AGREEMENT



                   This Agreement is made as of the 24th day of July, 1998



BETWEEN:



                                    DAVID J. STEUART, of the City of Burlington,

                                    in the Province of Ontario



                                    (hereinafter called the "Executive")



                                                               OF THE FIRST PART



                                    -and-



                                    BOWATER INCORPORATED, a corporation

                                    incorporated under the laws of Delaware



                                    (hereinafter called the "Corporation")



                                                              OF THE SECOND PART



                  WHEREAS the Executive is employed by Bowater Pulp and Paper

Canada Inc. ("Bowater Canada"), previously called Avenor Inc. ("Avenor");



                  AND WHEREAS Avenor is a corporation resulting from the

amalgamation on January 1, 1989 of CIP Inc. and Canadian Pacific Forest Products

Limited;



                  AND WHEREAS the Corporation entered into an Amended and

Restated Arrangement Agreement dated as of March 9, 1998 with Avenor (the

"Arrangement Agreement") pursuant to which the Corporation and Avenor have

engaged in a transaction that had the economic effect of causing the Corporation

to acquire control of Avenor by way of a Plan of Arrangement (as defined in the

Arrangement Agreement) on July 24, 1998 (the "Effective Date");



                  AND WHEREAS the Corporation changed the name of Avenor, on

July 24, 1998, to Bowater Canada, and such change of name shall have no effect

on the mutual rights and obligations of the parties hereto;



                  AND WHEREAS the Corporation wishes to provide for the

Executive's continued employment on the same or better terms and conditions, in

the aggregate, following such transaction and to encourage the continued loyalty





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                                                                              2.



and dedication of the Executive to the affairs of the Corporation and Bowater

Canada, and in that connection to provide for the amendment and termination of

certain employment agreements between the Executive and Avenor and to provide

certain benefits in respect of the employment of the Executive that will be

received during and following his termination of employment with Bowater Canada;



                  NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration

of the mutual covenants and agreements hereinafter contained the parties do

hereby covenant and agree as follows:



1. EMPLOYMENT. The Corporation and the Executive agree that the Executive shall

continue employment with Bowater Canada on the terms and conditions of the

Employment Agreement attached hereto as Schedule A, effective the Effective

Date. The Corporation shall execute, and shall cause Bowater Canada to execute,

and the Executive shall execute such Employment Agreement immediately following

the execution of this Agreement, and such Employment Agreement shall be dated

the Effective Date. The Corporation and the Executive shall also execute

immediately following the execution of this Agreement a Change in Control

Agreement in the form attached hereto as Schedule B, which shall also be dated

the Effective Date.



2. CANCELLATION OF CERTAIN AVENOR AGREEMENTS. The Executive acknowledges and

agrees that, as of the Effective Date and upon the coming into force and upon

the execution and delivery of the Employment Agreement and the Change in Control

Agreement referred to in section 1 hereof, the following contracts are of no

force and effect whatsoever and the Executive hereby waives and releases any and

all rights he may have under such contracts:



         (a) employment agreement between Canadian Pacific Forest Products

         Limited (now called Avenor) and the Executive dated July, 1993;



         (b) change in control agreement dated September 1, 1993 between

         Canadian Pacific Forest Products Limited (now called Avenor) and the

         Executive, agreed to by the Executive on October 20, 1993, and amended

         by letter agreements dated February 21, 1996 and February 23, 1998; and



         (c) letter agreement dated September 1, 1993 from Canadian Pacific

         Forest Products Limited (now called Avenor) to the Executive, agreed to

         by the Executive on October 4, 1993.



3. CONFIRMATION OF RETIREMENT PLAN ARRANGEMENTS. The Corporation and the

Executive agree that the Executive shall continue membership (in respect of past

and future service) in the registered pension plan of Avenor of which he is

currently a member, and in the Senior Executive Retirement Plan of Avenor (the

"Avenor





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                                                                              3.



SERP"), without interruption, following the Effective Date, in accordance with

their respective terms. The Executive acknowledges and agrees that his

entitlement to a supplementary executive retirement benefit in respect of his

past and future service with Avenor and prior employers, as provided in the

terms of the Avenor SERP, is solely in accordance with the written terms of the

Avenor SERP dated November 28, 1997, and that such terms supersede the

provisions of the employment agreement dated July, 1993 between Canadian Pacific

Forest Products Limited and the Executive. For greater certainty, the

Corporation acknowledges and agrees that as of June 30, 1998 the Executive's

pensionable service for purposes of calculating all entitlements under the

Avenor registered pension plan and the Avenor SERP is 28.561 years.



4. GRANT OF OPTIONS FOR SHARES OF BOWATER INCORPORATED.



         (a) The Corporation shall grant to the Executive as of the day after

         the Effective Date a stock option award on the terms and conditions

         described in the Corporation's standard stock option agreement attached

         hereto as Schedule C (and as amended from time to time) for the right

         to purchase 25,000 shares of the Corporation's common stock at the

         price of such stock on the date of the grant.



         (b) In addition, management of the Corporation agrees to nominate

         Executive for a stock option award for an additional 20,000 shares at

         the January 1999 meeting of the Human Resources and Compensation

         Committee of the Corporation's Board of Directors, assuming the

         Executive is still surviving and has performed and is then performing

         his duties as contemplated hereunder and that such proposed award is in

         accordance with the compensation guidelines then applicable to other

         similarly situated executives of the Corporation, and the Corporation's

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