EXHIBIT 10.1

ROCK-TENN COMPANY

2004 INCENTIVE STOCK PLAN
 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

                  Page

--------------------------------------------------------------------------------

§ 1. BACKGROUND AND PURPOSE     1     § 2. DEFINITIONS     1    
2.1     Affiliate     1    
2.2     Board     1    
2.3     Change Effective Date     1    
2.4     Change in Control     1    
2.5     Code     2    
2.6     Committee     2    
2.7     Company     2    
2.8     Director     2    
2.9     Eligible Employee     2    
2.10     Fair Market Value     2    
2.11     ISO     2    
2.12     1933 Act     2    
2.13     1934 Act     2    
2.14     Non-ISO     2    
2.15     Option     2    
2.16     Option Certificate     2    
2.17     Option Price     2    
2.18     Parent     2    
2.19     Plan     2    
2.20     Preexisting Plan     2    
2.21     Rule 16b-3     2    
2.22     SAR Value     2    
2.23     Stock     3    
2.24     Stock Appreciation Right     3    
2.25     Stock Appreciation Right Certificate     3    
2.26     Stock Grant     3    
2.27     Stock Grant Certificate     3    
2.28     Stock Unit Grant     3    
2.29     Subsidiary     3    
2.30     Ten Percent Shareholder     3      § 3. SHARES AND GRANT LIMITS     3  
 
3.1     Shares Reserved     3      
3.2     Source of Shares     3  

--------------------------------------------------------------------------------

 

                  Page

--------------------------------------------------------------------------------

 
3.3     Use of Proceeds     3    
3.4     Grant Limits     4    
3.5     Preexisting Plan     4     § 4. EFFECTIVE DATE     4     § 5. COMMITTEE
    4     § 6. ELIGIBILITY     4     § 7. OPTIONS     4    
7.1     Committee Action     4    
7.2     $100,000 Limit     5    
7.3     Option Price     5    
7.4     Payment     5    
7.5     Exercise     5     § 8. STOCK APPRECIATION RIGHTS     5    
8.1     Committee Action     5    
8.2     Terms and Conditions     5    
8.3     Exercise     6     § 9. STOCK GRANTS     6    
9.1     Committee Action     6    
9.2     Conditions     6    
9.3     Dividends, Voting Rights and Creditor Status     7    
9.4     Satisfaction of Forfeiture Conditions     7    
9.5     Income Tax Deduction     8     § 10. NON-TRANSFERABILITY     8    
§ 11. SECURITIES REGISTRATION     9     § 12. LIFE OF PLAN     9    
§ 13. ADJUSTMENT     9    
13.1     Capital Structure     9    
13.2     Available Shares     10    
13.3     Transactions Described in § 424 of the Code     10    
13.4     Fractional Shares     10     § 14. CHANGE IN CONTROL     10    
§ 15. AMENDMENT OR TERMINATION     11     § 16. MISCELLANEOUS     11    
16.1     Shareholder Rights     11    
16.2     No Contract of Employment     11    
16.3     Withholding     11  

-ii-

--------------------------------------------------------------------------------

 

                  Page

--------------------------------------------------------------------------------

 
16.4     Construction     11    
16.5     Other Conditions     11    
16.6     Rule 16b-3     11    
16.7     Coordination with Employment Agreements and Other Agreements     12  

-iii-

--------------------------------------------------------------------------------

 

§ 1.

BACKGROUND AND PURPOSE

      The purpose of this Plan is to promote the interest of the Company by
authorizing the Committee to grant Options and Stock Appreciation Rights and to
make Stock Grants and Stock Unit Grants to Eligible Employees and Directors in
order (1) to attract and retain Eligible Employees and Directors, (2) to provide
an additional incentive to each Eligible Employee or Director to work to
increase the value of Stock and (3) to provide each Eligible Employee or
Director with a stake in the future of the Company which corresponds to the
stake of each of the Company’s shareholders.

§ 2.

DEFINITIONS

      2.1     Affiliate — means any organization (other than a Subsidiary) that
would be treated as under common control with the Company under § 414(c) of the
Code if “50 percent” were substituted for “80 percent” in the income tax
regulations under § 414(c) of the Code.

      2.2     Board — means the Board of Directors of the Company.

      2.3     Change Effective Date — means either the date which includes the
“closing” of the transaction which makes a Change in Control effective if the
Change in Control is made effective through a transaction which has a “closing”
or the date a Change in Control is reported in accordance with applicable law as
effective to the Securities and Exchange Commission if the Change in Control is
made effective other than through a transaction which has a “closing”.

      2.4     Change in Control — means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the 1934 Act as in effect at
the time of such “change in control”, provided that such a change in control
shall be deemed to have occurred at such time as

