Exhibit 10.32
SEPARATION AGREEMENT
          This Separation Agreement (the “Agreement”), dated August 27, 2007, is
entered into by and among Timothy J. Cunningham (“Mr. Cunningham”), Pregis
Holding I Corporation, a Delaware corporation (“Holding I”), and its wholly
owned subsidiaries, Pregis Holding II Corporation, a Delaware corporation
(“Holding II”), and Pregis Corporation, a Delaware Corporation (the “Company”
and together with Holding I and Holding II, the “Companies”).
          WHEREAS, Mr. Cunningham is employed by the Companies pursuant to an
Employment Agreement among Mr. Cunningham and the Companies, dated as of
April 12, 2006 (the “Employment Agreement”);
          WHEREAS, Mr. Cunningham and Holding I are parties to a Noncompetition
Agreement dated as of April 12, 2006 (the “Noncompetition Agreement”) and a
Subscription Agreement (the “Subscription Agreement”) dated as of May 1, 2006;
          WHEREAS, Mr. Cunningham and the Company’s Board of Directors have
mutually agreed that a separation is in the best interests of Mr. Cunningham and
the Company;
          WHEREAS, Mr. Cunningham’s employment with the Companies shall conclude
on the Separation Date (as defined below); and
          WHEREAS, as a condition precedent and a material inducement for the
Companies to provide to Mr. Cunningham the Separation Benefits (as defined
below), Mr. Cunningham has agreed to execute this Agreement and the Waiver and
Release of Claims attached as Exhibit A hereto and be bound by the provisions
herein and therein.
          NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for the monetary and other consideration set
forth below, the parties agree as follows:
     1. Interim Position. As of August 27, 2007, Mr. Cunningham shall cease to
hold the position of Chief Financial Officer. Mr. Cunningham shall be appointed
to the position of Interim Chief Financial Officer as of August 27, 2007, and
shall continue to hold this position until the earlier to occur of
(i) December 31, 2007 and (ii) any such earlier date determined by mutual
agreement of Mr. Cunningham and the Company (the “Separation Date”); provided,
however, that the Company may change Mr. Cunningham’s position from Interim
Chief Financial Officer to consultant during this time. While serving as Interim
Chief Financial Officer or consultant, Mr. Cunningham shall (i) receive his base
salary of $350,000 per year, payable bi-weekly and prorated for any partial
employment period and (ii) be eligible to participate in the Companies’ benefit
programs to the extent of his participation prior to his change of position. The
parties agree that effective upon the Separation Date, Mr. Cunningham shall be
deemed to have resigned from any directorship, position or office with or in the
Companies or their affiliates. For the avoidance of doubt, the date of
Mr. Cunningham’s

 

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termination of employment for purposes of application of the Noncompetition
Agreement shall be the Separation Date.
     2. Separation Benefits. In consideration for acceptance of the terms
contained in this Agreement and the Waiver and Release of Claims attached as
Exhibit A, the Company shall (i) pay to Mr. Cunningham an amount equal to his
base salary as of the Separation Date (the “Termination Payment”); (ii) pay to
Mr. Cunningham all accrued but unpaid amounts payable to him under any employee
benefit plan, including four (4) weeks of weekly base salary in settlement of
accrued vacation benefits, and reimbursements for any unreimbursed expenses
incurred in accordance with the Companies’ policies prior to the Separation Date
(the “Accrued Payment”); and (iii) continue to provide Mr. Cunningham with
medical benefits on the same terms that would have otherwise applied to him had
he remained an active employee until the earlier of (a) December 31, 2008 or
(b) the date Mr. Cunningham becomes eligible for medical benefits from a
subsequent employer (the “Continued Medical Benefits”). In addition, the Company
shall pay Mr. Cunningham an incentive bonus for the fiscal year 2007, based on
the Companies’ actual performance through the end of such fiscal year (pro rata
if the Separation Date occurs before December 31, 2007) (the “Incentive
Payment,” collectively with the Termination Payment, Accrued Payment and
Continued Medical Benefits, the “Separation Benefits”). The Company’s obligation
to pay Mr. Cunningham the Termination Payment and Incentive Payment, to provide
him Continued Medical Benefits and to provide the benefits set forth in
Section 3 below shall, in each case, be conditioned upon: (i) Mr. Cunningham’s
continued compliance with his obligations under the Noncompetition Agreement,
(ii) Mr. Cunningham’s execution, delivery and non-revocation of the Waiver and
Release of Claims and (iii) Mr. Cunningham’s continued compliance with his
obligations under this Agreement. The Separation Benefits shall be subject to
any and all applicable withholding taxes or other amounts required by law to be
withheld. The Termination Payment shall be paid in installments on the
Companies’ regular payroll dates occurring during the twelve (12) month period
immediately following the effectiveness of the Waiver and Release of Claims. The
Incentive Payment shall be paid in 2008 at the time Companies ordinarily pay
incentive bonuses to its executives with respect to the fiscal year in which the
Separation Date occurs. The Accrued Payment shall be paid within thirty (30)
days following the Separation Date. The Separation Benefits shall continue to be
paid and provided until the dates provided herein if Cunningham dies prior
thereto.
     3. Stock Options. Subject to Section 2 hereof, on January 1, 2008
Mr. Cunningham shall vest with respect to 3.026 of the shares subject to the
Nonqualified Stock Option Agreement, dated as of February 27, 2007, between
Holding I and Mr. Cunningham (the “2007 Option Grant”) if the EBITDA vesting
conditions with respect to such shares are satisfied. With respect to the
portion, if any, of the 2007 Option Grant which becomes vested, and the portion
of the options which are vested pursuant to the Nonqualified Option Agreement
for Employees, dated as of May 1, 2006, between Holding I and Mr. Cunningham
(the “2006 Option Grant”), Mr. Cunningham may exercise such vested portion until
the date six (6) months following the Separation Date.
     4. Release of Claims. Mr. Cunningham shall sign the Waiver and Release of
Claims attached hereto as Exhibit A on the Separation Date.

