Document:

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                  BOWATER INCORPORATED SAVINGS PLAN FOR CERTAIN
                                HOURLY EMPLOYEES

                    As Originally Effective July 3, 1984, and
                As Amended and Restated Effective January 1, 1997

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                                Table of Contents

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ARTICLE 1  DEFINITIONS.............................................................................2
         1.01       Accounts.......................................................................2
         1.02       Active Participant.............................................................2
         1.03       Affiliated Company.............................................................2
         1.04       Basic Employee Contribution Accounts...........................................2
         1.05       Beneficiary....................................................................2
         1.06       Board..........................................................................3
         1.07       Code...........................................................................3
         1.08       Committee......................................................................3
         1.09       Company........................................................................3
         1.10       Current Or Accumulated Profits.................................................3
         1.11       Disability.....................................................................3
         1.12       Early Retirement Date..........................................................3
         1.13       Earnings.......................................................................3
         1.14       Effective Date.................................................................4
         1.15       Employee.......................................................................4
         1.16       Employer.......................................................................4
         1.17       Employment.....................................................................4
         1.18       Enrollment Date................................................................4
         1.19       Erisa..........................................................................4
         1.20       Fiduciary......................................................................4
         1.21       Forfeitures....................................................................4
         1.22       Hour Of Service................................................................5
         1.23       Initial Company Contribution Account...........................................5
         1.24       Investment Funds...............................................................5
         1.25       Matching Contribution Account..................................................5
         1.26       Normal Retirement Date.........................................................5
         1.27       Participant....................................................................5
         1.28       Plan...........................................................................5
         1.29       Plan Administrator.............................................................5
         1.30       Plan To Plan Transfer..........................................................5
         1.31       Plan Year......................................................................5
         1.32       Postponed Retirement Date......................................................5
         1.33       Retirement.....................................................................5
         1.34       Severance From Service Date....................................................5
         1.35       Share Of Company Stock.........................................................6
         1.36       Specified Hardship Withdrawal..................................................6
         1.37       Spouse.........................................................................6
         1.38       Supplemental Non Tax-Deferred Employee Contribution Account....................7
         1.39       Supplemental Tax-Deferred Employee Contribution Account........................7
         1.40       Trust Agreement................................................................7
         1.41       Trust Fund.....................................................................7
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         1.42       Trustee........................................................................7
         1.43       Valuation Date.................................................................7
         1.44       Vested Value...................................................................7
         1.45       Year Of Break In Service.......................................................7
         1.46       Years Of Service...............................................................7

ARTICLE 2  ELIGIBILITY AND PARTICIPATION...........................................................8
         2.01       Eligibility....................................................................8
         2.02       Participation..................................................................8
         2.03       Cessation Of Active Participation..............................................8
         2.04       Effect Of Reemployment On Plan Entry Or Reentry................................9
         2.05       Prior Employment With An Affiliated Company....................................9
         2.06       Effect Of Military Leave.......................................................9

ARTICLE 3  PARTICIPANT CONTRIBUTIONS..............................................................10
         3.01       Basic Tax-Deferred Employee Contributions.....................................10
         3.02       Supplemental Tax-Deferred Employee Contributions..............................10
         3.03       Non Tax-Deferred Employee Contributions.......................................10
         3.04       Mode Of Payment...............................................................10
         3.05       Limitation On Contributions...................................................10
         3.06       Change In Amount Of Contributions.............................................21
         3.07       Voluntary Suspension Of Participant Contributions.............................21
         3.08       Plan To Plan Transfer.........................................................21
         3.09       Employment With Affiliated Company............................................22
         3.10       Rollover Contributions........................................................22

ARTICLE 4  EMPLOYER CONTRIBUTIONS.................................................................24
         4.01       Matching Contributions........................................................24
         4.02       Initial Company Contributions.................................................24
         4.03       Mode Of Payment...............................................................24
         4.04       Return Of Certain Contributions To Employer...................................24
         4.05       Statutory Limitation On Additions:............................................25
         4.06       Combined Plans Limitation.....................................................27
         4.07       Forfeitures...................................................................27

ARTICLE 5  INVESTMENT OPTIONS.....................................................................28
         5.01       Investment Of Contributions...................................................28
         5.02       Investment Elections By Participants..........................................29
         5.03       Changes In Current Investment Elections.......................................29
         5.04       Transfer Of Accounts..........................................................29

ARTICLE 6  VALUATION OF PARTICIPANTS' ACCOUNTS....................................................30
         6.01       Accounts......................................................................30
         6.02       Valuation Of Accounts.........................................................30

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         6.03       Amount Of Participant's Accounts..............................................30
         6.04       Statement Of Participant Accounts.............................................30
         6.05       Timing Of Credits And Deductions..............................................30

ARTICLE 7  PAYMENT OF BENEFITS....................................................................31
         7.01       Retirement....................................................................31
         7.02       Death.........................................................................31
         7.03       Disability....................................................................31
         7.04       Other Termination Of Employment...............................................31
         7.05       Transfer From Hourly To Salaried Employment...................................32
         7.06       Election Of Benefits..........................................................32
         7.07       Method Of Payment.............................................................34
         7.08       Proof Of Death And Right Of Beneficiary.......................................35
         7.09       Direct Rollover Of Distribution...............................................35

ARTICLE 8  WITHDRAWALS AND LOANS..................................................................38
         8.01       General Conditions For Withdrawals............................................38
         8.02       Withdrawal Of Company Contributions...........................................38
         8.03       Withdrawal Of Non Tax-Deferred Contributions..................................38
         8.04       Specified Hardship Withdrawal.................................................38
         8.05       Withdrawal After Age 59-1/2...................................................39
         8.06       Withdrawal Of Rollover Account................................................39
         8.07       Loans.........................................................................39

ARTICLE 9  PLAN ADMINISTRATION....................................................................42
         9.01       Fiduciaries...................................................................42
         9.02       Responsibilities Of The Company...............................................42
         9.03       Savings Plan Committee........................................................42
         9.04       Operation Of The Committee....................................................42
         9.05       Plan Administrator............................................................44
         9.06       Reliance On Experts...........................................................44
         9.07       Committee Action..............................................................45
         9.08       Individual Indemnification....................................................45
         9.09       Expenses......................................................................45
         9.10       Service In Various Capacities.................................................45
         9.11       Standards Of Conduct..........................................................45
         9.12       Claims Procedures.............................................................46

ARTICLE 10  AMENDMENT AND TERMINATION OF THE PLAN.................................................48
         10.01      Amendment Of The Plan.........................................................48
         10.02      Merger, Consolidation, Or Transfer Of Assets..................................48
         10.03      Plan Termination..............................................................48
         10.04      Procedure.....................................................................48
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ARTICLE 11  CHANGE IN CONTROL.....................................................................49
         11.01      Controlling Provisions........................................................49
         11.02      Fully Vesting Of Matching Contribution Account................................49
         11.03      Definitions...................................................................49
         11.04      Amendment Of This Article 11..................................................50

ARTICLE 12  EXERCISE OF COMPANY STOCKHOLDERS' RIGHTS..............................................51
         12.01      Voting Rights.................................................................51
         12.02      Rights Other Than Voting Rights...............................................51

ARTICLE 13  GENERAL PROVISIONS....................................................................52
         13.01      Nonalienation Of Benefits.....................................................52
         13.02      Exclusive Benefit Of Participants And Beneficiaries...........................52
         13.03      No Right To Employment........................................................52
         13.04      Uniform Administration........................................................52
         13.05      Headings......................................................................52
         13.06      Construction..................................................................52
         13.07      Unclaimed Distributions.......................................................52
         13.08      Distributions To A Legal Representative.......................................52
         13.09      Expenses......................................................................53
         13.10      Source Of Payment.............................................................53

ARTICLE 14  MERGER OF PLAN........................................................................54
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                  BOWATER INCORPORATED SAVINGS PLAN FOR CERTAIN
                                HOURLY EMPLOYEES

                    As Originally Effective July 3, 1984, and
                As Amended and Restated Effective January 1, 1997

                                    PREAMBLE

Establishment of Plan

     The Bowater Incorporated Savings Plan for Certain Hourly Employees was
established effective July 3, 1984, for the benefit of eligible hourly Employees
of the Company, and of such of its subsidiaries as might adopt the Plan. The
Plan was established and is maintained pursuant to collective bargaining
agreements in effect between Bowater Incorporated and the United Paperworkers'
International Union and with its Locals 653, 788, 790 and 1514, the
International Brotherhood of Electrical Workers Union and its Local 175, and the
International Guards Union of America and its Local 100.

Amendment and Restatement of Plan

     Effective January 1, 1989, the Plan was amended and restated to comply with
the Tax Reform Act of 1986 and to make the Plan consistent with the Master Trust
Agreement between Bowater Incorporated and Fidelity Management Trust Company
(dated July 1, 1994) and with administrative practice. Effective January 1,
1997, the Plan is hereby further restated to bring its provisions into
compliance with applicable law, and to further conform the Plan's language to
administrative practice.

Purpose of Plan

     The purpose of the Plan is to provide Employees with an opportunity to save
money for their retirement by contributing to the Plan on both a pre-tax and an
after-tax basis. Employee contributions will be supplemented by Employer
contributions. All funds contributed will be held in trust, as described
hereinafter, and invested to achieve the objective of the Plan. The Plan and
related trust are intended to meet the requirements of Sections 401(a), 401(k),
409 and 501(a) of the Internal Revenue Code, as amended from time to time, and
the provisions of the Employee Retirement Income Security Act of 1974, as
amended from time to time.

<PAGE>
                                    ARTICLE 1

                                   DEFINITIONS

     The following words and phrases as used in the Plan shall have the
indicated meanings, unless a different meaning is plainly required by the
context. Wherever applicable, masculine pronouns shall include the feminine, and
the singular shall include the plural.

     1.01 ACCOUNTS. The separate Accounts maintained for each Participant,
including, but not limited to, a Participant's Basic and Supplemental
Tax-Deferred Employee Contribution Accounts, Supplemental Non Tax-Deferred
Employee Contributions Accounts, Initial Company Contribution Account and
Matching Company Contribution Account, as described under Articles 3 and 4.

     1.02 ACTIVE PARTICIPANT. An eligible Employee who has in effect an election
to have the Employer withhold and contribute to the Plan a portion of his
Earnings, or an Employee who has made a Plan to Plan Transfer to the Plan.

     1.03 AFFILIATED COMPANY. Any division or company within a family of
controlled corporations with the Company within the meaning of Code Section
1563(a) (determined without regard to Sections 1563(a)(4) and 1563(e)(3)(C)), or
a company that is a member of an affiliated service group to which the Company
belongs, within the meaning of Code Section 414(m). With respect to periods
prior to July 23, 1984, "Affiliated Company" includes any company which would
have been an Affiliated Company prior to the separation under the laws of the
United Kingdom of the Company from Bowater plc.

     1.04 BASIC EMPLOYEE CONTRIBUTION ACCOUNTS. With respect to each
Participant, the portion of the Trust Fund that is attributable to his Basic
Employee Contributions. Basic Tax-Deferred Employee Contributions made under
Section 3.01 shall be maintained in the Participant's Basic Tax-Deferred
Employee Contribution Account.

     1.05 BENEFICIARY. The person, estate or trust designated by a Participant
to receive any benefits payable in the event of his death, provided that such
designation is made in accordance with procedures established by the Plan
Administrator. In the absence of an effective designation, or if the
Participant's Beneficiary does not survive the Participant, the Beneficiary
shall be the first of the following surviving the Participant: the Participant's
(a) widow or widower; (b) child(ren); (c) parent(s); (d) sibling(s); (e)
executor or administrator.

     Notwithstanding the foregoing, if a Participant is married on the date of
his death, his Beneficiary shall be his surviving Spouse unless:

          (a)  the Participant has designated a Beneficiary other than his
               Spouse, and

          (b)  the Participant's Spouse has consented in writing to the
               Participant's designation of an alternate Beneficiary. The
               Spouse's consent must: (i) acknowledge the financial and legal
               effect of such election, and (ii) be witnessed by a
               representative of the Committee or a notary public. Such consent
               requirement may be excused if it is established to the
               satisfaction

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               of the Committee that such consent cannot be obtained because
               there is no Spouse or because the Spouse cannot be located.

     1.06 BOARD. The Board of Directors of the Company.

     1.07 CODE. The Internal Revenue Code of 1986, as amended from time to time.
All references to any Section of the Code shall be deemed to refer not only to
such Section but also to any successor statutory provision to such Section.

     1.08 COMMITTEE. The Savings Plan Committee as appointed and acting in
accordance with Article 9.

     1.09 COMPANY. Bowater Incorporated, a Delaware corporation, and its
successors by merger, purchase, or otherwise with respect to its Employees.

     1.10 CURRENT OR ACCUMULATED PROFITS. The Employer's net profits determined
in accordance with generally accepted accounting principles before provision for
income taxes and extraordinary items. No Employer contribution shall be made in
any Plan Year where there are not sufficient Current or Accumulated Profits.

     1.11 DISABILITY. The status of being totally and permanently disabled by
reason of physical or mental disability, causing: (a) an Employee to be
incapable of further Employment in the capacity in which he was employed prior
to such physical or mental disability, and (b) the Employee's Employment to be
terminated as a result of such Disability. An Employee will only be considered
to have suffered a Disability for purposes of the Plan if he is considered to be
disabled under the qualified defined benefit plan under which he is eligible.
The Committee, in its sole discretion, shall determine whether an Employee
suffers from a Disability, based on such evidence and recommendations as it
determines to be necessary or appropriate.

     1.12 EARLY RETIREMENT DATE. The date a Participant's Employment terminates
for any reason following his attainment of age 50 and completion of 15 or more
Years of Service.

     1.13 EARNINGS. The total compensation paid by the Employer to the Employee
that is reportable as "wages, tips and other compensation" in Box 1 of the
Employee's Federal Wage and Tax Statement (IRS Form W-2), adjusted as follows:

          (i)  The amount described above shall be increased by any salary
               reduction contributions made on the Employee's behalf under any
               plan maintained by the Employer pursuant to Code Section 125 or
               401(k) and, effective January 1, 1998, elective amounts excluded
               from taxable income under Section 132(f)(4) of the Code; and

          (ii) The amount described above shall be decreased by reimbursements
               or other expense allowances, cash and noncash fringe benefits,
               moving expenses, deferred compensation, welfare benefits,

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               payments received under the Employer's gainsharing program, and
               stock and stock-related compensation.

     Notwithstanding the foregoing, the amount of an Employee's Earnings taken
into account under the Plan for a Plan Year shall not exceed $160,000 (effective
January 1, 2000, $170,000), as adjusted for changes in the cost of living as
provided under Code Section 415(d).

     1.14 EFFECTIVE DATE. January 1, 1997, except as otherwise provided herein.

     1.15 EMPLOYEE. Any individual who is hired to perform duties for an
Employer on an hourly basis, is subject to its control, and receives regular
compensation other than a pension, severance pay, retainer, or fee under
contract who is not eligible to participate in any other savings plan sponsored
by the Company. Notwithstanding the foregoing, the term "Employee" shall not
include: (a) any individual designated by the Company on its records as an
independent contractor, consultant or other service provider to the Company
(even if a court, the Internal Revenue Service or other entity determines that
such individual is a common law employee); (b) any individual designated by the
Company on its records as a leased employee (as defined under Code Section
414(n)) (even if such individual is so determined to be a common law employee);
(c) any seasonal or temporary employees; and (d) any other employee of the
Company whose terms and conditions of employment are governed by a collective
bargaining agreement with respect to which benefits of the type provided to
employees under the Plan were the subject of good faith bargaining, unless such
agreement provides for participation in the Plan.

     1.16 EMPLOYER. Bowater Incorporated or any successors by merger, purchase
or otherwise with respect to its Employees, or any Affiliated Company that
elects to participate in the Plan by action of its board of directors, subject
to the approval of the Board.

     1.17 EMPLOYMENT. An individual's service as an Employee of an Employer on
and after the effective date of the Employer's adoption of the Plan.

     1.18 ENROLLMENT DATE. The first day of each calendar month. In the case of
any Affiliated Company that becomes an Employer, Enrollment Date shall mean the
effective date of such designation with respect to the Employees of such
Employer.

