Letter employment agreement with Mr. John D. Williams



 Exhibit 10.1 
  

					
		 		 	 Domtar Corporation

		 		 	 Head Office

		 		 	 395 de Maisonneuve Blvd. West

		 		 	 Montreal, QC H3A 1L6

			
		 		 	 Operations Center

		 		 	 100 Kingsley Park Dr.

		 		 	 Fort Mill, SC 29715-6476


 

 
  

			
	September 15, 2008	  	STRICTLY CONFIDENTIAL

 Mr. John D. Williams 
 Charters Towers 
 Brodick 
 Isle
of Arran 
 Scotland 
 KA27 8AF 
 Dear John, 
 We are pleased to confirm the terms of your
employment with Domtar Corporation, a Delaware corporation (the “Company”). As of January 1, 2009 (your “Start Date”), your employment with the Company will commence on the terms set forth herein. 

1. Duties. You will serve as President and Chief Executive Officer of the Company, with such duties and responsibilities as are customarily
assigned to individuals holding such positions and such other duties and responsibilities consistent with the positions of President and Chief Executive Officer as may be specified by the Board of Directors of the Company (the
“Board”). You will report directly to the Board and will devote all of your skill, knowledge and full working time solely and exclusively to the conscientious performance of your duties hereunder, other than authorized vacation time
and absence for sickness or disability. You will be appointed as a director of the Company contemporaneously with commencement of your employment with the Company pursuant to the terms of this letter agreement. You agree to devote your full business
time to the business and affairs of the Company Group (as hereinafter defined) except for (i) time spent serving on corporate, civic or charitable boards or committees provided that such service (individually or in the aggregate) does not
materially interfere with the performance of your duties and responsibilities, that service on any corporate 

  


					
		  		  	www.domtar.com









 
board is subject to the prior approval of the Board and that no such activities involve being involved with a competitive organization, and (ii) periods
of vacation and sick leave to which you are entitled. 
 2. Location. You shall perform your duties at the Company’s head office
in Montreal, Quebec, Canada (although from time to time you may be required to travel to other locations to properly fulfill your responsibilities). 
 3. Term. This letter shall be construed as a contract for employment for an indefinite period, subject to termination in accordance with the provisions of Section 14. 
 4. Base Salary. Your base salary while you are employed will be at an annualized rate of CDN$900,000 (the “Base Salary”), which
amount may be increased from time to time by the Board in its sole discretion and shall be reviewed annually by the Board. Your Base Salary shall be payable at the same time as the Company pays salary to the members of the management committee of
the Company (the “Management Committee”). 
 5. Annual Incentive Bonus. While you are employed, you will be eligible
to participate in the Domtar Corporation Annual Incentive Plan (including any successor to such plan, the “Annual Incentive Plan”). Your target annual bonus under the Annual Incentive Plan will be not less than 75% of Base Salary,
and your maximum annual bonus will be 150% of Base Salary. In respect of fiscal year 2009, 50% of your actual bonus payments will be determined based on performance results versus the applicable financial and operating targets established by the
Board (or the Human Resources Committee of the Board) for the members of the Management Committee, and the remaining 50% of your actual bonus payments will be determined based on performance results versus individual objectives to be discussed and
agreed with the Board (or the Human Resources Committee of the Board). Bonuses will be subject to and paid in accordance with the Annual Incentive Plan, a copy of which has previously been provided to you. In respect of fiscal year 2009, and
notwithstanding the foregoing, you shall be entitled to a bonus payment of not less than 50% of your target bonus opportunity of 75% of Base Salary. 
 Any annual bonus with respect to a particular year will be payable promptly following the receipt of the Company’s audited financial statements for such year and in any event within two and a half months of the
end of such year. 
 6. Long Term Incentive Awards. You will be eligible to participate in the Domtar Corporation 2007 Omnibus
Incentive Plan (the “Stock Incentive Plan”) as determined by the Board (or the Human Resources Committee of the Board) consistent with its determinations with respect to members of the Management Committee. With respect to fiscal
year 2009, you shall be granted awards under the Stock Incentive Plan having an aggregate grant date fair value of CDN$1,575,000, with the same relative weighting 

  


