Document:

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                                                                    EXHIBIT 10.3

                                                                  CONFORMED COPY

              SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT

                  SECOND AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT (this
"Agreement") dated as of June 21, 2000 between BOWATER INCORPORATED, a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Company"); each of the Subsidiaries of the Company from time to
time designated as "Subsidiary Borrowers" hereunder pursuant to Section 7.02(a)
of the Existing Credit Agreement as defined below (each, a "Subsidiary Borrower"
and, together with the Company, the "Borrowers"); each of the lenders that is a
signatory hereto identified under the caption "BANKS" on the signature pages
hereto or that, pursuant to Section 12.06(b) of the Existing Credit Agreement,
shall become a "Bank" hereunder (individually, a "Bank" and, collectively, the
"Banks"); and THE CHASE MANHATTAN BANK, as administrative agent for the Banks
(in such capacity, together with its successors in such capacity, the
"Administrative Agent").

                              W I T N E S S E T H:

                  WHEREAS, the Company, the Subsidiary Borrowers, the Banks, and
the Administrative Agent are party to an Amended and Restated 364-Day Credit
Agreement dated as of June 23, 1999 (as heretofore amended and modified by
Amendment No. 1 to said Credit Agreement dated as of April 10, 2000, the
"Existing Credit Agreement"), providing for the making of loans by the Banks to
the Borrowers in an aggregate original principal amount up to $150,000,000; and

                  WHEREAS, the parties hereto desire to amend in certain
respects and to restate in its entirety the Existing Credit Agreement;

                  NOW, THEREFORE, the parties hereto agree to amend the Existing
Credit Agreement as set forth in Section 2 hereof and to restate the Existing
Credit Agreement to read in its entirety as set forth in the Existing Credit
Agreement (which Existing Credit Agreement is incorporated herein by this
reference), as amended by the amendments set forth in Section 2 hereof:

                  Section 1. Definitions. Capitalized terms used but not
otherwise defined herein have the meanings given them in the Existing Credit
Agreement.

                  Section 2. Amendments. Subject to the satisfaction of the
conditions specified in Section 3 hereof, the Existing Credit Agreement shall be
amended as follows:

                  2.01. General. Each reference to the "Agreement" or to the
         "Existing Credit Agreement" and words of similar import in the Existing
         Credit Agreement, as amended and restated hereby, and in the promissory
         notes (provided for in Section 2.08(d) of the Existing Credit
         Agreement) shall be a reference to the Existing Credit Agreement as

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                                      -2-

         amended and restated hereby and as the same may be further amended,
         supplemented and otherwise modified and in effect from time to time.

                  2.02. Definitions. Section 1.01 of the Existing Credit
         Agreement shall be amended by adding and amending and restating the
         following definitions (to the extent already included in said Section
         1.01), as follows:

                           "Second Amendment and Restatement" shall mean the
                  Second Amended and Restated 364-Day Credit Agreement dated as
                  of June 21, 2000 between the Company, the Subsidiary
                  Borrowers, the Banks and the Administrative Agent.

                           "Commitment" shall mean, for each Bank, the
                  obligation of such Bank to make Syndicated Loans in an
                  aggregate amount at any one time outstanding up to but not
                  exceeding (a) in the case of a Bank that is a party to the
                  Second Amendment and Restatement on the date thereof, the
                  amount set opposite the name of such Bank on Schedule I hereto
                  under the caption "Commitment" or (b) in the case of any other
                  Bank, the aggregate amount of the Commitments of other Banks
                  acquired by it pursuant to Section 12.06 hereof (in each case,
                  as the same may be reduced from time to time pursuant to
                  Section 2.04 hereof or increased or reduced pursuant to said
                  Section 12.06(b)).

                           "Revolving Credit Termination Date" shall mean June
                  20, 2001, as such date may from time to time be extended as
                  provided in Section 2.10 of the Existing Credit Agreement.

                  2.03. Section 8.02. Section 8.02 is amended by (i) re-heading
         said Section 8.02 "Financial Conditions.", (ii) deleting the
         sub-heading "(a) Financial Statements." in clause (a) of said Section
         8.02 and (iii) deleting clause (b) of said Section 8.02 in its
         entirety.

