BOWATER INCORPORATED
                            LONG TERM CASH INCENTIVE
                           DEFERRED COMPENSATION PLAN




                          Effective September 16, 1996



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                              BOWATER INCORPORATED
                            LONG TERM CASH INCENTIVE
                           DEFERRED COMPENSATION PLAN

         This deferred compensation plan is adopted to provide certain employees
with an opportunity to elect to defer a portion of their compensation otherwise
payable by Bowater Incorporated under the terms of the Bowater Incorporated Long
Term Cash Incentive Plan or such other plans as may be designated in the future
by the Plan Administrator.

         NOW, THEREFORE, BOWATER INCORPORATED HEREBY ADOPTS THE BOWATER
INCORPORATED LONG TERM CASH INCENTIVE DEFERRED COMPENSATION PLAN, EFFECTIVE
SEPTEMBER 16, 1996, TO READ AS FOLLOWS:

         1.       DEFINITIONS.

         (a)      "Account" shall mean a Participant's interest under the Plan.

         (b) "Active Employee" shall mean an employee of an Employer other than
one who is on leave of absence, is receiving severance pay, or whose services
for all Employers is interrupted because of a Disability.

         (c) "Bowater" shall mean Bowater Incorporated, a Delaware corporation,
and any successor by merger or acquisition.

         (d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

         (e) "Disability" shall mean total and permanent disability as defined
under the long term disability plan sponsored by Bowater for the benefit of the
affected employee, or, in the absence of such a plan, an illness or injury that,
in the opinion of the Plan Administrator, will substantially and indefinitely
interfere with a Participant's performance of his or her duties for an Employer.

         (f) "Eligible Employee" shall mean any Active Employee who is currently
designated by the Plan Administrator as eligible to participate in the Plan.

         (g)      "Employer" shall mean Bowater and any other Related Employer.

         (h) "Incentive Payment" shall mean an award amount which becomes
payable to a Participant under an Incentive Plan.

         (i) "Incentive Plan" shall mean the Bowater Incorporated Long Term Cash
Incentive Plan and such other compensation or benefit plans as may be designated
by the Plan Administrator.



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         (j)      "Insolvency" shall mean with regard to Bowater:

                  (i) Bowater's inability to pay its debts as they become due,
         or

                  (ii) Bowater's being subject to a pending proceeding as a
         debtor under the United States Bankruptcy Code.

         (k) "Notice" shall mean a written election by a Participant to defer
Incentive Payments under the Plan in the form prescribed by Bowater.

         (l) "Participant" shall mean an Eligible Employee who has made the
election described in Paragraph 2 of the Plan. Any such Eligible Employee shall
remain a Participant until no election to defer Incentive Payments under the
Plan remains effective for him or her and all amounts contributed to the Plan
for him or her have been distributed.

         (m) "Plan" shall mean the Bowater Incorporated Long Term Cash Incentive
Deferred Compensation Plan, as set forth herein.

         (n) "Plan Administrator" shall mean the Vice President-Human Resources
of Bowater, or such other person or entity designated by the Chief Executive
Officer.

         (o) "Plan Year" shall mean each January 1 through December 31 from and
after the effective date of the Plan.

         (p) "Rate of Interest" shall mean the rate of return computed on a
monthly basis earned by the Fixed Income Fund offered as an investment option
under the Bowater Incorporated Salaried Employees' Savings Plan.

         (q) "Related Employer" shall mean any company that is related to
Bowater as described in Section 414(b), (c), (m) or (o) of the Code, or any
other company determined by the Plan Administrator to be related by ownership or
otherwise to an extent justifying the participation of its Eligible Employees
hereunder.

         (r) "Unforeseeable Emergency" shall mean a severe financial hardship to
the Participant resulting from a sudden and unexpected illness or accident of
the Participant or of a dependent (as defined in Section 152(a) of the Code) of
the Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that will
constitute an unforeseeable emergency will depend upon the facts of each case,
but, in any case, payment may not be made to the extent that such hardship is or
may be relieved:


         (i) through reimbursement or compensation by insurance or otherwise;



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                  (ii) by liquidation of the Participant's assets, to the extent
         the liquidation of such assets would not itself cause severe financial
         hardship; or

                  (iii) by cessation of deferrals under the Plan.

