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                                                                   Exhibit 10.08

                               RETENTION AGREEMENT


      AGREEMENT by and between NASHUA CORPORATION, a Delaware corporation (the
"Company") and PAUL BUFFUM (the "Executive"), dated as of the 24th day of
October, 1997.

      The Board of Directors of the Company (the "Board"), has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

      NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

      1.    CERTAIN DEFINITIONS. (a) The "Effective Date" shall be the first
date during the "Change of Control Period" (as defined in Section 1(b)) on which
a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Executive's employment with the Company is terminated or
the Executive ceases to be an officer of the Company prior to the date on which
a Change of Control occurs, and it is reasonably demonstrated that such
termination of employment (1) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (2) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.

      (b)   The "Change of Control Period" is the period commencing on the date
hereof and ending on the third anniversary of such date; provided, however, that
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof is
hereinafter referred to as the "Renewal Date"), the Change of Control Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.

      2.    CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean:




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      (a)   The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of l934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
(a "Person") of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Company Voting
Securities"), PROVIDED, HOWEVER, that any acquisition by (x) the Company or any
of its subsidiaries, or any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its subsidiaries or (y) any corporation
with respect to which, following such acquisition, more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities immediately prior
to such acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Company Common Stock
and Company Voting Securities, as the case may be, shall not constitute a Change
of Control; or

      (b)   Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to the date
hereof whose election or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the Company (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act); or

      (c)   Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, with respect
to which all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Company Common Stock and Company
Voting Securities immediately prior to such Business Combination do not,
following such Business Combination, beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from Business Combination in substantially the same
proportion as their ownership immediately prior to such Business Combination of
the Outstanding Company Common Stock and Company Voting Securities, as the case
may be; or

      (d)   (i) a complete liquidation or dissolution of the Company or of (ii)
sale or other disposition of all or substantially all of the assets of the
Company other than to a corporation with respect to which, following such sale
or disposition, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting



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                                       -3-

securities entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Company Voting Securities immediately prior
to such sale or disposition in substantially the same proportion as their
ownership of the Outstanding Company Common Stock and Company Voting Securities,
as the case may be, immediately prior to such sale or disposition.

      3.    EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company, for the period commencing on the Effective Date and ending on
the third anniversary of such date (the "Employment Period").

      4.    TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.

      (ii)  During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

      (b)   COMPENSATION. (i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable to the Executive by the Company and its
affiliated companies in respect of the twelve-month period immediately preceding
the month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be increased at
any time and from time to time as shall be substantially consistent with
increases in base salary awarded in the ordinary course of business to other
peer executives of the Company and its affiliated companies. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase



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and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" includes any company controlled by, controlling or under
common control with the Company.

      (ii)  ANNUAL BONUS. In addition to Annual Base Salary, the Executive shall
be awarded, for each fiscal year beginning or ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
average bonus paid or payable, including by reason of deferral, to the Executive
by the Company and its affiliated companies in respect of the three fiscal years
immediately preceding the fiscal year in which the Effective Date occurs
(annualized for any fiscal year during the Employment Period consisting of less
than twelve full months or with respect to which the Executive has been employed
by the Company for less than twelve full months) (the "Recent Annual Bonus").
Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.

      (iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to Annual Base
Salary and Annual Bonus payable as hereinabove provided, the Executive shall be
entitled to participate during the Employment Period in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive, savings and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than (x) the most favorable of those provided by
the Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 90-day
period immediately preceding the Effective Date or (y) if more favorable to the
Executive, those provided at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.

      (iv)  WELFARE BENEFIT PLANS. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent generally applicable
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than (x) the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or (y) if more favorable to the Executive, those provided at any
time after the Effective Date generally to other peer executives of the Company
and its affiliated companies.

      (v)   EXPENSES. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.



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      (vi)  FRINGE BENEFITS. During the Employment Period, the Executive shall
be entitled to fringe benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.

      (vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 90-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.

      (viii) VACATION. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated companies as in effect
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer incentives of the Company and its
affiliated companies.

      5.    TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 14(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" means the absence of the Executive from the Executive's duties with
the Company on a full-time basis for 180 consecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or Executive's legal representative (such agreement
as to acceptability not to be withheld unreasonably).

