Exhibit 10.32**SEPARATION AGREEMENT**          This Separation Agreement (the “***Agreement***”), dated August 27, 2007, is entered into by andamong Timothy J. Cunningham (“***Mr. Cunningham***”), Pregis Holding I Corporation, a Delawarecorporation (“***Holding I***”), and its wholly owned subsidiaries, Pregis Holding II Corporation, aDelaware 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 amongMr. 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 ofApril 12, 2006 (the “***Noncompetition Agreement***”) and a Subscription Agreement (the “***SubscriptionAgreement***”) dated as of May 1, 2006;          WHEREAS, Mr. Cunningham and the Company’s Board of Directors have mutually agreed that aseparation 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 toMr. Cunningham the Separation Benefits (as defined below), Mr. Cunningham has agreed to executethis Agreement and the Waiver and Release of Claims attached as Exhibit A hereto and be bound bythe provisions herein and therein.          NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, andfor 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 theposition of Chief Financial Officer. Mr. Cunningham shall be appointed to the position of InterimChief Financial Officer as of August 27, 2007, and shall continue to hold this position until theearlier to occur of (i) December 31, 2007 and (ii) any such earlier date determined by mutualagreement of Mr. Cunningham and the Company (the “***Separation Date***”); provided, however, that theCompany may change Mr. Cunningham’s position from Interim Chief Financial Officer to consultantduring this time. While serving as Interim Chief Financial Officer or consultant, Mr. Cunninghamshall (i) receive his base salary of $350,000 per year, payable bi-weekly and prorated for anypartial employment period and (ii) be eligible to participate in the Companies’ benefit programs tothe extent of his participation prior to his change of position. The parties agree that effectiveupon 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, thedate of Mr. Cunningham’s
 

 
termination of employment for purposes of application of the Noncompetition Agreement shall bethe Separation Date.     2. Separation Benefits. In consideration for acceptance of the terms contained inthis 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 himunder any employee benefit plan, including four (4) weeks of weekly base salary in settlement ofaccrued vacation benefits, and reimbursements for any unreimbursed expenses incurred in accordancewith 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 haveotherwise 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 subsequentemployer (the “***Continued Medical Benefits***”). In addition, the Company shall pay Mr. Cunningham anincentive bonus for the fiscal year 2007, based on the Companies’ actual performance through theend 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 ContinuedMedical Benefits, the “***Separation Benefits***”). The Company’s obligation to pay Mr. Cunningham theTermination Payment and Incentive Payment, to provide him Continued Medical Benefits and to providethe 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 SeparationBenefits shall be subject to any and all applicable withholding taxes or other amounts required bylaw 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 theeffectiveness of the Waiver and Release of Claims. The Incentive Payment shall be paid in 2008 atthe time Companies ordinarily pay incentive bonuses to its executives with respect to the fiscalyear 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 provideduntil the dates provided herein if Cunningham dies prior thereto.     3. Stock Options. Subject to Section 2 hereof, on January 1, 2008 Mr. Cunninghamshall 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***”) ifthe EBITDA vesting conditions with respect to such shares are satisfied. With respect to theportion, if any, of the 2007 Option Grant which becomes vested, and the portion of the optionswhich 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 exercisesuch 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 Claimsattached hereto as Exhibit A on the Separation Date.
-2-

 
     5. Non-Disparagement. Mr. Cunningham agrees that he shall not, from and after thedate 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 anyof the foregoing; and the Companies shall cause its directors and executive officers not to make orpublish 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 materiallybreaches the representations or any of his obligations pursuant to the Waiver and Release of Claimsor the Noncompetition Agreement, Mr. Cunningham will forfeit his right to receive all paymentsprovided for under Section 2 of this Agreement that have not been paid to him as of the date ofsuch breach and, if those payments were made as of the time of such breach, Mr. Cunningham agreesthat he will reimburse the Companies, immediately, for the amount of such payments.     7. Severability. Each provision hereof and portion thereof is severable, and if oneor more provisions hereof or portions thereof are declared invalid, the remaining provisions andportions thereof shall nevertheless remain in full force and effect. If any provision of thisAgreement or portion thereof is so broad, in scope or duration or otherwise, as to beunenforceable, 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 thisAgreement or to require at any time performance by the other party of any of the provisions hereofshall in no way be construed to be a waiver of such provisions or to affect the validity of thisAgreement, or any part hereof, or the right of either party thereafter to enforce each and everysuch provision in accordance with the terms of this Agreement.     9. Binding Effect; Assignment. This Agreement shall be binding upon any and allsuccessors and assigns of Mr. Cunningham and the Companies. Mr. Cunningham may not assign thisAgreement.     10. Governing Law. Except for issues or matters as to which federal law isapplicable, this Agreement shall be governed by and construed and enforced in accordance with thelaws 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 EmploymentAgreement and the Noncompetition Agreement constitute the entire agreement between the partieshereto, and supersede all prior agreements, understandings and arrangements, oral or written, ifany, between the parties hereto, with respect to the subject matter hereof.[signature page follows]
-3-