        (a) any “person” (as that term is used in Sections 13(d) and 14(d)(2) of
the 1934 Act), is or becomes the beneficial owner (as defined in Rule 13d-3
under the 1934 Act) directly or indirectly, of securities representing 20% or
more of the combined voting power for election of directors of the then
outstanding securities of the Company or any successor to the Company;          
(b) during any period of two consecutive years or less, individuals who at the
beginning of such period constitute the Board cease, for any reason, to
constitute at least a majority of the Board, unless the election or nomination
for election of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period;           (c) the shareholders of the Company approve any
reorganization, merger, consolidation or share exchange as a result of which the
common stock of the Company shall be changed, converted or exchanged into or for
securities of another corporation (other than a merger with a wholly-owned
subsidiary of the Company) or any dissolution or liquidation of the Company or
any sale or the disposition of 50% or more of the assets or business of the
Company; or           (d) the shareholders of the Company approve any
reorganization, merger, consolidation or share exchange unless (A) the persons
who were the beneficial owners of the outstanding shares of the common stock of
the Company immediately before the consummation of such transaction beneficially
own more than 50% of the outstanding shares of the common stock of the successor
or survivor corporation in such transaction immediately following the
consummation of such transaction and (B) the number of shares of the common
stock of such successor or survivor corporation beneficially owned by the
persons described in § 2.4(d)(A) immediately following the consummation of such
transaction is beneficially owned by each such person in substantially the same
proportion that each such person had beneficially owned shares of the Company
common stock immediately before the consummation of such transaction, provided
(C) the percentage described in § 2.4(d)(A) of the beneficially owned shares of

-1-

--------------------------------------------------------------------------------

 

  the successor or survivor corporation and the number described in § 2.4 (d)(B)
of the beneficially owned shares of the successor or survivor corporation shall
be determined exclusively by reference to the shares of the successor or
survivor corporation which result from the beneficial ownership of shares of
common stock of the Company by the persons described in § 2.4(d)(A) immediately
before the consummation of such transaction.

      2.5     Code — means the Internal Revenue Code of 1986, as amended.

      2.6     Committee — means a committee of the Board which shall have at
least 2 members, each of whom shall be appointed by and shall serve at the
pleasure of the Board and shall come within the definition of a “non-employee
director” under Rule 16b-3 and an “outside director” under § 162(m) of the Code.

      2.7     Company — means Rock-Tenn Company and any successor to Rock-Tenn
Company.

      2.8     Director — means any member of the Board who is not an employee of
the Company or a Parent or Subsidiary or affiliate (as such term is defined in
Rule 405 of the 1933 Act) of the Company.

      2.9     Eligible Employee — means an employee of the Company or any
Subsidiary or Parent or Affiliate to whom the Committee decides for reasons
sufficient to the Committee to make a grant under this Plan.

      2.10     Fair Market Value — means either (a) the closing price on any
date for a share of Stock as reported by The Wall Street Journal or, if The Wall
Street Journal no longer reports such closing price, such closing price as
reported by a newspaper or trade journal selected by the Committee or, if no
such closing price is available on such date, (b) such closing price as so
reported in accordance with § 2.10(a) for the immediately preceding business
day, or, if no newspaper or trade journal reports such closing price or if no
such price quotation is available, (c) the price which the Committee acting in
good faith determines through any reasonable valuation method that a share of
Stock might change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable
knowledge of the relevant facts.

      2.11     ISO — means an option granted under this Plan to purchase Stock
which is intended to satisfy the requirements of § 422 of the Code.

      2.12     1933 Act — means the Securities Act of 1933, as amended.

      2.13     1934 Act — means the Securities Exchange Act of 1934, as amended.

      2.14     Non-ISO — means an option granted under this Plan to purchase
Stock which is intended to fail to satisfy the requirements of § 422 of the
Code.

      2.15     Option — means an ISO or a Non-ISO which is granted under § 7.

      2.16     Option Certificate — means the certificate (whether in electronic
or written form) which sets forth the terms and conditions of an Option granted
under this Plan.

      2.17     Option Price — means the price which shall be paid to purchase
one share of Stock upon the exercise of an Option granted under this Plan.

      2.18     Parent — means any corporation which is a parent corporation
(within the meaning of § 424(e) of the Code) of the Company.

      2.19     Plan — means this Rock-Tenn Company 2004 Incentive Stock Plan as
effective as of the date approved by the shareholders of the Company and as
amended from time to time thereafter.

      2.20     Preexisting Plan — means the following plan, as such plan has
been amended from time to time up to the date this Plan is effective: the 2000
Rock-Tenn Company Incentive Stock Plan.

      2.21     Rule 16b-3 — means the exemption under Rule 16b-3 to
Section 16(b) of the 1934 Act or any successor to such rule.

      2.22     SAR Value — means the value assigned by the Committee to a share
of Stock in connection with the grant of a Stock Appreciation Right under § 8.

-2-

--------------------------------------------------------------------------------

 

      2.23     Stock — means the Class A common stock of the Company.

      2.24     Stock Appreciation Right — means a right which is granted under
§ 8 to receive the appreciation in a share of Stock.

      2.25     Stock Appreciation Right Certificate — means the certificate
(whether in electronic or written form) which sets forth the terms and
conditions of a Stock Appreciation Right which is not granted as part of an
Option.

      2.26     Stock Grant — means a grant under § 9 which is designed to result
in the issuance of the number of shares of Stock described in such grant rather
than a payment in cash based on the Fair Market Value of such shares of Stock.

      2.27     Stock Grant Certificate — means the certificate (whether in
electronic or written form) which sets forth the terms and conditions of a Stock
Grant or a Stock Unit Grant.

      2.28     Stock Unit Grant — means a grant under § 9 which is designed to
result in the payment of cash based on the Fair Market Value of the number of
shares of Stock described in such grant rather than the issuance of the number
of shares of Stock described in such grant.

      2.29     Subsidiary — means a corporation which is a subsidiary
corporation (within the meaning of § 424(f) of the Code) of the Company.

