BOWATER INC, S-3/A, 1994-01-28

BOWATER INC
S-3/A, 1994-01-28
PAPER MILLS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1994.
REGISTRATION NO. 33-51571
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 62-0721803
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>

55 EAST CAMPERDOWN WAY
POST OFFICE BOX 1028
GREENVILLE, SOUTH CAROLINA 29602
(803) 271-7733
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
WENDY C. SHIBA, ESQ.
SECRETARY AND ASSISTANT GENERAL COUNSEL
BOWATER INCORPORATED
55 EAST CAMPERDOWN WAY
POST OFFICE BOX 1028
GREENVILLE, SOUTH CAROLINA 29602
(803) 271-7733
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
JAMES M. SHOEMAKER, JR., ESQ. DAVID O. BROWNWOOD, ESQ.
WYCHE, BURGESS, FREEMAN & PARHAM, P.A. CRAVATH, SWAINE & MOORE
44 EAST CAMPERDOWN WAY WORLDWIDE PLAZA
POST OFFICE BOX 728 825 EIGHTH AVENUE
GREENVILLE, SOUTH CAROLINA 29602-0728 NEW YORK, NEW YORK 10019
(803) 242-3131 (212) 474-1000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. ( )
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities being offered only in connection with dividend or
interest reinvestment plans, check the following box. ( )
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 28, 1994
P R O S P E C T U S
3,000,000 DEPOSITARY SHARES

[company logo appears here, see appendix]

EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF
% SERIES C CUMULATIVE PREFERRED STOCK
PAR VALUE $1 PER SHARE
Each of the 3,000,000 Depositary Shares offered hereby (the Depositary
Shares) represents a one-fourth interest in a share of % Series C Cumulative
Preferred Stock, par value $1 per share (Series C Preferred Stock), of Bowater
Incorporated (the Company) to be deposited with Trust Company Bank, as the
Depositary, and entitles its holder to that proportion of the rights and
preferences of the Series C Preferred Stock (including dividend, voting, and
liquidation rights) represented thereby. The proportionate dividend per annum
and liquidation preference of each Depositary Share are $ and $25,
respectively. The Depositary Shares are evidenced by the Depositary Receipts (as
defined herein). See Description of Depositary Shares.
Dividends on the Series C Preferred Stock are cumulative from the date of
initial issuance and are payable quarterly on January 15, April 15, July 15 and
October 15 of each year, commencing April 15, 1994. See Description of Series C
Preferred Stock -- Dividends.

The Series C Preferred Stock will not be redeemable prior to February ,
1999. On or after that date, the Series C Preferred Stock will be redeemable at
the option of the Company, in whole or in part, at $100 per share (equivalent to
$25 per Depositary Share) plus accrued and unpaid dividends (whether or not
declared) to the redemption date. The Series C Preferred Stock has no stated
maturity and will not be subject to any sinking fund or mandatory redemption and
will not be convertible into any other securities of the Company. See
Description of Series C Preferred Stock -- Optional Redemption.
See Certain Investment Considerations for certain considerations relevant
to the Depositary Shares offered hereby.
The offering of Series C Preferred Stock is being conducted at
approximately the same time as an offering of approximately $100 million of
% PRIDES, Series B Convertible Preferred Stock, par value $1 per share
(the Series B Convertible Preferred Stock). The closings of the two offerings
are not contingent upon each other. The Series C Preferred Stock will rank, as
to payment of dividends and distribution of assets upon liquidation, PARI
PASSU with the Company's LIBOR Preferred Stock, Series A, and the Series B
Convertible Preferred Stock. Application has been made to list the Depositary
Shares on the New York Stock Exchange (NYSE). The Series C Preferred Stock
will not be so listed, and the Company does not expect that there will be any
trading market for the Series C Preferred Stock except as represented by the
Depositary Shares.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
<S> <C> <C> <C>
Per Depositary Share.................................. $ $ $
Total (4)............................................. $ $ $
</TABLE>
(1) Plus one-fourth of accrued dividends, if any, on the shares of Series C
Preferred Stock from the date of initial issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See Underwriting.
(3) Before deducting expenses payable by the Company estimated to be
approximately $262,000.
(4) The Company has granted to the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to an additional
Depositary Shares at the price to public, less the underwriting discount,
solely to cover over-allotments, if any. If such option is exercised in
full, the Price to Public, Underwriting Discount, and Proceeds to Company
will be $ , $ and $ , respectively. See Underwriting.
The Depositary Shares are offered by the Underwriters, as specified herein,
subject to prior sale when, as and if delivered to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the Depositary Receipts evidencing the Depositary Shares
offered hereby will be made in New York, New York, on or about , 1994.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
KIDDER, PEABODY & CO.
INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
SMITH BARNEY SHEARSON INC.
This Prospectus is printed on recycled paper manufactured by the Company.
The date of this Prospectus is , 1994.

<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEPOSITARY
SHARES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Bowater Incorporated (the Company) is currently subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the 1934 Act), and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the Commission).
Such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained upon
written request addressed to the Securities and Exchange Commission, Public
Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, such reports, proxy statements and
other information can be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 and the Pacific Stock
Exchange Incorporated, 301 Pine Street, San Francisco, California 94104.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits, the Registration Statement)
under the Securities Act of 1933, as amended (the Securities Act), in connection
with this offering. In accordance with the relevant rules and regulations of the
Commission, this Prospectus, which forms a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement.
Statements contained herein concerning provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference. For further information, reference is hereby made to the
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference into this Prospectus, and made a
part hereof, the following documents previously filed with the Commission
pursuant to the 1934 Act (Commission File No. 1-8712):
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
2. The Company's Amendment to Annual Report on Form 8, dated April 12,
1993.
3. The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended April 3, 1993, July 3, 1993, and October 2, 1993.
4. The Company's Current Report on Form 8-K, dated January 18, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the Depositary Shares made hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the respective dates of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner of Depositary Shares, to whom a copy of this
Prospectus has been delivered, upon written or oral request, a copy of all the
documents referred to above that have been or will be incorporated in this
Prospectus by reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed to Ms. SuAnne B. Aune,
Director -- Investor Relations, Bowater Incorporated, 55 East Camperdown Way,
Post Office Box 1028, Greenville, South Carolina 29602 (telephone (803)
271-7733).
2

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UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT
THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. ALL TONNAGE
INFORMATION IN THIS PROSPECTUS IS BASED ON THE SHORT TON UNIT OF WEIGHT
(EQUIVALENT TO 2,000 POUNDS). EXCEPT AS OTHERWISE INDICATED, ALL REFERENCES TO
THE COMPANY INCLUDE REFERENCES TO THE COMPANY AND ITS CONSOLIDATED SUBSIDIARIES.
FOR THE DEFINITION OF CERTAIN TECHNICAL TERMS USED HEREIN, SEE TECHNICAL
GLOSSARY.
THE COMPANY
The Company is a major producer of world-traded wood fiber products,
including virgin and recycled content printing papers. The Company is:

(bullet) the largest United States and third largest North American
manufacturer of newsprint, having produced approximately 1.6 million
tons of newsprint in 1992,
(bullet) a major producer of coated and uncoated groundwood specialty paper for
magazines, catalogs, printed promotional pieces, directories and other
similar uses, having produced approximately 642,000 tons of coated and
uncoated groundwood specialty paper in 1992,
(bullet) a leading converter of paper into communication papers used in
computers and other business applications, having converted paper
into approximately 204,000 tons of business forms in 1992, and
(bullet) a supplier of market pulp and lumber products, having produced
approximately 331,000 tons of market pulp and 191.6 million board
feet of lumber in 1992.

Approximately 82 percent of the Company's 1992 sales were made in the
United States, with the balance made in export markets. Generally the Company
markets and distributes its products in the United States through its own sales
force and in the export markets through independent agents.
The Company's objective is to become the leading worldwide supplier of a
broad range of groundwood based paper products. To achieve this objective, the
Company focuses on product quality, customer service and costs. The Company
strives to remain a low cost producer and distributor in each of its product
categories and believes that its abundant fiber base, stable and well-trained
work force and strategic mill locations support this goal. The Company believes
that its attention to quality and commitment to customer service and
satisfaction have made it a preferred supplier in many of its market segments.
Recently, the Company has sought to enhance its margins by increasing the
percentage of higher value-added products in its product base and by introducing
new products. The Company has redirected some of its newsprint manufacturing
capacity to the manufacture of directory and other uncoated groundwood specialty
papers, which typically generate higher margins than newsprint. The Company also
manufactures a significant portion of the uncoated groundwood specialty paper
used in its communication papers converting business.
The Company is a leader in utilizing post-consumer wastepaper in the
manufacture of certain of its products. Due to new legislation and consumer
preference, the demand for newsprint and uncoated groundwood specialty paper
containing recycled fiber has increased significantly in recent years. The
Company believes that its ability to produce paper with recycled content has
become an important competitive factor.
The Company operates four paper mills and two sawmills in the United States
and one paper mill and one sawmill in Canada. These operations are fully
integrated and are supported by approximately 4.0 million acres of timberlands
(almost all of which are owned by the Company). The Company has invested
approximately $1.1 billion in its facilities since 1988, principally to improve
their efficiency and to add production and recycling capacity. As of June 1993,
five of the Company's nine newsprint machines were ranked among the top twelve
most efficient in the industry. As a result, the Company believes it is well
positioned to take advantage of improvements in its primary markets when and if
they occur.
The Company was incorporated in Delaware in 1964. The Company's principal
executive offices are located at 55 East Camperdown Way, Greenville, South
Carolina 29601 (telephone (803) 271-7733).
3

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RECENT DEVELOPMENTS
On January 18, 1994, the Company reported net income for the fourth quarter
of 1993 of $4.9 million, or $.12 per share, on net sales (meaning sales net of
distribution costs) of $340.4 million. Included in the quarter's results were a
pre-tax gain of $48.9 million ($30.6 million, or $.84 per share, after tax) on
the sale of approximately 68,000 acres of non-strategic real property holdings
and a charge of $10.0 million before tax ($6.3 million, or $.17 per share, after
tax) for costs related to companywide personnel reductions. This compares to a
net loss for the fourth quarter of 1992 of $20.9 million, or $.59 per share, on
net sales of $363.2 million. The Company's operating loss for the fourth quarter
of 1993 was $19.8 million, as compared with an operating loss of $12.5 million
for the fourth quarter of 1992.
For the twelve months ended December 31, 1993, the Company incurred a net
loss of $64.5 million, or $1.84 per share, on net sales of $1.35 billion. This
compares to a loss before accounting changes of $92.9 million, or $2.64 per
share, on net sales of $1.36 billion for 1992. The Company's operating loss was
$63.3 million for the twelve months ended December 31, 1993 (which included
$20.0 million of restructuring charges), as compared with an operating loss of
$74.1 million in 1992 (which included $5.0 million of restructuring charges).
USE OF PROCEEDS

The net proceeds to the Company from the sale of the Depositary Shares,
after deducting expenses estimated to be approximately $262,000, will
be approximately $ million ($ million if the Underwriters' over-allotment
option is exercised in full). The offering of the Depositary Shares is being
conducted at approximately the same time as an offering of approximately
$100 million of the Company's Series B Convertible Preferred Stock, from which
the Company estimates the net proceeds to the Company to be approximately
$ million. The closings of the two offerings are not contingent upon each
other.

The Company intends to use the net proceeds from the two offerings to fund
capital expenditures and other costs in the following order of priority: (i)
approximately $105 million for the construction of a recovery boiler at its
Calhoun, Tennessee, mill, expected to be completed and funded in the second
quarter of 1994; (ii) approximately $32 million to fund capital expenditures and
other costs incurred in connection with the previously announced closure of
certain obsolete facilities at its Millinocket, Maine, facility; and (iii)
approximately $10 million to fund the costs associated with its recently
announced reduction in personnel. Any remaining net proceeds will be used for
general corporate purposes. Pending these applications, the Company plans to
invest the proceeds from the offerings in short-term, investment-grade
securities.
If the sale of Series B Convertible Preferred Stock does not occur, or if
the proceeds from this offering of Depositary Shares and the anticipated sale of
Series B Convertible Preferred Stock are inadequate to fund the above items in
full, then the Company plans to use its other sources of available liquidity to
fund the capital expenditures and costs set forth above. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.
4

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CERTAIN INVESTMENT CONSIDERATIONS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS BEFORE
PURCHASING THE DEPOSITARY SHARES OFFERED HEREBY.
INDUSTRY CONDITIONS AND COMPETITION
The Company's operating results reflect the general cyclical pattern of the
pulp and paper industry. Most of the Company's products are world-traded
commodity products. Consequently, the Company, like other suppliers to this
market, has little direct influence over the timing and extent of price changes.
Product pricing is significantly affected by the relationship between industry
supply and demand, with the former influenced primarily by fluctuations in
available manufacturing capacity and the latter by the health of the economy in
general and the strength of print media in particular. See Business.
The markets for the Company's products are highly competitive, with a
number of major companies competing in each market. Certain of the Company's
competitors may have greater financial resources than the Company. In addition,
some of the Company's competitors are currently lower cost producers in some of
the businesses in which the Company operates, including newsprint. The Company
competes with Canadian, European and United States producers in most of its
product lines. Variations in the exchange rate between the United States dollar
and other currencies, particularly those of Canada, Sweden, and Finland,
significantly affect the relative competitive position of the Company as
compared to many of its competitors. See Business -- Competition.
Trends in electronic data transmission and storage could adversely impact
traditional print media, including products of the Company's customers; however,
neither the timing nor extent of these trends can be predicted with certainty.
Industry reports indicate that the Company's newspaper publishing customers in
North America have experienced some loss in market share to other forms of media
and advertising, such as direct mailings and newspaper inserts (both of which
are end uses for other selected Company products) and cable television. These
customers are also facing a decline in newspaper readership, circulation and
advertising lineage. The Company does not believe that this is the case in most
overseas markets.
RECENT OPERATING RESULTS
The Company reported a net loss of $82 million in 1992, its first net loss
since becoming an independent, publicly traded company in 1984. This loss
followed record and near record net income years in 1988 and 1989 of $164
million and $145 million, respectively. Losses have continued in 1993 with the
Company reporting a net loss for the first nine months of $69 million. In
response to these results, the Company has adopted an ongoing program to
maximize cash flow that involves: (i) improving the manner in which the Company
markets and sells its products; (ii) increasing operating efficiencies and
productivity to reduce costs; (iii) eliminating certain high-cost operations and
reducing personnel; (iv) reducing non-essential capital spending; (v) selling
non-strategic assets; and (vi) reducing the Company's Common Stock dividend by
50 percent. See Business and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company's financial condition and results of operations will continue
to be sensitive to prevailing economic conditions and other factors beyond the
Company's control, such as the level of pricing, demand for its products,
interest rates, and currency exchange rates.
INDEBTEDNESS; LIMITATIONS ON ABILITY TO DECLARE DIVIDENDS
At October 2, 1993, the Company had approximately $1.1 billion of long-term
debt outstanding. The Company could, subject to compliance with the covenants
contained in its debt instruments, incur other indebtedness in the future.
For the nine-month period ended on October 2, 1993, the Company's earnings
before interest, taxes, depreciation and amortization (EBITDA) were $78.3
million. For the same period, the Company's interest expense, net of capitalized
interest, was $73.6 million and dividend payments on its LIBOR Preferred Stock,
Series A, were $1.7 million. If the Depositary Shares and Series B Convertible
Preferred Stock had been outstanding, an additional $ million in dividends
would have accrued during that period. See Capitalization and Selected Financial
and Operating Data. In addition, the Company could incur interest on its future
borrowings, if any.
The Company's ability to pay dividends on any of its Preferred Stock,
including the shares of Series C Preferred Stock, and on its Common Stock will
depend on its maintaining adequate net worth and compliance with the required
ratio of total debt to total capital as defined in and required by the Company's
current credit agreement (the Credit Agreement). The Credit Agreement requires
the Company to maintain a minimum net worth (generally defined therein as common
shareholders' equity plus any outstanding Preferred Stock) of $750 million. In
addition, the Credit Agreement imposes a maximum 60
5

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percent ratio of total debt to total capital (defined therein as total debt plus
net worth). At October 2, 1993, the net worth of the Company and the ratio of
total debt to total capital were $806.6 million and 58 percent, respectively.
The Company's net worth and the ratio of total debt to total capital will
improve as a result of the sale of the Depositary Shares and, if it occurs, the
sale of the Series B Convertible Preferred Stock.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources.
LIQUIDITY
Since becoming an independent, publicly traded company in 1984, the Company
has relied upon both internal and external sources of funds. Beginning in 1990,
however, deteriorating economic conditions in the Company's major markets have
adversely affected operating cash flows. These conditions, when combined with
the costs associated with the acquisition of Great Northern Paper, Inc. (GNP),
at year-end 1991, have prompted the Company to place more emphasis upon external
sources of funds for its operating, financial and capital requirements.

The Company's Credit Agreement, under which no amounts were borrowed as of
December 31, 1993, expires in December 1995 and is used to meet working capital
requirements. The Company's ability to borrow under the Credit Agreement is
dependent upon compliance with the covenants therein. One of these covenants
requires a 12-month ratio of EBITDA to interest expense of not less than 1.0.
The Company's 12-month ratio of EBITDA to interest expense was approximately 1.0
for the year ended December 31, 1993. The Company has entered into an amendment
to the Credit Agreement that waives compliance with this covenant to, but not
including, December 31, 1994, at which time the covenant will be reinstated. The
Company's ability to comply with the interest coverage covenant when reinstated
on December 31, 1994, will substantially depend upon the Company's ability to
maintain approximately the same level of EBITDA the Company achieved through the
first nine months of 1993. There are no assurances that the Company will be able
to maintain or enhance such levels of EBITDA or that the Company will be able to
comply with the covenants contained in the Credit Agreement in the future. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.

In anticipation of raising additional equity capital through the sale of
the Depositary Shares and the Series B Convertible Preferred Stock being offered
at approximately the same time, the Company determined that it would not need
the full $250 million credit line currently provided by the Credit Agreement.
Therefore, at the Company's request, the Credit Agreement amendment further
provides that such credit line will automatically be reduced from $250 to $200
million on March 31, 1994, if the Company shall have received by that time at
least $150 million of net cash proceeds from the issuance by the Company of
capital stock.
ENVIRONMENTAL REGULATION
The Company and its operations are subject to a wide range of general and
industry-specific environmental laws and regulations relating to, among other
matters, air emissions, wastewater discharges, waste management and landfill
sites. Compliance with these laws and regulations is an important factor in the
Company's business. The Company will continue to incur capital and operating
expenditures to maintain compliance with applicable environmental laws and to
meet new regulatory requirements, including proposed regulations announced on
November 1, 1993, by the United States Environmental Protection Agency (the
EPA). The regulations, if adopted as currently proposed, will require compliance
by 1998 and incurrence by the Company of an estimated $150 million in capital
expenditures through 1998. The ultimate financial impact of the proposed
regulations on the Company will depend upon the nature of the final regulations,
the timing of required implementation, the cost of available technology, the
development of new technology, and the determination by the Company as to
whether to maintain certain production levels or operate certain equipment.
Management believes that the Company is in substantial compliance with all
current regulations governing air emissions, wastewater discharges, waste
management and landfill sites. Expenditures to comply with proposed and future
laws and regulations could have an adverse effect on the Company's business and
financial condition.
See Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Environmental Matters and -- Legal Proceedings.
6

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CAPITALIZATION
The following table sets forth the Company's capitalization at October 2,
1993, on an historical basis and as adjusted to give effect to (i) the sale of
the Depositary Shares and (ii) the sale of the Series B Convertible Preferred
Stock as if these sales had occurred on such date. See Use of Proceeds.
<TABLE>
<CAPTION>
OCTOBER 2, 1993
ACTUAL AS ADJUSTED
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Total debt, including current installments...................................................... $1,133,136 $ 1,133,136
Deferred income taxes........................................................................... 269,482 269,482
Minority interests in subsidiaries.............................................................. 146,960 146,960
LIBOR Preferred Stock, Series A, par value $1 per share, 1,500,000 shares outstanding,
$75,000,000 aggregate liquidation value....................................................... 74,341 74,341
Shareholders' equity:
% Series C Cumulative Preferred Stock, par value $1 per share, shares outstanding,
$ aggregate liquidation value offered hereby............................................ --
% PRIDES, Series B Convertible Preferred Stock, par value $1 per share, shares outstanding,
$ aggregate liquidation value (1)....................................................... --
Common Stock, par value $1 per share, 36,908,172 shares issued (2)............................ 36,908 36,908
Additional paid-in capital.................................................................... 332,553 332,553
Retained earnings............................................................................. 390,116 390,116
Equity adjustment from foreign currency translation........................................... (1,614) (1,614)
Loan to ESOT.................................................................................. (11,648) (11,648)
Treasury stock, at cost....................................................................... (14,054) (14,054)
Total shareholders' equity................................................................. 732,261
Total capitalization.................................................................. $2,356,180 $
</TABLE>

(1) The Series B Convertible Preferred Stock has not yet been issued. Issuance
is expected to occur at approximately the same time as the issuance of
shares of Series C Preferred Stock, but the offering of Depositary Shares
and the offering of Series B Convertible Preferred Stock are not contingent
on each other. Any issuance of the Series B Convertible Preferred Stock will
be subject to certain closing conditions and there can be no assurance that
the Series B Convertible Preferred Stock will be issued, if at all, at the
time, in the amount or on the terms shown.
(2) Excludes shares reserved for issuance upon the exercise of options.
7

<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data presented below for, and as of the end of, each
of the years in the five-year period ended December 31, 1992, are derived from
the Company's consolidated financial statements, which have been audited by KPMG
Peat Marwick, independent certified public accountants. The Company's
consolidated financial statements for each of the years in the three-year period
ended December 31, 1992, and the report thereon are incorporated by reference
into this Prospectus. The unaudited selected financial data presented below for
the nine-month periods ended October 2, 1993, and September 26, 1992, and as of
October 2, 1993, and September 26, 1992, are derived from the Company's
unaudited consolidated financial statements and, in the opinion of management,
include all adjustments (consisting only of normal, recurring adjustments)
necessary to state fairly the information included therein in accordance with
generally accepted accounting principles. The Company's unaudited consolidated
financial statements as of October 2, 1993, and for the nine-month periods ended
October 2, 1993, and September 26, 1992, are incorporated by reference into this
Prospectus. The results of operations for the nine-month period ended October 2,
1993, are not necessarily indicative of the results to be expected for the full
year.
SELECTED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 2, SEPTEMBER 26, YEAR ENDED DECEMBER 31,
1993 (1) 1992 (1) 1992 (1) 1991 (1) 1990 1989
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA:
Sales:
Pulp, paper and related products
Newsprint............................ $ 459.5 $ 479.4 $ 662.2 $ 601.4 $ 617.2 $ 645.3
Directory and uncoated specialties... 154.8 92.3 124.7 -- -- --
Coated paper......................... 236.3 217.7 296.1 259.9 279.0 279.2
Pulp................................. 70.8 100.2 136.4 138.0 170.7 182.6
Lumber, stumpage and other products.. 72.0 57.6 79.5 34.3 32.6 32.7
Total pulp, paper and related
products.......................... 993.4 947.2 1,298.9 1,033.6 1,099.5 1,139.8
Communication papers................... 145.9 155.2 207.5 254.9 280.9 310.2
Eliminations........................... (17.5) (7.4) (12.5) -- -- --
Total sales....................... $1,121.8 $ 1,095.0 $1,493.9 $1,288.5 $1,380.4 $1,450.0
Operating income (loss):
Pulp, paper and related products....... $ (20.4)(2) $ (38.9) $ (46.1) $ 108.4 $ 183.0 $ 284.6
Communication papers................... (7.0) (2.3) (2.3) 14.4 11.4 17.5
Corporate expenses..................... (16.1) (20.4)(3) (25.7)(3) (19.1) (19.5) (21.6)
Total operating income (loss)........ $ (43.5) $ (61.6) $ (74.1) $ 103.7 $ 174.9 $ 280.5
Interest expense, net of capitalized
interest............................... $ 73.6 $ 55.0 $ 78.2 $ 42.0 $ 41.3 $ 22.3
Provision for income taxes............... (37.5) (49.5) (63.6) 25.4 52.3 93.9
Net income (loss)........................ (69.4) (61.1) (82.0) 45.6 78.4 144.6
Fully diluted earnings (loss) per
share.................................. $ (1.96) $ (1.75) $ (2.34) $ 1.15 $ 2.05 $ 3.86
Ratio of earnings to combined fixed
charges and preferred dividends (4).... N/M N/M N/M 2.0x 3.1x 4.9x
BALANCE SHEET DATA:
Working capital.......................... $ 153.2 $ (41.5)(5) $ 193.3 $ 103.7 $ 59.7 $ 111.8
Timber and timberlands................... 441.6 437.4 432.6 414.1 297.9 285.7
Total assets............................. 2,747.5 2,702.9 2,881.6 2,780.0 2,297.9 2,284.2
Total debt............................... 1,133.1 933.9 1,134.3 864.5 498.2 532.4
LIBOR Preferred Stock, Series A.......... 74.3 74.2 74.3 74.2 74.1 74.0
Common shareholders' equity.............. 732.3 850.5 818.0 942.6 935.5 907.1

1988
<S> <C>

INCOME STATEMENT DATA:
Sales:
Pulp, paper and related products
Newsprint............................ $ 671.3
Directory and uncoated specialties... --
Coated paper......................... 269.7
Pulp................................. 153.2
Lumber, stumpage and other products.. 37.2
Total pulp, paper and related
products.......................... 1,131.4
Communication papers................... 279.0
Eliminations........................... --
Total sales....................... $1,410.4
Operating income (loss):
Pulp, paper and related products....... $ 345.0
Communication papers................... 9.7
Corporate expenses..................... (20.6)
Total operating income (loss)........ $ 334.1
Interest expense, net of capitalized
interest............................... $ 32.8
Provision for income taxes............... 110.1
Net income (loss)........................ 164.3
Fully diluted earnings (loss) per
share.................................. $ 4.37
Ratio of earnings to combined fixed
charges and preferred dividends (4).... 7.0x
BALANCE SHEET DATA:
Working capital.......................... $ 68.1
Timber and timberlands................... 273.5
Total assets............................. 1,880.5
Total debt............................... 293.2
LIBOR Preferred Stock, Series A.......... 73.9
Common shareholders' equity.............. 826.9
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 2, SEPTEMBER 26, YEAR ENDED DECEMBER 31,
1993 (1) 1992 (1) 1992 (1) 1991 (1) 1990 1989
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
OTHER DATA:
Depreciation, amortization and cost
of timber harvested.................... $ 121.8 $ 118.4 $ 161.9 $ 132.0 $ 117.5 $ 106.7
Cash flow from operations................ (43.0)(6) 78.1(6) 109.5(6) 156.6 238.4 327.3
Capital expenditures, including
timberlands............................ 88.0 104.9(7) 156.0(7) 465.1(7) 214.1 423.4
Common shareholders' equity per share.... $ 20.12 $ 23.50 $ 22.55 $ 26.21 $ 26.24 $ 25.37
Cash dividends declared per share of
Common Stock........................... $ .45 $ .90 $ 1.20 $ 1.20 $ 1.20 $ 1.14
Shipments (thousands of short tons):
Newsprint.............................. 1,073 1,190 1,631 1,244 1,266 1,278
Directory and uncoated specialties..... 252 142 191 -- -- --
Coated paper........................... 339 328 447 346 352 343
Pulp................................... 216 233 318 317 300 261

1988
<S> <C>

OTHER DATA:
Depreciation, amortization and cost
of timber harvested.................... $ 98.0
Cash flow from operations................ 324.3
Capital expenditures, including
timberlands............................ 214.3
Common shareholders' equity per share.... $ 23.07
Cash dividends declared per share of
Common Stock........................... $ .97
Shipments (thousands of short tons):
Newsprint.............................. 1,233
Directory and uncoated specialties..... --
Coated paper........................... 337
Pulp................................... 250
</TABLE>

(1) Income statement and cash flow data include the results of GNP for the 1993
and 1992 periods only. Balance sheet data at December 31, 1992, December 31,
1991, October 2, 1993, and September 26, 1992, include the accounts of GNP.
(2) Includes $10.0 million pre-tax restructuring charge for the Millinocket,
Maine, mill.
(3) Includes $5.0 million pre-tax restructuring charge for relocation of the
Company's corporate office.

(4) In computing the ratio of earnings to combined fixed charges and preferred
dividends, earnings include income before income taxes, minority interests,
cumulative effect of changes in accounting principles and extraordinary
charges plus fixed charges, other than capitalized interest and preferred
stock dividend requirements, plus amortization of capitalized interest.
Fixed charges include gross interest expense, amortization of deferred
financing expenses, preferred stock dividend requirements and an amount
equivalent to interest included in rental charges. Due to the losses
incurred for the nine month periods ended October 2, 1993, and September 26,
1992, and for the 1992 fiscal year, earnings were deficient by $117.0,
$135.8 and $175.7 million, respectively, to cover fixed charges.

(5) During this period, the Company classified $150.0 million of commercial
paper and other short-term borrowings as current liabilities under the terms
of a previous credit agreement. In prior periods, such indebtedness was
classified as long-term debt.
(6) In the third quarter of 1992, the Company sold $74.0 million of accounts
receivable pursuant to an asset securitization program. During the first
quarter of 1993, the Company discontinued selling receivables under this
program.
(7) $305.5 million was incurred in 1991 for the acquisition of 80 percent of the
stock of GNP and $16.5 million was incurred in 1992 in connection with the
acquisition of the remaining 20 percent of the stock of GNP (of which $9.8
million was incurred in the first nine months of 1992).
9

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS -- NINE MONTHS ENDED OCTOBER 2, 1993, AS COMPARED TO NINE
MONTHS ENDED
SEPTEMBER 26, 1992
For the first nine months of 1993, the Company incurred a net loss of $69.4
million, or $1.96 per share, on sales of $1.12 billion. Included in 1993's nine
month net loss was a $6.2 million after-tax ($10.0 million pre-tax)
restructuring charge for costs relating to the closure of obsolete facilities at
the Company's wholly-owned subsidiary, GNP. Also included was a $6.0 million
charge for additional deferred taxes relating to the recent increase in the
Federal corporate income tax rate from 34 to 35 percent. This loss for the first
nine months of 1993 compares to a loss before accounting changes of $72.0
million, or $2.05 per share, on sales of $1.1 billion for the same period in
1992. After the cumulative effect of adopting two new accounting standards
covering post-retirement benefits and income taxes, the net loss for the first
nine months of 1992 was $61.1 million, or $1.75 per share.
PULP, PAPER AND RELATED PRODUCTS
This segment includes the Company's uncoated groundwood paper (newsprint,
directory paper and specialties), lightweight coated groundwood paper (LWC),
hardwood and softwood market pulp, timber and lumber products. For the first
nine months of 1993, sales of pulp, paper and related products were $993.4
million, an increase from $947.2 million in the same period in 1992. For the
first nine months of 1993, the operating loss for this segment was $20.4 million
(after the $10.0 million pre-tax restructuring charge) versus an operating loss
of $38.9 million for the same period last year. The majority of improvement was
from the Company's newsprint product line. Below is a review of all the
Company's major product lines in this segment.
NEWSPRINT
Newsprint sales decreased 4.2 percent to $459.5 million in the first nine
months of 1993 from $479.4 million during the first nine months of 1992. United
States newsprint consumption for the first nine months of 1993 was essentially
unchanged compared to the first nine months of 1992. The Company's newsprint
tonnage sales decreased 9.9 percent during the first nine months of 1993 versus
the same period last year, as the Company decreased its annual newsprint
manufacturing capacity by 264,500 tons through permanent elimination of
production capacity and the redirection of capacity to higher value-added
products. For the first nine months of 1993, newsprint's operating results
improved compared to the first nine months of 1992 as average transaction prices
for the period increased 6.4 percent. This improvement is a result of the
reductions in the level of discounting from list prices which occurred during
the latter part of 1992 and early 1993, although average transaction prices have
decreased since mid-year 1993. Excess capacity, weak demand, and the continued
devaluation of Canadian, Swedish and Finnish currencies were major factors in
the Company's inability to effect higher selling prices and therefore
profitability. Improvements in the newsprint market are largely dependent upon a
recovery in print advertising demand and the rate of economic recovery
worldwide.
UNCOATED GROUNDWOOD PAPERS (DIRECTORY AND OTHER SPECIALTY PAPERS)
Sales in the directory and uncoated groundwood specialties product line
increased 67.7 percent to $154.8 million for the first nine months of 1993 from
$92.3 million for the first nine months of 1992. With regard to directory paper,
tonnage sales increased 68.9 percent during the first nine months of 1993
compared to the same period last year as the Company redirected 103,000 tons of
annual newsprint manufacturing capacity to directory grades. Average transaction
prices for directory paper decreased 3.7 percent during the first nine months of
1993 versus the same period in 1992 due to increased competition from new
producers entering the marketplace.
COATED PAPER
Coated paper sales increased 8.5 percent to $236.3 million for the first
nine months of 1993 from $217.7 million for the comparable period in 1992. The
Company's coated groundwood paper tonnage shipments for the first nine months of
1993 increased 3.4 percent over the same period in 1992. The Company announced a
7.0 percent coated paper price increase on July 1, 1993, and average transaction
prices were 5.0 percent higher for the first nine months of 1993 compared to the
first nine months of 1992. Since this announcement, however, there has been
substantial price discounting due to an increase in imports and a decrease in
demand for magazine advertising, eroding the majority of the price increase.
10

<PAGE>
PULP
For the first nine months of 1993, pulp sales decreased 29.3 percent to
$70.8 million from $100.2 million during the first nine months of 1992. Due to
global capacity additions and the slow-paced recovery of world economies, the
pulp market experienced severe overcapacity. As a result, market pulp selling
prices are at extremely low levels. Although major producers of market pulp have
announced price increases effective early in 1994, the future profitability of
market pulp remains uncertain and dependent upon the pace of economic recovery
in world markets.
COMMUNICATION PAPERS
For the first nine months of 1993, sales of communication papers (which
include stock computer forms and other business papers) decreased 6.0 percent to
$145.9 million from $155.2 million for the first nine months of 1992. This
segment experienced an operating loss of $7.0 million for the first nine months
of 1993 as compared to a loss of $2.3 million for the same period in 1992.
Average transaction prices were 6.4 percent lower during the first nine months
of 1993 versus 1992, as the weak economy failed to stimulate demand. Operating
costs for this segment during the first nine months of 1993 were 3.3 percent
lower than during the first nine months of 1992, due to lower base paper costs,
despite a price increase in this raw material on April 1, 1993. The Company
continues to focus in this segment on cost reductions and new product
developments through the vertical integration of a portion of its paper
manufacturing capacity.
INTEREST EXPENSE
Total interest expense for the first nine months of 1993 was $19.8 million
higher than in the same period last year due to the higher average level of
borrowings outstanding. In the first nine months of 1993, $2.0 million of
interest was capitalized versus $0.8 million in 1992.
INCOME TAXES
The Company recorded an income tax benefit for the first nine months of
1993 and 1992 due to the pre-tax loss incurred in both years. During the third
quarter of 1993, the Company recorded a $6.0 million tax provision reflecting
higher deferred tax liabilities due to the recent increase in the Federal
corporate income tax rate from 34 to 35 percent. As a result, the effective tax
rate for the first nine months of 1993 was 32.8 percent compared to 37.0 percent
in the prior year.
RESULTS OF OPERATIONS -- FISCAL YEARS 1992, 1991 AND 1990
Financial results in 1992 include the operations of GNP (80 percent of the
stock of which was acquired at the end of 1991) and, as a result, are not
directly comparable with those of 1991.
The Company incurred a net loss in 1992 of $82.0 million, or $2.34 per
share, on sales of $1.49 billion versus net income in 1991 of $45.6 million, or
$1.15 per share, on sales of $1.29 billion. During 1992, the Company took
non-recurring after-tax charges against income totaling $32.3 million. These
consisted of $7.7 million for a write-off of non-operating equipment, $3.2
million for a corporate restructuring involving the headquarters' move to
Greenville, South Carolina, and $21.4 million for the adoption of accounting
standard SFAS No. 106, which covers anticipated post-retirement benefits, mainly
healthcare. Also adopted in 1992 was accounting standard SFAS No. 109 relating
to deferred taxes, which had the effect of adding $32.3 million to the net
results.
In 1992, the weak economy affected both domestic and overseas markets.
Consumer hesitancy and business caution held back print advertising in
newspapers and magazines, as well as production of inserts and other promotional
materials. With demand weak in key product lines and excess capacity, prices
dropped even further from 1991's depressed levels, resulting in an operating
loss. Some production curtailments were necessary in newsprint early in the
year. Although newsprint prices turned up slightly in the second half of 1992
and coated paper prices firmed modestly in September and October 1992, pulp
prices declined and stock computer forms continued to sell at uneconomic price
levels. Results also were affected by higher than anticipated costs at the newly
acquired GNP operations.
Sales in 1991 represented a decline of 6.7 percent from the $1.38 billion
recorded in 1990, while net income of $45.6 million dropped 41.8 percent from
the $78.4 million earned in 1990. The 1990 net income was after an extraordinary
charge of $9 million to retire debt. Results in 1991 were adversely affected by
the persistent economic downturn. With industry overcapacity, there was severe
price competition in key product categories. Sales in 1990 declined 4.8 percent
from strong sales of $1.45 billion in 1989. Income before the extraordinary
charge fell 39.5 percent from the $144.6 million earned in 1989, reflecting the
softening economy in 1990 and unexpectedly high startup costs at two new pulp
mills.
11

<PAGE>
PULP, PAPER AND RELATED PRODUCTS
In 1992, sales in the pulp, paper and related products segment increased
25.7 percent to $1.30 billion from $1.03 billion in 1991, which was a 6.0
percent decrease from sales of $1.10 billion in 1990. Operating results for this
segment were a loss of $46.1 million in 1992 as compared to income of $108.4
million in 1991 and $183.0 million in 1990. With the acquisition of GNP at
year-end 1991, the Company's grade mix was markedly changed, and the traditional
segmented financial comparisons were no longer meaningful. Consequently,
beginning in 1992, all pulp, paper and related products have been grouped into a
single segment for financial reporting purposes. Within this segment, however,
market and operating trends will be discussed by major product categories.
NEWSPRINT
Newsprint sales in 1992 increased 10.1 percent to $662.2 million from
$601.4 million in 1991. Newsprint sales were $617.2 million in 1990 and $645.3
million in 1989. Newsprint traditionally has been a cyclical product, affected
by changes in worldwide economic conditions and the availability of capacity
relative to fluctuating demand. Since 1989, the market has endured a long
downturn. While 1989 consumption remained relatively strong, prices began to
weaken in response to impending capacity increases. In 1990, consumption was
essentially unchanged, while the impact of new capacity was softened by strikes
and other factors. In addition, prices in 1990 were erratic and down overall
from the previous year. By 1991, the deepening recession, along with significant
overcapacity, reduced prices further. United States consumption declined 6.0
percent, and North American newsprint producers increased price discounts to try
to maintain market share.
This situation continued well into 1992. The recession caused retailers to
curtail further their print advertising programs. Domestic newsprint consumption
began improving in the second quarter and ended the year 2.4 percent ahead of
1991. In August 1992 a modest price increase took effect; however, pricing at
December 31, 1992, remained well below that of two years earlier.
During this period, the Company focused on productivity, quality and strict
cost containment. Machine production records were achieved at each location, and
higher customer quality standards were met. This was particularly helpful in
export markets, where the Company's long-term strategy to build a growing
overseas customer base was highly successful in 1992, doubling its 1991 volume.
Export strength enabled the Company to keep newsprint downtime to a minimum.
Finally, the Company's ability to supply substantial tonnages of
high-quality newsprint having as much as 20 percent recycled fiber content
improved its competitive position.
UNCOATED GROUNDWOOD PAPERS (DIRECTORY AND OTHER SPECIALTY PAPERS)
Sales in the directory and uncoated specialties product line were $124.7
million in 1992. The GNP acquisition provided the capacity to produce directory
papers typically used in telephone books and yellow-page directories. These
papers generally have a higher added value than newsprint. Since the
acquisition, the Company has successfully re-established GNP as a premier
supplier of directory paper. The Company resolved quality and service problems
and aggressively sought to restore domestic customer loyalty and to develop new
markets overseas. A three-year purchase contract was signed late in 1992 for
purchases by Nippon Telephone and Telegraph, and groundwork was laid for a
presence in world markets in 1993 and beyond.
Uncoated groundwood specialty papers are produced on GNP's smaller
machines, as well as at the Company's Calhoun, Tennessee facility. These
products are used in a variety of applications such as television listings,
newspaper inserts and school supplies. During 1992, these products suffered in
very competitive markets.
COATED PAPER
Some signs of recovery in LWC were felt in the second half of 1992 after a
recession-induced decline. Coated paper sales increased 13.9 percent to $296.1
million from $259.9 million in 1991. The Company experienced relatively flat
sales in 1990 of $279.0 million versus sales in 1989 of $279.2 million.
Beginning in 1989, prices for LWC eroded in anticipation of large new
capacity additions. Even though industry and Company shipments continued to grow
through 1990, margins were lower as a result of intensifying price pressures.
Import competition became an important factor, and in 1991, the combination of
worldwide overcapacity and a weakening United States economy had an even more
severe impact. Shipments for magazines and catalogs were down sharply, and
prices declined further along with the Company's margins. These trends continued
into mid-1992, exacerbated by competition from price-reduced coated freesheet
grades that normally serve only higher end uses and were in excess supply. The
second half of
12

<PAGE>
the year saw some indications of recovery in demand. Magazine advertising page
counts also improved. Catalog merchandisers, who had suffered from higher postal
costs and a more competitive market, reworked formats and marketing strategies,
revitalizing their business. The market for newspaper advertising inserts and
coupons strengthened. At year-end 1992, although LWC prices had stabilized, they
remained at low levels.
With the GNP acquisition, the Company not only increased its coated
groundwood paper capacity by 37 percent, but broadened its line to include
lighter weight grades that cannot be made at the Catawba, South Carolina, mill.
The northern wood fiber available from GNP's 2.1 million acres will provide the
appropriate fiber resource for new coated paper capacity at this site when the
Company finds it opportune and prudent to move ahead with such a project.
The Company integrated the marketing of GNP's lines with its own coated
grades during 1992 and improved product quality, rebuilding customer
relationships. Despite the challenging conditions in 1992, the Company remained
profitable in this product category.
PULP
The Company produces bleached kraft market pulp in both softwood and
hardwood grades. About 70 to 80 percent of its production is exported. Pulp
sales in 1992 were flat at $136.4 million as compared to sales in 1991 of $138.0
million. Pulp sales in 1991 decreased 19.2 percent from pulp sales of $170.7
million in 1990.
The years 1990 through 1992 witnessed a sharp cyclical downturn in market
pulp. The market peaked in 1989 after four years of growth. Then, new capacity
additions came on stream in 1990 as the world economy was weakening, causing
sharp price declines. This continued for much of 1991, but prices rose
temporarily toward year-end 1991 and into mid-1992. Canadian and Scandinavian
producers took substantial down-time, and customers built inventories in
anticipation of a strike in British Columbia, which eventually kept
approximately 480,000 tons out of the market before the strike was settled in
July 1992. When the European currency crisis occurred in the fall of 1992 and
the economies in many of these countries weakened, the pulp market deteriorated.
At the same time, approximately 882,000 tons of low cost new capacity entered
the market from Chile and Brazil -- all this against a background of continued
weak world demand for paper, the principal end product. Prices fell in the
fourth quarter of 1992.
While market pulp remained profitable for 1992, the Company's operating
margins at December 31, 1992, were as low as they had been for some time. In the
near term, the Company faces European and Japanese economies that have slowed
down, some new capacity remains to come on stream and traditional customers,
such as those in Germany, are demanding chlorine-free pulps that much of the
industry, including the Company, cannot supply.
COMMUNICATION PAPERS
The Company's communication papers group was hard hit in 1992 by a
recession-induced decline in basic demand for stock computer forms as well as
relentless price competition. Both unit sales and price realizations eroded,
causing a decline in dollar sales of 18.6 percent, to $207.5 million, and an
operating loss. Sales decreased in 1991 by approximately 9.3 percent from sales
in 1990 of $280.9 million. Operating results for this segment were a loss of
$2.3 million in 1992 as compared to income of $14.4 million in 1991 and $11.4
million in 1990.
This segment's business since 1989 has been erratic. The communication
papers group achieved record results in 1989 because of strong demand and
favorable cost-price balances. In 1990, the reverse occurred as the United
States slid toward recession, demand softened and selling prices dropped while
raw material costs were still rising. Demand eased further in 1991, as did
selling prices. Because raw material costs declined even faster, however, the
group recorded an improvement in operating income.
The Company's communication papers group is one of the nation's leading
suppliers of stock computer forms and other communication papers. The group
sells directly to major corporate, government and institutional users. It also
reaches other businesses and offices, as well as individual consumers, through
resellers and mass merchandising outlets. Even though the Company's converting
and distribution costs have been regularly reduced, the market is considered
mature. The cost of forms bond paper remains a major factor in the profitability
of the converted products made from it.
Given this environment, the Company's strategic focus is to differentiate
itself from others in the marketplace by developing new products to gain the
benefits of vertical integration, using the capabilities of its primary pulp and
paper mills. The recycling plants in Tennessee and Maine afford the opportunity
for such developments. Working with the Calhoun mill, which developed the base
paper, the communication papers group introduced Environmental Bond EB-20(TM)
and Environmental White EW-20(TM), computer forms papers that contain 20
percent post-consumer or comparable recycled fiber. EB-20
13

<PAGE>
and EW-20 have enjoyed success in all markets, particularly with major
corporations, because of their cost effectiveness and suitability for large data
center applications. Similar products for all segments of the computer forms
market are under development.
RECYCLING CAPABILITY
The Company has focused its efforts in recent years on meeting the demand
for recycled content paper products -- an environmental benefit in reducing
solid waste landfill deposits and a marketing imperative for publishers and
other customers trying to meet recycled content standards.
The Company broke ground for its first recycling plant in 1990 at Calhoun,
Tennessee. The mill has been successful since its startup in 1991. Taking a
mixture of 70 percent used newspapers and 30 percent used magazines, the plant
utilizes advanced mechanical and chemical processes to produce high quality
pulp. When up to 20 percent of this mixture is combined with virgin fiber, the
resulting product is comparable in quality to paper produced with 100 percent
virgin fiber pulp. Substantial tonnages of recycled content paper have been made
available to newsprint customers, while increasing quantities of EB-20 and EW-20
have been shipped to the Company's communication papers group for conversion to
computer forms.
The first major project at GNP since the acquisition has been the
construction of a similar recycling plant to provide recycled fiber for
newsprint, directory papers and other groundwood papers at that location. When
this second facility reaches full production, expected in the fourth quarter of
1994, the Company will have a combined capacity to supply over 250,000 tons per
year of recycled fiber pulp to its paper mills.
LIQUIDITY AND CAPITAL RESOURCES
Since becoming an independent, publicly traded company in 1984, the Company
has relied upon both internal and external sources of funds. Beginning in 1990,
however, deteriorating economic conditions in the Company's major markets have
adversely affected operating cash flows. These conditions, when combined with
the costs associated with the acquisition of GNP at year-end 1991, have prompted
the Company to place more emphasis upon external sources of funds for its
operating, financial and capital requirements.
For the first nine months of 1993, the Company's operations used $43.0
million of cash compared to generating $78.1 million of cash in the same period
of 1992. The decline in operating cash flow resulted primarily from the
Company's decision to discontinue the sale of receivables under an asset
securitization program, thereby increasing receivables and decreasing cash by
$74 million. In addition, the Company received $19.8 million in tax refunds,
realized a lower operating loss ($18.1 million decrease) but paid higher
interest costs ($12.1 million increase) during the first nine months of 1993
compared to the same period in 1992. The higher interest costs resulted from
fourth quarter 1992 financings.

Capital expenditures for the first nine months of 1993 decreased $16.9
million from the first nine months of 1992. Included in 1992's expenditures was
a $9.8 million cash payment for the acquisition of the remaining 20 percent
interest in GNP. The Company's capital expenditures total approximately $120
million in 1993. Excluding the cost of the recovery boiler described under Use
of Proceeds, the Company anticipates spending approximately $150 million on
capital expenditures in 1994.

Cash generated from operations in 1992 fell to $109.5 million, a 30.1
percent decrease from the $156.6 million generated in 1991, which was itself a
34.3 percent decrease from 1990. This steady drop was caused by a three year
decline in operating income, resulting in an operating loss for 1992, compounded
by significantly higher interest payments due to increased debt levels.
Included in 1992's cash flow from operations was a sale of $74 million of
receivables in August 1992 under the asset securitization program. The net cash
proceeds from this sale were used to retire commercial paper. The accounts
receivable sale was reflected as a reduction of receivables in the Consolidated
Balance Sheet at December 31, 1992. Under the terms of the agreement relating to
this program, the maximum amount of the purchaser's investment in the Company's
receivables at any one time is $80 million.
Due to the reduced level of cash generated from operations, the Company
took a number of steps in 1992 to conserve cash. Foremost among these steps was
a curtailment in capital expenditures. Cash invested in capital projects
(excluding the acquisition costs for GNP) totaled $139.5 million in 1992,
compared to $159.7 million and $214.1 million in 1991 and 1990, respectively.
Investments in 1992 were primarily for routine maintenance at the Company's
mills, but include expenditures
14

<PAGE>
for a new $62 million newsprint recycling plant at the East Millinocket, Maine,
mill. This plant is similar in design to the $66.6 million recycling facility
completed in 1991 at the Company's Calhoun, Tennessee, mill.
Borrowings in 1991 included $200 million of 8 1/2% Notes due 2001 and $200
million of 9 3/8% Debentures due 2021, incurred primarily to finance the
acquisition of GNP. In 1991, the Company also borrowed $30 million in proceeds
of tax-exempt 7 5/8% pollution control bonds issued by McMinn County, Tennessee,
partially financing the construction of the Calhoun recycling plant. An
additional $16.4 million in proceeds of McMinn County and York County, South
Carolina, tax-exempt pollution control refunding bonds, with interest rates
varying from 6.85 percent to 7.40 percent, were borrowed in 1991 to refund
outstanding higher cost bonds.
In October 1992, the Company sold $125 million of 8 1/4% Notes due 1999 and
$125 million of 9 1/2% Debentures due 2012. Approximately $150 million of the
net proceeds were used to repay revolving credit obligations and other
short-term borrowings. The remaining proceeds were invested in high-grade
marketable securities pending application to general corporate purposes.
Also in October 1992, the Company borrowed $62 million in proceeds of
tax-exempt 7 3/4% revenue bonds due 2022, through the Finance Authority of
Maine, and in December 1992 borrowed $39.5 million in proceeds of tax-exempt
7.40% revenue bonds through McMinn County. Proceeds from these issues were used
to fund the construction and completion of the recycling facilities at East
Millinocket and Calhoun, respectively.
As the Company secured the long-term financing in the capital markets
described above, its reliance on other credit facilities has decreased.
Accordingly, the Company has from time to time sought and put in place more
appropriately sized credit facilities.
Prior to 1992, the Company's general liquidity needs were met by a $400
million multiple option credit facility and a $350 million revolving credit
agreement. The Company replaced these facilities in the first quarter of 1992
with a $500 million credit agreement (the 1992 Credit Agreement). By the fourth
quarter of 1992, the Company believed that compliance with certain financial
covenants in the 1992 Credit Agreement was not assured, due to the increased
operating losses discussed above and the Company's increased indebtedness. In
December 1992, after reassessing the Company's liquidity needs, the Company
requested and received a $250 million, three-year revolving credit facility
provided by the Credit Agreement. All financial obligations outstanding under
the 1992 Credit Agreement were repaid as of December 31, 1992.