					
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between types of awards as applies to other members of the Management Committee (expected to be 25% options to purchase shares of the Company’s common
stock (“Options”) having an exercise price equal to the Fair Market Value (as defined under the Stock Incentive Plan) on the grant date, 50% performance-conditioned restricted stock units (“PCRSUs”) and 25%
time-vested restricted stock units (“RSUs”)), subject to your continuous employment through the grant date for such awards. Options will be valued on a Black-Scholes basis using the same assumptions that apply for purposes of the
Company’s audited financial statements and PCRSUs and RSUs will be valued based on the Fair Market Value of the Company’s common stock, in each case as of the grant date. The grant date (currently anticipated to occur in February 2009) and
specific terms of your awards (including vesting and exercisability) shall be the same as shall apply to awards granted to other members of the Management Committee in respect of fiscal year 2009 and may, as in the case of the May 2008 Option and
PCRSU grants, be subject to performance conditions. You hereby confirm receipt of a copy of the Stock Incentive Plan. For illustrative purposes only, a summary of the terms of Options, PCRSUs and RSUs granted thereunder to members of the Management
Committee in respect of fiscal year 2008 has been provided to you. 
 7. Additional Awards. To compensate you for annual incentive
payments for 2008 from your current employer and other compensation from your current employer which you will forfeit by reason of accepting employment with the Company and to induce you to accept employment under the terms and conditions of this
letter agreement: 
 (a) within 30 days after commencement of your employment with the Company, you shall receive a cash payment of
CDN$520,000 (the “Make-Whole Payment”), subject to your continuous employment through the date of such payment. 
 (b)
within 70 days after commencement of your employment with the Company, you shall receive an award under the Stock Incentive Plan of DSUs with an aggregate grant date fair value of CDN$415,000 (the “Replacement DSUs”) (as determined
in accordance with the principles set forth in Section 6 with respect to your long-term incentive awards), subject to your continuous employment through the date of such grant. The Replacement DSUs will vest in three substantially equal
installments on March 15 of each of 2009, 2010, and 2011, subject only to your continuous employment through the applicable vesting date, and will be payable in the form of cash or shares of the Company’s common stock (as elected by you)
in January of the year following the year of your Separation from Service (as defined in Section 24). 
 8. SERP. You shall be
eligible to participate in the DB SERP for Management Committee Members of Domtar (the “DB SERP”) (a copy of which will be provided to you) as of your Start Date. You will earn an additional two months of credited service under the
DB SERP for each 12 months of actual service (pro rated for any period of service of less than 12 months), up to a maximum of 12 months of additional credited service. 
  



					
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 9. Housing. While you are employed, to facilitate the fulfillment of your duties and
responsibilities with respect to the Company’s Operations Center in Fort Mill, South Carolina (the “Fort Mill Operations Center”), in lieu of hotel accommodations, the Company will make available for your exclusive use during
periods when your presence is required at the Fort Mill Operations Center a furnished two-bedroom condominium in the local area. 
 10.
Company Plane. While you are employed, you may use the Company plane for business travel, when necessary, subject to quarterly review by the Human Resources Committee of the Board; provided that you will be required to reimburse the
Company in an amount equivalent to a first class commercial fare for any passengers traveling with you on the Company plane for reasons other than business. You will be entitled to use the Company plane for personal reasons for up to 24 hours per
calendar year during the Employment Term, and hereby acknowledge and agree that you will be solely responsible for any taxes incurred by you with respect to this benefit. 
 11. Employee Benefits. (a) While you are employed, you will be eligible to participate in the employee benefit plans and programs generally available to the Company’s senior Canadian-based employees
as in effect from time to time, on the same basis as the Company’s other employees, subject to the terms and provisions of such plans and programs. Detailed information about the benefit plans and about our Human Resources policies and programs
has been provided to you. You will receive a minimum of four weeks paid vacation per year. 
 You and your spouse will be provided with
continued health insurance coverage under your current BUPA International Plan (the “BUPA Plan”) at the Company’s expense until such time as alternative arrangements are in place which provide to your satisfaction coverage at
least equivalent in scope to you and your spouses’ current coverage under the BUPA Plan. 
 (b) You shall also receive additional
financial planning and medical benefits on the same basis as, and to the extent that, such benefits are provided to members of the Management Committee. 
 (c) While you are employed by the Company, you will be reimbursed by the Company for initiation fees and annual dues for one business lunch, athletic or country club in Montreal. 
 12. Expenses. The Company will reimburse you for all reasonable expenses incurred by you in connection with your performance of services under
this letter agreement in accordance with the Company’s policies, practices and procedures. 
 13. Relocation. (a) We have
agreed that you will relocate to Montreal, Quebec in connection with your acceptance of this offer of employment. Except as otherwise 

