Exhibit 10.10

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT is entered into as of August 8, 2003 by and among
Riverwood International Corporation, a Delaware corporation (“Employer”),
Riverwood Holding, Inc., a Delaware corporation (“Holding”) and Michael R.
Schmal (“Executive”).

 

W I T N E S S E T H:

 

WHEREAS, Employer desires to employ Executive as its Senior Vice President
Beverage on the terms and conditions set forth herein;

 

WHEREAS, Executive desires to accept such employment on the terms and conditions
set forth herein;

 

WHEREAS, each of Employer, Holding and Executive agrees that Executive will have
a prominent role in the management of the business, and the development of the
goodwill, of Employer and its Affiliates (as defined below) and will establish
and develop relations and contacts with the principal customers and suppliers of
Employer and its Affiliates in the United States and the rest of the world, all
of which constitute valuable goodwill of, and could be used by Executive to
compete unfairly with, Employer and its Affiliates;

 

WHEREAS, (i) in the course of his employment with Employer, Executive will
obtain confidential and proprietary information and trade secrets concerning the
business and operations of Employer and its Affiliates in the United States and
the rest of the world that could be used to compete unfairly with Employer and
its Affiliates; (ii) the covenants and restrictions contained in Sections 8
through 13, inclusive, are intended to protect the legitimate interests of
Employer and its Affiliates in their respective goodwill, trade secrets and
other confidential and proprietary information; and (iii) Executive desires to
be bound by such covenants and restrictions;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein and for other good and valuable consideration,
Employer, Holding and Executive hereby agree as follows:

 

 1  Agreement to Employ.  Upon the terms and subject to the conditions of this
Agreement, Employer hereby employs Executive, and Executive hereby accepts
employment by Employer.

 

2  Term; Position and Responsibilities.

 

(a)                                  Term of Employment. Unless Executive’s
employment shall sooner terminate pursuant to Section 7, Employer shall employ
Executive for a term commencing on the date hereof and ending on the second
anniversary of the date hereof (the “Initial Term”). Effective upon the
expiration of the Initial Term and of each Additional Term (as defined below),
Executive’s employment hereunder shall be deemed to be automatically extended,
upon the same terms and conditions, for an additional period of one year (each,
an “Additional Term”), in each such case, commencing upon the expiration of the
Initial Term or the then current Additional Term, as the case may be, unless
Employer, at least 180 days prior to the expiration of the Initial Term or such
Additional Term, shall give written notice (a”Non-Extension Notice”) to
Executive of its intention not to extend the Employment Period (as defined
below) hereunder, provided that a Non-Extension Notice shall not constitute a
notice to Executive of the termination of his employment by Employer unless such
notice specifically provides for such termination of employment and the specific
date thereof. The period during which Executive is employed pursuant to this
Agreement, including any extension thereof in accordance with the preceding
sentence, shall be referred to as the “Employment Period”.

 

(b)                                 Position and Responsibilities. During the
Employment Period, Executive shall serve as Senior Vice President Beverage of
Employer and have such duties and responsibilities as are customarily assigned
to individuals serving in such position and such other duties consistent with
Executive’s title

 

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and position as the Board of Directors of Employer (“Employer’s Board”)
specifies from time to time. Executive shall report to the Company’s Executive
Vice President, Commercial Operations. Executive shall devote all of his skill,
knowledge and working time (except for (i) vacation time as set forth in
Section 6(c) and absence for sickness or similar disability and (ii) to the
extent that it does not interfere with the performance of Executive’s duties
hereunder, (A) such reasonable time as may be devoted to service on boards of
directors of other corporations and entities, subject to the provisions of
Section 9, and the fulfillment of civic responsibilities and (B) such reasonable
time as may be necessary from time to time for personal financial matters) to
the conscientious performance of the duties and responsibilities of such
position. If so elected or designated by the respective shareholders thereof,
Executive shall serve as a member of the Boards of Directors of Holding,
Employer and their respective Affiliates during the Employment Period without
additional compensation.

