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                                                                    EXHIBIT 10.7







                              BOWATER INCORPORATED
                      RETIREMENT PLAN FOR OUTSIDE DIRECTORS

                 (AMENDED AND RESTATED AS OF FEBRUARY 26, 1999)



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                                TABLE OF CONTENTS

                                                                        -Page-

PREAMBLE .................................................................iii

ARTICLE 1:  DEFINITIONS

     1.01  "Affiliate".....................................................1
     1.02  "Board".........................................................1
     1.03  "Change in Control".............................................1
     1.04  "Committee".....................................................3
     1.05  "Company".......................................................3
     1.06  "Continuous Service"............................................3
     1.07  "Director"......................................................3
     1.08  "Earnings"......................................................3
     1.09  "Effective Date"................................................3
     1.10  "Final Average Earnings"........................................3
     1.11  "Inside Director"...............................................3
     1.12  "Outside Director"..............................................3
     1.13  "Participating Director"........................................3
     1.14  "Plan"..........................................................4
     1.15  "Retire"........................................................4
     1.16  "Service".......................................................4

ARTICLE 2:  ELIGIBILITY TO RETIRE

     2.01  General Service Requirement.....................................4
     2.02  Waiver of Service and Other Requirements........................4

ARTICLE 3:  COMMENCEMENT OF RETIREMENT INCOME

     3.01  Early Retirement................................................4
     3.02  Normal Retirement...............................................4
     3.03  Postponed Retirement............................................5

ARTICLE 4:  AMOUNT OF RETIREMENT INCOME

     4.01  Normal Retirement Benefits......................................5
     4.02  Early Retirement Benefits.......................................5
     4.03  Postponed Retirement Benefits...................................5
     4.04  Benefit Payments................................................5

ARTICLE 5:  DEATH AND DISABILITY BENEFITS..................................6

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ARTICLE 6:  COVENANTS OF DIRECTOR

     6.01  During Continuation of Service..................................6
     6.02  Following Retirement............................................6

ARTICLE 7:  REMEDIES OF THE COMPANY........................................6

ARTICLE 8:  GENERAL PROVISIONS

     8.01  Limitation of Rights of the Director............................7
     8.02  Discharge of Obligations........................................7
     8.03  No Assignment of Benefits.......................................7
     8.04  Payments to Incompetents........................................7
     8.05  Construction....................................................7
     8.06  Amendment or Termination........................................8
     8.07  Funding.........................................................8
     8.08  Governing Law...................................................8

ARTICLE 9:  CLAIMS PROCEDURE

     9.01  Submission of Claims............................................9
     9.02  Written Notice of Denied Claim..................................9
     9.03  Review of Decision Denying Claim................................9
     9.04  Hearing.........................................................9
     9.05  Written Decision of Committee...................................9

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                              BOWATER INCORPORATED
                      RETIREMENT PLAN FOR OUTSIDE DIRECTORS

                 (Amended and Restated as of February 26, 1999)

                                    PREAMBLE

Establishment of Plan

The Bowater Incorporated Retirement Plan for Outside Directors (the "Plan") was
established effective July 1, 1988, for the benefit of Directors of Bowater
Incorporated who are not employees of the Company. The Plan is hereby amended
and restated as of February 26, 1999, to incorporate all amendments made through
such date.

Objective of Plan

Bowater recognizes that its long-term success and achievements are significantly
influenced by the expertise and continuity of its leadership. In view of this,
the Company has adopted this Plan.


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                      BOWATER INCORPORATED RETIREMENT PLAN
                                       FOR
                                OUTSIDE DIRECTORS

                           (Amended and Restated as of
                               February 26, 1999)

ARTICLE 1: DEFINITIONS

The following words and phrases, when used in this Plan with an initial capital
letter, unless the context clearly indicates otherwise, shall have the following
meanings. Wherever applicable the masculine pronoun shall include the feminine
pronoun and the singular shall include the plural.

1.01     AFFILIATE: Any company directly or indirectly controlled by,
         controlling, or under common control with the Company.