The new Credit Agreement, under which no amounts were borrowed as of
October 2, 1993, expires in December 1995 and is used to meet working capital
requirements. The Company's ability to borrow under the Credit Agreement is
dependent upon compliance with the covenants contained in the Credit Agreement.
One of these covenants requires a 12-month ratio of EBITDA to interest expense
of not less than 1.0. The Company's 12-month ratio of EBITDA to interest expense
was approximately 1.0 for the year ended December 31, 1993. The Company has
entered into an amendment to the Credit Agreement that waives compliance with
this covenant to, but not including, December 31, 1994, at which time the
covenant will be reinstated. The Company's ability to comply with the interest
coverage covenant when reinstated on December 31, 1994, will substantially
depend upon the Company's ability to maintain approximately the same level of
EBITDA the Company achieved through the first nine months of 1993. There are no
assurances that the Company will be able to maintain or enhance such levels of
EBITDA or that the Company will be able to comply with the covenants contained
in the Credit Agreement in the future.

<PAGE>
to total capital will improve upon the sale of the Depositary Shares and, if it
occurs, the sale of the Series B Convertible Preferred Stock being offered at
approximately the same time as the Depositary Shares.
In August 1992, Standard and Poor's Corporation (S&P) lowered its rating of
the Company, and those of several other pulp and paper companies, as a result of
deteriorating conditions in the pulp and paper industry. In November 1993, S&P
lowered the Company's senior debt and Preferred Stock ratings and changed the
Company's outlook from negative to stable. S&P confirmed its rating on the
Company's commercial paper. The Company's senior debt rating was reduced from
BBB to BBB-, and its LIBOR Preferred Stock, Series A rating was reduced from
BBB-to BB+. The new S&P ratings may raise the cost of any future financings the
Company may undertake and will increase the cost of borrowing under the Credit
Agreement. Moody's Investors Service (Moody's) rates the Company's senior debt
as Baa1, the LIBOR Preferred Stock, Series A, as Baa1 and the Company's
commercial paper as P-2. These ratings are not a recommendation to buy, sell or
hold securities of the Company (including the securities offered hereby) and may
be subject to revision or withdrawal at any time by the assigning rating agency.
Each agency's rating should be independently evaluated.
Due to the prevailing poor market conditions, the Company's management is
continually reviewing all aspects of the Company's operations in an effort to
reduce losses and improve cash flow. As part of these activities, the Company
has closed the Darien, Connecticut, corporate office, consolidating it with
other operations in Greenville, South Carolina. Commencing with the dividend
paid April 1, 1993, the Board of Directors reduced the dividend per share of
Common Stock to $.15 per share from $.30 per share.
In August 1993, the Company announced the closure of certain obsolete
facilities at the Millinocket, Maine, mill and the resulting elimination of
approximately 200 jobs. In November 1993, the Company announced the additional
elimination of approximately 450 positions companywide to be completed by the
end of 1994. Savings associated with both of these moves are estimated to be
approximately $40 million per year. The personnel reductions will be achieved
through attrition, early retirements and terminations, and, when completed, will
represent a total reduction of approximately 10 percent of the Company's work
force. The Company will record pre-tax charges totaling approximately $20
million in 1993 as a result of these actions (of which $10 million was recorded
in the third quarter and approximately $10 million will be recorded for the
fourth quarter).
In the fourth quarter of 1993, the Company sold approximately 68,000 acres
of non-strategic real property holdings in Alabama, Georgia, Mississippi, Ohio
and South Carolina. Proceeds from these transactions total approximately $69
million, resulting in pre-tax income of $48.9 million ($30.6 million, or $0.84
per share, after-tax).
ENVIRONMENTAL MATTERS
The Company is subject to a variety of federal, state and provincial
environmental and pollution control laws and regulations in all jurisdictions in
which it operates. The Company believes that all of its operations are currently
in substantial compliance with all applicable environmental laws and
regulations.
New Canadian federal regulations governing the discharge of pulp and paper
mill effluents were promulgated on May 20, 1992. These regulations will impose
new restrictions on the effluent of the Mersey mill that will require the
installation of a wastewater treatment facility at a cost of approximately $22
million, spread over 1994-95. The Company has obtained an extension to December
31, 1995, of the effective date of compliance with these new regulations, which
the Company believes will give it sufficient time to install the necessary
equipment.
Dioxins and other chlorinated organics are contained in the effluents of
bleached kraft pulp mills. Both the South Carolina and Tennessee facilities,
which have bleached kraft pulp mills, have received discharge permits with
dioxin limitations. Currently, the effluents of both mills are well below the
respective current discharge limits for dioxin. On November 1, 1993, the EPA
proposed regulations that would impose new air and water quality standards aimed
at further reductions of pollutants. Final promulgation of these regulations is
due by the fall of 1995. The regulations, if adopted, will require compliance by
1998. If adopted as proposed, these new rules will require capital expenditures
at all of the Company's United States facilities, but most significantly at its
Catawba, South Carolina, facility. The Company has a number of options in
complying with the new regulations, and the amount of required capital
expenditures will depend upon which of several alternative courses of action the
Company undertakes consistent with the regulations. The Company believes that
these alternatives would require aggregate capital expenditures by the Company
of approximately $150 million through 1998. The ultimate financial impact to the
Company of compliance will depend upon the nature of the final regulations, the
timing of required implementation, the cost of available technology, the
development of new technology, and the determination of the Company as to
whether to maintain certain production levels or operate certain equipment.
16

<PAGE>
Other than capital expenditures needed to comply with the new Canadian
federal regulations and the EPA's proposed regulations described above, the
Company anticipates that continued upgrading of its facilities to maintain
environmental compliance should require capital expenditures of approximately
$10 million to $15 million per year for the foreseeable future.
The Company has been identified as a potentially responsible party under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (CERCLA or Superfund), for the cleanup of contamination at five
Superfund sites. Based upon its percentage share in each proceeding and the
amount of capital expenditures, deferred charges or charges to income involved,
the Company believes that such matters will not result in liabilities that will
have a material adverse effect on the Company's financial condition or future
results of operations.
While it is difficult to predict with certainty the nature of future
environmental regulations, the Company believes that, as compared to many of its
North American competitors, it will not be at a competitive disadvantage in
meeting future United States or Canadian standards.
LEGAL PROCEEDINGS

In January 1994, the Company settled for an aggregate sum of approximately
$10.5 million all pending lawsuits naming the Company and other parties as
defendants in the State Circuit Courts of Hamilton County, Knox County and
McMinn County, Tennessee, and in the United States District Court for the
Eastern District of Tennessee, that claimed compensatory and punitive damages
for wrongful death, personal injury and/or property damage arising out of a
series of vehicular accidents that occurred on December 11, 1990, in fog on
Highway I-75, which passes in the general area of the Company's Calhoun,
Tennessee, mill property. The plaintiffs in these actions had sought to make the
Company liable on the theory that the mill's operations created the fog or
contributed to its density.

The Company's excess insurers reserved rights with respect to coverage of
the plaintiffs' claims on various grounds including their assertion that
coverage is not available for pollution claims, for consequences expected or
intended by the Company or for any punitive damages. On November 22, 1993, the
Company filed a complaint in the United States District Court for the Eastern
District of Tennessee against its first excess insurer, National Union Fire
Insurance Company, which seeks a declaratory judgment in favor of the Company on
the issues in dispute with that insurer.

The settlements will be funded by the Company's insurance carriers,
subject, in the case of approximately $9.5 million funded by the Company's first
excess insurer, to subsequent determination of ultimate coverage responsibility
in the pending insurance coverage lawsuit. Although no assurance can be
provided, the Company believes that it should prevail on the insurance coverage
issue.

The Company is also involved in various litigation relating to contracts,
commercial disputes, tax, environmental, workers' compensation and other
matters. The Company's management is of the opinion that the ultimate
disposition of these matters will not have a material adverse effect on the
Company's operations or its financial condition taken as a whole.
17

<PAGE>
BUSINESS
GENERAL
The Company is a major producer of world-traded wood fiber products,
including virgin and recycled content printing papers. The Company is:
(bullet) the largest United States and third largest North American
manufacturer of newsprint, having produced approximately 1.6
million tons of newsprint in 1992,
(bullet) a major producer of coated and uncoated groundwood specialty paper
for magazines, catalogs, printed promotional pieces, directories
and other similar uses, having produced approximately 642,000
tons of coated and uncoated groundwood specialty paper in 1992,
(bullet) a leading converter of paper into communication papers used in
computers and other business applications, having converted paper
into approximately 204,000 tons of business forms in 1992, and
(bullet) a supplier of market pulp and lumber products, having produced
approximately 331,000 tons of market pulp and 191.6 million
board feet of lumber in 1992.
Approximately 82 percent of the Company's 1992 sales were made in the
United States, with the balance made in export markets. Generally the Company
markets and distributes its products in the United States through its own sales
force and in the export markets through independent agents.
The Company's objective is to become the leading worldwide supplier of a
broad range of groundwood based paper products. To achieve this objective the
Company focuses on quality, customer service and costs. The Company strives to
remain a low cost producer and distributor in each of its product categories and
believes that its abundant fiber base, stable and well-trained work force and
strategic mill locations support this goal. The Company believes that its
attention to quality and commitment to customer service and satisfaction have
made it a preferred supplier in many of its market segments.
Recently, the Company has sought to enhance its margins by increasing the
percentage of higher value-added products in its product base and by introducing
new products. The Company has redirected some of its newsprint manufacturing
capacity to the manufacture of directory and other uncoated groundwood specialty
papers, which typically generate higher margins than newsprint. The Company also
manufactures a significant portion of the uncoated groundwood specialty paper
used in its communication papers converting business.
The Company is a leader in utilizing post-consumer wastepaper in the
manufacture of certain of its products. Due to new legislation and consumer
preference, the demand for newsprint and uncoated groundwood specialty paper
containing recycled fiber has increased significantly in recent years. The
Company believes that its ability to produce paper with recycled content has
become an important competitive factor.
The Company operates four paper mills and two sawmills in the United States
and one paper mill and one sawmill in Canada. These operations are fully
integrated and are supported by approximately 4.0 million acres of timberlands
(almost all of which are owned by the Company). The Company has invested
approximately $1.1 billion in its facilities since 1988, principally to improve
their efficiency and to add production and recycling capacity. As of June 1993,
five of the Company's nine newsprint machines were ranked among the top twelve
most efficient in the industry. As a result, the Company believes it is well
positioned to take advantage of improvements in its primary markets when and if
they occur.
PULP AND PAPER PRODUCTS SEGMENT
OVERVIEW
Newsprint is a basic type of printing paper used primarily in the
publication of newspapers with much of the remaining production going to
commercial printers for preprinted newspaper inserts and government printing
jobs. The highly capital intensive newsprint industry is global and
characterized by periods of supply and demand imbalance, primarily in the North
American, Western European and Asian markets. The demand for newsprint is most
heavily influenced by newspaper advertising and circulation and tends to track
general economic cycles. Increases in supply are mostly influenced by the
addition of large new newsprint machines which take approximately two years to
construct and place in service. Capacity additions may be announced and
implemented at similar times by several independent producers, which can
contribute to periods of oversupply.
18

<PAGE>
Uncoated groundwood specialty papers are generally of higher quality and
command higher prices than newsprint. These papers are manufactured using
production processes similar to those used for newsprint but typically have
significantly better printing characteristics, giving them a broader variety of
printing and advertising uses. These printing papers are used in a variety of
products, such as catalogs, directories, newspaper inserts, periodicals and
business papers.
Coated paper is a higher quality printing paper than uncoated groundwood
paper. Coated papers are typically categorized into a variety of types depending
on their ultimate end use. These varieties range from those suited for use in
annual reports and expensive advertising and marketing pieces to coated paper
used in mass market magazines, catalogs, coupons and newspaper inserts. The
manufacture of coated paper is more technically demanding than that of newsprint
or other uncoated groundwood papers.
The uncoated specialty and coated groundwood papers businesses also tend to
be cyclical and are significantly influenced by global competitive factors.
Prices for the various grades of uncoated groundwood specialty and coated
groundwood papers generally follow the price trends for newsprint and coated
freesheet papers, respectively, which in periods of oversupply may substitute
for these groundwood papers.
Pulp is produced by reducing wood into its component parts. Market pulp is
generally sold to other paper manufacturers. Because pulp is used in paper
products, demand for market pulp tends to track that for groundwood and
freesheet paper products.
NEWSPRINT
INDUSTRY OVERVIEW
Worldwide newsprint consumption in 1992 was approximately 35.5 million
tons, of which approximately 14.0 million tons or 39 percent were consumed in
North America, 8.8 million tons or 25 percent were consumed in Western Europe,
7.9 million tons or 22 percent were consumed in Asia and 4.8 million tons or 14
percent were consumed in the rest of the world.
Approximately 77 percent of the United States newsprint market is used by
daily newspapers and the remaining 23 percent goes into weekly newspapers,
pre-printed newspaper inserts, paperback books and similar uses. Of the 17.2
million tons of newsprint shipped by the North American newsprint industry in
1992, 12.8 million tons were shipped to the United States, 1.1 million tons were
shipped to Canada and 3.3 million tons were shipped to offshore markets,
principally Europe, Asia and Latin America. Approximately 40 percent of all
newsprint sold in the United States is sold to 10 major publishers.
The following table sets forth North American shipments, capacity, industry
operating rates, net exports and United States consumption for newsprint, as
reported by the American Forest and Paper Association (AFPA), and average
eastern United States transaction prices per ton, as reported by Resource
Information Services, Inc. (RISI).
NORTH AMERICAN NEWSPRINT
(THOUSANDS OF TONS, EXCEPT PERCENTAGES AND DOLLAR AMOUNTS)
<TABLE>
<CAPTION>
FIRST TEN
MONTHS OF
1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shipments.......................... 14,395 17,202 16,402 16,624 16,668 16,705 16,565 15,795 15,240
Capacity........................... 15,159(1) 18,413 18,392 17,926 17,341 17,077 16,870 16,661 16,562
Industry operating rate (2)........ 96% 92% 91% 93% 96% 99% 98% 95% 92%
Net exports (3).................... 2,592 3,202 2,701 2,027 2,201 1,830 1,560 1,635 1,362
U.S. consumption................... 10,611 12,824 12,545 13,365 13,493 13,498 13,562 13,088 12,684
Average eastern United States
transaction prices (United States
$) (4)........................... $415 $399 $481 $502 $512 $545 $497 $445 $454

1984 1983
<S> <C> <C>
Shipments.......................... 15,418 14,376
Capacity........................... 16,554 16,670
Industry operating rate (2)........ 93% 87%
Net exports (3).................... 1,574 1,801
U.S. consumption................... 12,510 11,606
Average eastern United States
transaction prices (United States
$) (4)........................... $450 $422
</TABLE>

(1) 10/12 of 1993 reported capacity.
(2) Calculated as the ratio of production to capacity.
(3) Total exports less total imports. Import data for the first ten months of
1993 were estimated.
(4) Transaction prices reflect an estimate of average delivered transaction
prices per ton for major contract buyers in the eastern United States.
Approximately 2.8 million tons of newsprint capacity were added in North
America from 1989 through 1991. These increases were accomplished through
expansions and improvements of existing facilities, resulting in twelve new
machines (five in the United States and seven in Canada) in operation. However,
United States newsprint consumption declined 5.4 percent between its peak in
1987 and 1992. This drop in consumption, coupled with the increase in new and
upgraded capacity, led to market oversupply and a drop in newsprint prices from
their high in 1988 of $545 per ton to $399 per ton in
19

<PAGE>
1992. The Company believes that this drop in prices resulted in operating losses
for most newsprint producers including the Company.

Faced with unprofitable machines and excess supply, some North American
producers either shut down or converted approximately 1.4 million tons of
newsprint capacity during 1989-1992. In addition, several North American
newsprint producers have announced closures and conversions to higher grades of
paper that would effectively remove approximately 330,000 tons of newsprint from
the market during 1993. Certain industry observers believe that the increasing
costs of compliance with environmental legislation could result in additional
closures of newsprint machines in North America. As of the date of this
Prospectus, the Company is aware of no significant announced North American
newsprint capacity increases and therefore believes that newsprint production
capacity increases by its North American competitors over the next two to three
years should be negligible. The Company is also aware, however, that
approximately 550,000 tons of industry newsprint capacity will be added in
Europe over the 1994-1996 time period.

The Company believes that four factors worked to pressure newsprint prices
in 1993. First, demand was essentially unchanged. Second, an anticipated strike
in eastern Canada did not materialize. These two factors contibuted to
substantially larger inventories than normal. Third, Canadian newsprint
producers became more cost competitive against United States producers due to
weakening in Canada's currency and cost reduction efforts. Finally, the
opportunity for North American newsprint producers to export was hurt by the
devaluation of Swedish and Finnish currencies in late 1992. Prices have weakened
steadily from the first half of 1993, eliminating the increase in transaction
prices that was achieved in March 1993.

North American newsprint operating rates and inventories have approached
levels that prompted numerous east coast industry producers (including the
Company) to announce a 7 percent reduction in price discounts effective March 1,
1994. No assurance can be given, however, that any price increase can be
achieved.
RECYCLED FIBER CONTENT IN NEWSPRINT
Since the late 1980's, demand for newsprint with recycled content has
increased significantly as a result of two principal factors: (i) existing and
anticipated legislation requiring the use of newsprint with minimum levels of
recycled fiber content and (ii) increasing public preference for products
perceived to be more environmentally friendly.
The technology of producing recycled pulp has improved substantially as
demand for paper containing recycled fiber has increased. The technology used by
the Company to produce recycled pulp is state-of-the-art and permits the Company
to provide recycled content papers with qualities comparable to virgin
wood-based papers.
COMPANY OPERATIONS
The Company is the largest United States manufacturer of newsprint and is
the third largest newsprint manufacturer in North America. Its newsprint
production for the nine months ended October 2, 1993, was approximately 1.1
million tons, representing approximately 8.4 percent of total North American
newsprint production for the same period.

The Company manufactures newsprint in a variety of basis weights. The
Company's newsprint production is sold directly by the Company, primarily to
newspaper publishers and commercial printers, through regional sales offices
located in major metropolitan areas of the eastern half of the United States. In
1992, Advance Publications, Inc., and The Washington Post (which separately have
an investment with a minority voting interest in certain production facilities
at two of the Company's mills) collectively accounted for approximately 8.1
percent of the Company's consolidated sales and 18.2 percent of the Company's
newsprint sales. Virtually all of the Company's newsprint customers buy from
several suppliers. The Company is a major exporter of newsprint, selling
between approximately 20 percent and 25 percent of its total newsprint
production abroad, and has exported into the European, South American and
Asian markets for many years. The geographic locations of the Company's
newsprint mills permit distribution of their products by rail, truck, ship or
barge.

During the recent period of economic downturn, the Company has continued to
invest in its mills to maintain modern, productive and cost-effective
facilities. The Company has focused on productivity, quality and cost
containment, achieving Company production records at each location, while at the
same time meeting strict customer quality standards.
The Company's ability to supply substantial quantities of high-quality
newsprint having as much as 20 percent recycled fiber content has given the
Company a competitive advantage in the newsprint industry.
20

<PAGE>
UNCOATED GROUNDWOOD SPECIALTY PAPERS (DIRECTORY AND OTHER SPECIALTY PAPERS)
INDUSTRY OVERVIEW
Worldwide uncoated groundwood specialty paper consumption in 1992 was
approximately 12.0 million tons, of which approximately 3.8 million tons or 32
percent were consumed in North America, 3.8 million tons or 32 percent were
consumed in Western Europe, and 4.4 million tons or 36 percent were consumed in
the rest of the world.
Directory paper is used primarily in publications such as telephone books,
while other groundwood specialty papers are used in newspaper inserts, direct
mail advertisements, catalogs, school supplies and similar kinds of
applications. Prices for uncoated groundwood specialty papers are generally
higher than for newsprint. These prices, however, are influenced by prices for
newsprint and for coated groundwood papers, as those papers may, at times, be
cost-effective substitutes for uncoated groundwood specialty papers.
The marketing and sale of uncoated groundwood specialty papers is different
from that of newsprint in a number of significant respects. Uncoated groundwood
specialty papers comprise a wider range of specifications such as weight,
brightness, smoothness and thickness and are generally purchased by a broader
variety of customers for a number of more specialized uses. As a result, a more
complex marketing effort generally is required to reach the customers in this
market and marketing efforts and production of paper must be more carefully
suited to the needs of particular customers. Consequently, service and
responsiveness are important in obtaining and retaining customers. Most
customers for uncoated groundwood specialty papers purchase from more than one
supplier.
North American producers shipped approximately 3.5 million tons of uncoated
groundwood specialty papers in 1992, of which approximately 3.3 million tons
went to customers in the United States and Canada. The North American market for
uncoated groundwood specialty papers was approximately 3.8 million tons in 1992,
of which the United States market was by far the largest, accounting for
approximately 3.5 million tons. Within the United States market, Canadian
producers supplied 45 percent of uncoated groundwood specialty papers, and the
United States producers supplied 42 percent of the requirements of that market,
with the balance primarily supplied by producers of various Western European
countries.
Demand for uncoated groundwood specialty papers in North America grew over
the last ten years at an average annual rate of 4.1 percent, a much faster
growth rate than for newsprint. The latest economic downcycle has offset this
trend somewhat and from 1991 to 1992 demand for uncoated groundwood specialty
papers fell. North American demand for uncoated groundwood specialty papers was
strong in the first nine months of 1993. Imports, however, increased during this
period due to devaluation of the Swedish and Finnish currencies in late 1992.
The increase in imports contributed to a lack of improvement in prices.
The following table shows North American shipments, capacity, industry
operating rates and net imports for uncoated groundwood specialty paper as
reported by AFPA, and North American consumption as reported by RISI.
NORTH AMERICAN UNCOATED GROUNDWOOD SPECIALTY PAPERS
(THOUSANDS OF TONS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
FIRST TEN
MONTHS OF
1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shipments.......................... 3,214 3,471 3,706 3,762 3,583 3,398 3,013 2,979 2,774
Capacity........................... 3,355(1) 4,052 4,465 4,018 3,906 3,574 3,204 3,170 2,961
Industry operating rate (2)........ 96% 86% 83% 94% 92% 95% 94% 94% 94%
Net imports (3).................... 334 314 155 270 313 413 509 422 412
North American consumption (4)..... 3,529 3,785 3,861 4,032 3,897 3,812 3,523 3,401 3,186

1984 1983
<S> <C> <C>
Shipments.......................... 2,673 2,437
Capacity........................... 2,828 2,670
Industry operating rate (2)........ 95% 91%
Net imports (3).................... 462 208
North American consumption (4)..... 3,136 2,640
</TABLE>

(1) 10/12 of reported capacity.
(2) Calculated as the ratio of shipments to capacity.
(3) Total imports less total exports. Data for ten months were estimated.
(4) Total shipments plus imports less exports. Data for ten months were
estimated.
RECYCLED FIBER CONTENT IN DIRECTORY AND OTHER UNCOATED GROUNDWOOD SPECIALTY
PAPERS
Generally, the proportion of recycled fiber is lower in uncoated groundwood
specialty papers than in newsprint, in large part because there has been limited
legislative activity with respect to recycled content in uncoated groundwood
specialties. Several states have nonetheless adopted legislation requiring
recycled content in certain uncoated groundwood paper grades. The Yellow Pages
Publishers Association, which represents telephone directory publishers
principally in the United States,
21

<PAGE>
has adopted recommended guidelines for minimum recycled content for directory
papers. In addition, in response to consumer demand for recycled products, many
regional telephone companies have set minimum recycled content requirements for
their purchases of directory paper.
COMPANY OPERATIONS
The Company is the largest United States and the fourth largest North
American producer of directory and other uncoated groundwood specialty papers.
With the acquisition of GNP on December 31, 1991, the Company gained the ability
to manufacture directory papers and increased its capacity to produce other
uncoated groundwood specialty paper grades. The Company's directory and other
uncoated groundwood specialty production for the nine months ended October 2,
1993, was approximately 248,000 tons. The Company's major customers for
directory papers are telephone companies, while its primary customers for its
other uncoated groundwood specialty papers are commercial printers.
The Company, like certain of its competitors, has begun to redirect some of
its newsprint manufacturing capacity to the manufacture of directory and other
uncoated groundwood specialty papers to capture the generally higher margins for
this product line. With the commencement in late May 1993 of operations at GNP's
new recycling plant, the Company is able to include post-consumer wastepaper in
its directory paper. In addition, the Company is focusing efforts on expanding
its presence in the export markets, and, in late 1992, entered into a three-year
contract for purchases by Nippon Telephone and Telegraph. With this contract,
the Company's 1993 exports were approximately 22 percent of its directory and
other uncoated groundwood specialty paper production. In addition, the Company
is manufacturing a significant portion of the uncoated groundwood specialty
paper used in its communication papers converting business. See
Business -- Communication Papers.
COATED GROUNDWOOD PAPER
INDUSTRY OVERVIEW
Worldwide coated groundwood paper consumption in 1992 was approximately
12.5 million tons, of which approximately 4.4 million tons or 35 percent were
consumed in North America, 5.7 million tons or 46 percent were consumed in
Western Europe, and 2.4 million tons or 19 percent were consumed in the rest of
the world.
Coated paper grades range from the premium grades found in annual reports
and expensive advertising pieces (requiring higher brightness and more expensive
pulps and coating materials) to those found in mass market magazines, catalogs,
coupons and newspaper inserts. The latter (referred to in the industry as No. 5
or LWC) is generally of a lower basis weight and lower brightness but currently
makes up approximately 45 percent of the total coated paper market.
The following chart sets forth North American shipments, capacity, industry
operating rates, net imports and United States purchases for coated groundwood
paper as reported by AFPA and the Canadian Pulp and Paper Association.
NORTH AMERICAN COATED GROUNDWOOD PAPERS
(THOUSANDS OF TONS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
FIRST TEN
MONTHS OF
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Shipments................................................ 4,086(1) 4,912 4,543 4,723 4,429
Capacity................................................. 4,501(2) 5,171 4,971 4,960 4,760
Industry operating rates (3)............................. 91% 95% 91% 95% 93%
Net imports (4).......................................... 311 125 148 282 299
U.S. purchases........................................... 4,168 4,787 4,470 4,761 4,481
</TABLE>

(1) Data for ten months were estimated.
(2) 10/12 of the 1993 reported capacity.
(3) Calculated as the ratio of shipments to capacity.
(4) Total imports less total exports. Data for ten months were
estimated.
The coated groundwood paper market has experienced a decline similar to,
although less severe than, that in the newsprint market. Increases in capacity,
particularly in Europe, created downward pressure on prices in the early 1990's.
Prices continued to decrease through mid-1992, due to the ailing United States
economy and the resulting weakness in the demand for advertising. Coated
groundwood paper demand in the United States was relatively flat in the first
nine months of 1993 versus the first nine months of 1992. The Company, along
with a number of other major producers of coated paper, implemented coated paper
price increases in the third quarter of 1993. Since then, there has been
substantial discounting due to an
22

<PAGE>
increase in imports and a decrease in magazine advertising demand, eroding the
majority of this price increase. The pace of any further market improvement will
depend upon growth in United States consumption and upon a rebound of the
European markets to absorb the excess capacity of European producers. The
Company believes that any improvement in demand in 1994 is likely to translate
into improved industry operating rates because capacity growth is only expected
to increase in 1994 by approximately 1 percent.
COMPANY OPERATIONS
The Company is the fifth largest producer in the United States and the
sixth largest North American producer of coated paper. Its coated paper
production for the nine months ended October 2, 1993, was approximately 344,000
tons. The Company's tonnage shipments have increased 3.4 percent for the first
nine months of 1993, compared with the same period in 1992. The Company's coated
paper production consists of LWC which is used primarily in mail order catalogs,
magazines, coupons and advertising pieces. Substantially all of the Company's
coated paper production is sold in the United States.
The Company sells coated paper to numerous printers, publishers, mail order
houses and paper merchants. Coated paper is distributed by truck and rail from
the Company's Catawba, South Carolina, and Millinocket, Maine, mill sites, which
are strategically located to supply the southeastern and northeastern United
States, respectively, as well as jointly serving the midwestern market.
MARKET PULP
Worldwide market pulp consumption in 1992 was approximately 30.2 million
tons, of which approximately 6.3 million tons or 21 percent were consumed in
North America, 13.8 million tons or 46 percent were consumed in Western Europe,
8.1 million tons or 27 percent were consumed in Asia and Africa and 2.0 million
tons or 6 percent were consumed in the rest of the world.
Market pulp is generally defined as pulp produced for sale in the open
market and is a globally traded commodity product. Since 1989, market pulp has
experienced significant weakening in demand and increases in new capacity. New
lower cost capacity from South America and Swedish and Finnish currency
devaluations have put further pressure on prices. These developments have caused
a significant decline in prices since 1989, from an average price per ton
realized by the Company of $699 in 1989 to $320 in November 1993. Moreover, the
Company, along with several of its competitors, faces significant problems in
selling market pulp into Germany and certain other European markets because it
does not produce total chlorine free or elemental chlorine free pulp. The
bleached kraft market is also facing some competition from recycled pulp.
The Company is a relatively small participant in the global pulp market,
producing approximately 330,000 tons annually. The Company sells its production
primarily in the export market, to numerous manufacturers of fine paper, tissues
and other paper products. Most of the Company's market pulp is fully bleached,
but small amounts of semi-bleached kraft grades are sold. In recent years, 70
percent to 80 percent of the Company's pulp sales have been to the export
market, where the product is typically sold through agents. United States sales
are made directly by the Company.
The depressed state of the world pulp market has led to numerous mill
closures and temporary production curtailments. Currently, the Company estimates
that world transaction prices are below sustainable levels and that inventory
levels are low relative to normal levels. Accordingly, the Company believes that
pulp producers worldwide are raising prices by between $40 and $60 per ton
effective in the December 1993 to March 1994 time period. No assurances can be
given, however, that any price increase will be maintained.

PULP AND PAPER MANUFACTURING FACILITIES
The Company manufactures paper or pulp at five locations. Both the
Company's Southern Division and Calhoun Newsprint Company (CNC) (of which
stock with approximately 51 percent voting power is held by the Company and
stock with approximately 49 percent voting power is held by Advance
Publications, Inc.) are located at Calhoun, Tennessee. The Company's Carolina
Division is located at Catawba, South Carolina. GNP owns the two mills located
in Maine. Bowater Mersey Paper Company (Mersey) (which is owned 51 percent by
the Company and 49 percent by The Washington Post Company) is located at
Liverpool, Nova Scotia.

<PAGE>
The following table sets forth certain information concerning these
manufacturing sites. The Company's facilities generally ran at or near capacity
during 1992 and the first nine months of 1993.
<TABLE>
<CAPTION>
NUMBER OF 1992
PAPER FURNISH PRODUCTION
PRODUCT AND FACILITY MACHINES TYPE (AMOUNTS IN TONS)
<S> <C> <C> <C>
Newsprint and other uncoated groundwood papers
Calhoun, Tennessee 5 TMP, Kraft, 837,076
Groundwood,
Recycled
Catawba, South Carolina 1 TMP, Kraft 260,342
Liverpool, Nova Scotia 2 TMP 252,602
Millinocket, Maine 2 Sulfite, Groundwood 152,291
E. Millinocket, Maine 2 Groundwood, 297,120
Recycled, Purchased
Kraft
TOTAL 12 1,799,431
Coated paper
Catawba, South Carolina 2 Kraft, TMP 335,588
Millinocket, Maine 3 Sulfite, Groundwood 110,955
TOTAL 5 446,543
Market pulp
Catawba, South Carolina Softwood 264,549
Calhoun, Tennessee Hardwood 66,787
TOTAL 331,336
</TABLE>

CALHOUN, TENNESSEE (SOUTHERN DIVISION AND CNC)
This facility is located on the Hiwassee River in Tennessee and is the
largest newsprint mill in North America. The site is shared by the Company and
CNC. Advance Publications, Inc., is the Company's largest customer, purchasing
the equivalent of CNC's entire annual output (which was approximately 240,000
tons in 1992).
At this facility, the Southern Division operates four paper machines that
produce newsprint and uncoated groundwood specialty papers. Also located at this
facility is CNC's newsprint machine, the largest on the site. Although the
Southern Division manages and operates the entire Calhoun facility, CNC owns
68.4 percent of the site's thermomechanical pulp (TMP) mill and 100 percent of
the site's recycled fiber plant completed in August 1991. The Southern Division
owns the remaining 31.6 percent of the TMP mill and 100 percent of the other
facilities at this location. These other facilities include kraft and groundwood
pulp mills, a power plant, water treatment facilities, and other support
equipment necessary to produce the finished product. Recent significant capital
improvements in the Southern Division have included the rebuilding and updating
of four paper machines with new twin wire formers that have contributed to
increased production and higher quality. The continuing modernization of the
Southern Division's facilities has substantially improved product quality and
supported its position as one of the most productive in the industry. In
addition, the Calhoun mill has created a process whereby post-consumer recycled
pulp and virgin pulps are used in paper sold to the Company's communication
papers group.
Approximately 20 percent of the Company's market pulp production comes from
the Southern Division, where the capability to produce hardwood pulp has opened
new market channels for the Company. The Company replaced a smaller 34-year old
kraft pulp mill at Calhoun in early 1990 with a new bleached kraft pulp mill
that has the capacity to produce 900 tons of pulp per day. This new mill
utilizes the most up-to-date technology and has provided increased capacity,
improved pulp quality, reduced energy consumption, and an improved environmental
impact. In addition to supplying the chemical pulp portion of the newsprint
furnish, the new kraft mill, during its third year of operation in 1992, also
produced 66,787 tons of fully bleached market pulp for sale to customers.
In 1994, the Southern Division will replace its present recovery boilers,
which are 27 and 39 years old, with a new recovery boiler currently under
construction. A recovery boiler is an essential part of the kraft pulping
process. The new recovery boiler will enable the Company to realize significant
cost reductions and meet currently proposed environmental
24

<PAGE>
regulations. The acquisition of this recovery boiler will be financed in part
with the proceeds of the sale of the Depositary Shares. See Use of Proceeds.
The Company believes that its Calhoun mill is a modern, highly efficient
operation meeting customer demands for paper with both wastepaper and virgin
pulp content.
CATAWBA, SOUTH CAROLINA (CAROLINA DIVISION)
This facility's newsprint machine is one of the largest and most productive
newsprint machines in the industry. In 1988, the Company installed a twin wire
former and other ancillary equipment that have enhanced this machine's capacity
and permitted it to produce a higher quality product.
The Carolina Division manufactures a variety of coated grades on two coated
paper machines. Since 1985, the Company has made continuous improvements in the
quality of its coated paper and the number of grades offered.
In addition to furnishing its internal pulp requirements, the Carolina
Division supplies bleached softwood kraft market pulp to paper manufacturers. In
1992, approximately 80 percent of the Company's market pulp production came from
its Carolina Division.
The Company believes that its Catawba mill is among the most
cost-competitive and productive mills in the industry.
LIVERPOOL, NOVA SCOTIA (MERSEY)

Mersey is jointly owned by the Company and The Washington Post Company,
which annually purchases approximately 80,000 tons of newsprint from the
Company. The Mersey mill is located on an ice-free port providing access to
ports along the eastern seaboard of the United States and throughout the world.
Its two paper machines, built in 1929, were completely rebuilt between 1983 and
1985. The mill also operates support facilities required to produce the finished
product. A new TMP mill was started up in late 1989 and it now supplies 100
percent of the pulp to the two newsprint machines. This change has resulted in
significant improvements in product quality.

The Company believes that its Mersey facilities are highly competitive in
product quality and machine efficiency and that the productivity of the facility
falls in the mid-range of Canadian producers.
EAST MILLINOCKET AND MILLINOCKET, MAINE (GNP)
The Company's acquisition of GNP has increased the Company's ability to
produce additional grades of lighter weight papers demanded by many publishers,
printers and paper merchants. Since the GNP acquisition, the Company has
undertaken a number of capital improvements at GNP to increase production
efficiencies and improve product quality.

The East Millinocket mill is located on the West Branch of the Penobscot
River in northern Maine. East Millinocket's two paper machines were built in
1954 and completely rebuilt in 1985. These two machines produce newsprint,
directory paper and other uncoated groundwood specialties. The East Millinocket
mill also operates a groundwood pulp mill and other support facilities required
to produce the finished products. Sulfite pulp is pumped through a pipeline from
the Millinocket mill for use at the East Millinocket mill. The mill's recycling
facility, which began operation in late May of 1993, will enable the Company to
meet widespread customer demand for directory and newsprint paper containing
post-consumer wastepaper.

The Company believes that the paper machines at the East Millinocket
facility are highly competitive and provide customers with excellent quality
newsprint and directory paper.
The Millinocket mill is located eight miles from the East Millinocket mill
and produces newsprint, directory papers and uncoated groundwood specialties.
The Company also manufactures a variety of coated grades on three coated paper
machines at this mill site. During the third quarter of 1993, the Company
announced the phased closure of certain older, higher cost operations located at
the Millinocket mill. The phaseout will involve the shutdown of the mill's
woodyard, groundwood pulping facilities and a small paper machine that produces
uncoated groundwood specialties. Approximately 200 positions will be eliminated
throughout the mill's operations over a 12 month period as a result of this
closure. The Company believes that these changes will significantly improve the
mill's cost competitiveness.
COMMUNICATION PAPERS
Throughout the 1990's, the business forms industry has faced weak demand
and excess industry capacity. The dollar value of United States sales of
continuous stock computer forms reached a high in 1990 of $1.97 billion and has
declined
25

<PAGE>
each year since then. In 1993, such industry sales volume has remained
essentially unchanged as compared to 1992. Industry capacity utilization rates
during the past three years have averaged between 59 percent and 62 percent.

The cost of forms bond paper, the principal raw material for many business
papers, remains the determining factor in the profitability of the product
converted from it. Since substantial overcapacity continues in this paper grade,
costs have been dropping steadily since 1991. Due to intense competition, prices
and margins have followed the same downward trend.

The Company believes that the market for continuous stock forms will remain
highly competitive, and the Company does not expect total demand to increase.
The Company's subsidiary, Bowater Communication Papers Inc. (BCPI),
converts paper into continuous stock computer forms at eight plants in the
United States. BCPI markets this product and other business communication papers
through its two divisions, Bowater Computer Forms (BCF) and Star Forms, which
use a network of 30 distribution centers to service customers in major
metropolitan areas throughout the United States. BCF specializes in direct sales
to numerous large-volume end-users, such as banks and governmental entities,
while Star Forms concentrates on sales to smaller businesses and individuals
through sales to numerous business forms distributors, paper merchants, office
product dealers, computer stores and other outlets.
Demand for continuous stock computer forms increased during the late
1980's, in part because of the popularity of home computers. In the early
1990's, as the United States economy weakened, demand softened, selling prices
dropped and raw material costs rose. As a result, the profitability of these
products declined in the early 1990's. Intense competition, excess industry
capacity and weak demand have hindered the recovery of selling prices.

Given this environment, the Company's strategic focus has been to
differentiate itself from others in the marketplace by developing new products,
including forms with recycled content such as EW-20 and EB-20, and by gaining
the benefits of more vertical integration, using the capabilities of its paper
mills. Paper is the primary cost of this business, and the Company is moving
toward providing more of BCPI's paper needs internally to the extent consistent
with customer product requirements. This vertical integration has provided the
Company generally with higher margins than the products previously produced on
its uncoated groundwood paper machines. The Company provided approximately
23 percent of BCPI's total paper requirements in 1993, and expects to
provide substantially more of BCPI's total paper requirements in 1994. The
Company believes that, notwithstanding the increase in use of business machines
using higher grades of paper, customers that generate high volumes of internal
documents will continue to demand groundwood based continuous stock computer
forms.

TIMBERLANDS AND LUMBER PRODUCTS
The Company currently owns approximately 3.9 million acres and manages
under lease approximately .1 million acres of timberlands throughout eight
states and Nova Scotia. These timberlands supply approximately half of the
Company's wood requirements. Approximately 2.1 million acres of these
timberlands were acquired in the GNP acquisition and are located in the State of
Maine. The balance of the United States acreage (approximately 1.1 million
acres) is located in the southeastern United States and approximately .8 million
acres are located in Nova Scotia. The Company also maintains two nurseries from
which it supplies seedlings to replace trees harvested from its timberlands,
generally planting three trees for each one that is cut.

The Company operates three sawmills that produce construction grade lumber.
The sawmill at Albertville, Alabama, produced 92.0 million board feet of lumber
in 1992. This lumber is sold in the southern and midwestern United States.
Mersey operates a small sawmill in Oak Hill, Nova Scotia, the products of which
are sold to customers in eastern Canada and the United Kingdom. The Oak Hill
sawmill produced 19.9 million board feet of lumber in 1992. The Company's
Pinkham Lumber sawmill in Ashland, Maine, produced 79.7 million board feet of
lumber in 1992, with the majority of this product being sold to customers in New
England.

COMPETITION
Newsprint and bleached market pulp are consumed in virtually every country
of the world and produced in nearly all countries with adequate indigenous fiber
sources. No proprietary process is employed in either their manufacture or use,
and the Company does not spend a material amount on research and development.
There are approximately 20 major producers of newsprint with which the Company
competes. The Company is not a major producer in the market pulp industry, which
includes numerous suppliers worldwide. Price, quality and service are important
competitive determinants.
26

<PAGE>
Over half of the United States consumption of directory and other uncoated
groundwood specialty papers is currently met by imports. The Company uses price,
quality and service to compete with other producers.
The coated paper market is also highly competitive. Price, quality and
service are important competitive determinants, but a degree of proprietary
knowledge is required in both the manufacture and use of this product, which
encourages close supplier-customer relationships.
The Company believes that it has the second largest United States market
share in the sale of continuous stock computer forms at approximately 11
percent. Nonetheless, this business faces considerable competition. The
Company's competitive efforts are focused on price, quality, customer service
and the introduction of new products, including products with post-consumer
wastepaper recycled content.
As with other globally manufactured and sold commodities, the Company's
competitive position, particularly with respect to its paper and pulp products,
is significantly affected by the volatility of currency exchange rates. Since
several of the Company's primary competitors are located in Canada, Sweden and
Finland, the relative rates of exchange between those countries' currencies and
the United States dollar can have a substantial effect on the Company's ability
to compete. Recently, the Company's competitive position has been adversely
affected by the relative strength of the United States dollar against these
currencies.
In addition, the degree to which the Company competes with foreign
producers depends in part on the level of demand abroad. Shipping costs
generally cause producers to prefer to sell in local markets when the demand is
sufficient in those markets.
Trends in electronic data transmission and storage could adversely affect
traditional print media, including products of the Company's customers; however,
neither the timing nor the extent of those trends can be predicted with
certainty. Industry reports indicate that the Company's newspaper publishing
customers in North America have experienced some loss of market share to other
forms of media and advertising, such as direct mailings and newspaper inserts
(both of which are end uses for selected Company products) and cable television.
These customers are also facing a decline in newspaper readership, circulation
and advertising lineage. The Company does not believe that this is the case in
most overseas markets.
Part of the Company's competitive strategy is to be a low cost producer of
its products while maintaining strict quality standards and being responsive on
environmental issues. The Company believes that its large woodland base,
relative to its paper production, provides it with a competitive advantage in
controlling costs and that its two recycling facilities have further enhanced
its competitive position. The Company believes that the cost advantage of these
recycling facilities, as compared to the more traditional methods of paper
production, should continue until the price for wastepaper significantly rises.
RAW MATERIALS
The manufacture of pulp and paper requires significant amounts of wood
fiber and energy. Approximately 3.0 million cords of wood were consumed by the
Company during 1992 for pulp and paper production. Wood harvested from Company-
owned or Company-leased properties supplies approximately 50 percent of the
Company's total wood fiber requirements. The balance of the Company's virgin
wood requirements are purchased, primarily under contract, from local wood
producers, private landowners and sawmills (in the form of chips) at market
prices. Wastepaper (in the form of old newspapers and magazines) is purchased
from suppliers in the regions of the Company's two recycling plants. These
suppliers collect, sort and bale the material before selling it to the Company,
primarily under long-term contracts.
Steam and electrical power are the primary forms of energy used in pulp and
paper production. In 1992, the Company internally generated approximately 21
percent of its total electrical power requirements. Over time, the Company has
reduced its dependence upon oil and natural gas by increasing its ability to
burn wood wastes and coal. Process steam is produced in boilers at the various
mill sites from a variety of fuel sources, including waste products. Internally
generated electrical power at the Calhoun and Catawba facilities supplements
purchased electrical power. The Company has long-term contracts in place with
the electric utilities that serve its Catawba, Calhoun and Mersey facilities.
The Company's paper operations in Maine are substantially self-sufficient
electrically with six hydroelectric facilities located on the West Branch of the
Penobscot River (containing 31 hydroelectric generators) and seven steam turbine
generators located in the mill power plants.
The Company operates its Maine hydroelectric facilities pursuant to
long-term licenses granted by the Federal Energy Regulatory Commission (FERC) or
its predecessor, the Federal Power Commission. The existing licenses for certain
dams expired on December 31, 1993. The Company is currently engaged in the
multi-year relicensing process to obtain new 30-
27

<PAGE>
year licenses. The relicensing proceedings have not yet concluded; however,
annual extensions are expected to be granted while FERC proceeds with
preparation of an environmental impact statement now scheduled to be issued in
the third quarter of 1994. In connection with the relicensing process, various
groups have intervened and raised objections that are now being considered by
FERC. Although there can be no assurances, the Company believes that,
notwithstanding these objections, new licenses will be issued and that such
licenses will contain terms and conditions that will allow the Company to
maintain most of the benefits that are provided under the existing licenses. In
the interim period, the Company will continue to operate under the existing
licenses or such annual licenses as FERC issues prior to the conclusion of the
pending relicensing proceedings.
EMPLOYEES

Along with wood fiber and energy, labor constitutes a significant component
of the cost of paper and pulp production. As of December 31, 1993, the Company
employed approximately 6,600 people, of whom approximately 4,300 were
represented by bargaining units. For a discussion of recent personnel
reductions, see Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources. The labor agreement at
the Company's Catawba mill covering all of the plant's hourly employees was
recently extended for four years beginning April 19, 1993. A 1991 labor contract
at the Calhoun mill with most of the plant's hourly employees lasts until July
1996. Negotiations are under way for the renewal of the labor contract at the
Mersey mill, which expired in May 1993. Contracts covering the large majority of
unionized employees of GNP expire in August 1995. All plant facilities are
situated in areas where an adequate labor pool exists and relations with
employees are considered good by the Company. The Company's employment efforts
are focused on training and safety.

TRADEMARKS AND NAME
The Company currently possesses the exclusive worldwide right to use the
trademarked Company logo and, in the western hemisphere, the exclusive right to
use the trade name Bowater. The Company considers these rights to be valuable
and necessary to the conduct of the Company's business.
28

<PAGE>
TECHNICAL GLOSSARY
BASIS WEIGHT: unit of measurement of paper consisting of its weight divided
by a specific surface area, commonly denominated in North America in pounds/ream
and elsewhere in grams/square meter.
COATED PAPER: paper treated with certain additives, mainly inorganic
pigments, latex, starch and other chemicals to obtain certain characteristics
necessary to achieve high quality printing.
DIRECTORY PAPERS: lightweight uncoated groundwood specialty papers used for
telephone and other directories and catalogs.
FREESHEET PAPER: paper made from fibers manufactured from a chemical
pulping process (kraft) as opposed to a mechanical pulping process (groundwood
or thermomechanical pulp).
FURNISH: a blend of different types of pulps and additives that are
provided to the paper machine for making paper.
LIGHTWEIGHT COATED GROUNDWOOD PAPER (LWC): coated groundwood paper
typically having a basis weight ranging between 25 and 50 pounds.
NEWSPRINT: a printing paper classified as newsprint by virtue of its
characteristics of weight, brightness, smoothness and thickness, made largely
from groundwood, mechanical or recycled pulp, usually reinforced to varying
degrees with chemical pulp.
OPERATING RATE: the ratio of actual production to the capacity of a machine
or mill.
PULP: a fibrous material produced mechanically or chemically by reducing
woody plants into their component parts. Pulp can result from a variety of
processes including cooking, refining, grinding or the processing and cleaning
of wastepaper. Pulp can be either in a wet or dry state. Types of pulp include:
KRAFT PULP -- pulp obtained by cooking wood in solutions of various
chemicals. The principal chemical processes are sulphite and sulphate.
RECYCLED PULP -- pulp produced from recycling and de-inking old
newspapers, directories and magazines.
GROUNDWOOD PULP -- pulp produced mechanically by grinding logs.
THERMOMECHANICAL PULP (TMP) -- groundwood pulp produced through a
process involving the mechanical refining of wood chips under high
temperature and pressure.
RECYCLING: a process to remove inks and other non-fiber contaminants from
repulped wastepaper for the purpose of obtaining clean fiber suitable for
manufacturing printing paper. The principal technique used by the Company to
remove ink and other non-fibrous contaminants is based on flotation and washing
technology.

TWIN WIRE FORMER: a manufacturing technique allowing drainage from two
supporting surfaces (wires), providing paper with better dimensional stability,
less two-sidedness and better overall printing characteristics than paper
manufactured from traditional single wire formers.

UNCOATED GROUNDWOOD SPECIALTY PAPERS: uncoated papers of higher quality
than newsprint but lower quality than fine paper in terms of weight, brightness,
smoothness and thickness. It is made largely from groundwood pulp, but also
contains varying proportions of chemical pulp.
VIRGIN FIBER: pulp fiber derived from fiber sources not previously
processed into paper.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF THE COMPANY'S CAPITAL STOCK
DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
ALL OF THE PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AND
BYLAWS.

The Company is authorized to issue 100,000,000 shares of Common Stock, $1
par value (Common Stock), and 10,000,000 shares of Serial Preferred Stock, $1
par value (Preferred Stock). As of January 27, 1994, there were approximately
7,251 holders of record of the Company's Common Stock.

COMMON STOCK
DIVIDENDS. Subject to the prior rights of the Preferred Stock, each
outstanding share of Common Stock is entitled to such dividends as may be
declared from time to time by the Board of Directors consistent with the
provisions of the Company's Restated Certificate of Incorporation, the Company's
Bylaws and applicable law.
VOTING. Each outstanding share of Common Stock is entitled to one vote on
all matters submitted to a vote of holders of the Common Stock. Removal of
directors can be for cause only and requires a 75 percent vote of the
outstanding shares entitled to vote at an election of directors. A vote of 75
percent of the outstanding shares entitled to vote for the election of directors
is required in order to approve certain business combinations involving certain
stockholders beneficially owning more than 5 percent of the outstanding shares
entitled to vote for the election of directors, unless the Board of Directors
recommends the transaction prior to the acquisition by such stockholders of more
than 5 percent of the voting power of the outstanding shares entitled to vote
for the election of directors, or unless a majority of the continuing directors
approves the transaction, in each of which cases the shareholder vote, if any,
that is required by law will suffice. A vote of 75 percent of the voting power
of the outstanding shares is required to amend certain provisions in the
Restated Certificate of Incorporation or, in certain circumstances, various
provisions of the Bylaws. Stockholders of the Company are not permitted to act
by written consent but are required to act through a sufficient vote at a duly
convened stockholders meeting. The Board of Directors is classified into three
classes, with staggered terms of three years each. The Company's Common Stock
does not possess cumulative voting rights.
LIQUIDATION. Subject to the prior rights of the Preferred Stock, in the
event of any liquidation or dissolution of the Company, holders of the Common
Stock are entitled to receive pro rata any assets of the Company remaining after
provision for payment of creditors.

TRANSFER AGENTS AND REGISTRARS. The transfer agent and registrar of the
Common Stock in the United States is The Bank of New York; the transfer agent
and registrar of the Common Stock in the United Kingdom is the R-M Trust Co.

