BOWATER INCORPORATED




                        EQUITY PARTICIPATION RIGHTS PLAN



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                              BOWATER INCORPORATED

                        EQUITY PARTICIPATION RIGHTS PLAN



1.       PURPOSES.
         The purposes of the Bowater Incorporated Equity Participation Rights
Plan (the "Plan") are to promote the interests of Bowater Incorporated (the
"Corporation") and its stockholders by attracting, retaining and stimulating the
performance of selected employees, giving such employees the opportunity to earn
additional compensation related to the success of the Corporation's business and
an increased personal interest in its continued success and progress.

2.       DEFINITIONS.
         Unless the context clearly indicates otherwise, the following terms
have the meanings set forth below.

         "Board of Directors" or "Board" means the Board of Directors of the 
Corporation.

         "Code" means the Internal Revenue Code of 1986, as amended.


         "Committee" means the Human Resources and Compensation Committee of 
the Board.


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         A majority of the members of the Committee shall constitute a quorum.
         All determinations of the Committee shall be made by a majority of its
         members. Any decision or determination of the Committee reduced to
         writing and signed by all of the members of the Committee shall be
         fully as effective as if it had been made at a meeting duly called and
         held.

         "Common Stock" means the common stock of Bowater  Incorporated,  $1 par
         value.

         "Disability", as applied to a Grantee, shall have the meaning set forth
         in Section 22(e)(3) of the Code.

         "Equity Participation Right" means a contractual right to receive a
         cash payment determined with reference to the increase in Fair Market
         Value of a share of Common Stock subject to the terms and conditions
         thereof.

         "Fair Market Value" of a share of Common Stock on any particular date
         is (1) the simple arithmetic mean between the highest and lowest prices
         per share at which the Common Stock is traded on the New York Stock
         Exchange Composite Transactions as reported in the Wall Street Journal
         for that date or, if not so traded, (2) the simple arithmetic mean
         between the closing bid-and-asked prices thereof as reported on such
         Exchange on that date; provided, however, that the Committee may, if it
         deems appropriate in view of stock market conditions, include in an
         agreement evidencing an 


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         Equity Participation Right a value provision based upon the "Average 
         Fair Market Value" of a share of Common Stock on any particular date. 
         Such "Average Fair Market Value" is the average of the Fair Market 
         Values specified in clause (1) or (2) for the twenty business days 
         immediately preceding such date.

         "Grant Date" means the date on which an Equity Participation Right is
         granted by the Committee pursuant to the Plan.

         "Grantee" means the individual to whom an Equity Participation Right is
         granted pursuant to the Plan.

         "Plan" means the Bowater Incorporated Equity Participation Rights Plan
         as set forth herein and as amended from time to time.

         "Retirement", as applies to an employee, shall have the meaning
         provided under the qualified pension plan applicable to such employee.

         "The 1934 Act" means the Securities Exchange Act of 1934, as amended.




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3.       ADMINISTRATION.
         (a) The Committee shall have all the powers vested in it by the terms
of the Plan, including exclusive authority (within the limitations described
herein) to select the employees to be granted Equity Participation Rights under
the Plan, to determine the type, size and terms of awards to be made to each
employee selected, to determine the time when Equity Participation Rights will
be granted to employees, to establish objectives and conditions, if any, for
earning such awards. The Committee shall have full power and authority to
administer and interpret the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable.
The Committee's interpretation of the Plan and all actions taken and
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all parties concerned, including
the Corporation, its stockholders, any Grantees and any other employee of the
Corporation or any of its subsidiaries.
         (b) Equity Participation Rights shall be evidenced by written
agreements which shall contain such terms and conditions consistent with the
Plan as may be determined by the Committee.
         (c) All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and conclusive.




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4.       ELIGIBILITY AND PARTICIPATION.
         The participants in the Plan shall consist of selected employees of the
Corporation or its present or future parent or subsidiaries, as defined in
Section 424 of the Code, who serve in executive, administrative or professional
capacities, as may from time to time be so designated by the Committee; provided
that no person who is an officer of the Corporation within the contemplation of
Section 16 of the Securities Exchange Act of 1934 shall be a participant in the
Plan.

5.       EFFECTIVE DATE OF THE PLAN AND TERM OF EXERCISE PERIOD.
         The Plan shall become effective upon its adoption by the Committee.
Subject to the provisions of Articles 11 and 13 hereof, the period during which
an Equity Participation Right granted under the Plan may be exercised shall be
the period, expiring not later than the tenth anniversary of the Grant Date of
the award, as may be determined by the Committee.