  


					
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provided herein, the Company will assume and pay expenses incurred in connection or as a result of your relocation to Montreal in accordance with its North
American Assignment Policy for localized employees, varied to the extent necessary to apply it so as to achieve a comparable result in the context of a move from Europe to Canada. Any questions in this regard shall be determined by the Human
Resources Committee of the Board acting reasonably. In this connection, the settlement allowance contemplated by section 4.3.2 of the policy shall be CDN$225,000 and, to the extent that this amount exceeds payments made by the Company and properly
chargeable to this allowance, the balance shall be paid to you on the earlier of 90 days after your purchase of a residence in Montreal and December 31, 2009 (but in no event prior to January 1, 2009). 
 (b) You will be reimbursed for reasonable legal, financial and tax planning expenses associated with your employment by the Company and your relocation
to Montreal. 
 14. Termination of Employment. 
 (a) You are free to terminate your employment at any time for any reason whatsoever; provided that you provide the Company with six months prior written notice of your termination, or such lesser period as shall be
agreed by the Human Resources Committee of the Board (the “Resignation Notice Period”). During the Resignation Notice Period you shall continue to receive your base salary and continue to receive the compensation and benefits
associated with your employment described generally in this letter agreement. The Company may elect in its sole discretion to place you on paid leave and suspend your duties and responsibilities for all or any part of such Resignation Notice Period.
During the Resignation Notice Period, you shall not perform services for any other business or employer. During the Resignation Notice Period, the Company may also elect to terminate your employment prior to the termination of the Resignation Notice
Period and pay you the outstanding Base Salary for the balance of the Resignation Notice Period in a lump sum. Notwithstanding the foregoing, any payment or benefit provided under this Section 14(a) following your Separation from Service that
is subject to Section 409A of the Code (as hereinafter defined) will be paid at the same time and in the same manner that the severance allowance or other comparable benefit described in Section 14(b) is required to be paid. If you are
terminated before termination of the Resignation Notice Period and paid salary as set forth in the preceding two sentences (as applicable), you will not be entitled to any additional payment or other benefits which you otherwise would have accrued
or received during the Resignation Notice Period or the remainder of the Resignation Notice Period. Actions taken by the Company pursuant to this Section 14(a) shall not entitle you to any severance or other benefits under Section 14(b) or
(c) or otherwise. 
 (b) The Company reserves the right to terminate your employment at any time for any reason whatsoever and with or
without notice, subject to the provisions of this Section 14. Upon a termination of your employment by the Company for reasons other 

  


					
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than (i) death or Cause, (ii) a breach by you of your obligations under Sections 15 – 20, inclusive, or of any representation or warranty made
by you in this letter agreement or (iii) a material breach by you of any other term or condition of this letter agreement, subject to your execution, delivery and non-revocation within 21 days after your termination of a general release in a
form provided by the Company, and notwithstanding any provisions of the Domtar Severance Program for Management Committee Members (the “Domtar Severance Program”) (a copy of which has been provided to you), this letter agreement or
any plan or other document referenced in this letter agreement to the contrary, you will receive the following payments and benefits: 
  

	 	(i)	a severance allowance of 24 months (such period, the “Severance Period”) of your Base Salary at the rate in effect at the time of termination, such severance
allowance to be paid in accordance with the terms of the Domtar Severance Program; provided that, if such termination is due to disability, your monthly disability payments during the Severance Period shall be reduced by an amount equal to your
monthly Base Salary rate in effect at the time of termination, but in no month shall the reduction exceed the amount of your disability payment. If you remain disabled at the end of the Severance Period, you shall be entitled to disability payments
under the Company’s disability policies, as amended from time to time, as if your disability had first occurred immediately prior to the end of the Severance Period. 