1.02     BOARD:  The Board of Directors of the Company.

1.03     CHANGE IN CONTROL: A Change in Control shall be deemed to have occurred
         upon:

         (a)      The date that any Person is or becomes an Acquiring Person.

         (b)      The date that the Corporation's shareholders approve a merger,
                  consolidation or reorganization of the Corporation with
                  another corporation or other Person, unless, immediately
                  following such merger, consolidation or reorganization, (i) at
                  least 50% of the combined voting power of the outstanding
                  securities of the resulting entity would be held in the
                  aggregate by the shareholders of the Corporation as of the
                  record date for such approval (provided that securities held
                  by any individual or entity that is an Acquiring Person, or
                  who would be an Acquiring Person if 5% were substituted for
                  20% in the definition of such term, shall not be counted as
                  securities held by the shareholders of the Corporation, but
                  shall be counted as outstanding securities for purposes of
                  this determination), or (ii) at least 50% of the board of
                  directors or similar body of the resulting entity are
                  Continuing Directors.

         (c)      The date the Corporation sells or otherwise transfers all or
                  substantially all of its assets to another corporation or
                  other Person, unless, immediately after such sale or transfer,
                  (i) at least 50% of the combined voting power of the
                  then-outstanding securities of the resulting entity
                  immediately following such transaction is held in the
                  aggregate by the Corporation's shareholders as determined
                  immediately prior to such transaction, (provided that
                  securities held by an individual or entity that is an
                  Acquiring Person, or who would be an Acquiring Person if 5%
                  were substituted for 20% in the definition of such

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                  term, shall not be counted as securities held by the
                  shareholders of the Corporation, but shall be counted as
                  outstanding securities for purposes of this determination),
                  any individual or entity that is an Acquiring Person, or who
                  would be an Acquiring Person if 5% were substituted for 20% in
                  the definition of such term, or (ii) at least 50% of the board
                  of directors or similar body of the resulting entity are
                  Continuing Directors.

         (d)      The date on which less than 50% of the total membership of the
                  Board consists of Continuing Directors.

For purposes of this definition:

         (i)      `Affiliate' and `Associate' shall have the respective meanings
                  ascribed to such terms in Rule 12b-2 of the General Rules and
                  Regulations under the Securities Exchange Act of 1934 (the
                  "Act").

         (ii)     `Acquiring Person' means the Beneficial Owner, directly or
                  indirectly, of Common Stock representing 20% or more of the
                  combined voting power of the Corporation's then outstanding
                  securities, not including (except as provided in clause (A) of
                  the next sentence) securities of such Beneficial Owner
                  acquired pursuant to an agreement allowing the acquisition of
                  up to and including 50% of such voting power approved by
                  two-thirds of the members of the Board who are Board members
                  before the Person becomes Beneficial Owner, directly or
                  indirectly, of Common Stock representing 5% or more of the
                  combined voting power of the Corporation's then outstanding
                  securities. Notwithstanding the foregoing, (A) securities
                  acquired pursuant to an agreement described in the preceding
                  sentence will be included in determining whether a Beneficial
                  Owner is an Acquiring Person if, subsequent to the approved
                  acquisition, the Beneficial Owner acquires 5% or more of such
                  voting power other than pursuant to such an agreement so
                  approved and (B) a Person shall not be an Acquiring Person if
                  such Person is eligible to and files a Schedule 13G with
                  respect to such Person's status as a Beneficial Owner of all
                  Common Stock of the Corporation of which the Person is a
                  Beneficial Owner.

         (iii)    A `Beneficial Owner' of Common Stock means (A) a Person who
                  beneficially owns such Common Stock, directly or indirectly,
                  or (B) a Person who has the right to acquire such Common Stock
                  (whether such right is exercisable immediately or only with
                  the passage of time) pursuant to any agreement, arrangement or
                  understanding (whether or not in writing) or upon the exercise
                  of conversion rights, exchange rights, warrants, options or
                  otherwise.