     1.19 ERISA. The Employee Retirement Income Security Act of 1974, as
amended from time to time. All references to any Section of ERISA shall be
deemed to refer not only to such Section but also to any successor statutory
provisions to such Section.

     1.20 FIDUCIARY. A person or entity exercising discretionary control over
the Plan or its assets, as defined in Section 3(21) of ERISA.

     1.21 FORFEITURES. The excess of all amounts held in a Participant's
Accounts, including investment returns, over the Vested Value of his Accounts,
as determined upon the termination of Employment of the Participant and his
completion of one (1) Year Break in Service.

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     1.22 HOUR OF SERVICE. Each hour, or part thereof, for which an Employee is
paid or entitled to payment, directly or indirectly, for the performance of
duties for the Employer.

     1.23 INITIAL COMPANY CONTRIBUTION ACCOUNT. With respect to each
Participant, the portion of the Trust Fund that is attributable to the
contributions made on his behalf by the Employer under Section 4.02 ("Initial
Company Account (1987)") and the Account containing such contributions made
previously ("Initial Company Contribution Account (1984)").

     1.24 INVESTMENT FUNDS. The funds established from time to time at the
direction of the Company, in accordance with Section 5.01.

     1.25 MATCHING CONTRIBUTION ACCOUNT. With respect to each Participant, the
portion of the Trust Fund that is attributable to contributions made on his
behalf by the Employer under Section 4.01.

     1.26 NORMAL RETIREMENT DATE. The date a Participant's Employment terminates
upon the attainment of age 65.

     1.27 PARTICIPANT. An Active Participant, former Active Participant or
Employee who has a positive balance in his Account(s).

     1.28 PLAN. The Bowater Incorporated Savings Plan for Certain Hourly
Employees, as set forth herein and amended from time to time.

     1.29 PLAN ADMINISTRATOR. The Company and its delegatees, as appointed in
accordance with Article 9 by the Board to administer the Plan.

     1.30 PLAN TO PLAN TRANSFER. A direct transfer of an Employee's Accounts, as
made in accordance with Section 3.08.

     1.31 PLAN YEAR. The calendar year.

     1.32 POSTPONED RETIREMENT DATE. The date a Participant's Employment
terminates following his attainment of age 65 and satisfaction of the
requirements for postponed retirement provided under the Pension Plan for
Certain Employees of Bowater Newsprint Division and Bowater Coated Papers and
Pulp Division.

     1.33 RETIREMENT. The date on which a Participant terminates his Employment
following his Early Retirement Date, Normal Retirement Date and Postponed
Retirement Date, or if an Employer has its own qualified retirement plan, early,
normal, or postponed retirement with respect to eligible Employees under such
Employer's retirement plan. A Participant will be considered to have entered
Retirement under the Plan if he terminates employment on or after attaining age
55.

     1.34 SEVERANCE FROM SERVICE DATE. The earlier of:

          (a)  The date on which the Employee quits, retires, is discharged or
               dies; and

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          (b)  The first anniversary of the start of a period during which the
               Employee remains absent from Employment with or without pay, for
               any reason other than those specified in subsection (a) of this
               Section 1.34, such as vacation, holiday, sickness, disability,
               leave of absence or layoff.

     In the case of an Employee who is absent from work for maternity or
paternity reasons beyond the first (1st) anniversary of the first (1st) date of
such absence, the Severance From Service Date shall be the second (2nd)
anniversary of the first (1st) date of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity reasons means an
absence resulting from: (i) the pregnancy of the Employee; (ii) the birth of a
child of the Employee; (iii) a placement of a child with the Employee in
connection with the adoption of such child by the Employee; or (iv) the
Employee's caring for a child for a period beginning immediately following the
child's birth or placement.

     In the case of an Employee on a leave of absence described in Section 1.45,
the Employee shall not incur a Severance from Service while on such a leave.
However, if such an Employee does not return to Employment within the period
described in Section 1.45, such Employee shall be deemed to have incurred a
Severance from Service in accordance with paragraph (a) of this Section 1.34 on
the last day of such leave.

     1.35 SHARE OF COMPANY STOCK. A share of common stock of the Company which
has voting power and dividend rights no less favorable than any other class of
common stock issued by such Company.

     1.36 SPECIFIED HARDSHIP WITHDRAWAL. A withdrawal necessitated by the
financial need of the Participant. A Specified Hardship Withdrawal shall be
allowed only for financial need arising out of expenses incurred or assumed by a
Participant (a) for deductible medical expenses of a Participant or his family
member or dependent not covered by insurance; (b) for the payment of tuition,
related educational fees and room and board expenses for the next twelve (12)
months of post-secondary education for the Participant, his Spouse or his
dependents; (c) relating to the acquisition of a primary residence of
Participant; or (d) expenses to prevent eviction from, or foreclosure on the
mortgage of the Participant's primary residence.

     A Specified Hardship Withdrawal may not exceed the actual expense
(including reasonably anticipated state and federal taxes and penalties payable
with respect to the receipt of the amount withdrawn) incurred by the Participant
due to the circumstances described in (a)-(d) above. A Specified Hardship
Withdrawal shall not be granted unless the Participant's financial needs cannot
be met through the use of his other reasonably available resources. Such
resources include all distributions or loans (other than Specified Hardship
Withdrawals) under this Plan, the ability to borrow from banks, credit unions or
other legitimate lenders and the disposition of personal assets which can be
readily sold without need for replacement. The Plan Administrator (or his
delegatee) shall determine whether applications for such withdrawal satisfy the
definition for Specified Hardship Withdrawal.

     1.37 SPOUSE. The person legally married to the Participant at the time an
action or event relevant for Plan purposes occurs.

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     1.38 SUPPLEMENTAL NON TAX-DEFERRED EMPLOYEE CONTRIBUTION ACCOUNT. With
respect to each Participant, the portion of the Trust Fund that is attributable
to Supplemental Non Tax-Deferred Employee Contributions he makes in accordance
with Section 3.03.

     1.39 SUPPLEMENTAL TAX-DEFERRED EMPLOYEE CONTRIBUTION ACCOUNT. With respect
to each Participant, the portion of the Trust Fund that is attributable to
Supplemental Tax-Deferred Employee Contributions he makes in accordance with
Section 3.02.

     1.40 TRUST AGREEMENT. The Master Trust Agreement between the Company and
Fidelity Management Trust Company (and any successors thereto) as amended from
time to time.

     1.41 TRUST FUND. The aggregate funds held by the Trustee in accordance with
the Trust Agreement.

     1.42 TRUSTEE. Fidelity Management Trust Company and its successors
appointed in accordance with the Trust Agreement.

     1.43 VALUATION DATE. The last business day of each calendar quarter and any
other date specified by the Trustee, on which the Trust Fund is valued in
accordance with Article 6. As to Accounts maintained in any Investment Fund
which is valued daily, each business day may be deemed to be a Valuation Date. A
Valuation Date on which all Investment Funds are valued shall be a
"Comprehensive Valuation Date."

     1.44 VESTED VALUE. The nonforfeitable portion of a Participant's Account(s)
as further described in Article 7.

     1.45 YEAR OF BREAK IN SERVICE. Any 12 consecutive-month period computed
from an Employee's Severance from Service Date during which he does not complete
one (1) or more Hours of Service. A Year of Break in Service shall occur on the
last day of the first such twelve-month period. Notwithstanding the above, an
Employee shall be deemed to have not incurred a Year of Break in Service if he
is on a leave of absence in excess of 12 months authorized by his Employer and
returns to active Employment prior to the expiration of such leave.

     1.46 YEARS OF SERVICE. The aggregate period of an Employee's Employment,
consisting of Years of Service and parts thereof, with each Year of Service
consisting of 12 months and with each month consisting of 30 days. Years of
Service shall be computed beginning on the date the Employee first completes an
Hour of Service upon commencing or recommencing employment and ending on his
next following Severance from Service Date. Years of Service shall include the
period of time between an Employee's Severance from Service Date and the date he
next completes an Hour of Service, provided that he does not incur a Year of
Break in Service.

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                                   ARTICLE 2

                          ELIGIBILITY AND PARTICIPATION

     2.01 ELIGIBILITY. Each Employee who is an Active Participant in the Plan on
the Effective Date shall continue to be an Active Participant in accordance with
the provisions of the Plan. Subject to Section 2.05, each other Employee shall
be eligible to participate in the Plan as of the Enrollment Date coinciding with
or next following the date he completes one (1) Year of Service; provided,
however, that each Employee who transfers from salaried Employment with an
Employer shall be eligible to make a Plan to Plan Transfer at any time.

     2.02 PARTICIPATION. Each Employee shall become a Participant as follows:

          (a)  With respect to Initial Company Contributions, an eligible
               Employee shall automatically become a Participant as of the date
               he first becomes eligible to receive such contribution:

          (b)  An Employee who satisfies the eligibility requirements of Section
               2.01 shall become an Active Participant the date the Employee
               files with the Employer a properly completed enrollment form in
               accordance with the requirements and time periods established by
               the Plan Administrator. An eligible Employee who does not file an
               enrollment form in accordance with the preceding sentence shall
               become an Active Participant on the first (1st) succeeding
               Enrollment Date after the date the Employee files such enrollment
               form with the Employer.

          (c)  With respect to a Plan to Plan Transfer, an Employee shall become
               a Participant as of the date he makes such Plan to Plan Transfer.

     2.03 CESSATION OF ACTIVE PARTICIPATION. An Employee shall cease to be an
Active Participant if:

          (a)  he voluntarily suspends his contributions to the Plan pursuant to
               Section 3.07;

          (b)  his Employee Contributions to the Plan are mandatorily suspended
               pursuant to Article 8;

          (c)  he incurs a Year of Break in Service; or

          (d)  there is any change in his Employment status which would make him
               ineligible to participate in the Plan, under the terms of Section
               2.01.

     An Employee shall not cease to be a Participant because of subsection (a)
or (b) above, nor as a result of a temporary absence from Employment. The
Employee shall continue to be a Participant until the Vested Value of his
Accounts are distributed in full to him or his Beneficiary.

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     2.04 EFFECT OF REEMPLOYMENT ON PLAN ENTRY OR REENTRY. If an Employee's
Employment resumes after he incurs a Severance from Service, the Employee may
enter or reenter the Plan pursuant to the following rules:

          (a)  If the Employee incurred one (1) or more Years of Break in
               Service before the Vested Value of his Accounts exceeded zero
               (0), he may enter or reenter the Plan on any Enrollment Date
               after he satisfies the requirements of Section 2.01;

          (b)  If the Employee was previously a Participant in the Plan and
               either (i) he did not incur one (1) Year of Break in Service, or
               (ii) the Vested Value of his Accounts was greater than zero (0)
               at the time of his termination of Employment, he may reenter the
               Plan as of the date his Employment resumes.

          (c)  If the Employee did not incur a Year of Break in Service, had
               satisfied the eligibility conditions of Section 2.01 but
               terminated Employment prior to becoming a Participant, he may
               become a Participant in the Plan on the later of: (i) the date
               his Employment resumes, or (ii) the Enrollment Date on which he
               would have become a Participant had he not incurred the
               termination of Employment;

          (d)  Each other Employee shall become a Participant following the
               resumption of his Employment as of the date he satisfies the
               requirements of Section 2.01.

     2.05 PRIOR EMPLOYMENT WITH AN AFFILIATED COMPANY. Each Employee who was
previously employed by an Affiliated Company or who previously performed
services for the Company as a leased employee within the meaning of Section
414(n) of the Code shall have such service taken into account under the Plan,
solely for purposes of determining eligibility to participate in the Plan and
the Vested Value of his Accounts.

     2.06 EFFECT OF MILITARY LEAVE. Notwithstanding any provision of the Plan to
the contrary (including Sections 3.05, 4.05 and 4.06), effective December 12,
1994, participation, contributions, benefits and service credit (as defined
under Code Section 414(u)) with respect to qualified military service shall be
provided under the Plan in accordance with Section 414(u) of the Code.

                                       9
<PAGE>

                                   ARTICLE 3

                            PARTICIPANT CONTRIBUTIONS

     3.01 BASIC TAX-DEFERRED EMPLOYEE CONTRIBUTIONS. Each Active Participant may
elect to make Basic Tax-Deferred Employee Contributions to the Plan. The rate of
such Contributions shall be 1%, 2%, 3%, 4%, 5% or 6% of the Participant's
Earnings.

     3.02 SUPPLEMENTAL TAX-DEFERRED EMPLOYEE CONTRIBUTIONS. Each Active
Participant who is making contributions of 6% of his Earnings under Section 3.01
may elect to make Supplemental Tax-Deferred Employee Contributions to the Plan.
The rate of such contributions shall be 1%, 2%, or 3% of the Participant's
Earnings. This provision shall be effective as of the dates and for the Employee
categories indicated below:

          (a)  July 3, 1996, for Employees connected with the Calhoun Newsprint
               operations;

          (b)  April 1, 1997, for Employees connected with Bowater Lumber; and

          (c)  August 1, 1997, for Employees connected with Calhoun Woodlands
               operations.

     3.03 NON TAX-DEFERRED EMPLOYEE CONTRIBUTIONS. Each Active Participant may
elect to make Supplemental Non Tax-Deferred Employee Contributions to the Plan.
The rate of such contributions shall be 1%, 2%, 3%, 4%, 5% or 6% of the
Participant's Earnings; provided that the total of a Participant's contributions
under Sections 3.01, 3.02 and 3.03 shall not exceed 15% of his Earnings.

     3.04 MODE OF PAYMENT. Contributions made under Sections 3.01, 3.02, and
3.03 shall be made by means of deductions from a Participant's Earnings in each
payroll period. All contributions shall be collected by the Employer, credited
to the applicable Accounts, and paid to the Trustee as soon as reasonably
possible, but in no event later than the 15th business day of the month
immediately following the month in which such amounts would otherwise have been
paid to the Participant.

     3.05 LIMITATION ON CONTRIBUTIONS. Notwithstanding any other provision in
the Plan (except Section 2.06), the provisions of this Section 3.05 shall apply
to limit Employee and Company Contributions to the Plan.

          (a)  Definitions. For purposes of this Section 3.05, the following
               terms shall have the meanings set forth herein:

               (i)  "Actual Deferral Percentage" shall be the average of the
                    ratios ("Actual Deferral Ratios" or "ADRs"), calculated
                    separately for each Employee in the HCE Group and the
                    Non-HCE Group, of:

                    (A)  each Employee's Elective Deferrals and amounts treated
                         as his Elective Deferrals actually paid over to the
                         Trust Fund

                                       10
<PAGE>
                          as contributions on behalf of such Employee for the
                          Plan Year, to

                     (B)  the Employee's Compensation for the Plan Year.

                     An Elective Contribution will be taken into account in
                     calculating the Actual Deferral Percentage for a Plan Year
                     only if:

                          (1) it relates to Compensation that either would have
                              been received by the Employee during the Plan Year
                              (but for the deferral election) or is attributable
                              to services performed by the Employee during the
                              Plan Year and, but for the deferral election,
                              would have been received by the Employee within 2
                              1/2 months after the close of the Plan Year; and

                          (2) it is allocated to the Employee's Accounts as of a
                              date within the relevant Plan Year. For this
                              purpose, an Elective Contribution is considered
                              allocated as of the date the allocation is no
                              longer contingent on participation in the Plan or
                              the performance of services, provided that the
                              Elective Contribution is actually paid to the
                              Trust Fund no later than 12 months after the close
                              of the Plan Year to which the contribution
                              relates.

                     In computing the Actual Deferral Percentage for all
                     Employees, the Employer may elect to take into account
                     Qualified Matching Contributions and Qualified Nonelective
                     Contributions, provided that the requirements of Treasury
                     Regulation Section 1.401(k)-1(b)(5) are satisfied.

                     Notwithstanding any other provision of this Section 3.05,
                     if Elective Contributions are taken into account for
                     purposes of the Contribution Percentage Test of subsection
                     (d) for any Plan Year, such contributions shall not be
                     taken into account under paragraph (A) of this subsection
                     (a)(i) for such Plan Year.

               (ii)  "Compensation" means compensation as defined under Code
                     Section 414(s), as determined by the Plan Administrator.

               (iii) "Contribution Percentage" shall be the average of the
                     ratios ("Actual Contribution Ratios" or "ACRs"), calculated
                     separately for each Employee in each of the HCE Group and
                     Non-HCE Group, of:

                                       11
<PAGE>

                    (A)  the sum of the Matching Contributions and Employee
                         Contributions paid under the Plan on behalf of such
                         Employee for the Plan Year, to

                    (B)  Employee's Compensation for the Plan Year.