      2.30     Ten Percent Shareholder — means a person who owns (after taking
into account the attribution rules of § 424(d) of the Code) more than ten
percent of the total combined voting power of all classes of stock of either the
Company, a Subsidiary or Parent.

§ 3.

SHARES AND GRANT LIMITS

      3.1     Shares Reserved — There shall (subject to § 13) be reserved for
issuance under this Plan (a) 2.0 million shares of Stock plus (b) the number of
shares of Stock which would remain available for issuance under each Preexisting
Plan if shares were issued on the effective date of this Plan sufficient to
satisfy grants then outstanding under such plan plus (c) the number of shares of
Stock subject to grants under any Preexisting Plan which are outstanding on the
effective date of this Plan and which are forfeited or expire on or after such
effective date in accordance with the terms of such grants; provided, however,
(d) no more than the number of shares of Stock described in § 3.1(a) shall be
issued in connection with the exercise of ISOs and (e) nothing in this Plan
shall affect any grants under any Preexisting Plan which are outstanding on the
effective date of this Plan until such time, if any, that any shares of Stock
subject to such grants are forfeited or grants respecting any shares of Stock
expire on or after such effective date in accordance with the terms of such
grants.

      3.2     Source of Shares — The shares of Stock described in § 3.1 shall be
reserved to the extent that the Company deems appropriate from authorized but
unissued shares of Stock and from shares of Stock which have been reacquired by
the Company. All shares of Stock described in § 3.1 shall remain available for
issuance under this Plan until issued pursuant to the exercise of an Option or a
Stock Appreciation Right or issued pursuant to a Stock Grant, and any such
shares of stock which are issued pursuant to an Option, a Stock Appreciation
Right or a Stock Grant which are forfeited thereafter shall again become
available for issuance under this Plan. Finally, if the Option Price under an
Option is paid in whole or in part in shares of Stock or if shares of Stock are
tendered to the Company in satisfaction of any condition to a Stock Grant, such
shares thereafter shall become available for issuance under this Plan and shall
be treated the same as any other shares available for issuance under this Plan.

      3.3     Use of Proceeds — The proceeds which the Company receives from the
sale of any shares of Stock under this Plan shall be used for general corporate
purposes and shall be added to the general funds of the Company.

-3-

--------------------------------------------------------------------------------

 

      3.4     Grant Limits. No Eligible Employee or Director in any calendar
year shall be granted an Option to purchase (subject to § 13) more than
500,000 shares of Stock or a Stock Appreciation Right based on the appreciation
with respect to (subject to § 13) more than 500,000 shares of Stock, and no
Stock Grant or Stock Unit Grant shall be made to any Eligible Employee or
Director in any calendar year where the Fair Market Value of the Stock subject
to such grant on the date of the grant exceeds $2,000,000. No more than
1,000,000 non-forfeitable shares of Stock shall (subject to § 13) be issued
pursuant to Stock Grants under § 9.

      3.5     Preexisting Plan. No grants shall be made under any Preexisting
Plan on or after the date this Plan becomes effective.

§ 4.

EFFECTIVE DATE

      The effective date of this Plan shall be the date the shareholders of the
Company (acting at a duly called meeting of such shareholders) approve the
adoption of this Plan.

§ 5.

COMMITTEE

      This Plan shall be administered by the Committee. The Committee acting in
its absolute discretion shall exercise such powers and take such action as
expressly called for under this Plan and, further, the Committee shall have the
power to interpret this Plan and (subject to § 14 and § 15 and Rule 16b-3) to
take such other action in the administration and operation of this Plan as the
Committee deems equitable under the circumstances, which action shall be binding
on the Company, on each affected Eligible Employee or Director and on each other
person directly or indirectly affected by such action. Furthermore, the
Committee as a condition to making any grant under this Plan to any Eligible
Employee or Director shall have the right to require him or her to execute an
agreement which makes the Eligible Employee or Director subject to
non-competition provisions and other restrictive covenants which run in favor of
the Company.

§ 6.

ELIGIBILITY

      Only Eligible Employees who are employed by the Company or a Subsidiary or
Parent shall be eligible for the grant of ISOs under this Plan. All Eligible
Employees and all Directors shall be eligible for the grant of Non-ISOs and
Stock Appreciation Rights and for Stock Grants and Stock Unit Grants under this
Plan.

§ 7.

OPTIONS

      7.1     Committee Action. The Committee acting in its absolute discretion
shall have the right to grant Options to Eligible Employees and to Directors
under this Plan from time to time to purchase shares of Stock, but the Committee
shall not (subject to § 13) take any action, whether through amendment,
cancellation, replacement grants, or any other means, to reduce the Option Price
of any outstanding Options absent the approval of the Company’s shareholders.
Each grant of an Option to a Eligible Employee or Director shall be evidenced by
an Option Certificate, and each Option Certificate shall set forth whether the
Option is an ISO or a Non-ISO and shall set forth such other terms and
conditions of such grant as the Committee acting in its absolute discretion
deems consistent with the terms of this Plan; however, (a) if the Committee
grants an ISO and a Non-ISO to a Eligible Employee on the same date, the right
of the Eligible Employee to exercise the ISO shall not be conditioned on his or
her failure to exercise the Non-ISO and (b) if the only condition to exercise of
the Option is the completion of a period of service, such period of service
shall be no less than the

-4-

--------------------------------------------------------------------------------

 

one (1) year period which starts on the date as of which the Option is granted
unless the Committee determines that a shorter period of service (or no period
of service) better serves the Company’s interest.

