Document:

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                                                                    EXHIBIT 10.6

                                    AGREEMENT

                   This Agreement is made as of the 24th day of July, 1998

BETWEEN:

                                    DAVID J. STEUART, of the City of Burlington,
                                    in the Province of Ontario

                                    (hereinafter called the "Executive")

                                                               OF THE FIRST PART

                                    -and-

                                    BOWATER INCORPORATED, a corporation
                                    incorporated under the laws of Delaware

                                    (hereinafter called the "Corporation")

                                                              OF THE SECOND PART

                  WHEREAS the Executive is employed by Bowater Pulp and Paper
Canada Inc. ("Bowater Canada"), previously called Avenor Inc. ("Avenor");

                  AND WHEREAS Avenor is a corporation resulting from the
amalgamation on January 1, 1989 of CIP Inc. and Canadian Pacific Forest Products
Limited;

                  AND WHEREAS the Corporation entered into an Amended and
Restated Arrangement Agreement dated as of March 9, 1998 with Avenor (the
"Arrangement Agreement") pursuant to which the Corporation and Avenor have
engaged in a transaction that had the economic effect of causing the Corporation
to acquire control of Avenor by way of a Plan of Arrangement (as defined in the
Arrangement Agreement) on July 24, 1998 (the "Effective Date");

                  AND WHEREAS the Corporation changed the name of Avenor, on
July 24, 1998, to Bowater Canada, and such change of name shall have no effect
on the mutual rights and obligations of the parties hereto;

                  AND WHEREAS the Corporation wishes to provide for the
Executive's continued employment on the same or better terms and conditions, in
the aggregate, following such transaction and to encourage the continued loyalty

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                                                                              2.

and dedication of the Executive to the affairs of the Corporation and Bowater
Canada, and in that connection to provide for the amendment and termination of
certain employment agreements between the Executive and Avenor and to provide
certain benefits in respect of the employment of the Executive that will be
received during and following his termination of employment with Bowater Canada;

                  NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration
of the mutual covenants and agreements hereinafter contained the parties do
hereby covenant and agree as follows:

1. EMPLOYMENT. The Corporation and the Executive agree that the Executive shall
continue employment with Bowater Canada on the terms and conditions of the
Employment Agreement attached hereto as Schedule A, effective the Effective
Date. The Corporation shall execute, and shall cause Bowater Canada to execute,
and the Executive shall execute such Employment Agreement immediately following
the execution of this Agreement, and such Employment Agreement shall be dated
the Effective Date. The Corporation and the Executive shall also execute
immediately following the execution of this Agreement a Change in Control
Agreement in the form attached hereto as Schedule B, which shall also be dated
the Effective Date.

2. CANCELLATION OF CERTAIN AVENOR AGREEMENTS. The Executive acknowledges and
agrees that, as of the Effective Date and upon the coming into force and upon
the execution and delivery of the Employment Agreement and the Change in Control
Agreement referred to in section 1 hereof, the following contracts are of no
force and effect whatsoever and the Executive hereby waives and releases any and
all rights he may have under such contracts:

         (a) employment agreement between Canadian Pacific Forest Products
         Limited (now called Avenor) and the Executive dated July, 1993;

         (b) change in control agreement dated September 1, 1993 between
         Canadian Pacific Forest Products Limited (now called Avenor) and the
         Executive, agreed to by the Executive on October 20, 1993, and amended
         by letter agreements dated February 21, 1996 and February 23, 1998; and

         (c) letter agreement dated September 1, 1993 from Canadian Pacific
         Forest Products Limited (now called Avenor) to the Executive, agreed to
         by the Executive on October 4, 1993.

3. CONFIRMATION OF RETIREMENT PLAN ARRANGEMENTS. The Corporation and the
Executive agree that the Executive shall continue membership (in respect of past
and future service) in the registered pension plan of Avenor of which he is
currently a member, and in the Senior Executive Retirement Plan of Avenor (the
"Avenor

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                                                                              3.