                    In computing the Contribution Percentage, the Employer may
                    elect to take into account Elective Contributions and
                    Qualified Nonelective Contributions under the Plan or any
                    other plan of the Employer, to the extent permitted under
                    applicable Treasury Regulations.

                    If Matching Contributions are taken into account for
                    purposes of the Actual Deferral Percentage Test of
                    subsection (c) of this Section 3.05 for any Plan Year, such
                    contributions shall not be taken into account under
                    paragraph (A) of this subsection (a)(iii) for such Plan
                    Year.

               (iv) "Elective Contributions" are contributions by the Employer
                    to a retirement plan that were subject to an election under
                    a cash or deferred arrangement (whether or not a
                    tax-qualified cash or deferred arrangement). No amount that
                    has become currently available to an Employee or that is
                    designated or treated as an after-tax Employee Contribution
                    may be treated as an Elective Contribution.

               (v)  "Elective Deferrals" means, with respect to any taxable
                    year, the sum of:

                    (A)  any Elective Contribution under a tax-qualified cash or
                         deferred arrangement (as defined in Code Section
                         401(k)) to the extent not includable in a Participant's
                         gross income for the taxable year under Code Section
                         402(e)(3) (determined without regard to the limits in
                         Code Section 402(g)),

                    (B)  any employer contribution to a simplified employee
                         pension plan (as defined in Section 408(k)) to the
                         extent not includable in a Participant's gross income
                         for the taxable year under Code Section 402(h)(1)(B)
                         (determined without regard to the limits in Code
                         Section 402(g)),

                    (C)  any employer contribution to purchase an annuity
                         contract under Code Section 403(b) made under a salary
                         reduction agreement (within the meaning of Code Section
                         3121(a)(5)(D)); unless such contribution is made
                         pursuant to an irrevocable election made by the
                         Employee at the

                                       12
<PAGE>

                            time he becomes eligible to participate in the
                            agreement or is made pursuant to a similar
                            arrangement involving an irrevocable election
                            specified in Treasury Regulations, and

                       (D)  any Employee Contribution to a trust described in
                            Code Section 501(c)(18), to the extent deductible
                            from the Employee's income for the taxable year
                            under Code Section 501(c)(18) (determined without
                            regard to the limits in Code Section 402(g)).

               (vi)    "Employee Contributions" means any mandatory or voluntary
                       contribution to the Plan that is treated at the time of
                       contribution as an after-tax Employee Contribution and is
                       allocated to a separate account to which attributable
                       earnings and losses are allocated.

               (vii)   "Excess Aggregate Contributions" means, with respect to
                       any Plan Year, the excess of:

                       (A)  the aggregate amount of the Matching Contributions
                            and Employee Contributions actually made on behalf
                            of HCEs for the Plan Year, including any Qualified
                            Nonelective Contribution or Elective Deferral taken
                            into account in computing the Contribution
                            Percentage, but excluding Qualified Matching
                            Contributions treated as Elective Deferrals under
                            subsection (a)(i) of this Section 3.05, over

                       (B)  the maximum amount of contributions described in
                            paragraph (A) above that are permitted under the
                            limitations of subsection (d) of this Section 3.05.

                       The amount of Excess Aggregate Contributions for a Plan
                       Year shall be determined only after first determining the
                       Excess Contributions that are treated as Employee
                       Contributions due to Recharacterization under subsection
                       (e)(ii) of this Section 3.05.

               (viii)  "Excess Contributions" means, with respect to any Plan
                       Year, the excess of:

                       (A)  the aggregate amount of Elective Contributions,
                            (including Qualified Nonelective Contributions and
                            Qualified Matching Contributions that are treated as
                            Elective Contributions), actually paid over to the
                            Trust Fund on behalf of HCEs for such Plan Year,
                            over

                       (B)  the maximum amount of such contributions permitted
                            under the limitations of subsection (c) of this
                            Section 3.05.

                                       13
<PAGE>

               (ix)    "Excess Deferral" means the Elective Deferrals of any
                       individual for any taxable year to the extent the amount
                       of such deferrals for the taxable year exceeds the limit
                       in subsection (b) of this Section 3.05, but excluding
                       amounts described in Section 1105(c)(5) of the Tax Reform
                       Act of 1986.

               (x)     "Highly Compensated Employee" means an Employee who
                       performs service during the Determination Year who:

                       (A)  is a five percent (5%) owner (as defined in Code
                            Section 416(i)(1)(A)(iii)) at any time during the
                            Determination Year or the Look-Back Year; or

                       (B)  receives compensation in excess of $80,000 (indexed
                            in accordance with Code Section 415(d)) during the
                            Look-Back Year and, if the Employer so elects, was a
                            member of the top-paid group during the Look-Back
                            Year.

                       Special Rules: For purposes of this subsection (x) only:
                       (a) the "Determination Year" means the Plan Year for
                       which the identification of HCEs is being made; (b) the
                       "Look-Back Year" means the 12-month period immediately
                       preceding the Determination Year or, if the Employer so
                       elects, the calendar year ending with or within the
                       Determination Year; (c) the "top-paid group" means the
                       top 20% of Employees ranked on the basis of compensation
                       received during the Plan Year; (d) "compensation" means
                       compensation within the meaning of Code Section
                       415(c)(3), including Elective Deferrals or salary
                       reduction contributions to a cafeteria plan, cash or
                       deferred arrangement or tax-sheltered annuity and,
                       effective January 1, 1998, elective amounts excluded from
                       taxable income under Section 132(f)(4) of the Code; and
                       (e) employers required to be aggregated under Code
                       Sections 414(b), (c), (m) or (o) are treated as a single
                       employer with the Employer.

               (xi)    "HCE Group" means the group consisting of all Highly
                       Compensated Employees.

               (xii)   "Matching Contributions" means:

                       (A)  any contribution to the Plan made by the Employer
                            (including a contribution made at the Employer's
                            discretion) on behalf of an Employee on account of
                            an Employee Contribution made by such Employee,

                       (B)  any contribution to the Plan made by the Employer
                            (including a contribution made at the Employer's

                                       14
<PAGE>

                            discretion) on behalf of an Employee on account of
                            an Elective Deferral made on an Employee's behalf,
                            and

                       (C)  Any Forfeiture allocated on the basis of Employee
                            Contributions, Matching Contributions or Elective
                            Contributions.

               (xiii)  "Nonelective Contributions" means contributions made by
                       the Employer (other than Matching Contributions) with
                       respect to which the Employee may not elect to receive
                       the contributions in cash or other benefits instead of
                       being contributed to the Plan.

               (xiv)   "Non-HCE Group" means the group consisting of all
                       Employees who are not Highly Compensated Employees.

               (xv)    "Qualified Matching Contributions" means Matching
                       Contributions which satisfy the requirements of
                       subsection (a)(xvi).

               (xvi)   "Qualified Nonelective Contributions" means any
                       contribution (other than a Matching Contribution or
                       Elective Contribution) with respect to which the Employee
                       may not elect to receive the contribution in cash instead
                       of being contributed to the Plan, and only if such
                       contribution is nonforfeitable when made and
                       distributable only upon the occurrence of one (1) of the
                       following events:

                       (A)  the Employee's Retirement, death, Disability or
                            separation from service;

                       (B)  the termination of the Plan without establishment or
                            maintenance of another defined contribution plan
                            (other than an ESOP or SEP) by the Employer;

                       (C)  the Employee's attainment of age 59 1/2;

                       (D)  the sale or other disposition by the Employer to an
                            unrelated corporation of substantially all of the
                            assets used in the trade or business to which the
                            Plan relates, but only with respect to Employees who
                            continue employment with the acquiring corporation
                            which does not maintain the Plan after the
                            disposition; and

                       (E)  the sale or other disposition by the Employer of its
                            interest in a subsidiary to an unrelated entity, but
                            only with respect to Employees who continue
                            employment with the

                                       15
<PAGE>

                            subsidiary, the acquiring entity of which does not
                            maintain the Plan after the disposition.

                       Paragraphs (B), (D) and (E) above apply only if the
                       Employer, as the transferor corporation, continues to
                       maintain the Plan for its remaining Employees.
                       Nonelective Contributions which may be treated as
                       Matching Contributions must satisfy these requirements
                       without regard to whether they are actually taken into
                       account as Matching Contributions.

          (b)  Individual Limitation. The amount of Elective Deferrals that a
               Participant may make in any taxable year shall be limited to
               $9,500 (as adjusted annually for changes in cost of living
               pursuant to Code Section 402(g)).

               To the extent a Participant has made Elective Deferrals to the
               Plan in excess of the amount set forth above, such Excess
               Deferrals shall be distributed to him no later than April 15
               following the end of the taxable year during which such Elective
               Deferrals are made. If a Participant makes Elective Deferrals to
               this Plan and to any other plan or arrangement in a single
               taxable year, he may allocate the amount of any Excess Deferrals
               for such taxable year among all such plans. No later than March 1
               following the close of the taxable year during which the Excess
               Deferrals are made, the Participant shall notify the Plan
               Administrator in writing of the amount of the Excess Deferrals to
               be allocated to this Plan. Such amount (including income thereon)
               shall then be distributed to the Participant no later than the
               next following April 15th.

          (c)  Before-Tax Contribution Limitation ("Actual Deferral Percentage
               Test"). The Actual Deferral Percentage for the HCE Group for a
               Plan Year shall bear a relationship to the Actual Deferral
               Percentage for the Non-HCE Group that meets either of the
               following tests:

               (i)     The Actual Deferral Percentage for the HCE Group for a
                       Plan Year shall not be more than the Actual Deferral
                       Percentage for the Non-HCE Group for the preceding Plan
                       Year, multiplied by 1.25; or

               (ii)    The excess of the Actual Deferral Percentage for the HCE
                       Group for the Plan Year over that of Non-HCE Group for
                       the preceding Plan Year is not more than 2 percentage
                       points, and the Actual Deferral Percentage for the HCE
                       Group for the Plan Year is not more than the Actual
                       Deferral Percentage for the Non-HCE Group for the
                       preceding Plan Year, multiplied by 2.

               For purposes of applying this subsection (c), all Elective
               Contributions that are made under two (2) or more plans that are
               aggregated for purposes of Code Sections 401(a)(4) or 410(b)
               (other than Code Section 410(b)(2)(A)(ii)) are to be treated as
               made under a single plan. If two (2)

                                       16
<PAGE>

               or more plans are permissively aggregated for purposes of Code
               Section 401(k), the aggregated plans must also satisfy Code
               Sections 401(a)(4) and 410(b) as though they were a single plan.

               The Actual Deferral Percentage taken into account for any Highly
               Compensated Employee who is a Participant in two (2) or more cash
               or deferred arrangements maintained by the Employer or Affiliated
               Company shall be the sum of the Elective Deferrals for that
               Employee under each 401(k) plan of the Employer or Affiliated
               Company, divided by the Participant's Compensation from the
               Employer and Affiliated Company.

               Except to the extent provided under regulations or rules of the
               Secretary of the Treasury, Excess Contributions distributed to
               Participants who are Highly Compensated Employees in accordance
               with subsection (b) above shall be treated as Employee
               Contributions for purposes of this subsection (c).

               If, in order to satisfy the Actual Deferral Percentage Test of
               this subsection (c), Excess Contributions must be distributed to
               Highly Compensated Employees, the total dollar amount of such
               Excess Contributions determined under this paragraph shall be
               allocated and distributed in accordance with subsection (e) of
               this Section 3.05.

          (d)  Company and Supplemental Contribution Limitation ("Contribution
               Percentage Test"). The Contribution Percentage for the HCE Group
               for a Plan Year shall not exceed the greater of:

               (i)     125% of the Contribution Percentage for the Non-HCE Group
                       for the preceding Plan Year; or

               (ii)    the lesser of 200% of the Contribution Percentage for the
                       Non-HCE Group for the preceding Plan Year, or the
                       Contribution Percentage for the Non-HCE Group for the
                       preceding Plan Year, plus two (2) percentage points.

               If two (2) or more plans of the Employer to which Matching
               Contributions, Employee Contributions or Elective Deferrals are
               made are treated as a single plan for purposes of Code Section
               410(b), such plans shall be treated as a single plan for purposes
               of this subsection (d). The Contribution Percentage taken into
               account for any Highly Compensated Employee who is a Participant
               in two (2) or more plans of the Employer or an Affiliated Company
               to which Matching Contributions or Employee Contributions are
               made shall be the sum of the Matching Contributions and Employee
               Contributions made for the HCE under each such plan, divided by
               his or her Compensation from the Employer and Affiliated Company.

                                       17
<PAGE>
               Any Employee who is eligible to make an Employee Contribution
               (or, if the Employer takes Elective Contributions into account,
               Elective Contributions) or to receive a Matching Contribution
               shall be considered an eligible Employee. In addition, if an
               Employee Contribution is required as a condition of participation
               in the Plan, any Employee who would be a Participant in the Plan
               if such Employee made such a contribution shall be treated as an
               eligible Employee on behalf of whom no Employer contributions are
               made.

               The Employer may elect to take into account Elective
               Contributions and/or Qualified Nonelective Contributions
               allocated to a Participant's Accounts under the Plan or any other
               plan it sponsors if the conditions described in Section
               1.401(m)-1(b)(5) of the Treasury regulations are satisfied.

               If, in order to satisfy the Contribution Percentage Test of this
               subsection (d), Excess Aggregate Contributions must be
               distributed to Highly Compensated Employees, the total dollar
               amount of such Excess Aggregate Contributions determined under
               this paragraph shall be allocated and distributed in accordance
               with subsection (e) of this Section 3.05.

               Notwithstanding the foregoing, Employees who are members of a
               collective bargaining unit shall not be included in applying the
               provisions of this subsection (d).

          (e)  The Plan shall be treated as satisfying the requirements of
               subsections (c) and (d) above for any Plan Year if, before the
               close of the following Plan Year:

               (i)     the Participant's share of Excess Contributions and
                       Excess Aggregate Contributions for such Plan Year is
                       distributed to the Participant; or

               (ii)    in the case of Excess Contributions, the Participant
                       elects to treat his share of such Excess Contributions as
                       distributed and recontributed by the Participant to the
                       Plan as a Non Tax-Deferred Employee Contribution
                       ("Recharacterized"), to the extent allowed under
                       applicable Treasury regulations; or

               (iii)   in the case of Excess Aggregate Contributions, such
                       Contributions are forfeited to the extent they are
                       forfeitable.

               The Plan Administrator shall determine which of methods (i),
               (ii), or (iii) above shall be utilized; provided, however, that
               such determination shall be made on a consistent and
               non-discriminatory basis.

                                       18
<PAGE>
               If Excess Contributions are to be distributed to Highly
               Compensated Employees, the Elective Deferrals of the Highly
               Compensated Employee with the highest dollar amount of Elective
               Deferrals for the Plan Year shall be reduced by the amount
               required to cause that Highly Compensated Employee's Elective
               Deferrals to equal the dollar amount of Elective Deferrals of the
               Highly Compensated Employee with the next highest dollar amount
               of Elective Deferrals. This amount is then distributed to the
               Highly Compensated Employee with the highest dollar amount.
               However, if a lesser reduction, when added to the total dollar
               amount already distributed under this provision, would equal the
               total Excess Contributions, the lesser reduction amount shall be
               distributed. If the total dollar amount distributed is less than
               the total Excess Contributions for the Plan Year for all affected
               Highly Compensated Employees, this process is repeated until the
               total dollar amount distributed equals the total Excess
               Contributions for the Plan Year.

               Excess Aggregate Contributions shall be distributed to Highly
               Compensated Employees in the same manner, starting with the
               Highly Compensated Employee on whose behalf the highest dollar
               amount of Employee and Matching Contributions were made, until
               the Contribution Percentage Test is satisfied.

               The amount of Excess Contributions to be distributed or
               Recharacterized shall be reduced by Excess Deferrals previously
               distributed for the taxable year ending in the same Plan Year.
               Excess Deferrals to be distributed to Participants for a taxable
               year will be reduced by any Excess Contributions that have
               previously been distributed or Recharacterized for the Plan Year
               beginning in the same taxable year.