      7.2     $100,000 Limit. No Option shall be treated as an ISO to the extent
that the aggregate Fair Market Value of the Stock subject to the Option which
would first become exercisable in any calendar year exceeds $100,000. Any such
excess shall instead automatically be treated as a Non-ISO. The Committee shall
interpret and administer the ISO limitation set forth in this § 7.2 in
accordance with § 422(d) of the Code, and the Committee shall treat this § 7.2
as in effect only for those periods for which § 422(d) of the Code is in effect.

      7.3     Option Price. The Option Price for each share of Stock subject to
an Option shall be no less than the Fair Market Value of a share of Stock on the
date the Option is granted; provided, however, if the Option is an ISO granted
to an Eligible Employee who is a Ten Percent Shareholder, the Option Price for
each share of Stock subject to such ISO shall be no less than 110% of the Fair
Market Value of a share of Stock on the date such ISO is granted.

      7.4     Payment. The Option Price shall be payable in full upon the
exercise of any Option and, at the discretion of the Committee, an Option
Certificate can provide for the payment of the Option Price either in cash, by
check or in Stock which has been held for at least 6 months and which is
acceptable to the Committee, or through any cashless exercise procedure which is
effected by an unrelated broker through a sale of Stock in the open market and
which is acceptable to the Committee, or in any combination of such forms of
payment. Any payment made in Stock shall be treated as equal to the Fair Market
Value of such Stock on the date the certificate for such Stock (or proper
evidence of such certificate) is presented to the Committee or its delegate in
such form as acceptable to the Committee.

      7.5     Exercise.

      (a) Exercise Period. Each Option granted under this Plan shall be
exercisable in whole or in part at such time or times as set forth in the
related Option Certificate, but no Option Certificate shall make an Option
exercisable on or after the earlier of

        (1) the date which is the fifth anniversary of the date the Option is
granted, if the Option is an ISO and the Eligible Employee is a Ten Percent
Shareholder on the date the Option is granted, or           (2) the date which
is the tenth anniversary of the date the Option is granted, if the Option is
(a) a Non-ISO or (b) an ISO which is granted to an Eligible Employee who is not
a Ten Percent Shareholder on the date the Option is granted.

      (b) Termination of Status as Eligible Employee or Director. Subject to
§ 7.5(a), an Option Certificate may provide for the exercise of an Option after
an Eligible Employee’s or a Director’s status as such has terminated for any
reason whatsoever, including death or disability.

§ 8.

STOCK APPRECIATION RIGHTS

      8.1     Committee Action. The Committee acting in its absolute discretion
shall have the right to grant Stock Appreciation Rights to Eligible Employees
and to Directors under this Plan from time to time, and each Stock Appreciation
Right grant shall be evidenced by a Stock Appreciation Right Certificate or, if
such Stock Appreciation Right is granted as part of an Option, shall be
evidenced by the Option Certificate for the related Option.

      8.2     Terms and Conditions.

      (a) Stock Appreciation Right Certificate. If a Stock Appreciation Right is
granted independent of an Option, such Stock Appreciation Right shall be
evidenced by a Stock Appreciation Right Certificate, and such certificate shall
set forth the number of shares of Stock on which the Eligible Employee’s or
Director’s right to appreciation shall be based and the SAR Value of each share
of Stock. Such SAR Value shall be no less than

-5-

--------------------------------------------------------------------------------

 

the Fair Market Value of a share of Stock on the date that the Stock
Appreciation Right is granted. The Stock Appreciation Right Certificate shall
set forth such other terms and conditions for the exercise of the Stock
Appreciation Right as the Committee deems appropriate under the circumstances,
but no Stock Appreciation Right Certificate shall make a Stock Appreciation
Right exercisable on or after the date which is the tenth anniversary of the
date such Stock Appreciation Right is granted.

      (b) Option Certificate. If a Stock Appreciation Right is granted together
with an Option, such Stock Appreciation Right shall be evidenced by an Option
Certificate, the number of shares of Stock on which the Eligible Employee’s or
Director’s right to appreciation shall be based shall be the same as the number
of shares of Stock subject to the related Option, and the SAR Value for each
such share of Stock shall be no less than the Option Price under the related
Option. Each such Option Certificate shall provide that the exercise of the
Stock Appreciation Right with respect to any share of Stock shall cancel the
Eligible Employee’s or Director’s right to exercise his or her Option with
respect to such share and, conversely, that the exercise of the Option with
respect to any share of Stock shall cancel the Eligible Employee’s or Director’s
right to exercise his or her Stock Appreciation Right with respect to such
share. A Stock Appreciation Right which is granted as part of an Option shall be
exercisable only while the related Option is exercisable. The Option Certificate
shall set forth such other terms and conditions for the exercise of the Stock
Appreciation Right as the Committee deems appropriate under the circumstances.

      (c) Minimum Period of Service. If the only condition to exercise of a
Stock Appreciation Right is the completion of a period of service, such period
of service shall be no less than the one (1) year period which starts on the
date as of which the Stock Appreciation Right is granted unless the Committee
determines that a shorter period of service (or no period of service) better
serves the Company’s interest.