OTHER. Holders of Common Stock have no conversion rights or preemptive
rights to purchase or subscribe for securities of the Company. The Common Stock
is not subject to further calls or to assessments.
RIGHTS PLAN
The following summary of certain provisions of the Company's Rights Plan
does not purport to be complete and is qualified in its entirety by reference to
all of the provisions of the Rights Agreement dated as of April 22, 1986, as
amended, between the Company and the Bank of New York as successor Rights Agent
to Morgan Guaranty Trust Company of New York. Capitalized terms used in this
summary and not otherwise defined in this Prospectus shall have the meanings
ascribed to them in the Rights Agreement.
RIGHTS. Effective May 2, 1986, the Company initiated a rights plan (the
Rights Plan) and declared a dividend of one right (a Right) for each share of
Common Stock outstanding on that date. Each certificate for shares of Common
Stock issued after May 2, 1986 and before the Distribution Date (defined below)
shall be deemed also to be a certificate for the same number of Rights. Each
Right entitles the holder to purchase one one-hundredth of a share of Junior
Participating Preferred Stock, Series A (Junior Preferred Stock), at the
Purchase Price (defined below) at any time after the Distribution Date. Until
the Distribution Date, the Rights are evidenced by the certificates for Common
Stock and are transferable only in connection with the transfer of Common Stock,
with the surrender for transfer of any certificates for Common Stock
constituting a transfer of the Rights associated with such Common Stock. As soon
as practicable after the Distribution Date, separate certificates evidencing the
Rights will be mailed to holders of record of the Common Stock as of the close
of business on the Distribution Date. Until a Right is exercised, such Right
confers no rights as a stockholder of the Company, including without limitation
the right to vote or to receive dividends.
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DISTRIBUTION DATE. The Distribution Date is the earlier of (1) ten days
after the announced date (Stock Acquisition Date) that a person (Acquiring
Person), together with affiliates and associates, becomes the beneficial owner
of 20 percent or more of the Common Stock or (2) ten days after the date of
commencement or public announcement by a person (other than the Company),
together with affiliates and associates, of a tender offer for 30 percent or
more of the Common Stock.
PURCHASE PRICE. Each Right is exercisable at an initial Purchase Price of
$90. The Purchase Price is payable, at the holder's option, in cash or shares of
Common Stock having a market value equal to the Purchase Price. The Purchase
Price, and the number of shares of Junior Preferred Stock or other securities
issuable upon exercise of the Rights, are subject to adjustment to prevent
dilution arising from certain events enumerated in the Rights Plan, and the
securities issuable upon exercise of the Rights are subject to further
adjustment upon the occurrence of a Triggering Event (defined below).
TRIGGERING EVENT. A Triggering Event occurs at any time:
(1) an Acquiring Person or any affiliate or associate of an Acquiring
Person (a) merges into the Company or any subsidiary of which the Company owns a
majority of any class of capital stock and the Common Stock remains outstanding
and unchanged, (b) transfers assets to the Company in exchange for, or otherwise
obtains, securities of the Company other than in a pro rata distribution, (c)
effects a transaction in the assets of the Company or any such subsidiary having
an aggregate fair market value of more than $3 million, (d) effects a
transaction in the assets of the Company or any such subsidiary on terms less
favorable than arm's-length, (e) receives compensation from the Company or any
such subsidiary other than for full-time employment, or (f) receives the benefit
of credit assistance or tax advantages provided by the Company;
(2) there is an Acquiring Person and any transaction involving the
securities of the Company or any subsidiary results in the increase by more than
1 percent of the proportionate share of any security of the Company held by the
Acquiring Person or any affiliate or associate;
(3) a person (other than the Company or certain controlled entities)
becomes the beneficial owner of 30 percent or more of the Common Stock; or
(4) after the Distribution Date that the Company merges into or combines
with another person, any person merges or combines with the Company and the
Common Stock is exchanged for securities of another person, or the Company or
any such subsidiary sells more than 50 percent of its assets or earning power.
EFFECTS OF TRIGGERING EVENT. Upon the occurrence of a Triggering Event, the
Rights held by an Acquiring Person, and any affiliate, associate, and certain
transferees of the Acquiring Person, become void, and exercise of a valid Right
and tender of the Purchase Price by any other holder entitles the holder to
receive, in lieu of Junior Preferred Stock, (a) two times the number of shares
of Common Stock that could otherwise be purchased for the Purchase Price at the
then fair market value of the Common Stock, or (b) at the option of the
Continuing Directors, any combination of cash, property, Common Stock or other
securities of the Company equal in value to such number of shares of Common
Stock, or (c) in the case of a Triggering Event described in clause (4) of the
preceding paragraph, two times the number of shares of common stock of the
resulting or surviving corporation that could otherwise be purchased for the
Purchase Price at the fair market value of such common stock.
REDEMPTION AND TERMINATION. At any time on or prior to the earlier of the
10th day following the Stock Acquisition Date and May 2, 1996 (the expiration
date of the Rights), the Company may redeem the Rights for $.01 per Right. The
Company's Board of Directors has stated that, without shareholder approval, the
Rights Plan will not be renewed upon its expiration.
PREFERRED STOCK
The Company's Restated Certificate of Incorporation authorizes the Board of
Directors (without stockholder approval), among other things, to issue series of
Preferred Stock with such powers, designations, preferences and rights, and
qualifications, limitations or restrictions, as the Board of Directors shall
determine.

The Company currently has one series of Preferred Stock outstanding,
consisting of 1,500,000 shares of LIBOR Preferred Stock, Series A (the LIBOR
Preferred Stock), which has a stated involuntary liquidation preference of
$50.00 per share. The dividend rate on the LIBOR Preferred Stock, 2.8924 percent
for the 12-month period ended October 2, 1993, is reset quarterly based on the
London Interbank offered rates for three month United States dollar deposits.
The transfer agent and registrar of the LIBOR Preferred Stock is Mellon
Securities Trust Company.

As described above under Rights Plan, Rights holders are entitled to
purchase shares of Junior Preferred Stock subject to certain terms and
conditions. No share of Junior Preferred Stock is currently outstanding.
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At approximately the same time as the offering of the Depositary Shares,
the Company is offering approximately $100 million stated liquidation amount
of the Company's Series B Convertible Preferred Stock. The two closings are not
contingent upon one another. The Company expects that the dividend rate on the
Series B Convertible Preferred Stock, if issued, will be approximately %.
Certain provisions of the Company's Restated Certificate of Incorporation
or Bylaws may have the effect of delaying, deferring or preventing a change in
control of the Company. These provisions include: those regarding a classified
Board of Directors; the supermajority shareholder or special director voting
requirements for approval of certain business combinations and for filling
vacancies on the Board of Directors under certain circumstances; the requirement
that the stockholders may act only through a stockholders meeting, coupled with
the provision that only the Board of Directors or certain executive officers can
call special stockholders meetings; the ability of the Board of Directors to
issue Preferred Stock issued serially without prior approval of the stockholders
and which may have various voting rights designated by the directors, including
a separate right to approve a merger or sale of substantially all of the assets
of the Company; and the supermajority voting requirements to amend certain
provisions of the Restated Certificate of Incorporation or, in certain
circumstances, various provisions of the Bylaws. The Rights Plan may also have
the effect of making the acquisition of control of the Company more difficult.
See Description of Capital Stock -- Rights Plan. Certain provisions in the
Company's employment contracts, stock option plans, severance pay plans, and
qualified and nonqualified benefit plans, in the Credit Agreement, and in the
indenture relating to the Company's 9% debentures due 2009 in the principal
amount of, $300 million may also have the effect of inhibiting a change of
control of the Company.

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DESCRIPTION OF SERIES C PREFERRED STOCK
THE SUMMARY CONTAINED HEREIN OF THE TERMS OF SHARES OF SERIES C PREFERRED
STOCK, INCLUDING THOSE TERMS APPLICABLE TO THE SHARES OF PREFERRED STOCK OF THE
COMPANY OF ALL SERIES (THE PREFERRED STOCK), DOES NOT PURPORT TO BE COMPLETE AND
IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ALL OF THE
PROVISIONS OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AND FORM OF
CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES C PREFERRED STOCK
(THE CERTIFICATE OF DESIGNATIONS), A COPY OF EACH OF WHICH HAS BEEN FILED AS AN
EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART.
Each of the Depositary Shares represents beneficial ownership of one-fourth
of a share of Series C Preferred Stock and entitles the owner to that proportion
of all the rights, preferences and privileges of the share of Series C Preferred
Stock represented thereby. See Description of Depositary Shares. The Series C
Preferred Stock will not be listed on any exchange, and the Company does not
expect that there will be any trading market for the shares of Series C
Preferred Stock except as represented by the Depositary Shares.
DIVIDENDS
Holders of record of the shares of Series C Preferred Stock (and thereby
holders of Depositary Shares) shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefor, cash
dividends from the date of initial issuance of shares of Series C Preferred
Stock at the rate of percent of the stated liquidation preference per annum
(equivalent to $ per annum or $ per quarter for each Depositary
Share), payable quarterly in arrears on the fifteenth day of January, April,
July and October or, if any such date is not a business day, on the next
succeeding business day. The first dividend period will be from the date of
initial issuance of the shares of Series C Preferred Stock to, but excluding,
April 15, 1994, and will be payable on April 15, 1994. Dividends will cease to
accrue on the shares of Series C Preferred Stock on the date of their
redemption. Dividends will be payable to holders of record of shares of Series C
Preferred Stock as they appear on the stock register of the Company on such
record dates, not less than 15 nor more than 60 days preceding the payment date
thereof, as shall be fixed by the Board of Directors. Dividends payable on
shares of Series C Preferred Stock for any period less than a full quarterly
dividend period will be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in any period of less than one
month.
Dividends on shares of Series C Preferred Stock shall accrue whether or not
there are funds legally available for the payment of such dividends and whether
or not such dividends are declared. Accrued but unpaid dividends on shares of
Series C Preferred Stock shall cumulate as of the dividend payment date on which
they first become payable, but no interest shall accrue on accumulated but
unpaid dividends on shares of Series C Preferred Stock.
The shares of Series C Preferred Stock will rank on a parity, both as to
payment of dividends and distribution of assets upon liquidation, with the
Company's LIBOR Preferred Stock, Series A, and the shares of Series B
Convertible Preferred Stock (expected to be issued at approximately the same
time as the shares of Series C Preferred Stock), as well as any Preferred Stock
issued in the future by the Company that by its terms ranks PARI PASSU with the
shares of Series C Preferred Stock.
As long as any shares of Series C Preferred Stock are outstanding, no
dividends (other than dividends payable in shares of, or warrants, rights or
options exercisable for or convertible into shares of, any capital stock,
including without limitation the Common Stock, of the Company ranking junior to
the shares of Series C Preferred Stock as to the payment of dividends and the
distribution of assets upon liquidation (collectively Junior Stock) and cash in
lieu of fractional shares in connection with any such dividend) will be paid or
declared in cash or otherwise, nor will any other distribution be made (other
than a distribution payable in Junior Stock and cash in lieu of fractional
shares in connection with any such distribution), on any Junior Stock unless:
(i) full dividends on Preferred Stock that does not constitute Junior Stock
(Parity Preferred Stock) have been paid, or declared and set aside for payment,
for all dividend periods terminating on or prior to the date of such Junior
Stock dividend or distribution payment to the extent such dividends are
cumulative; (ii) dividends in full for the current quarterly dividend period
have been paid, or declared and set aside for payment, on all Parity Preferred
Stock to the extent such dividends are cumulative; (iii) the Company has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for any Parity
Preferred Stock; and (iv) the Company is not in default on any of its
obligations to redeem any Parity Preferred Stock.
In addition, as long as any shares of Series C Preferred Stock are
outstanding, no shares of any Junior Stock may be purchased, redeemed, or
otherwise acquired by the Company or any of its subsidiaries (except in
connection with a reclassification or exchange of any Junior Stock through the
issuance of other Junior Stock (and cash in lieu of fractional shares in
connection therewith) or the purchase, redemption, or other acquisition of any
Junior Stock with any Junior Stock (and cash
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in lieu of fractional shares in connection therewith)) nor may any funds be set
aside or made available for any sinking fund for the purchase, redemption or
acquisition of any Junior Stock unless: (i) full dividends on Parity Preferred
Stock have been paid, or declared and set aside for payment, for all dividend
periods terminating on or prior to the date of such purchase, redemption,
acquisition, setting aside or making available to the extent such dividends are
cumulative; (ii) dividends in full for the current quarterly dividend period
have been paid, or declared and set aside for payment, on all Parity Preferred
Stock to the extent such dividends are cumulative; (iii) the Company has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for any Parity
Preferred Stock; and (iv) the Company is not in default on any of its
obligations to redeem any Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or otherwise
acquired by the Company or any of its subsidiaries, and funds may be set aside
or made available for that purpose, from time to time. In the event of the
declaration and payment of any such dividends or other distributions, the
holders of such Junior Stock will be entitled, to the exclusion of holders of
Parity Preferred Stock, to share therein according to their respective
interests.

As long as any shares of Series C Preferred Stock are outstanding,
dividends or other distributions may not be declared or paid on any Parity
Preferred Stock (other than dividends or other distributions payable in Junior
Stock and cash in lieu of fractional shares in connection therewith), and the
Company may not purchase, redeem or otherwise acquire any Parity Preferred Stock
(except with any Junior Stock and cash in lieu of fractional shares in
connection therewith and except with the right, subject to clause (b) of this
paragraph and any similar requirement of any other Preferred Stock, to receive
accrued and unpaid dividends), unless either: (a)(i) full dividends on Parity
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such Parity Preferred
Stock dividend, distribution, redemption, purchase or acquisition payment to the
extent such dividends are cumulative; (ii) dividends in full for the current
quarterly dividend period have been paid, or declared and set aside for payment,
on all Parity Preferred Stock to the extent such dividends are cumulative; (iii)
the Company has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any Parity Preferred Stock; and (iv) the Company is not in
default on any of its obligations to redeem any Parity Preferred Stock; or (b)
with respect to the declaration and payment of dividends only, any such
dividends are declared and paid pro rata so that the amounts of any dividends
declared and paid per share of Series C Preferred Stock and each other share of
Parity Preferred Stock will in all cases bear to each other the same ratio that
accrued and unpaid dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if such dividends are cumulative) per
share of Series C Preferred Stock and the other share of Parity Preferred Stock
bear to each other.

OPTIONAL REDEMPTION
Shares of Series C Preferred Stock (and thereby the Depositary Shares) are
not redeemable by the Company prior to February , 1999. At any time and from
time to time on or after that date, the Company will have the right to redeem,
in whole or in part, the outstanding shares of Series C Preferred Stock (and
thereby the related Depositary Shares), for $100 per share (equivalent to $25
per Depositary Share) plus accrued and unpaid dividends (whether or not
declared) to, but not including, the date fixed for redemption (other than
previously declared dividends payable to a holder of record as of a prior date).
Dividends will cease to accrue on the shares of Series C Preferred Stock on the
date fixed for their redemption.
If fewer than all the outstanding shares of Series C Preferred Stock are to
be called for redemption, shares of Series C Preferred Stock to be called will
be selected by the Company from outstanding shares of Series C Preferred Stock
not previously called by lot or pro rata (as nearly as may be) or by any other
method determined by the Board of Directors in its sole discretion to be
equitable.
The Company will provide notice of any call for redemption of shares of
Series C Preferred Stock to holders of record of the shares of Series C
Preferred Stock to be called for redemption not less than 30 nor more than 60
days prior to the date fixed for redemption. Any such notice will be provided by
mail, sent to the holders of record of the shares of Series C Preferred Stock to
be called for redemption at such holder's address as it appears on the stock
register of the Company, first class postage paid; PROVIDED, HOWEVER, that
failure to give such notice or any defect therein shall not affect the validity
of the proceeding for redemption of any shares of Series C Preferred Stock to be
redeemed except as to the holder to whom the Company has failed to give said
notice or whose notice was defective. On and after the redemption date, all
rights of the
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holders of the shares of Series C Preferred Stock called for redemption shall
terminate except the right to receive the redemption price (unless the Company
defaults on payment of the redemption price). A public announcement of any call
for redemption will be made by the Company prior to, or at the time of, the
mailing of such notice of redemption.
Each holder of shares of Series C Preferred Stock called for redemption
must surrender the certificates evidencing such shares of Series C Preferred
Stock to the Company at the place and in the manner designated in the notice of
redemption and will thereupon be entitled to receive the redemption price.
There is no mandatory redemption or sinking fund obligation with respect to
the Series C Preferred Stock.
The Company will not redeem the Series C Preferred Stock if advised in
advance by Moody's Investor's Service, Inc. or Standard & Poor's Corporation
that to do so would result in a lowering of the Company's credit ratings from
then existing levels.
The Depositary Shares are subject to call upon substantially identical
terms and conditions (including those as to notice to the owners of Depositary
Shares) as the shares of Series C Preferred Stock, adjusted to reflect the fact
that four Depositary Shares are the equivalent of one share of Series C
Preferred Stock. See Description of Depositary Shares -- Redemption of
Depositary Shares.
CONVERSION RIGHTS
The Series C Preferred Stock is not convertible into shares of any other
class or series of capital stock of the Company.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, and subject to the rights of holders of any other
series of Preferred Stock, the holders of outstanding shares of Series C
Preferred Stock are entitled to receive $100 per share (equivalent to $25 for
each Depositary Share), plus accrued and unpaid dividends thereon, out of the
assets of the Company available for distribution to stockholders, before any
distribution of assets is made to holders of Junior Stock upon liquidation,
dissolution, or winding up.
If upon any voluntary or involuntary liquidation, dissolution, or winding
up of the Company, the assets of the Company are insufficient to permit the
payment of the full preferential amounts payable with respect to shares of
Series C Preferred Stock and all other series of Parity Preferred Stock, the
holders of shares of Series C Preferred Stock and of all other series of Parity
Preferred Stock will share ratably in any distribution of assets of the Company
in proportion to the full respective preferential amounts to which they are
entitled. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of Series C Preferred Stock will
not be entitled to any further participation in any distribution of assets by
the Company. A consolidation or merger of the Company with one or more
corporations or a sale or transfer of substantially all of the assets of the
Company shall not be deemed to be a liquidation, dissolution, or winding up of
the Company.
VOTING RIGHTS
Except for the voting rights described below and except as otherwise
provided by law, the holders of shares of Series C Preferred Stock shall not be
entitled to vote on any matter or to receive notice of, or to participate in,
any meeting of shareholders of the Company.
In the event that dividends on the shares of Series C Preferred Stock or
any other series of Preferred Stock shall be in arrears and unpaid for six
quarterly dividend periods, or if any other series of Preferred Stock shall be
entitled for any other reason to exercise voting rights, separate from the
Common Stock, to elect any Directors of the Company (Preferred Stock Directors),
the holders of the shares of Series C Preferred Stock (voting separately as a
class with holders of all other series of Preferred Stock upon which like voting
rights have been conferred and are exercisable), with each share of Series C
Preferred Stock entitled to one vote (equivalent to 1/4 of a vote for each
Depositary Share) on this and other matters in which Preferred Stock votes as a
group, will be entitled to vote for the election of two Preferred Stock
Directors, such Directors to be in addition to the number of Directors
constituting the Board of Directors immediately prior to the accrual of such
right. Such right, when vested, shall continue until all dividends in arrears on
the shares of Series C Preferred Stock and such other series of Preferred Stock
shall have been paid in full and the right of any other series of Preferred
Stock to exercise voting rights, separate from the Common Stock, to elect any
Preferred Stock Directors shall terminate or have terminated, and, when so paid
and such termination occurs or has occurred, such right of the holders of the
shares of Series C Preferred Stock shall cease. Upon the termination of the
aforesaid voting right, subject to the requirements of the Delaware corporation
law and the
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Restated Certificate of Incorporation of the Company, such Preferred Stock
Directors shall cease to be Directors of the Company and shall resign.
The Company will not, without the approval of the holders of at least
66 2/3 percent of all the shares of Series C Preferred Stock then outstanding:
(i) amend, alter, or repeal any of the provisions of the Restated Certificate of
Incorporation or the Bylaws of the Company so as to affect adversely the powers,
preferences, or rights of the holders of the shares of Series C Preferred Stock
then outstanding or reduce the minimum time required for any notice to which
only the holders of the shares of Series C Preferred Stock then outstanding may
be entitled (an amendment of the Restated Certificate of Incorporation to
authorize or create, or to increase the authorized amount of, Junior Stock,
Preferred Stock or any stock of any class ranking on a parity with the shares of
Series C Preferred Stock shall be deemed not to affect adversely the powers,
preferences, or rights of the holders of the shares of Series C Preferred
Stock); (ii) create any series of Preferred Stock ranking prior to the shares of
Series C Preferred Stock as to payment of dividends or the distribution of
assets upon liquidation; (iii) authorize or create, or increase the authorized
amount of, any capital stock, or any security convertible into capital stock, of
any class ranking prior to the Series C Preferred Stock as to payment of
dividends or the distribution of assets upon liquidation; or (iv) merge or
consolidate with or into any other corporation, unless each holder of the Series
C Preferred Stock immediately preceding such merger or consolidation shall
receive or continue to hold in the resulting corporation the same number of
shares, with substantially the same rights and preferences, as correspond to the
Series C Preferred Stock so held.

As long as any shares of Series C Preferred Stock are outstanding, the
Company will not, without the approval of the holders of at least a majority of
the shares of Parity Preferred Stock then outstanding: (i) increase the
authorized amount of the Preferred Stock or (ii) create any class or classes of
capital stock ranking on a parity with the Parity Preferred Stock, either as to
payment of dividends or the distribution of assets upon liquidation, and not
existing on the date of the Certificate of Designations, or create any stock, or
other security, convertible into or exchangeable for or evidencing the right to
purchase any stock of such other class of capital stock ranking on a parity with
the Parity Preferred Stock, or increase the authorized number of shares of any
such other class of capital stock or amount of such other stock or security.

Notwithstanding the provisions summarized in the preceding two paragraphs,
however, no such approval described therein of the holders of the shares of
Series C Preferred Stock shall be required if, at or prior to the time when such
amendment, alteration, or repeal is to take effect or when the authorization,
creation or increase of any such prior or parity stock or such other stock or
security is to be made, or when such consolidation or merger is to take effect,
as the case may be, provision is made for the redemption of all shares of Series
C Preferred Stock at the time outstanding.
TRANSFER AGENT AND REGISTRAR
Trust Company Bank, Atlanta, Georgia, will act as transfer agent and
registrar for, and paying agent for the payment of dividends on, shares of
Series C Preferred Stock and the Depositary Shares. Trust Company Bank maintains
a New York drop facility.
MISCELLANEOUS
Upon issuance, the shares of Series C Preferred Stock will be fully paid
and nonassessable. Holders of shares of Series C Preferred Stock have no
preemptive rights. Shares of Series C Preferred Stock redeemed or otherwise
acquired by the Company shall resume the status of authorized and unissued
shares of Preferred Stock, undesignated as to series, and shall be available for
subsequent issuance.
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DESCRIPTION OF DEPOSITARY SHARES
THE FOLLOWING SUMMARY OF THE TERMS AND PROVISIONS OF THE DEPOSITARY SHARES
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY
BY, THE DEPOSIT AGREEMENT, AS DEFINED BELOW (WHICH CONTAINS THE FORM OF THE
DEPOSITARY RECEIPT, AS DEFINED BELOW).

Each Depositary Share represents one-fourth of a share of Series C
Preferred Stock deposited under the Deposit Agreement, dated as of February ,
1994 (the Deposit Agreement), among the Company, Trust Company Bank, as
depositary (including any successor, the Depositary), and the holders from time
to time of depositary receipts executed and delivered thereunder (the Depositary
Receipts). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share is entitled, proportionately, to all the rights, preferences
and privileges of the Series C Preferred Stock represented thereby (including
dividend, voting and liquidation rights), and subject to all of the limitations
of the Series C Preferred Stock represented thereby, contained in the
Certificate of Designations and summarized under Description of Series C
Preferred Stock. The principal executive office of Trust Company Bank
is located at One Park Place, Atlanta, Georgia 30302.

The Depositary Shares are evidenced by Depositary Receipts. Copies of the
Deposit Agreement, the form of which is filed as an exhibit to the Registration
Statement, are available for inspection at the Corporate Office (as defined in
the Deposit Agreement) of the Depositary.
EXECUTION AND DELIVERY OF DEPOSITARY RECEIPTS
Immediately following the issuance of the Series C Preferred Stock by the
Company to the Underwriters, the shares of Series C Preferred Stock will be
deposited by the Underwriters, or on their behalf, with the Depositary, which
will then execute and deliver the Depositary Receipts to the Underwriters.
Depositary Receipts will be executed and delivered evidencing only whole
Depositary Shares.
WITHDRAWAL OF SERIES C PREFERRED STOCK
Upon surrender of Depositary Receipts at the Corporate Office of the
Depositary, the owner of the Depositary Shares evidenced thereby is entitled to
delivery at such office of certificates evidencing the number of shares of
Series C Preferred Stock (but only in whole shares of Series C Preferred Stock)
represented by such Depositary Receipts. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of whole shares of Series C Preferred
Stock to be withdrawn, the Depositary will at the same time deliver to such
holder a new Depositary Receipt or Receipts evidencing such excess number of
Depositary Shares. The Company does not expect that there will be any public
trading market for the Series C Preferred Stock except as represented by the
Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
The Depositary Shares will be redeemed, upon no less than 30 nor more than
60 days' notice, from the cash received by the Depositary resulting from the
redemption, in whole or in part, at the Company's option, but subject to the
terms and conditions applicable thereto, of the shares of Series C Preferred
Stock held by the Depositary. The redemption price per Depositary Share will be
equal to one-fourth of the redemption price per share payable with respect to a
share of the Series C Preferred Stock. See Description of Series C Preferred
Stock -- Optional Redemption. Whenever the Company redeems shares of the Series
C Preferred Stock from the Depositary, the Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the shares of the
Series C Preferred Stock so redeemed.
If fewer than all of the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed shall be selected by lot or pro rata or by any
other equitable method determined by the Depositary to be consistent with the
method determined by the Board of Directors with respect to the Series C
Preferred Stock. If fewer than all of the Depositary Shares evidenced by a
Receipt are called for redemption, the Depositary will deliver to the holder of
such Depositary Receipt upon its surrender to the Depositary, together with the
redemption payment, a new Depositary Receipt evidencing the Depositary Shares
evidenced by such prior Depositary Receipt and not called for redemption.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of such Depositary Shares will cease, except the right to receive the
amounts payable on such redemption and any money or other property to which the
holders of such Depositary Shares were entitled upon such redemption, upon
surrender to the Depositary of the Depositary Receipt or Receipts evidencing
such Depositary Shares.
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<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions in respect of the Series C Preferred Stock to the record holders
of Depositary Receipts in proportion, insofar as practicable, to the number of
Depositary Shares owned by such holders.
In the event of a distribution other than cash in respect of the Series C
Preferred Stock, the Depositary will distribute property received by it to the
record holders of Depositary Receipts in proportion, insofar as practicable, to
the number of Depositary Shares owned by such holders, unless the Depositary
determines that it is not feasible to make such distribution, in which case the
Depositary may, with the approval of the Company, adopt such method as it deems
equitable and practicable for the purpose of effecting such distribution,
including sale (at public or private sale) of such property and distribution of
the net proceeds from such sale to such holders.
The amount distributed in any of the foregoing cases will be reduced by any
amount required to be withheld by the Company or the Depositary on account of
taxes.
RECORD DATE
Whenever (i) any cash dividend or other cash distribution shall become
payable, any distribution other than cash shall be made, or any rights,
preferences or privileges shall be offered with respect to the Series C
Preferred Stock, or (ii) the Depositary shall receive notice of any meeting at
which holders of Series C Preferred Stock are entitled to vote or of which
holders of Series C Preferred Stock are entitled to notice, or of any election
on the part of the Company to call for redemption any shares of Series C
Preferred Stock, the Depositary shall in each such instance fix a record date
(which shall be the same date as the record date for the Series C Preferred
Stock) for the determination of the holders of Depositary Receipts (x) who shall
be entitled to receive such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof, (y) who shall be entitled to
give instructions for the exercise of voting rights at any such meeting or to
receive notice of such meeting, or (z) who shall be subject to such redemption,
subject to the provisions of the Deposit Agreement.
VOTING OF SERIES C PREFERRED STOCK
Upon receipt of notice of any meeting at which holders of Series C
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of Depositary
Receipts. Each record holder of Depositary Receipts on the record date (which
will be the same date as the record date for the Series C Preferred Stock) will
be entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the number of shares of Series C Preferred Stock represented by
such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the number of shares of Series C Preferred Stock
represented by such Depositary Shares in accordance with such instructions, and
the Company has agreed to take all reasonable action which may be deemed
necessary by the Depositary in order to enable the Depositary to do so. The
Depositary will abstain from voting shares of Series C Preferred Stock to the
extent it does not receive specific written voting instructions from the holders
of Depositary Receipts representing such shares of Series C Preferred Stock.
TAXATION
The Company believes that owners of the Depositary Shares will be treated
for Federal income tax purposes as if they were owners of the Series C Preferred
Stock represented by such Depositary Shares and accordingly, will be entitled to
take into account for Federal income tax purposes income and deductions to which
they would be entitled if they were holders of shares of such Series C Preferred
Stock. In addition, (i) no gain or loss will be recognized for Federal income
tax purposes upon the withdrawal of Series C Preferred Stock in exchange for
Depositary Shares as provided in the Deposit Agreement, (ii) the tax basis of
each share of Series C Preferred Stock to an exchanging owner of Depositary
Shares will, upon such exchange, be the same as the aggregate tax basis of the
Depositary Shares exchanged therefor, and (iii) the holding period for shares of
Series C Preferred Stock in the hands of an exchanging owner of Depositary
Shares will include the period during which such person owned such Depositary
Shares.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of Depositary Receipts and any provision of the Deposit Agreement
may at any time be amended by agreement between the Company and the Depositary.
However, any amendment that imposes any fees, taxes or other charges payable by
holders of Depositary Receipts (other than taxes and other governmental charges,
fees and other expenses payable by such holders as stated under Charges of
Depositary), or that otherwise prejudices any substantial existing right of
38

<PAGE>
holders of Depositary Receipts, will not take effect as to outstanding
Depositary Receipts until the expiration of 90 days after notice of such
amendment has been mailed to the record holders of outstanding Depositary
Receipts. Every holder of Depositary Receipts at the time any such amendment
becomes effective shall be deemed to consent and agree to such amendment and to
be bound by the Deposit Agreement, as so amended. In no event may any amendment
impair the right of any owner of Depositary Shares, subject to the conditions
specified in the Deposit Agreement, upon surrender of the Depositary Receipts
evidencing such Depositary Shares to receive shares of Series C Preferred Stock
and any money or other property represented thereby, except in order to comply
with mandatory provisions of applicable law.

Whenever so directed by the Company, the Depositary will terminate the
Deposit Agreement after mailing notice of such termination to the record holders
of all Depositary Receipts then outstanding at least 30 days prior to the date
fixed in such notice for such termination. The Depositary may likewise terminate
the Deposit Agreement if at any time 45 days shall have expired after the
Depositary shall have delivered to the Company a written notice of its election
to resign and a successor depositary shall not have been appointed and accepted
its appointment. If any Depositary Receipts remain outstanding after the date of
termination, the Depositary thereafter will discontinue the transfer of
Depositary Receipts, will suspend the distribution of dividends to the holders
thereof, and will not give any further notices (other than notice of such
termination) or perform any further acts under the Deposit Agreement except as
provided below and except that the Depositary will continue (i) to collect
dividends on the Series C Preferred Stock and any other distributions with
respect thereto and (ii) to deliver the shares of Series C Preferred Stock
together with such dividends and distributions and the net proceeds of any sales
of rights, preferences, privileges or other property, without liability for
interest thereon, in exchange for Depositary Receipts surrendered. At any time
after the expiration of two years from the date of termination, the Depositary
may sell the shares of Series C Preferred Stock then held by it at public or
private sale, at such place or places and upon such terms as it deems proper and
may thereafter hold the net proceeds of any such sale, together with any money
and other property then held by it, without liability for interest thereon, for
the pro rata benefit of the holders of Depositary Receipts which have not been
surrendered. The Company does not intend to terminate the Deposit Agreement or
to permit the resignation of the Depositary without appointing a successor
depositary. In the event the Deposit Agreement is terminated and a sufficient
number of shares of Series C Preferred Stock remain outstanding, the Company
will use its best efforts to list the shares of Series C Preferred Stock on the
NYSE (unless the holders of a majority of the outstanding shares of the Series C
Preferred Stock shall consent to the Company not effecting such listing).

CHARGES OF DEPOSITARY
The Company will pay all charges of the Depositary including charges in
connection with the initial deposit of the Series C Preferred Stock, the initial
execution and delivery of the Depositary Receipts, the distribution of
information to the holders of Depositary Receipts with respect to matters on
which shares of Series C Preferred Stock are entitled to vote, withdrawals of
the Series C Preferred Stock by the holders of Depositary Receipts or redemption
of the Series C Preferred Stock, except for taxes (including transfer taxes, if
any) and other governmental charges and such other charges as are expressly
provided in the Deposit Agreement to be at the expense of holders of Depositary
Receipts or persons depositing shares of Series C Preferred Stock.
GENERAL
The Depositary will make available for inspection by holders of Depositary
Receipts at its Corporate Office all reports and communications from the Company
that are delivered to the Depositary and made generally available to the holders
of Series C Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control from or in performing its
obligations under the Deposit Agreement.
39

<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
Purchase Agreement) between the Company and each of the underwriters named below
(the Underwriters), for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Salomon Brothers Inc, Kidder, Peabody & Co. Incorporated, Prudential Securities
Incorporated, and Smith Barney Shearson Inc. are acting as representatives (the
Representatives), the Company has agreed to sell to the Underwriters, and each
of the Underwriters severally has agreed to purchase from the Company, the
number of Depositary Shares set forth opposite each Underwriter's name.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER DEPOSITARY SHARES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................
Salomon Brothers Inc................................................................
Kidder, Peabody & Co. Incorporated..................................................
Prudential Securities Incorporated..................................................
Smith Barney Shearson Inc. .........................................................
Total............................................................................... 3,000,000
</TABLE>

In the Purchase Agreement, the several Underwriters have agreed, subject to
the terms and conditions set forth therein, to purchase all of the Depositary
Shares being sold pursuant to the Purchase Agreement if any of the shares being
sold pursuant to the Purchase Agreement are purchased. Under certain
circumstances, the commitments of non-defaulting Underwriters may be increased.
The Representatives have advised the Company that they propose initially to
offer the Depositary Shares to the public at the public offering price set forth
on the cover page of the Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of $
per share on sales to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed.
The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to Depositary
Shares at the public offering price less the underwriting discount. The
Underwriters may exercise this option only to cover over-allotments, if any,
made on the sale of Depositary Shares offered hereby. To the extent that the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase the same percentage of
such shares as the number of Depositary Shares to be purchased by each
Underwriter shown in the foregoing table bears to the total number of shares
initially offered hereby.

The Company and certain of its executive officers have agreed, for a period
of 90 days after the date of this Prospectus, to not, without the prior written
consent of the Representatives, directly or indirectly, sell, offer to sell,
grant any option for the sale of, or otherwise dispose of, any shares of its
capital stock or securities convertible into or exchangeable for capital stock
of the Company other than to the Representatives pursuant to the Purchase
Agreement, the Series B Convertible Preferred Stock, the Junior Participating
Preferred Stock, Series A, shares of Common Stock pursuant to the Rights Plan
and other than shares of Common Stock or options for shares of Common Stock
issued pursuant to or sold in connection with qualified employee benefit,
dividend reinvestment and stock option and stock purchase plans and shares of
Common Stock issuable upon conversion of securities or exercise of stock options
or currently outstanding warrants.

Prior to this Offering, there has been no public market for the Depositary
Shares. There can be no assurance that an active trading market will develop for
the Depositary Shares or that the Depositary Shares will trade in the public
market subsequent to the Offering at or above the initial public offering price.

The Company has agreed to indemnify the Underwriters and its controlling
persons against certain liabilities, including liabilities under the Securities
Act, and to contribute to payments that the Underwriters and its controlling
persons may be required to make in respect thereof.

The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
40

<PAGE>
LEGAL MATTERS

Certain aspects of the legality of the Depositary Shares and the shares of
Series C Preferred Stock offered hereby will be passed upon for the Company by
Wendy C. Shiba, Esq., Secretary and Assistant General Counsel for the Company,
who will rely as to certain matters of Delaware law on the opinion of Richards,
Layton & Finger, Wilmington, Delaware. Certain legal matters with respect to the
Depositary Shares and the shares of Series C Preferred Stock offered hereby will
be passed upon for the Underwriters by Cravath, Swaine & Moore, New York, New
York. Ms. Shiba owns no shares of stock of the Company, but has been granted
options to purchase an aggregate of 9,000 shares of Common Stock of the Company
pursuant to the Company's 1992 Stock Incentive Plan. Such options are not
currently exercisable.

EXPERTS
The consolidated financial statements and schedules of Bowater Incorporated
and Subsidiaries as of December 31, 1992 and 1991, and for each of the years in
the three-year period ended December 31, 1992, incorporated by reference herein
and elsewhere in the Registration Statement, have been incorporated by reference
herein and in the Registration Statement in reliance upon the reports of KPMG
Peat Marwick, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick covering the December 31, 1992
financial statements refers to accounting changes regarding the Company's
adoption of the provisions of the Financial Accounting Standards Board's
Statement on Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, and Statement on Financial
Accounting Standards No. 109, Accounting for Income Taxes, in 1992.
41

<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................................ 2
Incorporation of Certain Documents by
Reference.......................................... 2
The Company.......................................... 3
Recent Developments.................................. 4
Use of Proceeds...................................... 4
Certain Investment Considerations.................... 5
Capitalization....................................... 7
Selected Financial and Operating Data................ 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 10
Business............................................. 18
Technical Glossary................................... 29
Description of Capital Stock......................... 30
Description of Series C Preferred Stock.............. 33
Description of Depositary Shares..................... 37
Underwriting......................................... 40
Legal Matters........................................ 41
Experts.............................................. 41
</TABLE>

3,000,000 DEPOSITARY SHARES

[company logo appears here, see appendix]

EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF
% SERIES C
CUMULATIVE PREFERRED STOCK,
PAR VALUE $1 PER SHARE
P R O S P E C T U S
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
KIDDER, PEABODY & CO.
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY SHEARSON INC.
, 1994

<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses incurred in connection with the offering of the
shares of Series C Preferred Stock and the Depositary Shares are as follows:

<TABLE>
<S> <C>
Registration fee................................................................................... $ 29,310.55
New York Stock Exchange fees....................................................................... 15,700.00
Printing and engraving expenses.................................................................... 89,400.00
Accounting fees and expenses....................................................................... 22,500.00
Legal fees and expenses............................................................................ 70,000.00
Blue sky fees and expenses......................................................................... 5,000.00
Depositary's fees and expenses..................................................................... 4,150.00
Miscellaneous...................................................................................... 25,600.00
Total............................................................................................ $261,660.55
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of the State of Delaware
empowers a corporation to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise.
Depending on the character of the proceeding, a corporation may indemnify
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification may be made in
respect of any claim, issue or manner as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
that despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.

The Restated Certificate of Incorporation of the Company provides, in
effect, that, to the extent and under the circumstances permitted by Section 145
of the General Corporation Law of the State of Delaware, the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any action, suit or proceeding of the type described above by reason of the
fact that he or she is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of another
enterprise.

Pursuant to Section 6 of the Purchase Agreement, which is Exhibit 1.1
hereto, the Underwriters named therein have agreed to indemnify the Company, its
controlling persons, its directors and certain of its officers against certain
liabilities, including civil liabilities under the Securities Act.
Under insurance polices maintained by the Company, directors and officers
of the Company may be indemnified against certain losses arising from certain
claims, including claims under the Securities Act, which may be made against
such persons by reason for their being such directors or officers.
II-1

<PAGE>
ITEM 16. EXHIBITS*

<TABLE>
<S> <C>
1.1** Form of Purchase Agreement among the Company and the Representatives of the several underwriters.
4.1 Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to provide the Commission upon request copies of certain
other instruments with respect to long-term debt not being registered where the amount of securities
authorized under each such instrument does not exceed 10 percent of the total assets of the registrant and
its subsidiaries on a consolidated basis (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement No. 2-93455).
4.2*** Restated Certificate of Incorporation of the Company, as amended.
4.3.1** Form of Certificate of Designations, Preference and Rights of PRIDES, Series B Convertible Preferred
Stock.
4.3.2** Form of Certificate of Designations, Preference and Rights of Series C Cumulative Preferred Stock.
4.4 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement
No. 33-11228).
4.5 Rights Agreement between the Company and Morgan Guaranty Trust Company of New York (incorporated by
reference to Exhibit 4 to Current Report of the Company on Form 8-K dated April 22, 1986).
4.5.1 Addendum to Rights Agreement substituting The Bank of New York as successor Rights Agent (incorporated by
reference to Exhibit 4.5A to Annual Report of the Company on Form 10-K for 1988).
4.6** Form of Deposit Agreement, by and among the Company, Trust Company Bank, as Depositary and the holders
from time to time of the Depositary Receipts relating to the Company's PRIDES, Series B Convertible
Preferred Stock, together with form of Depositary Receipt as Exhibit A.
4.6.1** Form of Deposit Agreement, by and among the Company, Trust Company Bank, as Depositary and the holders
from time to time of the Depositary Receipts relating to the Company's Series C Cumulative Preferred
Stock, together with form of Depositary Receipt as Exhibit A.
4.7 Indenture, dated as of August 1, 1989, between the Company and Manufacturers Hanover Trust Company, as
Trustee, with respect to the 9 percent Debentures due 2009 (incorporated by reference to Exhibit 4.0 to
Quarterly Report of the Company on Form 10-Q dated November 10, 1989).
4.8 Indenture, dated as of December 1, 1991, between the Company and Marine Midland Bank, N.A., as Trustee,
with respect to the 9 3/8 percent Debentures due 2021 (incorporated by reference to Exhibit 4.8 to Annual
Report of the Company on Form 10-K for 1991).
4.9 Indenture, dated as of December 1, 1991, between the Company and Marine Midland Bank, N.A., as Trustee,
with respect to the 8 1/2 percent Notes due 2001 (incorporated by reference to Exhibit 4.9 to Annual
Report of the Company on Form 10-K for 1991).
4.10 Indenture, dated as of October 15, 1992, between the Company and The Chase Manhattan (N.A.) as Trustee,
with respect to the 8 1/4 percent Notes due 1999 (incorporated by reference to Exhibit 4.10 to the
Company's Annual Report on Form 10-K for 1992).
4.11 Indenture, dated as of October 15, 1992, between the Company and The Chase Manhattan (N.A.) as Trustee,
with respect to the 9 1/2 percent Debentures due 2012 (incorporated by reference to Exhibit 4.11 to the
Company's Annual Report on Form 10-K for 1992).
5.1*** Opinion of Wendy C. Shiba, Esq. regarding the legality of the shares of Series C Preferred Stock.
12.1*** Computation of Ratio of Earnings to Fixed Charges.
23.1** The consent of KPMG Peat Marwick. Previously filed as Exhibit 24.1.
23.3*** The consent of Wendy C. Shiba, Esq. is contained in her opinion included as Exhibit 5.1 hereto. Previously
filed as Exhibit 24.3.
24.1*** Powers of Attorney, pursuant to which the Registration Statement and amendments thereto may be signed by
certain of the officers and directors of the Company. Previously filed as Exhibit 25.1.
24.2*** Additional Powers of Attorney, pursuant to which the Registration Statement and amendments thereto may be
signed by certain of the officers and directors of the Company. Previously filed as Exhibit 25.2.
</TABLE>

* All reports previously filed by the Company with the Commission pursuant to
the 1934 Act, and the rules and regulations promulgated thereunder, exhibits
of which are incorporated into this Registration Statement by reference
thereto, were filed under Commission File Number 1-8712.
** Filed with this Amendment No. 2 to Registration Statement.

*** Previously filed.
II-2

<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in a
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of New York, State of New York, as of the 28th day
of January, 1994.

BOWATER INCORPORATED

By: /s/ DAVID G. MAFFUCCI

DAVID G. MAFFUCCI
VICE PRESIDENT -- TREASURER

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below by the following persons
in the capacities indicated as of January 28, 1994.

<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
/s/ A. P. GAMMIE* Director, Chairman and Chief Executive Officer
A. P. GAMMIE
/s/ R. D. MCDONOUGH* Director and Vice Chairman
R. D. MCDONOUGH
/s/ R. C. LANCASTER* Senior Vice President and Chief Financial Officer
R. C. LANCASTER
/s/ M. F. NOCITO* Vice President-Controller
M. F. NOCITO
/s/ F. J. AGUILAR* Director
F. J. AGUILAR
/s/ H. D. AYCOCK* Director
H. D. AYCOCK
/s/ R. BARTH* Director
R. BARTH
/s/ K. M. CURTIS* Director
K. M. CURTIS
/s/ R. LASTER* Director
R. LASTER
/s/ H. G. MACNEILL* Director
H. G. MACNEILL
</TABLE>
II-4

<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE
<C> <S>
/s/ D. R. MELVILLE* Director
D. R. MELVILLE
/s/ J. A. ROLLS* Director
J. A. ROLLS
/s/ J. WHITE* Director
J. WHITE
</TABLE>

* By Wendy C. Shiba, pursuant to Power of Attorney.
II-5

<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<S> <C> <C>
1.1** Form of Purchase Agreement among the Company and the Representatives of the several
underwriters.
4.1 Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to provide the Commission upon request copies
of certain other instruments with respect to long-term debt not being registered where the
amount of securities authorized under each such instrument does not exceed 10 percent of the
total assets of the registrant and its subsidiaries on a consolidated basis (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement No. 2-93455).
4.2*** Restated Certificate of Incorporation of the Company, as amended.
4.3.1** Form of Certificate of Designations, Preference and Rights of PRIDES, Series B Convertible
Preferred Stock.
4.3.2** Form of Certificate of Designations, Preference and Rights of Series C Cumulative Preferred
Stock.
4.4 Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Company's Registration
Statement No. 33-11228).
4.5 Rights Agreement between the Company and Morgan Guaranty Trust Company of New York (incorporated
by reference to Exhibit 4 to Current Report of the Company on Form 8-K dated April 22, 1986).
4.5.1 Addendum to Rights Agreement substituting The Bank of New York as successor Rights Agent
(incorporated by reference to Exhibit 4.5A to Annual Report of the Company on Form 10-K for
1988).
4.6** Form of Deposit Agreement, by and among the Company, Trust Company Bank, as Depositary and the
holders from time to time of the Depositary Receipts relating to the Company's PRIDES, Series B
Convertible Preferred Stock, together with form of Depositary Receipt as Exhibit A.
4.6.1** Form of Deposit Agreement, by and among the Company, Trust Company Bank, as Depositary and the
holders from time to time of the Depositary Receipts relating to the Company's Series C
Cumulative Preferred Stock, together with form of Depositary Receipt as Exhibit A.
4.7 Indenture, dated as of August 1, 1989, between the Company and Manufacturers Hanover Trust
Company, as Trustee, with respect to the 9 percent Debentures due 2009 (incorporated by
reference to Exhibit 4.0 to Quarterly Report of the Company on Form 10-Q dated November 10,
1989).
4.8 Indenture, dated as of December 1, 1991, between the Company and Marine Midland Bank, N.A., as
Trustee, with respect to the 9 3/8 percent Debentures due 2021 (incorporated by reference to
Exhibit 4.8 to Annual Report of the Company on Form 10-K for 1991).
4.9 Indenture, dated as of December 1, 1991, between the Company and Marine Midland Bank, N.A., as
Trustee, with respect to the 8 1/2 percent Notes due 2001 (incorporated by reference to Exhibit
4.9 to Annual Report of the Company on Form 10-K for 1991).
4.10 Indenture, dated as of October 15, 1992, between the Company and The Chase Manhattan (N.A.) as
Trustee, with respect to the 8 1/4 percent Notes due 1999 (incorporated by reference to Exhibit
4.10 to the Company's Annual Report on Form 10-K for 1992).
4.11 Indenture, dated as of October 15, 1992, between the Company and The Chase Manhattan (N.A.) as
Trustee, with respect to the 9 1/2 percent Debentures due 2012 (incorporated by reference to
Exhibit 4.11 to the Company's Annual Report on Form 10-K for 1992).
5.1*** Opinion of Wendy C. Shiba, Esq. regarding the legality of the shares of Series C Preferred
Stock.
12.1*** Computation of Ratio of Earnings to Fixed Charges.
23.1** The consent of KPMG Peat Marwick. Previously filed as Exhibit 24.1.
23.3*** The consent of Wendy C. Shiba, Esq. is contained in her opinion included as Exhibit 5.1 hereto.
Previously filed as Exhibit 24.3.
24.1*** Powers of Attorney, pursuant to which the Registration Statement and amendments thereto may be
signed by certain of the officers and directors of the Company. Previously filed as Exhibit
25.1.
24.2*** Additional Powers of Attorney, pursuant to which the Registration Statement and amendments
thereto may be signed by certain of the officers and directors of the Company. Previously filed
as Exhibit 25.2.
</TABLE>

*** Previously filed.

****************************************************************************
APPENDIX

On the Prospectus Cover a Bowater logo appears where indicated.

On the Prospectus Cover a redherring appears on the left hand side, rotated
90 degress. Text reads as follows:

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any State.

On the Back Cover a Bowater logo appears where indicated.