 
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year firstabove 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            
-4-

 
**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 ICorporation, a Delaware corporation (“***Holding I***”), and its wholly owned subsidiaries, PregisHolding II Corporation, a Delaware corporation (“***Holding II***”), and Pregis Corporation, a DelawareCorporation (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 anyaffiliates, agents, representatives, successors and assigns of any of the foregoing, and directorsand officers of the foregoing (collectively referred to as the “***Releasees***”), from any and allobligations, liabilities, damages, costs, claims, complaints, charges, or causes of action in lawor equity that Mr. Cunningham or his heirs, administrators, successors, or assigns may now have ormay ever have against any Releasee, whether accrued, absolute, contingent, unliquidated orotherwise, and whether known or unknown on the date hereof, which have or may have arisen out ofany act or omission occurring, or state of facts existing, on or prior to the date of execution ofthis Agreement (collectively “***Claims***”), including but not limited to (i) Claims in any way relatedto 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 February27, 2007, between Mr. Cunningham and Holding I, and (ii) Claims based on federal, state or locallaw or regulation or the common law, including but not limited to Claims in any way related toTitle VII of the Civil Rights Act of 1964, the Illinois Human Rights Act, the Equal Pay Act, theFair Labor Standards Act, the Americans with Disabilities Act, the Employee Retirement IncomeSecurity Act of 1974, as amended, the Age Discrimination in Employment Act, all applicable stateand local labor and employment laws (including all laws concerning discrimination, unlawful andunfair labor and employment practices), breach of contract, wrongful discharge, defamation orintentional infliction of emotional distress, but expressly not including any claim against anyReleasee arising out of any breach of any provision of the Separation Agreement, including, withoutlimitation, the provisions relating to the continuing effectiveness and exercisability of optionsunder the Stock Option Agreements described in Section 3 of the Separation Agreement (the “***Waiverand Release***”).     2. The Companies acknowledge that, as of the date of this Waiver and Release, they are notaware of any actual or threatened claim or cause of action arising from or in any respect relatingto the Employment Agreement, dated as of April 12, 2006, among Mr. Cunningham and the Companies, orMr. Cunningham’s employment by the Companies, or the conclusion thereof. Nothing contained in thisSection shall be deemed to constitute a waiver of any legal rights of the Releasees.
-1-

 
     3. The Waiver and Release is for any relief, no matter how denominated, including, but notlimited to, injunctive relief, wages, back pay, front pay, compensatory damages, or punitivedamages. Mr. Cunningham further agrees that he will not file or permit to be filed on his behalfany 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 thecontinuation coverage provisions of the Consolidated Omnibus Reconciliation Act of 1985, asamended. If and to the extent a court of competent jurisdiction shall determine any part orportion of the Waiver and Release to be invalid or unenforceable, the same shall not affect theremainder of the Waiver and Release which shall be given full effect without regard to the invalidpart or portion of the Waiver and Release. Mr. Cunningham acknowledges that he has been given aperiod 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 executionof this Waiver and Release, revoke this Waiver and Release by a signed writing delivered to theGeneral Counsel of the Company at the Company’s headquarters. If no such revocation occurs, thisWaiver and Release shall become irrevocable in its entirety, and binding and enforceable againstMr. Cunningham, on the next day following the day on which the foregoing seven (7) day period haselapsed. If Mr. Cunningham revokes this Waiver and Release, this Waiver and Release shall be nulland void. Mr. Cunningham acknowledges that the Waiver and Release relates only to Claims whichexist as of the date hereof.     4. Mr. Cunningham represents that with respect to any act or omission occurring, or state offacts existing, on or prior to the date of execution of this Waiver and Release, he has not filedany 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 theSeparation Agreement and his obligations under this Waiver and Release are in addition to anythingof 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 ofany 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 anyReleasee, or anyone acting on any Releasee’s behalf, to induce him to execute this Waiver andRelease. Mr. Cunningham also acknowledges that he has had the opportunity to consult with anattorney prior to signing this Waiver and Release, and that he has read and understood all of theprovisions of this Waiver and Release.[signature page follows]
-2-

 
     IN WITNESS WHEREOF, the parties have executed this Waiver and Release of Claims as of the dateand 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            
-3-