      8.3     Exercise. A Stock Appreciation Right shall be exercisable only
when the Fair Market Value of a share of Stock on which the right to
appreciation is based exceeds the SAR Value for such share, and the payment due
on exercise shall be based on such excess with respect to the number of shares
of Stock to which the exercise relates. An Eligible Employee or Director upon
the exercise of his or her Stock Appreciation Right shall receive a payment from
the Company in cash or in Stock issued under this Plan, or in a combination of
cash and Stock, and the number of shares of Stock issued shall be based on the
Fair Market Value of a share of Stock on the date the Stock Appreciation Right
is exercised. The Committee acting in its absolute discretion shall have the
right to determine the form and time of any payment under this § 8.3.

§ 9.

STOCK GRANTS

      9.1     Committee Action. The Committee acting in its absolute discretion
shall have the right to make Stock Grants and Stock Unit Grants to Eligible
Employees and to Directors. Each Stock Grant and each Stock Unit Grant shall be
evidenced by a Stock Grant Certificate, and each Stock Grant Certificate shall
set forth the conditions, if any, under which Stock will be issued under the
Stock Grant or cash will be paid under the Stock Unit Grant and the conditions
under which the Eligible Employee’s or Director’s interest in any Stock which
has been issued will become non-forfeitable.

      9.2     Conditions.

      (a) Conditions to Issuance of Stock. The Committee acting in its absolute
discretion may make the issuance of Stock under a Stock Grant subject to the
satisfaction of one, or more than one, condition which the Committee deems
appropriate under the circumstances for Eligible Employees or Directors
generally or for an Eligible Employee or a Director in particular, and the
related Stock Grant Certificate shall set forth each such condition and the
deadline for satisfying each such condition. Stock subject to a Stock Grant
shall be issued in the name of an Eligible Employee or Director only after each
such condition, if any, has been timely satisfied, and any Stock which is so
issued shall be held by the Company pending the satisfaction of the forfeiture
conditions, if any, under § 9.2(b) for the related Stock Grant.

-6-

--------------------------------------------------------------------------------

 

      (b) Conditions on Forfeiture of Stock or Cash Payment. The Committee
acting in its absolute discretion may make any cash payment due under a Stock
Unit Grant or Stock issued in the name of an Eligible Employee or Director under
a Stock Grant non-forfeitable subject to the satisfaction of one, or more than
one, objective employment, performance or other condition that the Committee
acting in its absolute discretion deems appropriate under the circumstances for
Eligible Employees or Directors generally or for an Eligible Employee or a
Director in particular, and the related Stock Grant Certificate shall set forth
each such condition, if any, and the deadline, if any, for satisfying each such
condition. An Eligible Employee’s or a Director’s non-forfeitable interest in
the shares of Stock underlying a Stock Grant or the cash payable under a Stock
Unit Grant shall depend on the extent to which he or she timely satisfies each
such condition. If a share of Stock is issued under this § 9.2(b) before a
Eligible Employee’s or Director’s interest in such share of Stock is
non-forfeitable, (1) such share of Stock shall not be available for re-issuance
under § 3 until such time, if any, as such share of Stock thereafter is
forfeited as a result of a failure to timely satisfy a forfeiture condition and
(2) the Company shall have the right to condition any such issuance on the
Eligible Employee or Director first signing an irrevocable stock power in favor
of the Company with respect to the forfeitable shares of Stock issued to such
Eligible Employee or Director in order for the Company to effect any forfeiture
called for under the related Stock Grant Certificate.

      (c) Minimum Period of Service. If the only condition to the forfeiture of
a Stock Grant or a Stock Unit Grant is the completion of a period of service,
such period of service shall be no less than the three (3) year period which
starts on the date as of which the Stock Grant or Stock Unit Grant is made
unless the Committee determines that a shorter period of service (or no period
of service) better serves the Company’s interest.

      9.3     Dividends, Voting Rights and Creditor Status.

      (a) Cash Dividends. Except as otherwise set forth in a Stock Grant
Certificate, if a dividend is paid in cash on a share of Stock after such Stock
has been issued under a Stock Grant but before the first date that an Eligible
Employee’s or a Director’s interest in such Stock (1) is forfeited completely or
(2) becomes completely non-forfeitable, the Company shall pay such cash dividend
directly to such Eligible Employee or Director.

      (b) Stock Dividends. If a dividend is paid on a share of Stock in Stock
after such Stock has been issued under a Stock Grant but before the first date
that an Eligible Employee’s or a Director’s interest in such Stock (1) is
forfeited completely or (2) becomes completely non-forfeitable, the Company
shall hold such dividend Stock subject to the same conditions under § 9.2(b) as
the related Stock Grant.

      (c) Other. If a dividend (other than a dividend described in § 9.3(a) or
§ 9.3(b)) is paid with respect to a share of Stock after such Stock has been
issued under a Stock Grant but before the first date that an Eligible Employee’s
or a Director’s interest in such Stock (1) is forfeited completely or
(2) becomes completely non-forfeitable, the Company shall distribute or hold
such dividend in accordance with such rules as the Committee shall adopt with
respect to each such dividend.

      (d) Voting. Except as otherwise set forth in a Stock Grant Certificate, an
Eligible Employee or a Director shall have the right to vote the Stock issued
under his or her Stock Grant during the period which comes after such Stock has
been issued under a Stock Grant but before the first date that an Eligible
Employee’s or Director’s interest in such Stock (1) is forfeited completely or
(2) becomes completely non-forfeitable.