               If Matching Contributions have been made by the Employer on
               account of Excess Contributions which are distributed or
               Recharacterized, such Matching Contributions and income allocable
               thereto shall be forfeited and applied to reduce Employer
               contributions in subsequent Plan Years.

               Excess Contributions must be corrected by the close of the Plan
               Year following the Plan Year for which they were made. Excess
               Contributions that are Recharacterized will remain subject to the
               nonforfeitability requirements and distribution limitations that
               apply to Elective Contributions.

          (f)  The distribution of Excess Contributions and/or Excess Aggregate
               Contributions will include the income allocable thereto. The
               income allocable to Excess Contributions and/or Excess Aggregate
               Contributions includes income for the Plan Year for which the
               Excess Contributions and/or Excess Aggregate Contributions were
               made.

                                       19
<PAGE>

               (i)     Income allocable to an Employee's share of Excess
                       Contributions shall be determined by multiplying the
                       income for the Plan Year allocable to all Elective
                       Contributions and amounts treated as Elective
                       Contributions (for purposes of this paragraph only, the
                       "Effective Elective Contributions") for the Plan Year by
                       a fraction:

                       (A)  the numerator of which is the Employee's share of
                            Excess Contributions for the Plan Year; and

                       (B)  the denominator of which is the sum of: (1) the
                            Employee's total Account balance attributable to
                            Effective Elective Contributions as of the beginning
                            of the Plan Year; plus (2) the Employee's Effective
                            Elective Contributions for the Plan Year.

               (ii)    Income allocable to an Employee's Excess Aggregate
                       Contributions shall be determined by multiplying the
                       income allocable to all Matching Contributions, Employee
                       Contributions and any Qualified Nonelective Contributions
                       or Elective Deferral for the Plan Year that are taken
                       into account in computing the Contribution Percentage,
                       excluding Qualified Matching Contributions treated as
                       Elective Contributions (together, for purposes of this
                       paragraph only, the "Effective Matching/Employee
                       Contributions") by a fraction:

                       (A)  the numerator of which is the Employee's Excess
                            Aggregate Contributions for the Plan Year; and

                       (B)  the denominator of which is the sum of (1) the
                            Employee's total Account balance attributable to
                            Effective Matching/Employee Contributions as of the
                            beginning of the Plan Year; plus (2) the Employee's
                            Effective Matching/ Employee Contributions for the
                            Plan Year.

          (g)  In addition to the limitations described in subsections (b), (c)
               and (d) above, if:

               (i)     the Actual Deferral Percentage for the HCE Group exceeds
                       the limits described under subsection (c)(i); and

               (ii)    the Contribution Percentage for the HCE Group exceeds the
                       limits described under subsection (d)(i); and

               (iii)   the sum of Actual Deferral Percentage and the
                       Contribution Percentage exceeds the limit described in
                       Treasury Regulation Section 1.401(m)-2(b)(3),

                                       20
<PAGE>

               the Employer will reduce the Actual Deferral Percentage of the
               Highly Compensated Employees in the manner described in Treasury
               Regulation Section 1.401(k)-1(f)(2), as provided in Treasury
               Regulation Section 1.401(m)-2(c)(3).

     3.06 CHANGE IN AMOUNT OF CONTRIBUTIONS. Subject to the provisions of
Section 3.05, a Participant may change the rate of his Basic Tax-Deferred
Employee Contributions, Supplemental Tax-Deferred Employee Contributions and/or
Non Tax-Deferred Employee Contributions as of any Enrollment Date by submitting
prior written notice to the Employer as required by the Plan Administrator. The
Plan Administrator shall establish the time period in which such notice must be
submitted.

     3.07 VOLUNTARY SUSPENSION OF PARTICIPANT CONTRIBUTIONS. A Participant may
suspend his Basic Tax-Deferred Employee Contributions, Supplemental Tax-Deferred
Employee Contributions and/or Supplemental Non Tax-Deferred Employee
Contributions as of the last day of any month by giving such notice to the
Employer as is required by the Plan Administrator. The Plan Administrator shall
establish the time period in which such notice must be submitted. A suspension
of Basic Tax-Deferred Employee Contributions will automatically cause a
suspension of the Employee's Supplemental Tax-Deferred Employee Contributions
and Non Tax-Deferred Employee Contributions. The Participant may resume making
contributions as of any Enrollment Date after the effective date of the
suspension by giving such notice to the Employer as required by the Plan
Administrator.

     3.08 PLAN TO PLAN TRANSFER. An Employee who previously participated in one
of the following retirement plans may elect to transfer the vested balance of
his account under such plan to this Plan: the Bowater Incorporated Salaried
Employees' Savings Plan, the Bowater Incorporated/Coated Papers and Pulp
Division Hourly Employees Savings Plan, the Great Northern Paper, Inc. Hourly
401(k) Savings Plan or such other tax-qualified retirement plan as may be
approved by the Plan Administrator. The Employee shall continue to accrue
service under such other plan(s) on account of his employment with the Employer,
and any unvested amounts held under such plan(s) shall vest and become eligible
for a Plan to Plan Transfer to this Plan in accordance with the vesting schedule
of such other plan(s). Transfers under this Section 3.08 shall be subject to the
applicable restrictions of Article 8 but shall not be subject to the limitations
of Sections 3.05, 4.05, or 4.06; nor shall amounts transferred under this
Section 3.08 be included in the calculation of the Participant's rate of Basic
or Supplemental Contributions (Tax-Deferred or Non Tax-Deferred) pursuant to
Sections 3.01 through 3.03.

     The amounts transferred shall be treated as follows:

          (a)  The portion attributable to pre-tax contributions pursuant to
               Code Section 401(k) shall be credited to the Employee's
               Supplemental Tax-Deferred Employee Contribution Account;

          (b)  The portion attributable to after-tax contributions pursuant to
               Code Section 401(a) shall be credited to the Employee's
               Supplemental Non Tax-Deferred Employee Contribution Account;

                                       21
<PAGE>

          (c)  The portion attributable to matching contributions made by the
               Company or Affiliated Company pursuant to Code Section 401(a)
               shall be credited to the Employee's Company Contribution Account.

     The Plan Administrator shall require the Employee to furnish a written
statement containing such information as may be necessary to establish that the
transfer does not contain amounts from sources other than provided above and
that the transfer otherwise meets the requirements of applicable law.

     3.09 EMPLOYMENT WITH AFFILIATED COMPANY. A Participant may not contribute
to the Plan while he is employed by an Affiliated Company which is not an
Employer, except to the extent that he continues to receive Earnings from an
Employer. A Participant's prior and concurrent service with an Affiliated
Company which is not an Employer, or as a leased employee (within the meaning of
Code Section 414(n)) for the Company or an Affiliated Company, shall be counted
as Years of Service under the Plan to the extent such credit would be given
under Section 2.05 if such Affiliated Company had been an Employer. For purposes
of this Section 3.09, the fact that the Participant has made no contributions
under the Plan shall be disregarded.

     3.10 ROLLOVER CONTRIBUTIONS. An Employee may request that the Plan
Administrator direct the Trustee to accept any of the following amounts from or
on behalf of the Employee and place them in a Rollover Contribution Account
established on his behalf:

          (a)  amounts transferred to this Plan directly from another trust or
               annuity contract maintained as part of a plan qualified under
               Code Section 401(a);

          (b)  lump sum distributions received by the Employee from another
               qualified plan which are eligible for tax-free rollover treatment
               and which are transferred by the Employee to this Plan within 60
               days following his receipt thereof;

          (c)  amounts transferred to the Plan from a conduit individual
               retirement account (as defined in Code Section 408) consisting
               solely of assets and the income thereon which were previously
               distributed to the Employee from another tax-qualified retirement
               plan as part of a qualifying rollover distribution (as defined in
               Code Section 402(a)(5)) to the individual retirement account
               within 60 days of their receipt; provided that such assets are
               transferred directly to the Plan from the conduit individual
               retirement account or are transferred to the Plan within 60 days
               of their distribution to the Employee from the conduit individual
               retirement account.

     Any amounts transferred into the Plan under this Section 3.10 shall be by
check. No securities may be transferred. The Employee shall make application to
the Plan Administrator in writing, submitting whatever information is deemed
necessary and sufficient by the Plan Administrator to establish compliance with
the requirements of this Section 3.10. Amounts accepted by the Plan
Administrator shall be placed in a Rollover Contribution Account

                                       22
<PAGE>

established for the Employee and shall become part of the Trust Fund. The
Employee shall have a fully vested and nonforfeitable right to amounts held in
his Rollover Contribution Account at any time. The Employee shall be able to
direct the investment of his Rollover Contribution Account in accordance with
the provisions of Article 5.

                                       23
<PAGE>

                                   ARTICLE 4

                             EMPLOYER CONTRIBUTIONS

     4.01 MATCHING CONTRIBUTIONS. With respect to each Active Participant in its
employ, the Employer shall make a Matching Contribution to the Plan from its
Current or Accumulated Profits equal to 40% of such Participant's Basic Employee
Contributions. Contributions by the Employer shall be paid to the Trustee
promptly and credited to each Participant's Matching Contribution Account.

     4.02 INITIAL COMPANY CONTRIBUTIONS. With respect to each individual who was
employed by Bowater Southern Company on June 12, 1987, and each individual who
was employed by Hiawassee Land Company as of July 14, 1987, the Employer made an
Initial Company Contribution to the Plan from its Current or Accumulated Profits
in an amount sufficient to purchase forty (40) Shares of Company Stock. Such
contributions were made as of September 1, 1987. Such contributions were paid to
the Trustee promptly and credited to each Participant's Initial Company
Contribution Account. There shall be no Initial Company Contributions for
individuals who first become Employees after June 12, 1987 or for individuals
who first became Employees of Hiawassee Land Company after July 14, 1987.

     4.03 MODE OF PAYMENT. Employer contributions made under Sections 4.01 shall
be made in cash. Employer contributions under Section 4.02 shall be made in cash
or in Shares of Company Stock.

     4.04 RETURN OF CERTAIN CONTRIBUTIONS TO EMPLOYER. The following
contributions may be returned to an Employer as follows:

          (a)  Any contribution made by an Employer under a mistake of fact may
               be returned to the Employer within one (1) year of the
               contribution;

          (b)  Any contribution which is disallowed as a deduction under Code
               Section 404 may be returned to an Employer within one (1) year of
               its disallowance;

          (c)  Any contribution made by an Employer that is conditioned on the
               initial qualification of the Plan under Code Sections 401(a),
               401(k) and 401(m), may be returned if a timely determination
               letter request is filed with the Internal Revenue Service and the
               Plan receives an adverse determination.

     The amount which may be returned to an Employer shall not exceed the amount
of the Employer's contribution, reduced by any investment losses attributable to
the contribution. No contribution or portion thereof will be returned to an
Employer if the return of such amount would cause the value of a Participant's
Accounts to be less than their value had the contribution not been made.

                                       24
<PAGE>

     4.05 STATUTORY LIMITATION ON ADDITIONS:

          (a)  Notwithstanding any other provisions of the Plan except Section
               2.06, "the annual additions" to a Participant's Accounts shall
               not exceed the lesser of:

               i.      the Maximum Permissible Dollar Amount (as defined below);
                       and

               ii.     25% of the Participant's Total Compensation (as defined
                       below) for the Plan Year.

          (b)  For purposes of Sections 4.05 and 4.06, the following definitions
               shall apply:

               i.      "Annual additions" shall mean the sum of:

                       (A)  Employer contributions and Forfeitures allocated to
                            a Participant's Accounts under Sections 4.01 and
                            4.02; and

                       (B)  Employee Contributions allocated to the
                            Participant's Accounts under Sections 3.01, 3.02 and
                            3.03; and

               ii.     The initial "Maximum Permissible Dollar Amount" shall
                       mean $30,000 (effective January 1, 2001, $35,000) and the
                       initial "Maximum Permissible Benefit" shall mean $125,000
                       (effective January 1, 2001, $140,000). These limitations
                       shall be adjusted automatically as the limits set forth
                       in Code Sections 415(c)(1)(A) and 415(b)(1)(A) are
                       adjusted for the cost of living in accordance with Code
                       Section 415(d).

               iii.    "Total Compensation" shall mean, (A) for Plan Years
                       beginning before December 31, 1997, the amount reported
                       on the Participant's Form W-2 as "wages" for the taxable
                       year that coincides with the Plan Year; and (B) for Plan
                       Years beginning on or after January 1, 1998, all pay that
                       is reported in Box 1 of Internal Revenue Service Form
                       W-2, plus amounts excluded from income under Code
                       Sections 125 and 132(f)(4) and the Participant's Elective
                       Contributions.

          (c)  The limitations of this Section 4.05 with respect to any
               Participant who at any time has been a participant in any other
               defined contribution plan maintained by the Company or an
               Affiliated Company shall apply as if the total contributions made
               under all such defined contribution plans were made to this Plan.

          (d)  If the limitations of this Section 4.05 would be exceeded in any
               Plan Year, the Plan Administrator shall take the following action
               in any order as

                                       25
<PAGE>

               required and to the extent necessary to prevent the limitations
               from being exceeded:

               i.      discontinue or reduce a Participant's Basic and/or
                       Supplemental Tax-Deferred Employee Contributions for the
                       Plan Year;

               ii.     discontinue or reduce the Participant's Supplemental Non
                       Tax-Deferred Employee Contributions for the Plan Year;

               iii.    instruct the Trustee to return all or a portion of the
                       Participant's Supplemental Tax-Deferred or Non
                       Tax-Deferred Employee Contributions made during the Plan
                       Year;

               iv.     instruct the Trustee to return all or a portion of the
                       Participant's Basic Tax-Deferred Employee Contributions
                       made during the Plan Year;

               v.      instruct the Employee to reduce or eliminate its Matching
                       Contributions to the Participant's Account for the
                       remainder of the Plan Year;

               vi.     instruct the Trustee to return to the Employer all or a
                       portion of any Matching Contributions allocated to a
                       Participant's Account for the Plan Year; or

               vii.    apply any amounts in excess of the limitations of this
                       Section 4.05 ("Excess Amounts") to reduce Matching
                       Contributions allocated to a Participant's Account for
                       the next Plan Year (and succeeding Plan Years, as
                       necessary), provided that the Participant is covered by
                       the Plan as of the end of the Plan Year. If the
                       Participant is not covered by the Plan as of the end of
                       the Plan Year, then such Excess Amounts shall be held
                       unallocated in a suspense account for the Plan Year and
                       reallocated in the next Plan Year to the Accounts of all
                       of the remaining Participants. Such reallocation may not
                       result in the limitations of this Section 4.05 being
                       exceeded for any Participant for the Plan Year. Any
                       Excess Amounts not allocated to Participants' Accounts
                       from a suspense account shall be used to reduce Matching
                       Contributions allocated to the Accounts of all of the
                       Participants remaining in the Plan in subsequent Plan
                       Years, as necessary to reduce the balance of the suspense
                       account to zero.

     Actions taken under this Section 4.05 shall not be considered a suspension
of Participant Contributions, as provided in Section 3.07.

                                       26
<PAGE>

     Notwithstanding the foregoing, the provisions of this Section 4.05 shall be
interpreted in a manner consistent with the provisions of Code Section 415,
which are incorporated herein by reference.

     4.06 COMBINED PLANS LIMITATION. For Plan Years beginning before January 1,
2000, if a Participant is also a participant in any defined benefit pension plan
maintained by the Employer, the benefits provided under this Plan shall be
limited so that the sum of the Participant's "defined benefit fraction" and the
"defined contribution fraction" shall not exceed 1.0 for any Plan Year.

          (a)  The term "defined contribution fraction" shall mean a fraction,
               the numerator of which is the sum of annual additions made to the
               Participant's Accounts for all Plan Years as of the end of the
               Plan Year and the denominator of which is the lesser of 125% of:
               (i) the Maximum Permissible Dollar Amount for the Plan Year and
               all prior Years of Service and (ii) 140% of 25% of the
               Participant's Total Compensation for that Plan Year and all prior
               Years of Service.

          (b)  The term "defined benefit fraction shall mean a fraction, the
               numerator of which is the projected annual benefit for the
               Participant under all qualified retirement plans of the Employer,
               and the denominator of which is the lesser of: (i) 125% of the
               Maximum Permissible Benefit under the retirement plans for the
               Plan Year, and (ii) 140% of the Participant's average Total
               Compensation for the three (3) highest paid years. Such fraction
               shall be determined as of the end of the Plan Year.