<PAGE>
[Draft -- 1/25/94]
Bowater Incorporated
(a Delaware corporation)
Depositary Shares
Representing a One-Fourth
Interest in a Share of
% Series C Cumulative Preferred Stock,
par value $1 per share
PURCHASE AGREEMENT
February , 1994
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Brothers Inc
Kidder, Peabody & Co. Incorporated
Prudential Securities Incorporated
Smith Barney Shearson Inc.
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
Bowater Incorporated, a Delaware corporation (the Company),
confirms its agreement with you and each of the other Underwriters named in
Schedule A hereto (collectively, the Underwriters, which term shall also include
any underwriter substituted as hereinafter provided in Section 10) for whom you
are acting as representatives (the Representatives), with respect to the sale by
the Company and the purchase by the Underwriters, acting severally and not
jointly, of the respective numbers of Depositary Shares (the Depositary Shares),
each representing a one-fourth interest in a share of the Company's % Series C
Cumulative Preferred Stock, par value $1 per share, (the Series C Preferred
Stock) set forth in said Schedule A and with respect to the grant by the Company
to the Underwriters, acting severally and not jointly, of the option described
in Section 2(b) hereof to purchase up to [ ] additional

<PAGE>
2
Depositary Shares to cover over-allotments, in each case except as may otherwise
be provided in the Pricing Agreement, as hereinafter defined. The aforesaid
Depositary Shares (the Initial Shares) and all or any part of the [ ]
Depositary Shares subject to the option described in Section 2(b) hereof (the
Option Shares) are collectively hereinafter called the Shares.
The shares of the Series C Preferred Stock are to be deposited
by or on behalf of the several Underwriters against delivery of Depositary
Receipts (Depositary Receipts) to be issued under a Deposit Agreement (the
Deposit Agreement) dated as of February , 1994 among the Company, Trust
Company Bank, as Depositary (the Depositary), and the holders from time to time
of Depositary Receipts issued thereunder. The Depositary Receipts issued upon
such deposit or deposits of the shares of the Series C Preferred Stock will
evidence the Initial Shares and, if the option described in Section 2(b) hereof
is exercised, the Option Shares.
Prior to the purchase and public offering of the Shares by the
several Underwriters, the Company and the Representatives, acting on behalf of
the several Underwriters, shall enter into an agreement substantially in the
form of Exhibit A hereto (the Pricing Agreement). The Pricing Agreement may take
the form of an exchange of any standard form of written telecommunication
between the Company and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Shares will
be governed by this Agreement, as supplemented by the Pricing Agreement. From
and after the date of the execution and delivery of the Pricing Agreement, this
Agreement shall be deemed to incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange
Commission (the Commission) a registration statement on Form S-3 (No. 33-51571)
and related preliminary prospectuses for the registration of the Shares under
the Securities Act of 1933, as amended (the 1933 Act), has filed such amendments
thereto, if any, and such amended preliminary prospectuses as may have been
required to the date hereof, and will file such additional amendments thereto
and such amended prospectuses as may hereafter be required. Such registration
statement (as amended, if applicable) and the prospectus constituting a part
thereof (including in each case all documents, if any, incorporated or deemed to
be incorporated by reference therein and the information, if any, deemed to be
part thereof pursuant to Rule 430A(b) of the rules and regulations of the
Commission under the 1933 Act (the 1933 Act Regulations)), as from time to time
amended or supplemented pursuant to the 1933 Act, the Securities Exchange Act of
1934, as amended (the 1934 Act) or otherwise,

<PAGE>
3
are hereinafter referred to as the Registration Statement and the Prospectus,
respectively, except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the offering of the
Shares that differs from the Prospectus on file at the Commission at the time
the Registration Statement becomes effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of the
1933 Act Regulations), the term Prospectus shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters. All
references in this Agreement to financial statements and schedules and other
information that is contained,included or statedin the Registration Statement or
the Prospectus (and all other references of like import) shall be deemed to mean
and include all such financial statements and schedules and other information
that is or is deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement or the
Prospectus shall be deemed to mean and include the filing of any document under
the 1934 Act that is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be.
The Company understands that the Underwriters propose to make
a public offering of the Shares as soon as the Representatives deem advisable
after the Registration Statement becomes effective and the Pricing Agreement has
been executed and delivered. All parties to this Agreement will exercise good
faith in the performance of their obligations under this Agreement.
SECTION 1. Representations and Warranties. (a) The Company
represents and warrants to each Underwriter as of the date hereof and as of the
date of the Pricing Agreement (such latter date being hereinafter referred to as
the Representation Date) as follows:
(i) The Company has been duly incorporated and each of the
Company and each active subsidiary of the Company is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required and the failure to so qualify would have a material adverse effect on
the business, operations or financial condition of the Company; all of the
issued and outstanding capital stock of each such subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is owned by
the Company, directly or through subsidiaries,

<PAGE>
4
free and clear of any security interest, mortgage, pledge, lien, or encumbrance
(except as disclosed to the contrary in the Prospectus).
(ii) At the time the Registration Statement becomes effective,
the Registration Statement will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus, at the Representation Date (unless the term Prospectus refers to
a prospectus that has been provided to the Underwriters by the Company for use
in connection with the offering of the Shares that differs from the Prospectus
on file at the Commission at the time the Registration Statement becomes
effective, in which case at the time it is first provided to the Underwriters
for such use) and at Closing Time referred to in Section 2 hereof, will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the Company in
writing by any Underwriter through the Representatives set forth in the last
paragraph of the cover page, the first paragraph of page 2, and under the
heading Underwriting in the Registration Statement or Prospectus.
(iii) The documents incorporated or deemed to be incorporated
by reference in the Registration Statement or the Prospectus, at the time they
were filed or amended, as the case may be, or hereafter are filed with the
Commission, complied or when so filed will comply, as the case may be, in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission under the 1934 Act (the 1934 Act Regulations),
and, when read together with the other information in the Prospectus at the time
the Registration Statement and any amendments thereto become effective, will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the

<PAGE>
5
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than those in the
ordinary course of business, that are material with respect to the Company and
its subsidiaries considered as one enterprise, and (C) except for regular
quarterly dividends, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(v) The Company is in compliance with all of the provisions of
Section 517.075 of the Florida Statutes, and all rules and regulations
promulgated thereunder relating to issuers doing business in Cuba.
(b) Any certificate signed by any officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing. (a) On
the basis of the representations and warranties herein contained and subject to
the terms and conditions herein set forth, the Company agrees to sell to each
Underwriter, severally and not jointly, and each Underwriter, severally and not
jointly, agrees to purchase from the Company, at the price per share set forth
in the Pricing Agreement, the number of Initial Shares set forth in Schedule A
opposite the name of such Underwriter (except as otherwise provided in the
Pricing Agreement), plus any additional number of Initial Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof. If the Company elects to rely on Rule 430A, Schedule A may be
attached to the Pricing Agreement.
(1) If the Company has elected not to rely upon Rule 430A of
the 1933 Act Regulations, the initial public offering price and the purchase
price per share to be paid by the several Underwriters for the Shares have each
been determined and set forth in the Pricing Agreement, dated the date hereof,
and an amendment to the Registration Statement and the Prospectus will be filed
before the Registration Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A of the
1933 Act Regulations, the purchase price per share to be paid by the several
Underwriters for the Shares shall be an amount equal to the initial public
offering price, less an amount per share to be determined by agreement between
the Representatives and the Company. The initial public offering price per share
of the Shares shall be a fixed price to be determined by agreement

<PAGE>
6
between the Representatives and the Company. The initial public offering price
and the purchase price, when so determined, shall be set forth in the Pricing
Agreement. In the event that such prices have not been agreed upon and the
Pricing Agreement has not been executed and delivered by all parties thereto by
the close of business on the fourth business day following the date of this
Agreement, this Agreement shall terminate forthwith, without liability of any
party to any other party, unless otherwise agreed to by the Company and the
Representatives. For purposes of this Agreement, the term business day means a
day on which the New York Stock Exchange is open for business.
(b) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the Underwriters, severally and
not jointly, to purchase up to an additional [ ] Depositary Shares
at the price per share set forth in the Pricing Agreement. The option hereby
granted will expire 30 days after (i) the date the Registration Statement
becomes effective, if the Company has elected not to rely on Rule 430A under the
1933 Act Regulations, or (ii) the Representation Date, if the Company has
elected to rely upon Rule 430A under the 1933 Act Regulations, and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments that may be made in connection with the offering and
distribution of the Initial Shares upon notice by the Representatives to the
Company setting forth the number of Option Shares as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Shares. Any such time and date of delivery (a Date of
Delivery) shall be determined by the Representatives, but shall not be later
than seven full business days and not earlier than two full business days after
the exercise of said option, nor in any event prior to Closing Time, as
hereinafter defined, unless otherwise agreed by the Representatives and the
Company. If the option is exercised as to all or any portion of the Option
Shares, each of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Shares then being
purchased that the number of Initial Shares set forth in Schedule A opposite the
name of such Underwriter bears to the total number of Initial Shares (except as
otherwise provided in the Pricing Agreement), subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment of the purchase price for, and delivery of
certificates for, the Initial Shares shall be made at the offices of Cravath,
Swaine & Moore, New York, New York, or at such other place as shall be agreed
upon by the Representatives and the Company, at 10:00 A.M. on the fifth business
day (unless

<PAGE>
7
postponed in accordance with the provisions of Section 10) following the date
the Registration Statement becomes effective (or, if the Company has elected to
rely upon Rule 430A of the 1933 Act Regulations, the fifth business day after
execution of the Pricing Agreement), or such other time not later than ten
business days after such date as shall be agreed upon by the Representatives and
the Company (such time and date of payment and delivery being herein called
Closing Time). In addition, in the event that any or all of the Option Shares
are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Shares shall be made at the above
mentioned offices of Cravath, Swaine & Moore, or at such other place as shall be
agreed upon by the Representatives and the Company, on each Date of Delivery as
specified in the notice from the Representatives to the Company. Payment shall
be made to the Company by certified or official bank check or checks drawn in
New York Clearing House funds or similar next day funds payable to the order of
the Company, against delivery to the Representatives for the respective accounts
of the Underwriters of certificates for the Initial Shares to be purchased by
them. Certificates for the Initial Shares and the Option Shares, if any, shall
be in such denominations and registered in such names as the Representatives may
request in writing at least three business days before Closing Time or the Date
of Delivery, as the case may be. It is understood that each Underwriter has
authorized the Representatives, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the Initial Shares that it has
agreed to purchase. The Representatives, individually and not as representatives
of the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Shares or the Option Shares, if any, to be
purchased by any Underwriter whose check has not been received by Closing Time
or the Date of Delivery, as the case may be, but such payment shall not relieve
such Underwriter from its obligations hereunder. The certificates for the
Initial Shares and the Option Shares, if any, will be made available for
examination and packaging by the Representatives not later than 10:00 A.M. on
the last business day prior to Closing Time or Date of Delivery, as the case may
be.
SECTION 3. Covenants of the Company. The Company covenants
with each Underwriter as follows:
(a) The Company will notify the Representatives immediately, and
confirm the notice in writing, (i) of the effectiveness of the
Registration Statement and any amendment thereto (including any
post-effective amendment), (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or

<PAGE>
8
supplement to the Prospectus or for additional information, and (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will give the Representatives notice of its
intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement
to the Prospectus (including any revised prospectus that the Company
proposes for use by the Underwriters in connection with the offering of
the Shares which differs from the prospectus on file at the Commission at
the time the Registration Statement becomes effective, whether or not
such revised prospectus is required to be filed pursuant to Rule 424(b)
of the 1933 Act Regulations), whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Representatives with copies of any
such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such
amendment or supplement or use any such prospectus to which the
Representatives or counsel for the Underwriters shall reasonably object.
(c) The Company will deliver to the Representatives
[ ] signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated
or deemed to be incorporated by reference therein, as requested) and will
also deliver to the Representatives a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the Underwriters.
(d) The Company will furnish to each Underwriter, from time to
time during the period when the Prospectus is required to be delivered
under the 1933 Act or the 1934 Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may
reasonably request for the purposes contemplated by the 1933 Act or the
1934 Act or the respective applicable rules and regulations of the
Commission thereunder.
(e) If any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Prospectus in order that
the Prospectus will not include an

<PAGE>
9
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, the Company will forthwith amend or supplement
the Prospectus or make appropriate filings under the 1934 Act (in form
and substance reasonably satisfactory to counsel for the Underwriters) so
that, as so amended or supplemented, the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, and the Company will furnish to the Underwriters a reasonable
number of copies of such amendment or supplement or 1934 Act filing.
(f) The Company will endeavor, in cooperation with the
Underwriters, to qualify the Shares for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States as the Representatives may reasonably designate. In each
jurisdiction in which the Shares have been so qualified, the Company,
acting on advice of counsel, will file such statements and reports as may
be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, an earnings statement (which need
not be audited, but which shall be in form complying with the provisions
of Rule 158 of the 1933 Act Regulations) covering a twelve month period
beginning not later than the first day of the Company's fiscal quarter
next following the effective date (as defined in said Rule 158) of the
Registration Statement.
(h) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A of the 1933 Act Regulations, then immediately following
the execution of the Pricing Agreement, the Company will prepare, and
file or transmit for filing with the Commission in accordance with such
Rule 430A and Rule 424(b) of the 1933 Act Regulations, copies of the
amended Prospectus, or, if required by such Rule 430A, a post-effective
amendment to the Registration Statement (including amended Prospectuses),
containing all information so omitted.

<PAGE>
10
(i) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, will file
all documents required to be filed with the Commission pursuant to
Sections 13, 14 or 15 of the 1934 Act within the time periods required by
the 1934 Act and the 1934 Act Regulations.
(j) The Company will use the net proceeds received by it from
the sale of the Shares in the manner specified in the Prospectus under
Use of Proceeds in all material respects.
(k) The Company will not prior to the expiration of 90 days
after the date of the Pricing Agreement, sell, offer to sell, grant any
option for the sale of or otherwise dispose of any other shares of
capital stock or securities convertible into or exchangeable for capital
stock (other than (i) the Shares, (ii) the shares of Common Stock
issuable upon conversion or redemption of the % PRIDES, Series B
Convertible Preferred Stock (the Series B Preferred Stock), being offered
at approximately the same time as the Series C Preferred Stock, (ii) the
Series B Preferred Stock, (iii) the Junior Participating Preferred Stock,
Series A, and any shares of Common Stock pursuant to the Company's Rights
Plan, and (iv) the shares of Common Stock or options for shares of Common
Stock issued pursuant to or sold in connection with the Company's
qualified employee benefit, dividend reinvestment, and stock option and
stock purchase plans and shares of Common Stock issuable upon the
conversion of securities or the exercise of stock options or warrants
outstanding as of the date hereof) either directly or indirectly, without
prior written consent of the Representatives.
(l) The Company will use its best efforts to effect the listing
of the Shares on the New York Stock Exchange.
SECTION 4. Payment of Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the printing and filing of the Registration Statement as
originally filed and of each amendment thereto, (ii) the reproduction and
distribution of this Agreement and the Pricing Agreement, (iii) the preparation,
issuance and delivery of the certificates for the Shares to the Underwriters,
(iv) the fees and disbursements of the Company's counsel and accountants, (v)
the qualification of the Shares under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey, (vi) the printing and
delivery to the Underwriters of copies of the

<PAGE>
11
Registration Statement as originally filed and of each amendment thereto, of
each preliminary prospectus, and of the Prospectus and any amendments or
supplements thereto, (vii) the reproduction and delivery to the Underwriters of
copies of the Blue Sky Survey, and (viii) the fees and expenses incurred in
connection with the listing of the Shares on the New York Stock Exchange.
If this Agreement is terminated by the Representatives in
accordance with the provisions of Section 5 or Section 9(a)(i), the Company
shall reimburse the Underwriters for all of their reasonable out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date hereof, or with the consent of the
Representatives at a later time and date, not later, however, than 5:30
P.M. on the first business day following the date hereof, or at such
later time and date as may be approved by a majority in interest of the
Underwriters; and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission. If the Company has elected to rely upon Rule 430A of the 1933
Act Regulations, the price of the Shares and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing pursuant to Rule 424(b) of the 1933 Act Regulations within the
prescribed time period, and prior to Closing Time the Company shall have
provided evidence satisfactory to the Representatives of such timely
filing, or a post-effective amendment providing such information shall
have been promptly filed and declared effective in accordance with the
requirements of Rule 430A of the 1933 Act Regulations.
(b) At Closing Time the Representatives shall have received:
(1) the favorable opinion, dated as of Closing Time of
Wendy C. Shiba, Esq., Secretary and Assistant General Counsel for
the Company, in form and substance

<PAGE>
12
satisfactory to counsel for the Underwriters, to the effect that:
(i) the Company has been duly organized and is
validly existing and in good standing under the laws of the
State of Delaware with corporate power and authority to
own, lease and operate its properties and conduct its
business as described in the Prospectus;
(ii) to the best of her knowledge and information,
the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction in which such qualification is required and
the failure to so qualify would have a material adverse
effect on the business, operations or financial condition
of the Company taken as a whole;
(iii) the authorized, issued and outstanding
capital stock of the Company is in all material respects as
set forth in the Prospectus (except for subsequent
issuances, if any, pursuant to reservations, agreements,
employee benefit plans or the exercise of convertible
securities referred to in the Prospectus); the Shares have
been duly and validly authorized, and, when issued and
delivered to and paid for by the Underwriters pursuant to
this Agreement, will be fully paid and non-assessable; the
Series C Preferred Stock, Depositary Shares and Depositary
Receipts conform to the description thereof contained in
the Prospectus; the Depositary Shares have been duly
authorized for listing, subject to official notice of
issuance and, in the case of the Depositary Shares,
evidence of satisfactory distribution, on the New York
Stock Exchange; and the certificates for the Shares are in
valid and sufficient form under Delaware law;
(iv) the issuance of the Shares is not subject to
preemptive or other similar rights arising by operation of
law, under the Restated Certificate of Incorporation or
by-laws of the Company or, to the best of her knowledge and
information, otherwise;
(v) the Deposit Agreement has been duly
authorized, executed and delivered by the

<PAGE>
13
Company, and, assuming due authorization, execution and
delivery thereof by the Depositary, constitutes a legal,
valid and binding instrument enforceable against the
Company in accordance with its terms (subject, as to
enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, fraudulent transfer, moratorium
or other laws affecting creditors' rights generally from
time to time in effect and to general principles of
equity); assuming payment of the purchase price by the
Underwriters, each Depositary Share represents a one-fourth
interest in a validly issued, outstanding, fully paid and
nonassessable share of Series C Preferred Stock; and the
Depositary Shares, when issued under the Deposit Agreement
in accordance with the provisions of the Deposit Agreement
will be validly issued, and, assuming due execution and
delivery of the Depositary Receipts by the Depositary
pursuant to the Deposit Agreement, the Depositary Receipts
will entitle the holders thereof to the benefits provided
therein and in the Deposit Agreement;
(vi) the Registration Statement has become
effective under the 1933 Act and to the best of her
knowledge no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding
for that purpose has been instituted or threatened under
the 1933 Act;
(vii) the Registration Statement and the
Prospectus, and any amendment or supplement thereto, comply
as to form in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations;
(viii) to the best of her knowledge, there is no
pending or threatened, suit or proceeding before any court
or governmental agency, authority or body or any arbitrator
against or involving the Company or any of its
subsidiaries, of a character required to be disclosed in
the Registration Statement that is not adequately disclosed
in the Prospectus;
(ix) to the best of her knowledge and information,
there are no material contracts, indentures or other
instruments required to be described or referred to in the
Registration

<PAGE>
14
Statement or to be filed as exhibits thereto other than
those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the
descriptions thereof or references thereto are correct in
all material respects;
(x) this Agreement and the Pricing Agreement have
been duly authorized, executed and delivered by the
Company; the performance of this Agreement or the Pricing
Agreement and the consummation of the transactions herein
contemplated and the issuance and sale of the Shares, will
not result in a breach or violation of any of the terms and
provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or
any of its active subsidiaries pursuant to, any material
contract, indenture or other instrument to which the
Company or any of its active subsidiaries is a party or by
which it is bound or to which any of the property of the
Company or any of its active subsidiaries is subject, the
Company's Restated Certificate of Incorporation or by-laws,
or any order, rule or regulation known to such counsel of
any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and
no consent, approval, authorization or order of, or filing
with any court or governmental agency or body is required
for the consummation of the transactions contemplated by
this Agreement or the Pricing Agreement, except such as
have been obtained under the 1933 Act and such as may be
required under state securities laws in connection with the
purchase and distribution of such Shares by the
Underwriters; provided that no opinion is called for with
respect to any such consent, approval, authorization or
order required to be obtained by any Underwriters.
In rendering such opinion, such counsel may rely on the
opinion of Richards, Layton & Finger described in Section 5(b)(4)
below as to the matters of Delaware law covered thereby.
(2) The favorable opinion, dated as of Closing Time, of
Cravath, Swaine & Moore, counsel for the Underwriters, with
respect to the issuance and sale of the Shares, the Registration
Statement, the Prospectus

<PAGE>
15
and other related matters as the Representatives may reasonably
require.
(3) In giving their opinions required by subsections
(b)(1) and (b)(2), respectively, of this Section, Wendy C. Shiba,
Esq. and Cravath, Swaine & Moore shall each additionally state
that nothing has come to their attention that would lead them to
believe that the Registration Statement (except for financial
statements and schedules and other financial or statistical data
included or incorporated by reference therein, as to which counsel
need make no statement), at the time it became effective or at the
Representation Date, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading
or that the Prospectus (except for financial statements and
schedules and other financial or statistical data included or
incorporated by reference therein, as to which counsel need make
no statement), at the Representation Date (unless the term
Prospectus refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the
offering of the Shares which differs from the Prospectus on file
at the Commission at the time the Registration Statement becomes
effective, in which case at the time it is first provided to the
Underwriters for such use) or at Closing Time, included or
includes an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(4) The favorable opinion, dated as of or prior to
Closing Time of Richards, Layton & Finger, special Delaware
counsel for the Company, in form and substance satisfactory to
counsel for the Underwriters, to the effect that the issuance and
sale of the Series C Preferred Stock and the Depositary Shares (i)
will not result in a breach or violation of the Company's Restated
Certificate of Incorporation, the Certificate of Designations of
the LIBOR Preferred Stock, Series A or the Certificate of
Designation, Preferences and Rights of the Junior Participating
Preferred Stock, Series A and (ii) will not require the consent or
approval of the holders of the LIBOR Preferred Stock, Series A.

<PAGE>
16
(5) The opinion, dated as of Closing Time of , counsel
for the Depositary, to the effect that:
(i) The Deposit Agreement has been duly
authorized, executed and delivered by the Depositary and is
a valid and binding agreement of the Depositary; and
(ii) The Depositary Receipts have been duly
executed and delivered by the Depositary in accordance with
the provisions of the Deposit Agreement.
(c) At Closing Time, there shall not have been, since the date
hereof or since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and the Representatives shall have received
a certificate of the Company signed by a Vice President or other officer
and the principal financial or principal accounting officer or treasurer
of the Company, dated as of Closing Time, to the effect that the signers
of such certificate have carefully examined the Registration Statement,
the Prospectus, any supplement to the Prospectus and this Agreement and
that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1 are true and correct with the
same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under this Agreement
at or prior to Closing Time, and (iv) to the best knowledge of the
Company, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
initiated or threatened by the Commission.
(d) At the time of the execution of this Agreement, the
Representatives shall have received from KPMG Peat Marwick a letter dated
such date, in form and substance satisfactory to the Representatives,
confirming that they are independent accountants within the meaning of
the 1933 Act and the 1934 Act and the respective applicable published
rules and regulations thereunder and stating in effect that:

<PAGE>
17
(i) in their opinion the audited consolidated financial
statements and financial statement schedules included or
incorporated in the Registration Statement and the Prospectus and
reported on by them comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and
the 1934 Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited
consolidated financial statements made available by the Company;
carrying out certain specified procedures (but not an audit in
accordance with generally accepted auditing standards) which would
not necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the
meetings of the stockholders, directors and the executive and
audit committees of the Company and the subsidiaries; and
inquiries of certain officials of the company who have
responsibility for financial and accounting matters of the Company
and its subsidiaries as to transactions and events subsequent to
December 31, 1992, nothing came to their attention which caused
them to believe that:
(1) the amounts in the unaudited Selected
Financial and Operating Data, if any, included in the
Registration Statement and the Prospectus do not agree with
the corresponding amounts in the audited consolidated
financial statements, unaudited consolidated financial
statements or analyses prepared by the Company from which
such amounts were derived; or
(2) any unaudited consolidated financial
statements included or incorporated in the Registration
Statement and the Prospectus do not comply as to form in
all material respects with applicable accounting
requirements and with the published rules and regulations
of the Commission with respect to financial statements
included or incorporated in quarterly reports on Form 10-Q
under the 1934 Act; and said unaudited consolidated
financial statements are not in conformity with generally
accepted accounting principles applied on a basis
substantially consistent with that of the audited
consolidated financial statements included or incorporated
in the Registration Statement and the Prospectus; or

<PAGE>
18
(3) with respect to the period from the date of
the most recent consolidated financial statements (other
than any capsule information), audited or unaudited,
included or incorporated in the Registration Statement and
the Prospectus to the date of the most recent unaudited
consolidated financial statements prepared by the Company,
there were any changes in the consolidated long-term debt
of the Company or capital stock of the Company or decreases
in the consolidated stockholders' equity of the Company as
compared with the amounts shown on the most recent
consolidated balance sheet included or incorporated in the
Registration Statement and the Prospectus, or for the
period from the date of the most recent consolidated
financial statements included or incorporated in the
Registration Statement and the Prospectus to such date
there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated
income before income taxes or in total or per share amounts
of consolidated net income of the Company, except in all
instances for changes or decreases set forth in such
letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof
unless said explanation is not deemed necessary by the
Representatives; or
(4) based solely upon discussions with management
of the Company, and subject to such further limitations as
may be required in the circumstances, (A) with respect to
the period subsequent to the date of the most recent
unaudited consolidated financial statements prepared by the
Company, there were any changes, at a specified date not
more than five business days prior to the date of the
letter, in the consolidated long-term debt of the Company
or capital stock of the Company or decreases in the
consolidated stockholders' equity of the Company as
compared with the amounts shown on the most recent
consolidated balance sheet included or incorporated in the
Registration Statement and Prospectus, or (B) for the
period from the date of the most recent consolidated
financial statements included or incorporated in the
Registration Statement and the Prospectus to such specified
date there were any decreases, as compared with the
corresponding period in the

<PAGE>
19
previous year, in consolidated income before income taxes
or in total or per share amounts of consolidated net income
of the Company, except in all instances for changes or
decreases set forth in such letter, in which case the
letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said
explanation is not deemed necessary by the Representatives;
or
(5) the amounts included in any unaudited capsule
information included or incorporated in the Registration
Statement and the Prospectus do not agree with the amounts
set forth in the unaudited consolidated financial
statements for the same periods or were not determined on a
basis substantially consistent with that of the
corresponding amounts in the audited consolidated financial
statements included or incorporated in the Registration
Statement and the Prospectus;
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration
Statement and the Prospectus and in Exhibit 12.1 to the
Registration Statement, including the information set forth under
the captions Capitalization, Market Price of Common Stock,
Selected Financial and Operating Data, Recent Developments and
Management's Discussion and Analysis of Financial Condition and
Results of Operations in the Registration Statement and the
Prospectus, the information included or incorporated in Items 1,
6, 7 and 11 of the Company's Annual Report on Form 10-K,
incorporated in the Registration Statement and the Prospectus and
the information included in the Management's Discussion and
Analysis of Financial Condition and Results of Operations included
or incorporated in the Company's Quarterly Reports on Form 10-Q,
incorporated in the Registration Statement and the Prospectus (if
any), agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.

<PAGE>
20
References to the Prospectus in this paragraph (d) include any
supplement thereto at the date of the letter.
(e) At Closing Time, the Representatives shall have received
from KPMG Peat Marwick a letter, dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant
to subsection (d) of this Section, except that the specified date
referred to shall be a date not more than five days prior to Closing
Time, and, if the Company has elected to rely on Rule 430A of the 1933
Act Regulations, to the further effect that they have carried out
procedures as specified in clauses (ii) and (iii) of subsection (d) of
this Section with respect to certain amounts, percentages and financial
information deemed to be a part of the Registration Statement pursuant to
Rule 430A(b).
(f) At Closing Time, the Shares shall have been approved for
listing on the New York Stock Exchange upon notice of issuance.
(g) At Closing Time and at each Date of Delivery, if any,
counsel for the Underwriters shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Shares as
contemplated in this Agreement, the Pricing Agreement and related
proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
agreements or conditions herein contained; and all proceedings taken by
the Company in connection with the issuance and sale of the Shares as
herein contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(h) At Closing Time, the Company shall have furnished to the
Representatives a letter from [names of about five (number to depend on
size of holdings) shareholders who are officers or directors] addressed
to the Representatives, in which each such person agrees not to offer,
sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce an offering of, any shares of Common Stock
beneficially owned by such person or any securities convertible into, or
exchangeable for, shares of Common Stock for a period of 90 days
following the Closing Time without the prior written consent of the
Representatives, other than shares of Common Stock disposed of as bona
fide gifts.

<PAGE>
21
(i) Subsequent to the time of the execution of this Agreement,
there shall not have been any decrease in the rating of any of the
Company's debt or equity securities by any nationally recognized
statistical rating organization (as defined for purposes of Rule 436(g)
under the 1933 Act) or any notice given by such organization of any
intended or potential decrease in any such rating or of a possible change
in any such rating that does not indicate the direction of the possible
change.
(j) In the event the Underwriters exercise their option provided
in Section 2(b) hereof to purchase all or any portion of the Option
Shares, the representations and warranties of the Company contained
herein and the statements in any certificates furnished by the Company
hereunder shall be true and correct as of each Date of Delivery, and the
Underwriters shall have received:
(1) A certificate, dated such Date of Delivery, of the
Company by a Vice President or other officer and the principal
financial or principal accounting officer or treasurer in their
capacities as such, confirming that the certificate delivered at
Closing Time pursuant to Section 5(c) hereof remains true and
correct as of such Date of Delivery.
(2) The favorable opinion of Wendy C. Shiba, Esq., in
form and substance reasonably satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Shares and otherwise to the same effect as the opinions required
by Section 5(b)(1) hereof.
(3) The favorable opinion of Cravath, Swaine & Moore,
counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Shares and otherwise to the same effect as
the opinion required by Section 5(b)(2) hereof.
(4) The opinion of , counsel to the
Depositary, dated such Date of Delivery, to the same effect as the
opinion required by Section 5(b)(5) hereof.
(5) A letter from KPMG Peat Marwick, in form and
substance satisfactory to the Representatives and dated such Date
of Delivery, substantially the same in scope and substance as the
letter furnished to the Representatives pursuant to Section 5(e)
hereof, except that the specified date in the letter

<PAGE>
22
furnished pursuant to this Section 5(j)(5) shall be a date not
more than five days prior to such Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representatives by notice to the Company at any time at or prior to
Closing Time, and such termination shall be without liability of any party to
any other party except as provided in Section 4, and provided further that
Sections 6, 7 and 13 hereof shall survive such termination.
SECTION 6. Indemnification. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage and
reasonable expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto) including the
information deemed to be part of the Registration Statement pursuant to
Rule 430A(b) of the 1933 Act Regulations, if applicable, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
reasonable expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
if such settlement is effected with the written consent of the Company;
and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the reasonable fees and
disbursements of counsel chosen by the Representatives, if applicable
thereunder), that is reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or

<PAGE>
23
proceeding by any governmental agency or body, commenced or threatened,
or any claim whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;

provided, however, that
this indemnity agreement shall not apply to any loss, liability, claim,
damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon
and in conformity with written information furnished to the Company by
any Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto); and provided further, that the
foregoing indemnification with respect to any preliminary prospectus
shall not inure to the benefit of the Underwriters, or any person
controlling the Underwriters, with respect to losses, claims, liabilities
or damages asserted by any person who purchased Shares from the
Underwriters, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of the
Underwriters to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of such
Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss,
claim, damage or liability.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, each of its
officers who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933
Act, against any and all loss, liability, claim, damage and reasonable
expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by such Underwriter
through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment
or supplement thereto). The Company acknowledges that the statements set
forth in the last paragraph of the cover page, the first paragraph of
page 2, and under the heading Underwriting in the Registration Statement
(or any amendment thereto) or the Prospectus (or any amendment or

<PAGE>
24
supplement thereto) constitute the only information furnished in writing
by or on behalf of the several Underwriters for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment
or supplement thereto).
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party shall not relieve such
indemnifying party from any liability which it may have otherwise than on
account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of any such action. If it
so elects within a reasonable time after receipt of such notice, an
indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by
it and approved by the indemnified parties defendant in such action,
which approval shall not be unreasonably withheld, unless such
indemnified parties object to such assumption on the ground that there
may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection
with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances.
SECTION 7. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 6 is for any reason held to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company and the Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by said
indemnity agreement incurred by the Company and one or more of the Underwriters,
as incurred, in such proportions that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover page of the Prospectus bears to the initial public offering price
appearing thereon and the Company is responsible for the balance; provided,
however, that no person guilty of fraudulent misrepresentation (within the

<PAGE>
25
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section, each person, if any, who controls a Underwriter within the
meaning of Section 15 of the 1933 Act shall have the same rights to contribution
as such Underwriter, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act shall have
the same rights to contribution as the Company.
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements contained in
this Agreement and the Pricing Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall remain operative and in
full force and effect, regardless of any investigation made by or on behalf of
any Underwriter or controlling person, or by or on behalf of the Company, and
shall survive delivery of the Shares to the Underwriters.
SECTION 9. Termination of Agreement. (a) The Representatives
may terminate this Agreement, by notice to the Company, at any time at or prior
to Closing Time (i) if there has been, since the date of this Agreement or since
the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or any outbreak or
escalation of hostilities or other national or international calamity or crisis,
the effect of which is such as to make it, in the judgment of the
Representatives, impracticable or inadvisable to market the Shares or to enforce
contracts for the sale of the Shares, or (iii) if trading in the Common Stock
has been suspended by the Commission or the New York Stock Exchange, or if
trading generally on the New York Stock Exchange has been suspended, or minimum
or maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by said Exchange or by order of the Commission or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either federal or New York State authorities.
(b) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other
party except as provided in Section 4, and provided further that Sections
6, 7 and 13 hereof shall survive such termination.

<PAGE>
26
SECTION 10. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail at Closing Time to purchase the Initial
Shares which it or they are obligated to purchase under this Agreement and the
Pricing Agreement (the Defaulted Shares), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Shares in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Shares does not exceed 10% of the
Initial Shares, each of the non-defaulting Underwriters shall be
obligated, severally and not jointly, to purchase the full amount thereof
in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Shares exceeds 10% of the Initial
Shares, this Agreement shall terminate without liability on the part of
any nondefaulting Underwriter or the Company.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone Closing Time for a period not exceeding seven days in
order to effect any changes deemed necessary or advisable in the Registration
Statement or Prospectus or in any other documents or arrangements.
SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed, personally delivered or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives in care of Merrill Lynch & Co., North Tower, World Financial
Center, New York, New York 10281-1201, Attention of [ ];
notices to the Company shall be directed to it at 55 East Camperdown Way, Post
Office Box 1028, Greenville, South Carolina 29602, Attention of Treasurer, with
a copy to Corporate Secretary.
SECTION 12. Parties. This Agreement and the Pricing Agreement
shall each inure to the benefit of and be binding upon the Underwriters and the
Company and their respective successors.

<PAGE>
27
Nothing expressed or mentioned in this Agreement or the Pricing Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their respective successors, heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or the
Pricing Agreement or any provision herein or therein contained. This Agreement
and the Pricing Agreement and all conditions and provisions hereof and thereof
are intended to be for the sole and exclusive benefit of the Underwriters and
the Company and their respective successors, and said controlling persons and
officers and directors and their respective successors, heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Shares from any Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 13. Governing Law and Time. This Agreement and the
Pricing Agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and to be performed in
said State. Specified times of day refer to New York City time.

<PAGE>
28
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its terms.
Very truly yours,
BOWATER INCORPORATED,
By
Name: David G. Maffucci
Title: Vice President-
Treasurer
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON BROTHERS INC
KIDDER, PEABODY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY SHEARSON INC.
By MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
By
Name:
Title:
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.

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29
SCHEDULE A
<TABLE>
<S> <C>
Number of
Initial
Number of Underwriter Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................................................
Salomon Brothers Inc................................................................
Kidder, Peabody & Co. Incorporated..................................................
Prudential Securities Incorporated..................................................
Smith Barney Shearson Inc...........................................................
Total...............................................................................
</TABLE>

<PAGE>
EXHIBIT A
BOWATER INCORPORATED
(a Delaware Corporation)
[ ] Depositary Shares
Representing a One-Fourth
Interest in a Share of
% Series C Cumulative Preferred Stock,
par value $1 per share
PRICING AGREEMENT
February , 1994
MERRILL LYNCH & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SALOMON BROTHERS INC
KIDDER, PEABODY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY SHEARSON INC.
as Representatives of the several Underwriters
named in the within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
Reference is made to the Purchase Agreement, dated February
, 1994 (the Purchase Agreement), relating to the purchase by the several
Underwriters named in Schedule A thereto (the Underwriters), for whom Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon
Brothers Inc, Kidder, Peabody & Co. Incorporated, Prudential Securities
Incorporated, and Smith Barney Shearson Inc. are acting as representatives (the
Representatives), of the Depositary Shares (the Shares), representing a
one-fourth interest in the % Series C Cumulative Preferred Stock, of Bowater
Incorporated, a Delaware corporation (the Company).

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2
Pursuant to Section 2 of the Purchase Agreement, the Company
agrees with each Underwriter as follows:
1. The initial public offering price per share for the Shares,
determined as provided in said Section 2, shall be $ .
2. The purchase price per share for the Shares to be paid by the
several Underwriters shall be $ being an amount equal to the initial
public offering price set forth above less $ per share; provided that the
purchase price per share for any Option Shares (as defined in the
Purchase Agreement) purchased upon exercise of the over-allotment option
described in Section 2(b) of the Purchase Agreement shall be reduced by
an amount per share equal to any dividends per share declared by the
Company and payable on the Initial Shares (as defined in the Purchase
Agreement) but not payable on the Option Shares.
3. The dividend rate on the Series C Cumulative Preferred Stock
will be %.
4. Payment of the purchase price for, and delivery of
certificates for, the Shares shall be at the office of Cravath, Swaine &
Moore, New York, at 10:00 A.M. on the fifth business day after the
execution of this Pricing Agreement.

<PAGE>
3
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its terms.
Very truly yours,
BOWATER INCORPORATED
By
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON BROTHERS INC
KIDDER, PEABODY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY SHEARSON INC.
By MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
Name:
Title:
For themselves and as Representatives of the other Underwriters named in
Schedule A to the Purchase Agreement.

<PAGE>
[Draft -- 1/25/94]
BOWATER INCORPORATED
CERTIFICATE OF DESIGNATIONS
OF THE
% PRIDES, SERIES B CONVERTIBLE PREFERRED STOCK

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

BOWATER INCORPORATED, a corporation organized and existing
under the laws of the State of Delaware (the Corporation), hereby certifies that
the following resolution was duly adopted by the Board of Directors of the
Corporation (the Board of Directors) at a meeting duly called and held on
January 26, 1994 at which meeting a quorum of the members of the Board of
Directors was present and acting throughout, and was duly amended and
supplemented by the action of the Pricing Committee (the Pricing Committee) of
the Board of Directors, acting pursuant to authority delegated to the Pricing
Committee by the Board of Directors on October 21, 1993, at a meeting duly
called and held on [ ] at which meeting a quorum of the members
of the Pricing Committee was present and acting throughout.

<PAGE>
2
RESOLVED that, pursuant to authority expressly vested in the
Board of Directors by the provisions of the Restated Certificate of
Incorporation of the Corporation (the Certificate), the Board of Directors
hereby provides for the issuance of a series of serial preferred stock of the
Corporation, par value $1.00 per share (all series of serial preferred stock of
the Corporation being hereinafter referred to collectively as the Preferred
Stock), to consist of [1,250,000] shares, and hereby fixes the powers,
designation, preferences and relative, participating, optional and other rights
of such series of Preferred Stock, and the qualifications, limitations and
restrictions thereof, as follows:
1. Designation; Ranking. (a) The designation of the series of
Preferred Stock created by this resolution shall be % PRIDES, Series B
Convertible Preferred Stock (hereinafter called the PRIDES), and the number of
shares constituting the PRIDES is [1,250,000].
(b) Any shares of the PRIDES that at any time have been
redeemed, purchased, acquired upon conversion or otherwise acquired by the
Corporation shall, after such redemption, purchase, conversion or other
acquisition, resume the status of authorized and unissued shares of Preferred
Stock without designation as to series until such shares are once more
designated as part of a particular series by the Board of Directors.

<PAGE>
3
(c) The shares of PRIDES will rank on a parity, both as to
payment of dividends and distribution of assets upon liquidation, with the
Corporation's LIBOR Preferred Stock, Series A, [and its [ ]% Series C
Cumulative Preferred Stock,] as well as any Preferred Stock issued in the future
by the Corporation that by its terms ranks pari passu with the shares of PRIDES.
2. Dividends. The holders of record of the shares of PRIDES
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available therefor, cash dividends (Preferred Dividends)
from the date of the initial issuance of the shares of PRIDES at the rate of
[ ] percent of the $[ ] liquidation preference per annum, payable
quarterly in arrears on the first day of January, April, July, and October or,
if any such date is not a business day (as defined in paragraph 6 hereto), the
Preferred Dividend due on such date shall be payable on the next succeeding
business day (each such payment date, and any redemption date pursuant to the
proviso set forth in this sentence, being a Dividend Payment Date); provided,
however; that, with respect to any dividend period during which a redemption of
any shares of PRIDES occurs, the Corporation may, at its option, declare accrued
Preferred Dividends to, and pay such dividends on, the date fixed for
redemption, in which case such dividends would be payable in cash to the holders
of shares of PRIDES as of the record date for such dividend payment

<PAGE>
4
and would not be included in the calculation of the related Call Price (as
defined herein). The first dividend period will be from the date of initial
issuance of the shares of PRIDES to but excluding April 1, 1994 and will be
payable on April 1, 1994. Preferred Dividends shall cease to accrue on shares of
PRIDES on the Mandatory Conversion Date (as defined herein) or on the date of
their earlier conversion or redemption. Preferred Dividends will be payable to
holders of record of shares of PRIDES as they appear on the stock register of
the Corporation on such record dates, not less than 15 nor more than 60 days
preceding the payment date thereof, as shall be fixed by the Board of Directors.
Preferred Dividends payable on shares of PRIDES for any period less than a full
quarterly dividend period (or, in the case of the first Preferred Dividend, from
the date of initial issuance of the shares of PRIDES to the first Dividend
Payment Date) will be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in any period less than one month.
Preferred Dividends shall accrue on a daily basis (computed as set forth in the
immediately preceding sentence) whether or not there are funds of the
Corporation legally available for the payment of such dividends and whether or
not such Preferred Dividends are declared. Accrued but unpaid Preferred
Dividends shall cumulate

<PAGE>
5
as of the Dividend Payment Date on which they first become payable, but no
interest shall accrue on accumulated but unpaid Preferred Dividends.
As long as shares of PRIDES are outstanding, no dividends
(other than dividends payable in shares of, or warrants, rights or options
exercisable for or convertible into shares of, any capital stock, including
without limitation the Common Stock (as defined herein), of the Corporation
ranking junior to the shares of PRIDES as to the payment of dividends and the
distribution of assets upon liquidation (collectively, Junior Stock) and cash in
lieu of fractional shares in connection with any such dividend) will be paid or
declared in cash or otherwise, nor will any other distribution be made (other
than a distribution payable in Junior Stock and cash in lieu of fractional
shares in connection with any such distribution), on any Junior Stock unless (i)
full dividends on Preferred Stock that does not constitute Junior Stock (Parity
Preferred Stock) have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such Junior Stock
dividend or distribution payment to the extent such dividends are cumulative;
(ii) dividends in full for the current quarterly dividend period have been paid,
or declared and set aside for payment, on all Parity Preferred Stock to the
extent such dividends are cumulative; (iii) the Corporation has paid or set
aside all amounts, if any, then or

<PAGE>
6
theretofore required to be paid or set aside for all purchase, retirement, and
sinking funds, if any, for any Parity Preferred Stock; and (iv) the Corporation
is not in default on any of its obligations to redeem any Parity Preferred
Stock.
As long as any shares of PRIDES are outstanding, no shares of
Junior Stock may be purchased, redeemed, or otherwise acquired by the
Corporation or any of its subsidiaries (except in connection with a
reclassification or exchange of any Junior Stock through the issuance of other
Junior Stock (and cash in lieu of fractional shares in connection therewith) or
the purchase, redemption, or other acquisition of any Junior Stock with any
Junior Stock (and cash in lieu of fractional shares in connection therewith))
nor may any funds be set aside or made available for any sinking fund for the
purchase, redemption or acquisition of any Junior Stock unless: (i) full
dividends on Parity Preferred Stock have been paid, or declared and set aside
for payment, for all dividend periods terminating on or prior to the date of
such purchase, redemption, acquisition, setting aside or making available to the
extent such dividends are cumulative; (ii) dividends in full for the current
quarterly dividend period have been paid, or declared and set aside for payment,
on all Parity Preferred Stock to the extent such dividends are cumulative; (iii)
the Corporation has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase,

<PAGE>
7
retirement, and sinking funds, if any, for any Parity Preferred Stock; and (iv)
the Corporation is not in default on any of its obligations to redeem any Parity
Preferred Stock.
As long as any shares of PRIDES are outstanding, dividends or
other distributions may not be declared or paid on any Parity Preferred Stock
(other than dividends or other distributions payable in Junior Stock and cash in
lieu of fractional shares in connection therewith) and the Corporation may not
purchase, redeem or otherwise acquire any Parity Preferred Stock (except with
any Junior Stock and cash in lieu of fractional shares in connection therewith
and except with the right, subject to clause (b) of this paragraph and any
similar requirement of any other Certificate of Designations for Preferred
Stock, to receive accrued and unpaid dividends), unless either: (a)(i) full
dividends on Parity Preferred Stock have been paid, or declared and set aside
for payment, for all dividend periods terminating on or prior to the date of
such Parity Preferred Stock dividend, distribution, redemption, purchase or
acquisition payment to the extent such dividends are cumulative; (ii) dividends
in full for the current quarterly dividend period have been paid, or declared
and set aside for payment, on all Parity Preferred Stock to the extent such
dividends are cumulative; (iii) the Corporation has paid or set aside all
amounts, if any, then or theretofore required to be paid or set aside for all
purchase, retirement, and

<PAGE>
8
sinking funds, if any, for any Parity Preferred Stock; and (iv) the Corporation
is not in default on any of its obligations to redeem any Parity Preferred
Stock; or (b) with respect to the declaration and payment of dividends only, any
such dividends are declared and paid pro rata so that the amounts of any
dividends declared and paid per share of PRIDES and each other share of Parity
Preferred Stock will in all cases bear to each other the same ratio that accrued
and unpaid dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if such dividends are cumulative) per
share of PRIDES and such other share of Parity Preferred Stock bear to each
other.
3. Conversion or Redemption. (a) Unless previously either
called for redemption in accordance with the provisions of paragraph 3(b) or
converted at the option of the holder in accordance with the provisions of
paragraph 3(c), on January 1, 1998 (the Mandatory Conversion Date) each
outstanding share of PRIDES will convert mandatorily (the Mandatory Conversion)
into (i) shares of authorized common stock, $1.00 par value, of the Corporation
(the Common Stock) at the Common Equivalent Rate (as defined herein) in effect
on the Mandatory Conversion Date and (ii) the right to receive an amount in cash
equal to all accrued and unpaid Preferred Dividends on such share of PRIDES
(other than previously declared dividends payable to a holder of record as of a
prior date) to the Mandatory Conversion Date,

<PAGE>
9
whether or not declared, out of funds legally available for the payment of
Preferred Dividends, subject to the requirement set forth in clause (b) in the
last paragraph of paragraph 2 above and any similar requirement of any other
Certificate of Designations for Preferred Stock, subject to the right of the
Corporation to redeem the shares of PRIDES on or after January 1, 1997 (the
Initial Redemption Date) and prior to the Mandatory Conversion Date and subject
to the conversion of the shares of PRIDES at the option of the holder at any
time prior to the Mandatory Conversion Date. The Common Equivalent Rate is
initially four shares of Common Stock for each share of PRIDES and is subject to
adjustment as set forth in paragraphs 3(d) and 3(e) below. Preferred Dividends
on the shares of PRIDES shall cease to accrue and such shares of PRIDES shall
cease to be outstanding on the Mandatory Conversion Date. The Corporation shall
make such arrangements as it deems appropriate for the issuance of certificates
representing shares of Common Stock and for the payment of cash in respect of
such accrued and unpaid dividends, if any, or cash in lieu of fractional shares,
if any, without interest, in exchange for and contingent upon surrender of
certificates representing the shares of PRIDES, and the Corporation may defer
the payment of dividends on such shares of Common Stock and the voting thereof
until, and make

<PAGE>
10
such payment and voting contingent upon, the surrender of certificates
representing the shares of PRIDES, provided that the Corporation shall give the
holders of the shares of PRIDES such notice of any such actions as the
Corporation deems appropriate and upon such surrender such holders shall be
entitled to receive such dividends declared and paid, if any, without interest,
on such shares of Common Stock subsequent to the Mandatory Conversion Date.
(b) (i) Shares of PRIDES are not redeemable by the Corporation
prior to the Initial Redemption Date. At any time and from time to time on or
after that date until immediately prior to the Mandatory Conversion Date, the
Corporation will have the right to redeem, in whole or in part, the outstanding
shares of PRIDES (subject to the notice provisions set forth in paragraph
3(b)(iii) and to the Certificate). Upon any such redemption the Corporation will
deliver to the holder thereof, in exchange for each share of PRIDES subject to
redemption, the greater of:
(A) the number of shares of Common Stock equal to the
Call Price (as defined herein) in effect on the redemption date divided by
the Current Market Price (as defined herein) of the Common Stock, such
Current Market Price being determined as of the second Trading Day (as
defined herein) immediately preceding the Notice Date (as defined herein);
or

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11
(B) shares of Common Stock equal to the then applicable
Optional Conversion Rate (as defined herein).
Dividends will cease to accrue on the shares of PRIDES on the
date fixed for their redemption (unless the Corporation defaults on the payment
of the redemption price). The Call Price of each share of PRIDES is the sum of
(x) $[ ] on and after the Initial Redemption Date to and including March
31, 1997, or $[ ] on and after April 1, 1997, to and including June 30,
1997, or $[ ] on and after July 1, 1997, to and including September 30,
1997, or $[ ] on and after October 1, 1997, to and including November 30,
1997, or $[ ] on and after December 1, 1997, to and including December 31,
1997, and (y) all accrued and unpaid dividends thereon to but not including the
date fixed for redemption (other than previously declared dividends payable to a
holder of record as of a prior date). If fewer than all of the outstanding
shares of PRIDES are to be called for redemption, shares of PRIDES to be called
for redemption will be selected by the Corporation from outstanding shares of
PRIDES not previously called by lot or pro rata (as nearly as may be) or by any
other method determined by the Board of Directors in its sole discretion to be
equitable.
(ii) The term Current Market Price per share of the Common
Stock on any date of determination means the lesser of (x)

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12
the average of the Closing Prices (as defined herein) of the Common Stock for
the 15 consecutive Trading Days ending on and including such date of
determination, or (y) the Closing Price of the Common Stock for such date of
determination; provided, however, that, with respect to any redemption of shares
of PRIDES, if any event that results in an adjustment of the Common Equivalent
Rate occurs during the period beginning on the first day of such 15-day period
and ending on the applicable redemption date, the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted, in the sole
determination of the Board of Directors of the Corporation whose determination
shall be conclusive, to reflect the occurrence of such event.
(iii) The Corporation will provide notice of any call for
redemption of shares of PRIDES to holders of record of the shares of PRIDES to
be called for redemption not less than 15 nor more than 60 days prior to the
date fixed for redemption. Any such notice will be provided by mail, sent to the
holders of record of the shares of PRIDES to be called for redemption at such
holder's address as it appears on the stock register of the Corporation, first
class postage prepaid; provided, however, that failure to give such notice or
any defect therein shall not affect the validity of the proceeding for the
redemption of any shares of PRIDES to be redeemed except as to the holder to
whom the Corporation has failed to give said notice or whose notice was
defective. On and

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13
after the redemption date, all rights of the holders of the shares of PRIDES
called for redemption shall terminate except the right to receive the redemption
price (unless the Corporation defaults on the payment of the redemption price).
A public announcement of any call for redemption will be made by the Corporation
prior to, or at the time of, the mailing of such notice of redemption. The term
Notice Date with respect to any notice given by the Corporation in connection
with a redemption of shares of PRIDES means the date on which first occurs
either the public announcement of such call for redemption or the commencement
of mailing of the notice to the holders of shares of PRIDES to be called for
redemption, in each case pursuant to this subparagraph (iii).
Each such notice shall state, as appropriate, the following
and may contain such other information as the Corporation deems advisable:
(A) the redemption date;
(B) that all outstanding shares of PRIDES are to be
redeemed or, in the case of a redemption of fewer than all outstanding
shares of PRIDES, the number of such shares held by such holder to be
redeemed;
(C) the Call Price, the number of shares of Common Stock
deliverable upon redemption of each share of PRIDES to be redeemed, and the
Current Market Price used to calculate such number of shares of Common
Stock;

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14
(D) the place or places where certificates for such
shares of PRIDES are to be surrendered for redemption; and
(E) that dividends on the shares of PRIDES to be redeemed
shall cease to accrue on and after such redemption date (except as
otherwise provided herein).
(iv) The Corporation's obligation to deliver shares of Common
Stock and provide funds upon redemption in accordance with this paragraph 3(b)
and paragraph 4 shall be deemed fulfilled if, on or before a redemption date,
the Corporation shall deposit, with a bank or trust company, or an affiliate of
a bank or trust company, having an office or agency in New York, New York, and
having a capital and surplus of at least $50,000,000 according to its last
published statement of condition, or shall set aside or make other reasonable
provision for the issuance of, such number of shares of Common Stock as are
required to be delivered by the Corporation pursuant to this paragraph 3(b) upon
the occurrence of the related redemption of PRIDES and such amount of cash in
lieu of the issuance of fractional share amounts as is required by paragraph 4,
in trust for the account of the holders of such shares of PRIDES to be redeemed
(and so as to be and continue to be available therefor), with irrevocable
instructions and authority to such bank or trust company, or affiliate thereof,
to deliver such shares and funds upon redemption of the shares of PRIDES so
called for redemption. Any interest accrued on such funds shall

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15
be paid to the Corporation from time to time. Any shares of Common Stock or
funds so deposited and unclaimed at the end of three years from such redemption
date shall be repaid and released to the Corporation, after which, subject to
applicable law, the holder or holders of such shares of PRIDES so called for
redemption shall look only to the Corporation for delivery of shares of Common
Stock and the payment of any other funds due in connection with the redemption
of such shares of PRIDES.
(v) Each holder of shares of PRIDES called for redemption must
surrender the certificates evidencing such shares (properly endorsed or assigned
for transfer, if the Board of Directors shall so require and the notice shall so
state) to the Corporation at the place designated in the notice of such
redemption and will thereupon be entitled to receive certificates evidencing
shares of Common Stock and to receive any funds payable pursuant to this
paragraph 3(b) and paragraph 4, without interest, following such surrender and
on or following the date of such redemption. In case fewer than all the shares
represented by any such surrendered certificate are called for redemption, a new
certificate shall be issued at the expense of the Corporation representing the
unredeemed shares. If such notice of redemption shall have been given, and if on
the date fixed for redemption shares of Common Stock and funds necessary for the
redemption

