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                                                                 Exhibit 10.18


                     SEPARATION AGREEMENT AND MUTUAL RELEASE
                                     BETWEEN
                             WILLIAM J. O'NEILL, JR.
                                       AND
                              POLAROID CORPORATION


         This Separation Agreement and Mutual General Release (the "Agreement")
is made by and between WILLIAM J. O'NEILL, JR. (the "Officer") and POLAROID
CORPORATION (the "Company") entered into this 29th day of October 1999, and
provided to the Officer on September 14, 1999.

                                    RECITALS

A.       The Officer is employed by the Company as an Executive Vice President.

B.       The Officer and the Company have mutually agreed to terminate the
         employment relationship.

C.       The Officer and the Company desire to specify the terms of the
         Officer's separation from the Company and to resolve fully and finally
         any and all claims, disputes, or disagreements that the Officer and the
         Company may have against each other.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:

1.       RESIGNATION.  Upon mutual agreement,  the Officer's  employment with
         the Company will terminate  effective December 31, 1999 (the
         "Separation Date").

2.       ANNUAL BONUS PAYMENT. The Officer will receive a 1999 bonus from the
         Polaroid Incentive Plan for Executives if a bonus is paid to active
         employees. This payment would be made at the time the bonus, if any, is
         paid for active employees.

3.       SEVERANCE PAYMENT. The Company shall pay the Officer a severance amount
         equal to twenty-four (24) months pay at the Officer's base rate in
         effect on his Separation Date. Such severance shall be paid in a
         stream of bi-weekly payments in accordance with the Company's regular
         bi-weekly payroll schedule beginning shortly after his Separation
         Date. Notwithstanding the foregoing, no payment shall be due for at
         least one (1) week after the execution of this Agreement by both
         parties.

4.       MISCELLANEOUS ADJUSTMENTS. The Company shall have the right to deduct
         from all payments referred to in this Agreement all amounts required by
         applicable law to be


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         withheld and any amounts which the Officer may owe the Company as of
         his Separation Date (including, but not limited to, items such as
         company store and corporate credit card obligations, garnishments, or
         liens).

5.       OPTIONS.

         a.       The Officer agrees that he shall forfeit all unexercised
                  options with an exercise price at or above $30.00 issued on or
                  after April 1, 1993, regardless of whether such options have
                  been vested or are unvested as of the Officer's Separation
                  Date. The terms of this forfeiture are set forth in draft in a
                  Supplemental Option Agreement attached as Appendix A

         b.       The Company shall fully vest all unexercised options held by
                  the Officer with an exercise price below $30.00 issued on or
                  after April 1, 1993, and all options issued prior to April 1,
                  1993. The Officer shall have the lesser of two (2) years from
                  his Separation Date or ten (10) years from the date the
                  options were issued in which to exercise his options. The
                  terms of this acceleration are set forth in draft in a
                  Supplemental Option Agreement attached as Appendix A.

         c.       The  Officer  shall be awarded a Phantom  Stock  Agreement
                  for a total of  101,000  units in the form and under such
                  terms as set forth in Appendix B.

6.       PERFORMANCE SHARES. A pro-rata portion of the Officer's Performance
         Awards will not be forfeited on the Officer's Separation Date and
         Common Stock will be awarded pursuant to these awards at the time such
         awards, if any, are made to active employees. For this purpose, the
         pro-rata portion shall be based on the period the Officer was an
         employee during the performance period of each award divided by the
         total period of the Performance Award. These Performance Award
         distributions, as adjusted for the pro-rata period, shall be based on
         the Company's actual performance during the performance period for such
         award. No performance awards shall be granted after the date of this
         Agreement.

7.       MEDICAL AND DENTAL BENEFITS.

         a.       RETIREE MEDICAL BENEFITS. The Officer is entitled to medical
                  benefits at the employee rate for two (2) years from the
                  Officer's Separation Date or until he becomes eligible for
                  substantially similar insurance from another employer,
                  whichever occurs first. Thereafter, the Officer shall be
                  entitled, as a bona-fide retiree, to medical benefits under
                  the same terms and conditions as they are available to other
                  bona-fide retirees of the Company.

         b.       DENTAL BENEFITS. For two (2) years from the Officer's
                  Separation Date, or until he becomes eligible for
                  substantially similar insurance from another employer,
                  whichever occurs first, the Company shall continue to provide
                  the Officer with dental insurance at the same cost to him as
                  to then currently employed officers similarly situated.