  

	 	(ii)	 (x) the bonus you would have received pursuant to the Annual Incentive Plan for the year in which such termination by the Company occurs if you had continued in
employment based on achievement of the applicable performance criteria for such year, multiplied by a fraction, the numerator of which is the number of days in such calendar year prior to your Separation from Service and the denominator of which is
the total number of days in such calendar year, (y) if such termination by the Company occurs after the end of a calendar year, any bonus you otherwise would have received pursuant to the Annual Incentive Plan for such calendar year that has
not been paid as of the date of termination and (z) for each calendar year during the Severance Period, a payment equal to (1) the average of the bonus payments received by you under the Annual Incentive Plan for the two years immediately
preceding the year in which such termination occurs or (2) in the event that the period of your employment by the Company at the time of termination is less than two years, your target bonus payment for the year of termination, in either case
multiplied by a fraction, the numerator of which is the number of days in the Severance Period during such calendar year and the denominator of which is the total number of days in such calendar year (it being understood that the aggregate of such
payments shall equal but not exceed 



  


					
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two times such bonus average or target bonus as applicable), with any payment to which you become entitled under clause (x), (y) or (z) to be made
on the date in the following calendar year that bonuses for the relevant calendar year are paid to the members of the Management Committee but in no event later than March 15 of such following calendar year; 


  

	 	(iii)	(x) continued coverage under the Company’s health insurance policies, subject, if applicable, to Section 24(c) or (y) if the BUPA Plan is still in effect as of the
date of termination, continued health insurance coverage thereunder at the Company’s expense, subject, if applicable, to Section 24(d), in either case until the last day of the Severance Period or, if earlier, the date on which coverage
from another employer is obtained; 

  

	 	(iv)	in the event that such termination by the Company occurs prior to your receipt of the Make-Whole Payment, the Make Whole Payment shall be paid to you within 60 days following your
Separation from Service; 

  

	 	(v)	in the event that such termination by the Company occurs less than 70 days after commencement of your employment, your Replacement DSUs will immediately vest, and will be payable in
the form of cash or shares of the Company’s common stock (as elected by you) (or, if such Replacement DSUs have not yet been granted, a cash payment of CDN $415,000 will be made to you) within 60 days after your Separation from Service,


  

	 	(vi)	all awards granted to you under the Stock Incentive Plan, including any unvested Options, PCRSUs and RSUs shall continue to vest, become exercisable, be paid or settled (as
applicable) and otherwise be treated under the governing agreements and the Stock Incentive Plan as if you had remained in employment through the last day of the Severance Period; 

  

	 	(vii)	you shall accrue service credit under the DB SERP for the duration of the Severance Period; 

  

	 	(viii)	to the extent not already expressly provided for in this Section 14(b) (and excluding the benefits provided under this Section 14(b)) you shall be entitled to all other
benefits, payments and consideration provided under the Domtar Severance Program, the Domtar North American Assignment Policy and other Domtar policies (as such programs and policies may be amended from time to time) providing other payments,
benefits, and consideration on a termination of employment for reasons other than (x) death or Cause, (y) a breach by you of your obligations under Sections 15 – 20, inclusive, or of any representation or warranty made by you in this
letter agreement, or (z) a material breach by you of any other term or condition of this letter agreement. 

  


					
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 For the avoidance of doubt, no awards shall be granted under the Stock Incentive Plan after your
Separation from Service. 
 No severance or other benefits shall be payable upon your resignation from employment or if you engage in any of
the actions described in Sections 15-20 of this letter agreement. 
 Severance and other benefits provided under this Section 14
includes any pay in lieu of notice and severance pay required by law and, except as expressly provided herein, is in lieu of and not in addition to any severance or other benefits payable under any applicable Domtar severance policy. 
 (c) Any benefits payable to you pursuant to this Section 14 will be in full satisfaction of all liabilities to you under this letter agreement and
with respect to any other claim you may have in conjunction with your termination of employment. These benefits will not be subject to any offset, mitigation or other reduction as a result of your receiving salary or other benefits by reason of your
securing other employment. If you die before the payments, benefits and other consideration have been paid or provided to you under Section 14, such payments, benefits and other consideration shall be paid or provided to your estate or your
designated beneficiary, as applicable. 
 (d) For purposes of this letter, “Cause” means (i) your willful
failure to perform substantially your duties as an officer and employee of the Company (other than due to physical or mental illness), (ii) your engaging in serious misconduct that is injurious to the Company, (iii) your
having been convicted of a crime that constitutes an indictable offense under the Canadian Criminal Code or a felony under U.S. law, (iv) your willful unauthorized disclosure of Confidential Information or violation of the Confidential
Information and Intellectual Property Agreement or (v) your material breach of any provision of this letter agreement. For the avoidance of doubt, a termination by the Company due to disability shall be deemed a termination without Cause
entitling you to the payments, benefits and other consideration set forth in Sections 14(b) and (c). 
 (e) Upon a termination of your
employment due to retirement, you shall participate in the DB SERP as described in Section 8 and be entitled to receive such post-retirement payments and benefits as are provided under the plans, policies and programs of the Company in which
you participate as of the date of your retirement, as the same may be amended from time to time. 
 15. Unauthorized Disclosure.
During your employment with the Company and at all times thereafter, except as required pursuant to your good faith exercise of your duties under Section 1 of this letter agreement, you will not, except with the express consent of 