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     5. Non-Disparagement. Mr. Cunningham agrees that he shall not, from and
after the date of this Agreement, make or publish any disparaging statements
(whether written or oral) regarding any of the Companies, or their affiliates,
stockholders, subsidiaries, directors, officers and employees, and any
affiliates, agents, representatives, successors and assigns of any of the
foregoing; and the Companies shall cause its directors and executive officers
not to make or publish any disparaging statements (whether written or oral)
regarding Mr. Cunningham.
     6. Forfeiture of Separation Benefits. Mr. Cunningham acknowledges and
agrees that, notwithstanding any other provision of this Agreement, in the event
Mr. Cunningham materially breaches the representations or any of his obligations
pursuant to the Waiver and Release of Claims or the Noncompetition Agreement,
Mr. Cunningham will forfeit his right to receive all payments provided for under
Section 2 of this Agreement that have not been paid to him as of the date of
such breach and, if those payments were made as of the time of such breach,
Mr. Cunningham agrees that he will reimburse the Companies, immediately, for the
amount of such payments.
     7. Severability. Each provision hereof and portion thereof is severable,
and if one or more provisions hereof or portions thereof are declared invalid,
the remaining provisions and portions thereof shall nevertheless remain in full
force and effect. If any provision of this Agreement or portion thereof is so
broad, in scope or duration or otherwise, as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
     8. Enforceability. The failure to enforce at any time any of the provisions
of this Agreement or to require at any time performance by the other party of
any of the provisions hereof shall in no way be construed to be a waiver of such
provisions or to affect the validity of this Agreement, or any part hereof, or
the right of either party thereafter to enforce each and every such provision in
accordance with the terms of this Agreement.
     9. Binding Effect; Assignment. This Agreement shall be binding upon any and
all successors and assigns of Mr. Cunningham and the Companies. Mr. Cunningham
may not assign this Agreement.
     10. Governing Law. Except for issues or matters as to which federal law is
applicable, this Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to the
conflicts of law principles thereof.
     11. Entire Agreement. This Agreement, Appendix A to this Agreement, the
Employment Agreement and the Noncompetition Agreement constitute the entire
agreement between the parties hereto, and supersede all prior agreements,
understandings and arrangements, oral or written, if any, between the parties
hereto, with respect to the subject matter hereof.
[signature page follows]

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.

                  /s/ Timothy J. Cunningham       Timothy J. Cunningham         
 

                                  The Companies:                        
 
                                PREGIS HOLDING I CORPORATION           PREGIS
HOLDING II CORPORATION    
 
                                By:   /s/ Michael T. McDonnell           By:  
/s/ Michael T. McDonnell        
 
Name:
 
 
 
Michael T. McDonnell              
 
Name:
 
 
 
Michael T. McDonnell    
 
  Title:   President & CEO               Title:   President & CEO    
 
                                PREGIS CORPORATION                        
 
                                By:   /s/ Michael T. McDonnell                  
 
 
Name:
 
 
 