SERP"), without interruption, following the Effective Date, in accordance with
their respective terms. The Executive acknowledges and agrees that his
entitlement to a supplementary executive retirement benefit in respect of his
past and future service with Avenor and prior employers, as provided in the
terms of the Avenor SERP, is solely in accordance with the written terms of the
Avenor SERP dated November 28, 1997, and that such terms supersede the
provisions of the employment agreement dated July, 1993 between Canadian Pacific
Forest Products Limited and the Executive. For greater certainty, the
Corporation acknowledges and agrees that as of June 30, 1998 the Executive's
pensionable service for purposes of calculating all entitlements under the
Avenor registered pension plan and the Avenor SERP is 28.561 years.

4. GRANT OF OPTIONS FOR SHARES OF BOWATER INCORPORATED.

         (a) The Corporation shall grant to the Executive as of the day after
         the Effective Date a stock option award on the terms and conditions
         described in the Corporation's standard stock option agreement attached
         hereto as Schedule C (and as amended from time to time) for the right
         to purchase 25,000 shares of the Corporation's common stock at the
         price of such stock on the date of the grant.

         (b) In addition, management of the Corporation agrees to nominate
         Executive for a stock option award for an additional 20,000 shares at
         the January 1999 meeting of the Human Resources and Compensation
         Committee of the Corporation's Board of Directors, assuming the
         Executive is still surviving and has performed and is then performing
         his duties as contemplated hereunder and that such proposed award is in
         accordance with the compensation guidelines then applicable to other
         similarly situated executives of the Corporation, and the Corporation's
         subsidiaries. This award will be on the terms and conditions described
         in the Corporation's standard stock option agreement attached hereto as
         Schedule C (and as amended from time to time).

         (c) For the purpose of the grants described in this section 4, Bowater
         Canada shall be deemed to be a Subsidiary within the meaning of section
         1(dd) of the Plan as defined in Schedule C.

         (d) For greater certainty, the Corporation agrees that from the
         Effective Date the Executive shall participate in the Bowater
         Incorporated 1997 Stock Option Plan or the Bowater Incorporated Equity
         Participation Rights Plan, as amended from time to time (or any
         substitute therefor).

5. PAYMENT ON TERMINATION OF EMPLOYMENT WITH BOWATER CANADA.

         (a) In recognition of the long service and experience of the Executive
         in the business carried on by Bowater Canada the Corporation will pay
         or cause

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                                                                              4.

         Bowater Canada to pay to the Executive (or his legal representative)
         within 30 business days (as defined in the Arrangement Agreement)
         following the termination of the Executive's employment with Bowater
         Canada or the Executive's death, whichever first occurs, a lump sum
         consisting of a principal sum of $2 million (Canadian) together with
         interest thereon, calculated daily from the Effective Date to the date
         of payment at a rate equal to the LIBOR one-year rate, pro-rated to the
         number of completed months from the Effective Date to December 31,
         1998, and thereafter the accumulated principal and interest shall be
         compounded with interest annually at a rate equal to the then current
         LIBOR one-year rate, such earnings to be credited on an annual basis.
         In the calendar year in which the Executive terminates employment with
         Bowater Canada, or dies, such interest shall be pro-rated to the number
         of completed months from the beginning of such calendar year to the
         date of termination of employment or death, as the case may be, based
         upon the LIBOR one-year rate in effect on the first day of the month in
         which the Executive terminates employment or dies, as the case may be
         (the "Termination Benefit").

         (b) The Termination Benefit shall be paid to the Executive (or his
         legal representative) regardless of the reason for termination of
         employment, as a lump sum payment, unless Bowater Canada and the
         Executive agree prior to the Executive's termination of employment or
         death, to make payment of the Termination Benefit on some other basis.

         (c) The payment of the Termination Benefit shall be subject to all
         withholdings and deductions required by law.

