately
following such sale or transfer, (A) at least 50% of the combined voting power
of the outstanding securities of the acquiring entity would be held in the
aggregate by the stockholders of the Corporation as of the record date for such
approval (provided that securities held by any individual or entity that is an
Acquiring Person, or who would be an Acquiring Person if 5% were substituted for
20% in the definition of such term, shall not be counted as securities held by
the stockholders of the Corporation, but shall be counted as outstanding
securities for purposes of this determination), or (B) at least 50% of the board
of directors or similar body of the acquiring entity are Continuing Directors;
or     (iv)   the date on which less than 50% of the total membership of the
Board consists of Continuing Directors.

  (i)   “Code” shall mean the United States Internal Revenue Code of 1986,
amended.     (j)   “Continuing Directors” shall mean any member of the Board who
(i) was a member of the Board immediately prior to the date of the event that
would constitute a Change in Control, and any successor of a Continuing Director
while such successor is a member of the Board, (ii) who is not an Acquiring
Person or

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      an Affiliate or Associate of an Acquiring Person and (iii) is recommended
or elected to succeed the Continuing Director by a majority of the Continuing
Directors.

  (k)   “Corporation” shall mean Bowater Incorporated; provided that, if the
Executive is employed by a subsidiary of the Corporation, “Corporation” shall
mean such subsidiary of the Corporation for purposes of references to the
Executive’s compensation and benefits, and the plans, programs and arrangements
pursuant to which compensation and benefits are provided.     (l)   “Disability”
shall mean a physical or mental condition that is defined as a disability in the
Corporation’s long term disability insurance plan covering the Executive
immediately prior to the Change in Control.     (m)   “Employer Match” shall
mean an amount equal to the maximum matching contribution the Corporation could
have made (regardless of actual circumstances) on the Executive’s behalf to the
Corporation’s Statutory and non-Statutory defined contribution or savings plans
for the fiscal year in which the Change in Control occurred, or, if higher, the
maximum matching contribution the Corporation could have made for the fiscal
year in which the Executive’s employment terminated.     (n)   “Exchange Act”
shall mean the United States Securities Exchange Act of 1934, as amended.    
(o)   “Good Reason” shall mean:

  (i)   a change in the Executive’s status, title, position or responsibilities
(including in reporting line relationships) that, in the Executive’s reasonable
judgment, represents a substantial adverse change from the Executive’s status,
title, position or responsibilities as in effect at any time within 180 days
preceding the date of a Change in Control or at any time thereafter; the
assignment to the Executive of any duties or responsibilities that, in the
Executive’s reasonable judgment, are inconsistent with the Executive’s status,
title, position or responsibilities as in effect at any time within 180 days
preceding the date of a Change in Control or any time thereafter; or any removal
of the Executive from or failure to reappoint or reelect the Executive to any
office or position held prior to the Change in Control, except in connection
with the termination of the Executive’s employment for Disability, Cause, as a
result of the Executive’s death or by the Executive other than for Good Reason;
    (ii)   the failure by the Corporation to provide the Executive with
compensation and benefits, in the aggregate, at least equal (in terms of benefit
levels and/or reward opportunities which opportunities will be evaluated in
light of the performance requirements therefor) to those provided for under the

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      employee compensation and benefit plans, programs and practices in which
the Executive was participating at any time within one-hundred eighty (180) days
preceding the date of a Change in Control or at any time thereafter;

  (iii)   the reduction of the Executive’s salary as in effect on the date of
the Change in Control or any time thereafter;     (iv)   a failure by the
Corporation to obtain from any Successor its assent to this Agreement
contemplated by Section 12 hereof; or     (v)   the relocation of the principal
office at which the Executive is to perform services on behalf of the
Corporation to a location more than thirty-five (35) miles from its location
immediately prior to the Change in Control or a substantial increase in the
Executive’s business travel obligations subsequent to the Change in Control.

  (p)   “Notice of Termination” shall mean a notice sent by either the Executive
or the Corporation to the other party terminating the Executive’s employment as
of a certain date and setting forth the reasons therefor.     (q)   “Person”
shall mean any individual, corporation, partnership, group, association or other
“person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act.  
  (r)   “Pro Rata Bonus” shall mean an amount equal to the Bonus Amount
multiplied by a fraction, the numerator of which is the number of months and
partial months through the Termination Date and the denominator of which is
twelve (12).     (s)   “Statutory Plan” shall mean a retirement plan that is
intended to be qualified (for purposes of United States tax law) or registered
(for purposes of Canadian tax law), as the case may be.     (t)   “Successor”
shall mean the direct or indirect successor by purchase, merger, consolidation
or otherwise, to all or substantially all of the business and/or assets of the
Corporation.     (u)   “Termination Date” shall mean (i) in the case of the
Executive’s death, the date of death, (ii) in the case of a termination by the
Executive in accordance with Section 3, the last day of employment as set forth
in the Notice of Termination given by the Executive, (iii) in the case of a
termination by the Corporation for Cause, a date not less than thirty (30) days
after receipt of the Notice of Termination by the Executive, (iv) in the case of
a termination by the Corporation due to the Executive’s Disability, the date not
less than thirty (30) days after receipt of the Notice of Termination by the
Executive, provided that the Executive shall not have returned to the full-time
performance of duties within thirty (30) days after such receipt, and (v) in all
other cases, the date specified in the Notice