Michael T. McDonnell                        
 
  Title:   President & CEO                        

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EXHIBIT A
WAIVER AND RELEASE OF CLAIMS
     1. In consideration of the payments and benefits to be made under the
Separation Agreement, dated as of August 27, 2007 to which Timothy J. Cunningham
(“Mr. Cunningham”), Pregis Holding I Corporation, a Delaware corporation
(“Holding I”), and its wholly owned subsidiaries, Pregis Holding II Corporation,
a Delaware corporation (“Holding II”), and Pregis Corporation, a Delaware
Corporation (the “Company” and together with Holding I and Holding II, the
“Companies”) are parties (the “Separation Agreement”), Mr. Cunningham, with the
intention of binding himself, his heirs, executors, administrators and assigns,
does hereby release and forever discharge the Companies, their affiliates,
stockholders, subsidiaries, directors, officers and employees, and any
affiliates, agents, representatives, successors and assigns of any of the
foregoing, and directors and officers of the foregoing (collectively referred to
as the “Releasees”), from any and all obligations, liabilities, damages, costs,
claims, complaints, charges, or causes of action in law or equity that
Mr. Cunningham or his heirs, administrators, successors, or assigns may now have
or may ever have against any Releasee, whether accrued, absolute, contingent,
unliquidated or otherwise, and whether known or unknown on the date hereof,
which have or may have arisen out of any act or omission occurring, or state of
facts existing, on or prior to the date of execution of this Agreement
(collectively “Claims”), including but not limited to (i) Claims in any way
related to Mr. Cunningham’s employment with the Companies or the termination of
that employment, including, but not limited to, pursuant to the Stock Option
Agreements, dated as of May 1, 2006 and February 27, 2007, between
Mr. Cunningham and Holding I, and (ii) Claims based on federal, state or local
law or regulation or the common law, including but not limited to Claims in any
way related to Title VII of the Civil Rights Act of 1964, the Illinois Human
Rights Act, the Equal Pay Act, the Fair Labor Standards Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act of 1974, as
amended, the Age Discrimination in Employment Act, all applicable state and
local labor and employment laws (including all laws concerning discrimination,
unlawful and unfair labor and employment practices), breach of contract,
wrongful discharge, defamation or intentional infliction of emotional distress,
but expressly not including any claim against any Releasee arising out of any
breach of any provision of the Separation Agreement, including, without
limitation, the provisions relating to the continuing effectiveness and
exercisability of options under the Stock Option Agreements described in
Section 3 of the Separation Agreement (the “Waiver and Release”).
     2. The Companies acknowledge that, as of the date of this Waiver and
Release, they are not aware of any actual or threatened claim or cause of action
arising from or in any respect relating to the Employment Agreement, dated as of
April 12, 2006, among Mr. Cunningham and the Companies, or Mr. Cunningham’s
employment by the Companies, or the conclusion thereof. Nothing contained in
this Section shall be deemed to constitute a waiver of any legal rights of the
Releasees.

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     3. The Waiver and Release is for any relief, no matter how denominated,
including, but not limited to, injunctive relief, wages, back pay, front pay,
compensatory damages, or punitive damages. Mr. Cunningham further agrees that he
will not file or permit to be filed on his behalf any Claims. The Release shall
not apply to the obligations set forth in this Waiver and Release, pursuant to
qualified plans maintained by or contributed to by the Companies, or pursuant to
the continuation coverage provisions of the Consolidated Omnibus Reconciliation
Act of 1985, as amended. If and to the extent a court of competent jurisdiction
shall determine any part or portion of the Waiver and Release to be invalid or
unenforceable, the same shall not affect the remainder of the Waiver and Release
which shall be given full effect without regard to the invalid part or portion
of the Waiver and Release. Mr. Cunningham acknowledges that he has been given a
period of twenty-one (21) days to consider whether to execute this Waiver and
Release. Mr. Cunningham may, for a period of seven (7) days following (and not
including) the date of execution of this Waiver and Release, revoke this Waiver
and Release by a signed writing delivered to the General Counsel of the Company
at the Company’s headquarters. If no such revocation occurs, this Waiver and
Release shall become irrevocable in its entirety, and binding and enforceable
against Mr. Cunningham, on the next day following the day on which the foregoing
seven (7) day period has elapsed. If Mr. Cunningham revokes this Waiver and
Release, this Waiver and Release shall be null and void. Mr. Cunningham
acknowledges that the Waiver and Release relates only to Claims which exist as
of the date hereof.
     4. Mr. Cunningham represents that with respect to any act or omission
occurring, or state of facts existing, on or prior to the date of execution of
this Waiver and Release, he has not filed any complaints, charges or lawsuits
against any Releasee with any government agency or any court. Mr. Cunningham
acknowledges that the payments and benefits he is receiving in connection with
the Separation Agreement and his obligations under this Waiver and Release are
in addition to anything of value to which Mr. Cunningham is entitled from the
Companies.
     5. Nothing in this Waiver and Release shall be construed as an admission by
any Releasee of any liability on its part under any federal, state, or local law
or regulation or the common law. Mr. Cunningham acknowledges that no
representation or fact or opinion has been made by any Releasee, or anyone
acting on any Releasee’s behalf, to induce him to execute this Waiver and
Release. Mr. Cunningham also acknowledges that he has had the opportunity to
consult with an attorney prior to signing this Waiver and Release, and that he
has read and understood all of the provisions of this Waiver and Release.
[signature page follows]

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     IN WITNESS WHEREOF, the parties have executed this Waiver and Release of
Claims as of the date and year indicated under the signature line below.

                  /s/ Timothy J. Cunningham       Timothy J. Cunningham     
Date:     

                                  The Companies:                        
 
                                PREGIS HOLDING I CORPORATION           PREGIS
HOLDING II CORPORATION    
 
                                By:   /s/ Michael T. McDonnell           By:  
/s/ Michael T. McDonnell        
 
Name:
 
 
 
Michael T. McDonnell              
 
Name:
 
 
 
Michael T. McDonnell    
 
  Title:   President & CEO               Title:   President & CEO    
 
                                PREGIS CORPORATION                        
 
                                By:   /s/ Michael T. McDonnell                  
 
 
Name:
 
 
 
Michael T. McDonnell                        
 
  Title:   President & CEO                        

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