         For purposes of the Plan, an "Unforeseeable Emergency" shall not
include a Participant's need to send his or her child to college or a
Participant's desire to purchase a home.


         2.       EMPLOYEE CONTRIBUTIONS.

         (a) An Eligible Employee who is a participant in the Incentive Plan may
elect to defer a whole percentage (up to a maximum of 100%) of an Incentive
Payment otherwise payable to him or her under the Incentive Plan, less any
applicable taxes or other amounts that are required to be withheld thereon. A
deferral election hereunder shall be made by filing a Notice with the Plan
Administrator no later than (i) except as provided in clause (ii), at least one
full Plan Year before the Incentive Payment would otherwise be payable; or (ii)
in the first Plan Year, by October 15, 1996.

         (b) Each Notice shall be effective only for the Incentive Payment for
which it is filed.


         (c) An Account shall be established on behalf of each Participant for
contributions made pursuant to subparagraph (a) above. The Account shall be a
bookkeeping record credited with contributions and earnings and charged for
distributions and shall not require a segregation of any assets of Bowater. Each
Participant shall be an unsecured general creditor of Bowater with respect to
his or her Account and shall have no right or claim to any specific asset of
Bowater.

         (d) Contributions will be credited to each Participant's Account as of
the date an Incentive Payment becomes distributable from an Incentive Plan.

         (e) A Participant shall always have a fully vested interest in the
adjusted balance of his or her Account.


         3.       EARNINGS; MAINTENANCE OF ACCOUNTS.

         (a) Each Participant's Account shall be credited as of the last
business day of each month with earnings at the Rate of Interest on the average
balance of the Account for the month.


         (b) A Participant's Account may not be encumbered or assigned by a
Participant or any beneficiary and any attempt to encumber or assign any Account
under the Plan shall be null and void. No interest of any person or entity in
the Plan, nor any right to receive a benefit hereunder,


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shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind; nor may
such interest or right to receive a benefit be taken, either voluntarily or
involuntarily, for the satisfaction of the debts of, or other obligations or
claims against, such person or entity, including claims for alimony, support,
separate maintenance and claims in bankruptcy proceedings.


         4.       DISTRIBUTIONS.

         (a) Distribution of a Participant's Account shall be made (in the case
of a lump sum distribution) or commenced (in the case of a distribution made in
installments) as of the first to occur of (i) the date selected by the
Participant as described in subparagraph (c) below: or (ii) the last day of the
first calendar month that is at least thirty (30) days after the date that the
Participant's employment with all Employers terminates.

         (b) A distribution under the Plan will be made in a lump sum as soon as
practicable after the date described in subparagraph (a) above, unless the
Participant has elected to receive distribution of his Account in five (5)
substantially equal (as determined by the Plan Administrator) annual
installments, by specifying such distribution form on the first Notice filed by
him or her pursuant to the Plan. Upon the approval of the Plan Administrator, a
Participant who has elected distribution in installments may amend the election
to elect distribution in a lump sum or a Participant who has not previously
elected distribution in installments may make such an election, provided that
such later election is made before January 1 of the Plan Year immediately
preceding the date as of which the Participant's distribution is made or
commenced.
All distributions under the Plan shall be made in cash.

         (c) A Participant may select a distribution date for his or her
Account, by specifying such distribution date on the first Notice filed by him
or her pursuant to the Plan. Upon the approval of the Plan Administrator, a
Participant who has elected a distribution date may amend the election to elect
a different distribution date, provided that such subsequent election is made
before January 1 of the Plan Year immediately preceding the distribution date
previously elected. Notwithstanding any provision herein to the contrary, upon
the termination of a Participant's employment with all Employers for any reason
other than retirement, the Participant's Account (or the remainder thereof)
shall be distributed in a lump sum. For purposes of this section, "retirement"
shall occur if, when the participant terminates employment with all Employers,
he or she is then eligible for immediate payment of a benefit under the defined
benefit retirement plan sponsored by his or her Employer.