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         (iv)     `Continuing Directors' means any member of the Board who (A)
                  was a member of the Board prior to the date of the event that
                  would constitute a Change in Control, and any successor of a
                  Continuing Director while such successor is a member of the
                  Board, (B) is not an Acquiring Person or an Affiliate or
                  Associate of an Acquiring Person, and (C) is recommended or
                  elected to succeed the Continuing Director by a majority of
                  the Continuing Directors.

         (v)      `Person' means any individual, firm, corporation, partnership,
                  trust or other entity.

1.04     COMMITTEE: The Executive Committee of the Board exclusive of any member
         thereof who is at the time a "Participating Director" as that term is
         hereinafter defined.

1.05     COMPANY:  Bowater Incorporated.

1.06     CONTINUOUS SERVICE: Incumbency as a Director without interruption. For
         the purpose hereof, Continuous Service shall include periods of
         incumbency during disability or leave of absence granted by the
         Company. Although incumbency while an Inside Director will not be
         credited as Service, Service will not be deemed to be interrupted by
         incumbency while an Inside Director.

1.07     DIRECTOR: Any individual who is elected and qualifies to serve as a
         member of the Board. At all times of incumbency as a Director, an
         individual is either an "Inside Director" or an "Outside Director" as
         those terms are hereinafter defined.

1.08     EARNINGS: The regular retainer paid to a Director by the Company for
         serving as a Director, excluding any reimbursement for out-of-pocket
         expenses or fees paid for attendance at meetings of committees.

1.09     EFFECTIVE DATE: The date after which the provisions of this amended and
         restated Plan shall be effective, which is February 26, 1999.

1.10     FINAL AVERAGE EARNINGS: The amount determined by dividing by four (4)
         the annualized Earnings of a Director at the termination of his
         Service.

1.11     INSIDE DIRECTOR: A Director who is an employee of the Company or any of
         its Affiliates (but only during such times as such employment
         continues).

1.12     OUTSIDE DIRECTOR:  A Director who is not an Inside Director.

1.13     PARTICIPATING DIRECTOR: An Outside Director who continues to have
         rights or contingent rights to benefits payable under this Plan, as
         provided in Articles 2 and 3 and subject to the terms and conditions of
         Articles 6 and 7.



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1.14     PLAN: The Bowater Incorporated Retirement Plan for Outside Directors,
         as restated herein, and as it may be amended from time to time.

1.15     RETIRE: To terminate incumbency as a Director for any reason other than
         death under circumstances which entitle a terminating Participating
         Director to receive retirement income under this Plan. A change in
         status which does not interrupt Continuous Service under Section 1.06
         shall not constitute a termination for the purposes of this Section.

1.16     SERVICE: Incumbency, measured in years and months to the nearest whole
         month, as an Outside Director of the Company. (While credit for Service
         is not given for incumbency as an Inside Director, Continuous Service
         is not deemed interrupted by such incumbency. See Section 1.06.)

ARTICLE 2: ELIGIBILITY TO RETIRE

2.01     GENERAL SERVICE REQUIREMENT: Except as provided in Section 2.02, a
         Participating Director shall not be eligible to Retire until he has
         completed five (5) years of Service in Continuous Service.

2.02     WAIVER OF SERVICE AND OTHER REQUIREMENTS: Any Participating Director
         who was a Director immediately prior to a Change in Control of the
         Company who is removed from or not renominated to his directorship
         following such Change in Control shall not be required to meet the
         service requirement imposed by Section 2.01 hereof and shall be
         eligible to Retire early pursuant to Section 3.01 without the consent
         of the Company and without regard to his attained age at the time of
         such retirement.

ARTICLE 3: COMMENCEMENT OF RETIREMENT INCOME

3.01     EARLY RETIREMENT: A Participating Director may, with the consent of the
         Company, Retire on the first day of any month on or after his
         attainment of age fifty-five (55) and the completion of five (5) years
         of Service in Continuous Service, and may elect to commence receiving
         benefits on or after that date.

3.02     NORMAL RETIREMENT: A Participating Director may, with the consent of
         the Company, Retire on the first day of the month following his
         attainment of age sixty-five (65) and the completion of five (5) years
         of Service in Continuous Service and commence receiving benefits on
         that date.



