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                                                                   EXHIBIT 10.26


                                February 13, 2002

Mr. Michael J. Keough
1091 Lawrence Avenue
Lake Forest, Illinois 60045

               Re: Caraustar Industries, Inc.

Dear Mike:

        On behalf of Caraustar Industries, Inc. (the "Company"), I am pleased to
offer you employment with the Company on the following terms and conditions.

        1.     TITLE AND REPORTING: Senior Vice President and Chief Operating
Officer, reporting to the President and CEO.

        2.     DUTIES: Duties will include, but are not limited to, planning,
direction and coordination of the operational and sales and marketing aspects of
the Company's various business units, and such other duties consistent with your
position as assigned to you from time to time.

        3.     COMPENSATION AND BENEFITS

               (a)    BASE SALARY: $450,000 per year (provided in accordance
        with the Company's standard payroll practices for all salaried
        employees), which may be increased by the Board of Directors in its sole
        discretion.

               (b)    BONUS: You will be eligible for an annual bonus at the
        Company's discretion under the terms of the Company's Key Employee
        Incentive Compensation Plan as currently in effect; provided, however,
        that you are guaranteed to receive a bonus for each of plan years 2002
        and 2003 that will in no event be less than 20% of your base salary
        earned during each such plan year (i.e., the 2002 bonus will be prorated
        based on your time of service with the Company during 2002).

               (c)    BASIC BENEFIT PLANS: You will be eligible to participate
        in the Company's regular health, life, disability, retirement and other
        benefit plans offered to all employees in accordance with the terms of
        those plans. In addition, you will be provided with the following other
        specific company-paid benefits:

               A basic life insurance policy of $1,000,000;

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Mr. Michael J. Keough
February 13, 2002
Page 2


               A long-term disability plan supplemental to the Company's basic
        long-term disability plan to ensure the replacement of at least 66 2/3%
        of your base salary in the event of a qualifying disability;

               Four weeks of earned vacation annually;

               Twenty-five years of industry service credit for purposes of the
        Short-Term Disability income replacement plan;

               Immediate participation upon hire in the Supplemental Employee
        Retirement Plan with twenty-five years of industry service credit for
        purposes of the benefit calculation (with the total benefit payable
        under the plan to be offset by any other payments from qualified plans
        of prior employers);

               Full relocation services as necessary for your needs under the
        Company's Relocation Program;

               Membership in a Country Club of your election;

               Annual financial planning services;

               A one-time non-qualified option grant to purchase 60,000
        restricted shares of the Company's stock valued as of date of hire, with
        the grant to vest over a four-year term and be exercisable for a term of
        ten years; and

               Participation, if you elect, in any of the Company's other
        voluntary benefit plans for similarly situated employees.

        4.     BUSINESS EXPENSES: You will be reimbursed for reasonable and
necessary business expenses, in accordance with the Company's policies and upon
presentation of appropriate documentation.

        5.     MEMBERSHIP ON THE BOARD OF DIRECTORS: You will be nominated for
membership to the Company's Board of Directors, subject to the terms and
conditions normally applicable to such actions.

        6.     SEVERANCE BENEFITS:

               (a)    In the event your employment is terminated other than
        because of your death or "disability" (as defined below), by you for any
        reason, for "cause" (as defined below) or in connection with a
        qualifying termination under the terms of a change in control severance
        agreement to be entered between you and the Company, you will be
        entitled to a severance benefit equal to at least twelve (12) months'
        continuation of your then-current base salary and benefits coverage in
        place at the time of termination.

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Mr. Michael J. Keough
February 13, 2002
Page 3


               (b)    In the event your employment is terminated because of your
        death or disability, for cause, or by you for any reason, you will not
        be entitled to receive any compensation or benefits after the date of
        termination, except for any benefits accrued through the date of
        termination under the Company's plans.

               (c)    In the event of a qualifying termination under the terms
        of a change in control severance agreement to be entered between you and
        the Company, you will be entitled to receive the benefit provided
        thereunder. The Company will enter such change in control severance
        agreement with you under terms approved by the Company's Board of
        Directors and provided to its other executive officers; provided, that
        such agreement will at a minimum provide benefits upon a qualifying
        termination up to the lesser of (i) twenty-four (24) months salary
        continuation benefit or (ii) such lesser amount as is necessary to
        ensure that no payments to you thereunder will cause any deductions to
        be disallowed to the Company or cause you to be assessed any excise
        taxes under the Internal Revenue Code.

               (d)    For purposes of this offer, "disability" means termination
        owing to your inability to perform your duties hereunder by reason of
        disability or incapacity, due to physical or mental illness, for a
        period in excess of six (6) consecutive months, and "cause" means (i)
        your commission of a felony; or (ii) fraud, misappropriation or
        embezzlement involving Company property or other intentional wrongful
        acts that materially impair the goodwill or business of the Company or
        that cause material damage to the Company's property, goodwill or
        business.

        7.     RESTRICTIVE COVENANTS: You agree, as a condition to your
employment, to execute any form of confidentiality, non-competition and
non-solicitation agreement reasonably requested by the Company and agree that
the term of such non-competition and non-solicitation agreement shall be no less
than 12 months following your termination of employment or any such longer
period during which you are receiving severance benefits from the Company or any
successor.

        Mike, we are excited at the prospect of your joining the Company and
hope that you accept our offer. If I can answer any questions or be of further
assistance in your decision process, please do not hesitate to contact me.

                                   Sincerely,

                                   CARAUSTAR INDUSTRIES, INC.


                                   By: /s/ Thomas V. Brown
                                       ______________________________________
                                       Thomas V. Brown, President and CEO

Accepted: /s/ Michael J. Keough
          _______________________________
          Michael J. Keough