                  Section 3. Conditions. The amendment and restatement of the
Existing Credit Agreement contemplated hereby shall become effective as of June
21, 2000 (the "Restatement Effective Date") upon the satisfaction prior to such
date of each of the following conditions to effectiveness (including, without
limitation, that each document to be received by the Administrative Agent shall
be in form and substance satisfactory to the Administrative Agent):

                  3.01. Execution. The Administrative Agent (or its counsel)
         shall have received from each party hereto either (a) a counterpart of
         this Agreement signed on behalf of such party or (b) written evidence
         satisfactory to the Administrative Agent (which may include telecopy
         transmission of a signed signature page of this Agreement) that such
         party has signed a counterpart of this Agreement.

                  3.02. Opinion. The Administrative Agent shall have received a
         favorable written opinion (addressed to the Administrative Agent and
         the Banks and dated the Restatement Effective Date) of Wendy C. Shiba,
         Esq., Vice President, Secretary and Assistant General Counsel of the
         Company, substantially in the form of Exhibit B to the Existing Credit

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         Agreement (with appropriate modifications to reflect the amendment and
         restatement thereof contemplated hereby). The Company hereby requests
         such counsel to deliver such opinion.

                  3.03. Certificate as to Incumbency. The Administrative Agent
         shall have received a certificate of the Secretary or an Assistant
         Secretary of the Company in respect of each of the officers (a) who are
         authorized to sign this Agreement on the Company's behalf and (b) who
         will, until replaced by another officer or officers duly authorized for
         that purpose, act as its representative for the purposes of signing
         documents and giving notices and other communications in connection
         with this Agreement, the promissory notes and the transactions
         contemplated hereby.

                  3.04. Certificate of Authorized Officer. The Administrative
         Agent shall have received a certificate of a duly authorized financial
         officer of the Company, dated the Restatement Effective Date, stating
         that (a) no Default has occurred and is continuing as of such date, and
         (b) the representations and warranties contained in Section 8 of the
         Existing Credit Agreement, as amended and restated hereby, are true and
         complete on and as of such date with the same force and effect as if
         made on and as of such date (or, if any such representation or warranty
         is expressly stated to have been made as of a specific date, as of such
         specific date).

                  3.05. Fees and Expenses. The Administrative Agent shall have
         received all fees and other amounts due and payable on or prior to the
         Restatement Effective Date, including (i) for the account of the Banks,
         an up-front fee in an amount equal to 0.03% of each Bank's Commitment
         and (ii) to the extent invoiced, including reimbursement or payment of
         all out-of-pocket expenses required to be reimbursed or paid by the
         Company hereunder.

The Administrative Agent shall notify the Company and the Banks of the
occurrence of the Restatement Effective Date, and such notice shall be
conclusive and binding.

                  Section 4. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be identical and all of which, when
taken together, shall constitute one and the same instrument, and any of the
parties hereto may execute this Agreement by signing any such counterpart.

                  Section 5. Expenses. Without limiting its obligations under
Section 12.03 of the Existing Credit Agreement, the Company agrees to pay, on
demand, all reasonable out-of-pocket expenses incurred by the Administrative
Agent and its affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent as documented in
reasonable detail, in connection with the preparation and administration of this
Agreement and the transactions contemplated hereby.

                  Section 6. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

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                                      -4-

                  Section 7. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the law of the State of New York.

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                                      -5-

                  IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated 364-Day Credit Agreement to be duly executed as of the date
first above written.

                                     COMPANY

                                        BOWATER INCORPORATED

                                        By: /s/ David G. Maffucci
                                            ------------------------------------
                                            Name: David G. Maffucci
                                            Title: Senior Vice President and
                                                   Chief Financial Officer

                                        By: /s/ William G. Harvey
                                            ------------------------------------
                                            Name: William G. Harvey
                                            Title: Vice President and Treasurer

                                     ADMINISTRATIVE AGENT

                                        THE CHASE MANHATTAN BANK,
                                          as Administrative Agent

                                        By: /s/ Gary L. Spevack
                                            ------------------------------------
                                            Name: Gary L. Spevack
                                            Title: Vice President

                                     BANKS

                                        THE CHASE MANHATTAN BANK

                                        By: /s/ Gary L. Spevack
                                            ------------------------------------
                                            Name: Gary L. Spevack
                                            Title: Vice President

                                        THE BANK OF NEW YORK

                                        By: /s/ David C. Siegel
                                            ------------------------------------
                                            Name: David C. Siegel
                                            Title: Vice President

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                                      -6-

                                        BANK OF AMERICA, N.A.