  


					
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the Board of Directors or its authorized representative, disclose any confidential or proprietary trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans, manufacturing plans, management organization information, operating policies or manuals, business plans, financial records, packaging design or other financial, commercial,
business or technical information (i) relating to the Company or any of its subsidiaries or affiliates or (ii) that the Company or any of its subsidiaries or affiliates (collectively, the “Company Group”) may
receive belonging to suppliers, customers or others who do business with the Company or any of their respective affiliates (collectively, “Confidential Information”) to any third person unless such Confidential Information has been
previously disclosed to the public or is in the public domain (other than by reason of your breach of this letter agreement). 
 You agree to
sign the Company’s form of Confidential Information and Intellectual Property Agreement (a copy of which has been provided to you). 
 16. Non-Competition. While you are employed, and during the period commencing on the date of your Separation from Service and ending 24 months thereafter (such period, the “Restriction Period”), you agree that
you shall not, directly or indirectly, engage in business with, serve as an agent or consultant to, become a general partner, member, principal or important stockholder or equity holder (other than a holder of less than 2% of the
outstanding voting shares of any publicly held entity) of or become employed in a senior-level management position by, any person, firm or other entity that competes with the Business (as hereinafter defined) of the Company Group in North America,
except where (i) the business of such person, firm or other entity that competes with the business of the Company Group is negligible or incidental to the primary business of such firm such that less than 10% of the consolidated revenues of
such person, firm or other entity comes from the competing business, (ii) your interest or association with such person, firm or other entity does not and will not in any way relate to the business of the Company Group, and (iii) prior to
your commencing any such employment, you certify in writing to the Company that the position satisfies the requirements of clauses (i) and (ii) above and that you have informed such entity of the restrictions on your activities contained
in this letter agreement. Whether any such person, firm or entity competes with the Business of the Company Group shall be determined in good faith by the Board. For purposes of this letter agreement, “Business” shall mean the
business of the Company Group as described in the Company’s most recent annual report on Form 10-K during your employment or at the time of your Separation from Service, as applicable, or other similar report under the Company’s securities
law or stock exchange requirements at such time. 
 17. Non-Solicitation of Employees. During the Restriction Period, you agree that
you shall not, directly or indirectly, for your own account or for the account of any other person or entity with which you are or shall become associated in any capacity, (i) solicit for employment, employ or otherwise interfere with
the relationship of the Company 

  


					
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Group with any person who at any time during the twelve months preceding such solicitation, employment or interference is or was employed by or otherwise
engaged to perform services for the Company Group, other than any such solicitation or employment during your employment with the Company on behalf of the Company Group, or (ii) induce any employee of the Company Group who is
a member of management to engage in any activity which you are prohibited from engaging in under any of Sections 15 – 20, inclusive or to terminate his or her employment with the Company Group. For purposes of this Section 17,
the placement of “help wanted” advertisements, postings on internet job sites and searches by employment search companies which are not specifically targeting employees of the Company Group shall not result in a violation of this
Section 17. 
 18. Non-Solicitation of Customers. During the Restriction Period, you shall not, directly or indirectly,
(i) induce or attempt to induce any customer, distributor, supplier or other business relation of the Company Group to cease doing business with, or reduce the amount of business conducted with, the Company Group or (ii) solicit or
otherwise attempt to establish for yourself or any other person, firm or entity anywhere in North America any business relationship of a nature that is competitive with the Business or relationship of any member of the Company Group with any
person, firm or corporation which was a customer, client or distributor of any member of the Company Group during the period during which you are employed or during the twelve-month period preceding the date of your Separation from Service (and
whom you came into contact with or had knowledge of as a result of your employment with the Company), other than any such solicitation for the benefit of the Company Group during your employment with the Company Group. 
 19. Return of Documents. In the event of the termination of your employment for any reason, you shall deliver to the Company Group all of its
property and non-personal documents and data of any nature and in whatever medium pertaining to your employment with the Company Group, and you shall not take with you any such property, documents or data of any description or any reproduction
thereof, or any documents containing or pertaining to any Confidential Information. 
 20. Certain Understandings, Injunctive Relief with
Respect to Covenants. 
 (a) You acknowledge and agree that your covenants, obligations and agreements under this letter with respect to
noncompetition, nonsolicitation, confidentiality and Company Group property relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants, obligations or agreements will cause the Company Group
irreparable injury for which adequate remedies are not available at law. Therefore, you agree that the Company Group shall be entitled to an injunction, restraining order or such other equitable relief (without the requirement to post bond) as
a court of competent jurisdiction may deem necessary or appropriate to restrain you from committing any violation of the covenants, obligations or agreements referred to in this 