 

3  Base Salary.  As compensation for the services to be performed by Executive
during the Employment Period, Employer shall pay Executive a base salary at an
annualized rate of $300,000, payable in installments on Employer’s regular
payroll dates, and, in the event that Executive’s employment hereunder is
terminated by death, for the remainder of the pay period in which death occurs
and for one month thereafter. Employer’s Board shall review Executive’s base
salary annually during the period of his employment hereunder and, in its sole
discretion, Employer’s Board may increase (but may not decrease) such base
salary from time to time based upon the performance of Executive, the financial
condition of Employer, prevailing industry salary levels and such other factors
as Employer’s Board shall consider relevant. (The annual base salary payable to
Executive under this Section 3, as the same may be increased from time to time
and without regard to any reduction therefrom in accordance with the next
sentence, shall hereinafter be referred to as the “Base Salary”.) The Base
Salary payable under this Section 3 shall be reduced to the extent that
Executive elects to defer such Base Salary under the terms of any deferred
compensation, savings plan or other voluntary deferral arrangement that may be
maintained or established by Employer.

 

4  Incentive Compensation Arrangements.  During the Employment Period, Executive
shall participate in Employer’s incentive compensation programs for its senior
executives existing from time to time, at a level commensurate with his position
and duties with Employer and based on such performance targets as may be
established from time to time by Employer’s Board or a committee thereof.

 

5  Employee Benefits.  During the Employment Period, employee benefits,
including life, medical, dental, accidental death and dismemberment, business
travel accident, prescription drug and disability insurance, shall be provided
to Executive in accordance with the programs of Employer then available to its
senior executives, as the same may be amended and in effect from time to time.
Executive shall also be entitled to participate in all of Employer’s profit
sharing, pension, retirement, deferred compensation and savings plans, as the
same may be amended and in effect from time to time, applicable to senior
executives of Employer. The benefits referred to in this Section 5 shall be
provided to Executive on a basis that is commensurate with Executive’s position
and duties with Employer hereunder and that is no less favorable than that of
similarly situated employees of Employer.

 

6  Perquisites and Expenses.

 

(a)                                  General. During the Employment Period,
Executive shall be entitled to the perquisites set forth on Schedule I hereto.

 

(b)                                 Business Travel, Lodging, etc. Employer
shall reimburse Executive for reasonable travel, lodging, meal and other
reasonable expenses incurred by him in connection with his performance of
services hereunder upon submission of evidence, satisfactory to Employer, of the
incurrence and purpose of each such expense and otherwise in accordance with
Employer’s business travel reimbursement policy applicable to its senior
executives as in effect from time to time.

 

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(c)                                  Vacation. During the Employment Period,
Executive shall be entitled to a number of weeks of paid vacation on an
annualized basis, without carryover accumulation, equal to the greater of (i)
four weeks and (ii) the number of weeks of paid vacation per year applicable to
senior executives of Employer in accordance with its vacation policy as in
effect from time to time.

 

 7  Termination of Employment.

 

(a)                                  Termination Due to Death or Disability. In
the event that Executive’s employment hereunder terminates due to death or is
terminated by Employer due to Executive’s Disability (as defined below), no
termination benefits shall be payable to or in respect of Executive except as
provided in Section 7(f)(ii). For purposes of this Agreement, “Disability” shall
mean a physical or mental disability that prevents or would prevent the
performance by Executive of his duties hereunder for a continuous period of six
months or longer. The determination of Executive’s Disability shall (i) be made
by an independent physician who is reasonably acceptable to Employer and
Executive (or his representative), (ii) be final and binding on the parties
hereto and (iii) be based on such competent medical evidence as shall be
presented to such independent physician by Executive and/or Employer or by any
physician or group of physicians or other competent medical experts employed by
Executive and/or Employer to advise such independent physician.

