EMPLOYMENT AGREEMENT


         THIS  AGREEMENT,  is made as of this 1st day of  August,  1997,  by and
between BOWATER INCORPORATED, a Delaware corporation having a mailing address of
55 East Camperdown Way,  Greenville,  South Carolina 29601 (the  "Corporation"),
and Arthur D. Fuller, 111 Rapid River Trail, Greenville,  South Carolina 29615 (
the AExecutive@).

         WHEREAS,  the Corporation  desires to employ the Executive as Executive
Vice  President  of the  Corporation  and as  President  of  the  Newsprint  and
Directory Division; and


         WHEREAS, the Executive is desirous of serving the Corporation in such
capacity;


         NOW, THEREFORE, the parties hereto agree as follows:


         1. Employment. During the term of this Agreement the Corporation agrees
to continue to employ the Executive, and the Executive agrees to continue in the
employ of the  Corporation,  in accordance with and subject to the provisions of
this Agreement.


         2.       Term.

                  (a)      Subject to the  provisions of  subparagraphs  (b) and
                           (c) of this  Section  2, the  term of this  Agreement
                           shall  begin on the Date  hereof  and shall  continue
                           thereafter   until  terminated  by  either  party  by
                           written  notice  given  to the  other  party at least
                           thirty (30) days prior to the  effective  date of any
                           such   termination.   The   effective   date  of  the
                           termination  shall be the date stated in such notice,
                           provided  that  if  the   Corporation   specifies  an
                           effective date that is more than thirty

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                           (30)  days  following  the date of such  notice,  the
                           Executive  may, upon thirty (30) days= written notice
                           to the Corporation,  accelerate the effective date of
                           such termination.

                  (b)      Notwithstanding  Section 2(a), upon the occurrence of
                           a Change  in  Control  as  defined  in the  Change in
                           Control  Agreement of even date herewith  between the
                           Corporation and the Executive (the "Change in Control
                           Agreement"),  the  term of this  Agreement  shall  be
                           deemed  to  continue  until  terminated,  but  in any
                           event,  for a period of not less than three (3) years
                           following  the date of the Change in Control,  unless
                           such termination shall be at the Executive's election
                           for other than "Good  Reason" as that term is defined
                           in the Change in Control Agreement.

                  (c)      Notwithstanding   Section  2(a),  the  term  of  this
                           Agreement shall end upon:

                           (i)      the death of the Executive;

                           (ii)     the  inability  of the  Executive to perform
                                    his  duties  properly,  whether by reason of
                                    ill-health,  accident or other cause,  for a
                                    period  of  one  hundred  and  eighty  (180)
                                    consecutive days or for periods totaling one
                                    hundred  and  eighty  (180)  days  occurring
                                    within any twelve (12) consecutive  calendar
                                    months; or

                           (iii)    the  executive's  retirement on his early or
                                    normal retirement date.


         3. Position and Duties. Throughout the term hereof, the Executive shall
be employed as Executive Vice President of the  Corporation  and as President of
the  Newsprint  and  Directory  Division  (Salary Grade 36), with the duties and
responsibilities  customarily  attendant  to  that  office,  provided  that  the
Executive   shall   undertake   such   other   and   further   assignments   and
responsibilities  of at least  comparable  status as the Board of Directors  may
direct.  The Executive shall  diligently and faithfully  devote his full working
time and best efforts to the  performance  of the services  under this Agreement
and to the furtherance of the best interests of the Corporation.

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         4. Place of Employment. The Executive will be employed at the corporate
offices in the City of Greenville,  South Carolina or at such other place as the
Corporation shall designate from time to time,  provided,  however,  that if the
Executive is transferred to another place of employment,  necessitating a change
in his  residence,  the Executive  shall be entitled to financial  assistance in
accordance with the terms of the Corporation's relocation policy then in effect.


         5.       Compensation and Benefits.

                  (a)      Base  Salary.   The  Corporation  shall  pay  to  the
                           Executive  a  base  salary  of  $352,000  payable  in
                           substantially  equal  periodic  installments  on  the
                           Corporation's  regular payroll dates. The Executive's
                           base salary  shall be reviewed at least  annually and
                           from time to time may be increased  (or  reduced,  if
                           such    reduction    is    effected    pursuant    to
                           across-the-board    salary    reductions    similarly
                           affecting   all    management    personnel   of   the
                           Corporation).

                  (b)      Bonus  Plan.  In  addition  to his base  salary,  the
                           Executive  shall be entitled to receive a bonus under
                           the  Corporation's  bonus plan in effect from time to
                           time  determined in the manner,  at the time,  and in
                           the amounts set forth under such plan.

                  (c)      Benefit   Plans.    The   Corporation    shall   make
                           contributions  on  the  Executive's   behalf  to  the
                           various benefit plans and programs of the Corporation
                           in which the Executive is eligible to  participate in
                           accordance  with the provisions  thereof as in effect
                           from time to time.

                  (d)      Vacations.  The  Executive  shall be entitled to paid
                           vacation,  in keeping with the Corporate policy as in
                           effect from time to time, to be taken at such time or
                           times as may be approved by the Corporation.

                  (e)      Expenses.   The   Corporation   shall  reimburse  the
                           Executive  for  all  reasonable   expenses   properly
                           incurred,  and  appropriately   documented,   by  the
                           Executive  in  connection  with the  business  of the
                           Corporation.