      (b)   CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" means
(i) an action taken by the Executive involving willful and wanton malfeasance
involving specifically a wholly wrongful and unlawful act, or (ii) the Executive
being convicted of a felony.

      (c)   GOOD REASON. The Executive's employment may be terminated during the
Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good Reason" means:



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                                       -6-

      (i)   the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;

      (ii)  any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;

      (iii) the Company's requiring the Executive to be based at any office or
location other than that described in Section 4(a)(i)(B) hereof;

      (iv)  any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or

      (v)   any failure by the Company to comply with and satisfy Section 13(c)
of this Agreement.

      For purposes of this Agreement, any good faith determination of Good
Reason made by the Executive shall be conclusive.

      (d)   NOTICE OF TERMINATION. Any termination by the Company for Cause or
by the Executive for Good Reason shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 14(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
fifteen days after the giving of such notice). In the case of a termination of
the Executive's employment for Cause, a Notice of Termination shall include a
copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to the Executive and
reasonable opportunity for the Executive, together with the Executive's counsel,
to be heard before the Board prior to such vote), finding that in the good faith
opinion of the Board the Executive was guilty of conduct constituting Cause. No
purported termination of the Executive's employment for Cause shall be effective
without a Notice of Termination. The failure by the Executive to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive hereunder or
preclude the Executive from asserting such fact or circumstance in enforcing the
Executive's rights hereunder.



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                                       -7-

      (e)   DATE OF TERMINATION. "Date of Termination" means the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be; provided, however, that (i) if the Executive's employment is terminated
by the Company other than for Cause or Disability, the Date of Termination shall
be the date on which the Company notifies the Executive of such termination and
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be. If during the Employment
Period the Executive's employment is terminated by the Executive following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the date
such termination or determination occurs, whichever is later, shall constitute
the Date of Termination.

      6.    OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH. If the
Executive's employment is terminated by reason of the Executive's death during
the Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this Agreement, other
than the following obligations: (i) payment of the Executive's Annual Base
Salary through the Date of Termination to the extent not theretofore paid, (ii)
payment of the product of (x) the greater of (A) the Annual Bonus paid or
payable, including by reason of deferral, (and annualized for any fiscal year
consisting of less than twelve full months or for which the Executive has been
employed for less than twelve full months) for the most recently completed
fiscal year during the Employment Period, if any, and (B) the Recent Annual
Bonus (such greater amount hereafter referred to as the "Highest Annual Bonus")
and (y) a fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of which is 365
and (iii) payment of any compensation previously deferred by the Executive
(together with any accrued interest thereon) and not yet paid by the Company and
any accrued vacation pay not yet paid by the Company (the amounts described in
paragraphs (i), (ii) and (iii) are hereafter referred to as "Accrued
Obligations"). All Accrued Obligations shall be paid to the Executive's estate
or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date
of Termination. In addition, the Executive's estate or designated beneficiaries
shall be entitled to receive the Executive's Annual Base Salary for the balance
of the Employment Period; PROVIDED, HOWEVER, that such payments of Annual Base
Salary shall be reduced by any survivor benefits paid to the Executive's estate
or designated beneficiary under the Retirement Plan. Anything in this Agreement
to the contrary notwithstanding, the Executive's estate and family shall be
entitled to receive benefits at least equal to the most favorable benefits
provided generally by the Company and any of its affiliated companies to the
estates and surviving families of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, as in effect generally with respect to other peer
executives and their estates and families at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect on the date of the Executive's death
generally with respect to other peer executives of the Company and its
affiliated companies and their families.

      (b)   DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. All Accrued Obligations



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                                       -8-

shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination. In addition, the Executive shall be entitled to receive the
Executive's Annual Base Salary for the balance of the Employment Period;
PROVIDED, HOWEVER, that such payments of Annual Base Salary shall be reduced by
any benefits paid to the Executive under the Retirement Plan by reason of
Disability. Anything in this Agreement to the contrary notwithstanding, the
Executive shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to the most favorable of those
generally provided by the Company and its affiliated companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.