         (d) The Termination Benefit is in addition to all other amounts to
         which the Executive is or may become entitled upon termination of
         employment for any reason from Bowater Canada and shall not be included
         in any calculation of any other compensation or benefit of the
         Executive for any purpose, and shall not be used to reduce or affect
         any other entitlement payable to the Executive in respect of his
         employment or disability.

         (e) Neither the Corporation nor Bowater Canada shall be required to set
         aside funds or establish or maintain any separate fund or account to
         secure the payment required to be made under this section 5. The
         Corporation and Bowater Canada may accumulate the amount to be paid on
         a notional basis.

         (f) If the Executive is required to pay income tax in respect of all or
         part of the Termination Benefit prior to the date upon which the
         Executive (or his legal representative) is entitled to receive payment
         of the Termination Benefit or hereunder, the Corporation shall, or
         shall cause Bowater Canada, to promptly reimburse the Executive for any
         such tax liability (including any tax liability in respect of the
         reimbursement) and the amount of the notionally

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                                                                              5.

         accumulated Termination Benefit payable shall be reduced by the amount
         of such reimbursement at the time it is paid.

6. SHORT TERM INCENTIVE PLAN. The Corporation will pay or cause Bowater Canada
to pay to the Executive a lump sum in lieu of the Executive's participation in
the Avenor Inc. Short Term Incentive Plan (formerly called the Incentive
Compensation Plan of Avenor Inc.) (the "Avenor STIP") during the period of
January 1, 1998 to the Effective Date, which shall be equal to the greater of:

          (I) the amount payable to the Executive under the Avenor STIP for
          1998, determined as if one hundred (100) percent of the target result
          of the performance of Avenor Inc. for 1998 were achieved, prorated for
          the portion of the year up to the Effective Date, and

          (II) the amount payable to the Executive under the Avenor STIP for
          1998, determined as if the actual performance of Avenor Inc. from the
          beginning of 1998 to the end of the most recently completed fiscal
          quarter of 1998 prior to the Effective Date, on an annualized basis,
          were the actual performance of Avenor Inc. for 1998, for the portion
          of the year up to the Effective Date.

The Corporation shall pay or cause the payment in 6(I) to be paid as soon as
practicable following the Effective Date, and the balance, if any, to be paid to
the Executive at approximately the same time payments are made by Bowater Canada
to other members of the Avenor STIP (anticipated to be February 1999), and in
any event, no later than June 30, 1999.

7. BOWATER LONG TERM INCENTIVE PLAN. The Corporation agrees that from the
Effective Date the Executive shall participate in the Corporation's three year
performance based incentive plan adopted in January 1997 and known as the
"Bowater Incorporated 1997 -- 1999 Long-Term Incentive Plan", as amended from
time to time (or any substitute therefor)

8. EXECUTIVE'S POSITION WITH BOWATER INCORPORATED. The Executive agrees to serve
the Corporation while employed by Bowater Canada, in the position of "President,
Pulp Division of Bowater Incorporated" and such position shall be based in the
Greater Metropolitan Toronto, Canada Area.

9. GOVERNING LAW. This Settlement Agreement shall be governed by and interpreted
in accordance with the laws of the Province of Ontario and the Corporation
hereby attorns to the jurisdiction of the courts of Ontario for purposes of this
Agreement.

10. INDEPENDENT LEGAL ADVICE. The Executive hereby accepts and agrees to the
terms and conditions of this Agreement, having been offered and exercised the
opportunity to seek independent legal advice.

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                                                                              6.

11. AMENDMENTS AND WAIVERS. No amendment to this Agreement shall be valid or
binding unless set forth in writing and duly executed by the parties hereto. No
waiver of any breach of any term or provision of this Agreement shall be
effective or binding unless made in writing and signed by the party purporting
to give the same and, unless otherwise provided in the written waiver, shall be
limited to the specific breach waived.