          (c)  The Participant's projected annual benefit shall be determined
               under such retirement plans assuming that his earnings continue
               to his Normal Retirement Date at the same level as they are at
               the end of the Plan Year and that his service continues to accrue
               to his Normal Retirement Date without a Year of Break in Service.
               The terms "earnings," "service," "normal retirement date," and
               "break in service" shall have the same meaning as defined in such
               retirement plans.

     4.07 FORFEITURES. The amount of any Forfeitures under Section 7.04 shall be
applied to reduce future Employer contributions under the Plan as soon as
practicable after the event giving rise to the Forfeiture shall have occurred.
In the event that the amount of Forfeitures exceeds the amount of Employer
contributions, Forfeitures shall be kept in a suspense account until such
Forfeitures, increased by the Earnings thereon and reduced by the losses
thereon, if any, are applied pursuant to this Section 4.07.

                                       27
<PAGE>

                                   ARTICLE 5

                               INVESTMENT OPTIONS

     5.01 INVESTMENT OF CONTRIBUTIONS. Participant and Employer contributions
shall be invested by the Trustee, either as required by the Plan or as directed
by a Participant in one (1) or more of the Investment Funds, which shall include
the following:

          (a)  The Company Stock Fund. A fund which invests primarily in Shares
               of Company Stock. A small percentage of the Company Stock Fund
               shall be invested in money market instruments to facilitate daily
               cash transactions. Accounts in this Fund shall segregate,
               separately account for and respectively consist of Shares of
               Company Stock allocable to (i) Initial Company Contributions, and
               (ii) Employee Contributions (whether Basic or Supplemental,
               Tax-Deferred or Non Tax-Deferred). All Employee Contributions
               initially invested directly in this fund pursuant to Section 5.02
               shall be treated as if invested at 95% of market value, with the
               Employer making the necessary contributions to make a total
               investment at 100% of fair market value.

               Any cash dividends received by the Trustee with respect to Shares
               of Company Stock held by the Plan shall be invested in additional
               Shares of Company Stock. Shares of Company Stock purchased from
               cash dividends, plus any other Shares of Company Stock received
               as a result of a stock split or a stock dividend, shall be
               allocated to a Participant's Company Stock Fund Accounts in
               proportion to the respective Shares of Company Stock credited to
               such Accounts as of the appropriate record date.

          (b)  Additional Investment Funds. Trustee, at the direction of the
               Company or its designee, shall establish one (1) or more
               additional Investment Funds as shall be deemed appropriate,
               including Investment Funds deemed appropriate for satisfying the
               requirements of ERISA Section 404(c) and regulations thereunder.

          (c)  Temporary Investment. The Trustee may temporarily invest all or
               any part of the Investment Funds in short and medium term
               securities, including but not limited to commercial paper, notes
               of finance companies and obligations of the U.S. Government or
               any instrumentality or agency thereof. The Board or its designee
               may from time to time specify additional temporary investment
               vehicles or may direct the Trustee in the temporary investment of
               the Trust Fund. The Trustee may invest all or part of any
               Investment Fund directly in the securities and obligations
               authorized for the respective Investment Fund or through the
               medium of any common, collective or commingled trust fund which
               is invested principally in securities and obligations authorized
               for the respective Investment Fund

                                       28
<PAGE>
               The Plan Administrator may authorize changes in the Investment
               Funds as it, in its discretion, deems necessary and appropriate.

     5.02 INVESTMENT ELECTIONS BY PARTICIPANTS. Each Participant must elect to
have all Participant and Employer contributions (other than contributions made
under Sections 4.02) invested in one (1) or more of the available Investment
Funds in whole number percentages of his contributions, provided that the sum of
such percentages equals 100%. Investment elections shall be made by written,
telephonic or other electronic means established by and directed to the Plan
Administrator. Basic, Supplemental Tax-Deferred and Non Tax-Deferred Employee
Contribution Accounts, Initial Company Contribution Account, Matching Company
Contribution Account and, if applicable, Rollover Contribution Account shall be
established for the Participant in each Investment Fund in which such
contributions are invested on his behalf. Contributions and earnings thereon as
to which no current, valid investment election has been made shall be invested
by the Trustee, in its discretion; provided, however, that if the Trustee does
not agree to undertake such investment responsibility, such contributions and
earnings shall be temporarily invested in one (1) or more of the investment
vehicles authorized in subsection (c) of Section 5.01 until a valid investment
direction is obtained.

     5.03 CHANGES IN CURRENT INVESTMENT ELECTIONS. A Participant may change his
investment election with respect to his Accounts. Changes in investment
elections shall be made by written, telephonic or other electronic means
established by the Plan Administrator and must be expressed as revised whole
number percentages of amounts held in his Accounts, totaling 100%.

     5.04 TRANSFER OF ACCOUNTS. A Participant may elect to transfer all or part
of his Account in any Investment Fund to another Investment Fund, except his
Payroll-Based Employee Stock Ownership Contribution Account. Transfer shall be
made by written, telephonic or other electronic means establishment by the Plan
Administrator and shall be expressed as a dollar amount or percentage of a
Participant's Account(s). Transfers shall be effective as soon thereafter as
practicable (which, with respect to Funds which are valued daily and accessible
by telephone or other electronic investment direction, may be the same day as
directions are transmitted, if received before 4:00 P.M. local time, or the next
business day thereafter).

                                       29
<PAGE>
                                    ARTICLE 6

                       VALUATION OF PARTICIPANTS' ACCOUNTS

     6.01 ACCOUNTS. Each Participant shall have established for him separate
Accounts reflecting all amounts contributed to the Plan on his behalf and the
investment earnings and losses thereon.

     6.02 VALUATION OF ACCOUNTS. As of each Valuation Date, each Participant's
Account shall be adjusted separately to reflect any appreciation or depreciation
in the fair market value of each Investment Fund in which it is held. The fair
market value of each Investment Fund shall be determined by the Trustee and
communicated to the Plan Administrator in writing and shall represent the fair
market value of all securities or other property held in the Investment Fund,
plus cash and accrued earnings, less accrued expenses and proper charges against
the Fund as of the Valuation Date. The Trustee's determination of the fair
market value of the Investment Funds shall be final and conclusive for all
purposes of the Plan. A Participant's Accounts shall be adjusted in proportion
to the balance in each Participant's Account on the preceding Valuation Date,
less distributions.

     6.03 AMOUNT OF PARTICIPANT'S ACCOUNTS. The amount of a Participant's
Accounts for purposes of distribution shall be determined as follows:

          (a)  the value of the Participant's Accounts as of the most recent
               Valuation Date, plus

          (b)  the Participant and Employer contributions made to the
               Participant's Accounts since the most recent Valuation Date,
               minus

          (c)  the amount of any distribution made since the most recent
               Valuation Date.

     Notwithstanding the foregoing, the Plan Administrator may in its discretion
use the value of the Participant's Accounts as of a special Valuation Date to
determine the proper amount to be distributed. The Plan Administrator may delay
any distribution under the Plan until the special Valuation Date.

     6.04 STATEMENT OF PARTICIPANT ACCOUNTS. Each Participant shall receive a
quarterly statement showing the value of his Accounts as of the most recent
Valuation Date.

     6.05 TIMING OF CREDITS AND DEDUCTIONS. Adjustments of a Participant's
Accounts shall be deemed to have been made on the date to which they relate,
even if they are determined at another date. Notwithstanding the foregoing,
transactions with respect to which Investment Funds that are valued daily will
be effected on the date money or investment directions are received from a
Participant prior to 4:00 P.M. local time, otherwise on the next business day.
The Participants' Accounts will be debited or credited, as appropriate, no later
than the date on which transactions are effected.

                                       30

<PAGE>

                                   ARTICLE 7
                               PAYMENT OF BENEFITS

     7.01 RETIREMENT. Upon a Participant's Retirement, the Vested Value of his
Accounts shall equal the total value of his Accounts. The Vested Value of the
Participant's Accounts shall be paid to him in accordance with Sections 7.06 or
7.07 (or, if applicable, Section 13.07).

     7.02 DEATH. Upon the death of a Participant, the Vested Value of his
Accounts shall equal the total value of his Accounts, to the extent not yet
distributed. The Vested Value of the Participant's Accounts shall be paid to his
Beneficiary in accordance with Sections 7.06 and 7.07 (or, if applicable,
Section 13.07).

     7.03 DISABILITY. If a Participant's Employment terminates as a result of
his Disability before his Retirement, the Vested Value of his Accounts shall
equal the value of his Accounts. The Vested Value of the Participant's Accounts
shall be paid to him in accordance with Sections 7.06 and 7.07 (or, if
applicable, Section 13.07).

     7.04 OTHER TERMINATION OF EMPLOYMENT. Upon the termination of a
Participant's Employment other than by Retirement, Death or Disability, and
other than by transfer to an Affiliated Company which is not an Employer, the
Vested Value of his Accounts shall equal the balance credited to his:

           (a) Basic and Supplemental Tax-Deferred Employee Contribution
               Account;

           (b) Supplemental Non Tax-Deferred Employee Contribution Account;

           (c) Initial Company Contribution Account and Matching Company
               Contribution Account, if the Participant has at least 3 Years of
               Service; and

           (d) Rollover Contribution Account.

     Upon such termination of Employment and the completion of a one (1) Year of
Break in Service, the Participant shall forfeit the portion of his Initial
Company Contribution and/or Matching Contribution Accounts that is not included
in his Vested Value; provided, however, that amounts so forfeited shall be
reinstated to the Participant's Accounts if he is reemployed by an Employer at
any time before he incurs five (5) Years of Break in Service, and if he then
repays the entire amount of his Basic Employee Contribution Account previously
distributed to him, if any.

     The Vested Value of such Participant's Accounts shall be paid to the
Participant in a single sum under Sections 7.06(a) and/or 7.06(c), or, if the
Participant attains age 59-1/2 before or upon the commencement of benefit
payments, in installments under Section 7.06(b). All distributions shall be
subject to the requirements of Section 7.07.

     For purposes of this Section 7.04, a Participant who transfers to
employment with an Affiliated Company that is not an Employer and subsequently
terminates his employment with

                                       31
<PAGE>

such Affiliated Company shall be deemed to have terminated his Employment as of
the date his employment with such Affiliated Company terminates, unless he
transfers without intervening employment to employment with an Employer or other
Affiliated Company.

     7.05 TRANSFER FROM HOURLY TO SALARIED EMPLOYMENT. If a Participant
transfers to salaried employment status with an Employer, he may:

           (a) elect a Plan to Plan Transfer of the Vested Value of his Accounts
               to the Bowater Incorporated Salaried Employees' Savings Plan as
               of any Valuation Date, provided that the trustee of such plan is
               authorized to receive such Transfer; or

           (b) defer such Plan to Plan Transfer or the receipt of any
               distribution from the Plan until a later date. His Accounts will
               remain in the Plan until his Retirement, death, Disability or
               termination of employment with the Employer or Affiliated
               Company, or until he is eligible to make a withdrawal under
               Article 8.

     If a Participant transfers to salaried employment status with an Affiliated
Company which is not an Employer, the disposition of his Accounts shall be
governed by Section 7.04. A Participant will receive credit for Years of Service
for his period of employment with the Employer or Affiliated Company.

     7.06 ELECTION OF BENEFITS. Each Participant shall elect the form or forms
in which distributions due to him hereunder shall be paid or made available. The
Participant shall elect to receive the distribution in one (1) or more of the
following methods:

           (a) in lump sum payment(s) in cash;

           (b) in annual installments over a period not to exceed ten (10)
               years, provided such period does not exceed the greater of: (i)
               the life expectancy of the Participant, and (ii) the joint life
               expectancy of the Participant and his Beneficiary. The amount of
               each installment will be determined by dividing the Participant's
               Vested Value by the number of annual installments which remain to
               be made at the time an installment is to be paid. Notwithstanding
               the foregoing, this method of payment is not available for a
               Participant described in Section 7.04 who has not attained age 59
               1/2 before or upon commencement of his distribution.

           (c) in kind, equal to the full Shares of Company Stock plus the cash
               equivalent of the fair market value of any fractional Shares of
               Company Stock in the Company Stock Fund, together with lump sum
               cash payment(s) representing the Participant's interest in the
               other Investment Funds. In the case of fractional shares, the
               Trustee shall be deemed to have purchased such fractional share
               from the Participant at a price equal to the cash payment made to
               the Participant. Cash for the purchase of

                                       32
<PAGE>

               fractional shares may be taken from dividend receipts or other
               cash held in the Trust.

     A Participant may receive multiple lump sum payments in cash described in
(i) above upon request to the Plan Administrator or its delegate. Lump sum
payments in cash, shall be in amounts not less than $1,000, unless the
distribution is the entire remaining vested balance of the Participant's
Account.

     Benefit elections may be made in writing or by electronic or telephonic
means in accordance with procedures established by the Plan Administrator for
each purpose. A Participant may change his election of benefits at any time
prior to his date of distribution. If no election is made, distribution shall be
in a lump sum payment of cash.

     A Participant who has previously elected to receive benefits under
subsection (b) above may request that any remaining Vested Value of his account
be paid to him in lump sum payment(s) in cash, such Vested Value to be
determined as of the Comprehensive Valuation Date next preceding the date on
which the Plan Administrator approves the request or next following the
Participant's request, whichever is later. Such amounts shall not include the
amount of any installments paid to the Participant since the preceding
Comprehensive Valuation Date.

     Notwithstanding the foregoing or any election made by a Participant, if a
Participant's Employment, and employment with all Affiliated Companies,
terminates for any reason, and the Vested Value of the Participant's Account
equals $3,500 (effective January 1, 1998, $5,000) or less, the Plan
Administrator shall direct that the Vested Value of the Account be distributed
to the Participant (or his Beneficiary) in the form of a lump sum cash payment.
The Plan Administrator may direct such distribution without obtaining the
Participant's (or, if applicable, his Spouse's) consent.

     If the Participant's Account balance at the time of any distribution
exceeds $3,500 (effective January 1, 1998, $5,000), then neither that
distribution nor any subsequent distribution shall be made to the Participant at
any time before he attains age 70-1/2 without his or her consent (which age
70-1/2 distributions shall be made in accordance with Section 7.07(d)). No such
consent shall be valid unless the Participant receives a general description of
the material features and an explanation of the value of the form of benefit
available under the Plan. In addition, the Participant must be informed of his
right to defer receipt of the payment or distribution. The Plan Administrator
shall deliver such written notice to the Participant during a period beginning
no less than 30 days and no more than 90 days before the Participant's date of
commencement of benefits. The written consent of the Participant to the payment
or distribution shall not be made before the Participant receives the notice and
shall not be made more than 90 days before his or her date of commencement of
benefits. Notwithstanding the foregoing, a distribution may commence less than
30 days after the notice required under Section 1.411(a)-11(c) of the Treasury
Regulations is given, provided that (i) the Plan Administrator clearly informs
the Participant that the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and (ii)
the Participant, after receiving the notice, affirmatively elects a
distribution.

                                       33
<PAGE>

     7.07 METHOD OF PAYMENT. Benefits shall be paid or made available upon the
direction of the Plan Administrator, as soon as practicable following a
Participant's Retirement, death, Disability or other termination of Employment;
provided that no distribution may be made to a Participant without his consent
unless the Vested Value of his Account equals $3,500 (effective January 1, 1998,
$5,000).

           (a) Unless a Participant elects otherwise, the distribution of his
               benefits will begin no later than 60 days after the end of the
               Plan Year in which the latest of the following events occurs:

               (i)   the Participant's attainment of age 65;

               (ii)  the tenth (10th) anniversary of the year in which the
                     Participant commenced participation in the Plan; or

               (iii) the Participant's termination of Employment with the
                     Employer and any employment with all Affiliated Companies.

           (b) If a Participant receiving distributions under Section
               7.06(b)(ii) dies before his entire interest has been distributed,
               the remaining portion of his Accounts will be distributed to his
               Beneficiary at least as rapidly as it was being distributed as of
               the date of his death.

           (c) If distributions have not begun upon the death of a Participant,
               if no election has been made by the Beneficiary pursuant to
               Section 7.08, the entire interest of the Participant will be
               distributed in accordance with Section 7.06(a) at the end of the
               calendar year containing the fifth (5th) anniversary of the
               Participant's death.