  


					
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Section 20. These injunctive remedies are cumulative and in addition to any other rights and remedies the Company Group may have. You and the Company
Group hereby irrevocably submit to the exclusive jurisdiction of the United States Federal and Delaware State courts, in each case located in the State of Delaware, in respect of the injunctive remedies set forth in this Section 20 and the
interpretation and enforcement of Sections 15 – 20, inclusive, insofar as such interpretation and enforcement relate to any request or application for injunctive relief in accordance with the provisions of this Section 20, and the
parties hereto hereby irrevocably agree that (i) the sole and exclusive appropriate venue for any suit or proceeding relating solely to such injunctive relief shall be in such a court, (ii) all claims with respect to any
request or application for such injunctive relief shall be heard and determined exclusively in such a court, (iii) any such court shall have exclusive jurisdiction over the person of such parties and over the subject matter of any
dispute relating to any request or application for such injunctive relief and (iv) each hereby waives any and all objections and defenses based on forum, venue or personal or subject matter jurisdiction as they may relate to an
application for such injunctive relief in a suit or proceeding brought before such a court in accordance with the provisions of this Section 20. 
 (b) You and the Company Group agree that you will have a prominent role in the management of the business, and the development of the goodwill, of the Company Group and will establish and develop relations and
contacts with the principal customers and suppliers of the Company Group in Canada, the United States and the rest of the world, all of which constitute valuable goodwill of, and could be used by you to compete unfairly with, the Company Group.

 (c) You acknowledge that (i) in the course of your employment with the Company Group, you will obtain confidential information
and trade secrets concerning the worldwide business and operations of the Company Group; (ii) the covenants and restrictions contained in Sections 15 – 20, inclusive, are intended to protect the legitimate interests of the
Company Group to protect its goodwill, trade secrets and other confidential information; and (iii) you agree to be bound by such covenants and restrictions and to enter into this letter. 
 21. Indemnification. The Company will enter into an Indemnification Agreement with you in the same form as entered into with the directors of the
Company, a copy of which form has been previously provided to you. 
 22. Immigration Matters. You will use all reasonable efforts to
cooperate with the Company in (i) satisfying all applicable Canadian and U.S. legal requirements allowing you to legally work in Montreal, Quebec, Canada and travel to the Company’s offices in Fort Mill, South Carolina, (ii) obtaining
a Canadian work permit and (iii) obtaining visas and other documentation or approvals necessary for business travel to the United States. In the event that, notwithstanding your full cooperation as required by the preceding sentence, you are
unable to obtain a Canadian work permit and as a result, are 

  