 

(b)                                 Termination by Employer for Cause. Executive
may be terminated for Cause (as defined below) by Employer, provided that
Executive shall be permitted to attend a meeting of Employer’s Board within
30 days after delivery to him of a Notice of Termination (as defined below)
pursuant to this Section 7(b) to explain why he should not be terminated for
Cause and, if following any such explanation by Executive, Employer’s Board
determines that Employer does not have Cause to terminate Executive’s
employment, any such prior Notice of Termination delivered to Executive shall
thereupon be withdrawn and of no further force or effect. “Cause” shall mean (i)
the willful failure of Executive substantially to perform his duties hereunder
(other than any such failure due to Executive’s physical or mental illness) or
other willful and material breach by Executive of any of his obligations
hereunder or under any option agreement or other incentive award agreement,
after a written demand for substantial performance has been delivered, and a
reasonable opportunity to cure has been given, to Executive by Employer’s Board,
which demand identifies in reasonable detail the manner in which Employer’s
Board believes that Executive has not substantially performed his duties or has
breached his obligations, (ii) Executive’s engaging in willful and serious
misconduct that has caused or is reasonably expected to result in material
injury to Employer or any of its Affiliates or (iii) Executive’s conviction of,
or entering a plea of guilty or nolo contendere to, a crime that constitutes a
felony.

 

(c)                                  Termination Without Cause. A termination
“Without Cause” shall mean a termination of employment by Employer other than
due to Disability as described in Section 7(a) or for Cause as described in
Section 7(b).

 

(d)                                 Termination by Executive. Executive may
terminate his employment for any reason. A termination of employment by
Executive for “Good Reason” shall mean a termination by Executive of his
employment with Employer within 30 days following the occurrence, without
Executive’s consent, of any of the following events: (i) the assignment to
Executive of duties that are significantly different from, and that result in a
substantial diminution of, the duties that he is to assume on the date hereof,
(ii) the failure of Employer to obtain the assumption of this Agreement by any
Successor (as defined below) to Employer as contemplated by Section 14, (iii) a
reduction in the rate of Executive’s Base Salary, (iv) a material breach by
Employer of any of its obligations hereunder or by Holding of any of its
obligations under any option agreement or other incentive award agreement or (v)
delivery to Executive of a Non-Extension Notice, provided that, in the case of
any of clauses (i), (iii) or (iv), within 30 days following the occurrence of
any of the events set forth therein, Executive shall have delivered written
notice to Employer of his intention to terminate his employment for Good Reason,
which notice specifies in reasonable detail the circumstances claimed to give
rise to Executive’s right to

 

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terminate his employment for Good Reason, and Employer or Holding, as the case
may be, shall not have cured such circumstances to the reasonable satisfaction
of Executive.

 

(e)                                  Notice of Termination. Any termination by
Employer pursuant to Section 7(a), 7(b) or 7(c), or by Executive pursuant to
Section 7(d), shall be communicated by a written Notice of Termination addressed
to the other parties to this Agreement. A”Notice of Termination” shall mean a
notice stating that Executive’s employment with Employer has been or will be
terminated.

 

(f)                                    Payments Upon Certain Terminations.

 

(i)                                     In the event of a termination of
Executive’s employment by Employer Without Cause or a termination by Executive
of his employment for Good Reason during the Employment Period, Employer shall
pay to Executive (or, following his death, to Executive’s beneficiaries):

 

(A)                              his Base Salary, which shall be payable in
installments on Employer’s regular payroll dates, for the period (the “Severance
Period”) beginning on the Date of Termination (as defined below) and ending on
the first anniversary of the Date of Termination, and

 

(B)                                the product of (1) the amount of incentive
compensation that would have been payable to Executive for the calendar year in
which the Date of Termination occurs if Executive had remained employed for the
entire calendar year and assuming that all applicable performance targets had
been achieved, multiplied by (2) a fraction, the numerator of which is equal to
the number of days in such calendar year that precede the Date of Termination
and the denominator of which is equal to 365 (such product, the “Pro Rata
Bonus”), less

 

(C)                                the amount, if any, paid or payable to
Executive under the terms of any severance plan, policy, program or practice of
Holding, Employer or any of their respective Affiliates applicable to Executive,
as in effect on the Date of Termination;

 

provided that Employer may, at any time, pay to Executive, in a single lump sum
and in satisfaction of Employer’s obligations under clauses (A) and (B) of this
Section 7(f)(i), an amount equal to (x) the installments of the Base Salary then
remaining to be paid to Executive pursuant to clause (A) above, and the amount,
if any, then remaining to be paid to Executive pursuant to clause (B) above,
less (y) the amount, if any, remaining to be paid to Executive pursuant to any
plan, policy, program or practice identified under clause (C) above.