           (d) The distributions of the Vested Value of a Participant's Accounts
               will commence not later than the "required beginning date." For
               purposes of this Section 7.07, the term "required beginning date"
               means:

               (i)  for Plan Years beginning prior to January 1, 1997, April 1
                    of the calendar year following the calendar year in which
                    the Employee attains age 70-1/2;

               (ii) for Plan Years beginning on or after January 1, 1997:

                    (A)  for a Participant who is not a five percent (5%) owner
                         (as defined under Code Section 416), April 1 of the
                         calendar year following the year in which occurs the
                         later of the Participant's: (A) termination of
                         Employment with the Employer and all Affiliated
                         Companies, and (B) attainment of age 70-1/2; and

                    (B)  for a Participant who is a five percent (5%) owner,
                         April 1 of the calendar year following the calendar
                         year in which

                                       34
<PAGE>

                         the Employee attains age 70-1/2, or such other date as
                         may be prescribed by applicable law or regulations.

                    Notwithstanding the foregoing, if a Participant who is not a
                    five percent (5%) owner attained age 70-1/2 on or after
                    January 1, 1996 and is still employed by the Employer or an
                    Affiliated Company on April 1 of the calendar year following
                    the year in which he or she attained age 70-1/2, such
                    Participant may elect to commence the distribution of the
                    Vested Value of his or her Accounts effective as of April 1
                    of the calendar year following the calendar year in which he
                    or she attained age 70-1/2 or to delay the commencement of
                    distributions until the termination of his or her
                    employment.

     7.08 PROOF OF DEATH AND RIGHT OF BENEFICIARY. If a Participant who has
begun to receive benefits in annual installments under Section 7.06(b) dies
before the total Vested Value of his Accounts has been distributed, his
Beneficiary will receive the undistributed Vested Value of his Accounts in
annual installments on the same basis as the Participant had elected. The
Beneficiary may elect to receive the remaining Vested Value of the Participant's
Accounts in a lump sum cash payment by filing a written election with the Plan
Administrator on a form provided for such purpose within 90 days of the
Participant's death. If a Participant who elects to receive benefits under
Section 7.06(a) or (c) dies, his Beneficiary may elect to receive the
undistributed value of the Participant's Accounts under one (1) of the methods
described in Section 7.06 by filing a written election with the Plan
Administrator within 180 days of the Participant's death, except that the
maximum period in which installment payments may be made under Section 7.06(b)
shall be five (5) years. If the Beneficiary does not elect a distribution within
180 days, the Plan Administrator will distribute the remaining Vested Value of
the Participant's Account in accordance with Section 7.07(c).

     The Plan Administrator may require and rely upon such proof of a
Participant's death and evidence of the right of any Beneficiary to receive
benefits as it deems proper, and its determination shall be conclusive. A
Beneficiary who does not elect to receive benefits in the form of a lump sum
payment shall designate a Beneficiary on a form provided by the Plan
Administrator.

     7.09 DIRECT ROLLOVER OF DISTRIBUTION. Any "Eligible Rollover Distribution"
under this Article may, at the Participant's election, and subject to such
uniform and nondiscriminatory conditions as the Plan Administrator may require,
be transferred to an "Eligible Retirement Plan," subject to the provisions of
Section 402 of the Code and the regulations thereunder and as hereinafter
provided.

           (a) The Plan Administrator shall notify any "Distributee" entitled to
               receive an "Eligible Rollover Distribution" no less than thirty
               nor more than ninety days before the starting date of any payment
               (or at such other time as is permitted by law) of his right to
               elect a "Direct Rollover" to an "Eligible Retirement Plan"
               pursuant to the provisions of this section.

                                       35
<PAGE>

           (b) To elect a Direct Rollover, the Distributee must request in
               writing to the Plan Administrator that all or a specified portion
               of the Eligible Rollover Distribution be transferred directly to
               one or more "Eligible Retirement Plans." If a distribution will
               be made on behalf of the Distributee in more than one year, the
               notice specified in paragraph (a) must be given to the
               Distributee in each year in which there is an Eligible Rollover
               Distribution, and the Distributee must file a new election with
               the Plan Administrator if he wishes to have the Eligible Rollover
               Distribution transferred directly to an Eligible Retirement Plan.

           (c) The Distributee shall not be entitled to elect a Direct Rollover
               pursuant to this section, unless he has obtained any applicable
               Spousal consent that would otherwise be required to obtain a
               distribution in the amount of the Eligible Rollover Distribution.

           (d) For purposes of this section, the following definitions shall
               apply:

               (i)   A "Direct Rollover" is a payment by the Plan to the
                     "Eligible Retirement Plan" specified by the Distributee;

               (ii)  A "Distributee" includes Participants, a Participant's
                     surviving Spouse and a Participant's Spouse or former
                     Spouse who is the alternate payee under a qualified
                     domestic relations order, as defined in Code Section
                     414(p), but only with regard to the interest of such
                     individual under the Plan;

               (iii) An "Eligible Retirement Plan" is a retirement plan which
                     meets the requirements of Code Section 401(a), an annuity
                     described in Code Section 403(a), an individual retirement
                     account described in Code Section 408(a), or an individual
                     retirement annuity (other than an endowment contract)
                     described in Code Section 408(b), the terms of which permit
                     the acceptance of a Direct Rollover of the Distributee's
                     Eligible Rollover Distribution. However, in the case of an
                     Eligible Rollover Distribution to the surviving Spouse of a
                     Participant, an Eligible Retirement Plan is an individual
                     retirement account or an individual retirement annuity. The
                     Plan Administrator may establish reasonable procedures for
                     ascertaining that the Eligible Retirement Plan meets the
                     preceding requirements.

               (iv)  An "Eligible Rollover Distribution" is any distribution
                     from this Plan of all or any portion of the balance to the
                     credit of the Distributee, except for distributions (or
                     portions thereof) which are:

                    (A)  Part of a series of substantially equal periodic
                         payments (not less frequently than annually) made over
                         the life of the

                                       36
<PAGE>

                         Participant (or the joint lives of the
                         Participant and the Participant's designated
                         Beneficiary), the life expectancy of the Participant
                         (or the joint life and last survivor expectancy of the
                         Participant and the Participant's designated
                         Beneficiary), or a specified period of ten years or
                         more;

                    (B)  Required under Code Section 401(a)(9) (relating to the
                         minimum distribution requirements);

                    (C)  The portion of any distribution that is not includible
                         in gross income (determined without regard to the
                         exclusion for net unrealized appreciation in employer
                         securities described in Code Section 402(e)(4); or

                    (D)  Specified Hardship Withdrawals made on or after January
                         1, 1999, as provided under Section 8.04 of this Plan.

                                       37
<PAGE>

                                   ARTICLE 8
                              WITHDRAWALS AND LOANS

     8.01 GENERAL CONDITIONS FOR WITHDRAWALS. Subject to this Article 8, a
Participant may withdraw the Vested Value of his Accounts, provided, however,
that no withdrawals may be made under this Article 8 from a Participant's Basic
Tax-Deferred Employee Contribution Account, or Supplemental Tax-Deferred
Employee Contribution Account except pursuant to the provisions of Sections 8.04
and 8.05 hereof. A Participant may request a withdrawal in writing or by
electronic or telephonic means in accordance with procedures established by the
Plan Administrator for such purpose.

     All amounts withdrawn shall be paid in cash. In the case of a withdrawal of
less than the full vested Value of a Participant's Accounts, the amount
withdrawn from each Investment Fund in which an Account is maintained for a
Participant shall be taken, pro rata, from each such Fund from which withdrawal
is permissible in the same proportion as the value of the Participant's interest
in each such Fund bears to the total value of his Accounts.

     A Participant may elect to have a withdrawal made under this Section 8.01
transferred directly to an individual retirement account or another
tax-qualified plan, subject to the provisions of Code Section 402 of the Code
and regulations thereunder and in accordance with the procedures described in
Section 7.09 of the Plan.

     8.02 WITHDRAWAL OF COMPANY CONTRIBUTIONS. A Participant may withdraw all or
a portion of the Vested Value of his Initial Company Contribution Account and/or
Matching Company Contribution Account, excluding any contributions made to such
Accounts within the two (2) years preceding the withdrawal, determined as of the
Valuation Date next preceding the date the withdrawal is made. Amounts not
withdrawn may not be distributed to the Participant until his termination of
Employment or until such amounts have been in the Plan for at least two (2)
years, whichever occurs first.

     A Participant may not receive more than one (1) withdrawal under this
Section 8.02 during any single Plan Year.

     8.03 WITHDRAWAL OF NON TAX-DEFERRED CONTRIBUTIONS. A Participant may
withdrawal all or a portion of the Vested Value of his Supplemental Non
Tax-Deferred Employee Contribution Account, determined as of the Valuation Date
preceding the date the request for a withdrawal is made. A Participant may not
receive more than one (1) withdrawal under this subsection (b) during a single
Plan Year.

     8.04 SPECIFIED HARDSHIP WITHDRAWAL. The Plan Administrator (or his
delegatee) may permit a Participant to make a Specified Hardship Withdrawal of
all or a portion of his Basic and Supplemental Tax-Deferred Employee
Contributions, excluding investment earnings thereon.

     The value of the Participant's Accounts for purposes of this Section 8.04
shall be determined as of the Valuation Date next preceding the date on which
the Plan Administrator (or his delegatee) approves the Specified Hardship
Withdrawal or the Valuation Date next following

                                       38
<PAGE>

the Plan Administrator's receipt of the Participant's application for a
Specified Hardship Withdrawal, whichever is later. The value shall include Basic
and Supplemental Tax-Deferred Employee Contributions made since the applicable
Valuation Date and shall not include the amount of any withdrawals made by the
Participant since the Valuation Date.

     A Participant who has made a withdrawal under this Section 8.04 shall be
subject to a mandatory suspension of all Employee Contributions for 12 months
following the date the Specified Hardship Withdrawal is made. In addition, the
Participant's Tax-Deferred Employee Contributions for the Plan Year following
the Withdrawal shall not exceed the limit on Elective Deferrals described under
Section 3.05, reduced by the amount of Tax-Deferred Employee Contributions made
by the Participant in the Plan Year in which he makes the Specified Hardship
Withdrawal.

     8.05 WITHDRAWAL AFTER AGE 59-1/2. A Participant who has attained age 59-1/2
may make a withdrawal of all or a portion of his Basic and Supplemental
Tax-Deferred Employee Contributions, including investment earnings thereon. The
value of the Participant's Accounts for this purpose shall be determined under
the provisions of Section 8.04. Upon such a withdrawal, the Participant shall
not incur a mandatory suspension of his contributions to the Plan.

     8.06 WITHDRAWAL OF ROLLOVER ACCOUNT. A Participant who has made a Rollover
Contribution under Section 3.10 may withdraw the total value of his Rollover
Account at any time.

     8.07 LOANS. A Participant may request a loan from the Vested Value of any
of his Accounts. The Participant's loan request may be made in writing or by
electronic or telephonic means in accordance with procedures established by the
Plan Administrator for such purpose. The Plan Administrator shall establish
procedures relating to loan requests which shall be uniformly applied to all
similarly situated Participants. Plan loans are subject to the following
requirements of this Section 8.08.

          (a)  A Participant shall not be permitted to have more than one (1)
               outstanding loan at any time.

          (b)  The Company (or the Trustee) may charge a reasonable fee for
               processing and maintaining loans. Any such fees shall either (i)
               be paid in advance by the Participant and shall not be charged
               against the loan amount or (ii) be charged against the
               Participant's Account.

          (c)  The minimum principal amount of any loan shall be $1,000. The
               maximum principal amount of any loan shall be the lesser of: (i)
               fifty percent (50%) of the Vested Value of the Participant's
               Accounts, determined as of the last business day of the week
               preceding disbursement of the loan; and (ii) $50,000 reduced by
               the Participant's highest outstanding loan balance during the one
               (1) year period ending on the day before the date on which the
               loan is disbursed. Loans shall be deemed to have been made on a
               pro rata basis from each of a Participant's Accounts.

                                       39
<PAGE>

          (d)  The term of the loan may not exceed 60 (in the case of a loan
               taken to acquire the Participant's principal residence, 180)
               months. In the case of a loan whose term exceeds 60 months, the
               Trustee shall obtain the Plan Administrator's approval of the
               loan before approving a Participant's request therefor. The loan
               must be repaid in substantially level amounts, with payments due
               not less than quarterly. Repayment shall be made through
               automatic payroll deductions beginning in the first (1st) pay
               period following the Participant's receipt of the loan. The loan
               may not be renewed or extended beyond its original maturity date.
               Loans may be prepaid in full without penalty at any time before
               the loan's maturity date. Partial prepayments will not be
               accepted.

          (e)  The interest rate of the loan shall be set at the time the loan
               request is approved and shall equal the prime lending rate for
               corporate debt, as published in the Wall Street Journal, plus one
               percent (1%).

          (f)  The loan shall be secured by 50% of the balance of the
               Participant's Accounts from which loans are available, to the
               extent of the principal amount of the loan plus accrued interest.
               The Company may request such other collateral for the loan as it
               deems necessary and prudent in order to protect the Plan from
               risk of loss of principal or income if a default were to occur.
               All loans shall be bona fide and evidenced by a note containing
               such additional terms and conditions, consistent with this
               Section 8.07, as the Plan Administrator shall require.

          (g)  If the balance of a Participant's Accounts becomes distributable
               (other than amounts distributed under Sections 8.02 through 8.06)
               while the Participant has an outstanding loan balance, amounts
               otherwise distributable shall be reduced by the outstanding
               amount of unpaid principal and interest due on the loan.

          (h)  Notwithstanding any provision of this Section 8.07 to the
               contrary, loan repayments will be suspended under the Plan as
               permitted under Code Section 414(u).

          (i)  If a Participant terminates Employment with an outstanding loan
               balance, the entire outstanding balance of the loan shall be
               considered in default and immediately due and payable. If amounts
               due remain delinquent for beyond the close of the calendar
               quarter following the calendar quarter in which the loan amounts
               become due, such outstanding balance shall be reported to the
               Participant as a distribution from the Plan for the year in which
               such following calendar quarter ended, and charged against the
               Participant's Accounts at the earliest date amounts are
               distributable to the Participant under the terms of the Plan.

          (j)  At all times during which a Participant has an outstanding loan
               balance, the Participant shall be obligated to inform the Plan
               Administrator of any

                                       40
<PAGE>

               declaration of the Participant's personal bankruptcy, as issued
               by a court of competent jurisdiction. The entire outstanding
               balance of the loan shall be considered in default and
               immediately due and payable as of the effective date of such
               declaration. The Plan Administrator shall thereafter seek from
               the Participant a reaffirmation of the loan, or take whatever
               other steps it deems necessary to protect the Plan's interest in
               collecting amounts due, to the extent permitted under applicable
               federal and state bankruptcy laws not preempted by ERISA.

                                       41
<PAGE>

                                   ARTICLE 9
                               PLAN ADMINISTRATION

     9.01 FIDUCIARIES.

          (a)  The Company, the Trustee, the Plan Administrator, members of the
               Committee and persons to whom they delegate discretionary
               authority or control over the Plan shall be Fiduciaries.

          (b)  Each Fiduciary's responsibility shall be specified in the Plan or
               by the Company and accepted by each Fiduciary. The Fiduciaries
               may allocate unassigned responsibilities among themselves. The
               Trustee may thereafter rely upon any actions taken consistent
               with the allocation, until such allocation is revoked.

     9.02 RESPONSIBILITIES OF THE COMPANY. The Company shall have the following
powers and duties with respect to the Plan:

          (a)  to appoint any individual or Committee to whom fiduciary
               responsibilities have been assigned under the Plan;

          (b)  to delegate any fiduciary responsibilities under the Plan to any
               individuals, committees or entity it may designate; and

          (c)  to exercise any other powers or responsibilities not specifically
               allocated to another fiduciary.