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16
shall have been irrevocably either (A) set aside by the Corporation separate and
apart from its other funds or assets in trust for the account of the holders of
the shares to be redeemed (and so as to be and continue to be available
therefor) or (B) deposited with a bank or trust company or an affiliate thereof
as provided herein or the Corporation shall have made other reasonable provision
therefor, then notwithstanding that the certificates evidencing any shares of
PRIDES so called for redemption shall not have been surrendered, the shares
represented thereby so called for redemption shall be deemed no longer
outstanding, Preferred Dividends with respect to the shares so called for
redemption shall cease to accrue on the date fixed for redemption and all rights
with respect to the shares so called for redemption shall forthwith after such
date cease and terminate, except for the rights of the holders to receive the
shares of Common Stock and funds, if any, payable pursuant to this paragraph
3(b) and paragraph 4, without interest, upon surrender of their certificates
therefor and except that holders of shares of PRIDES at the close of business on
a record date (preceding the redemption date) for any payment of Preferred
Dividends shall be entitled to receive the Preferred Dividend payable on such
shares on the corresponding Dividend Payment Date notwithstanding the redemption
of such shares following such record date and prior to such Dividend Payment
Date. Holders of shares of PRIDES that are redeemed shall not

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17
be entitled to receive dividends declared and paid on the shares of Common Stock
deliverable upon such redemption, and such shares of Common Stock shall not be
entitled to vote, until such shares of Common Stock are issued upon the proper
surrender of the certificates representing such shares of PRIDES, and upon such
surrender such holders shall be entitled to receive such dividends, without
interest, declared and paid on such shares of Common Stock subsequent to such
redemption date.
(c) Shares of PRIDES are convertible, in whole or in part, at
the option of the holders thereof (Optional Conversion), at any time prior to
the Mandatory Conversion Date, unless previously redeemed, into shares of Common
Stock at a rate of [ ] shares of Common Stock for each share of PRIDES
(the Optional Conversion Rate), subject to adjustment as set forth below. The
right of Optional Conversion of shares of PRIDES called for redemption will
terminate immediately prior to the close of business on any redemption date with
respect to such shares.
Optional Conversion of shares of PRIDES may be effected by
delivering certificates evidencing such shares, together with written notice of
conversion and proper assignment of such certificates to the Corporation or in
blank (and, if applicable, cash payment of an amount equal to the dividend
attributable to the current quarterly dividend period payable on such shares),
to

<PAGE>
18
the office of any transfer agent for the shares of PRIDES or to any other office
or agency maintained by the Corporation for that purpose and otherwise in
accordance with Optional Conversion procedures established by the Corporation.
Each Optional Conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the foregoing requirements shall
have been satisfied. The Optional Conversion shall be at the Optional Conversion
Rate in effect at such time on such date.
Holders of shares of PRIDES at the close of business on a
record date for any payment of declared Preferred Dividends will be entitled to
receive the Preferred Dividend payable on such shares of PRIDES on the
corresponding Dividend Payment Date notwithstanding the Optional Conversion of
such shares of PRIDES following such record date and prior to such Dividend
Payment Date. However, shares of PRIDES surrendered for Optional Conversion
after the close of business on a record date for any payment of declared
Preferred Dividends and before the opening of business on the next succeeding
Dividend Payment Date must be accompanied by payment in cash of an amount equal
to the Preferred Dividends attributable to the current quarterly dividend period
payable on such date (unless such shares of PRIDES are subject to redemption on
a redemption date subsequent to the record date established for such Dividend
Payment Date and prior to or on such Dividend Payment Date). Except as provided
above, upon any

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19
Optional Conversion of shares of PRIDES, the Corporation will make no payment of
or allowance for unpaid Preferred Dividends, whether or not in arrears, on such
shares of PRIDES as to which Optional Conversion has been effected or previously
declared dividends or distributions on the shares of Common Stock issued upon
such Optional Conversion.
(d) The Common Equivalent Rate and the Optional Conversion
Rate are each subject to adjustment from time to time as provided below in this
paragraph (d).
(i) If the Corporation shall pay or make a dividend or
other distribution with respect to its Common Stock in shares of Common
Stock (including by way of reclassification of any shares of its Common
Stock), the Common Equivalent Rate and the Optional Conversion Rate in
effect at the opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such dividend or
other distribution shall each be increased by multiplying such Common
Equivalent Rate and Optional Conversion Rate by a fraction of which the
numerator shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination, excluding the effect of such dividend or distribution, plus
the total number of shares of Common Stock constituting such dividend or
other distribution, and of which the denominator shall be the number

<PAGE>
20
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination, excluding the effect of such dividend or
distribution, such increase to become effective at the opening of business
on the day following the date fixed for such determination. For the
purposes of this clause (i), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Corporation and the number of shares constituting such dividend or other
distribution shall include shares represented by cash issued in lieu of
fractional shares of Common Stock.
(ii) In case outstanding shares of Common Stock shall be
subdivided or split into a greater number of shares of Common Stock, the
Common Equivalent Rate and the Optional Conversion Rate in effect at the
opening of business on the day following the day upon which such
subdivision or split becomes effective shall each be proportionately
increased, and, conversely, in case outstanding shares of Common Stock
shall be combined into a lesser number of shares of Common Stock, the
Common Equivalent Rate and the Optional Conversion Rate in effect at the
opening of business on the day following the day upon which such
combination becomes effective shall each be proportionately reduced, such
increases or reductions, as the case may be, to become effective at the
opening

<PAGE>
21
of business on the day following the day upon which such subdivision or
split or combination becomes effective.
(iii) If the Corporation shall, after the date hereof,
issue rights or warrants to all holders of its Common Stock entitling them
(for a period not exceeding 45 days from the date of such issuance) to
subscribe for or purchase shares of Common Stock at a price per share less
than the Current Market Price of the Common Stock (determined pursuant to
paragraph 3(b)(ii)) on the record date for the determination of
stockholders entitled to receive such rights or warrants, then in each case
the Common Equivalent Rate and the Optional Conversion Rate shall each be
adjusted by multiplying the Common Equivalent Rate and the Optional
Conversion Rate in effect on such record date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the record date for issuance of such rights or
warrants, excluding the effect of such issuance, plus the number of
additional shares of Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be
the number of shares of Common Stock outstanding at the close of business
on the record date for issuance of such rights or warrants, excluding the
effect of such issuance, plus the number of shares of Common Stock which
the aggregate offering price of

<PAGE>
22
the total number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at such Current
Market Price (determined by multiplying such total number of offered shares
by the exercise price of such rights or warrants and dividing the product
so obtained by such Current Market Price). Shares of Common Stock held by
the Corporation or by another company of which a majority of the shares
entitled to vote in the election of directors are held, directly or
indirectly, by the Corporation shall not be deemed to be outstanding for
purposes of such computation. Such adjustment shall become effective at the
opening of business on the business day next following the record date for
the determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of Common Stock are not delivered by
reason of the expiration of such rights or warrants, the Common Equivalent
Rate and the Optional Conversion Rate shall each be readjusted to the
Common Equivalent Rate and the Optional Conversion Rate which would then be
in effect had the adjustments made by reason of the issuance of such rights
or warrants been made upon the basis of the issuance of rights or warrants
in respect of only the number of shares of Common Stock actually delivered.
(iv) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock consisting

<PAGE>
23
of evidences of its indebtedness, cash or other assets (including shares of
capital stock of the Corporation other than Common Stock but excluding any
cash dividends or distributions, other than Extraordinary Cash
Distributions (as defined herein), and dividends referred to in clause (i)
above), or shall issue to all holders of its Common Stock rights or
warrants to subscribe for or purchase any of its securities (other than
those referred to in clause (iii) above), then in each such case the Common
Equivalent Rate and the Optional Conversion Rate shall each be adjusted by
multiplying the Common Equivalent and the Optional Conversion Rate in
effect on the record date for such dividend or distribution or for the
determination of stockholders entitled to receive such rights or warrants,
as the case may be, by a fraction of which the numerator shall be the
Current Market Price per share of the Common Stock (determined pursuant to
paragraph 3(b)(ii) on such record date), and of which the denominator shall
be such Current Market Price per share of Common Stock less either (i) the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) on such record date of the portion of
the assets or evidences of indebtedness so distributed, or of such rights
or warrants,

<PAGE>
24
applicable to one share of Common Stock or (ii), if applicable, the amount
of the Extraordinary Cash Distribution applicable to one share of Common
Stock. Such adjustment shall become effective at the opening of business on
the business day next following the record date for such dividend or
distribution or for the determination of holders entitled to receive such
rights or warrants, as the case may be. Extraordinary Cash Distribution
means the portion of any cash dividend or cash distribution on the Common
Stock that, when added to all other cash dividends and cash distributions
on the Common Stock made during the immediately preceding 12-month period
(other than cash dividends and cash distributions for which a prior
adjustment to the Common Equivalent Rate and Optional Conversion Rate was
previously made) exceeds, on a per share of Common Stock basis, 10% of the
average daily Closing Price of the Common Stock over such 12-month period.
(v) Anything in this paragraph 3 notwithstanding, the
Corporation will be entitled (but shall not be required) to make such
upward adjustments in the Common Equivalent Rate and the Optional
Conversion Rate or the Call Price in addition to those set forth by this
paragraph 3, as the Corporation, in its sole discretion, shall determine to
be advisable, in order that any stock dividend, subdivision of stock,
distribution

<PAGE>
25
of rights to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock (or any transaction that could
be treated as any of the foregoing transactions pursuant to Section 305 of
the Internal Revenue Code of 1986, as amended, or any successor provision)
hereafter made by the Corporation to its stockholders will not be taxable
in whole or in part.
(vi) All adjustments to the Common Equivalent Rate and
the Optional Conversion Rate will be calculated to the nearest 1/100th of a
share of Common Stock. No adjustment in the Common Equivalent Rate or the
Optional Conversion Rate will be required unless such adjustment would
require an increase or decrease of at least one percent in the Common
Equivalent Rate; provided, however, that any adjustments which by reason of
this subparagraph are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All adjustments to the
Common Equivalent Rate and Optional Conversion Rate shall be made
successively.
(vii) Prior to taking any action that could result in
adjustment affecting the Common Equivalent Rate or the Optional Conversion
Rate such that the conversion price (for purposes of this subparagraph, an
amount equal to the Call Price divided by the Common Equivalent Rate or the
Optional

<PAGE>
26
Conversion Rate, respectively, as in effect from time to time) would be
below the then par value of the Common Stock, the Corporation will take any
corporate action which may, in the opinion of its Board of Directors, be
necessary in order that the Corporation may validly and legally issue fully
paid and nonassessable shares of Common Stock at the Common Equivalent Rate
or the Optional Conversion Rate as so adjusted.
(viii) Before redeeming any shares of PRIDES, the
Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock upon such
redemption.
(e) In case of any consolidation or merger to which the
Corporation is a party (other than a merger or consolidation in which the
Corporation is the surviving or continuing corporation and in which each share
of Common Stock outstanding immediately prior to the merger or consolidation
remains unchanged in all material respects), or in case of any sale or transfer
to another corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), each share of PRIDES shall, after consummation of such
transaction, be subject to (i) conversion at the option of the holder into the
kind and amount of

<PAGE>
27
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which such
share of PRIDES might have been converted immediately prior to consummation of
such transaction, (ii) conversion on the Mandatory Conversion Date into the kind
and amount of securities, cash or other property receivable upon consummation of
such transaction by a holder of the number of shares of Common Stock into which
such share of PRIDES would have been converted if the conversion on the
Mandatory Conversion Date had occurred immediately prior to the date of
consummation of such transaction, plus the right, subject to the requirement set
forth in clause (b) in the last paragraph of paragraph 2 above and any similar
requirement of any other Certificate of Designations for Preferred Stock, to
receive cash in an amount equal to all accrued and unpaid dividends on such
share of PRIDES (other than previously declared dividends payable to a holder of
record as of a prior date), and (iii) redemption on any redemption date in
exchange for the kind and amount of securities, cash or other property
receivable upon consummation of such transaction by a holder of the number of
shares of Common Stock that would have been issuable, using the Call Price in
effect on such redemption date, upon a redemption of such share of PRIDES
immediately prior to consummation of such transaction, assuming that, if the
Notice Date for such redemption is not prior to such transaction, the

<PAGE>
28
Notice Date had been the date of such transaction; and assuming in each case
that such holder of shares of Common Stock failed to exercise rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon consummation of such transaction (provided that, if the kind or
amount of securities, cash or other property receivable upon consummation of
such transaction is not the same for each non-electing share, then the kind and
amount of securities, cash or other property receivable upon consummation of
such transaction for each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares). The
kind and amount of securities into or for which the shares of the PRIDES shall
be convertible or redeemable after consummation of such transaction shall be
subject to adjustment as described in paragraph 3(d) following the date of
consummation of such transaction. The Corporation may not become a party to any
such transaction unless the terms thereof are consistent with the foregoing.
(f) Whenever the Common Equivalent Rate and Optional
Conversion Rate are adjusted as provided in paragraph 3(d), the Corporation
shall:
(i) forthwith compute the adjusted Common Equivalent Rate
and Optional Conversion Rate in accordance with this paragraph 3 and
prepare a certificate signed by the

<PAGE>
29
Chief Financial Officer, any Vice President, the Treasurer or the
Controller of the Corporation setting forth the adjusted Common Equivalent
Rate and Optional Conversion Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon which
such adjustment is based, which certificate shall be conclusive, final and
binding evidence of the correctness of the adjustment, and shall file such
certificate forthwith with the transfer agent or agents for the shares of
PRIDES and the Common Stock;
(ii) make a prompt public announcement stating that the
Common Equivalent Rate and Optional Conversion Rate have been adjusted and
setting forth the adjusted Common Equivalent Rate and Optional Conversion
Rate; and
(iii) mail a notice stating that the Common Equivalent
Rate and Optional Conversion Rate have been adjusted, the facts requiring
such adjustment and upon which such adjustment is based and setting forth
the adjusted Common Equivalent Rate and Optional Conversion Rate, to the
holders of record of the outstanding shares of the PRIDES no later than 45
days after the end of the Corporation's fiscal quarter period during which
the facts requiring such adjustment occurred.
(g) In case, at any time while any of the shares of PRIDES are
outstanding,

<PAGE>
30
(i) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock, excluding any cash dividends other
than Extraordinary Cash Distributions, or
(ii) the Corporation shall authorize the issuance to all
holders of the Common Stock of rights or warrants to subscribe for or
purchase shares of the Common Stock or of any other subscription rights or
warrants, or
(iii) of any reclassification of the Common Stock (other
than a subdivision, split or combination thereof) or of any consolidation
or merger to which the Corporation is a party and for which approval of any
stockholders of the Corporation is required (except for a merger of the
Corporation into one of its subsidiaries solely for the purpose of changing
the corporate domicile of the Corporation to another state of the United
States and in connection with which there is no substantive change in the
rights or privileges of any securities of the Corporation other than
changes resulting from differences in the corporate statutes of the state
the Corporation was then domiciled in and the new state of domicile), or of
the sale or transfer of all or substantially all of the assets of the
Corporation (except to one or more wholly-owned subsidiaries),

<PAGE>
31
then the Corporation shall cause to be filed at each office or agency maintained
for the purpose of conversion of the shares of PRIDES, and shall cause to be
mailed to the holders of shares of PRIDES at their last addresses as they shall
appear on the stock register, at least 10 business days before the date
hereinafter specified in clause (A) or (B) below (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified), a
notice stating (A) the date on which a record is to be taken for the purpose of
such dividend, distribution, or issuance of rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, or issuance of rights or warrants
are to be determined, or (B) the date on which any such reclassification,
consolidation, merger, sale or transfer is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
(including cash), if any, deliverable upon such reclassification, consolidation,
merger, sale or transfer. The failure to give or receive the notice required by
this paragraph (g) or any defect therein shall not affect the legality or
validity of any such dividend, distribution, issuance of any right or warrant or
other action.

<PAGE>
32
4. No Fractional Shares. No fractional shares of Common Stock
shall be issued upon the redemption or conversion of any shares of the PRIDES.
In lieu of any fractional share otherwise issuable in respect of the aggregate
number of shares of the PRIDES of any holder that are redeemed or converted on
any redemption date or upon Mandatory Conversion or any Optional Conversion,
such holder shall be entitled to receive an amount in cash (computed to the
nearest cent) equal to the same fraction of the (i) Current Market Price of the
Common Stock, determined as of the second Trading Date immediately preceding the
Notice Date, in the case of redemption, or (ii) Closing Price of the Common
Stock determined (A) as of the fifth Trading Day immediately preceding the
Mandatory Conversion Date, in the case of Mandatory Conversion or (B) as of the
second Trading Day immediately preceding the effective date of conversion, in
the case of an Optional Conversion by a holder. If more than one share of PRIDES
shall be surrendered for conversion or redemption at one time by or for the same
holder, the number of full shares of Common Stock issuable upon conversion or
redemption thereof shall be computed on the basis of the aggregate number of
shares of the PRIDES so converted or redeemed.
5. Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized and unissued Common
Stock, solely for issuance upon the conversion or

<PAGE>
33
redemption of shares of PRIDES as herein provided, free from any preemptive
rights, such maximum number of shares of Common Stock as shall from time to time
be issuable upon the Mandatory Conversion, Optional Conversion or redemption of
all the shares of PRIDES then outstanding.
6. Definitions. As used in this Certificate of Designations:
(i) the term business day shall mean any day other than a
Saturday, a Sunday or a day on which commercial banking institutions in the
City of New York, New York, or Atlanta, Georgia, are authorized or
obligated by law or executive order to close;
(ii) the term Closing Price, on any day, shall mean the
closing sale price regular way of the Common Stock on such day or, in case
no such sale takes place on such day, the average of the reported closing
bid and asked prices regular way of the Common Stock on such day, in each
case on the New York Stock Exchange or, if the Common Stock is not listed
or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading, or, if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices of the
Common Stock on the over-the-counter market on the day in question as
reported by

<PAGE>
34
the National Association of Securities Dealers, Inc. Automated Quotation
System (or any successor to such system), or a similarly generally accepted
reporting service, or if not so available in such manner, as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose;
(iii) the term record date shall be such date as is from
time to time fixed by the Board of Directors with respect to the receipt of
dividends, the receipt of a redemption price upon redemption or the taking
of any action or exercise of any voting rights permitted hereby; and
(iv) the term Trading Day shall mean a date on which the
New York Stock Exchange (or any successor to such Exchange), or, if the
Common Stock is not listed or admitted to trading on such exchange, the
date on which such exchange or market on which the Common Stock is listed
or traded, is open for the transaction of business.
7. Payment of Taxes. The Corporation will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on the redemption or conversion of
shares of PRIDES pursuant to paragraph 3; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any registration or transfer involved in the issue or delivery of

<PAGE>
35
shares of Common Stock in a name other than that of the registered holder of
shares of PRIDES redeemed or converted or to be redeemed or converted, and no
such issue or delivery shall be made unless and until the person requesting such
issue or delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
8. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
subject to the rights of the holders of any other series of Preferred Stock, the
holders of outstanding shares of PRIDES are entitled to receive the sum of
$[ ] per share, plus an amount equal to any accrued and unpaid dividends
thereon, out of the assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of Junior
Stock upon liquidation, dissolution, or winding up. If upon any voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
assets of the Corporation are insufficient to permit the payment of the full
preferential amounts payable with respect to shares of PRIDES and all other
series of Parity Preferred Stock, the holders of shares of PRIDES and of all
other series of Parity Preferred Stock will share ratably in any distribution of
assets of the Corporation in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating

<PAGE>
36
distribution to which they are entitled, the holders of shares of PRIDES will
not be entitled to any further participation in any distribution of assets by
the Corporation. A consolidation or merger of the Corporation with one or more
corporations or a sale or transfer of substantially all of the assets of the
Corporation shall not be deemed to be a liquidation, dissolution, or winding up
of the Corporation.
9. Voting Rights. The holders of shares of PRIDES shall have
the right with the holders of Common Stock to vote in the election of Directors
and upon each other matter coming before any meeting of the holders of Common
Stock on the basis of 3-1/5 votes for each share of PRIDES held. The holders of
shares of PRIDES and the holders of Common Stock will vote together as one class
on such matters except as provided by law or the Certificate.
In the event that dividends on the shares of PRIDES or any
other series of Preferred Stock shall be in arrears and unpaid for six quarterly
dividend periods, or if any other series of Preferred Stock shall be entitled
for any other reason to exercise voting rights, separate from the Common Stock,
to elect any Directors of the Corporation (Preferred Stock Directors), the
holders of the shares of PRIDES (voting separately as a class with holders of
all other series of Preferred Stock upon which like voting rights have been
conferred and are exercisable), with each

<PAGE>
37
share of PRIDES entitled to one vote on this and other matters in which
Preferred Stock votes as a group, will be entitled to vote for the election of
two Preferred Stock Directors, such Directors to be in addition to the number of
Directors constituting the Board of Directors immediately prior to the accrual
of such right. Such right, when vested, shall continue until all dividends in
arrears on the shares of PRIDES and such other series of Preferred Stock shall
have been paid in full and the right of any other series of Preferred Stock to
exercise voting rights, separate from the Common Stock, to elect any Preferred
Stock Directors shall terminate or have terminated, and, when so paid and such
termination occurs or has occurred, such right of the holders of the shares of
PRIDES shall cease. Upon any termination of the aforesaid voting right, subject
to the requirements of the Delaware corporation law and the Certificate, such
Preferred Stock Directors shall cease to be Directors of the Corporation and
shall resign.
The Corporation will not, without the approval of the holders
of at least 66-2/3% of all the shares of PRIDES then outstanding: (i) amend,
alter, or repeal any of the provisions of the Certificate or the By-laws of the
Corporation so as to affect adversely the powers, preferences, or rights of the
holders of the shares of PRIDES then outstanding or reduce the minimum time
required for any notice to which only the holders of the shares of

<PAGE>
38
PRIDES then outstanding may be entitled (an amendment of the Certificate to
authorize or create, or to increase the authorized amount of, Junior Stock,
Preferred Stock or any stock of any class ranking on a parity with the shares of
PRIDES shall be deemed not to affect adversely the powers, preferences, or
rights of the holders of the shares of PRIDES); (ii) create any series of
Preferred Stock ranking prior to the shares of PRIDES as to payment of dividends
or the distribution of assets upon liquidation; (iii) authorize or create, or
increase the authorized amount of, any capital stock, or any security
convertible into capital stock, of any class ranking prior to the shares of
PRIDES as to payment of dividends or the distribution of assets upon
liquidation; or (iv) merge or consolidate with or into any other corporation,
unless each holder of the shares of PRIDES immediately preceding such merger or
consolidation shall receive or continue to hold in the resulting corporation the
same number of shares, with substantially the same rights and preferences, as
correspond to the shares of PRIDES so held.
As long as any shares of PRIDES are outstanding, the
Corporation will not, without the approval of the holders of at least a majority
of the shares of Parity Preferred Stock then outstanding: (i) increase the
authorized amount of the Preferred Stock or (ii) create any class or classes of
capital stock ranking on a parity with the Parity Preferred Stock, either as to
payment

<PAGE>
39
of dividends or the distribution of assets upon liquidation, and not existing on
the date of this Certificate of Designations, or create any stock, or other
security, convertible into or exchangeable for or evidencing the right to
purchase any stock of such other class of capital stock ranking on a parity with
the Parity Preferred Stock, or increase the authorized number of shares of any
such other class of capital stock or amount of such other stock or security.
Notwithstanding the provisions set forth in the preceding two
paragraphs, however, no such approval described therein of the holders of the
shares of PRIDES shall be required if, at or prior to the time when such
amendment, alteration, or repeal is to take effect or when the authorization,
creation or increase of any such prior or parity stock or such other stock or
security is to be made, or when such consolidation or merger is to take effect,
as the case may be, provision is made for the redemption of all shares of PRIDES
at the time outstanding.
10. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a
<PAGE>
40
court of competent jurisdiction should determine that a provision hereof would
be valid or enforceable if a period of time were extended or shortened or a
particular percentage were increased or decreased, then such court may make such
change as shall be necessary to render the provision in question effective and
valid under applicable law.
IN WITNESS WHEREOF, Bowater Incorporated has caused this
Certificate of Designations to be signed by , its , and
attested by , its , this day of , 1994.

BOWATER INCORPORATED,
by
[CORPORATE SEAL]
ATTEST:
by

<PAGE>
[Draft -- 1/25/94]
BOWATER INCORPORATED
CERTIFICATE OF DESIGNATIONS
OF THE
% SERIES C CUMULATIVE PREFERRED STOCK

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

<PAGE>
2
RESOLVED that, pursuant to authority expressly vested in the
Board of Directors by the provisions of the Restated Certificate of
Incorporation of the Corporation (the Certificate), the Board of Directors
hereby provides for the issuance of a series of serial preferred stock of the
Corporation, par value $1.00 per share (all series of serial preferred stock of
the Corporation being hereinafter referred to collectively as the Preferred
Stock), to consist of [750,000] shares, and hereby fixes the powers,
designation, preferences and relative, participating, optional and other rights
of such series of Preferred Stock, and the qualifications, limitations and
restrictions thereof, as follows:
1. Designation; Ranking. (a) The designation of the series of
Preferred Stock created by this resolution shall be [ ]% Series C Cumulative
Preferred Stock(hereinafter called the Cumulative Preferred Stock), and the
number of shares constituting the Cumulative Preferred Stock is [750,000].
(b) Any shares of the Cumulative Preferred Stock that at any
time have been redeemed, purchased or otherwise acquired by the Corporation
shall, after such redemption, purchase or other acquisition, resume the status
of authorized and unissued shares of Preferred Stock without designation as to
series until such shares are once more designated as part of a particular series
by the Board of Directors.

<PAGE>
3
(c) The shares of Cumulative Preferred Stock will rank on a
parity, both as to payment of dividends and distribution of assets upon
liquidation, with the Corporation's LIBOR Preferred Stock, Series A, [and its
[ ]% PRIDES, Series B Convertible Preferred Stock,] as well as any Preferred
Stock issued in the future by the Corporation that by its terms ranks pari passu
with the shares of Cumulative Preferred Stock.
2. Dividends. The holders of record of the shares of
Cumulative Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefor, cash
dividends (Preferred Dividends) from the date of the initial issuance of the
shares of Cumulative Preferred Stock at the rate of [ ] percent of the
$100 liquidation preference per annum, payable quarterly in arrears on the 15th
day of January, April, July and October or, if any such date is not a business
day (as defined in paragraph 7 hereof), the Preferred Dividend due on such date
shall be payable on the next succeeding business day (each a Dividend Payment
Date). The first dividend period will be from the date of initial issuance of
the shares of Cumulative Preferred Stock to but excluding April 15, 1994 and
will be payable on April 15, 1994. Preferred Dividends will cease to accrue in
respect of the shares of Cumulative Preferred Stock on the date of their
redemption. Preferred Dividends will be payable to holders of record of the
Cumulative Preferred Stock as

<PAGE>
4
they appear on the stock register of the Corporation on such record dates, not
less than 15 nor more than 60 days preceding the payment date thereof, as shall
be fixed by the Board of Directors. Preferred Dividends payable on shares of
Cumulative Preferred Stock for any period less than a full quarterly dividend
period (or, in the case of the first Preferred Dividend, from the date of
initial issuance of the shares of Cumulative Preferred Stock to the first
Dividend Payment Date) shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in any period less
than one month. Preferred Dividends shall accrue on a daily basis (computed as
set forth in the immediately preceding sentence) whether or not there are funds
of the Corporation legally available for the payment of such dividends and
whether or not such Preferred Dividends are declared. Accrued but unpaid
Preferred Dividends shall cumulate as of the Dividend Payment Date on which they
first become payable, but no interest shall accrue on accumulated but unpaid
Preferred Dividends.
As long as shares of Cumulative Preferred Stock are
outstanding, no dividends (other than dividends payable in shares of, or
warrants, rights or options exercisable for or convertible into shares of, any
capital stock of the Corporation, including without limitation the Corporation's
common stock, $1.00 par value per share (Common Stock), ranking junior to the
shares of

<PAGE>
5
Cumulative Preferred Stock as to the payment of dividends and the distribution
of assets upon liquidation (collectively, Junior Stock) and cash in lieu of
fractional shares in connection with any such dividend) will be paid or declared
in cash or otherwise, nor will any other distribution be made (other than a
distribution payable in Junior Stock and cash in lieu of fractional shares in
connection with any such distribution), on any Junior Stock unless (i) full
dividends on Preferred Stock that does not constitute Junior Stock (Parity
Preferred Stock) have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such Junior Stock
dividend or distribution payment to the extent such dividends are cumulative;
(ii) dividends in full for the current quarterly dividend period have been paid,
or declared and set aside for payment, on all Parity Preferred Stock to the
extent such dividends are cumulative; (iii) the Corporation has paid or set
aside all amounts, if any, then or theretofore required to be paid or set aside
for all purchase, retirement, and sinking funds, if any, for any Parity
Preferred Stock; and (iv) the Corporation is not in default on any of its
obligations to redeem any Parity Preferred Stock.
As long as any shares of Cumulative Preferred Stock are
outstanding, no shares of Junior Stock may be purchased, redeemed, or otherwise
acquired by the Corporation or any of its subsidiaries (except in connection
with a reclassification or

<PAGE>
6
exchange of any Junior Stock through the issuance of other Junior Stock (and
cash in lieu of fractional shares in connection therewith) or the purchase,
redemption, or other acquisition of any Junior Stock with any Junior Stock (and
cash in lieu of fractional shares in connection therewith)) nor may any funds be
set aside or made available for any sinking fund for the purchase, redemption or
acquisition of any Junior Stock unless: (i) full dividends on Parity Preferred
Stock have been paid, or declared and set aside for payment, for all dividend
periods terminating on or prior to the date of such purchase, redemption,
acquisition, setting aside or making available to the extent such dividends are
cumulative; (ii) dividends in full for the current quarterly dividend period
have been paid, or declared and set aside for payment, on all Parity Preferred
Stock to the extent such dividends are cumulative; (iii) the Corporation has
paid or set aside all amounts, if any, then or theretofore required to be paid
or set aside for all purchase, retirement, and sinking funds, if any, for any
Parity Preferred Stock; and (iv) the Corporation is not in default on any of its
obligations to redeem any Parity Preferred Stock.
As long as any shares of Cumulative Preferred Stock are
outstanding, dividends or other distributions may not be declared or paid on any
Parity Preferred Stock (other than dividends or other distributions payable in
Junior Stock and cash in lieu of fractional shares in connection therewith) and
the Corporation

<PAGE>
7
may not purchase, redeem or otherwise acquire any Parity Preferred Stock (except
with any Junior Stock and cash in lieu of fractional shares in connection
therewith and except with the right, subject to clause (b) of this paragraph and
any similar requirement of any other Certificate of Designations for Preferred
Stock, to receive accrued and unpaid dividends), unless either: (a)(i) full
dividends on Parity Preferred Stock have been paid, or declared and set aside
for payment, for all dividend periods terminating on or prior to the date of
such Parity Preferred Stock dividend, distribution, redemption, purchase or
acquisition payment to the extent such dividends are cumulative; (ii) dividends
in full for the current quarterly dividend period have been paid, or declared
and set aside for payment, on all Parity Preferred Stock to the extent such
dividends are cumulative; (iii) the Corporation has paid or set aside all
amounts, if any, then or theretofore required to be paid or set aside for all
purchase, retirement, and sinking funds, if any, for any Parity Preferred Stock;
and (iv) the Corporation is not in default on any of its obligations to redeem
any Parity Preferred Stock; or (b) with respect to the declaration and payment
of dividends only, any such dividends are declared and paid pro rata so that the
amounts of any dividends declared and paid per share of Cumulative Preferred
Stock and each other share of Parity Preferred Stock will in all cases bear to
each other the same ratio that accrued and

<PAGE>
8
unpaid dividends (including any accumulation with respect to unpaid dividends
for prior dividend periods, if such dividends are cumulative) per share of
Cumulative Preferred Stock and such other share of Parity Preferred Stock bear
to each other.
3. Redemption. The shares of Cumulative Preferred Stock are
not redeemable by the Corporation prior to [ ], 1999. At any
time and from time to time on or after that date the Corporation will have the
right to redeem, in whole or in part, outstanding shares of Cumulative Preferred
Stock for $100 per share, plus accrued and unpaid dividends (whether or not
declared) to, but not including, the date fixed for redemption (other than
previously declared dividends payable to a holder of record as of a prior date).
Preferred Dividends will cease to accrue on the shares of Cumulative Preferred
Stock on the date fixed for their redemption (unless the Corporation defaults on
the payment of the redemption price). If fewer than all of the outstanding
shares of Cumulative Preferred Stock are to be called for redemption, shares of
Cumulative Preferred Stock to be called for redemption will be selected by the
Corporation from outstanding shares of Cumulative Preferred Stock not previously
called by lot or pro rata (as nearly as may be) or by any other method
determined by the Board of Directors in its sole discretion to be equitable. The
Corporation will provide notice of any call for redemption of shares of
Cumulative Preferred Stock

<PAGE>
9
to holders of record of the shares of Cumulative Preferred Stock to be called
for redemption not less than 30 nor more than 60 days prior to the date fixed
for redemption. Any such notice will be provided by mail, sent to the holders of
record of the shares of Cumulative Preferred Stock to be called for redemption
at such holder's address as it appears on the stock register of the Corporation,
first class postage prepaid; provided, however, that failure to give such notice
or any defect therein shall not affect the validity of the proceeding for the
redemption of any shares of Cumulative Preferred Stock to be redeemed except as
to the holder to whom the Corporation has failed to give said notice or whose
notice was defective. On and after the redemption date, all rights of the
holders of the shares of Cumulative Preferred Stock called for redemption shall
terminate except the right to receive the redemption price (unless the
Corporation defaults on the payment of the redemption price). A public
announcement of any call for redemption will be made by the Corporation prior
to, or at the time of, the mailing of such notice of redemption. Each such
notice shall state, as appropriate, the following and may contain such other
information as the Corporation deems advisable:
(A) the redemption date;
(B) that all outstanding shares of Cumulative Preferred
Stock are to be redeemed or, in the case of a redemption of fewer than all
outstanding shares of Cumulative Preferred

<PAGE>
10
Stock, the number of such shares held by such holder to be redeemed;
(C) the place or places where certificates for such
shares of Cumulative Preferred Stock are to be surrendered for redemption;
and
(D) that dividends on the shares of Cumulative Preferred
Stock to be redeemed shall cease to accrue on and after such redemption
date (except as otherwise provided herein).
The Corporation's obligation to provide funds upon redemption
in accordance with this paragraph 3 shall be deemed fulfilled if, on or before a
redemption date, the Corporation shall deposit, with a bank or trust company, or
an affiliate of a bank or trust company, having an office or agency in New York,
New York and having a capital and surplus of at least $50,000,000 according to
its last published statement of condition, the redemption price for the shares
of Cumulative Preferred Stock to be redeemed as required by this paragraph 3, in
trust for the account of the holders of such shares of Cumulative Preferred
Stock to be redeemed (and so as to be and continue to be available therefor),
with irrevocable instructions and authority to such bank or trust company, or
affiliate thereof, to deliver such funds upon redemption of the shares of
Cumulative Preferred Stock so called for redemption. Any interest accrued on
such funds shall be paid to the Corporation from time to time. Any funds so

<PAGE>
11
deposited and unclaimed at the end of three years from such redemption date
shall be repaid and released to the Corporation, after which, subject to
applicable law, the holder or holders of such shares of Cumulative Preferred
Stock so called for redemption shall look only to the Corporation for payment of
the funds due in connection with the redemption of such shares of Cumulative
Preferred Stock.
Each holder of shares of Cumulative Preferred Stock called for
redemption must surrender the certificates evidencing such shares (properly
endorsed or assigned for transfer, if the Board of Directors shall so require
and the notice shall so state) to the Corporation at the place designated in the
notice of such redemption and will thereupon be entitled to receive any funds
payable pursuant to this paragraph 3, without interest, following such surrender
and on or following the date of such redemption. In case fewer than all the
shares represented by any such surrendered certificate are called for
redemption, a new certificate shall be issued at the expense of the Corporation
representing the unredeemed shares. If such notice of redemption shall have been
given, and funds equal to the redemption price of all redeemed shares of
Cumulative Preferred Stock shall have been irrevocably either (A) set aside by
the Corporation separate and apart from its other funds or assets in trust for
the account of

<PAGE>
12
the holders of the shares to be redeemed (and so as to be and continue to be
available therefor) or (B) deposited with a bank or trust company or an
affiliate thereof as provided herein or the Corporation shall have made other
reasonable provision therefor, then notwithstanding that the certificates
evidencing any shares of Cumulative Preferred Stock so called for redemption
shall not have been surrendered, the shares represented thereby so called for
redemption shall be deemed no longer outstanding, Preferred Dividends with
respect to the shares so called for redemption shall cease to accrue on the date
fixed for redemption and all rights with respect to the shares so called for
redemption shall forthwith after such date cease and terminate, except for the
rights of the holders to funds, if any, payable pursuant to this paragraph 3
without interest upon surrender of their certificates therefor and except that
holders of shares of Cumulative Preferred Stock at the close of business on a
record date (preceding the redemption date) for any payment of Preferred
Dividends shall be entitled to receive the Preferred Dividend payable on such
shares on the corresponding Dividend Payment Date notwithstanding the redemption
of such shares following such record date and prior to such Dividend Payment
Date.

<PAGE>
13
4. Conversion. The holders of shares of Cumulative Preferred
Stock shall not have any rights to convert such shares into shares of any other
class or series of capital stock of the Corporation.
5. Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
subject to the rights of the holders of any other series of Preferred Stock, the
holders of outstanding shares of Cumulative Preferred Stock are entitled to
receive the sum of $100 per share, plus an amount equal to any accrued and
unpaid dividends thereon, out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made to
holders of Junior Stock upon liquidation, dissolution, or winding up. If upon
any voluntary or involuntary liquidation, dissolution, or winding up of the
Corporation, the assets of the Corporation are insufficient to permit the
payment of the full preferential amounts payable with respect to shares of
Cumulative Preferred Stock and all other series of Parity Preferred Stock, the
holders of shares of Cumulative Preferred Stock and of all other series of
Parity Preferred Stock will share ratably in any distribution of assets of the
Corporation in proportion to the full respective preferential amounts to which
they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of Cumulative

<PAGE>
14
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. A consolidation or merger of the
Corporation with one or more corporations or a sale or transfer of substantially
all of the assets of the Corporation shall not be deemed to be a liquidation,
dissolution, or winding up of the Corporation.
6. Voting Rights. In the event that dividends on the shares of
Cumulative Preferred Stock or any other series of Preferred Stock shall be in
arrears and unpaid for six quarterly dividend periods, or if any other series of
Preferred Stock shall be entitled for any other reason to exercise voting
rights, separate from the Common Stock, to elect any Directors of the
Corporation (Preferred Stock Directors), the holders of the shares of Cumulative
Preferred Stock (voting separately as a class with holders of all other series
of Preferred Stock upon which like voting rights have been conferred and are
exercisable), with each share of Cumulative Preferred Stock entitled to one vote
on this and other matters in which Preferred Stock votes as a group, will be
entitled to vote for the election of two Preferred Stock Directors, such
Directors to be in addition to the number of Directors constituting the Board of
Directors immediately prior to the accrual of such right. Such right, when
vested, shall continue until all dividends in arrears on the shares of
Cumulative Preferred Stock and such other series of Preferred Stock shall have

<PAGE>
15
been paid in full and the right of any other series of Preferred Stock to
exercise voting rights, separate from the Common Stock, to elect any Preferred
Stock Directors shall terminate or have terminated, and, when so paid and such
termination occurs or has occurred, such right of the holders of the shares of
Cumulative Preferred Stock shall cease. Upon any termination of the aforesaid
voting right, subject to the requirements of the Delaware corporation law and
the Certificate, such Preferred Stock Directors shall cease to be Directors of
the Corporation and shall resign.
The Corporation will not, without the approval of the holders
of at least 66-2/3% of all the Cumulative Preferred Stock then outstanding: (i)
amend, alter, or repeal any of the provisions of the Certificate or the By-laws
of the Corporation so as to affect adversely the powers, preferences, or rights
of the holders of the Cumulative Preferred Stock then outstanding or reduce the
minimum time required for any notice to which only the holders of the Cumulative
Preferred Stock then outstanding may be entitled (an amendment of the
Certificate to authorize or create, or to increase the authorized amount of,
Junior Stock, Preferred Stock or any stock of any class ranking on a parity with
the Cumulative Preferred Stock shall be deemed not to affect adversely the
powers, preferences, or rights of the holders of the Cumulative Preferred
Stock); (ii) create any series of Preferred Stock

<PAGE>
16
ranking prior to the shares of Cumulative Preferred Stock as to payment of
dividends or the distribution of assets upon liquidation; (iii) authorize or
create, or increase the authorized amount of, any capital stock, or any security
convertible into capital stock, of any class ranking prior to the Cumulative
Preferred Stock as to payment of dividends or the distribution of assets upon
liquidation; or (iv) merge or consolidate with or into any other corporation,
unless each holder of the Cumulative Preferred Stock immediately preceding such
merger or consolidation shall receive or continue to hold in the resulting
corporation the same number of shares, with substantially the same rights and
preferences, as correspond to the Cumulative Preferred Stock so held.
As long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation will not, without the approval of the holders of at
least a majority of the shares of Parity Preferred Stock then outstanding: (i)
increase the authorized amount of the Preferred Stock or (ii) create any class
or classes of capital stock ranking on a parity with the Parity Preferred Stock,
either as to payment of dividends or the distribution of assets upon
liquidation, and not existing on the date of this Certificate of Designations,
or create any stock, or other security, convertible into or exchangeable for or
evidencing the right to purchase any stock of such other class of capital stock
ranking on

<PAGE>
17
a parity with the Parity Preferred Stock, or increase the authorized number of
shares of any such other class of capital stock or amount of such other stock or
security.
Notwithstanding the provisions set forth in the preceding two
paragraphs, however, no such approval described therein of the holders of the
shares of Cumulative Preferred Stock shall be required if, at or prior to the
time when such amendment, alteration, or repeal is to take effect or when the
authorization, creation or increase of any such prior or parity stock or such
other stock or security is to be made, or when such consolidation or merger is
to take effect, as the case may be, provision is made for the redemption of all
shares of Cumulative Preferred Stock at the time outstanding.
7. Definitions. As used in this Certificate of Designations:
(i) the term business day shall mean any day other than
a Saturday, a Sunday or a day on which commercial banking institutions in
the City of New York, New York, or Atlanta, Georgia, are authorized or
obligated by law or executive order to close; and
(ii) the term record date shall be such date as is from
time to time fixed by the Board of Directors with respect to the receipt
of dividends, the receipt of a

<PAGE>
18
redemption price upon redemption or the taking of any action or exercise
of any voting rights permitted hereby.
8. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such change as
shall be necessary to render the provision in question effective and valid under
applicable law.

<PAGE>
19
IN WITNESS WHEREOF, Bowater Incorporated has caused this
Certificate of Designations to be signed by , its
and attested by , its , this day of , 1994.

BOWATER INCORPORATED,
by
[CORPORATE SEAL]
ATTEST:
by

BOWATER INCORPORATED

TRUST COMPANY BANK, as Depositary

and

THE HOLDERS FROM TIME TO TIME OF
THE DEPOSITARY RECEIPTS DESCRIBED HEREIN
IN RESPECT OF THE
% PRIDES, SERIES B CONVERTIBLE PREFERRED STOCK

_______

Deposit Agreement

_______

Dated as of February , 1994

TABLE OF CONTENTS

Page

PARTIES . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I

DEFINITIONS

Business Day . . . . . . . . . . . . . . . . . . . . 1
Certificate of Designations . . . . . . . . . . . . . 2
Certificate of Incorporation . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Office . . . . . . . . . . . . . . . . . . 2
Deposit Agreement . . . . . . . . . . . . . . . . . . 2
Depositary . . . . . . . . . . . . . . . . . . . . . 2
Depositary Share . . . . . . . . . . . . . . . . . . 2
Depositary's Agent . . . . . . . . . . . . . . . . . 3
Receipt . . . . . . . . . . . . . . . . . . . . . . . 3
record holder . . . . . . . . . . . . . . . . . . . . 3
Registrar . . . . . . . . . . . . . . . . . . . . . . 3
Rights . . . . . . . . . . . . . . . . . . . . . . . 3
Securities Act . . . . . . . . . . . . . . . . . . . 3
Series B Preferred Stock . . . . . . . . . . . . . . 3

ARTICLE II

FORM OF RECEIPTS, DEPOSIT OF SERIES B PREFERRED STOCK,
EXECUTION AND DELIVERY, TRANSFER,
SURRENDER AND REDEMPTION OF RECEIPTS

SECTION 2.01. Form and Transferability
of Receipts . . . . . . . . . . . . . 3
SECTION 2.02. Deposit of Series B Preferred Stock;
Execution and Delivery of Receipts
in Respect Thereof . . . . . . . . . . 5
SECTION 2.03. Redemption of Series B Preferred
Stock . . . . . . . . . . . . . . . . 6
SECTION 2.04. Transfer of Receipts . . . . . . . . . 9
SECTION 2.05. Combination and Split-ups of Receipts 10
SECTION 2.06. Surrender of Receipts and Withdrawal
of Series B Preferred Stock . . . . . 10

SECTION 2.07 Limitations on Execution and Delivery,
Transfer, Split-up, Combination,
Surrender and Exchange of Receipts . . 11
SECTION 2.08. Lost Receipts, etc. . . . . . . . . . 12
SECTION 2.09. Cancellation and Destruction of
Surrendered Receipts . . . . . . . . . 12
SECTION 2.10. Optional Conversion of Series B Preferred
Stock into Common Stock . . . . . . . 12
SECTION 2.11. Mandatory Conversion of Series B Preferred
Stock into Common Stock . . . . . . . 16

ARTICLE III

CERTAIN OBLIGATIONS OF HOLDERS
OF RECEIPTS AND THE COMPANY

SECTION 3.01. Filing Proofs, Certificates and Other
Information . . . . . . . . . . . . . 18
SECTION 3.02. Payment of Taxes or Other Governmental
Charges . . . . . . . . . . . . . . . 19
SECTION 3.03. Representations and Warranties as to
Series B Preferred Stock . . . . . . . 19

ARTICLE IV

THE SERIES B PREFERRED STOCK, NOTICES

SECTION 4.01. Cash Distributions . . . . . . . . . . 20
SECTION 4.02. Distributions Other Than Cash . . . . 20
SECTION 4.03. Subscription Rights, Preferences or
Privileges . . . . . . . . . . . . . . 21
SECTION 4.04. Notice of Dividends, Fixing of Record
Date for Holders of Receipts . . . . . 22
SECTION 4.05. Voting Rights . . . . . . . . . . . . 23
SECTION 4.06. Changes Affecting Series B Preferred
Stock and Reclassifications,
Recapitalizations, etc. . . . . . . . 23
SECTION 4.07. Inspection of Reports . . . . . . . . 24
SECTION 4.08. List of Receipt Holders . . . . . . . 24

ARTICLE V

THE DEPOSITARY AND THE COMPANY

SECTION 5.01. Maintenance of Offices, Agencies,
Transfer Books by the Depositary, the
Registrar . . . . . . . . . . . . . . 24
SECTION 5.02. Prevention of or Delay in Performance
by the Depositary, the Depositary's
Agents or the Company . . . . . . . . 25
SECTION 5.03. Obligations of the Depositary, the
Depositary's Agents and the Company . 26
SECTION 5.04. Resignation and Removal of the
Depositary; Appointment of Successor
Depositary . . . . . . . . . . . . . . 28
SECTION 5.05. Corporate Notices and Reports . . . . 29
SECTION 5.06. Deposit of Series B Preferred Stock
by the Company . . . . . . . . . . . . 29
SECTION 5.07. Indemnification by the Company . . . . 30
SECTION 5.08. Fees, Charges and Expenses . . . . . . 30

ARTICLE VI

AMENDMENT AND TERMINATION

SECTION 6.01. Amendment . . . . . . . . . . . . . . 30
SECTION 6.02. Termination . . . . . . . . . . . . . 31

ARTICLE VII

MISCELLANEOUS

SECTION 7.01. Counterparts . . . . . . . . . . . . 32
SECTION 7.02. Exclusive Benefits of Parties . . . . 32
SECTION 7.03. Invalidity of Provisions . . . . . . 33
SECTION 7.04. Notices . . . . . . . . . . . . . . . 33
SECTION 7.05. Depositary's Agents . . . . . . . . . 34
SECTION 7.06. Holders of Receipts Are Parties . . . 34
SECTION 7.07. Governing Law . . . . . . . . . . . . 34
SECTION 7.08. Headings . . . . . . . . . . . . . . . 34

TESTIMONIUM . . . . . . . . . . . . . . . . . . . . 35
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 35

EXHIBIT A: Form of Depositary Receipt

DEPOSIT AGREEMENT

DEPOSIT AGREEMENT dated as of
February [ ], 1994, among Bowater
Incorporated, a Delaware corporation, Trust
Company Bank, as depositary (the
"Depositary"), and all holders from time to
time of Depositary Receipts executed and
delivered hereunder.

WHEREAS, it is desired to provide, as hereinafter
set forth in this Deposit Agreement, for the deposit of
shares of ____% PRIDES, Series B Convertible Preferred
Stock, par value $1 per share (the "Series B Preferred
Stock") of the Company with the Depositary, as agent for the
beneficial owners of the Series B Preferred Stock, for the
purposes set forth in this Deposit Agreement and for the
execution and delivery hereunder of the Receipts (as defined
below) evidencing Depositary Shares (as defined below) in
respect of the Series B Preferred Stock so deposited; and

WHEREAS, the Receipts are to be substantially in
the form of the Depositary Receipt annexed as Exhibit A,
with appropriate insertions, modifications and omissions, as
hereinafter provided in this Deposit Agreement;

NOW, THEREFORE, in consideration of the premises
contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as
follows:

ARTICLE I

DEFINITIONS

The following definitions shall apply to the
respective terms (in the singular and plural forms of such
terms) used in this Agreement and the Depositary Receipts:

"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which commercial banking
institutions in the City of New York, New York, or Atlanta,
Georgia, are authorized or obligated by law or executive
order to close.

"Certificate of Designations" shall mean the
Certificate of Designations of the ___% PRIDES, Series B
Convertible Preferred Stock, par value $1 per share, as
filed with the Secretary of State of the State of Delaware,
establishing and setting forth the rights, preferences,
privileges and limitations of the Series B Preferred Stock.

"Certificate of Incorporation" shall mean the
Restated Certificate of Incorporation, as amended from time
to time, of the Company.

"Common Stock" shall mean the Common Stock, par
value $1 per share, of the Company.

"Company" shall mean Bowater Incorporated, a
Delaware corporation, and its successors.

"Corporate Office" shall mean the office of the
Depositary in the city of Atlanta, Georgia, at which at any
particular time its business in respect of matters governed
by this Deposit Agreement shall be administered, which at
the date of this Deposit Agreement is located at One Park
Place, Atlanta, Georgia.

"Deposit Agreement" shall mean this agreement, as
the same may be amended, modified or supplemented from time
to time.

"Depositary" shall mean Trust Company Bank, as
Depositary hereunder, and any successor as depositary
hereunder.

"Depositary Share" shall mean an interest in
one-fourth of a share of the Series B Preferred Stock
deposited with the Depositary hereunder and the same
proportional interest in any and all other property received
by the Depositary in respect of such share of Series B
Preferred Stock and held under this Deposit Agreement, all
as evidenced by the Receipts executed and delivered
hereunder. Subject to the terms of this Deposit Agreement,
each owner of a Depositary Share is entitled,
proportionately, to all the rights, preferences and
privileges of the Series B Preferred Stock represented by
such Depositary Share, including the dividend, voting and
liquidation rights contained in the Certificate of
Designations, and to the benefits of all obligations of the
Company under the Certificate of Designations.

"Depositary's Agent" shall mean an agent appointed
by the Depositary as provided, and for the purposes
specified, in Section 7.05.

"Receipt" or "Depositary Receipt" shall mean a
Depositary Receipt executed and delivered hereunder to
evidence one or more Depositary Shares, whether in
definitive or temporary form.