                                        By: /s/ Michael L. Short
                                            ------------------------------------
                                            Name: Michael L. Short
                                            Title: Managing Director

                                        FIRST UNION NATIONAL BANK

                                        By: /s/ J. Andrew Phelps
                                            ------------------------------------
                                            Name: J. Andrew Phelps
                                            Title: Vice President

                                        TORONTO DOMINION (TEXAS), INC.

                                        By: /s/ Carolyn R. Faeth
                                            ------------------------------------
                                            Name: Carolyn R. Faeth
                                            Title: Vice President

                                        WACHOVIA BANK, N.A.

                                        By: /s/ Donald E. Sellers, Jr.
                                            ------------------------------------
                                            Name: Donald E. Sellers, Jr.
                                            Title: Vice President

                                        MORGAN GUARANTY TRUST
                                          COMPANY OF NEW YORK

                                        By: /s/ Dennis Wilczek
                                            ------------------------------------
                                            Name: Dennis Wilczek
                                            Title: Associate

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                                        THE BANK OF NOVA SCOTIA

                                        By: /s/ W.J. Brown
                                            ------------------------------------
                                            Name: W.J. Brown
                                            Title: Vice President

                                        SUNTRUST BANK, NASHVILLE, N.A.

                                        By: /s/ Nathan Bickford
                                            ------------------------------------
                                            Name: Nathan Bickford
                                            Title: Assistant Vice President

                                        WESTDEUTSCHE LANDESBANK
                                           GIROZENTRALE, NEW YORK BRANCH

                                        By: /s/ Cynthia M. Niesen
                                            ------------------------------------
                                            Name: Cynthia M. Niesen
                                            Title: Managing Director

                                        By: /s/ Walter T. Duffy III
                                            ------------------------------------
                                            Name: Walter T. Duffy III
                                            Title: Associate Director

                                        BANK OF MONTREAL

                                        By: /s/ Amy K. Dumser
                                            ------------------------------------
                                            Name: Amy K. Dumser
                                            Title: Director

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                                      -8-

                                        DG BANK, DEUTSCHE
                                           GENOSSENSCHAFTSBANK, AG
                                           CAYMAN ISLANDS BRANCH

                                        By: /s/ J.W. Somers
                                            ------------------------------------
                                            Name: J.W. Somers
                                            Title: Senior Vice President

                                        By: /s/ Gary P. Franke
                                            ------------------------------------
                                            Name: Gary P. Franke
                                            Title: Vice President

                                        ABN AMRO BANK N.V.

                                        By: /s/ Angela Reitz
                                            ------------------------------------
                                            Name: Angela Reitz
                                            Title: Vice President

                                        By: /s/ Laurie D. Flom
                                            ------------------------------------
                                            Name: Laurie D. Flom
                                            Title: Group Vice President

<PAGE>   9

                                                                      Schedule I

--------------------------------------------------------------------------------
                 BANK                                COMMITMENT
--------------------------------------------------------------------------------

The Chase Manhattan Bank                             16,000,000
--------------------------------------------------------------------------------

First Union National Bank                            14,500,000
--------------------------------------------------------------------------------

Bank of America, N.A.                                14,500,000
--------------------------------------------------------------------------------

The Bank of New York                                 14,500,000
--------------------------------------------------------------------------------

Wachovia Bank, N.A.                                  14,500,000
--------------------------------------------------------------------------------

Toronto Dominion (Texas), Inc.                       14,500,000
--------------------------------------------------------------------------------

SunTrust Bank, Nashville, N.A.                       11,500,000
--------------------------------------------------------------------------------

Morgan Guaranty Trust Company of New York            11,500,000
--------------------------------------------------------------------------------

The Bank of Nova Scotia                              11,500,000
--------------------------------------------------------------------------------

Bank of Montreal                                      6,750,000
--------------------------------------------------------------------------------

Westdeutsche Landesbank                               6,750,000
Girozentrale, New York Branch
--------------------------------------------------------------------------------

DG Bank, Deutsche Genossenschaftsbank,                6,750,000
AG, Cayman Islands Branch
--------------------------------------------------------------------------------

ABN AMRO Bank N.V.                                    6,750,000
--------------------------------------------------------------------------------<PAGE>   1

                                                                    EXHIBIT 10.4

                                                                  CONFORMED COPY

                                 AMENDMENT NO. 1

                  AMENDMENT NO. 1 dated as of July 31, 2000 (this "Amendment")
to the Second Amended and Restated 364-Day Credit Agreement (the "Credit
Agreement") dated as of June 21, 2000 between BOWATER INCORPORATED, a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Company"); each of the Subsidiaries of the Company from time to
time designated as "Subsidiary Borrowers" hereunder pursuant to Section 7.02(a)
of the Credit Agreement as defined below (each, a "Subsidiary Borrower" and,
together with the Company, the "Borrowers"); each of the lenders that is a
signatory hereto identified under the caption "BANKS" on the signature pages
hereto or that, pursuant to Section 12.06(b) of the Credit Agreement, shall
become a "Bank" hereunder (individually, a "Bank" and, collectively, the
"Banks"); and THE CHASE MANHATTAN BANK, as administrative agent for the Banks
(in such capacity, together with its successors in such capacity, the
"Administrative Agent").