      (e) General Creditor Status. Each Eligible Employee and each Director to
whom a Stock Unit grant is made shall be no more than a general and unsecured
creditor of the Company with respect to any cash payable under such Stock Unit
Grant.

      9.4     Satisfaction of Forfeiture Conditions. A share of Stock shall
cease to be subject to a Stock Grant at such time as an Eligible Employee’s or a
Director’s interest in such Stock becomes non-forfeitable under this Plan, and
the certificate or other evidence of ownership representing such share shall be
transferred to the Eligible Employee or Director as soon as practicable
thereafter.

-7-

--------------------------------------------------------------------------------

 

      9.5     Income Tax Deduction.

      (a) General. The Committee shall (where the Committee under the
circumstances deems in the Company’s best interest) either (1) make Stock Grants
and Stock Unit Grants to Eligible Employees subject to at least one condition
related to one, or more than one, performance goal based on the performance
goals described in § 9.5(b) which seems likely to result in the Stock Grant or
Stock Unit Grant qualifying as “performance-based compensation” under § 162(m)
of the Code or (2) make Stock Grants and Stock Unit Grants to Eligible Employees
under such other circumstances as the Committee deems likely to result in an
income tax deduction for the Company with respect such Stock Grant or Stock Unit
Grant. A performance goal may be set in any manner determined by the Committee,
including looking to achievement on an absolute or relative basis in relation to
peer groups or indexes.

      (b) Performance Goals. A performance goal is described in this § 9.5(b) if
such goal relates to (1) the Company’s return over capital costs or increases in
return over capital costs, (2) the Company’s safety record, (3) the Company’s
customer satisfaction survey, (4) the Company’s total earnings or the growth in
such earnings, (5) the Company’s consolidated earnings or the growth in such
earnings, (6) the Company’s earnings per share or the growth in such earnings,
(7) the Company’s net earnings or the growth in such earnings, (8) the Company’s
earnings before interest expense, taxes, depreciation, amortization and other
non-cash items or the growth in such earnings, (9) the Company’s earnings before
interest and taxes or the growth in such earnings, (10) the Company’s
consolidated net income or the growth in such income, (11) the value of the
Company’s common stock or the growth in such value, (12) the Company’s stock
price or the growth in such price, (13) the tons of paperboard produced or
converted by the Company, (14) the Company’s return on assets or the growth on
such return, (15) the Company’s cash flow or the growth in such cash flow,
(16) the Company’s total shareholder return or the growth in such return,
(17) the Company’s expenses or the reduction of such expenses, (18) the
Company’s sales growth, (19) the Company’s overhead ratios or changes in such
ratios, (20) the Company’s expense-to-sales ratios or the changes in such
ratios, or (21) the Company’s economic value added or changes in such value
added. The performance goals for the participants will (as the Committee deems
appropriate) be based on criteria related to company-wide performance,
division-specific or other business unit-specific performance (where the
Committee can apply the business criteria on such basis), plant or
facility-specific performance, department-specific performance, personal goal
performance or any combination of the performance-based criteria.

      (c) Adjustments. When the Committee determines whether a performance goal
has been satisfied for any period, the Committee may exclude any or all
“extraordinary items” as determined under U.S. generally accepted accounting
principles and any other unusual or non-recurring items, including, without
limitation, the charges or costs associated with restructurings of the Company,
discontinued operations, and the cumulative effects of accounting changes. The
Committee may also adjust any performance goal for a period as it deems
equitable in recognition of unusual or non-recurring events affecting the
Company, changes in applicable tax laws or accounting principles, or such other
factors as the Committee may determine (including, without limitation, any
adjustments that would result in the Company’s paying non-deductible
compensation to an Eligible Employee).

§ 10.

NON-TRANSFERABILITY

      No Option, Stock Grant, Stock Unit Grant or Stock Appreciation Right shall
(absent the Committee’s consent) be transferable by an Eligible Employee or a
Director other than by will or by the laws of descent and distribution, and any
Option or Stock Appreciation Right shall (absent the Committee’s consent) be
exercisable during a Eligible Employee’s or Director’s lifetime only by the
Eligible Employee or Director. The person or persons to whom an Option or Stock
Grant or Stock Unit Grant or Stock Appreciation Right is transferred by will or
by the laws of descent and distribution (or with the Committee’s consent)
thereafter shall be treated as the Eligible Employee or Director.

-8-

--------------------------------------------------------------------------------

 

§ 11.

SECURITIES REGISTRATION

      As a condition to the receipt of shares of Stock under this Plan, the
Eligible Employee or Director shall, if so requested by the Company, agree to
hold such shares of Stock for investment and not with a view of resale or
distribution to the public and, if so requested by the Company, shall deliver to
the Company a written statement satisfactory to the Company to that effect.
Furthermore, if so requested by the Company, the Eligible Employee or Director
shall make a written representation to the Company that he or she will not sell
or offer for sale any of such Stock unless a registration statement shall be in
effect with respect to such Stock under the 1933 Act and any applicable state
securities law or he or she shall have furnished to the Company an opinion in
form and substance satisfactory to the Company of legal counsel satisfactory to
the Company that such registration is not required. Certificates or other
evidence of ownership representing the Stock transferred upon the exercise of an
Option or Stock Appreciation Right or upon the lapse of the forfeiture
conditions, if any, on any Stock Grant may at the discretion of the Company bear
a legend to the effect that such Stock has not been registered under the
1933 Act or any applicable state securities law and that such Stock cannot be
sold or offered for sale in the absence of an effective registration statement
as to such Stock under the 1933 Act and any applicable state securities law or
an opinion in form and substance satisfactory to the Company of legal counsel
satisfactory to the Company that such registration is not required.

