Exhibit 10.01

SEPARATION AND RETIREMENT AGREEMENT

This SEPARATION AND RETIREMENT AGREEMENT (“the Agreement”) is made and entered
into as of the 15th of December, 2008 (the “Effective Date”), by and between
CARAUSTAR INDUSTRIES, INC., a North Carolina corporation with its principal
place of business in Austell, Georgia (“the Company”), and Thomas C. Dawson, Jr.
(“Employee”).

STATEMENT OF PURPOSE

Employee has served as a Named Executive Officer of the Company with
responsibilities to the Mill Group. As of the Resignation Date, Employee will be
involuntarily terminated and tender his resignation as an officer of the
Company. The purpose of this Agreement is to set forth the terms and agreements
of the parties under which this involuntary separation will be accomplished.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein and other good and valuable consideration, the Company and Employee
hereby agree as follows:

1. Definitions. Throughout this Agreement, the following terms shall have the
stated meaning:

(a) Transition Period shall mean that period commencing with the Effective Date
up to and including December 31, 2008.

(b) Resignation Date shall mean December 31, 2008.

(c) Severance Period shall mean that period commencing January 1, 2009 up to the
Retirement Date.

(d) Retirement Date shall be the earlier of (i) the date on which Employee is
entitled to receive a payment under the Extended CIC Agreement, or
(ii) January 1, 2010.

(e) Extended CIC Agreement means the separate Extended Change in Control
Severance Agreement entered into between the Company and Employee as of the
Effective Date.

2. Resignation as Officer. Employee hereby formally tenders his resignation as
an officer and, as applicable, director of any of the Company’s subsidiaries
and/or affiliates, all such resignations to be effective as of the Resignation
Date. Employee agrees to execute any documents reasonably required by the
Company, and/or its subsidiaries and affiliates, to effect such resignations.

 

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3. Transition Period. Subject to Employee’s full compliance with the terms of
this Agreement, Employee shall continue to be employed by the Company during the
Transition Period. As an employee of the Company during the Transition Period,
Employee shall be entitled to receive the salary and benefits specified in
paragraph 4, below. During the Transition Period, Employee agrees to use any and
all accrued vacation to which he would otherwise be entitled and remain
accessible to Senior Management of the Company on business related matters as
may be requested of Employee with prior notice.

4. Payments and Benefits to Employee During the Transition Period.

(a) Salary. During the Transition Period, the Company shall continue to pay
Employee his current annual base salary of $329,000. All salary payments shall
be made at a time and in accord with the regular payroll practices of the
Company with respect to its executive officers. All such amounts shall be
subject to and reduced by any applicable federal and state withholding taxes or
other deductions authorized by Employee.

(b) Benefits. During the Transition Period, Employee and his covered dependents
shall be entitled to participate in all health and welfare and pension benefit
plans sponsored or provided by the Company to the same extent and on the same
basis as other executive employees of the Company. Nothing herein shall affect
the Company’s right to modify, change, terminate or amend the terms of any of
its group welfare or pension benefit plans, and Employee’s entitlement to any
benefits under such plans shall be governed solely and exclusively by the terms
of the then current, actual benefit plan documents.

5. Payment and Benefits During the Severance Period.

(a) Salary. During the Severance Period, the Company shall continue to pay
Employee his current annual base salary of $329,000. All salary payments shall
be made at a time and in accord with the regular payroll practices of the
Company with respect to its executive officers. All such amounts shall be
subject to and reduced by any applicable federal and state withholding taxes or
other deductions authorized by Employee.