                              W I T N E S S E T H:

                  WHEREAS, the Company, the Subsidiary Borrowers, the Banks, and
the Administrative Agent are party to the Credit Agreement which provides for
the making of loans by said Banks to the Borrowers in an aggregate original
principal amount up to $150,000,000; and

                  WHEREAS, the parties hereto desire to amend in certain
respects the Credit Agreement to increase the aggregate amount of the
Commitments under the Credit Agreement from $150,000,000 to $750,000,000 and to
amend the Credit Agreement in certain other respects.

                  NOW, THEREFORE, the parties hereto agree to amend the Credit
Agreement as set forth in Section 2 hereof:

                  Section 1. Definitions. Capitalized terms used but not
otherwise defined herein have the meanings given them in the Credit Agreement.

                  Section 2. Amendments. Subject to the satisfaction of the
conditions specified in Section 3 hereof, the Credit Agreement shall be amended
as follows:

                  2.01. Definitions. Section 1.01 of the Credit Agreement shall
be amended by adding and amending (to the extent already included in said
Section 1.01) the following definitions, as follows:

                  "Amendment No. 1" shall mean Amendment No. 1 to the Second
         Amendment and Restatement.

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                                      -2-

                  "Commitment" shall mean, for each Bank, the obligation of such
         Bank to make Syndicated Loans in an aggregate amount at any one time
         outstanding up to but not exceeding (a) in the case of a Bank that is a
         party to the Credit Agreement after giving effect to Amendment No. 1,
         the amount set opposite the name of such Bank on Schedule I to
         Amendment No. 1 under the caption "Commitment" or (b) in the case of
         any other Bank, the aggregate amount of the Commitments acquired by it
         pursuant to Section 12.06 hereof (in each case, as the same may be
         reduced from time to time pursuant to Section 2.04 hereof or increased
         or reduced pursuant to said Section 12.06(b)).

                  "Interest Period" shall mean:

                           (a) with respect to any Eurodollar Loan, each period
                  commencing on the date such Eurodollar Loan is made or
                  Converted from a Loan of another Type or the last day of the
                  next preceding Interest Period for such Loan and ending on the
                  numerically corresponding day in the first, second, third or
                  sixth calendar month thereafter, as the applicable Borrower
                  may select as provided in Section 4.05 hereof, except that
                  each Interest Period that commences on the last Business Day
                  of a calendar month (or on any day for which there is no
                  numerically corresponding day in the appropriate subsequent
                  calendar month) shall end on the last Business Day of the
                  appropriate subsequent calendar month;

                           (b) with respect to any Set Rate Loan, the period
                  commencing on the date such Set Rate Loan is made and ending
                  on any Business Day at least 7 and up to 360 days thereafter,
                  as the applicable Borrower may select as provided in Section
                  2.03(b) hereof; and

                           (c) with respect to any LIBOR Market Loan, the period
                  commencing on the date such LIBOR Market Loan is made and
                  ending on the numerically corresponding day in the first,
                  second, third or sixth calendar month thereafter, as the
                  applicable Borrower may select as provided in Section 2.03(b)
                  hereof, except that each Interest Period that commences on the
                  last Business Day of a calendar month (or any day for which
                  there is no numerically corresponding day in the appropriate
                  subsequent calendar month) shall end on the last Business Day
                  of the appropriate subsequent calendar month.