 

If Executive’s employment shall terminate and he is entitled to receive
continued payments of his Base Salary under clause (A) of this Section 7(f)(i),
Employer shall (x) continue to provide to Executive during the Severance Period
the life, medical, dental and prescription drug benefits referred to in
Section 5 (the “Continued Benefits”) and (y) reimburse Executive for expenses
incurred by him for outplacement and career counseling services provided to
Executive for an aggregate amount not in excess of the lesser of (i) $25,000 and
(ii) 20% of Executive’s Base Salary.

 

Executive shall not have a duty to mitigate the costs to Employer under this
Section 7(f)(i), except that Continued Benefits shall be reduced or canceled to
the extent of any comparable benefit coverage earned by (whether or not paid
currently) or offered to Executive during the Severance Period by a subsequent
employer or other Person (as defined below) for which Executive performs
services, including but not limited to consulting services.

 

(ii)                                  If Executive’s employment shall terminate
upon his death or Disability or if Employer shall terminate Executive’s
employment for Cause or Executive shall terminate his employment without Good
Reason during the Employment Period, Employer shall pay Executive his full Base
Salary through the Date of Termination; plus, in the case of termination upon
Executive’s death or Disability, if, as of the Date of Termination, Employer has
achieved the pro rated performance objectives for such calendar year (determined
as provided in Section 7(f)(i)), the Pro Rata Bonus for the portion of the
calendar year preceding Executive’s Date of Termination (exclusive of any time
between the onset of a

 

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physical or mental disability that prevents the performance by Executive of his
duties hereunder and the resulting Date of Termination); plus, in the case of
termination upon Executive’s death, his full Base Salary for the remainder of
the pay period in which death occurs and for one month thereafter, as provided
in Section 3.

 

(iii)                               Except as specifically set forth in this
Section 7(f), no benefits payable to Executive under any otherwise applicable
plan, policy, program or practice of Employer shall be limited by this
Section 7(f), provided that (x) Executive shall not be entitled to receive any
payments or benefits under any such plan, policy, program or practice providing
any bonus or incentive compensation (and the provisions of this Section 7(f)
shall supersede the provisions of any such plan, policy, program or practice),
and (y) the amount, if any, paid or payable to Executive under the terms of any
such plan, policy, program or practice relating to severance shall reduce the
amounts payable under Section 7(f)(i) as provided in clause (C) thereof.

 

(g)                                 Date of Termination. As used in this
Agreement, the term “Date of Termination” shall mean (i) if Executive’s
employment is terminated by his death, the date of his death, (ii) if
Executive’s employment is terminated by Employer for Cause, the date on which
Notice of Termination is given as contemplated by Section 7(e) or, if later, the
date of termination specified in such Notice, and (iii) if Executive’s
employment is terminated by Employer Without Cause, due to Executive’s
Disability or by Executive for any reason, the date that is 30 days after the
date on which Notice of Termination is given as contemplated by Section 7(e) or,
if no such Notice is given, 30 days after the date of termination of employment.

 

(h)                                 Resignation upon Termination. Effective as
of any Date of Termination under this Section 7 or otherwise as of the date of
Executive’s termination of employment with Employer, Executive shall resign, in
writing, from all Board memberships and other positions then held by him with
Holding, Employer and their respective Affiliates.