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3.03     POSTPONED RETIREMENT: A Participating Director who remains a Director
         of the Company beyond attainment of age sixty-five (65) may Retire on
         the first day of any month following his attainment of age sixty-five
         (65) and the completion of five (5) years of Service in Continuous
         Service but not later than the expiration of the final term on the
         Board of Directors to which he was elected in accordance with Section
         4.15 of the Company's By-laws. He may commence receiving benefits as of
         the date he retires.

ARTICLE 4. AMOUNT OF RETIREMENT INCOME

4.01     NORMAL RETIREMENT BENEFITS: The normal retirement income benefit
         payable under this Plan shall be a quarterly payment commencing as of
         the first day of the month following the Participating Director's
         sixty-fifth (65th) birthday equal to ten percent (10%) of the
         Participating Director's Final Average Earnings multiplied by the
         Participating Director's years of Service in Continuous Service up to a
         maximum of 10 with proportionate credit for completed months.

4.02     EARLY RETIREMENT BENEFITS: If a Participating Director retires early
         pursuant to Section 3.01 hereof, his retirement benefits will be based
         on his accrued benefit determined under Section 4.01 as of the date of
         his early retirement. Such benefits shall be actuarially reduced for
         the period (if any) by which the commencement of benefits precedes the
         first day of the month following the Participating Director's
         sixty-fifth (65th) birthday. The mortality table used for purposes of
         calculating the actuarial reduction hereunder shall be the Unisex
         Pension Table, 1984 (set forward one year) and the assumed interest
         rate shall be eight percent (8%) per annum.

4.03     POSTPONED RETIREMENT BENEFITS: In the event of postponed retirement
         pursuant to Section 3.03 hereof, a Participating Director's retirement
         benefits will be based on his accrued benefit determined under Section
         4.01 as of the date of his termination of Service. Such benefits shall
         commence as of the Participating Director's termination of Service, but
         shall not be actuarially increased to reflect commencement subsequent
         to the attainment of age sixty-five (65).

4.04     BENEFIT PAYMENTS: Retirement benefits payable pursuant to this Article
         shall be paid in arrears as quarterly payments on the first day of each
         calendar quarter. The first payment shall be paid on the first day of
         the calendar quarter next following the date as of which benefits are
         scheduled to commence pursuant to the provisions of Section 4.01, 4.02
         or 4.03, as applicable. In any event, the last installment shall be
         payable as of the first day of the month in which the Participating
         Director dies and paid on the first day of the next following calendar
         quarter.


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ARTICLE 5: DEATH AND DISABILITY BENEFITS

         There are no death or disability benefits under this Plan.

ARTICLE 6: COVENANTS OF DIRECTOR

6.01     DURING CONTINUATION OF SERVICE: As long as a Director continues in
         Service, the Director shall devote his best efforts and undivided
         loyalty to the Company, and devote such time to his tasks as a Director
         as shall be required to discharge his obligations to the best of his
         abilities.

6.02     FOLLOWING RETIREMENT: If a Participating Director's Service to the
         Company terminates under circumstances which obligate the Company to
         make quarterly payments under the provisions of Article 4, the
         Participating Director shall not, for a period of five (5) years
         thereafter, serve as a principal, director, officer or employee of a
         corporation or other entity which competes directly or indirectly with
         the Company or any of its Affiliates in any geographic area where the
         Company or any of its Affiliates is conducting or actively proposing to
         conduct its business, and shall be available to the Company at the
         mutual convenience of the parties, from time to time, to consult with
         the Company in an advisory capacity if, and when, the Participating
         Director is reasonably requested to do so by the Company.