     9.03 SAVINGS PLAN COMMITTEE. The Pension Administration Committee of the
Company (the "PAC") (or such other designee of the Company) shall appoint a
Committee consisting of not less than five (5) persons, two (2) of whom shall be
Employees elected or appointed by the Union locals to serve on the Committee.
Each member of the Committee shall serve for a one (1) year term which may be
continuously renewed, in the sole discretion of the PAC. A Committee member may
resign at any time during his appointment, provided that he submits written
notice to the PAC no later than forty-five (45) days prior to the effective date
of such resignation. The PAC shall have the discretion to fill vacancies on the
Committee, except to the extent that the prior Committee member had been
appointed by a Union local, in which case the appropriate Union local shall
appoint a member of the Union to fill the vacancy. The PAC may waive the
forty-five (45) day notice requirement in its sole discretion. A Committee
member may be removed by the PAC during his term if he fails to perform the
duties of his office in an efficient manner. Committee members shall serve
without compensation.

     9.04 OPERATION OF THE COMMITTEE.

          (a)  Powers and Duties: The Committee shall have the following powers
               and duties: -----------------

               (i)   to construe and interpret the Plan, in its discretion;

                                       42
<PAGE>

               (ii)  to determine, in its discretion, any question of fact under
                     the Plan, including questions relating to eligibility,
                     Earnings, service and the entitlement to and amount of
                     benefits;

               (iii) to establish such rules and procedures as it deems
                     necessary for the efficient completion of its assigned
                     duties;

               (iv)  to establish a funding policy, as described under paragraph
                     (c), below;

               (v)   to appoint one or more Investment Managers to have
                     discretionary control over Plan assets, as described under
                     paragraph (d) below; and

               (vi)  to employ or retain actuaries, accountants, legal counsel
                     and other experts as it deems necessary for the proper
                     administration of the Plan.

          (b)  Composition and Voting: The Committee shall select a chairperson
               from its members to oversee the Committee's operation. The
               Committee may also establish subcommittees thereof, as it deems
               necessary.

               A majority of the Committee shall constitute a quorum. Actions of
               the Committee shall be taken by a majority vote of a quorum, or,
               in the absence of a meeting, by written action signed by a
               majority of the Committee. All decisions made by majority vote of
               the Committee shall be final and binding on all parties.

          (c)  Funding Policy: The Committee shall formulate a funding policy
               based upon the Plan's short and long term financial needs. Once
               the funding policy has been established for a Plan Year, the
               Committee shall provide a copy thereof to the Trustee, who shall
               follow the policy in its management of the Trust Fund. In
               addition, the Committee shall periodically report to the Board
               regarding the funding policy. The provisions of this paragraph
               (c) shall not apply to that portion of the Trust Fund consisting
               of assets subject to the investment directions of Participants,
               nor during periods in which all assets in the Trust Fund are
               invested pursuant to either provisions of the Plan or Participant
               directions.

          (d)  Investment Managers: The Committee may appoint one or more
               "Investment Managers" to manage, acquire and dispose of all or
               any part of the assets of the Trust Fund. Each Investment Manager
               shall execute a written agreement detailing its responsibilities,
               specifying the Plan assets under its management and acknowledging
               its fiduciary status with respect to the Plan. The Investment
               Manager shall not have physical custody or control of any assets
               of the Plan, which shall be held by the Trustee. An Investment
               Manager must be either: (i) a corporation or partnership

                                       43
<PAGE>

               registered as an investment adviser under the Investment Advisers
               Act of 1940; (ii) a bank, as defined in that Act; or (iii) an
               insurance company qualified to manage, acquire or dispose of any
               asset of an employee benefit pension plan under the laws of more
               than one state. The provisions of this paragraph (d) shall not
               apply to that portion of the Trust Fund consisting of assets
               subject to the investment directions of Participants, nor during
               periods in which all assets in the Trust Fund are invested
               pursuant to either provisions of the Plan or Participant
               directions.

          (e)  The powers, duties, and responsibilities of the Committee may be
               changed by the PAC or the Company only upon written consent of
               the Committee.

     9.05 PLAN ADMINISTRATOR. The Company shall serve as the "Plan
Administrator," who shall be responsible for all duties and obligations imposed
on a plan administrator by ERISA and the Code (to the extent such
responsibilities are not otherwise delegated under the Plan to the Committee).
The Company may designate one (1) or more persons to carry out the duties
delegated to the Plan Administrator under the Plan. Such designee(s) may also
serve as member(s) of the Committee.

          (a)  Powers and Duties: The Plan Administrator shall have the
               following powers and duties with respect to the Plan:

               (i)   to comply with all applicable reporting and disclosure
                     requirements of ERISA;

               (ii)  to sign any registration statements required to be filed
                     with the Securities Exchange Commission;

               (iii) to sign any applications for determination of the
                     tax-qualified status of the Plan, as filed with the
                     Internal Revenue Service.

               (iv)  to maintain such records as are necessary for the proper
                     and efficient administration of the Plan.

               (v)   to develop such procedures as it deems necessary for
                     carrying out any other duties delegated to the Plan
                     Administrator under the terms of the Plan;

               (vi)  to employ or retain any accountant, attorney, consultant or
                     other expert as it deems necessary for the proper and
                     efficient administration of the Plan; and

               (vii) to report to the Committee upon its request so that the
                     Committee may review the Plan Administrator's performance.

     9.06 RELIANCE ON EXPERTS. A Fiduciary and its delegatees shall be entitled
to rely upon all certificates, opinions and reports made by experts employed to
provide services with respect to the Plan. The Fiduciary shall be fully
protected with respect to any action taken

                                       44
<PAGE>

in good faith reliance on such opinions or reports, provided that a prudent
person acting in like circumstances would have taken the same action.
Determinations and actions made by a Fiduciary in reliance on the report or
opinion of a duly-appointed expert or counsel shall be final and binding on all
parties.

     9.07 COMMITTEE ACTION. Unless otherwise directed by the Company, a majority
of the members of any committee(s) established under the Plan shall constitute a
quorum. Decisions with a quorum present shall be made by majority vote. In the
absence of a meeting, a committee may act by written action signed by a majority
of its members. All decisions made by majority vote of a committee shall have
the same effect as if agreed upon by every member.

     9.08 INDIVIDUAL INDEMNIFICATION. To the extent permissible under ERISA, the
Company shall indemnify each Fiduciary and its delegatee against costs, expenses
and liabilities, including attorney's fees, incurred in connection with any
action, or proceeding arising out of any act or omission taken or made in good
faith in his capacity as a Fiduciary (or delegatee thereof, as applicable).

     Upon receiving notice of the commencement of any action, any Fiduciary or
its delegatees entitled to indemnification under this Section 9.08 shall notify
the Company of the commencement of the action. Failure to so notify the Company
will relieve the Company from any liability hereunder. The Company shall be
entitled to, at its own expense, participate in or assume the defense of any
action brought against any party indemnified hereunder. In the event the Company
assumes the defense of any such suit, the Company shall choose counsel
reasonably satisfactory to the indemnified party to conduct such defense, and
the indemnified party shall bear the expense of retaining any additional
counsel.

     9.09 EXPENSES. Any expenses reasonably incurred by a Fiduciary in the
performance of his duties shall be paid by the Company. Such reasonable expenses
include the cost of obtaining personal liability insurance covering actions
taken by the Fiduciary on behalf of or with respect to this Plan. All reasonable
expenses incurred in connection with the administration of the Plan, including
the compensation paid to the Trustee, Investment Managers and any counsel,
accountant or other expert retained by a Fiduciary in connection with the
administration of the Plan shall be paid: (a) from the Trust Fund to the extent
permissible under ERISA and the Code, and (b) by the Company, to the extent not
payable under (a).

     9.10 SERVICE IN VARIOUS CAPACITIES. Any person may serve in more than one
Fiduciary capacity with respect to the Plan, including service as a member of
the Committee, the PAC, the Plan Administrator or Trustee.

     9.11 STANDARDS OF CONDUCT. Fiduciaries shall discharge their duties and
responsibilities in accordance with the standards of care and prudence required
under ERISA. Absent gross negligence or willful misconduct, persons acting for
or on behalf of the Plan (including but not limited to, the Company, the
Committee, the PAC, the Board, the Plan Administrator and the Trustee) shall not
be subject to civil liability under any provision of state, county or local law
pertaining to the conduct of fiduciaries and trustees or the permissibility of
their investments.

                                       45
<PAGE>

     9.12 CLAIMS PROCEDURES.

          (a)  Initial Claim: Claims for benefits under the Plan shall be
               submitted in writing to the Committee. Written notice of the
               Committee's decision with respect to the claim shall be furnished
               to the claimant within thirty (30) days after the claim is filed,
               unless special circumstances require an extension of the decision
               period for up to an additional ninety (90) days. The claimant
               will receive written notice of the need for an extension within
               the initial thirty (30) day period.

          (b)  Written Notice of Denied Claim. The claimant shall receive
               written notice of a claim denial. Such notice shall: (i) set
               forth the specific reason or reasons for the denial, (ii) be
               written in a manner calculated to be understood by the recipient,
               (iii) refer to the specific Plan provisions on which the denial
               is based; (iv) describe any additional information necessary for
               the claimant to perfect the claims; and (v) include a description
               of the Plan's appeal procedures.

          (c)  Review of Claim Denial. Following receipt of a claim denial, the
               claimant or his duly authorized representative may submit a
               written application for review of such denial to the Plan
               Administrator. The claimant or his duly authorized representative
               must submit an application for review within the ninety (90) day
               period following receipt of the claim denial. During such ninety
               (90) day period, the claimant and his representative may submit
               issues and comments with respect to the claim denial and review
               pertinent Plan documents at the Plan Administrator's office

          (d)  Hearing. Upon receipt of a timely request for review of a claim
               denial, the Committee may hold a hearing, or, in its discretion,
               appoint one or more of its members to hear the claimant's appeal.
               Such member(s) shall meet promptly with the claimant and/or his
               duly authorized representative and hear such arguments and
               examine such documents as the claimant or his representative
               shall present. The member(s) shall then report the results of the
               hearing to the Committee.

          (e)  Written Decision of Committee. A decision of the Committee on
               review of a claim denial shall be made in writing and shall: (i)
               include specific reasons for the decision; (ii) be written in a
               manner calculated to be understood by the claimant; and (iii)
               refer to a specific Plan provisions on which the decision is
               based. The claimant shall be notified in writing of the decision
               within the sixty (60) day period following his submission of the
               written request for review, unless special circumstances require
               an extension of time for reviewing the appeal for up to an
               additional sixty (60) days. The claimant shall be notified of the
               for an extension of time in writing prior to the expiration of
               the initial sixty (60) day period.

                                       46
<PAGE>

          (f)  Effect of Committee Decision: Benefits under the Plan will be
               paid only if the Committee decides, in its discretion, that the
               applicant is entitled to them. The decision of the Committee on
               review of a claim denial shall be final and binding on all
               parties.

                                       47
<PAGE>

                                   ARTICLE 10
                      AMENDMENT AND TERMINATION OF THE PLAN

     10.01 AMENDMENT OF THE PLAN. Subject to agreement with the Unions and its
locals, the Board or its designee reserves the right to amend the Plan in whole
or in part, at any time and from time to time, retroactively or prospectively;
provided that no such amendment shall make it possible for any part of the funds
of the Plan to be used for or diverted to purposes other than the exclusive
benefit of Participants or their Beneficiaries, except to the extent provided
under Section 4.04; and provided further, that no such amendment shall increase
the duties of the Trustee without its consent thereto in writing. Except as may
be required to conform with government regulations, no such amendment shall
result in a reduction in the amount of benefits a Participant or Beneficiary was
entitled to receive immediately prior to the effective date of such amendment.

     10.02 MERGER, CONSOLIDATION, OR TRANSFER OF ASSETS. The Plan shall not
merge or consolidate with, or transfer its assets or liabilities to any other
plan or entity unless each Participant would receive a benefit immediately after
the merger, consolidation, or transfer which is equal to or greater than the
benefit he would have been entitled to receive, if the Plan had terminated
immediately before the merger, consolidation or transfer.

     10.03 PLAN TERMINATION. The Company intends to continue the Plan
indefinitely. However, to the extent permissible under applicable collective
bargaining agreements, the Company reserves the right to terminate the Plan or
discontinue contributions thereto, in whole or in part, at any time. Upon a
complete or partial termination of the Plan or discontinuance of contributions
hereunder, the value of the Accounts of each Participant affected by such
termination or discontinuance shall be fully vested, and payment of benefits
shall be made to such Participants and their Beneficiaries in the same manner as
upon the termination of Employment under Section 7.06, subject to the
limitations of Code Section 401(k)(10). In the case of a complete termination or
discontinuance of contributions of the Plan, any Forfeitures not previously
applied in accordance with Section 4.03 shall be credited on a pro rata basis to
all Participants' Accounts in proportion to the amount of Employer contributions
credited to their respective Matching Contribution Accounts during the current
calendar year (or the prior calendar year, if no Matching Contributions have
been made during the current calendar year).

     10.04 PROCEDURE. The termination, partial termination or amendment of this
Plan may be effected by the adoption of a resolution by the Board to that
effect, or by the execution of an instrument amending or terminating the Plan by
a designee of the Board, to whom such authority to so act has been given by
resolution of the Board. The authorization of the Board may be general and need
not be given in contemplation of or with reference to specific terms of
amendment or termination.

                                       48
<PAGE>

                                   ARTICLE 11
                                CHANGE IN CONTROL

     11.01 CONTROLLING PROVISIONS. In the event of a Change in Control, as
hereinafter defined, the provisions of this Article 11 shall supersede any
conflicting provisions in the Plan.

     11.02 FULLY VESTING OF MATCHING CONTRIBUTION ACCOUNT. Notwithstanding any
portion of the Plan to the contrary, upon a Change in Control, the Matching
Contribution Account of Participants in the Plan who are Employees of the
Employer as of the date of Change in Control shall become 100% vested.

     11.03 DEFINITIONS. For purposes of this Article 11, the following terms
shall have the indicating meanings:

          (a)  Acquiring Person. Any Person who is or becomes a "beneficial
               owner" (as defined in Rule 13d-3 of the Securities Exchange Act
               of 1934, as amended (the "Exchange Act") of securities of the
               Company representing twenty percent (20%) or more of the combined
               voting power of the Company's then outstanding voting securities,
               unless such Person has filed Schedule 13G and all required
               amendments thereto with respect to its holdings and continues to
               hold such securities for investment in a manner qualifying such
               Person to utilize Schedule 13G for reporting of ownership.

          (b)  Affiliate and Associate. Such terms shall have the respective
               meanings ascribed to them under Rule 12b-2 of the General Rules
               and Regulations under the Exchange Act, as in effect on the date
               hereof.

          (c)  Change in Control. A Change in Control shall be deemed to have
               occurred if the following events occur:

               (i)   any Person is or becomes an Acquiring Person;

               (ii)  less than two-thirds (2/3) of the total membership of the
                     Board shall be Continuing Directors; or

               (iii) the shareholders of the Company shall approve a merger or
                     consolidation of the Company or a plan of complete
                     liquidation of the Company or an agreement for the sale or
                     disposition by the Company of all or substantially all of
                     the Company's assets.

          (d)  Continuing Directors. Any member of the Board who was a member of
               the Board prior to the date hereof, and any successor of a
               Continuing Director while such successor is a member of the Board
               who is not an Acquiring Person or an Affiliate or Associate of an
               Acquiring Person or of any such Affiliate or Associate and is
               recommended or elected to succeed the Continuing Director by a
               majority or the Continuing Directors.

                                       49
<PAGE>

          (e)  Person. Any individual, corporation, partnership, group,
               association or other "person" as such term is used in Section
               13(d) and 14(d) of the Exchange Act.

     11.04 AMENDMENT OF THIS ARTICLE 11. This Article of the Plan shall not be
amended upon or following a Change in Control in any manner that might have the
effect of reducing the Participants' Accounts under the Plan. Nothing in this
Section 11.04 shall be construed to prohibit, prior to a Change in Control, any
amendment to the Plan, including to this Article 11, or any termination of the
Plan pursuant to its terms.

