Exhibit
10.21


 


MANAGEMENT STOCK OPTION
AGREEMENT


 


MANAGEMENT STOCK OPTION AGREEMENT, dated as of
September 30, 2002, between Riverwood Holding, Inc., a Delaware corporation
(the “Company”), and the Grantee whose name appears on the signature page
hereof (the “Grantee”).


 


W  I
T  N  E  S  S  E  T  H:


 


WHEREAS, the Company has determined that it is in the
interests of the Company and its stockholders to provide certain of its senior
management and other key management employees or directors of the Company and
its subsidiaries, including the Grantee options to purchase shares of Class A
Common Stock pursuant to the Company’s 2002 Stock Incentive Plan (the “Plan”);
and


 


WHEREAS, the Grantee and the Company desire to enter
into an agreement to evidence and confirm the grant of such options on the
terms and conditions set forth herein;


 


NOW, THEREFORE, to evidence the stock options so
granted, and to set forth the terms and conditions governing such stock
options, the Company and the Grantee hereby agree as follows:


 


1.  Certain
Definitions.  As used in this
Agreement, the following terms shall have the following meanings:


 


(a)  “Affiliate” shall mean, with respect
to any person, any other person controlled by, controlling or under common
control with such person.


 


(b)  “Award Agreement” shall mean each
agreement evidencing the grant of any award under the Plan, including, without
limitation, this Agreement.


 


(c)  “Board” shall mean the Board of
Directors of the Company.


 


(d)  “CD&R Fund” shall mean the
Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands
exempted limited partnership, and any successor investment vehicle managed by
Clayton, Dubilier & Rice, Inc.


 


(e)  “Cause” shall have the meaning
assigned to such term in the Employment Agreement.


 


(f)  “Change in Control” shall mean the
first to occur of the following events after the date hereof:


 

















 


(i)  the acquisition by any person, entity or
“group” (as defined in Section 13(d) of the Exchange Act), other than the
Company, the Subsidiaries, any employee benefit plan of the Company or the
Subsidiaries, the CD&R Fund, any Investor or any Affiliate of the CD&R
Fund or of an Investor, of 50% or more of the combined voting power of the
Company’s or RIC’s then outstanding voting securities;


 


(ii)  the merger or consolidation of the Company
or RIC, as a result of which persons who were stockholders of the Company or
RIC, as the case may be, immediately prior to such merger or consolidation, do
not, immediately thereafter, own, directly or indirectly, more than 50% of the
combined voting power entitled to vote generally in the election of directors
of the merged or consolidated company;


 


(iii)  the liquidation or dissolution of the
Company or RIC other than a liquidation of RIC into the Company or into any
Subsidiary; and


 


(iv)  the sale, transfer or other disposition of
all or substantially all of the assets of the Company or RIC to one or more
persons or entities that are not, immediately prior to such sale, transfer or
other disposition, Affiliates of the Company, RIC, the CD&R Fund or any
Investor.


 


(g)  “Change in Control Price” shall mean
the price per share of Common Stock paid in conjunction with any transaction
resulting in a Change in Control (as determined in good faith by the Board if
any part of such price is payable other than in cash).


 


(h)  “Closing Date” shall mean the date of
the closing date of the Acquisition.


 


(i)  “Common Stock” shall mean the Class A
Common Stock, par value $.01 per share, of the Company.


 


(j)  “Company” shall mean Riverwood Holding,
Inc., a Delaware corporation formerly known as New River Holding, Inc., and any
successor thereto.


 


(k)  “Covered Options” shall have the
meaning set forth in Section 5(c)(i) hereof.


 


(l)  “Cumulative Sales Revenue” shall mean
the sum of the Sales Revenue for the Fiscal Quarters commencing after the Grant
Date, or, in the case of a determination of the Cumulative Sales Revenue
pursuant to Section 3(b), the sum


 


2

















 


of the Sales Revenue for each Fiscal Quarter
commencing after the Grant Date and ending prior to the date of determination.


 


(m)  “Delay Period” shall have the meaning
set forth in Section 10(c) hereof.


 


(n)  “Employment Agreement” shall mean the
employment agreement, dated September 30, 2002, between the Grantee, the
Company and RIC.


 


(o)  “Exchange Act” shall mean the U.S.
Securities Exchange Act of 1934, as amended.


 


(p)  “Exercise Date” shall have the
meaning set forth in Section 6 hereof.


 


(q)  “Exercise Price” shall have the
meaning set forth in Section 6 hereof.


 


(r)  “Exercise Shares” shall have the
meaning set forth in Section 6 hereof.


 


(s)  “Extraordinary Termination” shall
mean a termination of the Grantee’s employment with the Company and the
Subsidiaries by reason of the Grantee’s death, Permanent Disability or
Retirement.