(b) Benefits. During the Severance Period, Employee and his covered dependents
shall be entitled to participate in all health and welfare and pension benefit
plans sponsored or provided by the Company to the same extent and on the same
basis as other executive employees of the Company, except that: (i) Employee
shall be provided with fully subsidized healthcare coverage up to eighteen
(18) months, which shall be deemed to have been paid at the COBRA rate and which
shall run concurrently with COBRA coverage; and (ii) Employee shall not be
entitled, from and after the Resignation Date to: (iii) accrue vacation;
(iv) receive any short-term or long-term incentive payments, except as set forth
in subparagraph 5(d) below; (v) be reimbursed for dues or assessments relating
to

 

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any private club, country club or professional organization; (vi) participate in
or receive the benefits of the Change in Control Severance Agreement (“CIC
Agreement”) by and between Employee and the Company; (vii) receive benefits
under any severance plan, practice or policy maintained or sponsored by the
Company except as set forth in this subparagraph 5(b) and in subparagraph 5(e),
below and the Extended CIC Agreement; or (viii) receive reimbursement for any
business, entertainment or similar expenses incurred by Employee during the
Severance Period unless expressly approved in advance. Nothing herein shall
affect the Company’s right to modify, change, terminate or amend the terms of
any of its group welfare or pension benefit plans, and Employee’s entitlement to
any benefits under such plans shall be governed solely and exclusively by the
terms of the then current, actual benefit plan documents.

(c) Conditions to Benefits. All benefits provided to Employee during the
Severance Period, as set forth in subparagraph 5(b) above, shall terminate
immediately upon Employee being covered under any group benefit plan sponsored
by any other employer. Provided hat, Employee (and his covered dependents, if
applicable) shall continue to be eligible for and participate in such benefits
to which Employee is entitled under the Caraustar Industries, Inc. Retirement
Plan, the Caraustar Industries, Inc. Employees’ Savings Plan, the Caraustar
Industries, Inc. Restoration Plan (the “SERP”), and the Extended CIC Agreement.

(d) Incentive Plan. Employee shall be eligible to participate in the Company’s
Senior Managers and Key Leaders Incentive Plan (the “Incentive Plan”) for the
2008 calendar year and may be eligible for an Incentive Plan payment, provided
that, the Compensation Committee of the Board of Directors (the “Committee”)
approves Incentive Plan payments to executive officers.

(e) Outplacement Services. The Company will provide Employee, at no expense to
him, outplacement services at the executive level. Said services will be
provided by a mutually agreed upon resource.

6. Forfeiture of Benefits Upon Change in Control. Concurrent with the execution
of this Agreement, the parties have entered into the Extended CIC Agreement. The
Extended CIC Agreement terminates the prior CIC Agreement between the parties,
and provides certain severance benefits in the event that a change in control of
the Company occurs within a specified period following the Resignation Date. In
the event that Employee becomes entitled to severance benefits under the
Extended CIC Agreement as a result of a change in control following the
Resignation Date, then notwithstanding anything in this Agreement to the
contrary, all of the benefits described in paragraphs 4 and 5 of this Agreement
that have not yet been paid to Employee shall be forfeited as of the date that
severance benefits become payable under the Extended CIC Agreement, and any
further severance benefits, if any, shall be provided by the Company to Employee
under the Extended CIC Agreement.

 

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7. Stock Options and PARS. Equity grants of restricted stock in the form of,
performance accelerated restricted stock (PARS), performance shares and service
based restricted stock that have been granted to Employee prior to the date
hereof shall continue to vest in accordance with the provisions applicable to
such grants, and shall be exercisable according to the terms and conditions set
forth in the Long Term Equity Incentive Plan and the option agreements entered
into pursuant thereto. Employee acknowledges that he has voluntarily forfeited
his non qualified stock options granted by the Company in the years 2003, 2004
and 2006.

8. Return of Company Property. All records, files, lists, including
computer-generated and electronic files, drawings, notes, notebooks, letters,
handbooks, blueprints, manuals, sketches, specifications, formulas, financial
documents, sales and business plans, customer lists, lists of customer contacts,
pricing information, software, cellular phones, credit cards, keys, equipment
and similar items relating to the Company’s business, together with any other
property of the Company or property which the Employee received in the course of
Employee’s employment with the Company, shall be returned to the Company no
later than the Resignation Date. Employee will be allowed to keep the
company-owned laptop following the removal of any unlicensed software as well as
the company-sponsored cell phone and blackberry device. Employee further
represents that he will not copy or cause to be copied, download, print out or
cause to be printed out or downloaded or transferred any software, documents,
electronic data or files or other materials originating with or belonging to the
Company.