                                       50
<PAGE>

                                   ARTICLE 12
                    EXERCISE OF COMPANY STOCKHOLDERS' RIGHTS

     12.01 VOTING RIGHTS. Each Participant shall be entitled to direct the
Trustee as to the manner in which Company stock allocated to his Accounts is to
be voted. The Trustee, through the Plan Administrator, shall notify Participants
of each occasion for the exercise of their voting rights within a reasonable
time prior to the date such rights are to be exercised but not less than thirty
(30) days prior to such date. The notification shall include all information
distributed to shareholders regarding the exercise of such rights. Not less than
five (5) business days prior to the date on which voting rights are to be
exercised, each Participant wishing to exercise such rights shall inform the
Trustee, in the form and manner prescribed by the Plan Administrator, as to the
manner in which such voting rights are to be exercised, If a Participant does
not direct the Trustee in whole or in part with respect to the exercise of his
voting rights attributable to Company stock allocated to his Account(s), the
Trustee shall not exercise such voting rights, To the extent possible, the
Trustee shall vote the combined fractional shares of Company stock allocated to
Participants' Accounts to reflect the directions of the Participants to whom
such fractional shares of Company stock are allocated.

     Neither the Trustees nor the Plan Administrator nor the Committee may make
any recommendation regarding the manner in which Participants' voting rights are
to be exercised, including whether or not such rights should be exercised.

     12.02 RIGHTS OTHER THAN VOTING RIGHTS. Each Participant shall be entitled
to direct the Trustee, in the form and manner prescribed by the Plan
Administrator, with respect to the exercise of rights, other than voting rights,
attributable to Company stock allocated to his Account(s).

                                       51
<PAGE>

                                   ARTICLE 13
                               GENERAL PROVISIONS

     13.01 NONALIENATION OF BENEFITS. Except as required under a "qualified
domestic relations order' (as defined under Code Section 414(p)) or in
accordance with Section 206(d)(4) of ERISA, no benefit under the Plan shall be
subject to any manner of anticipation, alienation, sale, transfer, assignment,
pledge, garnishment or encumbrance, and any attempt to do so shall be void. The
Plan Administrator shall comply with any court order determined to be a
"qualified domestic relations order", and it shall adopt procedures for making
such determination. Notwithstanding the preceding sentence, the amount and form
of benefits provided by the Plan shall not be altered by the terms of a
qualified domestic relations order. Effective August 5, 1997, this Section 13.01
shall not apply to an order or requirement to pay that satisfies the
requirements of ERISA Section 206(d)(4) and (5) and Code Section 401(a)(13)(C)
and (D).

     13.02 EXCLUSIVE BENEFIT OF PARTICIPANTS AND BENEFICIARIES. Plan assets
shall be held in the Trust Fund for the exclusive benefit of Participants and
Beneficiaries of the Plan (except, however, contributions which may be returned
to the Employer under Section 4.05).

     13.03 NO RIGHT TO EMPLOYMENT. Nothing contained in the Plan shall be
construed as giving any Employee the right to be retained in the employ of the
Company or as interfering with the Company's rights to discharge an Employee at
any time.

     13.04 UNIFORM ADMINISTRATION. All actions taken by the Plan Administrator
shall be uniform in nature as applied to all persons similarly situated, and no
such action shall be taken which will discriminate in favor of highly
compensated Participants or Participants whose principal duties consist of
supervising the work of others.

     13.05 HEADINGS. The headings of the sections of this Plan are for
convenience of reference, and in the case of any conflict between the headings
and the text of the Plan, the text of the Plan shall control.

     13.06 CONSTRUCTION. To the extent not preempted by ERISA or other federal
law, the laws of the State of Delaware shall control the Plan. The Plan and the
Trust shall be construed so as to qualify under Code Sections 401(a), 401(k),
and 501(a), as applicable.

     13.07 UNCLAIMED DISTRIBUTIONS. If any distribution due to a Participant or
Beneficiary is not claimed within the five (5) year period following the date it
becomes payable, the distribution shall be treated as a Forfeiture, held in a
suspense account and applied to reduce Employer contributions under the Plan in
future Plan Years, in the manner described in Section 4.05(d)(vii); provided,
however, that the Employer shall restore amounts forfeited if and when the
Participant or Beneficiary entitled to receive the distribution makes a claim
for such amounts. The Employer shall use due care in attempting to distribute
all benefits payable under the Plan.

     13.08 DISTRIBUTIONS TO A LEGAL REPRESENTATIVE. If the Plan Administrator
finds that a person entitled to a benefit is unable to care for his affairs
because he

                                       52
<PAGE>

is a minor or because of mental or physical incapacity, the Plan Administrator
may direct that any benefits due shall be paid to the Participant's Spouse,
child or legal representative of such person, unless a claim for such benefits
is made by his duly appointed legal representative. Any payments so made under
the direction of the Plan Administrator shall represent a complete discharge of
the Plan's liabilities therefor.

     13.09 EXPENSES. The Plan (from Participants' accounts) shall pay all costs
and expenses incurred in administering the Plan, to the extent permissible under
ERISA and the Code. The Company shall pay any expenses not paid from the Plan.
Direct charges and expenses arising out of the purchase or sale of securities or
other assets and taxes levied on or measured by such transactions may be charged
against the Accounts of the Participants in the Investment Fund(s) for which the
transaction took place.

     13.10 SOURCE OF PAYMENT. Benefits under the Plan shall be payable only out
of the Trust Fund. The Company shall have no obligation, responsibility or
liability to make any direct payment of benefits under the Plan.

                                       53
<PAGE>

                                   ARTICLE 14
                                 MERGER OF PLAN

     Notwithstanding any provision in the Plan to the contrary, effective as of
December 31, 2001, the Plan is merged into and with the Bowater Incorporated
Savings Plan.

                                     * * * *

     IN WITNESS WHEREOF, BOWATER INCORPORATED has caused this document to be
executed by its duly authorized officers effective as of the dates stated herein
and signed on the date shown below.

                                    BOWATER INCORPORATED

                                    By /s/ James T. Wright
                                      -----------------------------------------

                                    Name: James T. Wright
                                         --------------------------------------

                                    Title: Vice President - Human Resources
                                          -------------------------------------

                                    Date Signed: February 19, 2002
                                                -------------------------------

                                       54<PAGE>
                                                                    Exhibit 10.1

                      LOAN AND NOTE MODIFICATION AGREEMENT

         This Loan and Note Modification Agreement ("AGREEMENT") is executed to
be effective as of the 26th day of April, 2002, among JPS INDUSTRIES, INC.
("BORROWER"), JPS CONVERTER AND INDUSTRIAL CORP. ("GUARANTOR A"), JPS
ELASTOMERICS CORP. ("GUARANTOR B") (Guarantor A and Guarantor B, together,
"GUARANTORS") and WACHOVIA BANK, NATIONAL ASSOCIATION (SUCCESSOR BY MERGER TO
FIRST UNION NATIONAL BANK) ("BANK") and modifies (i) that certain Revolving
Credit and Security Agreement between Borrower, Guarantors and Bank dated as of
May 9, 2001 ("LOAN AGREEMENT") and (ii) that certain Promissory Note dated as of
May 9, 2001, in the original principal amount of Thirty-five Million and no/100
Dollars ($35,000,000.00) from Borrower to Bank ("NOTE").

                               FACTUAL BACKGROUND

         Bank currently has a $35,000,000.00 revolving line of credit loan (the
"LOAN") evidenced by the Note outstanding to Borrower. Borrower has requested a
change in certain of its financial covenants and Bank has agreed to such change
pursuant to the modifications of the terms and conditions set forth in the Loan
Agreement and Note as more particularly described below.

         Any capitalized terms used but not otherwise defined herein shall have
the meaning set forth in the Loan Agreement.

         NOW THEREFORE Bank, Borrower and Guarantors hereby agree as follows:

         1. The Loan Agreement is hereby modified as follows:

                  a.       The term "Bank" as defined on the title page and in
                           the introductory language of the Loan Agreement is
                           hereby redefined to mean Wachovia Bank, National
                           Association successor by merger to First Union
                           National Bank.

                  b.       SECTION 7(a) of the Loan Agreement is hereby deleted
                           in its entirety and replaced with the following:

                           "(a) FUNDED DEBT TO EBITDA RATIO. Borrower shall at
                           all times maintain, on a consolidated basis, a ratio
                           of Funded Debt to EBITDA of not more than 2.75 to
                           1.00 through fiscal quarter ending January 31, 2003,
                           and of not more than 2.00 to 1.00 at fiscal quarter
                           ending April 30, 2003 and at all times thereafter.
                           For the purposes hereof, "Funded Debt to EBITDA"
                           shall mean (the sum of all Funded Debt) DIVIDED BY
                           (the sum of earnings before interest, taxes,
                           depreciation and amortization, on a rolling four
                           quarters basis).

FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 1 OF 5
<PAGE>

                           "Funded Debt" shall mean, as applied to any Person,
                           the (sum of all indebtedness for borrowed money
                           (including, without limitation, capital lease
                           obligations, subordinated debt (including debt
                           subordinated to Bank), and unreimbursed drawings
                           under letters of credit) or evidenced by a note,
                           bond, debenture or similar instrument of that Person)
                           LESS the (the sum of operating leases, normal
                           payables and accruals, deferred warranty revenues,
                           unfunded benefit obligations and other long term
                           liabilities and all cash) all as outstanding at the
                           point of testing. The foregoing shall be calculated
                           quarterly."

                  c.       Exhibit 1 of the Loan Agreement is modified as
                           follows:

                           The definition of the term "Maximum Loan Amount" is
                           deleted in its entirety and replaced with the
                           following definition:

                           "Maximum Loan Amount@ means $27,000,000.00."

         2. The Note is hereby modified as follows:

                  a.       The term "Bank" as defined on the front page of the
                           Note is hereby redefined to mean Wachovia Bank,
                           National Association successor by merger to First
                           Union National Bank.

                  b.       The principal amount of the Note is hereby reduced
                           from $35,000,000.00 to $27,000,000.00.

                  c.       The paragraph "Interest Rate" is hereby deleted in
                           its entirety and replaced with the following:

                           "INTEREST RATE. Interest shall accrue on the unpaid
                           principal balance of this Note from the date of any
                           advances hereunder at the LIBOR Market Index Rate
                           plus the Applicable Margin indicated in the matrix
                           below, as that rate may change from day to day in
                           accordance with changes in the LIBOR Market Index
                           Rate ("Interest Rate"). "LIBOR Market Index Rate",
                           for any day, is the rate for 1 month U.S. dollar
                           deposits as reported on Telerate page 3750 as of
                           11:00 a.m., London time, on such day, or if such day
                           is not a London business day, then the immediately
                           preceding London business day (or if not so reported,
                           then as determined by Bank from another recognized
                           source or interbank quotation)."

FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 2 OF 5
<PAGE>

<TABLE>
<CAPTION>

                   --------------------------------------------------------------------------------------
                             Tier            Funded Debt to EBITDA Ratio          Applicable Margin
                                               (as defined in the Loan
                                                      Agreement)
                   --------------------------------------------------------------------------------------
                   <S>                           <C>                                    <C>

                               I                 Less than 1.0 to 1.0                   .90%
                   --------------------------------------------------------------------------------------
                              II             Greater than 1.0 to 1.0 but                1.15%
                                                 < 1.25 to 1.0
                   --------------------------------------------------------------------------------------
                              III              Greater than 1.25 to 1.0                 1.25%
                                                  but < 1.50 to 1.0
                   --------------------------------------------------------------------------------------
                              IV             Greater than 1.5 to 1.0 but                1.50%
                                                 < 1.75 to 1.0
                   --------------------------------------------------------------------------------------
                               V               Greater than 1.75 to 1.0                 1.75%
                                                   but < 2.0 to 1.0
                   --------------------------------------------------------------------------------------
                              VI             Greater than 2.0 to 1.0 but                2.00%
                                                   < 2.25 to 1.0
                   --------------------------------------------------------------------------------------
                              VII              Greater than 2.25 to 1.0                 2.35%
                   --------------------------------------------------------------------------------------
</TABLE>

                           Testing shall be made based on quarterly financial
                           statements required to be furnished by Borrower under
                           SECTION 5.6(b) of the Loan Agreement and shall be
                           conducted upon Bank's receipt of such financial
                           statements from Borrower. Changes in the Interest
                           Rate shall become effective as of the first day of
                           the first month following Bank's receipt of such
                           financial statements (the "Change Date"). In addition
                           to any applicable increase in the Interest Rate
                           resulting from an Event of Default (as defined in the
                           Loan Agreement), in the event that Borrower fails
                           timely to comply with SECTION 5.6(b) of the Loan
                           Agreement, the Applicable Margin shall be 2.35% as of
                           the Change Date following such noncompliance, until
                           cured."

         3. From the effective date hereof, any reference to the "Loan
Agreement" or the "Note" in any Loan Document shall mean the Loan Agreement and
the Note as amended by this Agreement.

         4. Prior to or at the Closing hereof, Borrower shall meet the
pre-closing requirements set forth in this PARAGRAPH 4 and Lender shall not be
required to make any further advances on the Loan until such pre-closing
requirements are met.

                  a.       There will be no origination or commitment fees
                           associated with this modification.

                  b.       Borrower shall provide Bank with resolutions of
                           Borrower and each Guarantor authorizing the
                           modifications provided for herein and shall provide
                           Bank with a Secretary's Certificate of No Change as
                           to the Bylaws and Articles of Incorporation of
                           Borrower and each Guarantor since the original
                           closing date of the Loan.

                  c.       Borrower shall provide Bank with such other
                           documents, instruments or agreements as Bank shall
                           deem necessary for this modification in its
                           reasonable discretion.

FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 3 OF 5

<PAGE>

         5. Borrower and each Guarantor hereby represents and warrants that, at
the time of the execution and delivery of this Agreement it is in compliance
with all of its respective covenants set forth in the Loan Agreement and any
other Loan Documents and that the representations and warranties set forth
therein pertaining to it continue to be true and accurate. Borrower further
represents and warrants that it has been duly authorized by all necessary
corporate action to enter into and bind the Borrower with regard to this
Agreement and to execute any documents necessary to consummate the transaction
contemplated hereby.

         6. Borrower and each Guarantor agrees to hold Bank harmless and
indemnify Bank and its successors and assigns from any and all claims or causes
of action arising in connection with this Agreement or otherwise related to the
Loan.

         7. Borrower and each Guarantor agrees to pay all costs and expenses
arising from this Agreement including, without limitation, all expenses and fees
of Lender's legal counsel, such amounts being stated on a Statement of
Borrower's Costs dated of even date herewith.

         8. Borrower and each Guarantor agrees to execute and deliver to Bank,
promptly upon request from Bank, such other and further documents as may be
reasonably necessary or appropriate to consummate the transactions contemplated
herein.

         9. This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same instrument.

         10. This Agreement is not a novation and, except as otherwise modified
hereby, the terms and provisions of the Loan Agreement, the Note and all Loan
Documents shall remain in full force and effect and shall continue to be secured
by the Collateral with the same force, effect and priority.

         11. This Agreement shall be governed by South Carolina law.

         12. This Agreement reflects the complete agreement of the parties
hereto as to the matters set forth herein and supercedes all prior negotiations
and oral understandings and is hereby incorporated into the Loan Agreement as if
set forth herein.

                          [See Signature Page Attached]

FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 4 OF 5

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement under seal
to be effective as of the date first written above.

                                       BORROWER:

                                       JPS Industries, Inc.

                                       /s/ Charles R. Tutterow
                                       -----------------------------------------
                                                                          (Seal)
                                       By:   /s/ Charles R. Tutterow
                                            ------------------------------------
                                       Its:  Executive Vice President
                                            ------------------------------------
                                       Date: April 26, 2002
                                            ------------------------------------

                                       GUARANTORS:

                                       JPS Converter and Industrial Corp.

                                       /s/ Charles R. Tutterow
                                       -----------------------------------------
                                                                          (Seal)
                                       By:  /s/ Charles R. Tutterow
                                            ------------------------------------
                                       Its:  Secretary
                                            ------------------------------------
                                       Date: April 26, 2002
                                            ------------------------------------

                                       JPS Elastomerics Corp.

                                       /s/ Charles R. Tutterow
                                       -----------------------------------------
                                                                          (Seal)
                                       By:  /s/ Charles R. Tutterow
                                            ------------------------------------
                                       Its:   Secretary
                                            ------------------------------------
                                       Date:  April 26, 2002
                                            ------------------------------------

                                       BANK:

                                       Wachovia  Bank,  National  Association
                                       (successor by merger of First Union
                                       National Bank)

                                       By:   /s/ James K. Baumgardner
                                             -----------------------------------
                                       Its:   Vice President
                                       Date:  5-10-02
                                             -----------------------------------

FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 5 OF 5

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