ARTICLE 7: REMEDIES OF THE COMPANY

         Upon the occurrence of any one or more of the following circumstances:

         (a)      If the Director's Service is terminated whether by the
                  Director, by the Company or its shareholders, for any reason
                  prior to the Director's completion of five (5) years of
                  Service in Continuous Service;

         (b)      If the Participating Director is at any time removed from
                  incumbency as a Director for reasons deriving from his gross
                  negligence or misconduct, detrimental to the business
                  interests of the Company, or for criminal conduct of any type
                  (regardless of the effect thereof on the business interest of
                  the Company); or

         (c)      If the Participating Director at any time fails to comply with
                  the requirements of Article 6 hereof;

         then and in any such event the Company's obligation to pay or provide
         benefits hereunder to any such Participating Director shall
         automatically cease and terminate, and neither said Participating
         Director nor any other person claiming any benefit pursuant to said
         Participating Director's participation in this Plan shall have any
         rights, claims or causes of action hereunder against the Board, the



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         Company or any person acting on their behalf. The Company's sole remedy
         for breach by the Participating Director of the provisions of Article 6
         hereof shall be to cease paying or providing benefits pursuant to the
         provisions of this Article 7, but this shall not preclude the Company
         from recovering from a Participating Director damages inflicted on the
         Company or its affiliates by conduct of a Participating Director which
         renders the Participating Director liable to the Company independently
         of the fact that such conduct constitutes a breach of the Participating
         Director's covenants in Article 6 hereof.

ARTICLE 8: GENERAL PROVISIONS

8.01     LIMITATION OF RIGHTS OF THE DIRECTOR: Inclusion under the Plan shall
         not give a Director any right or claim to a benefit, except as
         specifically defined in this Plan. The establishment of the Plan shall
         not be construed as giving any Director a right to be continued in
         Service as a Director of the Company.

8.02     DISCHARGE OF OBLIGATIONS: The Company may at any time fully and
         completely satisfy and discharge all its obligations hereunder to a
         Participating Director by:

         (a)      delivering, or causing to be delivered, to the Participating
                  Director a fully-paid annuity policy issued by a corporate
                  insurer, providing quarterly or more frequent payments equal
                  to (or greater than) the amount the Company is obligated to
                  pay hereunder, or

         (b)      making some other comparable arrangement for the Participating
                  Director; provided that provision is made for not less than
                  the benefits to which the Participating Director may be
                  entitled under the provisions hereof, whether or not such
                  rights are enforceable at the time.

8.03     NO ASSIGNMENT OF BENEFITS: None of the rights of the Participating
         Director under this Plan shall be assignable in whole or in part either
         inter vivos or by will or succession, but shall be personal to the
         individual Participating Director.

8.04     PAYMENTS TO INCOMPETENTS: In the event that any quarterly payment
         hereunder becomes payable to a person adjudicated to be incompetent,
         payment thereof to the guardian or legal representative of such person
         shall constitute full and complete compliance herewith and entitle the
         Company to discharge with respect thereto.

8.05     CONSTRUCTION: Subject to the provisions of Article 9, the decision of
         the Committee on all matters concerning the interpretation and
         administration of this Plan shall be final. Each Director agrees, as a
         condition to participation herein, to be bound by all actions and
         interpretations regarding this Plan by the Committee.



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         Neither the Board, the Committee, any individual Director nor any
         persons acting on their behalf shall be subject to any liability to any
         Director or other person in the construction and administration of this
         Plan.

8.06     AMENDMENT OR TERMINATION: The Company reserves the right at any time,
         and from time to time, by action of a majority of the Committee at a
         meeting at which all members thereof are present and voting or the
         required notice of which contained an accurate summary of the action
         proposed for vote, to amend, in whole or in part, any or all of the
         provisions of this Plan including the right to terminate the Plan at
         any time; provided, however, that no such amendment or termination
         shall affect adversely benefits under this Plan already being paid or
         having become unconditionally payable pursuant to the terms hereof
         either due to Participating Director's completion of Five (5) years of
         Service in Continuous Service prior to the date of such amendment or
         termination, or because the Participating Director was removed from or
         not renominated to his directorship (whether before or after such
         amendment or termination) under circumstances entitling the
         Participating Director to Retire.

8.07     FUNDING: The Company's obligations under this Plan shall be unfunded,
         and the Company shall not be obligated under any circumstances to fund
         its obligations under this Plan. The Company may, however, at its sole
         and exclusive option, informally fund all or a part of this Plan. If
         the Company decides upon such informal funding, the manner, continuance
         or discontinuance of such informal funding shall be the sole and
         exclusive decision of the Company.