The term "record holder" as applied to a Receipt
shall mean the person in whose name a Receipt is registered
on the books maintained by the Depositary for such purpose.

"Registrar" shall mean any bank or trust company
appointed to register Receipts as herein provided.

"Rights" shall mean the rights issuable under the
Rights Agreement dated as of April 22, 1986, as amended,
between the Company and The Bank of New York as successor
Rights Agent to Morgan Guaranty Trust Company of New York,
as Rights Agent, as such Agreement may be amended, modified
or supplemented from time to time.

"Securities Act" shall mean the Securities Act of
1933, as amended.

"Series B Preferred Stock" shall mean the ___%
PRIDES, Series B Convertible Preferred Stock, par value $1
per share, of the Company.

ARTICLE II

FORM OF RECEIPTS, DEPOSIT OF SERIES B PREFERRED STOCK,
EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

tenor of the definitive Receipts in lieu of which they are
executed and delivered and with such appropriate insertions,
omissions, substitutions and other variations as the persons
executing such Receipts may determine, as evidenced by their
execution of such Receipts. If temporary Receipts are
executed and delivered, the Company and the Depositary will
cause definitive Receipts to be prepared without
unreasonable delay. After the preparation of definitive
Receipts, the temporary Receipts shall be exchangeable for
definitive Receipts upon surrender of the temporary Receipts
at an office described in the second to last paragraph of
Section 2.02, without charge to the holder. Upon surrender
for cancellation of any one or more temporary Receipts, the
Depositary shall execute and deliver in exchange therefor
definitive Receipts representing the same number of
Depositary Shares as represented by the surrendered
temporary Receipt or Receipts. Such exchange shall be made
at the Company's expense and without any charge therefor.
Until so exchanged, the temporary Receipts shall in all
respects be entitled to the same benefits under this
Agreement, and with respect to the Series B Preferred Stock
deposited hereunder, as definitive Receipts.

Receipts shall be executed by the Depositary by
the manual signature of a duly authorized signatory of the
Depositary; provided, however, that such signature may be a
facsimile if a Registrar (other than the Depositary) shall
have countersigned the Receipts by the manual signature of a
duly authorized signatory of the Registrar. No Receipt
shall be entitled to any benefits under this Deposit
Agreement or be valid or obligatory for any purpose unless
it shall have been executed as provided in the preceding
sentence. The Depositary shall record on its books each
Receipt executed as provided above and delivered as
hereinafter provided.

Except as the Depositary may otherwise determine,
Receipts shall be in denominations of any number of whole
Depositary Shares. All Receipts shall be dated the date of
their execution.

to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which
any particular Receipts are subject by reason of the date of
issuance of the Series B Preferred Stock or otherwise.

Title to any Receipt (and to the Depositary Shares
evidenced by such Receipt) that is properly endorsed or
accompanied by a properly executed instrument of transfer or
endorsement, or other instrument satisfactory to the
Depositary, shall be transferable by delivery; provided,
however, that until a Receipt shall be transferred on the
books of the Depositary as provided in Section 2.04, the
Depositary and the Company may, notwithstanding any notice
to the contrary, treat the record holder thereof at such
time as the absolute owner thereof for the purpose of
determining the person entitled to distribution of dividends
or other distributions or to any notice provided for in this
Deposit Agreement and for all other purposes.

SECTION 2.02. Deposit of Series B Preferred
Stock; Execution and Delivery of Receipts in Respect
Thereof. Subject to the terms and conditions of this
Deposit Agreement, the Company or any holder of Series B
Preferred Stock may deposit shares of Series B Preferred
Stock under this Deposit Agreement by delivery to the
Depositary of a certificate or certificates for the shares
of Series B Preferred Stock to be deposited, properly
endorsed or accompanied by a properly executed instrument of
transfer or endorsement in form satisfactory to the
Depositary, together with (i) all such certifications as may
be required by the Depositary in accordance with the
provisions of this Deposit Agreement and (ii) a written
order directing the Depositary to execute and deliver to or
upon the written order of the person or persons stated in
such order a Receipt or Receipts for the number of
Depositary Shares representing such deposited Series B
Preferred Stock.

If required by the Depositary, Series B Preferred
Stock presented for deposit at any time, whether or not the
register of holders of Receipts is closed, shall also be
accompanied by an agreement or assignment, or other
instrument satisfactory to the Depositary, that will provide
for the prompt transfer to the Depositary or its nominee of
any dividend or right to subscribe for additional Series B
Preferred Stock or to receive other property that any person
in whose name the Series B Preferred Stock is or has been
registered may thereafter receive upon or in respect of such

deposited Series B Preferred Stock, or in lieu thereof such
agreement of indemnity or other agreement as shall be
satisfactory to the Depositary.

Upon receipt by the Depositary of a certificate or
certificates for the shares of Series B Preferred Stock to
be deposited hereunder, together with the other documents
specified above, the Depositary shall, as soon as transfer
and registration can be accomplished, present such
certificates to the registrar and transfer agent of the
Series B Preferred Stock for transfer and registration in
the name of the Depositary or its nominee of the shares of
Series B Preferred Stock being deposited. Deposited Series
B Preferred Stock shall be held by the Depositary in an
account to be established by the Depositary at the Corporate
Office.

Upon receipt by the Depositary of a certificate or
certificates for Series B Preferred Stock to be deposited
hereunder, together with the other documents specified
above, the Depositary, subject to the terms and conditions
of this Deposit Agreement, shall execute and deliver to or
upon the order of the person or persons named in the written
order delivered to the Depositary referred to in the first
paragraph of this Section 2.02 a Receipt or Receipts for the
number of whole Depositary Shares representing the Series B
Preferred Stock so deposited and registered in such name or
names as may be requested by such person or persons. The
Depositary shall execute and deliver such Receipt or
Receipts at the Corporate Office, except that, at the
request, risk and expense of any person requesting such
delivery, such delivery may be made at such other place as
may be designated by such person. In each case, delivery
will be made only upon payment by such person to the
Depositary of all taxes and other governmental charges and
any fees payable in connection with such deposit and the
transfer of the deposited Series B Preferred Stock.

The Company shall deliver to the Depositary from
time to time such quantities of Receipts as the Depositary
may request to enable the Depositary to perform its
obligations under this Deposit Agreement.

SECTION 2.03. Redemption of Series B Preferred
Stock. Whenever the Company shall elect to redeem shares of
Series B Preferred Stock in accordance with the Certificate
of Designations it shall (unless otherwise agreed in writing
with the Depositary) give the Depositary in its capacity as

Depositary notice of the date of such proposed redemption of
the Series B Preferred Stock, which notice shall be given
not less than 3 Business Days prior to the date the
Depositary is to mail notice of the redemption to the record
holders of Receipts, in the case of a redemption of all
outstanding Depositary Shares, and not less than 10 calendar
days prior to the date the Depositary is to mail notice of
the redemption to the record holders of Receipts evidencing
the Depositary Shares to be redeemed, in the case of a
partial redemption of outstanding Depositary Shares, and be
accompanied by a certificate from the Company stating that
such redemption of the Series B Preferred Stock is in
accordance with the provisions of the Certificate of
Designations. Such notice shall be in addition to the
notice required to be given for redemption pursuant to the
Certificate of Designations. On the date of any such
redemption of Series B Preferred Stock, provided that the
Company shall then have deposited with the Depositary the
shares of Common Stock as required pursuant to the
Certificate of Designations to be delivered in exchange for
the Series B Preferred Stock to be redeemed, the Depositary
shall redeem (using the shares of Common Stock and any cash
deposited with it) the number of Depositary Shares
representing such redeemed Series B Preferred Stock.
Subject to the penultimate sentence of this Paragraph, the
Depositary shall mail, first class postage prepaid, notice
of the redemption of Series B Preferred Stock and the
proposed simultaneous redemption of the Depositary Shares
representing the Series B Preferred Stock to be redeemed,
not less than 15 and not more than 60 days prior to the date
fixed for redemption of such Series B Preferred Stock and
Depositary Shares (the "Redemption Date"), to the record
holders of the Receipts evidencing the Depositary Shares to
be so redeemed, at the addresses of such holders as they
appear on the records of the Depositary; but neither failure
to mail any such notice to one or more such holders nor any
defect in any notice to one or more such holders shall
affect the sufficiency of the proceedings for redemption as
to other holders. Each such notice shall state: (i) the
Redemption Date; (ii) the number of Depositary Shares to be
redeemed and, if less than all the Depositary Shares held by
any such holder are to be redeemed, the number of such
Depositary Shares held by such holder to be so redeemed;
(iii) the number of shares of Common Stock deliverable upon
redemption; (iv) the call price for the Depositary Shares;
(v) the Optional Conversion Rate (calculated in accordance
with paragraph 3 of the Certificate of Designations),
together with a statement that all conversion rights with

respect to Depositary Shares called for redemption will
terminate immediately prior to the close of business on the
date fixed for redemption; (vi) the place or places where
Receipts evidencing Depositary Shares are to be surrendered
for payment of the redemption price; and (vii) that
dividends in respect of the shares of Series B Preferred
Stock represented by the Depositary Shares to be redeemed
will cease to accumulate on such Redemption Date. Any such
notices shall be mailed in the same manner as notices of
redemption of the Series B Preferred Stock are required to
be mailed pursuant to paragraph 3 of the Certificate of
Designations and published in the same manner as notices of
redemption of the Series B Preferred Stock are required to
be published pursuant to said paragraph, if so required. In
case fewer than all the outstanding Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed shall be
selected by lot or pro rata (as nearly as may be) or by any
other equitable method determined by the Depositary to be
consistent with the method determined by the Board of
Directors of the Company with respect to the Series B
Preferred Stock.

Notice having been mailed and published by the
Depositary as aforesaid, from and after the Redemption Date
(unless the Company shall have failed to redeem the shares
of Series B Preferred Stock to be redeemed by it, as set
forth in the Company's notice provided for in the preceding
paragraph), the Depositary Shares called for redemption
shall be deemed no longer to be outstanding and all rights
of the holders of Receipts evidencing such Depositary Shares
(except the right to receive the shares of Common Stock upon
redemption and cash for any fractional share amount) shall,
to the extent of such Depositary Shares, cease and
terminate. Upon surrender in accordance with said notice of
the Receipts evidencing such Depositary Shares (properly
endorsed or assigned for transfer, if the Depositary shall
so require), such Depositary Shares shall be redeemed for
shares of Common Stock and cash for any fractional share
amount at a rate per Depositary Share equal to one-fourth of
the number of shares of Common Stock (including fractional
amounts) delivered upon redemption of a share of Series B
Preferred Stock pursuant to the Certificate of Designations.
The foregoing shall be subject further to the terms and
conditions of the Certificate of Designations.

If fewer than all of the Depositary Shares
evidenced by a Receipt are called for redemption, the
Depositary will deliver to the holder of such Receipt upon

its surrender to the Depositary, together with the shares of
Common Stock for the Depositary Shares called for
redemption, a new Receipt evidencing the Depositary Shares
evidenced by such prior Receipt and not called for
redemption.

To the extent that Depositary Shares are redeemed
for shares of Common Stock and all of such shares of Common
Stock cannot be distributed to the record holders of
Receipts without creating fractional interests in such
shares, the Depositary may, with the consent of the Company,
adopt such method as it deems equitable and practicable for
the purpose of effecting such distribution, including the
sale (at public or private sale) of such shares of Common
Stock at such place or places and upon such terms as it may
deem proper, and the net proceeds of any such sale shall,
subject to Section 3.02, be distributed or made available
for distribution to such record holders that would otherwise
receive fractional interests in such shares of Common Stock.

In the event that Depositary Shares are redeemed
into shares of Common Stock and certificates evidencing
Rights are issued or to be issued in connection therewith,
such certificates shall be distributed in the same manner
and to the same record holders receiving the shares of
Common Stock associated with such Rights and fractional
interests in Rights shall be subject to the same procedures
set forth in the preceding paragraph for fractional shares
of Common Stock.

Except with respect to a conversion of Depositary
Shares which may occur pursuant to paragraph 3 of the
Certificate of Designations, the Depositary shall not be
required (a) to execute and deliver, transfer or exchange
any Receipts for a period beginning at the opening of
business 15 days next preceding any selection of Depositary
Shares and Series B Preferred Stock to be redeemed and
ending at the close of business on the day of the mailing of
notice of redemption of Depositary Shares or (b) to transfer
or exchange for another Receipt any Receipt evidencing
Depositary Shares called or being called for redemption in
whole or in part, except as provided in the third paragraph
of this Section 2.03.

for such purpose, by the holder in person or by a duly
authorized attorney, properly endorsed or accompanied by a
properly executed instrument of transfer or endorsement, or
other instrument satisfactory to the Depositary, together
with evidence of the payment of any transfer taxes as may be
required by law. Upon such surrender, the Depositary shall
execute a new Receipt or Receipts and deliver the same to or
upon the order of the person or persons entitled thereto
evidencing the same aggregate number of Depositary Shares
evidenced by the Receipt or Receipts surrendered.

SECTION 2.05. Combination and Split-ups of
Receipts. Upon surrender of a Receipt or Receipts at the
Corporate Office or such other office as the Depositary may
designate for the purposes of effecting a split-up or
combination of Receipts, subject to the terms and conditions
of this Deposit Agreement, the Depositary shall execute and
deliver a new Receipt or Receipts in the authorized
denominations requested evidencing the same aggregate number
of Depositary Shares evidenced by the Receipt or Receipts
surrendered; provided, however, that the Depositary shall
not execute and deliver any Receipt evidencing a fractional
Depositary Share.

SECTION 2.06. Surrender of Receipts and
Withdrawal of Series B Preferred Stock. Any holder of a
Receipt or Receipts may withdraw any or all of the Series B
Preferred Stock (but only in whole shares of Series B
Preferred Stock) represented by the Depositary Shares
evidenced by such Receipts and all money and other property,
if any, represented by such Depositary Shares by
surrendering such Receipt or Receipts, properly endorsed or
accompanied by a properly executed instrument of transfer or
endorsement, or other instrument satisfactory to the
Depositary, at the Corporate Office or such other office as
the Depositary may designate for such withdrawals. After
such surrender, without unreasonable delay, the Depositary
shall deliver to such holder, or to the person or persons
designated by such holder as hereinafter provided, the whole
number of shares of Series B Preferred Stock and all such
money and other property, if any, represented by the
Depositary Shares evidenced by the Receipt or Receipts so
surrendered for withdrawal. If the Receipt or Receipts
delivered by the holder to the Depositary in connection with
such withdrawal shall evidence a number of Depositary Shares
in excess of the number of whole Depositary Shares
representing the whole number of shares of Series B
Preferred Stock to be withdrawn, the Depositary shall at the
same time, in addition to such whole number of shares of

Series B Preferred Stock and such money and other property,
if any, to be withdrawn, deliver to such holder, or (subject
to Section 2.04) upon his order, a new Receipt or Receipts
evidencing such excess number of whole Depositary Shares.
Delivery of the Series B Preferred Stock and such money and
other property being withdrawn may be made by the delivery
of such certificates, documents of title, and other
instruments as the Depositary may deem appropriate, which,
if required by the Depositary, shall be properly endorsed or
accompanied by proper instruments of transfer.

If the Series B Preferred Stock and the money and
other property being withdrawn are to be delivered to a
person or persons other than the record holder of the
Receipt or Receipts being surrendered for withdrawal of
Series B Preferred Stock, such holder shall execute and
deliver to the Depositary a written order so directing the
Depositary and the Depositary may require that the Receipt
or Receipts surrendered by such holder for withdrawal of
such shares of Series B Preferred Stock be properly endorsed
in blank or accompanied by a properly executed instrument of
transfer or endorsement in blank.

The Depositary shall deliver the Series B
Preferred Stock and the money and other property, if any,
represented by the Depositary Shares evidenced by Receipts
surrendered for withdrawal at the Corporate Office, except
that, at the request, risk and expense of the holder
surrendering such Receipt or Receipts and for the account of
the holder thereof, such delivery may be made at such other
place as may be designated by such holder.

SECTION 2.07 Limitations on Execution and
Delivery, Transfer, Split-up, Combination, Surrender and
Exchange of Receipts. As a condition precedent to the
execution and delivery, transfer, split-up, combination,
surrender or exchange of any Receipt, the Depositary, any of
the Depositary's Agents or the Company may require any or
all of the following: (i) payment to it of a sum sufficient
for the payment (or, in the event that the Depositary or the
Company shall have made such payment, the reimbursement to
it) of any tax or other governmental charge with respect
thereto (including any such tax or charge with respect to
the Series B Preferred Stock being deposited or withdrawn or
with respect to the Common Stock, Rights or other securities
or property of the Company being issued upon conversion or
redemption); (ii) the production of proof satisfactory to it
as to the identity and genuineness of any signature; and

(iii) compliance with such regulations, if any, as the
Depositary or the Company may establish not inconsistent
with the provisions of the Deposit Agreement.

The deposit of Series B Preferred Stock may be
refused, the delivery of Receipts against Series B Preferred
Stock may be suspended, the transfer of Receipts may be
refused, and the transfer, split-up, combination, surrender
or exchange of outstanding Receipts may be suspended (i)
during any period when the register of holders of Receipts
is closed, (ii) if any such action is deemed necessary or
advisable by the Depositary, any of the Depositary's Agents
or the Company at any time or from time to time because of
any requirement of law or of any government or governmental
body or commission, or under any provision of this Deposit
Agreement, or (iii) with the approval of the Company, for
any other reason.

SECTION 2.08. Lost Receipts, etc. In case any
Receipt shall be mutilated or destroyed or lost or stolen,
the Depositary in its discretion may execute and deliver a
Receipt of like form and tenor in exchange and substitution
for such mutilated Receipt or in lieu of and in substitution
for such destroyed, lost or stolen Receipt; provided,
however, that the holder thereof provides the Depositary
with (i) evidence satisfactory to the Depositary of such
destruction, loss or theft of such Receipt, of the
authenticity thereof and of his ownership thereof, (ii)
reasonable indemnification satisfactory to the Depositary
and (iii) payment of any expense (including fees, charges
and expenses of the Depositary) in connection with such
execution and delivery.

SECTION 2.09. Cancellation and Destruction of
Surrendered Receipts. All Receipts surrendered to the
Depositary or any Depositary's Agent shall be cancelled by
the Depositary. Except as prohibited by applicable law or
regulation, the Depositary is authorized to destroy such
Receipts so cancelled.

SECTION 2.10. Optional Conversion of Series B
Preferred Stock into Common Stock. Receipts may be
surrendered with written instructions to the Depositary to
instruct the Company to cause the conversion of any
specified number of whole shares of Series B Preferred Stock
represented by whole Depositary Shares evidenced by such
Receipts into whole shares of Common Stock and cash for any
fractional share amount at the conversion price then in

effect for the Series B Preferred Stock pursuant to the
Certificate of Designations as such conversion price may be
adjusted by the Company from time to time as provided in the
Certificate of Designations. Subject to the terms and
conditions of this Deposit Agreement and the Certificate of
Designations, a holder of a Receipt or Receipts evidencing
Depositary Shares representing whole or fractional shares of
Series B Preferred Stock may surrender such Receipt or
Receipts at the Corporate Office or at such office or to
such Depositary's Agents as the Depositary may designate for
such purpose, together with a notice of conversion duly
completed and executed, thereby directing the Depositary to
instruct the Company to cause the conversion of the number
of whole shares of underlying Series B Preferred Stock
specified in such notice of conversion into shares of Common
Stock, and an assignment of such Receipt or Receipts to the
Company or in blank, duly completed and executed. To the
extent that a holder delivers to the Depositary for
conversion a Receipt or Receipts which in the aggregate are
convertible into less than one whole share of Common Stock,
the holder shall receive payment in cash in lieu of such
fractional share of Common Stock otherwise issuable. If
more than one Receipt shall be delivered for conversion at
one time by the same holder, the number of whole shares of
Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of Depositary
Shares represented by the Receipts so delivered.

Upon receipt by the Depositary of a Receipt or
Receipts, together with notice of conversion, duly completed
and executed, directing the Depositary to instruct the
Company to cause the conversion of a specified number of
shares of Series B Preferred Stock, and an assignment of
such Receipt or Receipts to the Company or in blank, duly
completed and executed, the Depositary shall instruct the
Company (i) to cause the conversion of the number of whole
shares of Series B Preferred Stock represented by the
Depositary Shares evidenced by the Receipts so surrendered
for conversion as specified in the written notice to the
Depositary and (ii) to cause the delivery to the holders of
such Receipts of a certificate or certificates evidencing
the number of whole shares of Common Stock and the amount of
money, if any, to be delivered to the holders of Receipts
surrendered for conversion in lieu of fractional shares of
Common Stock otherwise issuable. The Company shall as
promptly as practicable after receipt thereof cause the
delivery of (i) a certificate or certificates evidencing the
number of whole shares of Common Stock into which the Series

B Preferred Stock represented by the Depositary Shares
evidenced by such Receipt or Receipts has been converted,
and (ii) any money or other property to which the holder is
entitled by reason of such conversion. Upon such
conversion, the Depositary (i) shall deliver to the holder a
Receipt evidencing the number of Depositary Shares, if any,
that equals the excess of the number of Depositary Shares
evidenced by the surrendered Receipt over the number of
Depositary Shares evidenced by such Receipt that has been so
converted, (ii) shall cancel the Depositary Shares evidenced
by Receipts surrendered for conversion and (iii) shall
deliver to the Company or its transfer agent for the Series
B Preferred Stock for cancellation the shares of Series B
Preferred Stock represented by the Depositary Shares
evidenced by the Receipts so surrendered and so converted.
Upon the delivery of the shares of Series B Preferred Stock
to be cancelled due to such conversion by the Depositary to
the Company, the Company shall deliver to the Depositary a
certificate or certificates evidencing the number of shares
of Series B Preferred Stock, if any, that equals the excess
of the number of shares of Series B Preferred Stock
evidenced by the surrendered certificate over the number of
shares of Series B Preferred Stock evidenced by that
certificate that has been so converted.

If Series B Preferred Stock shall be called by the
Company for redemption, the Depositary Shares representing
such Stock may be converted into Common Stock as provided in
this Deposit Agreement until, but not after, the close of
business on the Redemption Date unless the Company shall
fail to deposit with the Depositary the shares of Common
Stock and cash for any fractional share amounts required to
redeem the Series B Preferred Stock held by the Depositary,
in which case the Depositary Shares representing such Series
B Preferred Stock may continue to be converted into Common
Stock until, but not after, the close of business on the
date on which the Company deposits with the Depositary such
shares of Common Stock and cash for any fractional share
amounts as are required by the Certificate of Designations
to make full payment of the amounts payable upon such
redemption. Upon receipt by the Depositary of a Receipt or
Receipts, together with a properly completed and executed
notice of conversion, representing any Series B Preferred
Stock called for redemption, the shares of Series B
Preferred Stock held by the Depositary represented by such
Depositary Shares for which conversion is requested shall be
deemed to have been received by the Company for conversion

as of immediately prior to the close of business on the date
of such receipt by the Depositary.

The record holder of Depositary Shares on any
dividend payment record date established by the Depositary
pursuant to Section 4.04 shall be entitled to receive the
dividend payable with respect to such Depositary Shares on
the corresponding dividend payment date notwithstanding the
conversion subsequent to such record date of the shares of
Series B Preferred Stock to which such Depositary Shares
relate. If a share of Series B Preferred Stock is converted
between the record date with respect to any dividend payment
on the Series B Preferred Stock and the corresponding
dividend payment date, any holder of Receipts surrendered
with instructions to the Depositary for conversion of the
underlying Series B Preferred Stock shall pay to the
Depositary an amount equal to the dividend attributable to
the current quarterly dividend period payable on such
dividend payment date on the Depositary Shares represented
by the Receipts being surrendered for conversion (except for
Depositary Shares redeemed on a Redemption Date between such
record date and dividend payment date). Any holder of
Receipts on a dividend payment record date who (or whose
transferee) surrenders the Receipts with instructions to the
Depositary for conversion of the underlying Series B
Preferred Stock on the corresponding dividend payment date
will receive the dividend payable with respect to the
Depositary Shares underlying such Receipts and will not be
required to include payment of the amount of such dividend
upon surrender of the Receipts for conversion.

Upon the conversion of any share of Series B
Preferred Stock for which a request for conversion has been
made by the holder of Depositary Shares representing such
share, all dividends in respect of such Depositary Shares
shall cease to accrue, such Depositary Shares shall be
deemed no longer outstanding, all rights of the holder of
the Receipt with respect to such Depositary Shares (except
the right to receive the Common Stock, any cash payable with
respect to any fractional shares of Common Stock as provided
herein and any cash payable on account of accrued dividends
as provided herein and any Receipts evidencing Depositary
Shares not so converted) shall terminate, and the Receipt
evidencing such Depositary Shares shall be cancelled in
accordance with Section 2.09 hereof.

No fractional shares of Common Stock shall be
issuable upon conversion of Series B Preferred Stock

underlying the Depositary Shares. If any holder of Receipts
surrendered with instructions to the Depositary for
conversion of the underlying Series B Preferred Stock would
be entitled to a fractional share of Common Stock upon such
conversion, the Company shall cause to be delivered to such
holder an amount in cash for such fractional share as
provided in the Certificate of Designations.

SECTION 2.11. Mandatory Conversion of Series B
Preferred Stock into Common Stock. With respect to any
Series B Preferred Stock on deposit with the Depositary as
to which the Company has not exercised its right to redeem
and the record holder has not exercised its right of
optional conversion pursuant to the Certificate of
Designations, the Depositary shall mail, first class postage
prepaid, notice of the mandatory conversion of Series B
Preferred Stock and the simultaneous mandatory conversion of
the Depositary Shares representing the Series B Preferred
Stock to be mandatorily converted, not less than 5 and not
more than 15 days prior to the date fixed for mandatory
conversion of such Series B Preferred Stock and Depositary
Shares (the "Mandatory Conversion Date"), to all record
holders of Receipts evidencing Depositary Shares who are of
record on the date that is two Business Days prior to the
date of mailing, at the addresses of such holders as they
appear on the records of the Depositary; but neither failure
to mail any such notice to one or more such holders nor any
defect in any notice to one or more such holders shall
affect the sufficiency of the proceedings for mandatory
conversion as to any record holder (whether or not such
failure or defect affects such record holder). Each such
notice shall state: (i) the Mandatory Conversion Date;
(ii) that all outstanding Depositary Shares on the Mandatory
Conversion Date will be mandatorily converted pursuant to
the Certificate of Designations and this Agreement; (iii)
the Common Equivalent Rate (determined in accordance with
paragraph 3 of the Certificate of Designations); (iv) the
place or places where Receipts evidencing Depositary Shares
are to be surrendered for payment of the mandatory
conversion price; and (v) that dividends in respect of the
shares of Series B Preferred Stock represented by the
Depositary Shares to be mandatorily converted will cease to
accumulate on the Mandatory Conversion Date.

On the Mandatory Conversion Date, all then
outstanding shares of Series B Preferred Stock shall
mandatorily convert into shares of Common Stock, cash for
any fractional share amounts and the right to receive

amounts in cash equal to all accrued and unpaid dividends on
such shares of Series B Preferred Stock to the Mandatory
Conversion Date (other than previously declared dividends
payable to a holder of record as of a prior date), all as
provided in and subject to paragraph 3 of the Certificate of
Designations.

From and after the Mandatory Conversion Date, the
Depositary Shares representing the shares of Series B
Preferred Stock mandatorily converted shall be deemed no
longer to be outstanding and all rights of the record
holders of Receipts evidencing such Depositary Shares
(except the right to receive the shares of Common Stock, any
cash for accrued and unpaid dividends (other than previously
declared dividends payable to a holder of record as of a
prior date) and any fractional share amount deliverable or
payable upon mandatory conversion or in connection
therewith) shall, to the extent of such Depositary Shares,
cease and terminate. Upon surrender, in accordance with
said notice, of the Receipts evidencing such Depositary
Shares (properly endorsed or assigned for transfer, if the
Depositary shall so require), such Depositary Shares shall
be exchanged for shares of Common Stock and cash for any
fractional share amount (and the right to receive cash for
any accrued and unpaid dividends payable in connection
therewith) at a rate per Depositary Share equal to one-
fourth of the number (including fractional amounts) of
shares of Common Stock (and one-fourth of the right to
receive cash for any accrued and unpaid dividends) exchanged
for each share of Series B Preferred Stock pursuant to the
Certificate of Designations. The foregoing shall be subject
further to the terms and conditions of the Certificate of
Designations.

On or prior to the Mandatory Conversion Date, the
Company shall deposit with the Depositary certificates for
the shares of Common Stock and the cash for any fractional
share amounts into which the shares of Series B Preferred
Stock held by the Depositary shall mandatorily convert on
the Mandatory Conversion Date, plus, subject to the
Certificate of Designations, an amount in cash equal to all
accrued and unpaid dividends on such shares of Series B
Preferred Stock (other than previously declared dividends
payable to a holder of record as of a prior date) to the
Mandatory Conversion Date. Using such shares of Common
Stock and cash, the Depositary shall deliver certificates
for the appropriate number of shares of Common Stock and the
appropriate amount of cash, without interest, to record

holders who properly deliver their Receipts to the
Depositary.

No fractional shares of Common Stock shall be
issuable upon mandatory conversion of Series B Preferred
Stock underlying the Depositary Shares. If any holder of
Receipts surrendered to the Depositary for mandatory
conversion of the underlying Series B Preferred Stock would
be entitled to a fractional share of Common Stock upon such
mandatory conversion, the Company shall cause to be
delivered to such holder an amount in cash for such
fractional share as provided in the Certificate of
Designations. To the extent that Depositary Shares are
mandatorily converted into shares of Common Stock and all of
such shares of Common Stock cannot be distributed to the
record holders of Receipts without creating fractional
interest in such shares, the Depositary may, with the
consent of the Company, adopt such method as it deems
equitable and practicable for the purpose of effecting such
distribution, including the sale (at public or private sale)
of such shares of Common Stock at such place or places and
upon such terms as it may deem proper, and the net proceeds
of any such sale shall, subject to Section 3.02, without
interest, be distributed or made available for distribution
to such record holders that would otherwise receive
fractional interests in such shares of Common Stock.

ARTICLE III

CERTAIN OBLIGATIONS OF HOLDERS
OF RECEIPTS AND THE COMPANY

SECTION 3.01. Filing Proofs, Certificates and
Other Information. Any person presenting Series B Preferred
Stock for deposit or any holder of a Receipt may be required
from time to time to file such proof of residence or other
information, to execute such certificates and to make such
representations and warranties as the Depositary or the
Company may reasonably deem necessary or proper. The
Depositary or the Company may withhold or delay the delivery
of any Receipt, the transfer, redemption, conversion, or
exchange of any Receipt, the withdrawal of the Series B
Preferred Stock or money or other property, if any,
represented by the Depositary Shares evidenced by any
Receipt or the distribution of any dividend or other
distribution until such proof or other information is filed,

such certificates are executed or such representations and
warranties are made.

SECTION 3.02. Payment of Taxes or Other
Governmental Charges. If any tax or other governmental
charge shall become payable by or on behalf of the
Depositary with respect to any Receipt, the Depositary
Shares evidenced by such Receipt, the Series B Preferred
Stock (or fractional interest therein) represented by such
Depositary Shares or any transaction referred to in
Section 4.06, such tax (including transfer, issuance or
acquisition taxes, if any) or governmental charge shall be
payable by the holder of such Receipt. Until such payment
is made, transfer, redemption, conversion, or exchange of
any Receipt or any withdrawal of the Series B Preferred
Stock or money or other property, if any, represented by the
Depositary Shares evidenced by such Receipt may be refused,
any dividend or other distribution with respect to such
Receipt or the Series B Preferred Stock represented by the
Depositary Shares evidenced by such Receipt may be withheld
and any part or all of the Series B Preferred Stock or other
property represented by the Depositary Shares evidenced by
such Receipt may be sold for the account of the holder
thereof (after attempting by reasonable means to notify such
holder prior to such sale). Any dividend or other
distribution so withheld and the proceeds of any such sale
may be applied to any payment of such tax or other
governmental charge, the holder of such Receipt remaining
liable for any deficiency. The Depositary shall act as the
withholding agent for any payments, distributions, and
exchanges made with respect to the Depositary Shares and
Receipts, and the Series B Preferred Stock, Common Stock,
Rights or other securities or assets represented thereby
(collectively, the "Securities"). The Depositary shall be
responsible with respect to the Securities for the timely
(i) collection and deposit of any required withholding or
backup withholding tax, and (ii) filing of any information
returns or other documents with federal (and other
applicable) taxing authorities. In the event the Depositary
is required to pay any such amounts, the Company shall
reimburse the Depositary for payment thereof upon the
request of the Depositary and the Depositary shall, upon the
Company's request and as instructed by the Company, pursue
its rights against such holder at the Company's expense.

SECTION 3.03. Representations and Warranties as
to Series B Preferred Stock. Each person depositing Series
B Preferred Stock under this Deposit Agreement shall be

deemed thereby to represent and warrant that such Series B
Preferred Stock and each certificate therefor are valid and
that the person making such deposit is duly authorized to do
so. Such representations and warranties shall survive the
deposit of the Series B Preferred Stock and the execution
and delivery of Receipts.

ARTICLE IV

THE SERIES B PREFERRED STOCK, NOTICES

SECTION 4.01. Cash Distributions. Whenever the
Depositary shall receive any cash dividend or other cash
distribution on the Series B Preferred Stock, the Depositary
shall, subject to Section 3.02, distribute to record holders
of Receipts on the record date fixed pursuant to
Section 4.04 such portions of such sum as are, as nearly as
practicable, proportionate to the respective numbers of
Depositary Shares evidenced by the Receipts held by such
holders; provided, however, that in case the Company or the
Depositary shall be required to withhold and does withhold
from any cash dividend or other cash distribution in respect
of the Series B Preferred Stock an amount on account of
taxes or as otherwise required by law, regulation or court
order, the amount made available for distribution or
distributed in respect of Depositary Shares shall be reduced
accordingly. The Depositary shall distribute or make
available for distribution, as the case may be, only such
amount, however, as can be distributed without attributing
to any owner of Depositary Shares a fraction of one cent and
any balance not so distributable shall be held by the
Depositary (without liability for interest thereon) and
shall be added to and be treated as part of the next sum
received by the Depositary for distribution to record
holders of Receipts then outstanding.

SECTION 4.02. Distributions Other Than Cash.
Whenever the Depositary shall receive any distribution other
than cash on the Series B Preferred Stock, the Depositary
shall, subject to Section 3.02, distribute to record holders
of Receipts on the record date fixed pursuant to
Section 4.04 such portions of the securities or property
received by it as are, as nearly as practicable,
proportionate to the respective numbers of Depositary Shares
evidenced by the Receipts held by such holders, in any
manner that the Depositary and the Company may deem
equitable and practicable for accomplishing such

distribution. If, in the opinion of the Company after
consultation with the Depositary, such distribution cannot
be made proportionately among such record holders, or if for
any other reason (including any requirement that the Company
or the Depositary withhold an amount on account of taxes or
as otherwise required by law, regulation or court order),
the Depositary deems, after consultation with the Company,
such distribution not to be feasible, the Depositary may,
with the approval of the Company, adopt such method as it
deems equitable and practicable for the purpose of effecting
such distribution, including the sale (at public or private
sale) of the securities or property thus received, or any
part thereof, at such place or places and upon such terms as
it may deem proper. The net proceeds of any such sale
shall, subject to Section 3.02, be distributed or made
available for distribution, as the case may be, by the
Depositary to record holders of Receipts as provided by
Section 4.01 in the case of a distribution received in cash.

SECTION 4.03. Subscription Rights, Preferences or
Privileges. If the Company shall at any time offer or cause
to be offered to the persons in whose names Series B
Preferred Stock is registered on the books of the Company
any rights, preferences or privileges to subscribe for or to
purchase any securities or any rights, preferences or
privileges of any other nature, such rights, preferences or
privileges shall in each such instance be made available by
the Depositary to the record holders of Receipts if the
Company so directs in such manner as the Company shall
instruct (including by the execution and delivery to such
record holders of warrants representing such rights,
preferences or privileges); provided, however, that (a) if
at the time of issue or offer of any such rights,
preferences or privileges the Company determines that it is
not lawful or feasible to make such rights, preferences or
privileges available to some or all holders of Receipts (by
the execution and delivery of warrants or otherwise) or (b)
if and to the extent instructed by holders of Receipts who
do not desire to exercise such rights, preferences or
privileges, the Depositary shall then, if so instructed by
the Company, and if applicable laws and the terms of such
rights, preferences or privileges so permit, sell such
rights, preferences or privileges of such holders at public
or private sale, at such place or places and upon such terms
as it may deem proper. The net proceeds of any such sale
shall, subject to Section 3.02, be distributed by the
Depositary to the record holders of Receipts entitled

thereto in accordance with the withholding and fractional
amount provisions of Section 4.01.

If registration under the Securities Act of the
securities to which any rights, preferences or privileges
relate is required in order for holders of Receipts to be
offered or sold such securities, the Company shall promptly
file a registration statement pursuant to the Securities Act
with respect to such securities and use its best efforts and
take all steps available to it to cause such registration
statement to become effective sufficiently in advance of the
expiration of such rights, preferences or privileges to
enable such holders to exercise such rights, preferences or
privileges. In no event shall the Depositary make available
to the holders of Receipts any right, preference or
privilege to subscribe for or to purchase any securities
unless and until notified by the Company in writing that
such registration statement has become effective or that the
offering and sale of such securities to such holders are
exempt from registration under the provisions of the
Securities Act.

If any other action under the law of any
jurisdiction or any governmental or administrative
authorization, consent or permit is required in order for
such rights, preferences or privileges to be made available
to holders of Receipts, the Company agrees with the
Depositary that the Company will use its best efforts to
take such action or obtain such authorization, consent or
permit sufficiently in advance of the expiration of such
rights, preferences or privileges to enable such holders to
exercise such rights, preferences or privileges.

SECTION 4.04. Notice of Dividends, Fixing of
Record Date for Holders of Receipts. Whenever any cash
dividend or other cash distribution shall become payable, or
any distribution other than cash shall be made, or any
rights, preferences or privileges shall at any time be
offered, with respect to the Series B Preferred Stock, or
whenever the Depositary shall receive notice of (i) any
meeting at which holders of Series B Preferred Stock are
entitled to vote or of which holders of Series B Preferred
Stock are entitled to notice or (ii) any election on the
part of the Company to call for redemption any shares of
Series B Preferred Stock, the Depositary shall in each such
instance fix a record date (which shall be the same date as
the record date fixed by the Company with respect to the
Series B Preferred Stock) for the determination of the

holders of Receipts (i) who shall be entitled to receive
such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof, or to
give instructions for the exercise of voting rights at any
such meeting or to receive notice of such meeting or
(ii) whose Depositary Shares are to be so redeemed.

SECTION 4.05. Voting Rights. Upon issuance of
notice of any meeting at which the holders of Series B
Preferred Stock are entitled to vote, the Company shall
direct the Depositary, as soon as practicable thereafter, to
mail to the record holders of Receipts a notice, which shall
be provided by the Company and which shall contain (i) such
information as is contained in such notice of meeting, (ii)
a statement that the holders of Receipts at the close of
business on a specified record date fixed pursuant to
Section 4.04 will be entitled, subject to any applicable
provision of law, the Certificate of Incorporation or the
Certificate of Designations, to instruct the Depositary as
to the exercise of the voting rights pertaining to the
amount of Series B Preferred Stock represented by their
respective Depositary Shares and (iii) a brief statement as
to the manner in which such instructions may be given. Upon
the written request of a holder of a Receipt on such record
date, the Depositary shall endeavor insofar as practicable
to vote or cause to be voted the amount of Series B
Preferred Stock represented by the Depositary Shares
evidenced by such Receipt in accordance with the
instructions set forth in such request. The Company hereby
agrees to take all reasonable action that may be deemed
necessary by the Depositary in order to enable the
Depositary to vote such Series B Preferred Stock or cause
such Series B Preferred Stock to be voted. In the absence
of specific instructions from the holder of a Receipt, the
Depositary will abstain from voting to the extent of the
Series B Preferred Stock represented by the Depositary
Shares evidenced by such Receipt. After aggregating all
voting Depositary Shares, the Depositary will disregard for
voting purposes any fractional share of Series B Preferred
Stock remaining.

SECTION 4.06. Changes Affecting Series B
Preferred Stock and Reclassifications, Recapitalizations,
etc. Upon any split-up, consolidation or any other
reclassification of Series B Preferred Stock, or upon any
recapitalization, reorganization, merger, amalgamation or
consolidation affecting the Company or to which it is a
party or sale of all or substantially all of the Company's

assets, the Depositary shall, upon the instructions of the
Company, treat any shares of stock or other securities or
property (including cash) that shall be received by the
Depositary in exchange for or upon conversion of or in
respect of the Series B Preferred Stock as new deposited
property under this Deposit Agreement, and Receipts then
outstanding shall thenceforth represent the proportionate
interests of holders thereof in the new deposited shares,
other securities or other property so received in exchange
for or upon conversion or in respect of such Series B
Preferred Stock. In any such case the Depositary may, in
its discretion, with the approval of the Company, execute
and deliver additional Receipts, or may call for the
surrender of all outstanding Receipts to be exchanged for
new Receipts specifically describing such new deposited
shares, other securities or other property.

SECTION 4.07. Inspection of Reports. The
Depositary shall make available for inspection by holders of
Receipts at the Corporate Office and at such other places as
it may from time to time deem advisable during normal
business hours any reports and communications received from
the Company that are both received by the Depositary as the
holder of Series B Preferred Stock and made generally
available to the holders of Series B Preferred Stock by the
Company.

SECTION 4.08. List of Receipt Holders. Promptly
upon request from time to time by the Company and at the
Company's expense, the Depositary shall furnish to it a
list, as of a recent date, of the names, addresses and
holdings of Depositary Shares of all persons in whose names
Receipts are registered on the books of the Depositary.

ARTICLE V

THE DEPOSITARY AND THE COMPANY

SECTION 5.01. Maintenance of Offices, Agencies,
Transfer Books by the Depositary, the Registrar. Upon
execution of this Deposit Agreement in accordance with its
terms, the Depositary shall maintain (i) at the Corporate
Office, facilities for the execution and delivery, transfer,
surrender and exchange, split-up and combination of Receipts
and deposit and withdrawal of Series B Preferred Stock and
(ii) at the offices of the Depositary's Agents, if any,
facilities for the delivery, transfer, surrender and

exchange, split-up, combination and redemption of Receipts
and deposit and withdrawal of Series B Preferred Stock, all
in accordance with the provisions of this Deposit Agreement.

The Depositary shall keep books at the Corporate
Office for the registration and transfer of Receipts, which
books during normal business hours shall be open for
inspection by the record holders of Receipts, as provided by
applicable law, and by the Company. The Depositary shall
consult with the Company upon receipt of any request for
inspection. The Depositary may close such books, at any
time or from time to time, when deemed expedient by it in
connection with the performance of its duties hereunder.

If the Receipts or the Depositary Shares evidenced
thereby or the Series B Preferred Stock represented by such
Depositary Shares shall be listed on the New York Stock
Exchange, Inc., the Depositary may, with the approval of the
Company, appoint a Registrar for registry of such Receipts
or Depositary Shares in accordance with the requirements of
such Exchange. Such Registrar (which may be the Depositary
if so permitted by the requirements of such Exchange) may be
removed and a substitute registrar appointed by the
Depositary upon the request or with the approval of the
Company. If the Receipts, such Depositary Shares or such
Series B Preferred Stock are listed on one or more other
stock exchanges, the Company will, with the assistance of
the Depositary, arrange such facilities for the delivery,
transfer, surrender and exchange of such Receipts, such
Depositary Shares or such Series B Preferred Stock as may be
required by law or applicable stock exchange regulations.

SECTION 5.02. Prevention of or Delay in
Performance by the Depositary, the Depositary's Agents or
the Company. Neither the Depositary nor any Depositary's
Agent nor the Company shall incur any liability to any
holder of any Receipt, if by reason of any provision of any
present or future law or regulation thereunder of the United
States of America or of any other governmental authority or,
in the case of the Depositary or the Depositary's Agent, by
reason of any provision, present or future, of the
Certificate of Incorporation or the Certificate of
Designations or, in the case of the Company, the Depositary
or the Depositary's Agent, by reason of any act of God or
war or other circumstance beyond the control of the relevant
party, the Depositary, any Depositary's Agent or the Company
shall be prevented or forbidden from doing or performing any
act or thing that the terms of this Deposit Agreement

provide shall be done or performed; nor shall the
Depositary, any Depositary's Agent or the Company incur any
liability to any holder of a Receipt by reason of any
nonperformance or delay, caused as aforesaid, in the
performance of any act or thing that the terms of this
Deposit Agreement provide shall or may be done or performed
or by reason of any exercise of, or failure to exercise, any
discretion provided for in this Deposit Agreement.

SECTION 5.03. Obligations of the Depositary, the
Depositary's Agents and the Company. Neither the Depositary
nor any Depositary's Agent nor the Company assumes any
obligation or shall be subject to any liability under this
Deposit Agreement or any Receipt to holders of Receipts
other than that each of them agrees to use good faith in the
performance of such duties as are specifically set forth in
this Deposit Agreement.

Neither the Depositary nor any Depositary's Agent
nor the Company shall be under any obligation to appear in,
prosecute or defend any action, suit or other proceeding
with respect to the Series B Preferred Stock, Depositary
Shares, Receipts or Common Stock that in its opinion may
involve it in expense or liability, unless indemnity
satisfactory to it against all expense and liability be
furnished as often as may be required.

Neither the Depositary nor any Depositary's Agent
nor the Company shall be liable for any action or any
failure to act by it in reliance upon the advice of, or
information from, legal counsel, accountants, any person
presenting Series B Preferred Stock for deposit, any holder
of a Receipt or any other person believed by it in good
faith to be competent to give such advice or information.
The Depositary, any Depositary's Agent and the Company may
each rely and shall each be protected in acting upon any
written notice, request, direction or other document
believed by it to be genuine and to have been signed or
presented by the proper party or parties.

otherwise act fully or as freely as if it were not the
Depositary or the Depositary's Agent hereunder. The
Depositary may also act as transfer agent or registrar of
any of the securities of the Company and its affiliates.

It is intended that neither the Depositary nor any
Depositary's Agent shall be deemed to be an "issuer" of
securities under the federal securities laws or applicable
state securities laws, it being expressly understood and
agreed that the Depositary and any Depositary's Agent are
acting only in a ministerial capacity as Depositary for the
Series B Preferred Stock; provided, however, that the
Depositary agrees to comply with all information reporting
and withholding requirements applicable to it under law or
this Deposit Agreement in its capacity as Depositary.

Neither the Depositary (or its officers,
directors, employees or agents) nor any Depositary's Agent
makes any representation or has any responsibility as to the
validity of the Registration Statement pursuant to which the
Depositary Shares are registered under the Securities Act,
the Series B Preferred Stock, the Depositary Shares, the
Receipts (except for its countersignatures thereon) or any
instruments referred to therein or herein (other than an
instrument executed by the Depositary or Depositary's
Agent), or as to the correctness of any statement made
therein or herein or for the failure of the Company to
comply with any covenants contained in this Agreement or the
Receipts; provided, however, that the Depositary is
responsible for its representations in this Deposit
Agreement.

The Depositary assumes no responsibility for the
correctness of the description that appears in the Receipts,
which can be taken as a statement of the Company summarizing
certain provisions of this Deposit Agreement.
Notwithstanding any other provision herein or in the
Receipts, the Depositary makes no warranties or
representations as to the validity, genuineness or
sufficiency of any Series B Preferred Stock at any time
deposited with the Depositary hereunder or of the Depositary
Shares, as to the validity or sufficiency of this Deposit
Agreement, as to the value of the Depositary Shares or as to
any right, title or interest of the record holders of
Receipts in and to the Depositary Shares except that the
Depositary hereby represents and warrants as follows: (i)
the Depositary has been duly organized and is validly
existing and in good standing under the laws of the State of

Georgia, with full power, authority and legal right under
such laws to execute, deliver and carry out the terms of
this Deposit Agreement; (ii) this Deposit Agreement has been
duly authorized, executed and delivered by the Depositary;
and (iii) this Deposit Agreement constitutes a valid and
binding obligation of the Depositary, enforceable against
the Depositary in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law). The Depositary shall not
be accountable for the use or application by the Company of
the Depositary Shares or the Receipts or the proceeds
thereof.

SECTION 5.04. Resignation and Removal of the
Depositary; Appointment of Successor Depositary. The
Depositary may at any time resign as Depositary hereunder by
notice of its election to do so delivered to the Company,
such resignation to take effect upon the appointment of a
successor depositary and its acceptance of such appointment
as hereinafter provided.

The Depositary may at any time be removed by the
Company by notice of such removal delivered to the
Depositary, such removal to take effect upon the appointment
of a successor depositary and its acceptance of such
appointment as hereinafter provided.

In case at any time the Depositary acting
hereunder shall resign or be removed, the Company shall,
within 45 days after the delivery of the notice of
resignation or removal, as the case may be, appoint a
successor depositary, which shall be a bank or trust
company, or an affiliate of a bank or trust company, having
its principal office in the United States of America and
having a combined capital and surplus of at least
$50,000,000. If a successor depositary shall not have been
appointed in 45 days, the resigning Depositary may petition
a court of competent jurisdiction to appoint a successor
depositary. Every successor depositary shall execute and
deliver to its predecessor and to the Company an instrument
in writing accepting its appointment hereunder, and
thereupon such successor depositary, without any further act
or deed, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor and for

all purposes shall be the Depositary under this Deposit
Agreement, and such predecessor, upon payment of all sums
due it and on the written request of the Company, shall
promptly execute and deliver an instrument transferring to
such successor all rights and powers of such predecessor
hereunder, shall duly assign, transfer and deliver all
rights, title and interest in the Series B Preferred Stock
and any moneys or property held hereunder to such successor
and shall deliver to such successor a list of the record
holders of all outstanding Receipts and such other records
respecting the Receipts, the Depositary Shares and the
Series B Preferred Stock as the successor shall require in
order to perform its duties. Any successor depositary shall
promptly mail notice of its appointment to the record
holders of Receipts.

Any corporation into or with which the Depositary
may be merged, consolidated or converted shall be the
successor of such Depositary without the execution or filing
of any document or any further act. Such successor
depositary may execute the Receipts either in the name of
the predecessor depositary or in the name of the successor
depositary.

SECTION 5.05. Corporate Notices and Reports. The
Company agrees that it will deliver to the Depositary, and
the Depositary will, promptly after receipt thereof, and as
directed by the Company transmit to the record holders of
Receipts, in each case at the most recent address recorded
in the Depositary's books, copies of all notices and reports
(including financial statements) required by law, by the
rules of any national securities exchange upon which the
Series B Preferred Stock, the Depositary Shares, or the
Receipts are listed or by the Certificate of Incorporation
and the Certificate of Designations to be furnished by the
Company to holders of Series B Preferred Stock. Such
transmission will be at the Company's expense and the
Company will provide the Depositary with such number of
copies of such documents as the Depositary may reasonably
request. In addition, the Depositary will transmit to the
record holders of Receipts at the Company's expense such
other documents as may be requested by the Company.

SECTION 5.06. Deposit of Series B Preferred Stock
by the Company. Neither the Company nor any company
controlled by the Company will at any time deposit any
Series B Preferred Stock if such Series B Preferred Stock is
required to be registered under the provisions of the

Securities Act and no registration statement is at such time
in effect as to such Series B Preferred Stock.

SECTION 5.07. Indemnification by the Company.
The Company agrees to indemnify the Depositary, any
Depositary's Agent and any Registrar against, and hold each
of them harmless from, any liability, costs and expenses
(including reasonable attorneys' fees) that may arise out of
or in connection with its acting as Depositary, Depositary's
Agent or Registrar, respectively, under this Deposit
Agreement and the Receipts, except for any liability arising
out of negligence, bad faith or willful misconduct on the
part of any such person or persons.