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      of Termination or if no Notice of Termination is sent, the last day of the
Executive’s employment (an Executive receiving periodic severance pay is no
longer considered employed for the purposes of this Agreement).

2.   TERM OF AGREEMENT       This Agreement shall commence as of the date hereof
and shall continue in effect until the date the Executive’s employment is
terminated (an Executive being paid periodic severance benefits is no longer
considered employed for these purposes); provided, however, that if the
Executive’s employment is terminated following, or in anticipation of, a Change
in Control, the term shall continue in effect until all payments and benefits
have been made or provided to the Executive hereunder.

3.   EXECUTIVE’S RIGHT OF TERMINATION       After a Change in Control and for
thirty-six (36) months thereafter, the Executive shall have the right to
terminate employment for Good Reason by sending a Notice of Termination to the
Corporation setting forth in reasonable detail the facts and circumstances
claimed to constitute Good Reason. If the Executive’s employment is terminated
in accordance with the provisions of this Section 3, the Executive shall be
entitled to the compensation and benefits described in Section 4(b) below.   4.
  COMPENSATION UPON CHANGE IN CONTROL FOLLOWED BY CERTAIN TERMINATIONS       If
the Executive’s employment with the Corporation shall be terminated within
thirty-six (36) months following a Change in Control, the Executive shall be
entitled to the following compensation and benefits:

          (a) If the Executive’s employment is terminated (i) by the Corporation
for Cause or Disability, (ii) by reason of the Executive’s death or (iii) by the
Executive other than in accordance with Section 3, the Corporation shall pay to
the Executive the Accrued Compensation and, if such termination is other than by
the Corporation for Cause, the Pro Rata Bonus, computed as of the applicable
Termination Date.
          (b) If the Executive’s employment with the Corporation shall be
terminated (x) by the Corporation for any reason other than for Cause or
Disability, (y) other than by reason of the Executive’s death, or (z) by the
Executive pursuant to the provisions of Section 3, the Executive shall be
entitled to the following as of the applicable Termination Date:

  (i)   the Accrued Compensation and the Pro-Rata Bonus;     (ii)   an amount
equal to two (2) times the Base Amount;     (iii)   an amount equal to two
(2) times the Bonus Amount;     (iv)   an amount equal to two (2) times the
Employer Match;

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  (v)   An amount equal to 20% of the Base Amount for certain lost benefits;    
(vi)   An amount equal to the present value of the additional retirement
benefits the Executive would have earned under the Corporation’s defined benefit
retirement plans (Statutory and non-Statutory) for the two (2) years following
the Termination Date, computed assuming the following:

  (A)   the Executive’s salary continues at the Base Amount with a bonus or
target bonus equal to the Bonus Amount;     (B)   the payment of the Executive’s
retirement benefits commences as of the later of (x) the Executive’s age two (2)
years after the Termination Date or (y) the earliest retirement age (without
regard to service) allowed under the Statutory Plan applicable to the Executive;
    (C)   all vesting requirements are waived;     (D)   mortality and interest
rate assumptions applicable to the computation of lump sum values in the
applicable Statutory Plan are used; and     (E)   the benefits are paid in the
form of a single life annuity;

  (vii)   As of the Executive’s Termination Date, or, if later, when the
Executive attains age fifty (50), the Executive (and the Executive’s spouse or
surviving spouse and dependents) will be provided the retiree health care and
life insurance coverage provided by the Corporation to executive retirees as of
the date of the Change in Control. If and to the extent that the benefits
described in this paragraph cannot be provided under the Corporation’s plans or
programs without the benefits provided thereunder being taxable to the
Executive, the Corporation shall procure an insurance policy or policies on
substantially similar terms and conditions for the Executive and the Executive’s
spouse or surviving spouse and dependents, or if such policy or policies cannot
be obtained, shall provide a lump sum payment equal to the value of the lost
benefits, provided that if any of the foregoing benefits or payment is
determined to be deferred compensation subject to Internal Revenue Code
Section 409A, benefits shall be provided or payment shall be made in accordance
with Internal Revenue Code Section 409A or any guidance issued thereunder; and  
  (viii)   The Corporation shall pay for or provide the Executive either:
(i) individual out-placement assistance as offered by a member firm of the
Association of Out-Placement Consulting Firms, or (ii) a cash payment of $20,000
in lieu of individual outplacement services, as elected by the Executive at any
time during calendar year 2005, unless otherwise provided under Internal Revenue
Code Section 409A or any guidance issued thereunder.