§ 12.

LIFE OF PLAN

      No Option or Stock Appreciation Right shall be granted or Stock Grant or
Stock Unit Grant made under this Plan on or after the earlier of:

        (1) the tenth anniversary of the effective date of this Plan (as
determined under § 4), in which event this Plan otherwise thereafter shall
continue in effect until all outstanding Options and Stock Appreciation Rights
have been exercised in full or no longer are exercisable and all Stock issued
under any Stock Grants under this Plan have been forfeited or have become
non-forfeitable, or           (2) the date on which all of the Stock reserved
under § 3 has (as a result of the exercise of Options or Stock Appreciation
Rights granted under this Plan or the satisfaction of the forfeiture conditions,
if any, on Stock Grants) been issued or no longer is available for use under
this Plan, in which event this Plan also shall terminate on such date.

§ 13.

ADJUSTMENT

      13.1     Capital Structure. The grant caps described in § 3.4, the number,
kind or class (or any combination thereof) of shares of Stock subject to
outstanding Options and Stock Appreciation Rights granted under this Plan and
the Option Price of such Options and the SAR Value of such Stock Appreciation
Rights as well as the number, kind or class (or any combination thereof) of
shares of Stock subject to outstanding Stock Grants and Stock Unit Grants made
under this Plan shall be adjusted by the Committee in a reasonable and equitable
manner to preserve immediately after

        (a) any equity restructuring or change in the capitalization of the
Company, including, but not limited to, spin offs, stock dividends, large
non-reoccurring dividends, rights offerings or stock splits, or          
(b) any other transaction described in § 424(a) of the Code which does not
constitute a Change in Control of the Company

the aggregate intrinsic value of each such outstanding Option, Stock
Appreciation Right, Stock Grant and Stock Unit Grant immediately before such
restructuring or recapitalization or other transaction.

-9-

--------------------------------------------------------------------------------

 

      13.2     Available Shares. If any adjustment is made with respect to any
outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant
under § 13.1, then the Committee shall adjust the number, kind or class (or any
combination thereof) of shares of Stock reserved under § 3.1 so that there is a
sufficient number, kind and class of shares of Stock available for issuance
pursuant to each such Option, Stock Appreciation Right, Stock Grant and Stock
Unit Grant as adjusted under § 13.1 without seeking the approval of the
Company’s shareholders for such adjustment unless such approval is required
under applicable law or the rules of the stock exchange on which shares of Stock
are traded. Furthermore, the Committee shall have the absolute discretion to
further adjust such number, kind or class (or any combination thereof) of shares
of Stock reserved under § 3.1 in light of any of the events described in
§ 13.1(a) and § 13.1(b) to the extent the Committee acting in good faith
determinates that a further adjustment would be appropriate and proper under the
circumstances and in keeping with the purposes of this Plan without seeking the
approval of the Company’s shareholders for such adjustment unless such approval
is required under applicable law or the rules of the stock exchange on which
shares of Stock are traded.

      13.3     Transactions Described in § 424 of the Code. If there is a
corporate transaction described in § 424(a) of the Code which does not
constitute a Change in Control of the Company, the Committee as part of any such
transaction shall have right to make Stock Grants, Stock Unit Grants and Option
and Stock Appreciation Right grants (without regard to any limitations set forth
under 3.4 of this Plan) to effect the assumption of, or the substitution for,
outstanding stock grants, stock unit grants and option and stock appreciation
right grants previously made by any other corporation to the extent that such
corporate transaction calls for such substitution or assumption of such
outstanding stock grants, stock unit grants and stock option and stock
appreciation right grants. Furthermore, if the Committee makes any such grants
as part of any such transaction, the Committee shall have the right to increase
the number of shares of Stock available for issuance under § 3.1 by the number
of shares of Stock subject to such grants without seeking the approval of the
Company’s shareholders for such adjustment unless such approval is required
under applicable law or the rules of the stock exchange on which shares of Stock
are traded.

      13.4     Fractional Shares. If any adjustment under this § 13 would create
a fractional share of Stock or a right to acquire a fractional share of Stock
under any Option, Stock Appreciation Right or Stock Grant, such fractional share
shall be disregarded and the number of shares of Stock reserved under this Plan
and the number subject to any Options or Stock Appreciation Right grants and
Stock Grants shall be the next lower number of shares of Stock, rounding all
fractions downward. An adjustment made under this § 13 by the Committee shall be
conclusive and binding on all affected persons.

§ 14.

CHANGE IN CONTROL

      If there is a Change in Control of the Company, then as of the Change
Effective Date for such Change in Control any and all conditions to the exercise
of all outstanding Options and Stock Appreciation Rights on such date and any
and all outstanding issuance and forfeiture conditions on any Stock Grants and
Stock Unit Grants on such date automatically shall be deemed 100% satisfied as
of such Change Effective Date, and the Board shall have the right (to the extent
expressly required as part of such transaction) to cancel such Options, Stock
Appreciation Rights, Stock Grants and Stock Unit Grants after providing each
Eligible Employee and Director a reasonable period to exercise his or her
Options and Stock Appreciation Rights and to take such other action as necessary
or appropriate to receive the Stock subject to any Stock Grants and the cash
payable under any Stock Unit Grants; provided, if any issuance or forfeiture
condition described in this § 14 relates to satisfying any performance goal and
there is a target for such goal, such issuance or forfeiture condition shall be
deemed satisfied under this § 14 only to the extent of such target unless such
target has been exceeded before the Change Effective Date, in which event such
issuance or forfeiture condition shall be deemed satisfied to the extent such
target had been so exceeded.