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         The foregoing medical and dental benefits are intended to be in full
         satisfaction of the Company's obligations under the Consolidated
         Omnibus Budget Reconciliation Act of 1986 (COBRA). The Officer hereby
         waives any rights under COBRA to which he otherwise would have been
         entitled.

8.       PENSION ENHANCEMENT. The Officer's pension benefit shall be enhanced
         based upon the assumption that his age is sixty-five (65) on his
         Separation Date for the calculation of his annuity. All forms of
         benefits currently available shall be available to the Officer upon
         his election. Such forms currently available include, but are not
         limited to, lump sum distribution as of the Officer's Separation Date.
         This benefit enhancement will be from the non-qualified Supplemental
         Benefit Plan as set forth in draft in Appendix C.

9.       OUTPLACEMENT. The Company will provide the Officer outplacement
         assistance up to a maximum value of $30,000 in the twelve (12) month
         period following the Separation Date. The Officer shall be entitled to
         the services of any executive recruiter of his choice. The Company
         hereby expressly waives any such pre-existing agreement with any
         executive recruiter with respect to services for the Officer and for
         no other purpose. The Company shall negotiate a contract and make
         payments directly to the executive recruiter selected by the Officer.

10.      EXECUTIVE LIFE INSURANCE BENEFITS. The Company shall continue to
         provide the Officer with the executive life insurance program that is
         being provided to other officers as of the Separation Date for two (2)
         years from his Separation Date, or until he becomes eligible for
         substantially similar insurance from another employer, whichever comes
         first.

11.      FINANCIAL PLANNING. Upon proper documentation that the expense has
         been incurred, the Company agrees to reimburse the Officer in an
         amount not to exceed eight thousand dollars ($8,000) for financial
         planning expenses that he incurs during the calendar year 2000.

12.      OFFICER'S  GENERAL  RELEASE.  In exchange for the severance  benefits
         just described, except as otherwise provided below, which the Officer
         acknowledges are in excess of what would otherwise have been due him,
         the Officer agrees to and hereby does release all claims the Officer
         may have against the Company, the Company's employee benefit plans
         (including any trusts, or insurance contracts forming part of any such
         plans), and its directors, trustees, officers, shareholders,
         employees, agents, administrators, successors and assigns, including,
         but not limited to, any claims arising out of or in connection with
         the Officer's employment by the Company or the termination of the
         Officer's employment. This release includes a waiver of any claims
         that the Officer may have under the Age Discrimination in Employment
         Act of 1967, as amended (29 U.S.C.Section 621), except for any claims
         under that Act which may arise after the Effective Date of this
         Agreement.

         This release includes, but is not limited to, any pending grievances or
         claims, internal or otherwise, and any claims which might be brought
         under or on the basis of:


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         -       Any employment relations law;

         -       Any state, federal or local law, regulation or executive order
                  prohibiting discrimination on account of age, race, color,
                  sex, sexual orientation, national origin, religion, handicap
                  or veteran status, including, without limitation, the Age
                  Discrimination in Employment Act of 1967, as amended (29
                  U.S.C. Section 621);

         -       Common law, including, without limitation, claims arising from
                  any contract or tort law;

         -       Any public  policy,  law or equity claims for  expenses,
                  attorneys'  fees, or other  monetary or equitable relief; and

         -       Any other claim arising out of the Officer's employment with
                  the Company or termination of the Officer's employment with
                  the Company, from his first date of employment to the
                  Effective Date of this Agreement.

         This release will not preclude claims arising from workers compensation
         laws or for vested accrued benefits under the Polaroid Pension Plan or
         the Polaroid Retirement Savings Plan as determined by the plan
         administrators of such Plans.

         Further, nothing in this release shall operate as a release or waiver
         by the Officer of any claims or rights to defense and/or
         indemnification under any:

         -       Indemnification agreement to which the Company (including any
                  Polaroid subsidiary or parent) is a party;

         -       Applicable law;

         -       Certificates of  Incorporation and/or By-Laws of the Company
                  (including any subsidiary or parent); or

         -       Directors' and Officers' Liability Policy.