9. Confidentiality and Nondisparagement. Employee agrees to keep confidential
and not to make any statement, written or oral (including but not limited to any
media source or to any other party) regarding the terms of this Agreement.
Provided, however, it shall not constitute a breach of this paragraph for
Employee to disclose the terms of this Agreement to Employee’s spouse, legal
counsel, tax accountant, medical provider or licensed counselor, provided
Employee obtains the agreement of such person to keep the terms hereof
confidential. Furthermore, during the Transition and Severance Period, Employee,
for the good and valuable consideration furnished herein, agrees not to
disparage, bring into disrepute or make any negative statement concerning the
Company, its subsidiaries or affiliates or any of their respective employees,
officers or directors or make any other statement that would disrupt, impair or
affect adversely the reputation, business interests, or profitability of such
parties or place such parties in any negative light. Any breach of this
paragraph by Employee shall constitute a material breach of this Agreement, and
shall entitle the Company to any and all remedies provided by law for the
material breach of contract, including the suspension of any performance owed by
the Company hereunder. Provided, however, that notwithstanding the provisions
hereof, it shall not constitute a breach of this Agreement for Employee to
testify truthfully about any subject when compelled to do so by legal process or
disclose this agreement as a requirement of a legal process to enforce the
commitments contained herein.

10. Admissions. Employee acknowledges that the payment by the Company of the
benefits described herein shall never for any purpose be considered an admission
of liability on the part of the Company, by whom liability is expressly denied,
and no past or

 

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present wrongdoing on the part of the Company shall be implied by such payment.
Similarly, no admission of past or present wrongdoing on the part of Employee
shall be implied by virtue of his resignation from the Company.

11. Release. As consideration for the payments and benefits to be provided by
the Company to Employee hereunder, Employee agrees for Employee and for
Employee’s heirs, executors, administrators and assigns, to release and forever
discharge the Company and all of its parent and subsidiary corporations and each
of their affiliated entities (including limited liability companies and
partnerships or joint ventures), together with each of their respective agents,
officers, employees, directors, insurers, and attorneys, from, and to waive any
and all rights with respect to all manner of known claims, actions, causes of
action, suits, judgments, rights, demands, debts, damages, or accountings of
whatever nature, legal, equitable or administrative, which Employee ever had,
now has or may claim to have, upon or by reason of the occurrence of any matter,
cause or thing whatsoever up to the date of this Separation Agreement, including
without limitation: (i) any claim whatsoever (whether under federal or state
statutory or common law) arising from or relating to Employee’s employment or
changes in Employee’s employment relationship with the Company, including
Employee’s separation, termination, resignation or retirement therefrom;
(ii) all claims and rights for additional compensation or benefits of whatever
nature other than benefits provided by the Company’s group welfare and
retirement plans;; (iii) any claim under any contract including for breach of
contract, implied or express, impairment of economic opportunity, intentional or
negligent infliction of emotional distress, wage or benefit claim, prima facie
tort, defamation, libel, slander, negligent termination, wrongful discharge, or
any other tort, whether intentional or negligent; (iv) all claims and rights
under Title VII of the Civil Rights Act of 1964, the Civil Rights Acts of 1866,
1871, or 1991, the Age Discrimination in Employment Act, the Employee Retirement
Income Security Act, the Americans With Disabilities Act, the Family and Medical
Leave Act, all as amended, or any other federal, state, county or municipal
statute or ordinance relating to any condition of employment or employment
discrimination; and (v) all claims under any employment agreement by and between
Employee and the Company. Provided, however, this Release shall not (i) include
any claims relating to the obligations of the Company under this Agreement,
(ii) operate to release Employee’s ownership of any common stock of the Company
or rights provided to Employee in connection with stock option awards or
performance accelerated restricted stock issued to him prior to the date hereof;
or (iii) affect Employee’s vested and accrued rights as a participant in the
Company’s tax-qualified defined benefit or defined contribution pension plans,
the SERP or the Extended CIC Agreement.