                           Notwithstanding the foregoing: (i) if any Interest
                  Period for any Eurodollar Loan (other than a Term Loan) or
                  Money Market Loan would otherwise end after the Revolving
                  Credit Termination Date, such Interest Period shall end on the
                  Revolving Credit Termination Date; (ii) each Interest Period
                  that would otherwise end on a day that is not a Business Day
                  shall end on the next succeeding Business Day (or, in the case
                  of an Interest Period for a Eurodollar Loan or a LIBOR Market
                  Loan, if such next succeeding Business Day falls in the next
                  succeeding calendar month, on the next preceding Business
                  Day); (iii) if an Interest Period in respect of a Term Loan
                  would otherwise commence before and end after the Maturity
                  Date, such Interest Period shall end on the Maturity Date;

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                                      -3-

                  and (iv) notwithstanding clause (i) above, no Interest Period
                  for any Loan (other than a Set Rate Loan) shall have a
                  duration of less than one month and, if the Interest Period
                  for any Eurodollar or LIBOR Market Loan would otherwise be a
                  shorter period, such Loan shall not be available hereunder for
                  such period.

                  "Maturity Date" shall have the meaning set forth in Section
         2.10(d) hereof.

                  "Syndicated Loans" shall mean the loans provided for by
         Section 2.01 hereof, which may be Base Rate Loans and/or Eurodollar
         Loans and shall include each Term Loan.

                  "Term Loan" shall have the meaning set forth in Section
         2.10(d) hereof.

                  2.02. Syndicated Loans. Section 2.01 of the Credit Agreement
shall be amended to read in its entirety as follows:

                   "2.01 Syndicated Loans. Each Bank severally agrees, on the
         terms and conditions of this Agreement, to make loans to the Borrowers
         in Dollars during the period from and including the Closing Date to but
         not including the Revolving Credit Termination Date in an aggregate
         principal amount at any one time outstanding up to but not exceeding
         the amount of the Commitment of such Bank as in effect from time to
         time. Subject to the terms and conditions of this Agreement, during
         such period the Borrowers may borrow, repay and reborrow the amount of
         the Commitments by means of Base Rate Loans and Eurodollar Loans and
         during such period and thereafter the Borrowers may Convert Loans of
         one Type into Loans of another Type (as provided in Section 2.09
         hereof) or Continue Loans of one Type as Loans of the same Type (as
         provided in Section 2.09 hereof); provided that (a) subject to Section
         2.10(d) hereof, the aggregate principal amount of all Syndicated Loans
         of all Borrowers, together with the aggregate principal amount of all
         Money Market Loans of all Borrowers, at any one time outstanding shall
         not exceed the aggregate amount of the Commitments; and (b) no more
         than fifteen different Interest Periods for both Syndicated Loans and
         Money Market Loans of all Borrowers may be outstanding at the same time
         (for which purpose Interest Periods described in different lettered
         clauses of the definition of the term "Interest Period" shall be deemed
         to be different Interest Periods even if they are coterminous)."

                  2.03. Facility Fee. Section 2.05(a) of the Credit Agreement
shall be amended to read in its entirety as follows:

                 "(a) The Company shall pay to the Administrative Agent for
         account of each Bank a facility fee on the amount of such Bank's
         Commitment as then in effect, for the period from and including the
         date of this Agreement to but not including the earlier of the date
         such Commitment is terminated and the Revolving Credit Termination
         Date, at a rate per annum equal to (a) 0.0600% during any Level I
         Period, (b) 0.0800% during any Level II Period, (c) 0.1000% during any
         Level III Period, (d) 0.1250% during any Level IV Period and (e)
         0.2000% during any Level V Period; provided that if such Bank continues
         to have a Loan outstanding after such Bank's Commitment terminates,
         then such facility fee shall

<PAGE>   4
                                      -4-

         continue to accrue on the daily aggregate principal amount of Loans of
         such Bank from and including the date on which its Commitment
         terminates to but excluding the date on which such Bank ceases to have
         any Loans outstanding. Accrued facility fee shall be payable on each
         Quarterly Date, on the Maturity Date and on the earlier of the date the
         Commitments are terminated and the Revolving Credit Termination Date.
         Any change in a facility fee by reason of a change in the Standard &
         Poor's Rating or the Moody's Rating shall become effective on the date
         two Business Days after the date of announcement or publication by the
         respective rating agencies of a change in such rating or, in the
         absence of such announcement or publication, on the date two Business
         Days after the effective date of such changed rating."