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       Amounts payable pursuant to subsections (b)(i) – (vi) and (b)(viii) if
elected by the Executive shall be made in a lump sum as soon as administratively
feasible following the Executive’s Termination Date, but in no event shall
payment be made later than March 15 following the calendar year of the
Executive’s Termination Date, unless otherwise required by Internal Revenue Code
Section 409A or any guidance issued thereunder.

5.   EXCISE TAX GROSS-UP       If any payment or benefit made available to the
Executive in connection with a Change in Control (including, without limitation,
any payment made pursuant to any long-term incentive plans, stock option or
equity participation right plans) or termination of the Executive’s employment
following a Change in Control (in either category, a “Change in Control
Payment”) is subject to the Excise Tax (as hereinafter defined), the Corporation
shall pay to the Executive additional amounts (the “Gross Up Amounts”) such that
the total amount of all Change in Control Payments net of the Excise Tax shall
equal the total amount of all Change in Control Payments to which the Executive
would have been entitled if the Excise Tax had not been imposed. For purposes of
this Section 5, the term “Excise Tax” shall mean the tax imposed by Section 4999
of the Code and any similar tax that may hereafter be imposed.       The Gross
Up Amounts due to the Executive under this Section 5 shall be estimated by a
nationally recognized firm of certified public accountants (other than the firm
that audited the financial statements of the Corporation for the most recently
preceding fiscal year) selected by the individual holding the position of Chief
Financial Officer immediately before the Change in Control or such officer’s
designee, at any time that the Executive is to receive a Change in Control
Payment. The Gross Up Amounts will be based upon the following assumptions:

  (a)   all Change in Control Payments shall be deemed to be “parachute
payments” within the meaning of Section 280(G)(b)(2) of the Code, and all
“excess parachute payments” shall be deemed to be subject to the Excise Tax
except to the extent that, in the opinion of the certified public accountants
charged with estimating the Gross Up Amounts for the Executive under this
Section 5, such Change in Control Payments are not subject to the Excise Tax;
and     (b)   the Executive shall be deemed to pay federal, state and local
taxes at the highest marginal rate of taxation for the applicable calendar year.

    The estimated Gross Up Amount due the Executive with respect to any Change
in Control Payment pursuant to this Section 5 shall be paid to the Executive in
a lump sum not later than thirty (30) business days after such Change in Control
Payment is provided to the Executive. In the event that the Gross Up Amount is
less than the amount actually due to the Executive under this Section 5, the
amount of any such shortfall shall be paid to the Executive within ten (10) days
after the existence of the shortfall is discovered. In

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    the event the Gross Up Amount is more than the amount actually due the
Executive under this Section 5, the Executive shall repay the amount of such
overpayment to the Corporation within a reasonable time after the overpayment is
discovered.

6.   LUMP SUM PENSION OPTION       If the Executive is entitled to the payments
and benefits in Section 4(b), then, in accordance with the election requirements
described in Section 7, the Executive shall be entitled to elect a lump sum
payment of the present value of any retirement benefits to which the Executive
is entitled under any of the Corporation’s non-Statutory retirement plans
computed based upon the same assumptions listed in Section 4(b)(vi) above,
except 4(b)(vi)(A). Payment will be made as soon as administratively feasible
following the Executive’s Termination Date. The Corporation’s non-Statutory
retirement plans are hereby deemed amended as necessary to conform to the
provisions of this Section 6. To the extent that a payment on account of the
foregoing may not be made under a non-Statutory plan, the Corporation shall make
such payment separately in lieu of payment under such plan.   7.   PENSION
DISTRIBUTION ELECTION       The time and form of an election to receive amounts
to which the Executive is entitled under Section 6 is governed by the terms of
the non-Statutory retirement plan.   8.   NO MITIGATION REQUIRED       The
Executive shall not be required to mitigate the amount of any payment provided
for in this Agreement, nor shall any payment or benefit provided for in this
Agreement be offset by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits (provided that the
foregoing shall not cause Section 6 to result in a duplication of benefits
provided under any retirement plan), or be offset against any amount claimed to
be owed by the Executive to the Corporation, or otherwise.   9.   INTEREST      
If any payment to the Executive required by this Agreement is not made within
the time for such payment specified herein, the Corporation shall pay to the
Executive interest on such payment at the legal rate payable from time to time
upon judgments in the State of Delaware from the date such payment is payable
under the terms hereof until paid.   10.   NON-COMPETE CANCELLATION       If the
Executive is entitled to the payments and benefits described in Section 4(b),
then any agreement by the Executive not to compete with the Corporation or its
Affiliates after the Executive’s Termination Date shall be null and void and any
such agreement shall be deemed to be amended accordingly.