      (c)   CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive Annual Base Salary through the Date of Termination plus
the amount of any compensation previously deferred by the Executive, in each
case to the extent theretofore unpaid. If the Executive terminates employment
during the Employment Period other than for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations. In such case, all Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.

      (d)   GOOD REASON; OTHER THAN FOR CAUSE OR DISABILITY. If, (1) during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability, or the Executive shall terminate employment during
the Employment Period for Good Reason or (2) during the Employment Period the
Executive's employment is terminated by the Executive during or following a
restructuring program and the Board determines that Executive has substantially
completed his duties with respect to the restructuring program and the Company's
needs for the Executive's services have been substantially diminished, the
Company shall pay to the Executive in a lump sum in cash within 60 days after
the Date of Termination, and subject to receiving an executed irrevocable
Release as described in Section 10, the aggregate of the following amounts:

      A.    all Accrued Obligations; and

      B.    the product of (x) three and (y) the sum of (i) Annual Base Salary
            and (ii) the Highest Annual Bonus; and

      C.    a lump-sum retirement benefit equal to the difference between (a)
            the actuarial equivalent of the benefit under the Nashua Corporation
            Retirement Plan for Salaried Employees (the "Retirement Plan") and
            any supplemental and/or excess retirement plan providing benefits
            for the Executive (the "SERP") which the Executive would receive if
            the Executive's employment continued at the



<PAGE>   9

                                       -9-

            compensation level provided for in Sections 4(b)(i) and 4(b)(ii) of
            this Agreement for the remainder of the Employment Period, assuming
            for this purpose that all accrued benefits are fully vested, and (b)
            the actuarial equivalent of the Executive's actual benefit (paid or
            payable), if any, under the Retirement Plan and the SERP; for
            purposes of determining the amount payable pursuant to this Section
            6(d)(i)C the accrual formulas and actuarial assumptions utilized
            shall be no less favorable than those in effect with respect to the
            Retirement Plan and the SERP during the 90-day period immediately
            prior to the Effective Date.

If, before the Employment Period, the Executive's employment is terminated by
the Company for reason other than misconduct, the Company shall pay to the
Executive one year's salary continuation.

In addition, for the remainder of the Employment Period (if the termination took
place during the Employment Period under Sections 6(d)(1) or 6(d)(2) above) or
for one year following termination of employment before the Employment Period
under the immediately preceding sentence, or such longer period as any plan,
program, practice or policy may provide, the Company shall continue benefits to
the Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated companies
applicable generally to other peer executives and their families during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families. For purposes of determining eligibility of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period.

Notwithstanding the foregoing, if a Change of Control shall have occurred before
the Date of Termination, the aggregate amount of "parachute payments", as
defined in Section 280G of the Internal Revenue Code of 1986, as amended from
time to time (the "Code") payable to the Executive pursuant to all arrangements
with the Company shall not exceed one dollar less than three times the
Executive's "base amount", as defined in Section 280G of the Code (the "cut back
amount"); provided, however, that if Executive would be better off by at least
$25,000 on an after-tax basis by receiving the full amount of the parachute
payments as opposed to the cut back amount (notwithstanding a 20% excise tax)
the Executive shall receive the full amount of the parachute payments.

      7.    NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, programs, policies or practices, provided by
the Company or any of its affiliated companies and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its
affiliated companies. Amounts which are vested benefits or which the Executive
is otherwise entitled to receive under any plan, policy, practice or program of
the Company or any of its affiliated



<PAGE>   10

                                      -10-

companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program except as explicitly
modified by this Agreement.

      8.    FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof, plus in each case interest at the applicable
Federal rate provided for in Section 7872(f)(2) of the Internal Revenue Code of
l986, as amended (the "Code").

      9.    OTHER AGREEMENTS, SUPERSESSION AND CREDITING. The parties agree that
this Agreement supersedes the Employment Agreement between the parties dated as
of April 28, 1989 which is null and void. Any payments made to Executive by the
Company relating to the Executive's termination of employment under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies) shall
be credited toward payments made under this Agreement. Any payments made to
Executive by the Company relating to the Executive's termination of employment
under this Agreement shall be credited toward payments made under any other
agreement, policy, understanding or letter (including but not limited to
employment agreements, severance agreements and job abolishment policies).