6.       AWARDS.
         (a) Types. Awards under the Plan shall consist of Equity Participation
Rights.
         (b) Performance Goals. The Committee may, but need not, establish
performance goals to be achieved within such performance periods as may be
selected by it in its sole discretion, using such measures of the performance of
the Corporation and/or its subsidiaries as it may select. 
         (c) Guidelines. From time to time, the Committee may adopt written
policies implementing the Plan. Such policies may include, but need not be
limited to, the type, size 


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and terms of awards to be made to employees and the conditions for payment of 
such awards. Grantees of Equity Participation Rights must accept such awards by 
execution of a written agreement with the Corporation in such form as the 
Committee determines not more than sixty (60) days following the Grant Date or 
such rights shall expire.
         (d) Maximum Awards. A Grantee may be granted multiple awards under the
Plan.

7.       EQUITY PARTICIPATION RIGHTS.
         (a) An Equity Participation Right shall not be exercisable after the
expiration of the exercise period set forth in its related Equity Participation
Right Agreement. The Committee may provide in such Agreement for the lapse of
the Equity Participation Right prior to expiration of the exercise period, upon
the occurrence of any event specified by the Committee.
         (b) The Common Stock price referenced in an Equity Participation Right
granted under the Plan shall not be less than fifty percent of the Fair Market
Value (including the permitted use of the "Average Fair Market Value") per share
of Common Stock on the Grant Date.
         (c) Upon exercise of an Equity Participation Right, the Grantee shall
be entitled to receive, subject to the provisions of the Plan and such rules and
regulations as may be established by the Committee (including the permitted use
of the "Average Fair Market Value"), a cash payment equal to the product of (A)
the excess of (i) the Fair Market Value of one share of Common Stock at the time
of such exercise over (ii) the price per share specified in the related Equity
Participation Rights Agreement, times (B) the number of shares specified


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in such Equity Participation Rights Agreement or the portion thereof being
exercised. An Equity Participation Right held by a Grantee shall not be
exercisable during the first six months from the Grant Date of the Equity
Participation Right.



8.       EXERCISES.
         (a) Each Equity Participation Right granted shall be exercisable in
whole or in part at any time, or from time to time, during the period as the
Committee may determine and specify in the agreement pursuant to which such
Equity Participation Right is granted, provided that the election to exercise an
Equity Participation Right shall be made in accordance with applicable Federal
laws and regulations.
         (b) No right may at any time be exercised with respect to a fractional
share or exercised in part with respect to fewer than one hundred shares.

9.        WITHHOLDING TAXES FOR AWARDS.
         The Corporation shall withhold from amounts otherwise payable hereunder
the amount, if any, required to be withheld under applicable Federal and State
income tax laws.

10.      CHANGE IN CONTROL.
         (a) Upon the occurrence of a Change in Control (as hereinafter defined)
all Equity Participation Rights shall become immediately exercisable in full for
cash at the Acceleration Price, which shall be paid by the Corporation within a
period of thirty days following a Change in Control.

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         (b) The "Acceleration Price" is the excess over the exercise price, of
the highest of the following on the date of a Change in Control:

                  (i)      the highest reported sales price of the Common Stock
                           within the sixty days preceding the date of the 
                           Change in Control, as reported on any securities
                           exchange upon which the Common Stock is listed,

                  (ii)     the highest price of the Common Stock reported in a
                           Schedule 13D or an amendment thereto as paid within
                           the sixty days preceding the date of the Change in
                           Control,

                  (iii)    the highest tender offer price paid for the Common
                           Stock, and

                  (iv)     any cash merger or similar price.

         (c)      A "Change in Control" is the occurrence of any one of the 
following events:
                  (i)      any Person (other than a Grantee, the Corporation or
                           any trustee or other fiduciary holding securities
                           under an employee benefit plan of the Corporation (or
                           of any subsidiary of the Corporation)) 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 stockholders of the Corporation shall
                                    approve a merger or consolidation of the
                                    Corporation or a plan of complete
                                    liquidation of the Corporation or an
                                    agreement for the sale or disposition by the
                                    Corporation of all or substantially all of
                                    the Corporation's assets.

         (d)      For purposes of this Article 10:
                  (i)      "Acquiring Person" shall mean any Person who is or
                           becomes a "beneficial owner" (as defined in Rule
                           13d-3 of the 1934 Act) of securities of the
                           Corporation representing twenty percent (20%) or more
                           of the combined voting power of the Corporation's 
                           then outstanding

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                           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.


