**Exhibit10.4**

**EXECUTIONCOPY**

 

DATED as of the 28th dayof December, 2006.

- among -

**CASCADES INC.**

- and —

**DOMTAR INC.**

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COST SHARING AGREEMENT

RED ROCK PROPERTY

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**THISCOST SHARING AGREEMENT** is dated as of the 28th day ofDecember, 2006.
| **BETWEEN:** | **CASCADES INC.,** a company duly  incorporated and existing under the laws of the Province of Quebec, having  its head office at 404 Marie-Victorin Street, in the Town of Kingsey Falls,  Province of Quebec, J0A 1B0; |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **   | ** **                                                                                                                                                                                                                    |
| ** **   | (“**Cascades**”)                                                                                                                                                                                                    |
| ** **   | ** **                                                                                                                                                                                                                    |
| **AND:**     | **DOMTAR INC.,**a company duly  incorporated and existing under the laws of Canada, having its head office at  395 de Maisonneuve West, in the City of Montreal, Province of Quebec,  H3A 1L6;                           |
| ** **   | ** **                                                                                                                                                                                                                    |
| ** **   | (“**Domtar**”)                                                                                                                                                                                                      |

 

**RECITALS:**

1.             Cascades and Domtar entered into a letter ofintent dated December 4, 2006 and accepted by Domtar on December 5, 2006 (the “**LOI**”) pursuant to which Domtar agreed tosell the Purchased Shares on the Closing Date (the “**Transaction**”),subject to the terms and conditions set forth therein;

2.             Subsequently, Cascades and Domtar enteredinto a share purchase agreement dated as of December 28, 2006 (the “**Purchase Agreement**”) pursuant to which theParties formalized the terms and conditions relating to the Transaction;

3.             Immediately after Closing, Cascades will ownall of the issued and outstandingshares in the capital of Norampac Inc. (“**Norampac**”);

4.             The underlying assets of Norampac include theassets related to a containerboard mill operation (the “**Mill**”) located in Red Rock, Province ofOntario (the “**Property**”);

5.             Norampac has announced the temporary shutdown the Mill;

6.             The Parties anticipate that in the event thatCascades decides to permanently shut down the Mill, it will result inEnvironmental Remediation Costs;

7.             Aspart of the Transaction, Domtar hasagreed to be responsible for a portion of the Net Environmental RemediationCosts in the event that Cascades decides to permanently shut down the Mill, thewhole in accordance with the provisions hereof.

8.             It is a condition precedent to the Closingthat Cascades and Domtar enter into this Cost Sharing Agreement.

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NOW THEREFORE for goodand valuable consideration (the receipt and sufficiency of which are acknowledgedby each Party), Cascades and Domtar hereby covenant and agree as follows:

# **1.**                                                                                      **Definitions**

## 1.1                                                                                 Allcapitalized words or terms used herein and not otherwise defined shall have themeaning given thereto in the Purchase Agreement.

## 1.2                                                                                 Inthis Agreement:

“**EnvironmentalRemediation Costs**” means any third party(ies) environmental andremedial invoices of any kind or nature that are incurred or arise directlyfrom or in connection with the preparation and implementation of the remedialworks set out in the Remediation Plan, as same may be amended from time to timein accordance with the terms of this Agreement;

“**Hazardous Substance**” means any solid,liquid, gas, odour, heat, sound, vibration, radiation or combination of themthat may impair the natural environment, injure or damage property or plant oranimal life or harm or impair the health of any individual;

“**Mill**”has the meaning ascribed to that term in the fourth recital;

“**NetEnvironmental Remediation Costs**” means any Environmental RemediationCosts, but specifically excluding Cascades’ internal costs relatingthereto.  Additionally, for the purposesof calculating Net Environmental Remediation Costs, any proceeds of insuranceand revenues generated by the demolition and/or sale of all or any portion ofthe Mill shall be deducted;

“**Property**”has the meaning ascribed to that term in the fourth recital;

“**PurchaseAgreement**” has the meaning ascribed to that term in the firstrecital;

“**RemediationPlan**” has the meaning ascribed to that term in Section 3.1;

“**Requirementsof Environmental Law**” means duties under any Requirements of Law tothe extent that such are intended in any way to prevent, limit, control orotherwise regulate any adverse effects or risks to human health, theenvironment or property, including such Requirements of Law relating to: (a)the use, storage, presence, generation, discharge, emission, release, disposal,arrangement for disposal, remediation, or removal of any Hazardous Substance;or (b) the placement, construction, modification, maintenance, use, or removalof any structure; or (c) the modification, maintenance, use, or removal of anyland, wetland or waterway (including anything beneath the surfaces thereof);and any amendments to or regulations promulgated thereunder;

“**Requirementsof Law**” means any laws, treaties, regulations, judgments or ordersapplicable in the Province of Ontario, in each case, applicable to and bindingupon such Person or any of its property or to which such Person is subject as alegally enforceable requirement; and

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“**Transaction**“has the meaning ascribed to that term in the first recital.

# **2.****                             Applicability**

## 2.1                           Theterms of this Agreement shall only apply in the event that Cascades announcesthe permanent shutdown of the Mill on or prior to the second anniversary of thedate of the LOI.  Additionally, thisAgreement shall not apply in the event that Cascades, directly or indirectly,sells, transfers or assigns, in any way, in whole or in part, Norampac or theMill within a period of three years following the Closing Date, other than asale, transfer or assignment to one or more of its Affiliates.

