PIONEER COMPANIES INC
SEVERANCE AGREEMENT - MICHAEL J. FERRIS
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>6
<FILENAME>h03458exv10w3.txt
<DESCRIPTION>SEVERANCE AGREEMENT - MICHAEL J. FERRIS
<TEXT>
<PAGE>

                               September 30, 2002


Mr. Michael J. Ferris
3108 Locke Lane
Houston, Texas 77019

Dear Mike:

                  In connection with your separation from Pioneer Companies,
Inc. (the "Company"), you and the Company have agreed to the terms and
conditions as contained in the attachment (the "Attachment") and this letter
agreement (the "Letter Agreement") (hereinafter the Attachment and the Letter
Agreement are jointly this "Agreement") concerning your separation from
employment as of the close of business on September 30, 2002 (the "Separation
Date"). The Attachment is part of the Letter Agreement for all purposes.

                  The Company agrees to provide you with the benefits, payments
and other items described in this Agreement.

                  In consideration of the Company's agreement to provide the
benefits, payments, and other items described in this Agreement, some of which
are in addition to anything to which you are already entitled and the receipt
and sufficiency of which are hereby acknowledged, you hereby release and forever
discharge the Company and its parents, subsidiaries and affiliates, and their
officers, directors, agents, servants, employees, successors, assigns and
insurers, and any and all other persons, firms, organizations and corporations
from any and all damages, losses, causes of action, expenses, demands,
liabilities and claims on behalf of yourself, your heirs, executors,
administrators and assigns with respect to all matters relating to the Company,
and you hereby accept the cash payments, benefits and other items described
herein in full settlement of all such damages, losses, causes of action,
expenses, demands, liabilities and claims you now have or may have with respect
to such matters; provided, however, that, notwithstanding the foregoing release
and discharge, you shall retain all rights to any claims arising from a breach
of this Agreement.

                  This release includes, but is not limited to, claims arising
under the Age Discrimination in Employment Act, the Older Workers' Benefit
Protection Act, Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act, the Family and Medical Leave Act, the Texas Labor Code, any
state or federal statute, regulation or common law pertaining to
"whistle-blowers," any claims for breach of contract, tort or personal injury of
any sort, and any claims under any other state or federal statute or regulation,
in equity or at common law. Further, by accepting the payments described in this
Agreement, you agree not to sue the Company or the related persons and entities
described above with respect to any matters released hereunder. You affirm and
agree that your employment relationship ends on your Separation Date, and as of
such date you withdraw unequivocally, completely and finally from your


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employment, and as of September 17, 2002, you resign all positions, titles,
responsibilities and authority as a director, officer or employee of the Company
and its parents, subsidiaries and affiliates and waive all rights in connection
with such relationship except to vested benefits and the payments and benefits
described in this Agreement. You agree that this Agreement is valid, fair,
adequate and reasonable, was entered into with your full knowledge and consent,
and was not procured through fraud, duress or mistake. You shall have 21 days to
decide whether to sign this Agreement and be bound by its terms. You shall have
the right to revoke or cancel it within 7 days (the "Revocation Period") after
you have signed it. This cancellation or revocation can be accomplished by
delivery of a written notification to me. In the event that this Agreement is
canceled or revoked, the Company shall have no obligation to furnish the
payments and benefits described herein, except for any compensation that is due,
benefits that are vested, and/or other contractual rights and obligations as of
the Separation Date. You acknowledge that you have been advised in writing to
consult with an attorney prior to signing this Agreement and have had an
adequate opportunity to seek advice of your own choosing. You acknowledge that
you have read this Agreement, have consulted with an attorney, have had an
opportunity to ask questions and have it explained to you and that you
understand that the Agreement will have the effect of knowingly and voluntarily
waiving any action you might pursue, including breach of contract, personal
injury, retaliation, discrimination on the basis of race, age, sex, national
origin or disability and any other claims arising prior to the date of the
Agreement.