      10.   RELEASE. Prior to receipt of the payment described in Section 6(d)
the Executive shall execute and deliver a Release to the Company as follows:

      The Executive hereby fully, forever, irrevocably and unconditionally
      releases, remises and discharges the Company, its officers, directors,
      stockholders, corporate affiliates, agents and employees from any and all
      claims, charges, complaints, demands, actions, causes of action, suits,
      rights, debts, sums of money, costs, accounts, reckonings, covenants,
      contracts, agreements, promises, doings, omissions, damages, executions,
      obligations, liabilities and expenses (including attorneys' fees and
      costs), of every kind and nature which he ever had or now has against the
      Company, its officers, directors, stockholders, corporate affiliates,
      agents and employees, including, but not limited to, all claims arising
      out of his employment, all employment discrimination claims under Title
      VII of the Civil Rights Act of 1964, 42 U.S.C. ss.2000e ET SEQ., the Age
      Discrimination in Employment Act, 29 U.S.C., ss.621 ET SEQ., the Americans
      With Disabilities Act, 42 U.S.C., ss.12101 ET SEQ., the New Hampshire Law
      Against Discrimination, N.H. Rev. Stat. Ann. ss.354-A:1 ET SEQ. and
      similar state antidiscrimination laws, damages arising out of all
      employment discrimination claims, wrongful discharge claims or other
      common law claims and damages, provided, however, that nothing herein
      shall release the Company from Executive's Stock Option Agreements or



<PAGE>   11

                                      -11-

      Restricted Stock Agreements. The Release shall also contain, at a minimum,
      the following language:

                  The Executive acknowledges that he has been given twenty-one
                  (21) days to consider the terms of this Release and that the
                  Company advised him to consult with an attorney of his own
                  choosing prior to signing this Release. The Executive may
                  revoke this Release for a period of seven (7) days after the
                  execution of the Release and the Release shall not be
                  effective or enforceable until the expiration of this seven
                  (7) day revocation period.

At the same time, the Company shall execute and deliver a Release to the
Executive as follows:

      The Company hereby fully, forever, irrevocably and unconditionally
      releases, remises and discharges the Executive from any and all claims
      which it ever had or now has against the Executive, other than for
      intentional harmful acts.

      11.   CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 11 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.

      12.   ARBITRATION. Any controversy or claim arising out of this Agreement
shall be settled by binding arbitration in accordance with the commercial rules,
policies and procedures of the American Arbitration Association. Judgment upon
any award rendered by the arbitrator may be entered in any court of law having
jurisdiction thereof. Arbitration shall take place in Nashua, New Hampshire at a
mutually convenient location.

      13.   SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

      (b)   This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.

      (c)   The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the



<PAGE>   12

                                      -12-

Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

      14.   MISCELLANEOUS. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

      (b)   All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

         If to the Executive:
         --------------------

                  Paul Buffum
                  618 Isaac Frye Highway
                  Wilton, NH  03086

         If to the Company:
         ------------------

                  Nashua Corporation
                  44 Franklin Street
                  Nashua, New Hampshire 03060
                  Attention:  President

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

      (c)   The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

      (d)   The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

      (e)   The Executive's failure to insist upon strict compliance with any
provision hereof or the failure to assert any right the Executive may have
hereunder, including, without limitation, the right to terminate employment for
Good Reason pursuant to Section 5(c)(i)-(v), shall not be deemed to be a waiver
of such provision or right or any other provision or right thereof.




<PAGE>   13

                                      -13-

      (f)   During the Employment Period, the Executive shall have the right to
petition the Board to make a good faith determination that he has substantially
completed his duties with respect to the restructuring program and that the
Company's needs for his services have been substantially diminished.

      (g)   This Agreement contains the entire understanding of the Company and
the Executive with respect to the subject matter hereof.

      IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.



NASHUA CORPORATION                               EXECUTIVE



By  /s/ Gerald G. Garbacz                         /s/ Paul Buffum   
   -----------------------------------------     -----------------------------
   President and Chief Executive Officer         Name: Paul Buffum