 


(t)  “Fair Market Value” shall mean, as of
any date, the fair market value on such date per share of Common Stock as
determined in good faith by the Executive Committee of the Board.  In making a determination of Fair Market
Value, the Executive Committee shall give due consideration to such factors as
it deems appropriate, including, without limitation, the earnings and certain
other financial and operating information of the Company and the Subsidiaries
in recent periods, the potential value of the Company and the Subsidiaries as a
whole, the future prospects of the Company and the Subsidiaries and the
industries in which they compete, the history and management of the Company and
the Subsidiaries, the general condition of the securities markets, the fair
market value of securities of companies engaged in businesses similar to those
of the Company and the Subsidiaries and a valuation of the Common Stock, which
shall be performed by an independent valuation firm chosen by the Executive
Committee.  Notwithstanding the
foregoing, following a Public Offering, Fair Market Value shall mean the
average of the high and low trading prices for a share of Common Stock on the
primary national exchange (including NASDAQ) on which the Common Stock is then
traded on the trading day immediately preceding the date as of which such Fair
Market Value is determined.  The
determination of Fair Market Value will not give effect to any restrictions on
transfer of the shares of Common Stock or the fact that such Common Stock would
represent a minority interest in the Company.


 


3

















 


(u)  “Financing Agreements” shall have the
meaning set forth in Section 10(a) hereof.


 


(v)  “First Purchase Period” shall have
the meaning set forth in Section 5(c)(i) hereof.


 


(w)  “Fiscal Quarter” shall mean a three
period month ending on March 31, June 30, September 30 or December 31.


 


(x)  “Good Reason” shall have the meaning
assigned to such term in the Employment Agreement.


 


(y)  “Grant Date” shall mean the date
hereof, which is the date on which the Options are granted to the Grantee.


 


(z)  “Grantee” shall mean the employee
whose name appears on the signature page hereof.


 


(aa)  “Installment” shall mean Performance
Options with respect to 5,000 Shares.


 


(bb)  “Investors” shall mean each of the
investors who purchased shares of Common Stock or shares of Class B Common
Stock of the Company concurrently with the consummation of the merger
contemplated by the Merger Agreement, and their “specified affiliates”, within
the meaning of the Stockholders Agreement of the Company, as amended from time
to time.


 


(cc)  “Involuntary Termination” shall mean
a termination of the Grantee’s employment with a New Employer or any subsidiary
thereof by the New Employer for any reason.


 


(dd)  “Management Stock Subscription Agreement”
shall mean the management stock subscription agreement entered into by the
Company and the Grantee in connection with the Grantee’s exercise of any of the
Options and purchase of the Shares subject to any such Options pursuant to
Section 6 hereof.


 


(ee)  “New Employer” shall mean the
Grantee’s employer, or the parent or a subsidiary of such employer, immediately
following a Change in Control.


 


(ff)  “Normal Termination Date” shall mean
the 90th day following the tenth anniversary of the date hereof.


 


(gg)  “Option Price” shall mean the
exercise price under each Option and shall be equal to $120.00 per Share.


 


4

















 


(hh)  “Options” shall mean, collectively,
the Performance Options and Service Options granted to the Grantee hereby.


 


(ii)  “Performance Options” shall mean
those Options that are subject to the provisions of Section 3(b) hereof
providing for the vesting of such Options on the basis of Sales Revenue and/or
the continued employment of the Grantee. 
Performance Options have been granted to the Grantee pursuant to this
Agreement with respect to 15,000 Shares.


 


(jj)  “Permanent Disability” shall have the
meaning assigned to such term in the Employment Agreement.


 


(kk)  “Plan” shall mean the Riverwood
Holding, Inc. 2002 Stock Incentive Plan, as the same may be amended from time
to time.


 


(ll)  “Public Offering” shall mean the
first day as of which sales of Common Stock are made to the public in the
United States pursuant to an underwritten public offering of the Common Stock
led by one or more underwriters at least one of which is an underwriter of
nationally recognized standing.


 


(mm)  “Registration and Participation Agreement”
shall have the meaning set forth in Section 7(f) hereof.


 


(nn)  “Retirement” shall mean a Grantee’s
retirement from employment with the Company and the Subsidiaries at or after
age 65.


 


(oo)  “RIC” shall mean Riverwood
International Corporation, a Delaware corporation formerly known as Riverwood
International USA, Inc., and any successor thereto.


 


(pp)  “RIC Holding” shall mean RIC Holding,
Inc., a Delaware corporation and wholly owned subsidiary of the Company.


 


(qq)  “Rule 144” shall mean Rule 144
promulgated under the Securities Act.


 


(rr)  “Sales Revenue” shall mean gross
sales revenue of the Consumer Products Business Unit of RIC with respect to a
Fiscal Quarter less gross revenues from the sale of paperboard for the
applicable Fiscal Quarter.


 


(ss)  “Second Purchase Period” shall have
the meaning set forth in Section 5(c)(i) hereof.


 


5

















 


(tt)  “Securities Act” shall mean the U.S.
Securities Act of 1933, as amended.


 


(uu)  “Shares” shall mean the shares of
Common Stock subject to the Options. 
The number of Shares subject to the Options is set forth on the
signature page hereof.


 


(vv)  “Subsidiary” shall mean any
corporation or other person, a majority of whose outstanding voting securities
or other equity interests are owned, directly or indirectly, by the Company.