12. ASSIGNMENT. This Agreement is personal to the Executive and shall not be
assignable by him.

13. LEGAL FEES AND EXPENSES. The Corporation shall pay or shall cause Bowater
Canada to pay to the Executive's attorneys, as soon as practicable after
presentation of their account, all legal fees and expenses incurred by the
Executive in establishing the terms and conditions of the Executive's continuing
employment by Bowater Canada as contemplated hereunder and in the Employment
Agreement, provided such amount does not exceed $25,000 (Canadian).

14. JOINT AND SEVERAL LIABILITY. The Corporation and Bowater Canada shall be
jointly and severally liable for any and all benefits and entitlements provided
hereunder, and for all amounts payable in accordance with the Employment
Agreement annexed hereto.

15. CONFIDENTIALITY. The Executive shall keep the fact and terms of this
Agreement strictly confidential and shall not disclose the fact or terms of this
Agreement to any person or entity, other than his spouse, his attorney or his
financial adviser, or except as may be required by law.

                  IN WITNESS WHEREOF this Agreement has been executed by the
parties hereto as of the day and year first above written.

                                            BOWATER INCORPORATED

                                         By: /s/ Arnold M. Nemirow
                                             -----------------------------------
                                             Arnold M. Nemirow
                                             Chairman and Chief
                                             Executive Officer

SIGNED IN THE PRESENCE     )
OF                         )
/s/ Lynnette Dilena        )                 /s/ David J. Steuart
Witness                    )                 -----------------------------------
Name:  Lynnette Dilena     )                 DAVID J. STEUART

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                                  SCHEDULE "A"

The Employment Agreement originally included as Schedule A to this Agreement is
not included here but is filed as Exhibit 10.5 to Bowater Incorporated's
Quarterly Report on Form 10-Q for the period ending September 30, 1998 (the
"September 1998 10-Q").

                                  SCHEDULE "B"

The Change in Control Agreement originally included as Schedule B to this
Agreement is not included here but is filed as Exhibit 10.6 to the September
1998 10-Q.

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                                  SCHEDULE "C"

                              BOWATER INCORPORATED
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                           ___________________________
                                   Granted to

-----------------   ---------------    ----------------   ----------------------
    Grant Date      Expiration Date    Number of Shares   Option Price per Share

This stock option is granted to you by the Human Resources and Compensation
Committee (the "Committee") of the Board of Directors of Bowater Incorporated, a
Delaware corporation (the "Company"), upon the terms and conditions set forth
below and those contained in the Bowater Incorporated 1997 Stock Option Plan
(the "Plan").

1.   The Company hereby grants you a non-qualified stock option (the "Option")
     to purchase on or before the Expiration Date indicated above, at the Option
     Price per Share stated above, the Number of Shares (the "Shares") of the
     Common Stock of Bowater Incorporated, par value $1.00 per share, set forth
     above. This grant is subject to the condition that you execute and return
     this Agreement to the Company within sixty (60) days of the date you
     receive it; if you do not so execute and return this Agreement, the grant
     shall be null and void and without effect. This Agreement may only be
     modified by a writing signed by both you and the Company.

2.   No shares may be purchased hereunder unless you remain in the continuous
     employ of the Company or one of its Subsidiaries (as that term in defined
     in Section 1(dd) of the Plan) for one year following the grant date except
     as provided in paragraph 7. Thereafter, the Option may be exercised in the
     manner hereinafter set forth, provided that (a) you are at the time of such
     exercise in the employ of the Company or one of its Subsidiaries (except as
     provided in paragraphs 7 and 8), and (b) the Option may be exercised only
     to the extent of 50% of the number of Shares to which it relates on or
     after the first anniversary of the grant date, and may be exercised to the
     extent of the remaining 50% of such Shares only on or after the second
     anniversary of such date. The Option shall become immediately exercisable
     in the event of your death or a Change in Control (as that term may be
     defined from time to time in Section 1(g) of the Plan) while you are
     employed by the Company or one of its Subsidiaries.