12. Noncompetition. Employee shall continue to be bound by reasonable standards
of confidentiality until the expiration of the Severance Period. Employee’s
compliance with these obligations shall be a condition to Employee’s receipt of
any payments or benefits under this Agreement, and Employee’s failure to comply
with any of the terms thereof shall result in a forfeiture of all payments and
benefits described herein, except for Employee’s vested and accrued rights under
stock option and restricted stock agreements, the tax-qualified pension benefit
plans and the SERP of which Employee is a participant or beneficiary. Until the

 

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expiration of the Severance Period, the Employee shall not serve as a majority
owner or senior officer of an entity that is in direct competition with the
primary business and sales activities of the Mill Group. Until the expiration of
the Severance Period, the Employee shall be prohibited from directly calling on
or soliciting the customers currently being supplied by the Mill Group in such
competitive products and services.

13. Governing Law and Forum Selection. This Agreement shall be governed by the
substantive laws of the State of North Carolina, without regard to the effect or
application of any conflict of laws principles to the contrary. Employee and the
Company agree that any claim against the Company or any of its affiliates or
their employees, officers or directors (“the Company Parties”) arising out of or
relating in any way to this Agreement or to Employee’s employment with the
Company shall be brought exclusively in the Superior Court of Cobb County,
Georgia, or the United States District Court for the Northern District of
Georgia (Atlanta Division), and in no other forum. Employee and the Company
hereby irrevocably consent to the personal and subject matter jurisdiction of
these courts for the purpose of adjudicating any claims subject to this forum
selection clause. Employee and the Company also agree that any dispute of any
kind arising out of or relating to this Agreement or to Employee’s employment
(including without limitation any claim released herein by Employee) shall at
either Employee’s or the Company Parties’ election or demand be submitted to
final, conclusive and binding arbitration before and according to the rules then
prevailing of the American Arbitration Association in Atlanta, Georgia, which
election or demand may be made at any time prior to the last day to answer
and/or respond to a summons and/or complaint or counterclaim made by Employee or
the Company. The results of any such arbitration proceeding shall be final and
binding both upon the Company Parties and upon Employee, and shall be subject to
judicial confirmation as provided by the Federal Arbitration Act, which is
incorporated herein by reference. Provided, however, that nothing in this
paragraph 13 shall preclude the Company Parties from obtaining preliminary or
emergency injunctive relief to restrain any violation of the provisions hereof.

14. Severability. If any of the provisions set forth in this Agreement be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

15. Voluntary Agreement. Employee hereby represents that Employee has carefully
read and completely understands the provisions of this Agreement and that
Employee has entered into this Agreement voluntarily and without any coercion
whatsoever, and in order to receive benefits described in this Agreement that
are not otherwise owed to Employee by the Company. Employee represents that he
has been advised in writing of his right to secure counsel to assist in his
reviewing this Agreement, that he has had sufficient time to review carefully
each of the provisions hereto with his counsel, and that his execution hereof is
the product of his own free will and volition. The Company hereby represents
that it has entered into this Agreement voluntarily and that due corporate
authority has been obtained for entry into this Agreement.

 

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16. Assistance and Cooperation. During the Transition and Severance Periods
Employee agrees to cooperate with and provide assistance to the Company and its
legal counsel in connection with any litigation (including arbitration or
administrative hearings) or investigation affecting the Company, its
subsidiaries or affiliates in which, in the reasonable judgment of the Company’s
counsel, Employee’s assistance or cooperation is needed. During the Transition
and Severance Periods, Employee shall, when requested by the Company, provide
testimony or other assistance and shall travel at the Company’s request in order
to fulfill this obligation. Provided, however, that, in connection with such
litigation or investigation, the Company shall attempt to accommodate Employee’s
schedule, shall provide him with reasonable notice in advance of the times in
which his cooperation or assistance is needed, and shall reimburse Employee for
any reasonable expenses and loss of income incurred in connection with such
matters, unless otherwise prohibited by law. In addition, during the time he is
receiving any of the payments set forth herein, Employee agrees to cooperate
fully with the Company on all matters relating to his employment and the conduct
of the Company’s business. Nothing in this paragraph 16 shall impose an
obligation on Employee beyond the Transition and Severance Periods.