                  2.04. Utilization Fee. Section 2.05(b) of the Credit Agreement
shall be amended to read in its entirety as follows:

                  "(b) The Company shall pay to the Administrative Agent for
         account of each Bank a utilization fee at a rate per annum equal to
         0.25% on the aggregate outstanding principal amount of the Syndicated
         Loans made by such Bank hereunder for any period (during the period
         from and including June 23, 1999 to but not including the earlier of
         the date Commitments are terminated and the Revolving Credit
         Termination Date) that the aggregate principal outstanding amount of
         all Syndicated Loans hereunder exceeds 33% of the net amount of the
         Commitments after deducting the aggregate outstanding principal amount
         of all Money Market Loans hereunder at such time; provided however that
         if the aggregate principal amount of Syndicated Loans converted to Term
         Loans on the Revolving Credit Termination Date exceeds 33% of the net
         amount of the Commitments in effect on the Revolving Credit Termination
         Date (prior to the reduction of the Commitments to zero on such date)
         after deducting the aggregate outstanding principal amount of all Money
         Market Loans hereunder at such date, the Company shall pay to the
         Administrative Agent for the account of each Bank a utilization fee at
         a rate per annum equal to 0.25% on the aggregate outstanding principal
         amount of the Term Loans made by such Bank during the period from and
         including the Revolving Credit Termination Date to but excluding the
         date on which such Bank ceases to have any Term Loans outstanding.
         Accrued utilization fee shall be payable on each Quarterly Date, on the
         Maturity Date and on the earlier of the date the Commitments are
         terminated and the Revolving Credit Termination Date."

                  2.05. Term-Out Option. Section 2.10 of the Credit Agreement
shall be amended by adding paragraph (d) thereto to read in its entirety as
follows:

                  "(d) Term-Out Option. If the Revolving Credit Termination Date
         shall not have been extended pursuant to Section 2.10(c) hereof, each
         Borrower may, by notice to the Administrative Agent not less than 10
         days prior to the Revolving Credit Termination Date convert all
         Syndicated Loans made to such Borrower that are outstanding on the
         Revolving Credit Termination Date to term loans (each, a "Term Loan"
         and collectively, the "Term Loans"). Each Term Loan shall bear
         interest, until the payment in full thereof, at the rates provided for
         in Section 3.02 and shall otherwise constitute a Syndicated Loan for
         all purposes of this Agreement. The relevant Borrower hereby
         unconditionally

<PAGE>   5
                                      -5-

         promises to pay to the Administrative Agent for account of the Banks
         the unpaid principal amount of the Term Loans made to such Borrower
         that are outstanding on the date that is one year after the Revolving
         Credit Termination Date (or, if such date is not a Business Day, the
         next preceding Business Day) (the "Maturity Date"). Anything in this
         Section 2.10(d) to the contrary notwithstanding, any such conversion
         shall be subject to the conditions precedent that: (i) no Default shall
         have occurred and be continuing on the Revolving Credit Termination
         Date and (ii) each of the representations and warranties made by the
         Company in Section 8 hereof, and by each Subsidiary Borrower in its
         respective Subsidiary Borrower Designation Letter, shall be true and
         complete on and as of such Revolving Credit Termination Date with the
         same force and effect as if made on and as of such date (or, if any
         such representation or warranty is expressly stated to have been made
         as of a specific date, as of such specific date). Each notice of
         conversion delivered by a Borrower in accordance with this Section
         2.10(d) shall constitute a certification by such Borrower to the effect
         set forth in the preceding sentence (both as of the date of such notice
         and, unless such Borrower, after delivery of such notice, otherwise
         notifies the Administrative Agent prior to the Revolving Credit
         Termination Date, as of such date)."

                  2.06. Repayments of Loans. Section 3.01(b) of the Credit
Agreement shall be amended to read in its entirety as follows:

                  "(b) Repayment of Syndicated Loans. Each Borrower hereby
         promises to pay to the Administrative Agent for account of each Bank
         the principal of such Bank's Syndicated Loans to such Borrower on the
         Revolving Credit Termination Date, provided that, to the extent a
         Borrower shall have elected to convert any portion of the outstanding
         Syndicated Loans into Term Loans pursuant to Section 2.10(d), such Term
         Loans shall mature (and such Borrower hereby unconditionally promises
         to pay to the Administrative Agent for the account of each Bank the
         then unpaid principal amount of each Term Loan) on the Maturity Date."