					
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unable to commence work with the Company by the date of the Company’s 2009 annual meeting of stockholders, you shall be deemed to have been
terminated by the Company without Cause and will be entitled to the payments, benefits and other consideration set forth in Section 14(b) and (c). 
 23. Representations and Warranties. You represent and warrant that (1) you will not possess as of the date of commencement of, and during your employment with, the Company, any material, tangible,
confidential or proprietary information, including documents, files, disks, or other materials in whatever medium, belonging to your former employer or its affiliates; (2) as of the date you commence employment with the Company, you have not
solicited any employees of your former employer or its affiliates to change their association with your former employer or its affiliates; (3) you are not subject to any agreements or restrictive covenants with any former employer or any other
person or entity that (i) prevent your entering into employment with the Company, or (ii) limit your ability to perform for the Company the duties of President and Chief Executive Officer (except to the extent you may be subject to
pre-existing confidentiality obligations or prohibited from solicitation of employees for a limited period of time) and that you conducted a due diligence review of copies of all agreements you may have entered into with your former employer to
ensure that this is correct; (4) you are not a United States taxpayer; (5) all representations and warranties made by you in the course of your application to the Company are true and correct and you have not made any material
misrepresentation or omission in the course of your application to the Company regarding employment or your ability to perform the position offered; (6) no representations were made to you concerning this offer or the terms or conditions of
your anticipated employment except as expressly set out in this letter and (7) you have and will comply with the terms of the letter agreement, dated September 12, 2008, related to confidentiality (the “Confidentiality
Letter”). 
 24. Section 409A. 
 (a) For purposes of this letter agreement, “Separation from Service” shall mean a separation from service within the meaning of section 409A of the United States Internal Revenue Code of 1986, as
amended (the “Code”), and the United States treasury regulations promulgated thereunder (“Section 409A”). 
 (b) Notwithstanding anything else contained in this letter agreement to the contrary, if you are a “specified employee” within the meaning of Section 409A (a “Specified Employee”), any payment required to be
made to you hereunder or otherwise upon or following the date of termination of your employment that is subject to Section 409A shall be delayed until after the six month anniversary of your Separation from Service to the extent necessary to
comply with, and avoid imposition on you of any tax penalty imposed under, Section 409A. Should payments be delayed in accordance with the preceding sentence, the accumulated payment that would have been made but for the 

  


					
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period of the delay shall be paid in a single lump sum during the 10 day period following the six month anniversary of your Separation from Service.

 (c) Notwithstanding anything else contained in this letter agreement to the contrary, in the event that any continued health coverage to
which you become entitled under Section 14(b)(iii)(x) is subject to Section 409A, such benefits shall be administered as follows: 
  

	 	(i)	If you would otherwise be eligible to elect continued health coverage under Section 4980B of the Code (COBRA) (x) if permitted by the applicable plan and applicable law,
your coverage under the applicable health insurance policies maintained by the Company will remain in effect until the last day on which you would otherwise be eligible for COBRA coverage if you had elected such coverage and paid the applicable
premiums (the “COBRA Period”) and the Company shall reimburse you for the excess of the cost of obtaining comparable health insurance coverage for the portion of the Severance Period (if any) that extends beyond the COBRA Period
over your cost of continued coverage for the COBRA Period; or (y) if not so permitted, the Company shall reimburse you for the excess of the cost of COBRA coverage over what would have been your cost of continued coverage for the COBRA Period
under the applicable health insurance policies had you been permitted to continue coverage for the COBRA Period, and the excess of the cost of obtaining comparable health insurance coverage for the portion of the Severance Period (if any) that
extends beyond the COBRA Period over what would have been your cost of continued coverage for the COBRA Period under the applicable health insurance policies had you been permitted to continue coverage for the COBRA Period; provided that, if you are
a Specified Employee you will pay the full cost of any health coverage for which you would otherwise be reimbursed under clause (x) or (y), as applicable, during the six-month period following the date of your Separation from Service, with the
full amount of such costs to be reimbursed to you on the first payroll date following the six-month anniversary of the date or your Separation from Service. If you obtain equivalent or better coverage elsewhere, this coverage will terminate.


  

	 	(ii)	 If you would not otherwise be eligible to elect COBRA coverage, your coverage under the applicable health insurance policies maintained by the Company will remain
in effect until the last day of the Severance Period; provided that, if you are a Specified Employee you will pay the full cost of any such health coverage provided to you for the six-month period following the date of your Separation from Service,
with the full amount of such costs to be reimbursed to you on the first payroll date following 



  


					
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the six-month anniversary of the date or your Separation from Service. If you obtain equivalent or better coverage elsewhere, this coverage will terminate.