         This Agreement is an important and binding legal document, and the
         Company therefore encourages the Officer to consider its terms
         carefully and to seek the advice of an attorney before the Officer
         signs it.

         By signing this Agreement, the Officer acknowledges that he has been
         given a period of at least twenty-one (21) days to consider the terms
         of this Agreement. If the Officer chooses to sign this Agreement before
         the end of the twenty-one (21) day period the Company has set, he
         expressly waives any right to the balance of that period.

13.      GENERAL COVENANTS.

         a.       For a period of five (5) years from the Officer's Separation
                  Date, the Officer shall not commit any act, or in any way
                  assist others to commit any action, intended to injure the
                  Company, nor shall the Officer divulge (except as required by
                  law) any confidential information or make available to any
                  others


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                  any documents, files, or other papers concerning the Company,
                  or its financial affairs.

         b.       For a period of five (5) years from the Officer's  Separation
                  Date, the Officer, on behalf of himself and his spouse,
                  attorneys acting on his behalf, agents, and representatives,
                  agrees not to engage in any public criticism regarding his
                  employment or the business affairs of the Company, nor to
                  make any negative, detrimental, or derogatory comments
                  concerning the Company or its parents, partners, owners, and
                  affiliates, and their owners, stockholders, directors,
                  officers, employees, partners, trusts, agents, attorneys,
                  and representatives, past and present; the Company agrees to
                  make no public criticism regarding the Officer or his
                  employment with the Company.

         c.       The Officer  shall not disclose the terms of this  Agreement
                  unless required to do so by law; provided, however, that the
                  terms of this Agreement may be disclosed in confidence to
                  the following: to the Officer's immediate family, attorneys,
                  and tax or financial consultants. Before disclosing the
                  terms of this Agreement to anyone as permitted under this
                  paragraph, the Officer shall first obtain an agreement from
                  the person receiving the information that he or she will not
                  disclose the terms of the Agreement to any other person. The
                  unauthorized disclosure of the terms of this Agreement by
                  any person shall constitute a violation of this paragraph by
                  the party who initially disclosed the terms of this
                  Agreement. If and when this Agreement becomes a public
                  document, this paragraph shall become null and void.

14.      MUTUAL AGREEMENT. The parties understand and agree that nothing
         contained in this Agreement shall constitute or be construed in any way
         as an admission of any liability whatsoever by either the Officer or
         the Company.

15.      NON-COMPETITION AND CONFIDENTIALITY.

         a.       NON-COMPETITION.  For a period of  twenty-four  (24) months
                  following the Separation Date, the Officer shall not engage
                  in any activity or become associated with any entity or
                  venture, whether as a principal, partner, employee,
                  consultant, shareholder (other than as a holder of not in
                  excess of one percent (1%) of the outstanding voting shares)
                  or otherwise, of either Eastman Kodak Company or Fuji Film
                  Corporation, any affiliates thereof or any person or entity
                  working on their behalf. The intent of this Section is not
                  to prevent the Officer from working, but to protect the
                  Company and give the Company the opportunity to evaluate
                  situations in certain potentially sensitive areas.
                  Accordingly, the foregoing limitation on the Officer's
                  activities shall not apply to the extent the Company
                  consents to such activities.

                  Notwithstanding the foregoing, the immediately preceding
                  paragraph shall not apply when:

                  (i)      the Officer has obtained consent from the appropriate
                           Company designee


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                           that a certain job or venture is not in violation of
                           this Section 15; or,

                  (ii)     if an Arbitrator concludes that the activity that the
                           Officer has undertaken does not violate the terms of
                           this Section as it exists when signed.