-10-

--------------------------------------------------------------------------------

 

§ 15.

AMENDMENT OR TERMINATION

      This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate; provided, however, (a) no amendment
shall be made absent the approval of the shareholders of the Company to the
extent such approval is required under applicable law or the rules of the stock
exchange on which shares of Stock are listed and (b) no amendment shall be made
to § 14 on or after the date of any Change in Control which might adversely
affect any rights which otherwise would vest on the related Change Effective
Date. The Board also may suspend granting Options or Stock Appreciation Rights
or making Stock Grants or Stock Unit Grants under this Plan at any time and may
terminate this Plan at any time; provided, however, the Board shall not have the
right unilaterally to modify, amend or cancel any Option or Stock Appreciation
Right granted or Stock Grant made before such suspension or termination unless
(1) the Eligible Employee or Director consents in writing to such modification,
amendment or cancellation or (2) there is a dissolution or liquidation of the
Company or a transaction described in § 13.1 or § 14.

§ 16.

MISCELLANEOUS

      16.1     Shareholder Rights. No Eligible Employee or Director shall have
any rights as a shareholder of the Company as a result of the grant of an Option
or a Stock Appreciation Right pending the actual delivery of the Stock subject
to such Option or Stock Appreciation Right to such Eligible Employee or
Director. An Eligible Employee’s or a Director’s rights as a shareholder in the
shares of Stock which remain subject to forfeiture under § 9.2(b) shall be set
forth in the related Stock Grant Certificate.

      16.2      No Contract of Employment. The grant of an Option or a Stock
Appreciation Right or a Stock Grant or Stock Unit Grant to an Eligible Employee
or Director under this Plan shall not constitute a contract of employment or a
right to continue to serve on the Board and shall not confer on an Eligible
Employee or Director any rights upon his or her termination of employment or
service in addition to those rights, if any, expressly set forth in this Plan or
the related Option Certificate, Stock Appreciation Right Certificate, or Stock
Grant Certificate.

      16.3     Withholding. Each Option, Stock Appreciation Right, Stock Grant
and Stock Unit Grant shall be made subject to the condition that the Eligible
Employee or Director consents to whatever action the Committee directs to
satisfy the minimum statutory federal and state tax withholding requirements, if
any, which the Company determines are applicable to the exercise of such Option
or Stock Appreciation Right or to the satisfaction of any forfeiture conditions
with respect to Stock subject to a Stock Grant or Stock Unit Grant issued in the
name of the Eligible Employee or Director. No withholding shall be effected
under this Plan which exceeds the minimum statutory federal and state
withholding requirements.

      16.4     Construction. All references to sections (§) are to sections (§)
of this Plan unless otherwise indicated. This Plan shall be construed under the
laws of the State of Georgia. Each term set forth in § 2 shall, unless otherwise
stated, have the meaning set forth opposite such term for purposes of this Plan
and, for purposes of such definitions, the singular shall include the plural and
the plural shall include the singular. Finally, if there is any conflict between
the terms of this Plan and the terms of any Option Certificate, Stock
Appreciation Right Certificate or Stock Grant Certificate, the terms of this
Plan shall control.

      16.5     Other Conditions. Each Option Certificate, Stock Appreciation
Right Certificate or Stock Grant Certificate may require that an Eligible
Employee or a Director (as a condition to the exercise of an Option or a Stock
Appreciation Right or the issuance of Stock subject to a Stock Grant) enter into
any agreement or make such representations prepared by the Company, including
(without limitation) any agreement which restricts the transfer of Stock
acquired pursuant to the exercise of an Option or a Stock Appreciation Right or
a Stock Grant or provides for the repurchase of such Stock by the Company.

      16.6     Rule 16b-3. The Committee shall have the right to amend any
Option, Stock Grant or Stock Appreciation Right to withhold or otherwise
restrict the transfer of any Stock or cash under this Plan to an

-11-

--------------------------------------------------------------------------------

 

Eligible Employee or Director as the Committee deems appropriate in order to
satisfy any condition or requirement under Rule 16b-3 to the extent Rule 16 of
the 1934 Act might be applicable to such grant or transfer.

      16.7     Coordination with Employment Agreements and Other Agreements. If
the Company enters into an employment agreement or other agreement with an
Eligible Employee or Director which expressly provides for the acceleration in
vesting of an outstanding Option, Stock Appreciation Right, Stock Grant or Stock
Unit Grant or for the extension of the deadline to exercise any rights under an
outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant,
any such acceleration or extension shall be deemed effected pursuant to, and in
accordance with, the terms of such outstanding Option, Stock Appreciation Right,
Stock Grant or Stock Unit Grant and this Plan even if such employment agreement
or other agreement is first effective after the date the outstanding Option or
Stock Appreciation Right was granted or the Stock Grant or Stock Unit Grant was
made.

-12-