                  In consideration of your agreements in this Agreement, the
Company, its parents, subsidiaries, affiliates, predecessors, and successors
hereby release and forever discharge you from any and all damages, losses,
causes of action, expenses, demands, liabilities and claims with respect to all
matters relating to or arising from your employment, including, without
limitation, any and all of your actions or inactions done while employed by the
Company or its predecessors, subsidiaries, or affiliates; provided, however, the
preceding sentence shall not apply to any willful conduct which results in a
fraud upon the Company, misappropriation of funds or other property of the
Company, or criminal conduct which was demonstrably injurious to the property or
business of the Company. If at any time after your termination, you are made a
party to, or are threatened to be made a party in, any civil, criminal or
administrative action, suit or proceeding by reason of the fact that you are or
were a director, officer, employee or agent of the Company, or of any other
corporation or any partnership, joint venture, trust or other enterprise for
which you served as such at the request of the Company, then you shall be
indemnified by the Company, to the fullest extent permitted under applicable
law, against expenses actually and reasonably incurred by you or imposed on you
in connection with, or resulting from, any appeal therein if you acted in good
faith and in a manner you reasonably believed to be in or not opposed to the
best interest of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe your conduct was unlawful, except
with respect to matters as to which it is adjudged that you are liable to the
Company or to such other corporation, partnership, joint venture, trust or other
enterprise for gross negligence or willful misconduct in the performance of your
duties. As used herein, the term "expenses" shall include all obligations
actually and reasonably incurred by you for the payment of money, including,
without limitation, attorney's fees, judgments, awards, fines, penalties and
amounts paid in satisfaction of a judgment or in settlement of any such action,
suit or proceeding, except amounts paid to the Company or such other
corporation, partnership, joint venture, trust or other enterprise by you. The
foregoing indemnification provisions shall be in addition to any other rights to
indemnification to which you may be entitled.


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                  You recognize and acknowledge that you have had access to
certain information concerning the Company that is confidential and proprietary
and constitutes valuable and unique property of the Company. You agree that you
will not at any time disclose to others, use, copy or permit to be copied,
except pursuant to your duties on behalf of the Company or its successors,
assigns or nominees, any secret or confidential information of the Company
(whether or not developed by you) without the prior written consent of the Board
of Directors of the Company. The term "secret or confidential information of the
Company" (sometimes referred to herein as "Confidential Information") shall
include, without limitation, the Company's plans, strategies, potential
acquisitions, costs, prices, systems for buying, selling, and/or trading
relating to the manufacture or marketing of chlorine, caustic soda and related
products, client lists, pricing policies, financial information, the names of
and pertinent information regarding suppliers, computer programs, policy or
procedure manuals, training and recruiting procedures, accounting procedures,
the status and content of the Company's contracts with its suppliers or clients,
or servicing methods and techniques at any time used, developed, or investigated
by the Company, before or during your tenure of employment to the extent any of
the foregoing are (i) not generally available to the public and (ii) maintained
as confidential by the Company. You further agree to maintain in confidence any
confidential information of third parties received as a result of your
employment and duties with the Company. You affirm that you have delivered to
the Company, as determined appropriate by the Company, all correspondence,
memoranda, notes, records, client lists, computer systems, programs, or other
documents and all copies thereof made, composed or received by you, solely or
jointly with others, and which are in your possession, custody or control at
such date and which are related in any manner to the past, present or
anticipated business of the Company. You and the Company further agree that the
terms of this Agreement, including all terms and conditions contained in the
Attachment, shall be kept strictly confidential and that any disclosure to
anyone for any purpose whatsoever (save and except disclosure to your spouse, to
financial institutions as part of a financial statement, to immediate family
members and/or heirs, to financial, tax and legal advisors, or as required by
law) by you or the Company shall be a breach of this Agreement. The
aforementioned is in addition to and does not limit any existing confidentiality
agreement.

                  For a period of 12 months following the Separation Date, you
agree that you will not solicit, raid, entice, encourage or induce any person
who at the time of your termination of employment is an employee of the Company,
or any of its parents, subsidiaries or affiliates or to become employed by any
person, firm or corporation or to discontinue their employment with the Company.
You further agree, for the 12-month period, to refrain from approaching any such
employee for such purpose or authorizing or knowingly approving such actions by
any other person, firm or corporation or assisting any such person, firm or
corporation in taking such action.

                  You agree that the disclosure and solicitation restrictions in
the two preceding paragraphs contain reasonable limitations as to the time,
geographical area, and scope of activity to be restrained and that these
restrictions do not impose any greater restraint than is necessary to protect
the goodwill and other legitimate business interests of the Company, including,
but not limited to, the protection of Confidential Information. You also agree
that the general public shall not be harmed by enforcement of these provisions.
Should either of these provisions be held unreasonably broad with respect to the
restrictions as to time, geographical area or scope of activity to be
restrained, any such restriction shall be construed by limiting and reducing it
to the


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extent necessary to render it reasonable, and as so construed, such provision
shall be enforced. Furthermore, you consent and agree that if you violate these
nondisclosure or nonsolicitation provisions, the Company, its parents,
subsidiaries and affiliates would sustain irreparable harm and, therefore, in
addition to any other remedies which the Company may have under this Agreement
or otherwise, the Company shall be entitled to an injunction from any court of
competent jurisdiction restraining you from committing or continuing any such
violation. You acknowledge that damages at law would not be an adequate remedy
for violation of these nondisclosure and nonsolicitation provisions, and you
therefore agree that they may be specifically enforced against you in any court
of competent jurisdiction. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to the Company for such
breach or threatened breach, including the recovery of damages from you.