17. Waiver, Dependent Conditions and Fees. Any waiver or consent from the
Company or Employee with respect to any term or provision of this Agreement or
any other aspect of the Employee’s or Company’s conduct shall be effective only
in the specific instance and for the specific purpose for which given and shall
not be deemed, regardless of frequency given, to be a further or continuing
waiver or consent. The failure or delay of the Employee or Company at any time
or times to require performance of, or to exercise any of its powers, rights or
remedies with respect to, any term or provision of this Agreement shall not
affect the Employee’s or Company’s right at a later time to enforce any such
term or provision. In addition thereto, the failure of Employee to perform or
satisfy any material obligation set forth herein shall give the Company the
right to suspend any obligation otherwise owed to Employee hereunder.

18. Acknowledgement of Waiver of Rights. Employee acknowledges that Employee’s
waiver of rights and claims under this Agreement includes a waiver of rights and
claims under the Federal Age Discrimination in Employment Act of 1967, as
amended, and that such waiver and the waiver and release of all other rights and
claims contemplated by the release set forth in paragraph 11 above are made
knowingly and voluntarily. Employee acknowledges that he has been given a period
of at least twenty-one (21) days to consider the provisions of the release
stated above, and to consult with his attorney, accountant, tax advisor, spouse
or other persons prior to making a decision to sign this document. Employee
further acknowledges that the Company has not pressured or coerced Employee to
execute this Agreement prior to the expiration of 21 days from the date it was
furnished to Employee and that any decision to execute this Separation Agreement
prior to such time has been made freely and voluntarily.

19. Indemnification. To the extent that the Company would have covered Employee
during his employment, the Company agrees to indemnify Employee for acts and
omissions preceding the date of his resignation as an officer of the Company to
the full extent

 

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permitted under the Articles of Incorporation and Bylaws of the Company. The
Company further agrees to maintain for Employee, with respect to acts and
omissions preceding said resignation date, directors’ and officers’ liability
insurance with the same limits as pertain to the Company’s other officers and
directors.

20. Further Conditions. The obligations of the Company set forth in this
Agreement, are conditional upon Employee’s execution and full ratification of
this Agreement, including the release set forth herein, no later than twenty-one
(21) days following the date on which this Separation Agreement is submitted to
Employee, as well as upon Employee’s failure to revoke the same following the
expiration of seven days following such execution. In the event that Employee
fails to execute this Agreement within such 21-day period or revokes the
execution thereof within seven days following such execution thereof, the
Company’s obligations hereunder shall be null and void.

21. Ratification and Return of Consideration. Any attempt by Employee to
challenge this Agreement or attempt to declare any provision herein void or
voidable, must be preceded by a return of any and all consideration received
hereunder. In particular, should Employee fail to return any part of such
consideration within forty-five (45) days hereof, Employee shall be deemed to
have accepted the full benefits of this Agreement and shall be bound by all
provisions herein. Provided, however, that nothing in this paragraph shall be
deemed to preclude Employee’s ratification of this Agreement in any other way
allowed or permitted by law.

22. Entire Agreement. This Agreement contains the entire agreement between the
Company and Employee and supersedes all prior agreements relating to the subject
matter hereof, except as expressly referred to herein, and may be changed only
by a writing signed by the parties hereto. Provided that, the Employee’s accrued
rights under the pension plans and any other tax-qualified employee benefit
plans, the Extended CIC Agreement, the SERP, and the Incentive Plan, are not
superseded by this Agreement. Among the agreements superseded and replaced are
the Change in Control Severance Agreement, executed on April 24, 2008, and the
Confidentiality and Non-Competition Agreement, executed on November 7, 2005. The
aforementioned list is merely an example of the types of documents that Employee
has executed, but does not purport to be an exhaustive list of agreements which
are superseded and replaced by this Separation and Retirement Agreement. Any and
all prior representations, statements and discussions regarding the subject
matter of this Agreement have been merged into and/or replaced by the terms of
this Agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or
caused this Agreement to be duly executed by their authorized representatives as
of the day and year first above written.

 

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EMPLOYEE    CARAUSTAR INDUSTRIES, INC.

/s/ Thomas C. Dawson, Jr.

  

/s/ Michael J. Keough

By: Thomas C. Dawson, Jr.    By: Michael J. Keough    Its: President and CEO

 

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