         (d) Notwithstanding any provision of the Plan to the contrary, if a
Participant incurs an Unforeseeable Emergency, he or she may elect to make a
withdrawal from his or her Account, but only to the extent reasonably needed to
satisfy the Emergency need. A Participant who wishes to receive a distribution
pursuant to this subparagraph (d) shall apply for such distribution on forms
prescribed by the Plan Administrator and shall provide information to the Plan
Administrator reasonably necessary to permit the Plan Administrator to determine
whether an


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Unforeseeable Emergency exists and the amount of the distribution reasonably
needed to satisfy the emergency need. Distributions of less than all of a
Participant's Account will be charged first to the most recent contributions
made to his or her Account.

         (e) If a Participant dies before distribution has been made under the
Plan, distribution of his or her Account shall be made, in a lump sum, to the
beneficiary or beneficiaries designated in the Participant's Notice or on other
forms prescribed by Bowater as soon as reasonably practicable. If no beneficiary
designation has been made, then such distribution shall be made in a lump sum to
the Participant's estate.

         (f) At the option of the Plan Administrator, a Participant may elect to
have all or part of the earnings under the Plan distributed to him or her
currently, on such forms and subject to such conditions and restrictions as are
established by the Plan Administrator.


         5. CHANGE IN CONTROL . Notwithstanding any provision of the Plan to the
contrary, if a Change in Control of Bowater occurs, all Participants' Accounts
shall be distributed immediately. For this purpose:

         (a) "Acquiring Person" shall mean any Person who is or becomes a
"beneficial owner" (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of securities of Bowater representing
twenty percent (20%) or more of combined voting power of Bowater's then
outstanding voting securities, unless such Person has filed Schedule 13G and all
required amendments thereto with respect to its holdings and continues to hold
such securities for investment in a manner qualifying such Person to utilize
Schedule 13G for reporting of ownership.

         (b) "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.

         (c) "Board" shall mean the Board of Directors of Bowater.

         (d) "Change in Control" of Bowater shall be deemed to have occurred if:

                  (i) any Person is or becomes an Acquiring Person;

                  (ii) less than two-thirds (2/3) of the total membership of the
         Board shall be
         Continuing Directors; or

                  (iii) the shareholders of Bowater shall approve a merger or
         consolidation of Bowater or a plan of complete liquidation of Bowater
         or an agreement for the sale or disposition by Bowater of all or
         substantially all of Bowater's assets.


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                                      - 6 -

         (e) "Continuing Directors" shall mean any member of the Board who was a
member of the Board prior to the date hereof, and any successor of a Continuing
Director while such successor is a member of the Board, who is not an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or of any such
Affiliate or Associate and is recommended or elected to succeed the Continuing
Director by a majority of the Continuing Directors.

         (f) "Person" shall mean any individual, corporation, partnership,
group, association or other "person" as such term is used in Section 13(d) and
14(d) of the Exchange Act.


         6. NOTICES IRREVOCABLE. Except to the extent specifically provided for
in Sections 2 and 4, any election to defer Incentive Payments made by a
Participant under the Incentive Plan in a Plan Year shall be irrevocable.
Notwithstanding the foregoing, if a Participant incurs an Unforeseeable
Emergency, he or she may elect to amend or revoke his or her Notice (but only to
the extent reasonably needed to relieve the Unforeseeable Emergency) by filing
such forms as are prescribed by the Plan Administrator.


         7. ADMINISTRATION. The Plan shall be administered by the Plan
Administrator, who shall have all powers necessary to carry out the provisions
of the Plan. The Plan Administrator shall have the sole, final and discretionary
authority to interpret the Plan, and his or her determinations including those
regarding the eligibility, status, and rights of Eligible Employees and
Participants, and factual determinations of the Plan Administrator shall be
conclusive and binding on all persons; provided that if the Plan Administrator
is a Participant, then determinations regarding such Participant's benefits
under the Plan shall be made by the Board or its designee.