SECTION 5.08. Fees, Charges and Expenses. No
fees, charges and expenses of the Depositary or any
Depositary's Agent hereunder or of any Registrar shall be
payable by any person other than the Company, except for any
taxes and other governmental charges and except as provided
in this Deposit Agreement. If the Depositary incurs fees,
charges or expenses for which it is not otherwise liable
hereunder at the election of a holder of a Receipt or other
person, such holder or other person will be liable for such
fees, charges and expenses. All other fees, charges and
expenses of the Depositary and any Depositary's Agent
hereunder and of any Registrar (including, in each case,
reasonable fees and expenses of counsel) incident to the
performance of their respective obligations hereunder will
be paid from time to time upon consultation and agreement
between the Depositary and the Company as to the amount and
nature of such fees, charges and expenses.

ARTICLE VI

AMENDMENT AND TERMINATION

SECTION 6.01. Amendment. The form of the
Receipts and any provisions of this Deposit Agreement may at
any time and from time to time be amended by agreement
between the Company and the Depositary in any respect that
they may deem necessary or desirable. Any amendment that
shall impose any fees, taxes or charges payable by holders
of Receipts (other than taxes and other governmental
charges, fees and other expenses provided for herein or in
the Receipts), or that shall otherwise prejudice any
substantial existing right of holders of Receipts, shall not
become effective as to outstanding Receipts until the

expiration of 90 days after notice of such amendment shall
have been given to the record holders of outstanding
Receipts. Every holder of an outstanding Receipt at the
time any such amendment becomes effective shall be deemed,
by continuing to hold such Receipt, to consent and agree to
such amendment and to be bound by this Deposit Agreement as
amended thereby. In no event shall any amendment impair the
right, subject to the provisions of Sections 2.03, 2.06,
2.07 and 2.10 and Article III, of any owner of any
Depositary Shares to surrender the Receipt evidencing such
Depositary Shares with instructions to the Depositary to
deliver to the holder the Series B Preferred Stock and all
money and other property, if any, represented thereby, or to
cause the conversion of the underlying Series B Preferred
Stock into Common Stock and cash for any fractional share
amount, except in order to comply with mandatory provisions
of applicable law.

SECTION 6.02. Termination. Whenever so directed
by the Company upon at least five Business Days' prior
notice, the Depositary will terminate this Deposit
Agreement, provided, that notice of such termination has
been given by mailing notice of such termination to the
record holders of all Receipts then outstanding at least
30 days prior to the date fixed in such notice for such
termination. The Depositary may likewise terminate this
Deposit Agreement if at any time 45 days shall have expired
after the Depositary shall have delivered to the Company a
written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its
appointment as provided in Section 5.04.

If any Receipts shall remain outstanding after the
date of termination of this Deposit Agreement, the
Depositary thereafter shall discontinue the transfer of
Receipts, shall suspend the distribution of dividends to the
holders thereof and shall not give any further notices
(other than notice of such termination) or perform any
further acts under this Deposit Agreement, except as
hereinafter provided in this paragraph and except that the
Depositary shall continue to collect dividends and other
distributions pertaining to Series B Preferred Stock, shall
sell rights, preferences, privileges or other property as
provided in this Deposit Agreement and shall continue to
deliver the Series B Preferred Stock and any money and other
property represented by Receipts, without liability for
interest thereon, upon surrender thereof by the holders
thereof. At any time after the expiration of two years from

the date of termination, the Depositary may sell Series B
Preferred Stock then held hereunder at public or private
sale, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any
such sale, together with any money and other property held
by it hereunder, without liability for interest, for the
benefit, pro rata in accordance with their holdings, of the
holders of Receipts that have not theretofore been
surrendered. After making such sale, the Depositary shall
be discharged from all obligations under this Deposit
Agreement except to account for such net proceeds and money
and other property. Upon the termination of this Deposit
Agreement, the Company shall be discharged from all
obligations under this Deposit Agreement except for its
obligations to the Depositary, any Depositary's Agent and
any Registrar under Sections 5.07 and 5.08. In the event
this Deposit Agreement is terminated and a sufficient number
of shares of Series B Preferred Stock remain outstanding,
the Company hereby agrees to use its best efforts to list
the underlying Series B Preferred Stock on the New York
Stock Exchange, Inc. (unless the holders of a majority of
the outstanding shares of Series B Preferred Stock shall
consent to the Company not effecting such listing).

ARTICLE VII

MISCELLANEOUS

SECTION 7.01. Counterparts. This Deposit
Agreement may be executed by the Company and the Depositary
in separate counterparts, each of which counterpart, when so
executed and delivered, shall be deemed an original, but all
such counterparts taken together shall constitute one and
the same instrument. Delivery of an executed counterpart of
a signature page to this Deposit Agreement by facsimile
transmission shall be effective as delivery of a manually
executed counterpart of this Deposit Agreement. Copies of
this Deposit Agreement shall be filed with the Depositary
and the Depositary's Agents and shall be open to inspection
during business hours at the Corporate Office and the
respective offices of the Depositary's Agents, if any, by
any holder of a Receipt.

SECTION 7.02. Exclusive Benefits of Parties.
This Deposit Agreement is for the exclusive benefit of the
parties hereto, and their respective successors hereunder,

and shall not be deemed to give any legal or equitable
right, remedy or claim to any other person whatsoever.

SECTION 7.03. Invalidity of Provisions. In case
any one or more of the provisions contained in this Deposit
Agreement or in the Receipts should be or become invalid,
illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions
contained herein or therein shall in no way be affected,
prejudiced or disturbed thereby.

SECTION 7.04. Notices. Any notices to be given
to the Company hereunder or under the Receipts shall be in
writing and shall be deemed to have been duly given if
personally delivered or sent by mail or by facsimile
transmission confirmed by letter, addressed to the Company
at 55 East Camperdown Way, Post Office Box 1028, Greenville,
South Carolina 29602, Attention: Treasurer, with a copy to
Corporate Secretary, or at any other place to which the
Company may have transferred its principal executive office.

Any notices to be given to the Depositary
hereunder or under the Receipts shall be in writing and
shall be deemed to have been duly given if personally
delivered or sent by mail, or by telegram or telex or
telecopier confirmed by letter, addressed to the Depositary
at the Corporate Office.

Any notices given to any record holder of a
Receipt hereunder or under the Receipts shall be in writing
and shall be deemed to have been duly given if personally
delivered or sent by mail, or by telegram or telex or
telecopier confirmed by letter, addressed to such record
holder at the most recent address of such record holder as
it appears on the books of the Depositary or, if such holder
shall have timely filed with the Depositary a written
request that notices intended for such holder be mailed to
some other address, at the address designated in such
request.

Delivery of a notice sent by mail, or by telegram
or telex or telecopier, shall be deemed to be effected at
the time when a duly addressed letter containing the same
(or a duly addressed letter confirming an earlier notice in
the case of a facsimile transmission, telegram or telex) is
deposited, postage prepaid, in a post office letter box.
The Depositary or the Company may, however, act upon any
facsimile transmission received by it from the other or from

any holder of a Receipt, notwithstanding that such facsimile
transmission shall not subsequently be confirmed by letter
as aforesaid.

SECTION 7.05. Depositary's Agents. The
Depositary may from time to time appoint Depositary's Agents
to act in any respect for the Depositary for the purposes of
this Deposit Agreement and may at any time appoint
additional Depositary's Agents and vary or terminate the
appointment of such Depositary's Agents. The Depositary
will notify the Company of any such action.

SECTION 7.06. Holders of Receipts Are Parties.
Notwithstanding that holders of Receipts have not executed
and delivered this Deposit Agreement or any counterpart
thereof, the holders of Receipts from time to time shall be
deemed to be parties to this Deposit Agreement and shall be
bound by all of the terms and conditions hereof and of the
Receipts by acceptance of delivery of Receipts.

SECTION 7.07. Governing Law. This Deposit
Agreement and the Receipts and all rights hereunder and
thereunder and provisions hereof and thereof shall be
governed by, and construed in accordance with, the law of
the State of New York without giving effect to principles of
conflict of laws.

SECTION 7.08. Headings. The headings of articles
and sections in this Deposit Agreement and in the form of
the Receipt set forth in Exhibit A hereto have been inserted
for convenience only and are not to be regarded as a part of
this Deposit Agreement or the Receipts or to have any

bearing upon the meaning or interpretation of any provision
contained herein or in the Receipts.

IN WITNESS WHEREOF, Bowater Incorporated and Trust
Company Bank have duly executed this agreement as of the day
and year first above set forth and all holders of Receipts
shall become parties hereto by and upon acceptance by them
of delivery of Receipts executed and delivered in accordance
with the terms hereof.

BOWATER INCORPORATED,

By
________________________
Name:
Title:

TRUST COMPANY BANK,
as Depositary,

By
________________________
Name:
Title:

EXHIBIT A

DEPOSITARY RECEIPT
FOR
DEPOSITARY SHARES,
EACH REPRESENTING ONE-FOURTH OF A SHARE OF
___% PRIDES, SERIES B CONVERTIBLE PREFERRED STOCK,
par value $1 per share

BOWATER INCORPORATED
(Incorporated under the Laws of the State of Delaware)

No. Depositary Shares

CUSIP

Trust Company Bank, as Depositary (the
"Depositary"), hereby certifies that ___________________ is
the registered owner of __________ Depositary Shares (the
"Depositary Shares"), each Depositary Share representing
one-fourth of a share of ___% PRIDES, Series B Convertible
Preferred Stock, par value $1 per share (the "Series B
Preferred Stock"), of Bowater Incorporated, a corporation
duly organized and existing under the laws of the State of
Delaware (the "Company"), and the same proportionate
interest in any and all other property received by the
Depositary in respect of such shares of Series B Preferred
Stock and held by the Depositary under the Deposit Agreement
(as defined below). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share is entitled,
proportionately, to all the rights, preferences and
privileges of the Series B Preferred Stock represented
thereby, including the dividend, voting, conversion,
liquidation and other rights contained in the Certificate of
Designations of the ___% PRIDES, Series B Convertible
Preferred Stock, par value $1 per share, establishing the
rights, preferences, privileges and limitations of the
Series B Preferred Stock (the "Certificate of
Designations"), copies of which are on file at the office of
the Depositary at which at any particular time its business
in respect of matters governed by the Deposit Agreement
shall be administered, which at the time of the execution of
the Deposit Agreement is located at One Park Place, Atlanta,
Georgia (the "Corporate Office").

THE DEPOSITARY IS NOT RESPONSIBLE FOR THE VALIDITY OF ANY
DEPOSITED STOCK. THE DEPOSITARY ASSUMES NO RESPONSIBILITY
FOR THE CORRECTNESS OF THE DESCRIPTION SET FORTH IN THIS
RECEIPT, WHICH CAN BE TAKEN AS A STATEMENT OF THE COMPANY
SUMMARIZING CERTAIN PROVISIONS OF THE DEPOSIT AGREEMENT.
UNLESS EXPRESSLY SET FORTH IN THE DEPOSIT AGREEMENT, THE
DEPOSITARY MAKES NO WARRANTIES OR REPRESENTATIONS AS TO THE
VALIDITY, GENUINENESS OR SUFFICIENCY OF ANY STOCK AT ANY
TIME DEPOSITED WITH THE DEPOSITARY UNDER THE DEPOSIT
AGREEMENT OR OF THE DEPOSITARY SHARES OR RECEIPTS (EXCEPT
FOR ITS COUNTERSIGNATURES THEREON), AS TO THE VALIDITY OR
SUFFICIENCY OF THE DEPOSIT AGREEMENT, AS TO THE VALUE OF THE
DEPOSITARY SHARES OR AS TO ANY RIGHT, TITLE OR INTEREST OF
THE RECORD HOLDERS OF THE RECEIPTS IN AND TO THE DEPOSITARY
SHARES.

The Company will furnish to any holder of a
Receipt without charge, upon request addressed to its
executive office or the office of its transfer agent, a
statement or summary of the powers, designations,
preferences and relative, participating, optional or other
special rights of each authorized class of capital stock of
the Company, and of each series of preferred stock of the
Company authorized to be issued, so far as the same may have
been fixed, and of the qualifications, limitations or
restrictions of such preferences and/or rights.

This Depositary Receipt (the "Receipt") is
continued on the reverse hereof and the additional
provisions therein set forth for all purposes have the same
effect as if set forth at this place.

Dated:

TRUST COMPANY BANK
Depositary and Registrar

By
_________________________
Authorized Signatory

[FORM OF REVERSE

OF DEPOSITARY RECEIPT]

1. The Deposit Agreement. Depositary Receipts
(the "Receipts"), of which this Receipt is one, are made
available upon the terms and conditions set forth in the
Deposit Agreement, dated as of February [ ], 1994 (the
"Deposit Agreement") among the Company, the Depositary and
all holders from time to time of Receipts. The Deposit
Agreement (copies of which are on file at the Corporate
Office and at the office of any Agent of the Depositary)
sets forth the rights of holders of Receipts and the rights
and duties of the Depositary. The statements made on the
face and the reverse of this Receipt are summaries of
certain provisions of the Deposit Agreement and are subject
to the detailed provisions thereof, to which reference is
hereby made. In the event of any conflict between the
provisions of this Receipt and the provisions of the Deposit
Agreement, the provisions of the Deposit Agreement will
govern.

2. Definitions. Unless otherwise expressly
herein provided, all defined terms used herein shall have
the meanings ascribed thereto in the Deposit Agreement.

3. Redemption of Series B Preferred Stock.
Whenever the Company shall elect to redeem shares of Series
B Preferred Stock for shares of its Common Stock, par value
$1.00 per share ("Common Stock"), in accordance with the
Certificate of Designations, it shall (unless otherwise
agreed in writing with the Depositary) give the Depositary
in its capacity as Depositary the notice required by the
Deposit Agreement. The Depositary shall mail, first class
postage prepaid, notice of such redemption and the proposed
simultaneous redemption of the number of Depositary Shares
representing the Series B Preferred Stock to be redeemed,
not less than 15 and not more than 60 days prior to the date
fixed for redemption of such Series B Preferred Stock and
Depositary Shares (the "Redemption Date"), to the record
holders of the Receipts evidencing the Depositary Shares to
be so redeemed, at the addresses of such holders as they
appear on the records of the Depositary; but neither failure
to mail any such notice to one or more such holders nor any
defect in any notice to one or more such holders shall
affect the sufficiency of the proceedings for redemption as
to other holders. Each such notice shall state: (i) the

Redemption Date; (ii) the number of Depositary Shares to be
redeemed and, if less than all the Depositary Shares held by
any such holder are to be redeemed, the number of such
Depositary Shares held by such holder to be so redeemed;
(iii) the number of shares of Common Stock deliverable upon
redemption; (iv) the call price for the Depositary Shares;
(v) the Optional Conversion Rate (calculated in accordance
with paragraph 3 of the Certificate of Designations),
together with a statement that all conversion rights with
respect to the Depositary Shares called for redemption will
terminate immediately prior to the close of business on the
date fixed for redemption; (vi) the place or places where
Receipts evidencing Depositary Shares are to be surrendered
for payment of the redemption price; and (vii) that
dividends in respect of the shares of Series B Preferred
Stock represented by the Depositary Shares to be redeemed
will cease to accumulate on such Redemption Date. Any such
notices shall be mailed in the same manner as notices of
redemption of the Series B Preferred Stock are required to
be mailed pursuant to paragraph 3 of the Certificate of
Designations and published in the same manner as notices of
redemption of the Series B Preferred Stock are required to
be published pursuant to said paragraph, if so required. In
case fewer than all the outstanding Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed shall be
selected by lot or pro rata (as nearly as may be) or by any
other equitable method determined by the Depositary to be
consistent with the method determined by the Board of
Directors of the Company with respect to the Series B
Preferred Stock.

Notice having been mailed and published by the
Depositary as aforesaid, from and after the Redemption Date
(unless the Company shall have failed to redeem the shares
of Series B Preferred Stock to be redeemed by it, as set
forth in the Company's notice provided for above), the
Depositary Shares called for redemption shall be deemed no
longer to be outstanding and all rights of the holders of
Receipts evidencing such Depositary Shares (except the right
to receive the shares of Common Stock upon redemption and
cash for any fractional share amount) shall, to the extent
of such Depositary Shares, cease and terminate. Upon
surrender in accordance with said notice of the Receipts
evidencing such Depositary Shares (properly endorsed or
assigned for transfer, if the Depositary shall so require),
such Depositary Shares shall be redeemed for shares of
Common Stock and cash for any fractional share amount at a
rate per Depositary Share equal to one-fourth of the number

of shares of Common Stock (including fractional amounts)
delivered upon redemption of a share of Series B Preferred
Stock pursuant to the Certificate of Designations. The
foregoing shall be subject further to the terms and
conditions of the Certificate of Designations and the
Deposit Agreement.

If fewer than all of the Depositary Shares
evidenced by this Receipt are called for redemption, the
Depositary will deliver to the holder of this Receipt upon
its surrender to the Depositary, together with shares of
Common Stock for the Depositary Shares called for
redemption, a new Receipt evidencing the Depositary Shares
evidenced by such prior Receipt and not called for
redemption.

In the event that Depositary Shares are redeemed
for shares of Common Stock and certificates evidencing
Rights are issued or to be issued in connection therewith,
such certificates shall be distributed in the same manner
and to the same record holders receiving the shares of
Common Stock associated with such Rights.

4. Surrender of Receipts and Withdrawal of Series
B Preferred Stock. Upon surrender of this Receipt to the
Depositary at the Corporate Office or such other offices as
the Depositary may designate, and subject to the provisions
of the Deposit Agreement, the holder hereof is entitled to
withdraw, and to obtain delivery of, to or upon the order of
such holder, any or all of the Series B Preferred Stock (but
only in whole shares of Series B Preferred Stock) and any or
all money and other property, if any, at the time
represented by the Depositary Shares evidenced by this
Receipt; provided, however, that, in the event this Receipt
shall evidence a number of Depositary Shares in excess of
the number of Depositary Shares representing the whole
number of shares of Series B Preferred Stock to be
withdrawn, the Depositary shall, in addition to such whole
number of shares of Series B Preferred Stock and such money
and other property, if any, to be withdrawn, deliver, to or
upon the order of such holder, a new Receipt or Receipts
evidencing such excess number of whole Depositary Shares.

5. Optional Conversion of Series B Preferred
Stock into Common Stock. Subject to the terms and
conditions of the Deposit Agreement and the Certificate of
Designations, this Receipt may be surrendered with written
instructions to the Depositary to instruct the Company to

cause the conversion of any specified number of whole shares
of Series B Preferred Stock represented by whole Depositary
Shares evidenced hereby into whole shares of Common Stock
and cash for any fractional share amount at the conversion
price then in effect for the Series B Preferred Stock
pursuant to the Certificate of Designations as such
conversion price may be adjusted by the Company from time to
time as provided in the Certificate of Designations.
Subject to the terms and conditions of the Deposit Agreement
and the Certificate of Designations, a holder of a Receipt
or Receipts evidencing Depositary Shares representing whole
or fractional shares of Series B Preferred Stock may
surrender such Receipt or Receipts at the Depositary's
Office or at such office or to such Depositary's Agents as
the Depositary may designate for such purpose, together with
a notice of conversion duly completed and executed, thereby
directing the Depositary to instruct the Company to cause
the conversion of the number of whole shares of underlying
Series B Preferred Stock specified in such notice of
conversion into shares of Common Stock, and an assignment of
such Receipt or Receipts to the Company or in blank, duly
completed and executed. To the extent that a holder
delivers to the Depositary for conversion a Receipt or
Receipts which in the aggregate are convertible into less
than one whole share of Common Stock, the holder shall
receive payment in cash in lieu of such fractional share of
Common Stock otherwise issuable. If more than one Receipt
shall be delivered for conversion at one time by the same
holder, the number of whole shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of
the aggregate number of Depositary Shares represented by the
Receipts so delivered.

If Series B Preferred Stock shall be called by the
Company for redemption, the Depositary Shares representing
such Series B Preferred Stock may be converted into Common
Stock as provided in the Deposit Agreement until, but not
after, the close of business on the Redemption Date unless
the Company shall fail to deposit with the Depositary the
shares of Common Stock and cash for any fractional share
amounts required to redeem the Series B Preferred Stock, in
which case the Depositary Shares representing such Series B
Preferred Stock may continue to be converted into Common
Stock until, but not after, the close of business on the
date on which the Company deposits with the Depositary such
shares of Common Stock and cash for any fractional share
amounts as are required by the Certificate of Designations
to make full payment of the amounts payable upon such

redemption. Upon receipt by the Depositary of a Receipt or
Receipts, together with a properly completed and executed
notice of conversion, representing any Series B Preferred
Stock called for redemption, the shares of Series B
Preferred Stock held by the Depositary represented by such
Depositary Shares for which conversion is requested shall be
deemed to have been received by the Company for conversion
as of immediately prior to the close of business on the date
of such receipt by the Depositary.

6. Mandatory Conversion of Series B Preferred
Stock into Common Stock. With respect to any Series B
Preferred Stock on deposit with the Depositary as to which
the Company has not exercised its right to redeem and the
record holder has not exercised its right of optional
conversion pursuant to the Certificate of Designations, the
Depositary shall mail, first class postage prepaid, notice
of the mandatory conversion of Series B Preferred Stock and
the simultaneous mandatory conversion of the Depositary
Shares representing the Series B Preferred Stock to be
mandatorily converted, not less than 5 and not more than
15 days prior to the date fixed for mandatory conversion of
such Series B Preferred Stock and Depositary Shares (the
"Mandatory Conversion Date"), to all record holders of
Receipts evidencing Depositary Shares who are of record on
the date that is two Business Days prior to the date of
mailing, at the addresses of such holders as they appear on
the records of the Depositary; but neither failure to mail
any such notice to one or more such holders nor any defect
in any notice to one or more such holders shall affect the
sufficiency of the proceedings for mandatory conversion as
to any record holder (whether or not such failure or defect
affects such record holder). Each such notice shall
state: (i) the Mandatory Conversion Date; (ii) that all
outstanding Depositary Shares on the Mandatory Conversion
Date will be mandatorily converted pursuant to the
Certificate of Designations and the Deposit Agreement; (iii)
the Common Equivalent Rate (determined in accordance with
paragraph 3 of the Certificate of Designations); (iv) the
place or places where Receipts evidencing Depositary Shares
are to be surrendered for payment of the mandatory
conversion price; and (v) that dividends in respect of the
shares of Series B Preferred Stock represented by the
Depositary Shares to be mandatorily converted will cease to
accumulate on the Mandatory Conversion Date.

On the Mandatory Conversion Date, all then
outstanding shares of Series B Preferred Stock shall

mandatorily convert into shares of Common Stock, cash for
any fractional share amounts and the right to receive
amounts in cash equal to all accrued and unpaid dividends on
such shares of Series B Preferred Stock to the Mandatory
Conversion Date (other than previously declared dividends
payable to a holder of record as of a prior date), all as
provided in and subject to paragraph 3 of the Certificate of
Designations.

for the appropriate number of shares of Common Stock and the
appropriate amount of cash, without interest, to record
holders who properly deliver their Receipts to the
Depositary.

7. Transfers, Split-ups, Combinations. Subject
to Paragraphs 8, 9 and 10 below, this Receipt is
transferable on the books of the Depositary upon surrender
of this Receipt to the Depositary at the Corporate Office or
such other offices as the Depositary may designate, properly
endorsed or accompanied by a properly executed instrument of
transfer or endorsement, and upon such transfer the
Depositary shall sign and deliver a Receipt to or upon the
order of the person entitled thereto, all as provided in and
subject to the Deposit Agreement. This Receipt may be split
into other Receipts or combined with other Receipts into one
Receipt evidencing the same aggregate number of Depositary
Shares evidenced by the Receipt or Receipts surrendered;
provided, however, that the Depositary shall not execute and
deliver any Receipt evidencing a fractional Depositary
Share.

8. Conditions to Signing and Delivery, Transfer,
etc., of Receipts. Prior to the execution and delivery,
transfer, split-up, combination, surrender or exchange of
this Receipt, the Depositary, any of the Depositary's Agents
or the Company may require any or all of the following:
(i) payment to it of a sum sufficient for the payment (or,
in the event that the Depositary or the Company shall have
made such payment, the reimbursement to it) of any tax or
other governmental charge with respect thereto (including
any such tax or charge with respect to Series B Preferred
Stock being deposited or withdrawn or with respect to Common
Stock, Rights or other securities or property of the Company
being issued upon conversion or redemption); (ii) the
production of proof satisfactory to it as to the identity
and genuineness of any signature; and (iii) compliance with
such regulations, if any, as the Depositary or the Company
may establish not inconsistent with the Deposit Agreement.
Any person presenting Series B Preferred Stock for deposit,
or any holder of this Receipt, may be required to file such
proof of information, to execute such certificates and to
make such representations and warranties as the Depositary
or the Company may reasonably deem necessary or proper. The
Depositary or the Company may withhold or delay the delivery
of any Receipt, the transfer, redemption, conversion or
exchange of any Receipt, the withdrawal of the Series B
Preferred Stock or money or other property, if any,

represented by the Depositary Shares evidenced by this
Receipt or the distribution of any dividend or other
distribution until such proof or other information is filed,
such certificates are executed or such representations and
warranties are made.

9. Suspension of Delivery, Transfer, etc. The
deposit of Series B Preferred Stock may be refused, the
delivery of this Receipt against Series B Preferred Stock
may be suspended, and the transfer, split-up, combination,
surrender or exchange of this Receipt may be suspended
(i) during any period when the register of holders of
Receipts is closed, (ii) if any such action is deemed
necessary or advisable by the Depositary, any of the
Depositary's Agents or the Company at any time or from time
to time because of any requirement of law or of any
government or governmental body or commission, or under any
provision of the Deposit Agreement, or (iii) with the
approval of the Company, for any other reason. Except with
respect to a conversion of Depositary Shares which may occur
pursuant to paragraph 3 of the Certificate of Designations,
the Depositary shall not be required (a) to execute and
deliver, transfer or exchange any Receipts for a period
beginning at the opening of business 15 days next preceding
any selection of Depositary Shares and Series B Preferred
Stock to be redeemed and ending at the close of business on
the day of the mailing of notice of redemption of Depositary
Shares or (b) to transfer or exchange for another Receipt
any Receipt evidencing Depositary Shares called or being
called for redemption in whole or in part, except as
provided in the second to last paragraph of Paragraph 3
above.

10. Payment of Taxes or Other Governmental
Charges. If any tax or other governmental charge shall
become payable by or on behalf of the Depositary with
respect to this Receipt, the Depositary Shares evidenced by
this Receipt, the Series B Preferred Stock (or any
fractional interest therein) represented by such Depositary
Shares or any transaction referred to in Section 4.06 of the
Deposit Agreement, such tax (including transfer, issuance or
acquisition taxes, if any) or governmental charge shall be
payable by the holder hereof. Until such payment is made,
transfer, redemption, conversion or exchange of this Receipt
or any withdrawal of the Series B Preferred Stock or money
and other property, if any, represented by the Depositary
Shares evidenced by this Receipt may be refused, any
dividend or other distribution may be withheld and any part

or all of the Series B Preferred Stock or other property
represented by the Depositary Shares evidenced by this
Receipt may be sold for the account of the holder hereof
(after attempting by reasonable means to notify such holder
prior to such sale). Any dividend or other distribution so
withheld and the proceeds of any such sale may be applied to
any payment of such tax or other governmental charge, the
holder of this Receipt remaining liable for any deficiency.

11. Amendment. The form of the Receipts and any
provision of the Deposit Agreement may at any time and from
time to time be amended by agreement between the Company and
the Depositary in any respect that they may deem necessary
or desirable. Any amendment that shall impose any fees,
taxes or charges payable by holders of Receipts (other than
taxes and other governmental charges, fees and other
expenses provided for herein or in the Deposit Agreement),
or that shall otherwise prejudice any substantial existing
right of holders of Receipts, shall not become effective as
to outstanding Receipts until the expiration of 90 days
after notice of such amendment shall have been given to the
record holders of outstanding Receipts. The holder of this
Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold this Receipt, to
consent and agree to such amendment and to be bound by the
Deposit Agreement as amended thereby. In no event shall any
amendment impair the right, subject to the provisions of
Paragraphs 3, 4, 5, 6, 8, 9 and 10 hereof and of
Sections 2.03, 2.06, 2.07, 2.10 and 2.11 and Article III of
the Deposit Agreement, of the owner of the Depositary Shares
evidenced by this Receipt to surrender this Receipt with
instructions to the Depositary to deliver to the holder the
Series B Preferred Stock and all money and other property,
if any, represented hereby, or to cause the conversion of
the underlying Series B Preferred Stock into Common Stock
and cash for any fractional share amount, except in order to
comply with mandatory provisions of applicable law.

12. Fees, Charges and Expenses. The Company will
pay all fees, charges and expenses of the Depositary, except
for taxes (including transfer taxes, if any) and other
governmental charges and such charges as are expressly
provided in the Deposit Agreement to be at the expense of
persons depositing Series B Preferred Stock, holders of
Receipts or other persons.

13. Title to Receipts. It is a condition of this
Receipt, and every successive holder hereof by accepting or

holding the same consents and agrees, that title to this
Receipt (and to the Depositary Shares evidenced hereby) when
properly endorsed or accompanied by a properly executed
instrument of transfer or endorsement, is transferable by
delivery; provided, however, that until this Receipt shall
be transferred on the books of the Depositary as provided in
Section 2.04 of the Deposit Agreement, the Depositary may,
notwithstanding any notice to the contrary, treat the record
holder hereof at such time as the absolute owner hereof for
the purpose of determining the person entitled to
distribution of dividends or other distributions or to any
notice provided for in the Deposit Agreement and for all
other purposes.

14. Dividends and Distributions. Whenever the
Depositary receives any cash dividend or other cash
distribution on the Series B Preferred Stock, the Depositary
will, subject to the provisions of the Deposit Agreement,
distribute such portions of such sum to record holders of
Receipts as are, as nearly as practicable, proportionate to
the respective numbers of Depositary Shares evidenced by the
Receipts held by such holders; provided, however, that in
case the Company or the Depositary shall be required to
withhold and does withhold from any cash dividend or other
cash distribution in respect of the Series B Preferred Stock
an amount on account of taxes or as otherwise required by
law, regulation or court order, the amount made available
for distribution or distributed in respect of Depositary
Shares shall be reduced accordingly. The Depositary shall
distribute or make available for distribution, as the case
may be, only such amount, however, as can be distributed
without attributing to any owner of Depositary Shares a
fraction of one cent and any balance not so distributable
shall be held by the Depositary (without liability for
interest thereon) and shall be added to and be treated as
part of the next sum received by the Depositary for
distribution to record holders of Receipts then outstanding.

15. Subscription Rights, Preferences or
Privileges. If the Company shall at any time offer or cause
to be offered to the persons in whose names Series B
Preferred Stock is registered on the books of the Company
any rights, preferences or privileges to subscribe for or to
purchase any securities or any rights, preferences or
privileges of any other nature, such rights, preferences or
privileges shall in each such instance, subject to the
provisions of the Deposit Agreement, be made available by
the Depositary to the record holders of Receipts if the

Company so directs in such manner as the Company shall
instruct.

16. Notice of Dividends, Fixing of Record Date.
Whenever any cash dividend or other cash distribution shall
become payable, any distribution other than cash shall be
made, or any rights, preferences or privileges shall at any
time be offered, with respect to the Series B Preferred
Stock, or the Depositary shall receive notice of (i) any
meeting at which holders of Series B Preferred Stock are
entitled to vote or of which holders of Series B Preferred
Stock are entitled to notice or (ii) any election on the
part of the Company to call for redemption any shares of
Series B Preferred Stock, the Depositary shall in each such
instance fix a record date (which shall be the same date as
the record date fixed by the Company with respect to the
Series B Preferred Stock) for the determination of the
holders of Receipts (i) who shall be entitled to receive
such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof, or to
give instructions for the exercise of voting rights at any
such meeting or to receive notice of such meeting or
(ii) whose Depositary Shares are to be so redeemed.

17. Voting Rights. Upon issuance of notice of any
meeting at which the holders of Series B Preferred Stock are
entitled to vote, the Company shall direct the Depositary,
as soon as practicable thereafter, to mail to the record
holders of Receipts a notice, which shall contain (i) such
information as is contained in such notice of meeting,
(ii) a statement that the holders of Receipts at the close
of business on a specified record date determined as
provided in Paragraph 16 will be entitled, subject to any
applicable provision of law, the Certificate of
Incorporation or the Certificate of Designations, to
instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of Series B Preferred Stock
represented by their respective Depositary Shares, and
(iii) a brief statement as to the manner in which such
instructions may be given. Upon the written request of a
holder of a Receipt on such record date, the Depositary
shall endeavor insofar as practicable to vote or cause to be
voted the amount of Series B Preferred Stock represented by
the Depositary Shares evidenced by such Receipt in
accordance with the instructions set forth in such request.
The Company has agreed to take all reasonable action that
may be deemed necessary by the Depositary in order to enable
the Depositary to vote such Series B Preferred Stock or

cause such Series B Preferred Stock to be voted. In the
absence of specific instructions from the holder of a
Receipt, the Depositary will abstain from voting to the
extent of the Series B Preferred Stock represented by the
Depositary Shares evidenced by such Receipt. After
aggregating all voting Depositary Shares, the Depositary
will disregard for voting purposes any fractional share of
Series B Preferred Stock remaining.

18. Reports, Inspection of Transfer Books. The
Depositary shall make available for inspection by holders of
Receipts at the Corporate Office and at such other places as
it may from time to time deem advisable during normal
business hours any reports and communications received from
the Company that are both received by the Depositary as the
holder of Series B Preferred Stock and made generally
available to the holders of Series B Preferred Stock by the
Company. The Depositary shall keep books at the Corporate
Office for the registration and transfer of Receipts, which
books during normal business hours will be open for
inspection by the record holders of Receipts as provided by
applicable law.

19. Liability of the Depositary, the Depositary's
Agents and the Company. Neither the Depositary nor any
Depositary's Agent nor the Company shall incur any liability
to any holder of any Receipt, if by reason of any provision
of any present or future law or regulation of any
governmental authority or, in the case of the Depositary or
the Depositary's Agent, by reason of any provision, present
or future, of the Certificate of Incorporation or the
Certificate of Designations or, in the case of the Company,
the Depositary or the Depositary's Agent, by reason of any
act of God or war or other circumstance beyond the control
of the relevant party, the Depositary, any Depositary's
Agent or the Company shall be prevented or forbidden from
doing or performing any act or thing that the terms of the
Deposit Agreement provide shall be done or performed; nor
shall the Depositary, any Depositary's Agent or the Company
incur any liability to any holder of a Receipt by reason of
any nonperformance or delay, caused as aforesaid, in the
performance of any act or thing that the terms of the
Deposit Agreement provide shall or may be done or performed
or by reason of any exercise of, or failure to exercise, any
discretion provided for in the Deposit Agreement.

20. Obligations of the Depositary, the
Depositary's Agents and the Company. Neither the Depositary

nor any Depositary's Agent nor the Company assumes any
obligation or shall be subject to any liability hereunder or
under the Deposit Agreement to holders of Receipts other
than that each of them agrees to use good faith in the
performance of such duties as are specifically set forth in
the Deposit Agreement.

Neither the Depositary nor any Depositary's Agent
nor the Company shall be under any obligation to appear in,
prosecute or defend any action, suit or other proceeding
with respect to Series B Preferred Stock, Depositary Shares,
Receipts or Common Stock that in its opinion may involve it
in expense or liability, unless indemnity satisfactory to it
against all expense and liability be furnished as often as
may be required.

Neither the Depositary nor any Depositary's Agent
nor the Company will be liable for any action or failure to
act by it in reliance upon the advice of or information from
legal counsel, accountants, any person presenting Series B
Preferred Stock for deposit, any holder of a Receipt or any
other person believed by it in good faith to be competent to
give such advice or information.

21. Termination of Deposit Agreement. Whenever so
directed by the Company upon at least five Business Days'
prior notice, the Depositary will terminate the Deposit
Agreement, provided, that notice of such termination has
been given by mailing notice of such termination to the
record holders of all Receipts then outstanding at least
30 days prior to the date fixed in such notice for such
termination. The Depositary may likewise terminate the
Deposit Agreement if at any time 45 days shall have expired
after the Depositary shall have delivered to the Company a
written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its
appointment as provided in Section 5.04 of the Deposit
Agreement. Upon the termination of the Deposit Agreement,
the Company shall be discharged from all obligations
thereunder except for its obligations to the Depositary, any
Depositary's Agent and any Registrar under Sections 5.07 and
5.08 of the Deposit Agreement.

If any Receipts remain outstanding after the date
of termination, the Depositary thereafter shall discontinue
all functions and be discharged from all obligations as
provided in the Deposit Agreement, except as specifically
provided therein.

22. Governing Law. The Deposit Agreement and this
Receipt and all rights thereunder and hereunder and
provisions thereof and hereof shall be governed by, and
construed in accordance with, the law of the State of New
York without giving effect to principles of conflict of
laws.

This Receipt shall not be entitled to any benefits
under the Deposit Agreement or be valid or obligatory for
any purpose, unless this Receipt shall have been executed on
behalf of the Company by the manual or facsimile signature
of a duly authorized officer and executed manually or, if a
Registrar for the Receipts (other than the Depositary) shall
have been appointed, by facsimile by the Depositary by the
signature of a duly authorized officer and, if executed by
facsimile signature of the Depositary, shall have been
countersigned manually by such Registrar by the signature of
a duly authorized officer.

Dated:

TRUST COMPANY BANK
Depositary and Registrar

By
Authorized Officer

BOWATER INCORPORATED

By
Authorized Officer

NOTICE OF CONVERSION

The undersigned holder of this Receipt for
Depositary Shares hereby irrevocably exercises the option to
convert that number of whole shares of ___% PRIDES, Series B
Convertible Preferred Stock of the Company represented by [
] Depositary Shares into shares of Common Stock of the
Company and cash for any fractional share amount in
accordance with the terms of and subject to the conditions

of the Series B Preferred Stock, including the Certificate
of Designations in respect thereof, and the Deposit
Agreement, and directs the Depositary to instruct the
Company that the shares of Common Stock deliverable upon
such conversion be registered in the name of, and delivered
together with a check in payment for any fractional shares
of Common Stock to, the undersigned unless a different name
has been indicated below. If the shares of Common Stock are
to be registered in the name of a person other than the
undersigned, the undersigned will pay all transfer and
similar taxes payable with respect thereto. If the number
of whole shares of Series B Preferred Stock represented by
the number of Depositary Shares set forth above is less than
the number of shares of Series B Preferred Stock on deposit
in respect of this Receipt, the undersigned directs that the
Depositary execute and deliver to the undersigned, unless a
different name is indicated below, a new Receipt evidencing
Depositary Shares for the balance of such Series B Preferred
Stock not to be converted.

Dated: _________________________

Signature: _________________
NOTE: The signature on this notice of conversion
must correspond with the name as written upon the
face of this Receipt in every particular without
alteration or enlargement or any change
whatsoever, and must be guaranteed by a commercial
bank, trust company, securities broker or dealer,
credit union, savings association or other
eligible guarantor institution which is a member
of or participant in a signature guarantee program
acceptable to the Depositary.

Name: ______________________________________________________

Address: ___________________________________________________
(Please print names and address of Registered Holder)

Name: ______________________________________________________

Address: ___________________________________________________
(Please indicate other delivery instructions, if
applicable)

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto ____________ the within Receipt
and all rights and interests represented by the Depositary
Shares evidenced thereby, and hereby irrevocably constitutes
and appoints ________________ his attorney, to transfer the
same on the books of the within-named Depositary, with full
power of substitution in the premises.

Dated: Signature: __________________________
NOTE: The signature on this assignment
must correspond with the name as written
upon the face of the Receipt in every
particular, without alteration or
enlargement, or any change whatsoever, and
must be guaranteed by a commercial bank,
trust company, securities broker or
dealer, credit union, savings association
or other eligible guarantor institution
which is a member of or participant in a
signature guarantee program acceptable to
the Depositary.

BOWATER INCORPORATED

TRUST COMPANY BANK, as Depositary

and

THE HOLDERS FROM TIME TO TIME OF
THE DEPOSITARY RECEIPTS DESCRIBED HEREIN
IN RESPECT OF THE
% SERIES C CUMULATIVE PREFERRED STOCK

_______

Deposit Agreement
_______

Dated as of February , 1994

TABLE OF CONTENTS

Page

PARTIES . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I

DEFINITIONS

Business Day . . . . . . . . . . . . . . . . . . . . 1
Certificate of Designations . . . . . . . . . . . . . 2
Certificate of Incorporation . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Office . . . . . . . . . . . . . . . . . . 2
Deposit Agreement . . . . . . . . . . . . . . . . . . 2
Depositary . . . . . . . . . . . . . . . . . . . . . 2
Depositary Share . . . . . . . . . . . . . . . . . . 2
Depositary's Agent . . . . . . . . . . . . . . . . . 2
Receipt . . . . . . . . . . . . . . . . . . . . . . . 3
record holder . . . . . . . . . . . . . . . . . . . . 3
Registrar . . . . . . . . . . . . . . . . . . . . . . 3
Securities Act . . . . . . . . . . . . . . . . . . . 3
Series C Preferred Stock . . . . . . . . . . . . . . 3

ARTICLE II

FORM OF RECEIPTS, DEPOSIT OF SERIES C PREFERRED STOCK,
EXECUTION AND DELIVERY, TRANSFER,
SURRENDER AND REDEMPTION OF RECEIPTS

SECTION 2.01. Form and Transferability
of Receipts . . . . . . . . . . . . . 3
SECTION 2.02. Deposit of Series C Preferred Stock;
Execution and Delivery of Receipts
in Respect Thereof . . . . . . . . . . 5
SECTION 2.03. Redemption of Series C Preferred Stock for
Cash . . . . . . . . . . . . . . . . . 6
SECTION 2.04. Transfer of Receipts . . . . . . . . . 8
SECTION 2.05. Combination and Split-ups of Receipts 9
SECTION 2.06. Surrender of Receipts and Withdrawal
of Series C Preferred Stock . . . . . 9

SECTION 2.07 Limitations on Execution and Delivery,
Transfer, Split-up, Combination,
Surrender and Exchange of Receipts . . 10
SECTION 2.08. Lost Receipts, etc. . . . . . . . . . 11
SECTION 2.09. Cancellation and Destruction of
Surrendered Receipts . . . . . . . . . 11

ARTICLE III

CERTAIN OBLIGATIONS OF HOLDERS
OF RECEIPTS AND THE COMPANY

SECTION 3.01. Filing Proofs, Certificates and Other
Information . . . . . . . . . . . . . 11
SECTION 3.02. Payment of Taxes or Other Governmental
Charges . . . . . . . . . . . . . . . 12
SECTION 3.03. Representations and Warranties as to
Series C Preferred Stock . . . . . . . 13

ARTICLE IV

THE SERIES C PREFERRED STOCK, NOTICES

SECTION 4.01. Cash Distributions . . . . . . . . . . 13
SECTION 4.02. Distributions Other Than Cash . . . . 13
SECTION 4.03. Subscription Rights, Preferences or
Privileges . . . . . . . . . . . . . . 14
SECTION 4.04. Notice of Dividends, Fixing of Record
Date for Holders of Receipts . . . . . 15
SECTION 4.05. Voting Rights . . . . . . . . . . . . 16
SECTION 4.06. Changes Affecting Series C Preferred Stock
and Reclassifications, Recapitalizations,
etc. . . . . . . . . . . . . . . . . . 17
SECTION 4.07. Inspection of Reports . . . . . . . . 17
SECTION 4.08. List of Receipt Holders . . . . . . . 17

ARTICLE V

THE DEPOSITARY AND THE COMPANY

SECTION 5.01. Maintenance of Offices, Agencies,
Transfer Books by the Depositary, the
Registrar . . . . . . . . . . . . . . 17
SECTION 5.02. Prevention of or Delay in Performance
by the Depositary, the Depositary's
Agents or the Company . . . . . . . . 18
SECTION 5.03. Obligations of the Depositary, the
Depositary's Agents and the Company . 19
SECTION 5.04. Resignation and Removal of the
Depositary; Appointment of Successor
Depositary . . . . . . . . . . . . . . 21
SECTION 5.05. Corporate Notices and Reports . . . . 22
SECTION 5.06. Deposit of Series C Preferred Stock by
the Company . . . . . . . . . . . . . 23
SECTION 5.07. Indemnification by the Company . . . . 23
SECTION 5.08. Fees, Charges and Expenses . . . . . . 23

ARTICLE VI

AMENDMENT AND TERMINATION

SECTION 6.01. Amendment . . . . . . . . . . . . . . 23
SECTION 6.02. Termination . . . . . . . . . . . . . 24

ARTICLE VII

MISCELLANEOUS

SECTION 7.01. Counterparts . . . . . . . . . . . . 25
SECTION 7.02. Exclusive Benefits of Parties . . . . 26
SECTION 7.03. Invalidity of Provisions . . . . . . 26
SECTION 7.04. Notices . . . . . . . . . . . . . . . 26
SECTION 7.05. Depositary's Agents . . . . . . . . . 27
SECTION 7.06. Holders of Receipts Are Parties . . . 27
SECTION 7.07. Governing Law . . . . . . . . . . . . 27
SECTION 7.08. Headings . . . . . . . . . . . . . . . 27

TESTIMONIUM . . . . . . . . . . . . . . . . . . . . 27
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 28

EXHIBIT A: Form of Depositary Receipt

DEPOSIT AGREEMENT

WHEREAS, it is desired to provide, as hereinafter
set forth in this Deposit Agreement, for the deposit of
shares of __% Series C Cumulative Preferred Stock, par value
$1 per share (the "Series C Preferred Stock") of the Company
with the Depositary, as agent for the beneficial owners of
the Series C Preferred Stock, for the purposes set forth in
this Deposit Agreement and for the execution and delivery
hereunder of the Receipts (as defined below) evidencing
Depositary Shares (as defined below) in respect of the
Series C Preferred Stock so deposited; and

ARTICLE I

DEFINITIONS

The following definitions shall apply to the
respective terms (in the singular and plural forms of such
terms) used in this Agreement and the Depositary Receipts:

"Certificate of Designations" shall mean the
Certificate of Designations of the __% Series C Cumulative
Preferred Stock, par value $1 per share, as filed with the
Secretary of State of the State of Delaware, establishing
and setting forth the rights, preferences, privileges and
limitations of the Series C Preferred Stock.

"Certificate of Incorporation" shall mean the
Restated Certificate of Incorporation, as amended from time
to time, of the Company.

"Company" shall mean Bowater Incorporated, a
Delaware corporation, and its successors.

"Deposit Agreement" shall mean this agreement, as
the same may be amended, modified or supplemented from time
to time.

"Depositary" shall mean Trust Company Bank, as
Depositary hereunder, and any successor as depositary
hereunder.

"Depositary Share" shall mean an interest in one-
fourth of a share of the Series C Preferred Stock deposited
with the Depositary hereunder and the same proportional
interest in any and all other property received by the
Depositary in respect of such share of Series C Preferred
Stock and held under this Deposit Agreement, all as
evidenced by the Receipts executed and delivered hereunder.
Subject to the terms of this Deposit Agreement, each owner
of a Depositary Share is entitled, proportionately, to all
the rights, preferences and privileges of the Series C
Preferred Stock represented by such Depositary Share,
including the dividend, voting and liquidation rights
contained in the Certificate of Designations, and to the
benefits of all obligations of the Company under the
Certificate of Designations.

"Depositary's Agent" shall mean an agent appointed
by the Depositary as provided, and for the purposes
specified, in Section 7.05.

"Receipt" or "Depositary Receipt" shall mean a
Depositary Receipt executed and delivered hereunder to
evidence one or more Depositary Shares, whether in
definitive or temporary form.

The term "record holder" as applied to a Receipt
shall mean the person in whose name a Receipt is registered
on the books maintained by the Depositary for such purpose.

"Registrar" shall mean any bank or trust company
appointed to register Receipts as herein provided.

"Securities Act" shall mean the Securities Act of
1933, as amended.

"Series C Preferred Stock" shall mean the ___%
Series C Cumulative Preferred Stock, par value $1 per share,
of the Company.

ARTICLE II

FORM OF RECEIPTS, DEPOSIT OF SERIES C PREFERRED STOCK,
EXECUTION
AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

SECTION 2.01. Form and Transferability of
Receipts. Definitive Receipts shall be engraved or printed
or lithographed with steel-engraved borders and shall be
substantially in the form set forth in Exhibit A annexed to
this Deposit Agreement, with appropriate insertions,
modifications and omissions, as hereinafter provided.
Pending preparation of definitive Receipts, the Depositary,
upon the written order of the Company or any holder of
Series C Preferred Stock, as the case may be, delivered for
deposit in compliance with Section 2.02, shall execute and
deliver temporary Receipts which are printed, lithographed,
typewritten, mimeographed or otherwise substantially of the
tenor of the definitive Receipts in lieu of which they are
executed and delivered and with such appropriate insertions,
omissions, substitutions and other variations as the persons
executing such Receipts may determine, as evidenced by their
execution of such Receipts. If temporary Receipts are
executed and delivered, the Company and the Depositary will
cause definitive Receipts to be prepared without
unreasonable delay. After the preparation of definitive
Receipts, the temporary Receipts shall be exchangeable for

definitive Receipts upon surrender of the temporary Receipts
at an office described in the second to last paragraph of
Section 2.02, without charge to the holder. Upon surrender
for cancellation of any one or more temporary Receipts, the
Depositary shall execute and deliver in exchange therefor
definitive Receipts representing the same number of
Depositary Shares as represented by the surrendered
temporary Receipt or Receipts. Such exchange shall be made
at the Company's expense and without any charge therefor.
Until so exchanged, the temporary Receipts shall in all
respects be entitled to the same benefits under this
Agreement, and with respect to the Series C Preferred Stock
deposited hereunder, as definitive Receipts.

Except as the Depositary may otherwise determine,
Receipts shall be in denominations of any number of whole
Depositary Shares. All Receipts shall be dated the date of
their execution.

Receipts may be endorsed with or have incorporated
in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Deposit Agreement
as may be required by the Depositary or required to comply
with any applicable law or regulation or with the rules and
regulations of any securities exchange upon which the
Series C Preferred Stock or the Depositary Shares may be
listed or to conform with any usage with respect thereto, or
to indicate any special limitations or restrictions to which
any particular Receipts are subject by reason of the date of
issuance of the Series C Preferred Stock or otherwise.

Depositary, shall be transferable by delivery; provided,
however, that until a Receipt shall be transferred on the
books of the Depositary as provided in Section 2.04, the
Depositary and the Company may, notwithstanding any notice
to the contrary, treat the record holder thereof at such
time as the absolute owner thereof for the purpose of
determining the person entitled to distribution of dividends
or other distributions or to any notice provided for in this
Deposit Agreement and for all other purposes.

SECTION 2.02. Deposit of Series C Preferred
Stock; Execution and Delivery of Receipts in Respect
Thereof. Subject to the terms and conditions of this
Deposit Agreement, the Company or any holder of Series C
Preferred Stock may deposit shares of Series C Preferred
Stock under this Deposit Agreement by delivery to the
Depositary of a certificate or certificates for the shares
of Series C Preferred Stock to be deposited, properly
endorsed or accompanied by a properly executed instrument of
transfer or endorsement in form satisfactory to the
Depositary, together with (i) all such certifications as may
be required by the Depositary in accordance with the
provisions of this Deposit Agreement and (ii) a written
order directing the Depositary to execute and deliver to or
upon the written order of the person or persons stated in
such order a Receipt or Receipts for the number of
Depositary Shares representing such deposited Series C
Preferred Stock.

If required by the Depositary, Series C Preferred
Stock presented for deposit at any time, whether or not the
register of holders of Receipts is closed, shall also be
accompanied by an agreement or assignment, or other
instrument satisfactory to the Depositary, that will provide
for the prompt transfer to the Depositary or its nominee of
any dividend or right to subscribe for additional Series C
Preferred Stock or to receive other property that any person
in whose name the Series C Preferred Stock is or has been
registered may thereafter receive upon or in respect of such
deposited Series C Preferred Stock, or in lieu thereof such
agreement of indemnity or other agreement as shall be
satisfactory to the Depositary.

Upon receipt by the Depositary of a certificate or
certificates for the shares of Series C Preferred Stock to
be deposited hereunder, together with the other documents
specified above, the Depositary shall, as soon as transfer
and registration can be accomplished, present such

certificates to the registrar and transfer agent of the
Series C Preferred Stock for transfer and registration in
the name of the Depositary or its nominee of the shares of
Series C Preferred Stock being deposited. Deposited Series
C Preferred Stock shall be held by the Depositary in an
account to be established by the Depositary at the Corporate
Office.