                  As a material inducement to the Company to enter into this
Agreement, you agree that you will not (i) publicly criticize or disparage the
Company or any Related Party (as defined below), or privately criticize or
disparage the Company or any Related Party in a manner intended or reasonably
calculated to result in public embarrassment to, or injury to the reputation of,
the Company or any Related Party; (ii) commit damage to the property of the
Company or any Related Party or otherwise engage in any misconduct which is
injurious to the business or reputation of the Company or any Related Party; or
(iii) take any other action, or assist any person in taking any other action,
that is materially adverse to the interests of the Company or any Related Party
or inconsistent with fostering the goodwill of the Company or any Related Party.
In addition, you agree not to make any public statements regarding the Company
or its business without prior written consent of the Company. As used in this
section, the term "Related Party" means the Company or any affiliate, any
officer, director or executive of the Company or any affiliate, and any former
officer, director or executive of the Company or any affiliate.

                  You agree to furnish such information and proper assistance as
may be reasonably necessary in connection with any inquiry, investigation,
dispute, litigation, regulatory proceeding or other action in which the Company
is or may become involved insofar as it relates to matters that occurred during
your employment, and if you are called upon to serve as a witness or provide
assistance in or with respect to any such proceeding, you agree to cooperate
with the Company to the full extent permitted by law, and the Company agrees
that any such call shall be with reasonable notice, shall not unnecessarily
interfere with your later employment, and shall provide for payment for your
costs incurred in such matters. Furthermore, you will promptly give written
notice to the Company of any inquiry, approach or other notice you receive or
are informed of by or from any private party or governmental entity regarding
any inquiry, investigation, dispute, litigation, regulatory proceeding or other
action involving the Company. The provisions of this Agreement shall not apply
to or restrict in any way the communication of information by you to any state
or federal law enforcement agency or require notice to the Company thereof.

                  The parties hereto may attempt to resolve any dispute under
this Agreement informally via mediation or other means. Otherwise, the parties
agree that any controversy or claim arising out of or relating to this
Agreement, or any breach thereof, except as provided in the preceding paragraph,
must be adjudged by arbitration in accordance with the rules of the American
Arbitration Association, and judgment upon such award rendered by the arbitrator


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may be entered in any court having jurisdiction thereof. The arbitration must be
held in the city of Houston, Texas, or such other place as may be agreed upon at
the time by the parties to the arbitration. The arbitrator(s) will, in their
award, allocate between the parties the costs of arbitration, which will include
reasonable attorneys' fees of the parties, as well as the arbitrators' fees and
expenses, in such proportions as the arbitrator(s) deem just. THIS AGREEMENT
SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT
OTHERWISE REFER TO THE SUBSTANTIVE LAW OF ANOTHER JURISDICTION.

                  Any notice or other communication required or permitted
pursuant to the terms of this Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States mail, first
class, postage prepaid and registered with return receipt requested, addressed
to the intended recipient at his or its address set forth below and, in the case
of a notice or other communication to the Company, directed to the attention of
the Board of Directors of the Company with a copy to the Secretary of the
Company, or to such other address as the intended recipient may have theretofore
furnished to the sender in writing in accordance herewith, except that until any
notice of change of address is received, notices shall be sent to the following
addresses:

                  IF TO YOU:                   IF TO THE COMPANY:

                      Michael Ferris               Pioneer Companies. Inc.
                      3108 Locke Lane              700 Louisiana, Suite 4200
                      Houston, Texas 77019         Houston, Texas 77002
                                                   Attn: Chief Executive Officer

                  This Agreement supersedes all previous employment agreements,
written or oral, between the Company and you. This Agreement may be amended only
by written amendment duly executed by both parties hereto or their legal
representatives and authorized by action of the Board of Directors of the
Company. Except as otherwise specifically provided in this Agreement, no waiver
by either party hereto of any breach by the other party hereto of any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of a subsequent breach of such condition or provision or waiver
of a similar or dissimilar provision or condition at the same or at any prior or
subsequent time. Notwithstanding anything to the contrary set forth in this
Agreement, the Company may cause any of its subsidiaries for which you render
services to pay or otherwise satisfy, in whole or in part, some or all of the
Company's obligations hereunder.