# **3.****                             RemediationPlan**

# 3.1                           Subjectto Section 2, Cascades shall develop a preliminary plan relating to theremediation of the Property and the Mill in order to render the Property andthe Mill available for industrial use and in compliance with Requirements ofEnvironmental Law applicable to industrial use, as well as obtain a Record ofSite Condition for the Property accepted by the Ontario GovernmentalAuthorities within five (5) years of the permanent closure of the Mill (the “**Remediation Plan**”). The Remediation Plan and any material modifications thereto shall besubject to the approval of both Cascades and Domtar.  Additionally, the prior written approval ofDomtar shall be required with respect to any contract entered into in thecontext of the Remediation Plan which provides for total payments equal to orgreater than $500,000.  Furthermore,Domtar shall have the right to access and verify any information relating tothe Remediation Plan and its implementation which is in Norampac and Cascadespossession or control.

# **4.****                             CostSharing**

# 4.1                           Cascadesshall be solely responsible for the first CDN$10,000,000 of the NetEnvironmental Remediation Costs incurred. Domtar and Cascades shall be equally responsible for any NetEnvironmental Remediation Costs in excess of CDN$10,000,000 but not greaterthan CDN$40,000,000 and Domtar shall reimburse Cascades, within 30 days andfrom time to time, an amount equal to 50% of such Net Environmental RemediationCosts.  Any amounts in excess ofCDN$40,000,000 shall be the sole responsibility of Cascades.  Domtar’s obligation to assume NetEnvironmental Remediation Costs shall only apply to Net EnvironmentalRemediation Costs invoiced by third parties prior to the fifth anniversary of the date on which it has beenannounced that the Mill will be permanently shutdown.  Any payment made by Domtar pursuant to thisSection 4.1 shall be deemed to be an adjustment to the Purchase Price under thePurchase Agreement.

# **5.****                             GeneralProvisions**

## 5.1                           **Further Assurances**.  Each Party shall from time to time executeand deliver or cause to be executed and delivered all such further documentsand instruments

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## and do or cause to be done all further actsand things as the other Party may, before or after the date hereof, reasonablyrequire as being necessary or desirable in order to effectively carry out orbetter evidence or perfect the full intent and meaning of this Agreement or anyprovision hereof.

## 5.2                           **Notices**. Any notice, direction or other communication required or permitted to begiven to a Party shall be in writing and shall be given in accordance with thePurchase Agreement.

## 5.3                           **Costs and Expenses**.  Each Party shall be responsible for all costsand expenses (including the fees and disbursements of legal counsel, bankers,investment bankers, accountants, brokers and other advisors) incurred by it inconnection with this Agreement and the transactions contemplated herein.

## 5.4                           **Counterparts**.  This Agreement may be executed incounterparts, each of which shall be deemed to be an original and both of whichtogether shall constitute one and the same instrument.  To evidence its execution of an originalcounterpart of this Agreement, a Party may send a copy of its originalsignature on the execution page hereof to the other Party by facsimiletransmission and such transmission shall constitute delivery of an executedcopy of this Agreement to the receiving Party.

## 5.5                           **Assignment**. This Agreement shall not be assigned by either Party.

## 5.6                           **Parties in Interest**.  This Agreement shall enure to the benefit ofand be binding upon the Parties and their respective successors, including anysuccessor by reason of the amalgamation or merger of a Party, and permittedassigns.

## 5.7                           **Governing Law; Attornment**.  This Agreement shall be construed,interpreted and enforced in accordance with, and the rights of the Partiesshall be governed by, the laws of the Province of Quebec and the federal lawsof Canada applicable therein (excluding any conflict of law rule or principleof such laws that might refer such interpretation or enforcement to the laws ofanother jurisdiction).  Each Partyirrevocably submits to the exclusive jurisdiction of the courts of the Provinceof Quebec (district of Montréal) with respect to any matter arising hereunderor relating hereto.

## 5.8                           **Language**. The Parties hereby acknowledge that they have requested that thisAgreement and all related documents be drawn up in the English language.  *Lesparties aux présentes reconnaissent qu’elles ont exigé que la présenteconvention et tout document qui s’y rattachent soient rédigés en anglais*.

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IN WITNESS WHEREOF this Agreement has been executed bythe parties hereto.
|        | **CASCADES  INC.**                             |
|--------|------------------------------------------------|
|   | ** **                                     |
|   | /s/  Alain Lemaire                        |
|   | Alain Lemaire,  President and Chief Executive  |
|   | Officer                                        |
|   |                                           |
|   |                                           |
|   | /s/  Robert F. Hall                       |
|   | Robert F. Hall,  Vice-President, Legal Affairs |
|   | and Corporate  Secretary                       |
|   |                                           |
|   |                                           |
|   | **DOMTAR  INC.**                               |
|   |                                           |
|   | /s/  Gilles Pharand                       |
|   | Per: Gilles  Pharand                           |
|   | Title:                                         | Senior Vice-President Corporate Affairs |
|   |                                           | and General Counsel |
|   |                                           |
|   |                                           |
|   | /s/  Daniel Buron                         |
|   | Per: Daniel  Buron                             |
|   | Title:                                         | Senior Vice-President and |
|   |                                           | Chief Financial Officer |
|        |                                                |  |  |

 

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