                  2.07. Compensation. Section 5.05(b) of the Credit Agreement
shall be amended to read in its entirety as follows:

                  "(b) any failure by such Borrower for any reason (including,
         without limitation, the failure of any of the conditions precedent
         specified in Section 7 hereof to be satisfied, or the failure of any of
         the conditions precedent to the conversion requested by such Borrower
         of Syndicated Loans to Term Loans pursuant to Section 2.10(d) hereof,
         to be satisfied) to borrow a Fixed Rate Loan or a Set Rate Loan (with
         respect to which, in the case of a Money Market Loan, such Borrower has
         accepted a Money Market Quote) from such Bank on the date for such
         borrowing specified in the relevant notice of borrowing given pursuant
         to Section 2.02 or 2.03(b) hereof or to effect a conversion pursuant to
         Section 2.10(d) hereof pursuant to a notice given pursuant to Section
         2.10(d) hereof; or"

                  Section 3. Conditions. This Amendment shall become effective
as of July 31, 2000 (the "Facility Increase Effective Date") upon the
satisfaction prior to such date of each of the following conditions to
effectiveness (including, without limitation, that each document to be

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                                      -6-

received by the Administrative Agent shall be in form and substance satisfactory
to the Administrative Agent):

                  3.01. Execution. The Administrative Agent (or its counsel)
         shall have received from each party hereto (including each Bank that is
         a party to the Credit Agreement) either (a) a counterpart of this
         Amendment signed on behalf of such party or (b) written evidence
         satisfactory to the Administrative Agent (which may include telecopy
         transmission of a signed signature page of this Amendment) that such
         party has signed a counterpart of this Amendment.

                  3.02. Opinion. The Administrative Agent shall have received a
         favorable written opinion (addressed to the Administrative Agent and
         the Banks and dated the Facility Increase Effective Date) of Wendy C.
         Shiba, Esq., Vice President, Secretary and Assistant General Counsel of
         the Company, substantially in the form of Exhibit A hereto. The Company
         hereby requests such counsel to deliver such opinion.

                  3.03. Certificate as to Incumbency. The Administrative Agent
         shall have received a certificate of the Secretary or an Assistant
         Secretary of the Company in respect of each of the officers (a) who are
         authorized to sign this Amendment on the Company's behalf and (b) who
         will, until replaced by another officer or officers duly authorized for
         that purpose, act as its representative for the purposes of signing
         documents and giving notices and other communications in connection
         with this Amendment, the promissory notes and the transactions
         contemplated hereby.

                  3.04. Certificate of Authorized Officer. The Administrative
         Agent shall have received a certificate of a duly authorized financial
         officer of the Company, dated the Facility Increase Effective Date,
         stating that (a) no Default has occurred and is continuing as of such
         date, and (b) the representations and warranties contained in Section 8
         of the Credit Agreement are true and complete on and as of such date
         with the same force and effect as if made on and as of such date (or,
         if any such representation or warranty is expressly stated to have been
         made as of a specific date, as of such specific date).

                  3.05. Fees and Expenses. The Administrative Agent shall have
         received all fees and other amounts due and payable on or prior to the
         Facility Increase Effective Date, including (i) for the account of each
         Bank that has delivered to the Administrative Agent prior to such date
         a commitment letter in which it commits to increase its Commitment as
         result of this Amendment by an amount of at least $65,000,000, an
         up-front fee in an amount equal to 0.15% of the increase in such Bank's
         final allocated Commitment, (ii) for the account of each Bank that has
         delivered to the Administrative Agent prior to such date a commitment
         letter in which it commits to increase its Commitment as result of this
         Amendment by an amount of less than $65,000,000, an up-front fee in an
         amount equal to 0.10% of the increase in such Bank's final allocated
         Commitment and (iii) to the extent invoiced, including reimbursement or
         payment of all reasonable out-of-pocket expenses required to be
         reimbursed or paid by the Company hereunder.

<PAGE>   7
                                      -7-

The Administrative Agent shall notify the Company and the Banks of the
occurrence of the Facility Increase Effective Date, and such notice shall be
conclusive and binding.

                  Section 4. Readjustment of Loans. On the Facility Increase
Effective Date, the Banks shall take such actions, and make such adjustments
among themselves, as shall be necessary so that their outstanding Syndicated
Loans are held under the Credit Agreement ratably in accordance with their
respective Commitments as set forth on Schedule I hereto under the caption
"Commitment".

                  Section 5. Counterparts. This Amendment may be executed in any
number of counterparts, each of which shall be identical and all of which, when
taken together, shall constitute one and the same instrument, and any of the
parties hereto may execute this Agreement by signing any such counterpart.

                  Section 6. Expenses. Without limiting its obligations under
Section 12.03 of the Credit Agreement, the Company agrees to pay, on demand, all
reasonable out-of-pocket expenses incurred by the Administrative Agent and its
affiliates, including the reasonable fees, charges and disbursements of counsel
for the Administrative Agent as documented in reasonable detail, in connection
with the preparation and administration of this Amendment and the transactions
contemplated hereby.