         If the Company shall decide to purchase life insurance on the lives of
         Participants, the Company (or, in any event a nominee, agent or
         fiduciary of the Company whose duty it is to deliver or pay over such
         policies to the Company or its creditors in the event of insolvency)
         shall be the owner of such insurance, and the form and amount of such
         insurance shall be the sole and exclusive decision of the Company.

         If the Company decides to formally fund this Plan through the purchase
         of insurance, any Participating Director shall agree to submit to
         medical examinations, supply any information, and execute any documents
         required by the insurance company or companies to which the Company may
         have applied for such insurance.

8.08     GOVERNING LAW: To the extent not preempted by the Employee Retirement
         Income Security Act of 1974, as amended from time to time, this Plan
         shall be governed by and interpreted in accordance with the laws of the
         State of Connecticut and, subject to Section 8.06 above, shall be
         binding upon the Company and its successors, including any successor
         which acquires all or substantially all of the assets of the Company.



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ARTICLE 9: CLAIMS PROCEDURE

9.01     SUBMISSION OF CLAIMS: Claims for benefits under the Plan shall be
         submitted in writing to the Committee or a person designated by the
         Committee for this purpose. Written notice of the disposition of a
         claim shall be furnished to the claimant within 90 days after the
         application therefor is filed. (The 90-day notice period shall,
         however, be extended for an additional 90 days if the Committee
         determines that such an extension of time is necessary to process the
         claim and so advises the claimant in writing within 90 days after
         receipt of the claim, which writing shall also indicate the special
         circumstances requiring an extension of time and the date by which the
         Committee expects to render the final decision.)

9.02     WRITTEN NOTICE OF DENIED CLAIM: The Committee shall provide adequate
         notice in writing to any person whose claim for benefits has been
         denied. Such notice shall set forth the specific reason or reasons for
         the denial and shall be written in a manner calculated to be understood
         by the recipient. Such notice shall also refer specifically to
         pertinent Plan provisions on which the denial is based; shall describe
         any additional material or information necessary for the claimant to
         perfect the claims; and shall explain why such material or information
         is necessary. Such notice shall also explain the Plan's claims review
         procedure.

9.03     REVIEW OF DECISION DENYING CLAIM: The Committee shall afford to any
         person whose claim for benefits has been denied a reasonable
         opportunity for a full and fair review of the decision denying the
         claim. The claimant or his duly authorized representative shall request
         such review in writing not more than 90 days after receipt by the
         claimant of written notification of denial of a claim. Within ten days
         after, or as part of, a timely request for review, the claimant may
         submit issues and comments in writing and may review pertinent
         documents.

9.04     HEARING: Upon receipt of a timely request for review the Committee may,
         in its discretion, appoint one or more of its members to hear the
         claimant's request and inquire into the merits of the matter. Such
         member(s) shall meet promptly with the claimant and/or his duly
         authorized representative and hear such arguments and/or examine such
         documents as the claimant or his representative shall present. The
         member(s) shall then report his (their) findings to the Committee
         orally or in writing.

9.05     WRITTEN DECISION OF COMMITTEE: A decision of the Committee on review of
         a claim shall be in writing and shall include specific reasons for the
         decision, written in a matter calculated to be understood by the
         claimant. Such decision shall include specific references to the
         pertinent Plan provision on which the decision is based. The decision
         shall be made promptly and not later than 60 days after a request for
         review, unless special circumstances require an extension. In such
         case, the claimant shall be so advised in writing prior to the
         expiration of



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         the initial 60-day period and a decision shall be rendered as soon as
         possible, but not later than 120 days after receipt of a request for
         review.

         IN WITNESS WHEREOF, the Company has caused this document to be executed
by its duly authorized officer as of February 26, 1999.

                                        BOWATER INCORPORATED


                                        By: /s/ James T. Wright
                                            ------------------------------------
                                        Name: James T. Wright
                                        Title: Vice President - Human Resources
                                        Date Signed: June 2, 1999



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