         8. ARBITRATION. At the election of Bowater, disputes under the Plan
shall be submitted to binding arbitration, conducted in the principal offices of
Bowater, in accordance with the rules of the American Arbitration Association.
Each party to such arbitration shall bear its own costs provided that any
unallocated costs shall be borne equally by the parties.


         9. AMENDMENTS TO THE PLAN. The Plan Administrator may amend the Plan at
any time, without the consent of Participants or their beneficiaries, provided,
however, that no amendment shall divest any Participant or beneficiary of the
credits to his or her Accounts, or of any rights to which he or she would have
been entitled if the Plan had been terminated immediately prior to the effective
date of such amendment.


         10. TERMINATION OF THE PLAN. The Plan Administrator may terminate the
Plan at any time. Upon termination of the Plan, distribution of Participants'
Accounts shall be made in the


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                                      - 7 -

manner and at the time heretofore prescribed; provided that no additional
amounts shall be credited to the Accounts of a Participant following termination
of the Plan other than pursuant to subparagraph 3(a).


         11. EXPENSES. Costs of administration of the Plan will be paid by
Bowater.


         12. NOTICES. Any notice or election required or permitted to be given
to the Plan Administrator hereunder shall be in writing and shall be deemed to
be filed (a) on the date it is personally delivered to the Plan Administrator,
or (b) three (3) business days after it is sent by registered or certified mail
addressed to the Plan Administrator at the principal offices of Bowater.


         13. NO GUARANTEE OF EMPLOYMENT. Nothing in the Plan shall constitute a
contract or guarantee of employment or impede or otherwise affect the right of
Bowater to terminate the employment of any Participant or Eligible Employee.


         14. GOVERNING LAW. Except to the extent preempted by Federal law, the
Plan, Notices, and matters related thereto, shall be construed under and
governed by the laws of the State of Delaware.


         15. INCAPACITY. If any person entitled to a payment under the Plan is
deemed by the Plan Administrator to be incapable of personally receiving and
giving a valid receipt for such payment, then, unless and until claim therefor
shall have been made by a duly appointed guardian or other legal representative
of such person, Bowater may provide for such payment or any part thereof to be
made to any other person or institution then contributing toward or providing
for the care and maintenance of such person. Any such payment shall be a payment
for the account of such person and a complete discharge of any liability of the
Company, all Employers, the Plan Administrator, and the Plan therefor.


         16. LIABILITY LIMITED. Notwithstanding any of the preceding provisions
of the Plan, neither any Employer, the Plan Administrator, nor any individual
acting as an employee or agent of any Employer or the Plan Administrator shall
be liable to any Participant, former Participant, beneficiary or any other
person for any claim, loss, liability, or expense incurred in connection with
the Plan.


         17.      CLAIMS PROCEDURE.



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         (a) Any person claiming a benefit, requesting an interpretation or
ruling under the Plan, or requesting information under the Plan shall present
the request in writing to the Plan Administrator, who shall respond in writing
within sixty (60) days.

         (b) If the claim or request is denied, the written notice of denial
shall state:

                  (i) The reason for denial, with specific reference to the Plan
         provision on which the denial is based.

                  (ii) A description of any additional material or information
         required and an explanation of why it is necessary.

                  (iii) An explanation of the Plan's claim review procedure.

         (c) Any person whose claim or request is denied or who has not received
a response within thirty (30) days may request review by notice given in writing
to the Plan Administrator. The claim or request shall be reviewed by the Plan
Administrator who may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.

         (d) The decision on review shall normally be made within sixty (60)
days. If an extension of time is required for a hearing or other special
circumstances, the claimant shall be notified and the time limit shall be one
hundred twenty (120) days. The decision shall be in writing and shall state the
reason and the relevant Plan provisions. All decisions on review shall be final
and binding on all parties concerned.


         IN WITNESS WHEREOF, Bowater has caused this document to be executed by
its duly authorized officer as of the 16th day of September, 1996.


                           BOWATER INCORPORATED


                           By   /s/ Richard F. Frisch

                                    Richard F. Frisch
                           Its      Vice President-Human Resources
                           Date signed:       9/16/96