 
                  (ii)     "Affiliate" and "Associate" shall have the respective
                           meanings ascribed to such terms in Rule 12b-2 of the
                           General Rules and Regulations under the 1934 Act as
                           in effect on the date hereof.
                  (iii)    "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.
                  (iv)     "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
                           1934 Act.

11.      TRANSFER OF AWARDS.
     Awards granted under the Plan may not be transferred except by will or the
laws of descent and distribution, and, during the Grantee's lifetime, may be
exercised only by said Grantee or by said Grantee's guardian or legal
representative.



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12.      DEATH, DISABILITY, RETIREMENT AND TERMINATION OF EMPLOYMENT.

         (a) An Equity Participation Right that has not theretofore expired,
shall terminate at the time of the death of the Grantee or of the termination
for any reason of the Grantee's employment with the Corporation, its parent 
or subsidiaries, except that, subject to the condition that no Equity 
Participation Right may be exercised in whole or in part after the date 
determined by the Committee which date cannot be later than the tenth 
anniversary of the Grant Date: 


                  (i)      Upon the termination of the employment of any such
                           Grantee due to Disability or Retirement, the Grantee
                           may, within a period of up to five years after the
                           date of such termination, as determined by the
                           Committee, exercise some or all of the Equity
                           Participation Right, to the extent it was exercisable
                           immediately prior to such termination; and

                  (ii)     Upon the death of any such Grantee while in active
                           service or of any such disabled or retired Grantee
                           within the above-referenced period, the person or
                           persons to whom the rights under the Equity
                           Participation Right are transferred by will or the
                           laws of descent and distribution may, within twelve
                           months after the date the Grantee's death, exercise
                           some or all of the Equity Participation Right, to the
                           extent it was exercisable on the date of death by the
                           Grantee.

         Leaves of absence for such periods and purposes conforming to the
personnel policy of the Corporation as may be approved by the Committee shall
not be deemed terminations or interruptions of employment.
         (b) In the event that a Grantee to whom an Equity Participation Right
has been granted ceases employment with the Corporation, its parent and
subsidiaries for any reason, including death, Disability or Retirement, such
Equity Participation Right shall be exercisable only to the extent and upon the
conditions provided in its related Equity Participation Rights Agreement.


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         (c) The Committee may adopt rules and regulations, whether or not
inconsistent with this Article, setting forth the terms and conditions of awards
relating to the Grantee's rights in the event of termination of employment.




13.      CHANGES IN COMMON STOCK.
         In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, or other changes in corporate
structure or capitalization affecting the Common Stock, such appropriate
adjustment shall be made in the number, kind, exercise price, etc., of shares
subject to Equity Participation Rights granted under the Plan, as may be
determined by the Committee.

14.      NO RIGHT TO EMPLOYMENT.
         Nothing in the Plan or any instrument executed pursuant hereto shall
confer upon any employee any right to continue in the employ of the Corporation
nor shall anything in the Plan affect the right of the Corporation to terminate
the employment of any employee, with or without cause.

15.      LEGAL RESTRICTIONS.
         The Corporation will not be obligated to make any payment if counsel to
the Corporation determines that such issuance or payment would violate any law
or regulation of any governmental authority or any agreement between the
Corporation and any national 
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securities exchange upon which the Common Stock is listed. The Corporation shall
in no event be obliged to take any action in order to cause the exercise of 
any award under the Plan.

16.      NO RIGHTS AS SHAREHOLDERS.
         No Grantee, and no beneficiary or other person claiming through a
Grantee, shall have any interest in any shares of Common Stock allocated for 
the purposes of the Plan or subject to any award. Furthermore, the existence 
of awards under the Plan shall not affect: the right or power of the 
Corporation or its stockholders to make adjustments, recapitalizations, 
reorganizations or other changes in the Corporation's capital structure; the 
dissolution or liquidation of the Corporation, or the sale or transfer of any 
part of its assets or business; or any other corporate act, whether of a 
similar character or otherwise. No shares of Common Stock may be delivered or 
purchased under the Plan.

17.       CHOICE OF LAW.
         The validity, interpretation and administration of the Plan and of any
rules, regulations, determinations or decisions made thereunder, and the rights
of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of Delaware.




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18.      AMENDMENT AND DISCONTINUANCE.
         The Committee may alter, suspend, or discontinue the Plan, but may not,
materially and adversely affect any outstanding award without the consent of the
holder thereof.

         IN WITNESS WHEREOF, this Plan has been executed on behalf of the
Corporation by its duly authorized officers this 23rd day of January, 1996.

                                                BOWATER INCORPORATED



                                       By:     /s/ Richard F. Frisch
                                       Name:   Richard F. Frisch
                                       Title:  Vice President - Human Resources