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                                                                    EXHIBIT 10.2


                              BOWATER INCORPORATED

                              ANNUAL INCENTIVE PLAN

            (as amended and restated effective as of January 1, 1999)


                                    CONTENTS

1.       Name and Purpose

2.       Regulations

3.       Administration

4.       Policy

5.       Participation

6.       Performance Targets

7.       Incentive Awards

8.       Amendment or Discontinuance

9.       Effective Date


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                              BOWATER INCORPORATED

                              ANNUAL INCENTIVE PLAN

1.       Name and Purpose

         The name of this plan is the Bowater Incorporated Annual Incentive Plan
         (hereinafter referred to as the "Annual Incentive Plan" or the "Plan"),
         and its purpose is to promote the interests of the stockholders of
         Bowater Incorporated (hereinafter referred to as the "Corporation"), by
         attracting and retaining employees of the Corporation who will strive
         for excellence and to motivate those employees to set and achieve
         business objectives by providing rewards for those who contribute most
         to the operating progress and earning power of the Corporation and its
         subsidiaries.

2.       Regulations

         The Human Resources and Compensation Committee of the Board of
         Directors shall have the power to adopt eligibility and other rules and
         regulations not inconsistent with the provisions of the Plan
         (hereinafter referred to as the "Regulations") for the administration
         thereof and to alter, amend, or revoke any Regulation so adopted.

3.       Administration

         The Human Resources and Compensation Committee (hereinafter referred to
         as the "Committee") of the Board of Directors shall be chosen by the
         board from those of its members not eligible to participate in the
         benefits of the Plan and such Committee shall have full power and
         authority to interpret and administer the Plan in accordance with the
         Regulations.

4.       Policy

         The Annual Incentive Plan is an integral part of total compensation for
         participating employees of the Corporation. It is designed to
         contribute toward producing total competitive compensation (base salary
         plus annual incentive), in a normal year.

5.       Participation

         Participation in the benefits of the Plan shall be limited to employees
         of the Corporation and its subsidiaries.


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6.       Performance Targets

         Each year the Committee shall review and approve performance targets to
         be used to determine incentive awards.

7.       Incentive Awards

         (a)      Upon the determination by the Corporation of the extent to
                  which the performance targets have been achieved, the
                  Committee may make awards for such year to such employees as
                  it may select and in such amounts as it may determine in
                  accordance with the Regulations. The Regulations shall require
                  the Committee in fixing the amounts of such awards to take
                  into consideration the distinct contributions of the selected
                  employees' organizational units to the operating progress and
                  earnings power of the Corporation and its subsidiaries. The
                  Committee's selection of the employees to whom awards for such
                  year shall be made and its determination of the amount of each
                  such award shall be final.

         (b)      Subject to such conditions as may be provided or authorized by
                  the Regulations, the awards so made to selected employees
                  shall be paid or distributed to them or their legal
                  representatives by check or direct deposit to the payee's
                  account.

8.       Amendment or Discontinuance

         The Board of Directors may alter, suspend, or discontinue the Plan,
         subject to meeting any and all payment obligations incurred prior to
         such Board actions. Periodically, the Committee shall assess the Plan's
         effectiveness in achieving its purposes. The Committee shall make such
         changes in the Plan as it deems appropriate after each such review.

9.       Effective Date

         The Plan first became effective on January 1, 1984, and has been
         subsequently amended and restated as of January 1989 and as of January
         1, 1999.



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