                  If any one or more of the provisions or parts of a provision
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity or unenforceability shall not
affect any other provision or part of a provision of this Agreement, but this
Agreement shall be reformed and construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained herein
and such provisions or part thereof shall be reformed so that it would be valid,
legal and enforceable to the maximum extent permitted by law. Except as
otherwise indicated, this Agreement is not assignable without the written
authorization of both parties, provided that the Company may


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assign this Agreement to any entity to which the Company transfers substantially
all of its assets or to any entity which is a successor to the Company by
reorganization, incorporation, merger or similar business combination.

                  This Agreement may be executed in one or more counterparts,
which shall, collectively and separately, constitute one agreement.

                                       Very truly yours,

                                       /s/ Michael Y McGovern
                                       -----------------------------------------
                                       Michael Y McGovern
                                       President and Chief Executive Officer

AGREED TO AND ACCEPTED this
1st day of October, 2002


/s/ Michael J. Ferris
-------------------------------
Michael J. Ferris


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<PAGE>

              Attachment to the Agreement dated September 30, 2002


1.       SALARY CONTINUATION

                  For the twenty-four month period commencing on your Separation
Date (the "Salary Continuation Period"), you will receive monthly payments in
the amount of $25,333 and on the same schedule as the Company's payroll schedule
in effect immediately prior to your Separation Date, subject to applicable
withholding for FICA and income taxes.

2.       ACCRUED BONUS

                  You have already received a lump sum cash payment in the
amount of $200,000, subject to applicable withholding for FICA and income taxes,
in full satisfaction of any bonus you were entitled to by reason of or relating
to the emergence of the Company from bankruptcy or for any subsequent period.

3.       HEALTH AND WELFARE CONTINUATION

                  During the Salary Continuation Period, you will receive the
same medical and dental coverage generally available to Company salaried
employees. Upon the expiration of the Salary Continuation Period, you agree that
all Company provided health and dental benefits will be terminated; provided,
however, that you will allowed, following the lapse of the Salary Continuation
Period, to continue your Company medical and dental benefits coverage for a
period not to exceed the greater of (i) the maximum period required under the
Consolidated Omnibus Reconciliation Act of 1986, as amended ("COBRA"), for the
continuation of such coverage or (ii) 60 months following the lapse of the
Salary Continuation Period . If you should elect such continuation of Company
medical and dental benefits coverage, you will be required to pay for such
coverage in an amount not to exceed the maximum amount which may be charged for
such coverage under COBRA. Notwithstanding any of the foregoing, any coverage
and benefits provided to you under this paragraph 3, whether during the period
in which the Company pays for such continuation coverage or during the period in
which you elect to pay for such continuation coverage, shall be secondary to any
non-Company provided medical or dental coverage under which you, your spouse
and/or dependents are entitled to benefits

4.       STOCK OPTIONS

                  Because your options have not been outstanding for at least
one year, they will all expire as of the Separation Date.

5.       ATTORNEY'S FEES

                  On your Separation Date, you will receive a lump sum cash
payment, not to exceed $4,000, for attorney's fees incurred by you for legal
advice related to this agreement and which the Board of Directors of the Company
has determined to be reasonable.


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6.       CONSULTING

                  For two years following the Separation Date, you agreed to
provide consulting services to the Company, as reasonably requested by the CEO
of the Company, including assisting with operational and legal matters. The
Company agrees to pay you in arrears for this consulting obligation the monthly
amount of $8,000.

7.       OTHER BENEFITS

                  You are entitled to no other benefits or pay, including
vacation pay, and pension plan accruals shall cease as of the Separation Date.

8.       COMPUTERS

                  You may retain your Company laptop computer provided that you
delete all Company information or materials from such computer.

9.       PAYMENTS TO ESTATE

                  In the event of your death, to the extent that any of the
Company's obligations to you for salary continuation pay or consulting fees, as
respectively provided for in paragraphs 1 and 6 of this Attachment, remain
outstanding to you at the time of your death , the Company will continue to make
such payments to your estate in the time and manner set forth in the appropriate
provisions of paragraphs 1 and 6 of this Attachment.


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