 

8  Unauthorized Disclosure.  During the period of Executive’s employment with
Employer and the ten-year period following any termination of such employment,
without the prior written consent of Employer’s Board or its authorized
representative, except to the extent required by an order of a court having
jurisdiction or under subpoena from an appropriate government agency, in which
event, Executive shall use his best efforts to consult with Employer’s Board
prior to responding to any such order or subpoena, and except as required in the
performance of his duties hereunder, Executive shall not disclose any
confidential or proprietary trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including but not
limited to data and other information relating to members of the Board of
Directors of Holding, Employer or any of their respective Affiliates or to
management of Holding, Employer or any of their respective Affiliates),
operating policies or manuals, business plans, financial records, packaging
design or other financial, commercial, business or technical information (a)
relating to Holding, Employer or any of their respective Affiliates or (b) that
Holding, Employer or any of their respective Affiliates may receive belonging to
suppliers, customers or others who do business with Holding, Employer or any of
their respective Affiliates (collectively, “Confidential Information”) to any
third person unless such Confidential Information has been previously disclosed
to the public or is in the public domain (other than by reason of Executive’s
breach of this Section 8).

 

9  Non-Competition.  During the period of Executive’s employment with Employer
and, following any termination thereof, the period ending on the later of (a)
the first anniversary of the Date of Termination and (b) the last day of the
Severance Period, Executive shall not, directly or indirectly, become employed
in a similar executive capacity by, engage in business with, serve as an agent
or consultant to, or become a partner, member, principal or stockholder (other
than a holder of less than 1% of the outstanding voting shares of any publicly
held company) of, The Mead Corporation, any of its subsidiaries or any other
current or future direct competitor (or any of such direct  competitor’s

 

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subsidiaries or affiliates) in the paperboard and paperboard packaging business
of Holding, Employer or any of their respective subsidiaries, as determined in
good faith by Employer’s Board. For purposes of this Section 9, the phrase
employment “in a similar executive capacity” shall mean employment in any
position in connection with which Executive has or reasonably would be viewed as
having powers and authorities with respect to any other Person or any part of
the business thereof that are substantially similar, with respect thereto, to
the powers and authorities assigned to the Senior Vice President, Beverage or
any superior executive officer of Employer in the By-Laws of Employer as in
effect on the date hereof, a copy of the relevant portions of which has been
delivered to Executive on or before the date hereof, and which Executive hereby
confirms that he has reviewed.

 

10  Non-Solicitation of Employees.  During the period of Executive’s employment
with Employer and, following any termination thereof, the period ending on the
last day of the Severance Period (such periods collectively, the “Restriction
Period”), Executive shall not, directly or indirectly, for his own account or
for the account of any other Person anywhere in the United States or Europe, (i)
solicit for employment, employ or otherwise interfere with the relationship of
Holding, Employer or any of their respective subsidiaries with, any person who
at any time during the six months preceding such solicitation, employment or
interference is or was employed by or otherwise engaged to perform services for
Holding, Employer or any of their respective subsidiaries, other than any such
solicitation or employment during Executive’s employment with Holding and
Employer on behalf of Holding, and Employer, or (ii) induce any employee of
Holding, Employer or any of their respective Affiliates who is a member of
management to engage in any activity which Executive is prohibited from engaging
in under any of Sections 8, 9, 10 or 11 or to terminate his employment with
Employer.

 

11  Non-Solicitation of Customers.  During the Restriction Period, Executive
shall not, directly or indirectly, for his own account or for the account of any
other Person anywhere in the United States or Europe, solicit or otherwise
attempt to establish any business relationship of a nature that is competitive
with the paperboard and paperboard packaging business of Holding, Employer or
any of their respective subsidiaries, as determined in good faith by Employer’s
Board with any Person who is or was a customer, client or distributor of
Holding, Employer or any of their respective Affiliates at any time during which
Executive was employed by Employer (in the case of any such activity during such
time) or during the twelve-month period preceding the Date of Termination (in
the case of any such activity after the Date of Termination), other than any
such solicitation on behalf of Holding, Employer or any of their respective
Affiliates during Executive’s employment with Employer.