 (d) Notwithstanding anything else contained in this letter agreement to the contrary, in the event that any continued
health coverage to which you become entitled under Section 14(b)(iii)(y) is subject to Section 409A, if are a Specified Employee you will pay the full cost of any such health coverage provided to you for the six-month period following the
date of your Separation from Service, with the full amount of such costs to be reimbursed to you on the first payroll date following the six-month anniversary of the date or your Separation from Service. 
 (e) Except as expressly provided otherwise in Sections 24(c) and (d), any reimbursement payment or benefit under this agreement that is subject to
Section 409A shall be administered and paid as follows: (i) the Company shall reimburse any expense or cost due to you pursuant to this letter agreement, provided that you have submitted to the Company appropriate documentation evidencing
the particular expense or cost as promptly as possible and in any event within 90 days after the end of the calendar year in which the expense is incurred by you; (ii) the Company shall pay for any benefits in kind provided pursuant to this
agreement and, provided that appropriate documentation evidencing the particular expense or cost is timely submitted in accordance with the requirements of clause (i), shall make any reimbursement due to you under this letter agreement as promptly
as possible, and in no event later than the last day of your taxable year following the taxable year in which the related expense was incurred; (iii) the amount of any reimbursement or in-kind benefit provided under this agreement in one
taxable year shall not affect the amount of any reimbursement or in-kind benefit provided to you in any other taxable year; and (iv) no entitlement to any reimbursement or in-kind benefit provided under this letter agreement shall be subject to
liquidation or exchange for another benefit. 
 (f) It is intended that any payment, reimbursement or in-kind benefit under this letter
agreement be administered in a manner consistent with the requirements, where applicable, of Section 409A in a manner to avoid the imposition of immediate tax recognition and additional taxes pursuant to Section 409A. Neither the Company
nor any of its directors, officers or employees shall have any liability to you in the event such Section 409A applies to any payment, reimbursement or in-kind benefit provided pursuant to this letter agreement in a manner that results in
adverse tax consequences for you or any of your beneficiaries or transferees. 
 25. General Provisions. 
 (a) No provisions of this letter agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is
approved by the Human Resources Committee of the Board and is agreed to in a writing signed by you 

  


					
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and such Company officer as may be specifically designated by the Human Resources Committee to the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or provision of this letter agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. 
 (b) No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof,
have been made by either party, other than as set forth expressly in this letter agreement and in the Confidentiality Letter. This letter agreement and the Confidentiality Letter codifies all of your entitlements before, during and following a
termination of your employment with the Company and supersedes and replaces any and all prior agreements or understandings, whether written or oral, which may have existed with respect to the subject matter hereof or otherwise in relation to your
employment or termination of employment with the Company. The invalidity or unenforceability of any one or more provisions of this letter agreement will not affect the validity or enforceability of any other provision of this letter agreement, which
will remain in full force and effect. This letter agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument. 
 (c) You agree that you will abide by and adhere to all laws and rules and regulations of the various regulatory and/or self-regulatory organizations of
which the Company or any of its affiliates or related entities are members, as well as all internal rules, regulations, policies and codes of conduct that the Company has established. 
 (d) All amounts payable to you hereunder will be paid net of any and all applicable income or employment taxes required to be withheld therefrom under
applicable Canadian or foreign, provincial or local laws or regulations. 
 (e) The validity, interpretation, construction and performance of
this letter agreement will be governed by the laws of the State of Delaware and, where applicable, the federal laws of the United States of America without regard to any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this letter to the substantive law of another jurisdiction. In the event that any provision or portion of this letter shall be determined to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this letter shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. You may not assign this letter; however, the Company may assign this letter to any of its affiliates or
successors. 
 (f) The parties have expressly requested that this letter agreement be drafted in English. Les parties ont expressément
requis que cette entente soit rédigée en anglais. 
  


					
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 If the foregoing accurately sets forth the terms of your employment with the Company, please so indicate
by signing below and returning one signed copy of this letter agreement to me by 5:00 p.m., Eastern Daylight Time on October 3, 2008 (the “Execution Time”). This offer of employment shall remain outstanding until the Execution
Time, provided that the Company retains the right to rescind this offer of employment in the event of a breach by you of your obligations under the Confidentiality Letter or if it becomes aware of circumstances which, if you were employed by the
Company, would constitute the basis for a termination of your employment by the Company for Cause. If we have not received a signed copy of this letter agreement by the Execution Time, this offer of employment, and this letter agreement, and all
other terms and conditions outlined shall automatically lapse, terminate and be of no further effect. 
  


					
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	Sincerely,	 		 	
			
	DOMTAR CORPORATION	 		 	
					
	By:	 	/s/ Harold H. MacKay	 		 	By:	 	/s/ Brian M. Levitt
		 	Harold H. MacKay	 		 		 	Brian M. Levitt
		 	Chairman of the Board of Directors	 		 		 	Chairman of the
		 		 		 		 	Human Resources Committee

  

			
	 ACCEPTED AND AGREED
 as of this 1st day of
October, 2008

		
	By:	 	/s/ John D. Williams
		 	John D. Williams

  


					
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