         b.       CONFIDENTIALITY.  Without the prior written  consent of the
                  Company, except to the extent required by an order of a
                  court having competent jurisdiction or under subpoena from
                  an appropriate government agency, the Officer shall comply
                  with the Confidentiality Agreement the Officer executed when
                  hired and shall not disclose any trade secrets, customer
                  lists, drawings, designs, information regarding product
                  development, marketing plans, sales plans, manufacturing
                  plans, management organization information (including data
                  and other information relating to members of the Board and
                  management), operating policies or manuals, business plans,
                  financial records or other financial, commercial, business
                  or technical information relating to the Company or any of
                  its subsidiaries or information designated as confidential
                  or proprietary that the Company or any of its subsidiaries
                  may receive belonging to suppliers, customers or others, who
                  do business with the Company or any of its subsidiaries
                  (collectively, "Confidential Information") to any third
                  person unless such Confidential Information has been
                  previously disclosed to the public by the Company or is in
                  the public domain (other than by reason of the Officer's
                  breach of this Section 15).

         c.       COMPANY PROPERTY. Promptly following the Officer's Separation
                  Date, the Officer shall return to the Company all property of
                  the Company, and all copies thereof in the Officer's
                  possession or under his control.

         d.       NON-SOLICITATION OF EMPLOYEES. For a period of twenty-four
                  (24) months following the Officer's Separation Date, the
                  Officer shall not directly or indirectly induce any employee
                  of the Company or any of its subsidiaries to terminate
                  employment with such entity, and shall not directly or
                  indirectly, either individually or as owner, agent, employee,
                  consultant or otherwise, employ or offer employment to any
                  person who is employed by the Company or a subsidiary unless
                  that person has received notice of termination of employment
                  by the Company or a subsidiary.

         e.       NON-SOLICITATION OF CUSTOMERS. For a period of twenty-four
                  (24) months following the Officer's Separation Date, the
                  Officer shall not solicit customers of the Company for any
                  venture or business opportunity, which could directly or
                  indirectly be considered in competition with the Company's
                  business, as reasonably determined by the Company in its sole
                  discretion.

16.      INJUNCTIVE  RELIEF WITH RESPECT TO COVENANTS.  The Officer
         acknowledges and agrees that his covenants and obligations with
         respect to non-competition, non-solicitation, confidentiality and
         Company property relate to special, unique and extraordinary matters,
         including his own skills, and that a violation of any of the terms of
         such


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         covenants and obligations will cause the Company irreparable injury
         for which adequate remedies are not available at law. Therefore, in
         the event of a breach or threatened breach, the Officer agrees that
         the Company shall be entitled to an injunction, restraining order, or
         such other equitable relief (without the requirement to post bond)
         restraining the Officer from committing any violation of the covenants
         and obligations contained in this Agreement. These injunctive remedies
         are cumulative and are in addition to any other rights and remedies
         the Company may have at law or in equity.

         The Officer agrees that restraints imposed upon him pursuant to this
         section are necessary for the reasonable and proper protection of the
         Company and its subsidiaries and affiliates and that each and every
         one of the restraints is reasonable in respect to subject matter,
         length of time and geographic area. The parties further agree that, in
         the event that any provision of this Agreement shall be determined by
         any court of competent jurisdiction to be unenforceable by reason of
         its being extended over too great a time, too large a geographic area
         or too great a range of activities, such provision shall be deemed to
         be modified to permit its enforcement to the maximum extent permitted
         by law.

         The Officer agrees and convenants that he will not assert any claim of
         any type (whether by complaint, counterclaim, cross-claim or
         otherwise) in any forum or before any tribunal pursuant in which he
         seeks to have declared unenforceable, in whole or in part, any of the
         restraints imposed upon him by this section or to limit their
         enforceability in any way. The Officer further agrees that, should he
         file any such claim: (a) he will reimburse the Company for its
         reasonable costs and attorneys fees should the Company succeed in
         enforcing any such restraint in whole or in part; and (b) he will
         repay to the Company any severance paid him under this Agreement.

17.      PAYMENTS IN EVENT OF DEATH. Should the Officer become eligible to
         receive payments and benefits under this Agreement and die prior to
         receipt of all such payments and benefits, the residual payments shall
         be made to the beneficiaries identified on the Officer's beneficiary
         designation form for the Executive Deferred Compensation Plan. Any
         residual family medical and dental benefits which the Officer was
         receiving on the date of death shall continue to the family members to
         the extent such family members had coverage under such medical and
         dental plans on such date.