 

12  Return of Documents.  In the event of the termination of Executive’s
employment for any reason, Executive shall deliver to Employer all of (a) the
property of each of Holding, Employer and their respective Affiliates and (b)
the non-personal documents and data of any nature and in whatever medium of each
of Holding, Employer and their respective Affiliates, and he shall not take with
him any such property, documents or data or any reproduction thereof, or any
documents containing or pertaining to any Confidential Information. Whether
documents or data are “personal” or “non-personal” shall be determined as
follows: Executive shall present any documents or data that he wishes to take
with him to the chief legal officer of Employer for his review. The chief legal
officer shall make an initial determination whether any such documents or data
are personal or non-personal, and with respect to such documents or data that he
determines to be non-personal, shall notify Executive either that such documents
or data must be retained by Employer or that Employer must make and retain a
copy thereof before Executive may take such documents or data with him. Any
disputes as to the personal or non-personal nature of any such documents or data
shall first be presented to the Chairman of Employer’s Board or to another
representative designated by Employer’s Board, and if such disputes are not
promptly resolved by Executive and the Chairman or such representative, such
disputes shall be resolved through arbitration pursuant to Section 17(b).

 

13  Injunctive Relief with Respect to Covenants; Forum, Venue and Jurisdiction. 
Executive acknowledges and agrees that the covenants, obligations and agreements
of Executive contained in

 

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Sections 8, 9, 10, 11, 12 and 13 relate to special, unique and extraordinary
matters and that a violation of any of the terms of such covenants, obligations
or agreements will cause Employer irreparable injury for which adequate remedies
are not available at law. Therefore, Executive agrees that Employer shall be
entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) as a court of competent jurisdiction may
deem necessary or appropriate to restrain Executive from committing any
violation of such covenants, obligations or agreements. These injunctive
remedies are cumulative and in addition to any other rights and remedies
Employer may have. Employer, Holding and Executive hereby irrevocably submit to
the exclusive jurisdiction of the courts of the State of New York and the
Federal courts of the United States of America, in each case located in New York
City, in respect of the injunctive remedies set forth in this Section 13 and the
interpretation and enforcement of Sections 8, 9, 10, 11, 12 and 13 insofar as
such interpretation and enforcement relate to any request or application for
injunctive relief in accordance with the provisions of this Section 13, and the
parties hereto hereby irrevocably agree that (a) the sole and exclusive
appropriate venue for any suit or proceeding relating solely to such injunctive
relief shall be in such a court, (b) all claims with respect to any request or
application for such injunctive relief shall be heard and determined exclusively
in such a court, (c) any such court shall have exclusive jurisdiction over the
person of such parties and over the subject matter of any dispute relating to
any request or application for such injunctive relief, and (d) each hereby
waives any and all objections and defenses based on forum, venue or personal or
subject matter jurisdiction as they may relate to an application for such
injunctive relief in a suit or proceeding brought before such a court in
accordance with the provisions of this Section 13. All disputes not relating to
any request or application for injunctive relief in accordance with this
Section 13 shall be resolved by arbitration in accordance with Section 17(b).

 

14  Assumption of Agreement.  Employer shall require any Successor thereto, by
agreement in form and substance reasonably satisfactory to Executive, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Employer would be required to perform it if no such
succession had taken place. Failure of Employer to obtain such agreement prior
to the effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation from Employer in the same amount and
on the same terms as Executive would be entitled hereunder if Employer had
terminated Executive’s employment Without Cause as described in Section 7,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.

 

15  Entire Agreement.  This Agreement (including the Exhibit hereto) constitutes
the entire agreement among the parties hereto with respect to the subject matter
hereof. All prior correspondence and proposals (including but not limited to
summaries of proposed terms) and all prior promises, representations,
understandings, arrangements and agreements relating to such subject matter
(including but not limited to those made to or with Executive by any other
Person and those contained in any prior employment, consulting or similar
agreement entered into by Executive and Employer or any predecessor thereto or
Affiliate thereof) are merged herein and superseded hereby.