3.   You may exercise the Option, in whole or in part, by complying with
     notification procedures specified by the Company's Human Resources
     Department at its corporate headquarters. Contemporaneously with the
     delivery of notice with respect to exercise of the Option you must pay the
     full purchase price of the Shares purchased pursuant to the exercise of the
     Option in cash, or, if approved by the Committee, by tender of Share
     certificates in proper form for transfer to the Company valued at the Fair
     Market Value of the Shares (as defined in Section 1(p) of the Plan) on the
     preceding day, or by any combination of the foregoing, or with any other
     consideration acceptable to the Committee. You may also make payment upon
     the exercise of the Option by means of a properly executed exercise notice
     together with irrevocable instructions to a broker to deliver promptly to
     the Company the portion of the sale or loan proceeds sufficient to pay such
     purchase price. The Option may not be exercised with respect to a
     fractional share or with respect to fewer than 100 Shares (unless it is
     being exercised in full). No Shares shall be sold or delivered hereunder
     until full payment for such Shares has been made.

4.   The Company shall not be required to issue or deliver any certificate or
     certificates for Shares purchased upon the exercise of any part of the
     Option prior to (i) the admission of such Shares to listing on any stock
     exchange on which the Shares may then be listed, (ii) the completion of any
     registration or other qualification of such Shares under any applicable
     law, rule or regulation, (iii) the obtaining of any consent or approval or
     other clearance from any governmental agency that the Company determines to
     be necessary or advisable, and (iv) the payment to the Company, upon its
     demand, of any amount requested by the Company for the purpose of
     satisfying its liability, if any, to withhold federal, state or local
     income or earnings tax or any other applicable tax or assessment (plus
     interest or penalties thereon, if any, caused by a delay in making such
     payment) incurred by reason of the exercise of the Option or the transfer
     of such Shares thereupon.

5.   The Option shall be exercised and Shares issued only upon compliance with
     the Securities Act of 1933, as amended (the "Act"), and any other
     applicable securities laws, and you agree to comply with any requirements
     imposed by the Committee under such laws. You agree that you will not
     transfer any Shares acquired upon exercise of the Option at any time during
     which you are in possession of any material, nonpublic information about
     the Company, its business affairs, financial condition or prospects. If you
     are an officer of the Company subject to Section 16 of the Securities
     Exchange Act of 1934, as amended, you are required to obtain prior approval
     of any exercise of the Option or transfer of the Shares acquired thereby
     from the Secretary or General Counsel of the Company. If you are an
     "affiliate" of the Company (as that term is defined in Rule 144 promulgated
     under the Act, and which generally includes directors and certain
     officers), by accepting this Agreement, you agree that you will dispose of
     the Shares acquired upon exercise of the Option only in compliance with
     Rule 144 or in such other manner as will not violate the Act and the rules
     and regulations promulgated thereunder, and any other applicable securities
     law.
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6.   The Option is not transferrable by you otherwise than by will or by the
     laws of descent and distribution, and is exercisable, during your life,
     only by you or by your guardian or legal representative. Any attempted
     assignment, transfer, pledge, hypothecation or other disposition of the
     Option contrary to the provisions hereof shall be null and void. The Option
     does not confer upon you any right with respect to continuation of
     employment with the Company or any of its Subsidiaries, and will not
     interfere in any way with the right of the Company or any of its
     Subsidiaries to terminate your employment.

7.   To the extent that the Option has not become exercisable it shall terminate
     on the earlier of (i) the Expiration Date, or (ii) at the date of the
     termination of your employment with the Company or its Subsidiaries for any
     reason other than for death, Disability (as defined in Section 1(n) of the
     Plan) or Retirement (as defined in Section 1(z) of the Plan). Except as
     provided in the last sentence of this paragraph, to the extent that the
     Option has become exercisable, it shall terminate on the earlier of (i) the
     Expiration Date, or (ii) three months after the termination of your
     employment with the Company or its Subsidiaries for any reason other than
     death, Disability or Retirement. Subject to paragraph 8, and the condition
     that the Option may not be exercised in whole or in part after the
     Expiration Date or its expiration as otherwise provided in this paragraph,
     the Option may be exercised in whole or in part within a period of five
     years after the termination of your employment due to Disability or
     Retirement; and any period of Disability or Retirement shall be considered
     continued employment for purposes of paragraph 2. The Option terminates
     immediately upon termination of your employment for good cause (as
     determined by the Company).