                  (f)      Perquisites.  The Corporation shall make available to
                           the Executive all perquisites to which he is entitled
                           by virtue of his position.
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         6.  Nondisclosure.  During  and after the term of this  Agreement,  the
Executive  shall not,  without the written  consent of the Board of Directors of
the Corporation,  disclose or use directly or indirectly,  (except in the course
of employment hereunder and in furtherance of the business of the Corporation or
any of its  subsidiaries  and  affiliates)  any of the  trade  secrets  or other
confidential   information  or  proprietary  data  of  the  Corporation  or  its
subsidiaries or affiliates;  provided,  however,  that confidential  information
shall not include any information known generally to the public (other than as a
result of unauthorized disclosure by the Executive) or any information of a type
not otherwise considered  confidential by persons engaged in the same or similar
businesses.


         7. Noncompetition.  During the term of this Agreement, and for a period
of one (1) year  after  the  date the  Executive's  employment  terminates,  the
Executive shall not, without the prior approval of the Board of Directors of the
Corporation in the same or a similar  capacity engage in or invest in, or aid or
assist anyone else in the conduct of any business  (other than the businesses of
the Corporation and its  subsidiaries  and affiliates)  which directly  competes
with the business of the  Corporation  and its  subsidiaries  and  affiliates as
conducted during the term hereof. If any court of competent  jurisdiction  shall
determine  that any of the provisions of this Section 7 shall not be enforceable
because of the  duration or scope  thereof,  the parties  hereto agree that said
court shall have the power to reduce the duration and scope of such provision to
the extent  necessary to make it  enforceable  and this Agreement in its reduced
form  shall be  valid  and  enforceable  to the  extent  permitted  by law.  The
Executive  acknowledges that the Corporation's remedy at law for a breach by the
Executive of the provisions of this Section 7 will be  inadequate.  Accordingly,
in the event of the breach or threatened breach by the Executive of this Section
7, the  Corporation  shall be entitled to  injunctive  relief in addition to any
other remedy it may have.


         8.  Severance  Pay.  If  the   Executive's   employment   hereunder  is
involuntarily  terminated  for any reason  other than those set forth in Section
2(c) hereof, then unless the Corporation shall have terminated the Executive for
"Cause",  the  Corporation  shall pay the  Executive  severance pay in an amount
equal to twenty-four (24) months of the Executive's base salary on the effective
date of the  termination,  plus 1/12 of the amount of the last bonus paid to the
Executive  under the  Corporation's  bonus plan  applicable to the Executive for
each month in the period beginning on January 1 of the year in which the date of
the  termination  occurs and ending on the date of the  termination and for each
months'  base salary to which the  Executive  is entitled  under this Section 8,
provided,  however, that any amount paid to the Executive by the Corporation for
services  rendered   subsequent  to  the  thirtieth  (30th)  day  following  the
communication  to the Executive of notice of termination  shall be deducted from
the severance pay otherwise due hereunder.  Such payment shall be made in a lump
sum  within  ten  (10)  business  days  following  the  


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effective  date of the  termination.  The  severance pay shall be in lieu of all
other  compensation  or payments of any kind relating to the  termination of the
Executive's employment hereunder;  provided that the Executive's  entitlement to
compensation or payments under the Corporation's  retirement plans, stock option
or  incentive  plans,  savings  plans or bonus  plans  attributable  to  service
rendered prior to the effective date of the termination shall not be affected by
this clause and shall  continue to be governed by the  applicable  provisions of
such plans;  and further  provided  that in lieu hereof,  at his  election,  the
Executive  shall be entitled to the benefits of the Change in Control  Agreement
of even date hereof between the  Corporation  and the Executive,  if termination
occurs in a manner  and at a time  when such  Change  in  Control  Agreement  is
applicable.  For  purposes of this  Agreement,  the term for "Cause"  shall mean
because of gross negligence or willful misconduct by the Executive either in the
course of his employment hereunder or which has a material adverse effect on the
Corporation or the Executive's ability to perform adequately and effectively his
duties hereunder.


         9.  Notices.  Any notices  required or permitted to be given under this
Agreement  shall be in  writing  and shall be deemed  to have  been  given  when
delivered or mailed,  by registered or certified mail,  return receipt requested
to the  respective  addresses of the parties set forth  above,  or to such other
address  as any party  hereto  shall  designate  to the other  party in  writing
pursuant to the terms of this Section 9.


         10. Severability.  The provisions of this Agreement are severable,  and
the  invalidity  or  unenforceability  of any  provision  shall not  affect  the
validity or enforceability of any other provision.


         11.  Governing Law. This Agreement shall be governed by and interpreted
in accordance with the substantive laws of the State of Delaware.


         12.  Supersedure.  This Agreement  shall cancel and supersede all prior
agreements  relating to employment  between the  Executive and the  Corporation,
except the Change in Control Agreement.


         13.  Waiver  of  Breach.  The  waiver  by a party  of a  breach  of any
provision of this Agreement shall not operate or be construed as a waiver of any
prior or subsequent breach by any of the parties hereto.

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         14. Binding  Effect.  The terms of this Agreement shall be binding upon
and inure to the benefit of the  successors and assigns of the  Corporation  and
the heirs, executors,  administrators and successors of the Executive,  but this
Agreement may not be assigned by the Executive.


        IN WITNESS WHEREOF, the Corporation and the Executive have executed this

Agreement as of the day and year first above written.


BOWATER INCORPORATED


By   /s/ Arnold M. Nemirow                     /s/ Arthur D. Fuller
   ---------------------------------          -----------------------------
        Arnold M. Nemirow                            Arthur D. Fuller
        Chairman, President and
         Chief Executive Officer





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