Your retirement date will be July 1, 2009, which will be the day after your separation date (the “Retirement Date”).

Please see the attached documents on pension for an estimate of your pension benefits, which will be paid under and in accordance with the Domtar pension plans in which you participate and the Supplementary Pension Plan for Steven A. Barker.

In regards to your Life Insurance coverage including Accidental Death & Dismemberment Insurance, Personal Accident Insurance and Dependent Spouse Life Insurance, Business Travel Insurance, your Short-Term Disability coverage under the Domtar Salaried Employee Continuance Plan and your Long-Term Disability Insurance will terminate on the Separation Date.

With respect to your Life Insurance coverage and Dependent Spouse Life Insurance, you have the right to convert any employer paid life insurance coverage. Any employee paid coverage may be converted or ported. Any converted or ported insurance coverage will be to an individual insurance policy with Prudential Financial. You must exercise your conversion or portability right within thirty-one (31) days of cancellation of your Domtar insurance coverage. If you are interested in the conversion or portability option, please contact Christiane Trabelsi at (514) 848-5555 ext. 85285 or a local Prudential Financial sales representative for details.

Your Medical and Dental coverage under the Domtar group insurance program will remain in effect for 18 months following your Separation Date, provided you elect to continue your medical coverage in accordance with Section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”). If you elect COBRA coverage, the Corporation will reimburse you (within 30 days after your payment of the applicable premium) for the amount that the cost to you under COBRA exceeds what would have been the cost to you of medical coverage under the Domtar group insurance program had your employment continued. If you obtain equivalent or better coverage elsewhere, this cost reimbursement will terminate. Details of COBRA coverage and the election are attached.

Alternatively, you may elect retiree medical coverage under the Domtar Salaried Retiree Medical Plan. There is no dental retiree coverage although COBRA is still available even if you elect the Domtar Salaried Retiree Medical Plan. The Domtar Salaried Retiree Medical Plan monthly premium is entirely paid by the retiree. If you elect retiree medical coverage, for the 18 months following your Separation Date, Domtar will reimburse you (within 30 days after your payment of the applicable premium) for the amount that the cost to you under the Domtar Salaried Retiree Medical Plan exceeds what would have been the cost to you of medical coverage under the Domtar group insurance program had your employment continued. If you obtain equivalent or better coverage elsewhere, this cost reimbursement will terminate. If you are interested in considering this option as well, please advise Christiane Trabelsi and she will advise the plan administrator, SHPS, who in turn will send you all the necessary information.

If you elect medical coverage under COBRA, you cannot elect retiree medical coverage with Domtar at a later date.

According to our records, as of your Separation date, all your unused and earned vacation days will be used up. Therefore, there will be no days left for payment.

Full participation in the company pension and 401K plans will continue until your Separation Date. The amount and payment of your benefits under the company pension and 401K plans and the Supplementary Pension Plan for Steven A. Barker will be determined in accordance with the terms of the applicable plan.

You will be eligible for a bonus under our 2009 Annual Incentive Plan, subject to the satisfaction of the applicable performance criteria. The bonus, if any, will be based on Domtar’s performance relative to the performance criteria under the Annual Incentive Plan, calculated based on your actual base salary paid during 2009 and your bonus target of 58.75%. Payment will be made in accordance with the terms of the Annual Incentive Plan at the same time as payments are made to other executives and in any event, no later than March 15, 2010.

After your Separation Date, you will not accrue any additional vesting of stock options granted to you under the Executive Stock Option and Share Purchase Plan (the “Executive Stock Option Plan”). Your termination shall be considered a retirement for purposes of the Executive Stock Option Plan.

Subject to your retirement on the Retirement Date, you will have until the earlier of July 1, 2012 and the normal expiration date of the stock options to exercise the vested stock options granted to you under the Executive Stock Option Plan, subject to the provisions of the Executive Stock Option Plan, your grant letter

governing the vested options, and this Letter. The stock options not vested as of the Separation Date will be cancelled and forfeited without payment effective as of the Separation Date. You agree that the calculation of the number of vested and forfeited options reflected in the table attached to this Letter is correct and that you have no rights with respect to such options other than to exercise the vested options in accordance with the provisions of the Executive Stock Option Plan, your grant letter and this Letter.

For more information, please contact Josée Turgeon at 514-848-5555, ext. 85475.

Subject to the terms and conditions of this Letter, we intend to treat your termination as a “Retirement” under the Domtar Corporation 2007 Omnibus Incentive Plan (the “Omnibus Incentive Plan”).

Subject to your retirement on the Retirement Date, a pro rata portion of the unvested stock options granted to you will vest as of the Separation Date and you will have until the earlier of April 30, 2014 and the normal expiration date of the stock options to exercise the vested stock options granted to you under the Omnibus Incentive Plan, subject to the provisions of the Omnibus Incentive Plan, the award agreement governing the vested options and this Letter. The stock options granted to you under the Omnibus Incentive Plan that do not vest on the Separation Date will be cancelled and forfeited without payment effective as of the Separation Date. You agree that the calculation of the number of vested and forfeited options reflected in the table attached to this Letter is correct and that you have no rights with respect to such options other than to exercise the vested options in accordance with the provisions of the Omnibus Incentive Plan, your award agreement and this Letter.