18.      INDEMNIFICATION: DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The
         Officer shall, after the Separation Date, retain all rights to defense
         and indemnification:

         -       Under applicable law;

         -       Under any applicable agreements and/or insurance policies;

         -       Under any Company's subsidiary/parent Certificates of
                  Incorporation; or

         -       Under any Company's subsidiary/parent By-Laws, as they may be
                  amended or restated from time to time.


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                  In addition, the Company shall maintain Directors' and
                  Officers' liability insurance on the Officer's behalf, at
                  the level in effect immediately prior to the Officer's
                  Separation Date, for the first two (2) year period following
                  the Separation Date, and throughout the period of any
                  applicable statute of limitations.

19.      ENTIRE AGREEMENT. This Agreement represents the sole and entire
         agreement between the parties and supersedes all prior agreements,
         negotiations, and discussions between the parties with respect to the
         Officer's termination of employment with the Company and any and all
         other subject matters covered by this Agreement. Any amendment to this
         Agreement must be in writing, signed by the parties or their duly
         authorized representatives, and must state the intention of the
         parties to amend this Agreement.

20.      BINDING TERMS. This Agreement shall be binding upon the Officer and
         his spouse, heirs, administrators, representatives, executors,
         successors, and assigns and shall inure to the benefit of the Company
         and its parents, partners, owners, and affiliates, and their owners,
         stockholders, directors, officers, employees, partners, trusts,
         agents, attorneys, representatives, successors, and assigns.

21.      GOVERNING LAW. This Agreement shall be governed by, and construed in
         accordance with, the laws of the Commonwealth of Massachusetts. In the
         event that any part of this Agreement is found to be void or
         unenforceable, all other provisions of the Agreement shall remain in
         full force and effect.

22.      DISPUTES.  Subject to Section 16, all claims,  disputes,  questions,
         or controversies arising out of or relating to this Agreement,
         including, without limitation, the construction or application of any
         of the terms, provisions, or conditions of this Agreement, shall, on
         written request of either party served upon the other, be submitted to
         final and binding arbitration. Such arbitration shall be compelled and
         enforced by any court of competent jurisdiction and shall be conducted
         according to the Model Employment Arbitration Procedures of the
         American Arbitration Association ("AAA"), except as otherwise provided
         herein. The arbitration shall be conducted before AAA or such other
         arbitration service as the parties may, by mutual agreement, select.
         The arbitrator shall be appointed by agreement of the parties hereto
         or, if no agreement can be reached, by AAA pursuant to its rules.
         Judgment on the award the arbitrator renders may be entered in any
         court having jurisdiction over the parties. The arbitration shall be
         conducted in Boston, Massachusetts. Costs, including reasonable
         attorneys' fees, as well as the expenses of the arbitration, shall be
         paid as awarded by the arbitrator.

23.      REPRESENTATION AND VOLUNTARY EXECUTION.

         a.       The Officer represents and acknowledges that he has been
                  advised in writing to consult an attorney, that he has had an
                  adequate opportunity to consult and discuss all aspects of
                  this Agreement with an attorney and that he has carefully read
                  and fully understands all of its provisions.

         b.       The Officer represents and acknowledges that he has had an
                  adequate


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                  opportunity to make whatever investigation he or his counsel
                  may deem necessary or desirable in connection with the
                  subject matters of this Agreement.

         c.       The Officer represents and acknowledges that his decision to
                  enter into this Agreement has been made voluntarily,
                  knowingly, and without coercion of any kind.

25.      EXECUTION.  This  Agreement  may be  executed  in one or more
         counterparts,  each of  which  shall  be an original, but all of which
         together, shall be deemed to constitute a single document.

         If the terms of this Agreement are acceptable to the Officer, please
sign and return it no later than November 5, 1999. The Officer may revoke this
Agreement at any time during the seven (7) day period immediately following the
date of the Officer signing. If the Officer does not revoke this Agreement, then
on the eighth (8th) day following the date of the Officer signing (that eighth
day being the "Effective Date" of this Agreement), this Agreement shall take
effect as a legally binding agreement between the Officer and the Company.

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


WILLIAM J. O'NEILL, JR.           POLAROID CORPORATION


/s/ WILLIAM J. O'NEILL, JR.       By: /s/ GARY T. DICAMILLO
---------------------------           ---------------------
                                  Name:  Gary T. DiCamillo
                                  Title: Chairman and Chief Executive Officer


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