Upon receipt by the Depositary of a certificate or
certificates for Series C Preferred Stock to be deposited
hereunder, together with the other documents specified
above, the Depositary, subject to the terms and conditions
of this Deposit Agreement, shall execute and deliver to or
upon the order of the person or persons named in the written
order delivered to the Depositary referred to in the first
paragraph of this Section 2.02 a Receipt or Receipts for the
number of whole Depositary Shares representing the Series C
Preferred Stock so deposited and registered in such name or
names as may be requested by such person or persons. The
Depositary shall execute and deliver such Receipt or
Receipts at the Corporate Office, except that, at the
request, risk and expense of any person requesting such
delivery, such delivery may be made at such other place as
may be designated by such person. In each case, delivery
will be made only upon payment by such person to the
Depositary of all taxes and other governmental charges and
any fees payable in connection with such deposit and the
transfer of the deposited Series C Preferred Stock.

SECTION 2.03. Redemption of Series C Preferred
Stock for Cash. Whenever the Company shall elect to redeem
shares of Series C Preferred Stock in accordance with the
Certificate of Designations it shall (unless otherwise
agreed in writing with the Depositary) give the Depositary
in its capacity as Depositary notice of the date of such
proposed redemption of the Series C Preferred Stock, which
notice shall be given not less than 40 nor more than 70 days
prior to the date of the proposed redemption and be
accompanied by a certificate from the Company stating that
such redemption of the Series C Preferred Stock is in
accordance with the provisions of the Certificate of
Designations. Such notice shall be in addition to the
notice required to be given for redemption pursuant to the

Certificate of Designations. On the date of any such
redemption of Series C Preferred Stock, provided that the
Company shall then have paid in full to the Depositary the
redemption price of the Series C Preferred Stock to be
redeemed, the Depositary shall redeem the number of
Depositary Shares representing such redeemed Series C
Preferred Stock. Subject to the penultimate sentence of
this Paragraph, the Depositary shall mail, first class
postage prepaid, notice of the redemption of Series C
Preferred Stock and the proposed simultaneous redemption of
the Depositary Shares representing the Series C Preferred
Stock to be redeemed, not less than 30 and not more than 60
days prior to the date fixed for redemption of such Series C
Preferred Stock and Depositary Shares (the "Redemption
Date"), to the record holders of the Receipts evidencing the
Depositary Shares to be so redeemed, at the addresses of
such holders as they appear on the records of the
Depositary; but neither failure to mail any such notice to
one or more such holders nor any defect in any notice to one
or more such holders shall affect the sufficiency of the
proceedings for redemption as to other holders. Each such
notice shall state: (i) the Redemption Date; (ii) the
number of Depositary Shares to be redeemed and, if less than
all the Depositary Shares held by any such holder are to be
redeemed, the number of such Depositary Shares held by such
holder to be so redeemed; (iii) the redemption price;
(iv) the place or places where Receipts evidencing
Depositary Shares are to be surrendered for payment of the
redemption price; and (v) that dividends in respect of the
shares of Series C Preferred Stock represented by the
Depositary Shares to be redeemed will cease to accumulate on
such Redemption Date. Any such notices shall be mailed in
the same manner as notices of redemption of the Series C
Preferred Stock are required to be mailed pursuant to
paragraph 3 of the Certificate of Designations and published
in the same manner as notices of redemption of the Series C
Preferred Stock are required to be published pursuant to
said paragraph, if so required. In case fewer than all the
outstanding Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed shall be selected by lot or
pro rata (as nearly as may be) or by any other equitable
method determined by the Depositary to be consistent with
the method determined by the Board of Directors of the
Company with respect to the Series C Preferred Stock.

Notice having been mailed and published by the
Depositary as aforesaid, from and after the Redemption Date
(unless the Company shall have failed to redeem the shares

of Series C Preferred Stock to be redeemed by it, as set
forth in the Company's notice provided for in the preceding
paragraph), the Depositary Shares called for redemption
shall be deemed no longer to be outstanding and all rights
of the holders of Receipts evidencing such Depositary Shares
(except the right to receive the redemption price) shall, to
the extent of such Depositary Shares, cease and terminate.
Upon surrender in accordance with said notice of the
Receipts evidencing such Depositary Shares (properly
endorsed or assigned for transfer, if the Depositary shall
so require), such Depositary Shares shall be redeemed at a
redemption price per Depositary Share equal to one-fourth of
the redemption price per share paid in respect of the shares
of Series C Preferred Stock plus all money and other
property, if any, represented by such Depositary Shares,
including all amounts paid by the Company in respect of
dividends which on the redemption date have accrued on the
shares of Series C Preferred Stock to be so redeemed and
have not theretofore been declared or paid. The foregoing
shall be subject further to the terms and conditions of the
Certificate of Designations.

If fewer than all of the Depositary Shares
evidenced by a Receipt are called for redemption, the
Depositary will deliver to the holder of such Receipt upon
its surrender to the Depositary, together with the
redemption payment, a new Receipt evidencing the Depositary
Shares evidenced by such prior Receipt and not called for
redemption.

The Depositary shall not be required (a) to
execute and deliver, transfer or exchange any Receipts for a
period beginning at the opening of business 15 days next
preceding any selection of Depositary Shares and Series C
Preferred Stock to be redeemed and ending at the close of
business on the day of the mailing of notice of redemption
of Depositary Shares or (b) to transfer or exchange for
another Receipt any Receipt evidencing Depositary Shares
called or being called for redemption in whole or in part,
except as provided in the immediately preceding paragraph.

SECTION 2.04. Transfer of Receipts. Subject to
the terms and conditions of this Deposit Agreement, the
Depositary shall make transfers on its books from time to
time of Receipts upon any surrender thereof at the Corporate
Office or such other office as the Depositary may designate
for such purpose, by the holder in person or by a duly
authorized attorney, properly endorsed or accompanied by a
properly executed instrument of transfer or endorsement, or

other instrument satisfactory to the Depositary, together
with evidence of the payment of any transfer taxes as may be
required by law. Upon such surrender, the Depositary shall
execute a new Receipt or Receipts and deliver the same to or
upon the order of the person or persons entitled thereto
evidencing the same aggregate number of Depositary Shares
evidenced by the Receipt or Receipts surrendered.

SECTION 2.06. Surrender of Receipts and
Withdrawal of Series C Preferred Stock. Any holder of a
Receipt or Receipts may withdraw any or all of the Series C
Preferred Stock (but only in whole shares of Series C
Preferred Stock) represented by the Depositary Shares
evidenced by such Receipts and all money and other property,
if any, represented by such Depositary Shares by
surrendering such Receipt or Receipts, properly endorsed or
accompanied by a properly executed instrument of transfer or
endorsement, or other instrument satisfactory to the
Depositary, at the Corporate Office or such other office as
the Depositary may designate for such withdrawals. After
such surrender, without unreasonable delay, the Depositary
shall deliver to such holder, or to the person or persons
designated by such holder as hereinafter provided, the whole
number of shares of Series C Preferred Stock and all such
money and other property, if any, represented by the
Depositary Shares evidenced by the Receipt or Receipts so
surrendered for withdrawal. If the Receipt or Receipts
delivered by the holder to the Depositary in connection with
such withdrawal shall evidence a number of Depositary Shares
in excess of the number of whole Depositary Shares
representing the whole number of shares of Series C
Preferred Stock to be withdrawn, the Depositary shall at the
same time, in addition to such whole number of shares of
Series C Preferred Stock and such money and other property,
if any, to be withdrawn, deliver to such holder, or (subject
to Section 2.04) upon his order, a new Receipt or Receipts

evidencing such excess number of whole Depositary Shares.
Delivery of the Series C Preferred Stock and such money and
other property being withdrawn may be made by the delivery
of such certificates, documents of title, and other
instruments as the Depositary may deem appropriate, which,
if required by the Depositary, shall be properly endorsed or
accompanied by proper instruments of transfer.

If the Series C Preferred Stock and the money and
other property being withdrawn are to be delivered to a
person or persons other than the record holder of the
Receipt or Receipts being surrendered for withdrawal of
Series C Preferred Stock, such holder shall execute and
deliver to the Depositary a written order so directing the
Depositary and the Depositary may require that the Receipt
or Receipts surrendered by such holder for withdrawal of
such shares of Series C Preferred Stock be properly endorsed
in blank or accompanied by a properly executed instrument of
transfer or endorsement in blank.

The Depositary shall deliver the Series C
Preferred Stock and the money and other property, if any,
represented by the Depositary Shares evidenced by Receipts
surrendered for withdrawal at the Corporate Office, except
that, at the request, risk and expense of the holder
surrendering such Receipt or Receipts and for the account of
the holder thereof, such delivery may be made at such other
place as may be designated by such holder.

SECTION 2.07 Limitations on Execution and
Delivery, Transfer, Split-up, Combination, Surrender and
Exchange of Receipts. As a condition precedent to the
execution and delivery, transfer, split-up, combination,
surrender or exchange of any Receipt, the Depositary, any of
the Depositary's Agents or the Company may require any or
all of the following: (i) payment to it of a sum sufficient
for the payment (or, in the event that the Depositary or the
Company shall have made such payment, the reimbursement to
it) of any tax or other governmental charge with respect
thereto (including any such tax or charge with respect to
the Series C Preferred Stock being deposited or withdrawn);
(ii) the production of proof satisfactory to it as to the
identity and genuineness of any signature; and (iii)
compliance with such regulations, if any, as the Depositary
or the Company may establish not inconsistent with the
provisions of the Deposit Agreement.

The deposit of Series C Preferred Stock may be
refused, the delivery of Receipts against Series C Preferred
Stock may be suspended, the transfer of Receipts may be
refused, and the transfer, split-up, combination, surrender
or exchange of outstanding Receipts may be suspended (i)
during any period when the register of holders of Receipts
is closed, (ii) if any such action is deemed necessary or
advisable by the Depositary, any of the Depositary's Agents
or the Company at any time or from time to time because of
any requirement of law or of any government or governmental
body or commission, or under any provision of this Deposit
Agreement, or (iii) with the approval of the Company, for
any other reason.

ARTICLE III

CERTAIN OBLIGATIONS OF HOLDERS
OF RECEIPTS AND THE COMPANY

SECTION 3.01. Filing Proofs, Certificates and
Other Information. Any person presenting Series C Preferred
Stock for deposit or any holder of a Receipt may be required
from time to time to file such proof of residence or other
information, to execute such certificates and to make such
representations and warranties as the Depositary or the

Company may reasonably deem necessary or proper. The
Depositary or the Company may withhold or delay the delivery
of any Receipt, the transfer, redemption or exchange of any
Receipt, the withdrawal of the Series C Preferred Stock or
money or other property, if any, represented by the
Depositary Shares evidenced by any Receipt or the
distribution of any dividend or other distribution until
such proof or other information is filed, such certificates
are executed or such representations and warranties are
made.

SECTION 3.02. Payment of Taxes or Other
Governmental Charges. If any tax or other governmental
charge shall become payable by or on behalf of the
Depositary with respect to any Receipt, the Depositary
Shares evidenced by such Receipt, the Series C Preferred
Stock (or fractional interest therein) represented by such
Depositary Shares or any transaction referred to in
Section 4.06, such tax (including transfer, issuance or
acquisition taxes, if any) or governmental charge shall be
payable by the holder of such Receipt. Until such payment
is made, transfer, redemption or exchange of any Receipt or
any withdrawal of the Series C Preferred Stock or money or
other property, if any, represented by the Depositary Shares
evidenced by such Receipt may be refused, any dividend or
other distribution with respect to such Receipt or the
Series C Preferred Stock represented by the Depositary
Shares evidenced by such Receipt may be withheld and any
part or all of the Series C Preferred Stock or other
property represented by the Depositary Shares evidenced by
such Receipt may be sold for the account of the holder
thereof (after attempting by reasonable means to notify such
holder prior to such sale). Any dividend or other
distribution so withheld and the proceeds of any such sale
may be applied to any payment of such tax or other
governmental charge, the holder of such Receipt remaining
liable for any deficiency. The Depositary shall act as the
withholding agent for any payments, distributions, and
exchanges made with respect to the Depositary Shares and
Receipts, and the Series C Preferred Stock, or other
securities or assets represented thereby (collectively, the
"Securities"). The Depositary shall be responsible with
respect to the Securities for the timely (i) collection and
deposit of any required withholding or backup withholding
tax, and (ii) filing of any information returns or other
documents with federal (and other applicable) taxing
authorities. In the event the Depositary is required to pay
any such amounts, the Company shall reimburse the Depositary

for payment thereof upon the request of the Depositary and
the Depositary shall, upon the Company's request and as
instructed by the Company, pursue its rights against such
holder at the Company's expense.

SECTION 3.03. Representations and Warranties as
to Series C Preferred Stock. Each person depositing Series
C Preferred Stock under this Deposit Agreement shall be
deemed thereby to represent and warrant that such Series C
Preferred Stock and each certificate therefor are valid and
that the person making such deposit is duly authorized to do
so. Such representations and warranties shall survive the
deposit of the Series C Preferred Stock and the execution
and delivery of Receipts.

ARTICLE IV

THE SERIES C PREFERRED STOCK, NOTICES

SECTION 4.01. Cash Distributions. Whenever the
Depositary shall receive any cash dividend or other cash
distribution on the Series C Preferred Stock, the Depositary
shall, subject to Section 3.02, distribute to record holders
of Receipts on the record date fixed pursuant to
Section 4.04 such portions of such sum as are, as nearly as
practicable, proportionate to the respective numbers of
Depositary Shares evidenced by the Receipts held by such
holders; provided, however, that in case the Company or the
Depositary shall be required to withhold and does withhold
from any cash dividend or other cash distribution in respect
of the Series C Preferred Stock an amount on account of
taxes or as otherwise required by law, regulation or court
order, the amount made available for distribution or
distributed in respect of Depositary Shares shall be reduced
accordingly. The Depositary shall distribute or make
available for distribution, as the case may be, only such
amount, however, as can be distributed without attributing
to any owner of Depositary Shares a fraction of one cent and
any balance not so distributable shall be held by the
Depositary (without liability for interest thereon) and
shall be added to and be treated as part of the next sum
received by the Depositary for distribution to record
holders of Receipts then outstanding.

SECTION 4.02. Distributions Other Than Cash.
Whenever the Depositary shall receive any distribution other
than cash on the Series C Preferred Stock, the Depositary

shall, subject to Section 3.02, distribute to record holders
of Receipts on the record date fixed pursuant to
Section 4.04 such portions of the securities or property
received by it as are, as nearly as practicable,
proportionate to the respective numbers of Depositary Shares
evidenced by the Receipts held by such holders, in any
manner that the Depositary and the Company may deem
equitable and practicable for accomplishing such
distribution. If, in the opinion of the Company after
consultation with the Depositary, such distribution cannot
be made proportionately among such record holders, or if for
any other reason (including any requirement that the Company
or the Depositary withhold an amount on account of taxes or
as otherwise required by law, regulation or court order),
the Depositary deems, after consultation with the Company,
such distribution not to be feasible, the Depositary may,
with the approval of the Company, adopt such method as it
deems equitable and practicable for the purpose of effecting
such distribution, including the sale (at public or private
sale) of the securities or property thus received, or any
part thereof, at such place or places and upon such terms as
it may deem proper. The net proceeds of any such sale
shall, subject to Section 3.02, be distributed or made
available for distribution, as the case may be, by the
Depositary to record holders of Receipts as provided by
Section 4.01 in the case of a distribution received in cash.

SECTION 4.03. Subscription Rights, Preferences or
Privileges. If the Company shall at any time offer or cause
to be offered to the persons in whose names Series C
Preferred Stock is registered on the books of the Company
any rights, preferences or privileges to subscribe for or to
purchase any securities or any rights, preferences or
privileges of any other nature, such rights, preferences or
privileges shall in each such instance be made available by
the Depositary to the record holders of Receipts if the
Company so directs in such manner as the Company shall
instruct (including by the execution and delivery to such
record holders of warrants representing such rights,
preferences or privileges); provided, however, that (a) if
at the time of issue or offer of any such rights,
preferences or privileges the Company determines that it is
not lawful or feasible to make such rights, preferences or
privileges available to some or all holders of Receipts (by
the execution and delivery of warrants or otherwise) or (b)
if and to the extent instructed by holders of Receipts who
do not desire to exercise such rights, preferences or
privileges, the Depositary shall then, if so instructed by

the Company, and if applicable laws and the terms of such
rights, preferences or privileges so permit, sell such
rights, preferences or privileges of such holders at public
or private sale, at such place or places and upon such terms
as it may deem proper. The net proceeds of any such sale
shall, subject to Section 3.02, be distributed by the
Depositary to the record holders of Receipts entitled
thereto in accordance with the withholding and fractional
amount provisions of Section 4.01.

entitled to vote or of which holders of Series C Preferred
Stock are entitled to notice or (ii) any election on the
part of the Company to call for redemption any shares of
Series C Preferred Stock, the Depositary shall in each such
instance fix a record date (which shall be the same date as
the record date fixed by the Company with respect to the
Series C Preferred Stock) for the determination of the
holders of Receipts (i) who shall be entitled to receive
such dividend, distribution, rights, preferences or
privileges or the net proceeds of the sale thereof, or to
give instructions for the exercise of voting rights at any
such meeting or to receive notice of such meeting or
(ii) whose Depositary Shares are to be so redeemed.

SECTION 4.05. Voting Rights. Upon issuance of
notice of any meeting at which the holders of Series C
Preferred Stock are entitled to vote, the Company shall
direct the Depositary, as soon as practicable thereafter, to
mail to the record holders of Receipts a notice, which shall
be provided by the Company and which shall contain (i) such
information as is contained in such notice of meeting, (ii)
a statement that the holders of Receipts at the close of
business on a specified record date fixed pursuant to
Section 4.04 will be entitled, subject to any applicable
provision of law, the Certificate of Incorporation or the
Certificate of Designations, to instruct the Depositary as
to the exercise of the voting rights pertaining to the
amount of Series C Preferred Stock represented by their
respective Depositary Shares and (iii) a brief statement as
to the manner in which such instructions may be given. Upon
the written request of a holder of a Receipt on such record
date, the Depositary shall endeavor insofar as practicable
to vote or cause to be voted the amount of Series C
Preferred Stock represented by the Depositary Shares
evidenced by such Receipt in accordance with the
instructions set forth in such request. The Company hereby
agrees to take all reasonable action that may be deemed
necessary by the Depositary in order to enable the
Depositary to vote such Series C Preferred Stock or cause
such Series C Preferred Stock to be voted. In the absence
of specific instructions from the holder of a Receipt, the
Depositary will abstain from voting to the extent of the
Series C Preferred Stock represented by the Depositary
Shares evidenced by such Receipt. After aggregating all
voting Depositary Shares, the Depositary will disregard for
voting purposes any fractional share of Series C Preferred
Stock remaining.

SECTION 4.06. Changes Affecting Series C
Preferred Stock and Reclassifications, Recapitalizations,
etc. Upon any split-up, consolidation or any other
reclassification of Series C Preferred Stock, or upon any
recapitalization, reorganization, merger, amalgamation or
consolidation affecting the Company or to which it is a
party or sale of all or substantially all of the Company's
assets, the Depositary shall, upon the instructions of the
Company, treat any shares of stock or other securities or
property (including cash) that shall be received by the
Depositary in exchange for or upon conversion of or in
respect of the Series C Preferred Stock as new deposited
property under this Deposit Agreement, and Receipts then
outstanding shall thenceforth represent the proportionate
interests of holders thereof in the new deposited shares,
other securities or other property so received in exchange
for or upon conversion or in respect of such Series C
Preferred Stock. In any such case the Depositary may, in
its discretion, with the approval of the Company, execute
and deliver additional Receipts, or may call for the
surrender of all outstanding Receipts to be exchanged for
new Receipts specifically describing such new deposited
shares, other securities or other property.

SECTION 4.07. Inspection of Reports. The
Depositary shall make available for inspection by holders
of Receipts at the Corporate Office and at such other places
as it may from time to time deem advisable during normal
business hours any reports and communications received from
the Company that are both received by the Depositary as the
holder of Series C Preferred Stock and made generally
available to the holders of Series C Preferred Stock by the
Company.

ARTICLE V

THE DEPOSITARY AND THE COMPANY

SECTION 5.01. Maintenance of Offices, Agencies,
Transfer Books by the Depositary, the Registrar. Upon

execution of this Deposit Agreement in accordance with its
terms, the Depositary shall maintain (i) at the Corporate
Office, facilities for the execution and delivery, transfer,
surrender and exchange, split-up and combination of Receipts
and deposit and withdrawal of Series C Preferred Stock and
(ii) at the offices of the Depositary's Agents, if any,
facilities for the delivery, transfer, surrender and
exchange, split-up, combination and redemption of Receipts
and deposit and withdrawal of Series C Preferred Stock, all
in accordance with the provisions of this Deposit Agreement.

If the Receipts or the Depositary Shares evidenced
thereby or the Series C Preferred Stock represented by such
Depositary Shares shall be listed on the New York Stock
Exchange, Inc., the Depositary may, with the approval of the
Company, appoint a Registrar for registry of such Receipts
or Depositary Shares in accordance with the requirements of
such Exchange. Such Registrar (which may be the Depositary
if so permitted by the requirements of such Exchange) may be
removed and a substitute registrar appointed by the
Depositary upon the request or with the approval of the
Company. If the Receipts, such Depositary Shares or such
Series C Preferred Stock are listed on one or more other
stock exchanges, the Company will, with the assistance of
the Depositary, arrange such facilities for the delivery,
transfer, surrender and exchange of such Receipts, such
Depositary Shares or such Series C Preferred Stock as may be
required by law or applicable stock exchange regulations.

Certificate of Incorporation or the Certificate of
Designations or, in the case of the Company, the Depositary
or the Depositary's Agent, by reason of any act of God or
war or other circumstance beyond the control of the relevant
party, the Depositary, any Depositary's Agent or the Company
shall be prevented or forbidden from doing or performing any
act or thing that the terms of this Deposit Agreement
provide shall be done or performed; nor shall the
Depositary, any Depositary's Agent or the Company incur any
liability to any holder of a Receipt by reason of any
nonperformance or delay, caused as aforesaid, in the
performance of any act or thing that the terms of this
Deposit Agreement provide shall or may be done or performed
or by reason of any exercise of, or failure to exercise, any
discretion provided for in this Deposit Agreement.

Neither the Depositary nor any Depositary's Agent
nor the Company shall be under any obligation to appear in,
prosecute or defend any action, suit or other proceeding
with respect to the Series C Preferred Stock, Depositary
Shares or Receipts that in its opinion may involve it in
expense or liability, unless indemnity satisfactory to it
against all expense and liability be furnished as often as
may be required.

Neither the Depositary nor any Depositary's Agent
nor the Company shall be liable for any action or any
failure to act by it in reliance upon the advice of, or
information from, legal counsel, accountants, any person
presenting Series C Preferred Stock for deposit, any holder
of a Receipt or any other person believed by it in good
faith to be competent to give such advice or information.
The Depositary, any Depositary's Agent and the Company may
each rely and shall each be protected in acting upon any
written notice, request, direction or other document
believed by it to be genuine and to have been signed or
presented by the proper party or parties.

The Depositary, its parent, affiliates,
subsidiaries, officers, directors or employees and any
Depositary's Agent may own, buy, sell or deal in any class
of securities of the Company and its affiliates and in
Receipts or Depositary Shares or become pecuniarily
interested in any transaction in which the Company or its
officers may be interested or contract with or lend money to
the Company or any of its affiliates or officers or
otherwise act fully or as freely as if it were not the
Depositary or the Depositary's Agent hereunder. The
Depositary may also act as transfer agent or registrar of
any of the securities of the Company and its affiliates.

It is intended that neither the Depositary nor any
Depositary's Agent shall be deemed to be an "issuer" of
securities under the federal securities laws or applicable
state securities laws, it being expressly understood and
agreed that the Depositary and any Depositary's Agent are
acting only in a ministerial capacity as Depositary for the
Series C Preferred Stock; provided, however, that the
Depositary agrees to comply with all information reporting
and withholding requirements applicable to it under law or
this Deposit Agreement in its capacity as Depositary.

Neither the Depositary (or its officers,
directors, employees or agents) nor any Depositary's Agent
makes any representation or has any responsibility as to the
validity of the Registration Statement pursuant to which the
Depositary Shares are registered under the Securities Act,
the Series C Preferred Stock, the Depositary Shares, the
Receipts (except for its countersignatures thereon) or any
instruments referred to therein or herein (other than an
instrument executed by the Depositary or Depositary's
Agent), or as to the correctness of any statement made
therein or herein or for the failure of the Company to
comply with any covenants contained in this Agreement or the
Receipts; provided, however, that the Depositary is
responsible for its representations in this Deposit
Agreement.

deposited with the Depositary hereunder or of the Depositary
Shares, as to the validity or sufficiency of this Deposit
Agreement, as to the value of the Depositary Shares or as to
any right, title or interest of the record holders of
Receipts in and to the Depositary Shares except that the
Depositary hereby represents and warrants as follows: (i)
the Depositary has been duly organized and is validly
existing and in good standing under the laws of the State of
Georgia, with full power, authority and legal right under
such laws to execute, deliver and carry out the terms of
this Deposit Agreement; (ii) this Deposit Agreement has been
duly authorized, executed and delivered by the Depositary;
and (iii) this Deposit Agreement constitutes a valid and
binding obligation of the Depositary, enforceable against
the Depositary in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law). The Depositary shall not
be accountable for the use or application by the Company of
the Depositary Shares or the Receipts or the proceeds
thereof.

appointed in 45 days, the resigning Depositary may petition
a court of competent jurisdiction to appoint a successor
depositary. Every successor depositary shall execute and
deliver to its predecessor and to the Company an instrument
in writing accepting its appointment hereunder, and
thereupon such successor depositary, without any further act
or deed, shall become fully vested with all the rights,
powers, duties and obligations of its predecessor and for
all purposes shall be the Depositary under this Deposit
Agreement, and such predecessor, upon payment of all sums
due it and on the written request of the Company, shall
promptly execute and deliver an instrument transferring to
such successor all rights and powers of such predecessor
hereunder, shall duly assign, transfer and deliver all
rights, title and interest in the Series C Preferred Stock
and any moneys or property held hereunder to such successor
and shall deliver to such successor a list of the record
holders of all outstanding Receipts and such other records
respecting the Receipts, the Depositary Shares and the
Series C Preferred Stock as the successor shall require in
order to perform its duties. Any successor depositary shall
promptly mail notice of its appointment to the record
holders of Receipts.

SECTION 5.05. Corporate Notices and Reports. The
Company agrees that it will deliver to the Depositary, and
the Depositary will, promptly after receipt thereof, and as
directed by the Company transmit to the record holders of
Receipts, in each case at the most recent address recorded
in the Depositary's books, copies of all notices and reports
(including financial statements) required by law, by the
rules of any national securities exchange upon which the
Series C Preferred Stock, the Depositary Shares or the
Receipts are listed or by the Certificate of Incorporation
and the Certificate of Designations to be furnished by the
Company to holders of Series C Preferred Stock. Such
transmission will be at the Company's expense and the
Company will provide the Depositary with such number of
copies of such documents as the Depositary may reasonably
request. In addition, the Depositary will transmit to the

record holders of Receipts at the Company's expense such
other documents as may be requested by the Company.

SECTION 5.06. Deposit of Series C Preferred Stock
by the Company. Neither the Company nor any company
controlled by the Company will at any time deposit any
Series C Preferred Stock if such Series C Preferred Stock is
required to be registered under the provisions of the
Securities Act and no registration statement is at such time
in effect as to such Series C Preferred Stock.

ARTICLE VI

AMENDMENT AND TERMINATION

SECTION 6.01. Amendment. The form of the
Receipts and any provisions of this Deposit Agreement may at
any time and from time to time be amended by agreement

between the Company and the Depositary in any respect that
they may deem necessary or desirable. Any amendment that
shall impose any fees, taxes or charges payable by holders
of Receipts (other than taxes and other governmental
charges, fees and other expenses provided for herein or in
the Receipts), or that shall otherwise prejudice any
substantial existing right of holders of Receipts, shall not
become effective as to outstanding Receipts until the
expiration of 90 days after notice of such amendment shall
have been given to the record holders of outstanding
Receipts. Every holder of an outstanding Receipt at the
time any such amendment becomes effective shall be deemed,
by continuing to hold such Receipt, to consent and agree to
such amendment and to be bound by this Deposit Agreement as
amended thereby. In no event shall any amendment impair the
right, subject to the provisions of Sections 2.03, 2.06 and
2.07 and Article III, of any owner of any Depositary Shares
to surrender the Receipt evidencing such Depositary Shares
with instructions to the Depositary to deliver to the holder
the Series C Preferred Stock and all money and other
property, if any, represented thereby, except in order to
comply with mandatory provisions of applicable law.

provided in this Deposit Agreement and shall continue to
deliver the Series C Preferred Stock and any money and other
property represented by Receipts, without liability for
interest thereon, upon surrender thereof by the holders
thereof. At any time after the expiration of two years from
the date of termination, the Depositary may sell Series C
Preferred Stock then held hereunder at public or private
sale, at such place or places and upon such terms as it
deems proper and may thereafter hold the net proceeds of any
such sale, together with any money and other property held
by it hereunder, without liability for interest, for the
benefit, pro rata in accordance with their holdings, of the
holders of Receipts that have not theretofore been
surrendered. After making such sale, the Depositary shall
be discharged from all obligations under this Deposit
Agreement except to account for such net proceeds and money
and other property. Upon the termination of this Deposit
Agreement, the Company shall be discharged from all
obligations under this Deposit Agreement except for its
obligations to the Depositary, any Depositary's Agent and
any Registrar under Sections 5.07 and 5.08. In the event
this Deposit Agreement is terminated and a sufficient number
of shares of Series C Preferred Stock remain outstanding,
the Company hereby agrees to use its best efforts to list
the underlying Series C Preferred Stock on the New York
Stock Exchange, Inc. (unless the holders of a majority of
the outstanding shares of Series C Preferred Stock shall
consent to the Company not effecting such listing).

ARTICLE VII

MISCELLANEOUS

SECTION 7.02. Exclusive Benefits of Parties.
This Deposit Agreement is for the exclusive benefit of the
parties hereto, and their respective successors hereunder,
and shall not be deemed to give any legal or equitable
right, remedy or claim to any other person whatsoever.

deposited, postage prepaid, in a post office letter box.
The Depositary or the Company may, however, act upon any
facsimile transmission received by it from the other or from
any holder of a Receipt, notwithstanding that such facsimile
transmission shall not subsequently be confirmed by letter
as aforesaid.

IN WITNESS WHEREOF, Bowater Incorporated and Trust
Company Bank have duly executed this agreement as of the day
and year first above set forth and all holders of Receipts

shall become parties hereto by and upon acceptance by them
of delivery of Receipts executed and delivered in accordance
with the terms hereof.

BOWATER INCORPORATED,

By
________________________
Name:
Title:

TRUST COMPANY BANK,
as Depositary,

By
________________________
Name:
Title:

EXHIBIT A

DEPOSITARY RECEIPT
FOR
DEPOSITARY SHARES,
EACH REPRESENTING ONE-FOURTH OF A SHARE OF
__% SERIES C CUMULATIVE PREFERRED STOCK,
par value $1 per share

BOWATER INCORPORATED
(Incorporated under the Laws of the State of Delaware)

No. Depositary Shares

CUSIP

Trust Company Bank, as Depositary (the
"Depositary"), hereby certifies that ___________________ is
the registered owner of __________ Depositary Shares (the
"Depositary Shares"), each Depositary Share representing
one-fourth of a share of __% Series C Cumulative Preferred
Stock, par value $1 per share (the "Series C Preferred
Stock"), of Bowater Incorporated, a corporation duly
organized and existing under the laws of the State of
Delaware (the "Company"), and the same proportionate
interest in any and all other property received by the
Depositary in respect of such shares of Series C Preferred
Stock and held by the Depositary under the Deposit Agreement
(as defined below). Subject to the terms of the Deposit
Agreement, each owner of a Depositary Share is entitled,
proportionately, to all the rights, preferences and
privileges of the Series C Preferred Stock represented
thereby, including the dividend, voting, liquidation and
other rights contained in the Certificate of Designations of
the __% Series C Cumulative Preferred Stock, par value $1
per share, establishing the rights, preferences, privileges
and limitations of the Series C Preferred Stock (the
"Certificate of Designations"), copies of which are on file
at the office of the Depositary at which at any particular
time its business in respect of matters governed by the
Deposit Agreement shall be administered, which at the time
of the execution of the Deposit Agreement is located at One
Park Place, Atlanta, Georgia (the "Corporate Office").

This Depositary Receipt (the "Receipt") is
continued on the reverse hereof and the additional
provisions therein set forth for all purposes have the same
effect as if set forth at this place.

Dated:

TRUST COMPANY BANK
Depositary and Registrar

____________________
Authorized Signatory

[FORM OF REVERSE

OF DEPOSITARY RECEIPT]

2. Definitions. Unless otherwise expressly
herein provided, all defined terms used herein shall have
the meanings ascribed thereto in the Deposit Agreement.

3. Redemption of Series C Preferred Stock for
Cash. Whenever the Company shall elect to redeem shares of
Series C Preferred Stock for cash in accordance with the
Certificate of Designations, it shall (unless otherwise
agreed in writing with the Depositary) give the Depositary
in its capacity as Depositary not less than 40 nor more than
70 days' notice of the date of such proposed redemption of
Series C Preferred Stock. The Depositary shall mail, first
class postage prepaid, notice of such redemption and the
proposed simultaneous redemption of the number of Depositary
Shares representing the Series C Preferred Stock to be
redeemed, not less than 30 and not more than 60 days prior
to the date fixed for redemption of such Series C Preferred
Stock and Depositary Shares (the "Redemption Date"), to the
record holders of the Receipts evidencing the Depositary
Shares to be so redeemed, at the addresses of such holders
as they appear on the records of the Depositary; but neither
failure to mail any such notice to one or more such holders
nor any defect in any notice to one or more such holders
shall affect the sufficiency of the proceedings for
redemption as to other holders. Each such notice shall

state: (i) the Redemption Date; (ii) the number of
Depositary Shares to be redeemed and, if less than all the
Depositary Shares held by any such holder are to be
redeemed, the number of such Depositary Shares held by such
holder to be so redeemed; (iii) the redemption price;
(iv) the place or places where Receipts evidencing
Depositary Shares are to be surrendered for payment of the
redemption price; and (v) that dividends in respect of the
shares of Series C Preferred Stock represented by the
Depositary Shares to be redeemed will cease to accumulate on
such Redemption Date. Any such notices shall be mailed in
the same manner as notices of redemption of the Series C
Preferred Stock are required to be mailed pursuant to
paragraph 3 of the Certificate of Designations and published
in the same manner as notices of redemption of the Series C
Preferred Stock are required to be published pursuant to
said paragraph, if so required. In case fewer than all the
outstanding Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed shall be selected by lot or
pro rata (as nearly as may be) or by any other equitable
method determined by the Depositary to be consistent with
the method determined by the Board of Directors of the
Company with respect to the Series C Preferred Stock.

Notice having been mailed and published by the
Depositary as aforesaid, from and after the Redemption Date
(unless the Company shall have failed to redeem the shares
of Series C Preferred Stock to be redeemed by it, as set
forth in the Company's notice provided for above), the
Depositary Shares called for redemption shall be deemed no
longer to be outstanding and all rights of the holders of
Receipts evidencing such Depositary Shares (except the right
to receive the redemption price) shall, to the extent of
such Depositary Shares, cease and terminate. Upon surrender
in accordance with said notice of the Receipts evidencing
such Depositary Shares (properly endorsed or assigned for
transfer, if the Depositary shall so require), such
Depositary Shares shall be redeemed at a redemption price
per Depositary Share equal to one-fourth of the redemption
price per share paid in respect of the shares of Series C
Preferred Stock plus all money and other property, if any,
represented by such Depositary Shares, including all amounts
paid by the Company in respect of dividends which on the
redemption date have accrued on the shares of Series C
Preferred Stock to be so redeemed and have not theretofore
been declared or paid. The foregoing shall be subject
further to the terms and conditions of the Certificate of
Designations and the Deposit Agreement.

If fewer than all of the Depositary Shares
evidenced by this Receipt are called for redemption, the
Depositary will deliver to the holder of this Receipt upon
its surrender to the Depositary, together with the
redemption payment, a new Receipt evidencing the Depositary
Shares evidenced by such prior Receipt and not called for
redemption.

4. Surrender of Receipts and Withdrawal of Series
C Preferred Stock. Upon surrender of this Receipt to the
Depositary at the Corporate Office or such other offices as
the Depositary may designate, and subject to the provisions
of the Deposit Agreement, the holder hereof is entitled to
withdraw, and to obtain delivery of, to or upon the order of
such holder, any or all of the Series C Preferred Stock (but
only in whole shares of Series C Preferred Stock) and any or
all money and other property, if any, at the time
represented by the Depositary Shares evidenced by this
Receipt; provided, however, that, in the event this Receipt
shall evidence a number of Depositary Shares in excess of
the number of Depositary Shares representing the whole
number of shares of Series C Preferred Stock to be
withdrawn, the Depositary shall, in addition to such whole
number of shares of Series C Preferred Stock and such money
and other property, if any, to be withdrawn, deliver, to or
upon the order of such holder, a new Receipt or Receipts
evidencing such excess number of whole Depositary Shares.

5. Transfers, Split-ups, Combinations. Subject
to Paragraphs 6, 7 and 8 below, this Receipt is transferable
on the books of the Depositary upon surrender of this
Receipt to the Depositary at the Corporate Office or such
other offices as the Depositary may designate, properly
endorsed or accompanied by a properly executed instrument of
transfer or endorsement, and upon such transfer the
Depositary shall sign and deliver a Receipt to or upon the
order of the person entitled thereto, all as provided in and
subject to the Deposit Agreement. This Receipt may be split
into other Receipts or combined with other Receipts into one
Receipt evidencing the same aggregate number of Depositary
Shares evidenced by the Receipt or Receipts surrendered;
provided, however, that the Depositary shall not execute and
deliver any Receipt evidencing a fractional Depositary
Share.

6. Conditions to Signing and Delivery, Transfer,
etc., of Receipts. Prior to the execution and delivery,
transfer, split-up, combination, surrender or exchange of

this Receipt, the Depositary, any of the Depositary's Agents
or the Company may require any or all of the following:
(i) payment to it of a sum sufficient for the payment (or,
in the event that the Depositary or the Company shall have
made such payment, the reimbursement to it) of any tax or
other governmental charge with respect thereto (including
any such tax or charge with respect to Series C Preferred
Stock being deposited or withdrawn); (ii) the production of
proof satisfactory to it as to the identity and genuineness
of any signature; and (iii) compliance with such
regulations, if any, as the Depositary or the Company may
establish not inconsistent with the Deposit Agreement. Any
person presenting Series C Preferred Stock for deposit, or
any holder of this Receipt, may be required to file such
proof of information, to execute such certificates and to
make such representations and warranties as the Depositary
or the Company may reasonably deem necessary or proper. The
Depositary or the Company may withhold or delay the delivery
of any Receipt, the transfer, redemption or exchange of any
Receipt, the withdrawal of the Series C Preferred Stock or
money or other property, if any, represented by the
Depositary Shares evidenced by this Receipt or the
distribution of any dividend or other distribution until
such proof or other information is filed, such certificates
are executed or such representations and warranties are
made.

7. Suspension of Delivery, Transfer, etc. The
deposit of Series C Preferred Stock may be refused, the
delivery of this Receipt against Series C Preferred Stock
may be suspended, and the transfer, split-up, combination,
surrender or exchange of this Receipt may be suspended
(i) during any period when the register of holders of
Receipts is closed, (ii) if any such action is deemed
necessary or advisable by the Depositary, any of the
Depositary's Agents or the Company at any time or from time
to time because of any requirement of law or of any
government or governmental body or commission, or under any
provision of the Deposit Agreement, or (iii) with the
approval of the Company, for any other reason. The
Depositary shall not be required (a) to execute and deliver,
transfer or exchange any Receipts for a period beginning at
the opening of business 15 days next preceding any selection
of Depositary Shares and Series C Preferred Stock to be
redeemed and ending at the close of business on the day of
the mailing of notice of redemption of Depositary Shares or
(b) to transfer or exchange for another Receipt any Receipt
evidencing Depositary Shares called or being called for

redemption in whole or in part, except as provided in the
last sentence of Paragraph 3 above.

8. Payment of Taxes or Other Governmental
Charges. If any tax or other governmental charge shall
become payable by or on behalf of the Depositary with
respect to this Receipt, the Depositary Shares evidenced by
this Receipt, the Series C Preferred Stock (or any
fractional interest therein) represented by such Depositary
Shares or any transaction referred to in Section 4.06 of the
Deposit Agreement, such tax (including transfer, issuance or
acquisition taxes, if any) or governmental charge shall be
payable by the holder hereof. Until such payment is made,
transfer, redemption or exchange of this Receipt or any
withdrawal of the Series C Preferred Stock or money and
other property, if any, represented by the Depositary Shares
evidenced by this Receipt may be refused, any dividend or
other distribution may be withheld and any part or all of
the Series C Preferred Stock or other property represented
by the Depositary Shares evidenced by this Receipt may be
sold for the account of the holder hereof (after attempting
by reasonable means to notify such holder prior to such
sale). Any dividend or other distribution so withheld and
the proceeds of any such sale may be applied to any payment
of such tax or other governmental charge, the holder of this
Receipt remaining liable for any deficiency.

9. Amendment. The form of the Receipts and any
provision of the Deposit Agreement may at any time and from
time to time be amended by agreement between the Company and
the Depositary in any respect that they may deem necessary
or desirable. Any amendment that shall impose any fees,
taxes or charges payable by holders of Receipts (other than
taxes and other governmental charges, fees and other
expenses provided for herein or in the Deposit Agreement),
or that shall otherwise prejudice any substantial existing
right of holders of Receipts, shall not become effective as
to outstanding Receipts until the expiration of 90 days
after notice of such amendment shall have been given to the
record holders of outstanding Receipts. The holder of this
Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold this Receipt, to
consent and agree to such amendment and to be bound by the
Deposit Agreement as amended thereby. In no event shall any
amendment impair the right, subject to the provisions of
Paragraphs 3, 4, 6, 7 and 8 hereof and of Sections 2.03,
2.06 and 2.07 and Article III of the Deposit Agreement, of
the owner of the Depositary Shares evidenced by this Receipt

to surrender this Receipt with instructions to the
Depositary to deliver to the holder the Series C Preferred
Stock and all money and other property, if any, represented
hereby, except in order to comply with mandatory provisions
of applicable law.

10. Fees, Charges and Expenses. The Company will
pay all fees, charges and expenses of the Depositary, except
for taxes (including transfer taxes, if any) and other
governmental charges and such charges as are expressly
provided in the Deposit Agreement to be at the expense of
persons depositing Series C Preferred Stock, holders of
Receipts or other persons.

11. Title to Receipts. It is a condition of this
Receipt, and every successive holder hereof by accepting or
holding the same consents and agrees, that title to this
Receipt (and to the Depositary Shares evidenced hereby) when
properly endorsed or accompanied by a properly executed
instrument of transfer or endorsement, is transferable by
delivery; provided, however, that until this Receipt shall
be transferred on the books of the Depositary as provided in
Section 2.04 of the Deposit Agreement, the Depositary may,
notwithstanding any notice to the contrary, treat the record
holder hereof at such time as the absolute owner hereof for
the purpose of determining the person entitled to
distribution of dividends or other distributions or to any
notice provided for in the Deposit Agreement and for all
other purposes.

12. Dividends and Distributions. Whenever the
Depositary receives any cash dividend or other cash
distribution on the Series C Preferred Stock, the Depositary
will, subject to the provisions of the Deposit Agreement,
distribute such portions of such sum to record holders of
Receipts as are, as nearly as practicable, proportionate to
the respective numbers of Depositary Shares evidenced by the
Receipts held by such holders; provided, however, that in
case the Company or the Depositary shall be required to
withhold and does withhold from any cash dividend or other
cash distribution in respect of the Series C Preferred Stock
an amount on account of taxes or as otherwise required by
law, regulation or court order, the amount made available
for distribution or distributed in respect of Depositary
Shares shall be reduced accordingly. The Depositary shall
distribute or make available for distribution, as the case
may be, only such amount, however, as can be distributed
without attributing to any owner of Depositary Shares a

fraction of one cent and any balance not so distributable
shall be held by the Depositary (without liability for
interest thereon) and shall be added to and be treated as
part of the next sum received by the Depositary for
distribution to record holders of Receipts then outstanding.

13. Subscription Rights, Preferences or
Privileges. If the Company shall at any time offer or cause
to be offered to the persons in whose names Series C
Preferred Stock is registered on the books of the Company
any rights, preferences or privileges to subscribe for or to
purchase any securities or any rights, preferences or
privileges of any other nature, such rights, preferences or
privileges shall in each such instance, subject to the
provisions of the Deposit Agreement, be made available by
the Depositary to the record holders of Receipts if the
Company so directs in such manner as the Company shall
instruct.

14. Notice of Dividends, Fixing of Record Date.
Whenever any cash dividend or other cash distribution shall
become payable, any distribution other than cash shall be
made, or any rights, preferences or privileges shall at any
time be offered, with respect to the Series C Preferred Stock,
or the Depositary shall receive notice of (i) any meeting at
which holders of Series C Preferred Stock are entitled to
vote or of which holders of Series C Preferred Stock are
entitled to notice or (ii) any election on the part of the
Company to call for redemption any shares of Series C
Preferred Stock, the Depositary shall in each such instance
fix a record date (which shall be the same date as the
record date fixed by the Company with respect to the Series
C Preferred Stock) for the determination of the holders of
Receipts (i) who shall be entitled to receive such dividend,
distribution, rights, preferences or privileges or the net
proceeds of the sale thereof, or to give instructions for
the exercise of voting rights at any such meeting or to
receive notice of such meeting or (ii) whose Depositary
Shares are to be so redeemed.

15. Voting Rights. Upon issuance of notice of any
meeting at which the holders of Series C Preferred Stock are
entitled to vote, the Company shall direct the Depositary,
as soon as practicable thereafter, to mail to the record
holders of Receipts a notice, which shall contain (i) such
information as is contained in such notice of meeting,
(ii) a statement that the holders of Receipts at the close
of business on a specified record date determined as

provided in Paragraph 14 will be entitled, subject to any
applicable provision of law, the Certificate of
Incorporation or the Certificate of Designations, to
instruct the Depositary as to the exercise of the voting
rights pertaining to the amount of Series C Preferred Stock
represented by their respective Depositary Shares, and
(iii) a brief statement as to the manner in which such
instructions may be given. Upon the written request of a
holder of a Receipt on such record date, the Depositary
shall endeavor insofar as practicable to vote or cause to be
voted the amount of Series C Preferred Stock represented by
the Depositary Shares evidenced by such Receipt in
accordance with the instructions set forth in such request.
The Company has agreed to take all reasonable action that
may be deemed necessary by the Depositary in order to enable
the Depositary to vote such Series C Preferred Stock or
cause such Series C Preferred Stock to be voted. In the
absence of specific instructions from the holder of a
Receipt, the Depositary will abstain from voting to the
extent of the Series C Preferred Stock represented by the
Depositary Shares evidenced by such Receipt. After
aggregating all voting Depositary Shares, the Depositary
will disregard for voting purposes any fractional share of
Series C Preferred Stock remaining.

16. Reports, Inspection of Transfer Books. The
Depositary shall make available for inspection by holders of
Receipts at the Corporate Office and at such other places as
it may from time to time deem advisable during normal
business hours any reports and communications received from
the Company that are both received by the Depositary as the
holder of Series C Preferred Stock and made generally
available to the holders of Series C Preferred Stock by the
Company. The Depositary shall keep books at the Corporate
Office for the registration and transfer of Receipts, which
books during normal business hours will be open for
inspection by the record holders of Receipts as provided by
applicable law.

17. Liability of the Depositary, the Depositary's
Agents and the Company. Neither the Depositary nor any
Depositary's Agent nor the Company shall incur any liability
to any holder of any Receipt, if by reason of any provision
of any present or future law or regulation of any
governmental authority or, in the case of the Depositary or
the Depositary's Agent, by reason of any provision, present
or future, of the Certificate of Incorporation or the
Certificate of Designations or, in the case of the Company,

the Depositary or the Depositary's Agent, by reason of any
act of God or war or other circumstance beyond the control
of the relevant party, the Depositary, any Depositary's
Agent or the Company shall be prevented or forbidden from
doing or performing any act or thing that the terms of the
Deposit Agreement provide shall be done or performed; nor
shall the Depositary, any Depositary's Agent or the Company
incur any liability to any holder of a Receipt by reason of
any nonperformance or delay, caused as aforesaid, in the
performance of any act or thing that the terms of the
Deposit Agreement provide shall or may be done or performed
or by reason of any exercise of, or failure to exercise, any
discretion provided for in the Deposit Agreement.

18. Obligations of the Depositary, the
Depositary's Agents and the Company. Neither the Depositary
nor any Depositary's Agent nor the Company assumes any
obligation or shall be subject to any liability hereunder or
under the Deposit Agreement to holders of Receipts other
than that each of them agrees to use good faith in the
performance of such duties as are specifically set forth in
the Deposit Agreement.

Neither the Depositary nor any Depositary's Agent
nor the Company shall be under any obligation to appear in,
prosecute or defend any action, suit or other proceeding
with respect to Series C Preferred Stock, Depositary Shares
or Receipts that in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
expense and liability be furnished as often as may be
required.

Neither the Depositary nor any Depositary's Agent
nor the Company will be liable for any action or failure to
act by it in reliance upon the advice of or information from
legal counsel, accountants, any person presenting Series C
Preferred Stock for deposit, any holder of a Receipt or any
other person believed by it in good faith to be competent to
give such advice or information.

19. Termination of Deposit Agreement. Whenever so
directed by the Company upon at least five Business Days'
prior notice, the Depositary will terminate the Deposit
Agreement, provided, that notice of such termination has
been given by mailing notice of such termination to the
record holders of all Receipts then outstanding at least
30 days prior to the date fixed in such notice for such
termination. The Depositary may likewise terminate the
Deposit Agreement if at any time 45 days shall have expired

after the Depositary shall have delivered to the Company a
written notice of its election to resign and a successor
depositary shall not have been appointed and accepted its
appointment as provided in Section 5.04 of the Deposit
Agreement. Upon the termination of the Deposit Agreement,
the Company shall be discharged from all obligations
thereunder except for its obligations to the Depositary, any
Depositary's Agent and any Registrar under Sections 5.07 and
5.08 of the Deposit Agreement.

20. Governing Law. The Deposit Agreement and this
Receipt and all rights thereunder and hereunder and
provisions thereof and hereof shall be governed by, and
construed in accordance with, the law of the State of New
York without giving effect to principles of conflict of
laws.

Dated:

TRUST COMPANY BANK
Depositary and Registrar

By____________________________
Authorized Officer

BOWATER INCORPORATED

By____________________________
Authorized Officer

ASSIGNMENT

Dated: Signature:_________________________
NOTE: The signature on this assignment
must correspond with the name as written
upon the face of the Receipt in every
particular, without alteration or
enlargement, or any change whatsoever, and
must be guaranteed by a commercial bank,
trust company, securities broker or
dealer, credit union, savings association
or other eligible guarantor institution
which is a member of or participant in a
signature guarantee program acceptable to
the Depositary.

<PAGE>

EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Bowater Incorporated
The audits referred to in our report dated February 12, 1993, included the
related financial statement schedules as of December 31, 1992, and for each of
the years in the three-year period ended December 31, 1992 incorporated by
reference in the registration statement (as amended). These financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statement schedules based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the headings Selected Financial and Operating
Data and Experts in the prospectus.
Our report covering the December 31, 1992 financial statements refers to
accounting changes regarding the Company's adoption of the provisions of the
Financial Accounting Standards Board's Statement on Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, and Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes, in 1992.
KPMG PEAT MARWICK

Greenville, SC
January 28, 1994