                  Section 7. Binding Effect. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

                  Section 8. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the law of the State of New York.

<PAGE>   8
                                      -8-

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above written.

                                 COMPANY

                                          BOWATER INCORPORATED

                                          By: /s/ David G. Maffucci
                                              ----------------------------------
                                              Title: Senior Vice President and
                                                     Chief Financial Officer

                                          By: /s/ William G. Harvey
                                              ----------------------------------
                                              Title: Vice President
                                                     and Treasurer

                                 ADMINISTRATIVE AGENT

                                          THE CHASE MANHATTAN BANK,
                                            as Administrative Agent

                                          By: /s/ Gary L. Spevack
                                              ----------------------------------
                                              Title: Vice President

                                 BANKS

                                          THE CHASE MANHATTAN BANK

                                          By: /s/ Gary L. Spevack
                                              ----------------------------------
                                              Title: Vice President

                                          THE BANK OF NEW YORK

                                          By: /s/ David C. Siegel
                                              ----------------------------------
                                              Title: Vice President

<PAGE>   9
                                      -9-

                                          BANK OF AMERICA, N.A.

                                          By: /s/ Kevin F. Sullivan
                                              ----------------------------------
                                              Title: Managing Director

                                          FIRST UNION NATIONAL BANK

                                          By: /s/ Sarah T. Warren
                                              ----------------------------------
                                              Title: Vice President

                                          TORONTO DOMINION (TEXAS), INC.

                                          By: /s/ Carolyn R. Faeth
                                              ----------------------------------
                                              Title: Vice President

                                          WACHOVIA BANK, N.A.

                                          By: /s/ Donald E. Sellers, Jr.
                                              ----------------------------------
                                              Title: Senior Vice President

                                          MORGAN GUARANTY TRUST
                                            COMPANY OF NEW YORK

                                          By: /s/ Lewis Reford
                                              ----------------------------------
                                              Title: Vice President

                                          THE BANK OF NOVA SCOTIA

                                          By: /s/ William E. Zarrett
                                              ----------------------------------
                                              Title: Managing Director

<PAGE>   10
                                      -10-

                                          SUNTRUST BANKS, INC.

                                          By: /s/ Nathan Bickford
                                              ----------------------------------
                                              Title: Assistant Vice President

                                          WESTDEUTSCHE LANDESBANK
                                             GIROZENTRALE, NEW YORK BRANCH

                                          By: /s/ Cynthia M. Niesen
                                              ----------------------------------
                                              Title: Managing Director

                                          By: /s/ Walter T. Duffy
                                              ----------------------------------
                                              Title: Associate Director

                                          BANK OF MONTREAL

                                          By: /s/ Amy K. Dumser
                                              ----------------------------------
                                              Title: Director

<PAGE>   11
                                      -11-

                                          DG BANK, DEUTSCHE
                                             GENOSSENSCHAFTSBANK, AG
                                             CAYMAN ISLANDS BRANCH

                                          By: /s/ J.W. Somers
                                              ----------------------------------
                                              Title: Senior Vice President

                                          By: /s/ Kurt A. Morris
                                              ----------------------------------
                                              Title: Vice President

                                          ABN AMRO BANK N.V.

                                          By: /s/ Thomas Comfort
                                              ----------------------------------
                                              Title: Group Vice President

                                          By: /s/ Carla S. Waggoner
                                              ----------------------------------
                                              Title: Assistant Vice President

<PAGE>   12

                                                                      Schedule I

                  BANK                                    COMMITMENT
                  ----                                    ----------

The Chase Manhattan Bank                                  $76,000,000

Bank of America, N.A.                                     $70,500,000

First Union National Bank                                 $66,500,000

The Bank of New York                                      $66,500,000

Wachovia Bank, N.A.                                       $66,500,000

Toronto Dominion (Texas), Inc.                            $66,500,000

SunTrust Banks, Inc.                                      $63,500,000

Morgan Guaranty Trust Company of New York
                                                          $63,500,000

The Bank of Nova Scotia                                   $63,500,000

Bank of Montreal                                          $46,750,000

Westdeutsche Landesbank
Girozentrale, New York Branch                             $46,750,000

ABN AMRO Bank N.V.                                        $46,750,000

DG Bank, Deutsche Genossenschaftsbank,
AG, Cayman Islands Branch                                 $ 6,750,000
                                                          -----------

         Total                                           $750,000,000
                                                         ============

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