 

16  Indemnification.  Employer hereby agrees that it shall indemnify and hold
harmless Executive to the fullest extent permitted by Delaware law from and
against any and all liabilities, costs, claims and expenses, including all costs
and expenses incurred in defense of litigation (including attorneys’ fees),
arising out of the employment of Executive hereunder, except to the extent
arising out of or based upon the gross negligence or willful misconduct of
Executive. Costs and expenses incurred by Executive in defense of such
litigation (including attorneys’ fees) shall be paid by Employer in advance of
the final disposition of such litigation upon receipt by Employer of (a) a
written request for payment, (b) appropriate documentation evidencing the
incurrence, amount and nature of the costs and expenses for which payment is
being sought, and (c) an undertaking adequate under Delaware law made by or on
behalf of Executive to repay the amounts so paid if it shall ultimately be
determined that Executive is not entitled to be indemnified by Employer under
this Agreement, including but not limited to as a result of such exception.

 

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17  Miscellaneous.

 

(a)                                  Binding Effect; Assignment. This Agreement
shall be binding on and inure to the benefit of Employer, Holding and their
respective successors and permitted assigns. This Agreement shall also be
binding on and inure to the benefit of Executive and his heirs, executors,
administrators and legal representatives. This Agreement shall not be assignable
by any party hereto without the prior written consent of the other parties
hereto, except as provided pursuant to this Section 17(a). Each of Holding and
Employer may effect such an assignment without prior written approval of
Executive upon the transfer of all or substantially all of its business and/or
assets (by whatever means), provided that the Successor to Employer shall
expressly assume and agree to perform this Agreement in accordance with the
provisions of Section 14.

 

(b)                                 Arbitration. Any dispute or controversy
arising under or in connection with this Agreement (except in connection with
any request or application for injunctive relief in accordance with Section 13)
shall be resolved by binding arbitration. The arbitration shall be held in the
city of Atlanta, Georgia and except to the extent inconsistent with this
Agreement, shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect at the time of the
arbitration, and otherwise in accordance with principles which would be applied
by a court of law or equity. The arbitrator shall be acceptable to both Employer
and Executive. If the parties cannot agree on an acceptable arbitrator, the
dispute shall be heard by a panel of three arbitrators, one appointed by
Employer, one appointed by Executive, and the third appointed by the other two
arbitrators. All expenses of arbitration shall be borne by the party who incurs
the expense, or, in the case of joint expenses, by both parties in equal
portions, except that, in the event Executive prevails on the principal issues
of such dispute or controversy, all such expenses shall be borne by Employer.

 

(c)                                  Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without reference to principles of conflicts of laws, provided that the
indemnification provisions contained in Section 16 shall be governed by and
construed in accordance with the laws of the State of Delaware.

 

(d)                                 Taxes. Employer may withhold from any
payments made under this Agreement all applicable taxes, including but not
limited to income, employment and social insurance taxes, as shall be required
by law.

 

(e)                                  Amendments. No provision of this Agreement
may be modified, waived or discharged unless such modification, waiver or
discharge is approved by Employer’s Board or a Person authorized thereby and is
agreed to in writing by Executive and, in the case of any such modification,
waiver or discharge affecting the rights or obligations of Holding, is approved
by the Board of Directors of Holding or a Person authorized thereby. No waiver
by any party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No waiver of any
provision of this Agreement shall be implied from any course of dealing between
or among the parties hereto or from any failure by any party hereto to assert
its rights hereunder on any occasion or series of occasions.

 

(f)                                    Severability. In the event that any one
or more of the provisions of this Agreement shall be or become invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not be affected thereby.