8.   If you die while employed or during a period of Disability or Retirement
     described above, the legal representative to whom your rights hereunder are
     transferred by will or the laws of descent and distributions may exercise
     some or all of this Option at any time prior to the earlier of (i) the
     Expiration Date, or (ii) twenty-four months from the date of your death. As
     of the earlier of such dates, the Option shall terminate and expire.

9.   If a stock dividend, stock split, recapitalization, merger, consolidation,
     combination, exchange of shares or other similar corporate change occurs,
     the Committee may adjust the terms of this Option in such manner as it
     deems equitable.

10.  The Option shall be irrevocable during the Option period and its validity
     and construction shall be governed by the laws of the State of Delaware.
     The terms and conditions herein set forth are subject in all respects to
     the terms and conditions of the Plan, which shall be controlling. You agree
     to execute such other agreements, documents or assignments as may be
     necessary or desirable to effect the purposes of this Agreement.

                              BOWATER INCORPORATED

                              --------------------------------
                              Arnold M. Nemirow
                              Chairman and Chief Executive Officer

--------------------------------------------------------------------------------

I hereby acknowledge receipt of the Non-Qualified Stock Option (the "Option")
granted on the date shown above, which has been issued to me under the terms and
conditions of the Bowater Incorporated 1997 Stock Option Plan (the "Plan"). I
agree to conform to all of the terms and conditions of the Option and Plan.

Date: _______________________Your Signature: ___________________________________<PAGE>   1
                                                                   EXHIBIT 10.18

                   OUTSIDE DIRECTOR ELECTIVE STOCK OPTION PLAN

                                  MARCH 2, 2001

INTRODUCTION

This Plan is to be adopted under the 2000 Stock Option Plan and its purpose is
to allow outside directors to elect a one-time option grant in lieu of three
years of director compensation.

Directors will have until April 30, 2001, to determine whether to participate.

COMPENSATION WAIVED

If a director elects to participate, all director compensation except retirement
accruals for the three-year period will be replaced by the option grant. "All
compensation" includes the annual cash retainer, fees for attending board or
committee meetings and annual stock option grants (although the January 2001
option grant will not be affected). Participating directors will not be eligible
for any increases in director compensation or new compensation arrangements for
the three-year period. Any prior elections under the Deferred Compensation Plan
will remain effective through March 31, 2001.

Retirement benefits will be computed based on the compensation (including
increases) a director would have earned if the director had not participated in
the Plan.

Directors who do not participate will remain eligible for Bowater directors'
compensation policies and programs as in effect from time to time. They will be
eligible for all increases in existing compensation and for new compensation
arrangements.

STOCK OPTION AWARD

Participating directors will receive an option grant covering 20,000 shares on
May 9, 200l, at a price equal to the fair market value on the date of grant, as
defined in the 2000 Stock Option Plan. New board members will be offered an
opportunity to participate in the Plan and would receive a prorated grant.

VESTING PROVISIONS

One-third of the options will vest on each anniversary of the grant date. The
options will have a term of ten years if a director continues on the board. The
options will be redeemed at the acceleration price provided in the 2000 Stock
Option Plan if there is a Change in Control. If a director's service on the
board terminates during the term of the options for any reason except death or
disability, unvested options will expire upon such termination; any vested
options will remain exercisable in accordance with existing plan provisions.
Upon retirement, vested options may be exercised until the earlier of (i) five
years from the date of retirement, or (ii) the original expiration date of the
option.

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