MODIFICATION OF EMPLOYMENT AGREEMENT

                   CANCELLATION OF CHANGE IN CONTROL AGREEMENT

         THIS AGREEMENT is made and entered into as of this 30th day of April,
1997, by and between Bowater Incorporated, a Delaware corporation having a
mailing address of 55 East Camperdown Way, Greenville, South Carolina 29602 (the
"Corporation"), and Robert D. Leahy, of 307 Blockhouse Road, Greenville, SC
29615 (the "Executive").

         WHEREAS, the Corporation now employs the Executive pursuant to an
Employment Agreement dated as of March 15, 1993 (the "Employment Agreement") and
a Change in Control Agreement dated as of November 1, 1995 (the "Change in
Control Agreement"); and

         WHEREAS, the Executive and the Corporation wish to terminate the
Executive's employment as Vice President-Corporate Relations and provide for
certain severance benefits.

           NOW, THEREFORE, the parties hereto agree to the following:

1.         Change in Control Agreement.  The Change in Control Agreement will 
           terminate as of April 30, 1997.

2.         Employment Agreement.  The Employment Agreement is hereby modified 
           as follows:

           (a)  Term.  Section 2 of the Employment Agreement is
           amended in its entirety to read as follows:

                             "2. Term. The term of this Agreement will end on
                    April 30, 1998, unless terminated earlier by the Executive's
                    death. In the event of the Executive's death, all amounts
                    remaining unpaid under Sections 5(a) and (b), and the last
                    sentence of Section 5(e), shall immediately become due and
                    will be paid within sixty (60) days of the Executive's
                    death."

           (b)      Position and Duties.  Section 3 of the Employment Agreement 
           is amended in its entirety to read as follows:

                    "3.  Position and Duties.  Throughout the term hereof, the 
                    Executive will have the employment status of a salaried 
                    exempt employee.  The Executive is relieved as of April 30, 
                    1997, of the obligation to devote his full working time to 
                    the performance of duties under his Employment Agreement."


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           (c)      Compensation and Benefits.  Section 5 of the Employment 
                    Agreement is replaced and amended in
                    its entirety to read as follows:

                    "5.  Compensation and Benefits.

                             (a) Base Salary. The Corporation will pay to the
                             Executive a base salary at his current annual rate
                             in substantially equal periodic installments on the
                             Corporation's regular pay dates for the period
                             ending April 30, 1998. All applicable taxes and
                             other authorized deductions will be deducted from
                             each paycheck.

                             (b) Bonus Plan. In addition to the base salary, the
                             Executive will be entitled to a bonus equal to
                             16/12 times the bonus amount paid in 1997 for the
                             calendar year 1996, to be paid on August 1, 1997,
                             and subject to all applicable withholding
                             requirements. This bonus is in lieu of any bonus
                             for which the Executive may have been eligible
                             under the Corporation's 1997 or 1998 Annual
                             Incentive Plans (or any other bonus plans).

                             (c) Benefit Plans. The Corporation will make
                             contributions on the Executive's behalf to the
                             Corporation's various benefit plans and programs
                             (except for disability and business travel accident
                             insurance) in which the Executive is eligible to
                             participate in accordance with the provisions
                             thereof as in effect from time to time and in
                             accordance with the provisions hereof. The
                             Executive will continue to be responsible for all
                             required employee contributions. From and after
                             April 30, 1997, the Executive will not be eligible
                             to receive any stock option or equity participation
                             right awards or to participate in the disability or
                             business travel accident insurance benefit plans.

                             (d) Vacations. The Executive will be entitled to be
                             paid in a lump sum for all vacation accrued as of
                             April 30, 1997, but will no longer accrue vacation
                             from and after April 30, 1997.

                             (e) Perquisites. The Executive will be entitled to
                             outplacement assistance for up to twelve months as
                             determined and paid for by the Corporation, and
                             will continue to be entitled to all other
                             perquisites to which he is currently entitled by
                             virtue of his position until April 30, 1998. In
                             addition, the Executive will be paid the sum of
                             $40,000 (subject to all withholding requirements)
                             on August 1, 1997, as a relocation allowance."
 
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           (d)      Noncompetition.  Section 7 of the Employment Agreement is 
           hereby deleted.

           (e)  Severance Pay.  Section 8 of the Employment Agreement is 
           replaced and amended in its entirety to read as follows:

                    "8. Terminal Leave of Absence. The Executive will be on a
                    terminal paid leave of absence from the date hereof through
                    April 30, 1998. This terminal paid leave of absence is in
                    lieu of any severance pay the Executive would otherwise be
                    entitled to. The Executive's entitlement to benefits under
                    the Corporation's health, life insurance, retirement, stock
                    option (except for new awards), equity participation rights
                    (except for new awards), and savings (but not disability or
                    business travel accident insurance) plans, policies or
                    arrangements will not, except as otherwise required by law
                    or regulation or provided in this Modification, be affected
                    by the Executive's leave of absence status and will continue
                    to be governed by the applicable provisions of such plans as
                    though the Executive had continued to render services in the
                    active employment of the Corporation to the end of the
                    terminal paid leave of absence. The Executive will no longer
                    participate in the Corporation's disability or business
                    travel accident benefit plans."

           (f)  Governing Law.  Section 11 is hereby amended in its entirety to 
           read as follows:

                    "11.  Governing Law.  The Employment Agreement and this 
                    Modification of Employment Agreement shall be governed by 
                    and interpreted in accordance with the substantive laws of 
                    the State of Delaware."

           (g)  Ratification.  In all respects, except as herein provided, the 
           Employment Agreement is hereby ratified and confirmed.

3. Nondisclosure Obligation. The Executive agrees not to take any actions or
make any statements to the public, future employers, business associates,
clients, customers, the media, current, former or future employees, or any other
third party whatsoever that reflect negatively on the Corporation, and not to
express any opinions concerning the Corporation, its affiliates, officers,
directors, shareholders, employees and/or its operations that shall reflect
negatively upon same.

4. Equity Participation Rights. The Human Resources and Compensation Committee
of the Board of Directors has agreed to 


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amend the Executive's Equity Participation Right Agreement dated as of January 
22, 1997, to make it exercisable as to all 3000 units as of January 22, 1998, 
provided such Agreement has not sooner expired by its terms.

5. Effectiveness Contingent Upon Release. This Modification shall not be
effective unless and until the Executive has executed a certain Waiver and
Release Agreement (the "Release Agreement") by no later than April 22, 1997, and
the applicable seven-day revocation period provided for therein has expired. If
the Executive should breach the terms of the Release Agreement in the future,
this Modification (except for Section 3, which shall continue in full force and
effect), the Employment Agreement (except for Sections 6 and 7, which Sections
shall continue in full force and effect) and the Change in Control Agreement
shall immediately become null and void, and be deemed canceled. In addition, the
Executive shall be required to repay all but $500 of the monetary benefits which
the Executive has received under the terms of this Modification.

6. Binding Agreement. Except as provided in Section 5 above, this Modification
and the Employment 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 Modification 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/Richard F. Frisch                              /s/Robert D. Leahy
Name:Richard F. Frisch                               Robert D. Leahy
Title: Vice President - Human                        Date signed: 4/24/97
Resources
Date signed: 4/23/97





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