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11.   EXECUTIVE’S EXPENSES       The Corporation shall pay or reimburse the
Executive for all costs, including reasonable attorney’s, accountants’ and
actuary’s fees and expenses, incurred by the Executive (i) to confirm the
Executive’s rights to and amounts of payments hereunder, (ii) to contest or
dispute any termination of the Executive’s employment following a Change in
Control or seek to obtain or enforce any right or benefit provided by this
Agreement in litigation or arbitration, or (iii) in connection with any audit by
a taxing authority related to any payment or benefit hereunder, or any
subsequent contest or litigation relating to the tax treatment of such payment
or benefit. Upon demand therefor, the Corporation shall advance to the Executive
any amount as to which the Executive reasonably believes he or she will be
entitled pursuant to this Section 11 for costs that the Executive has incurred
or will incur during the ninety (90) days following such demand.   12.   BINDING
AGREEMENT       This Agreement shall inure to the benefit of and be enforceable
by the Executive, and the Executive’s heirs, executors, administrators,
successors and assigns. This Agreement shall be binding upon the Corporation,
its Successors and assigns. The Corporation shall require any Successor to
assume and agree to perform this Agreement in accordance with its terms. The
Corporation shall obtain such assumption and agreement prior to the
effectiveness of any such succession.   13.   NOTICE       Any notices and all
other communications provided for herein shall be in writing and shall be
delivered personally or sent by facsimile transmission (with written
confirmation sent at the same time), prepaid air courier or prepaid certified or
registered mail. Any such notice shall be deemed to have been given (a) when
received, if delivered in person, sent by facsimile transmission, or sent by
prepaid air courier, or (b) three (3) business days following the mailing
thereof, if mailed by prepaid certified or registered mail, return receipt
requested, addressed to the respective addresses set forth on the first page of
this Agreement or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt. All notices to the Corporation
shall be addressed to the attention of the Board with a copy to the General
Counsel.   14.   SOLE SEVERANCE; OTHER BENEFITS       If the Executive is paid
the entitlements due under Section 4(b), such payments shall be in lieu of any
other severance amounts to which the Executive may be entitled under any other
severance arrangement, including under any employment agreement, severance pay
plan, or applicable legislation entitling the Executive to severance benefits.
However, the parties acknowledge that the benefits paid hereunder are only
exclusive as to other severance payments and that the Executive may be entitled
to other benefits or payments triggered by a Change in Control under certain
other of the Corporation’s benefit or

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compensation arrangements, including, without limitation, any long term
incentive plans, stock option plans or equity participation rights plans. This
Agreement supercedes any Change in Control Agreement previously in effect
between the Executive and the Corporation.

15.   AMENDMENTS; WAIVERS       No provision of this Agreement may be modified,
waived or discharged except in a writing specifically referring to such
provision and signed by the party against which enforcement of such
modification, waiver or discharge is sought. No waiver by either party hereto of
the breach of any condition or provision of this Agreement shall be deemed a
waiver of any other condition or provision at the same or any other time.   16.
  GOVERNING LAW       The validity, interpretation, construction and performance
of this Agreement shall be governed by the substantive laws of the State of
Delaware without regard to the choice of law provisions thereof.   17.  
VALIDITY       The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.   18.  
ARBITRATION       If the Executive so elects, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Greenville, South Carolina, or at the Executive’s election in the
city nearest to the Executive’s principal residence that has an office of the
American Arbitration Association, by one arbitrator in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator’s award in any court having jurisdiction. The Corporation
hereby waives its right to contest the personal jurisdiction or venue of any
court, federal or state, in an action brought to enforce this Agreement or any
award of an arbitrator hereunder which action is brought in the jurisdiction in
which such arbitration was conducted, or, if no arbitration was elected, in
which arbitration could have been conducted pursuant to this Section 18.

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19.   COUNTERPARTS       This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.       IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the day and
year first above written.

                  BOWATER INCORPORATED
 
           
 
  By:   /s/ James T. Wright          8/1/06    
 
           
 
  Name:   James T. Wright    
 
           
 
  Title:   Sr. Vice President – Human Resources    
 
           
 
                /s/ William C. Morris          
 
  Name:   William C. Morris    
 
           

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