 

(g)                                 Notices. Any notice or other communication
required or permitted to be delivered under this Agreement shall be (i) in
writing, (ii) delivered personally, by courier service or by certified or
registered mail, first-class postage prepaid and return receipt requested, (iii)
deemed to have been received on the date of delivery or, if so mailed, on the
third business day after the mailing thereof,

 

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and (iv) addressed as follows (or to such other address as the party entitled to
notice shall hereafter designate in accordance with the terms hereof):

 

(A)                              If to Employer, to it at:

 

Riverwood International Corporation

814 Livingston Court

Marietta, Georgia 30067

Attention: General Counsel

 

(B)           if to Holding, to it at:

 

c/o Riverwood International Corporation

814 Livingston Court

Marietta, Georgia 30067

Attention: General Counsel

 

(C)                                if to Executive, to him at his residential
address as currently on file with Employer.

 

Copies of any notices or other communications given under this Agreement shall
also be given to:

 

Clayton, Dubilier & Rice, Inc.

375 Park Avenue

New York, New York 10152

Attention: Mr. Kevin J. Conway

 

and

 

Debevoise & Plimpton

875 Third Avenue

New York, New York 10022

Attention: Franci J. Blassberg, Esq.

 

(h)                                 Voluntary Agreement; No Conflicts.
Executive, Employer and Holding each represent that they are entering into this
Agreement voluntarily and that Executive’s employment hereunder and each party’s
compliance with the terms and conditions of this Agreement will not conflict
with or result in the breach by such party of any agreement to which he or it is
a party or by which he or it or his or its properties or assets may be bound.

 

(i)                                     Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.

 

(j)                                     Headings. The section and other headings
contained in this Agreement are for the convenience of the parties only and are
not intended to be a part hereof or to affect the meaning or interpretation
hereof.

 

(k)                                  Certain Definitions.

 

“Affiliate”: with respect to any Person, means any other Person that, directly
or indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with the first Person, including but not limited to a
Subsidiary of the first Person, a Person of which the first Person is a
Subsidiary, or another Subsidiary of a Person of which the first Person is also
a Subsidiary.

 

“Control”: with respect to any Person, means the possession, directly or
indirectly, severally or jointly, of the power to direct or cause the direction
of the management policies of such Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or executor, or
otherwise.

 

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“Person”: any natural person, firm, partnership, limited liability company,
association, corporation, company, trust, business trust, governmental authority
or other entity.

 

“Subsidiary”: with respect to any Person, each corporation or other Person in
which the first Person owns or Controls, directly or indirectly, capital stock
or other ownership interests representing 50% or more of the combined voting
power of the outstanding voting stock or other ownership interests of such
corporation or other Person.

 

“Successor”: of a Person means a Person that succeeds to the first Person’s
assets and liabilities by merger, liquidation, dissolution or otherwise by
operation of law, or a Person to which all or substantially all the assets
and/or business of the first Person are transferred.

 

 

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IN WITNESS WHEREOF, Employer and Holding have duly executed this Agreement by
their authorized representatives, and Executive has hereunto set his hand, in
each case effective as of the date first above written.

 

 

RIVERWOOD INTERNATIONAL CORPORATION

 

 

 

By:

/s/ Stephen M. Humphrey

 

 

 

Name: Stephen M. Humphrey

 

 

Title: President and Chief Executive Officer

 

 

 

RIVERWOOD HOLDING, INC.

 

 

 

By:

/s/ Stephen M. Humphrey

 

 

 

Name: Stephen M. Humphrey

 

 

Title: President and Chief Executive Officer

 

 

 

 

Executive:

 

/s/ Michael R. Schmal

 

 

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Schedule I

 

Perquisites

 

1                                          Annual executive physical.

 

2                                          Reimbursement up to $1,000 annually
for expenses relating to income tax preparation plus additional fees if incurred
on account of job-related circumstances and the cost of representation by return
preparer during any audit.

 

3                                          Reimbursement for expenses incurred
for financial and estate planning services of up to $5,000 for expenses incurred
in the first calendar year services are utilized and up to $2,500 for expenses
incurred in calendar years thereafter.

 

4                                          Subject to the advance approval of
the CEO, reimbursement for initiation fees (“grossed up” for federal and state
income taxes) and dues for one country club and one luncheon or city club.

 

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