Subject to your retirement on the Retirement Date, a pro rata portion of your Restricted Stock Units (“RSUs”) will vest and be paid on the later of January 31, 2010 and the six-month anniversary of your separation from service (as defined in section 409A of the Internal Revenue Code of 1986, as amended), subject to the provisions of the Omnibus Incentive Plan, the award agreement governing the vested RSUs and this Letter. The RSUs granted to you under the Omnibus Incentive Plan that do not vest on the Separation Date will be cancelled and forfeited without payment effective as of the Separation Date. You agree that the calculation of the number of vested and forfeited RSUs reflected in the table attached to this Letter is correct and that you have no rights with respect to such RSUs other than to settlement of the vested RSUs in accordance with the provisions of the Omnibus Incentive Plan, your award agreement and this Letter.

Subject to your retirement on the Retirement Date, a pro rata portion of the Performance Conditioned Restricted Stock Units (“PCRSUs”) calculated in accordance with the provisions of the Omnibus Incentive Plan that would have vested had you remained employed through the applicable vesting date will vest and be paid out at the same time as similar awards are paid out, subject to satisfaction of the performance goals and to the provisions of the Omnibus Incentive Plan, the award agreement governing the PCRSUs and this Letter. The PCRSUs granted to you under the Omnibus Incentive Plan that do not vest on the Separation Date will be cancelled and forfeited without payment effective as of the Separation Date. You agree that you have no rights with respect to such PCRSUs other than to settlement of vested PCRSUs in accordance with the provisions of the Omnibus Incentive Plan, your award agreement and this Letter.

All of the synergy PCRSUs that would have vested had you remained employed by the Corporation through the vesting date will vest and be paid out at the same time as synergy PCRSUs are generally paid out, subject to satisfaction of the performance goals and to the provisions of the Omnibus Incentive Plan, the award agreement governing the synergy PCRSUs and this Letter. In addition, you will be entitled to any additional bonus or payment made in connection with the vesting of the synergy PCRSUs that would have been paid to you based on the number of vested synergy PCRSUs if you had remained employed by the Corporation through the date that such additional bonus or payment is made to continuing members of the Corporation’s management committee.

For more information, please contact Josée Turgeon at 514-848-5555, ext. 85475.

On your Departure Date, you will be required to return the car to the Corporation. If you are interested in buying the car, please contact Jim Thomas who will coordinate with ARI.

You will be entitled to a twelve (12) months’ outplacement service under the Corporation’s outplacement program. If you refuse the service, there is no cash equivalent payout. This benefit will terminate in the event you obtain a new employment.

You will be entitled to a taxable reimbursement for up to $5,000 of financial counseling received through December 31, 2009. Reimbursement payments will be made to you promptly following submission of receipts for services, provided that receipts are submitted within 90 days. No reimbursement payment will be made later than December 31, 2010.

“Business of Employer” means manufacturing, marketing, selling, distributing or otherwise providing: pulp and paper products (including tissue and papers commonly used in copying, pamphlets, brochures, stationary, catalogues, posters, cards, packaging, envelopes, candy wrappings, surgical gowns and other forms of uncoated free sheet paper and coated groundwood paper) and wood products (including lumber, wood chips, sawdust and wood shavings).

“Confidential Information” means information about the Corporation and its employees, customers and/or suppliers which is not generally known outside of the Corporation, which employee learns or learned of in connection with employee’s employment with the company, and which would be useful to competitors of the Corporation. Confidential Information includes, but is not limited to: (1) business and employment policies, marketing methods and the targets of those methods, finances, business plans, promotional materials and price lists; (2) the terms upon which the Corporation obtains products from its suppliers and/or sells products to customers; (3) the nature, origin, composition and development of the Corporation’s products; and (4) the manner in which the Corporation provides products and services to its customers.

“Material Contact” means personal contact or the supervision of the efforts of those who have direct personal contact with a supplier or customer.

“Restricted Territory” means the United States and Canada.

This Letter and the Release together shall constitute the sole agreement between you and Domtar regarding your termination of employment, the severance benefits and payments to be provided to you, and the other subjects addressed therein. All prior correspondence and proposals (including summaries of proposed terms) and all prior promises, representations, understandings, arrangements and agreements relating to such subjects shall be merged into and superseded by this Letter and the Release.

In the event that any one or more of the provisions of this Letter or the Release shall be or become invalid, illegal or unenforceable in any respect, the remaining provisions contained in the Letter and Release shall continue to be legally valid and remain in full force and effect. In the event any of the paragraphs under the heading “Non-Competition and Non-Solicitation” are not enforceable in accordance with their terms, you and Domtar agree that such paragraph shall be reformed to make such paragraph enforceable in a manner that provides Domtar with the maximum rights permitted at laws.

This Letter and the Release are governed by and construed in accordance with the laws of the State of Delaware without regard for conflict of laws rules. You agree that, unless otherwise mutually agreed by the parties in writing, the exclusive forum for any claims or disputes arising under this agreement will be the appropriate court of the State of Ohio, or the appropriate Federal District Court in that State.

John D. Williams

President and Chief Executive Officer