 


2.  Confirmation
of Grant; Option Price.


 


(a)  The
Company hereby evidences and confirms its grant to the Grantee, effective as of
the date hereof, of (i) Service Options to purchase 10,000 Shares
and (ii) Performance Options to purchase 15,000 Shares.  The Options are not intended to be incentive
stock options under the U.S. Internal Revenue Code of 1986, as amended.  This Agreement is subordinate to, and the
terms and conditions of the Options granted hereunder are subject to, the terms
and conditions of the Plan.  If there is
any inconsistency between the terms hereof and the terms of the Plan, the terms
of the Plan shall govern.


 


(b)  Option
Price.  The per share exercise price
for the Shares covered by the Options shall equal $120.00.


 


3.  Exercisability.


 


(a)  Service
Options.  Except as otherwise
provided in this Agreement and subject to the continuous employment of the
Grantee with the Company or one of the Subsidiaries until the applicable
vesting date, the Service Options granted hereby shall vest and become
exercisable as to one-third on the second anniversary of the Grant Date and as
to the remaining two-thirds on the third anniversary of the Grant Date; provided
that, if (x) the Grantee’s employment is terminated by reason of an
Extraordinary Termination or (y)(i)the CD&R Fund and, if
applicable, its Affiliates effect a sale or other disposition of all of the
Common Stock then held by the CD&R Fund and its Affiliates to one or more
persons other than any person who is an Affiliate of the CD&R Fund and (ii) thereafter,
the Grantee’s employment is terminated by the Company other than for Cause, all
Service Options held by the Grantee as of the effective date of such Extraordinary
Termination or termination under the foregoing clause (y)(ii), whichever is
applicable, shall become immediately 100% vested and exercisable.


 


(b)  Performance
Options.  Except as otherwise
provided in this Agreement and subject to the continuous employment of the
Grantee with the Company or one or more


 


6

















 


of the Subsidiaries until the applicable vesting date, the Performance
Options shall become vested and exercisable as follows:


 


(i)                                     an
Installment as of the last day of the Fiscal Quarter as of which Cumulative
Sales Revenue is $25,000,000;


 


(ii)                                  an
Installment as of the last day of the Fiscal Quarter as of which Cumulative
Sales Revenue is $100,000,000; and


 


(iii)                               an
Installment as of the last day of the Fiscal Quarter as of which Cumulative
Sales Revenue is $150,000,000.


 


provided that if, on or prior to the
date that the Performance Options shall become vested,  (x) the Grantee’s employment is
terminated by reason of an Extraordinary Termination or (y)(i)
the CD&R Fund and, if applicable, its Affiliates effect a sale or other
disposition of all of the Common Stock then held by the CD&R Fund and its
Affiliates to one or more persons other than any person who is a general or
limited partner or Affiliate of the CD&R Fund and (ii) thereafter,
either the Grantee’s employment is terminated by the Company other than for
Cause or the Grantee’s employment is terminated by the Grantee for Good Reason,
then the excess of (x) a “proportionate share” of the Performance
Options, over (y) the number of Performance Options that have previously
become vested pursuant to Section 3(b) shall vest and become exercisable as of
such date of termination.  Such
“proportionate share” that shall become vested and exercisable shall equal the
product of (i) the percentage obtained by dividing (x) the
Cumulative Sales Revenue actually achieved by the Company during the period
commencing on the Grant Date and ending on the last day of the most recent
Fiscal Quarter ending on or prior to the effective date of the Extraordinary
Termination or other termination, whichever is applicable, as determined by the
Executive Committee of the Board, by (y) $150,000,000, multiplied by (ii)
the total number of Shares subject to such Performance Options.  Any Performance Options held by the Grantee
as of the date of an Extraordinary Termination or other termination, whichever
is applicable, that have not become vested and exercisable on or prior to such
date of termination in accordance with this Section 3(b) shall terminate and be
cancelled immediately on such date.


 


Notwithstanding the foregoing provisions of this
paragraph (b), 100% of the Performance Options shall become vested and
exercisable nine years and six months following the Grant Date regardless of
whether any Cumulative Sales Revenue targets have been achieved, subject to the
continuous employment of the Grantee with the Company or one or more of the
Subsidiaries until such date.


 


(c)  Conditions.  The Board may accelerate the vesting or
exercisability of any Option, all Options or any class of Options, at any time
and from time to time.  Shares eligible
for purchase may, subject to the provisions hereof, thereafter be purchased, at
any


 


7

















 


time and from time to time on or after such anniversary until the date
one day prior to the date on which the Options terminate, provided that any
such purchase shall be effected pursuant to and subject to the provisions
contained in the Management Stock Subscription Agreement related to such
Shares.


 


4.  Termination
of Options.


 


(a)  Normal
Termination Date.  Unless an earlier
termination date shall occur as specified in subsection (b), the Options shall
terminate and be canceled on the Normal Termination Date.


 


(b)  Early
Termination.  If the Grantee’s
employment is voluntarily or involuntarily terminated for any reason, any
Options held by the Grantee that have not vested and become exercisable on or
before the effective date of such termination shall terminate and be canceled
on such effective date.  Subject to the
provisions of Section 5(c), all Options held by the Grantee on the date of
such termination that shall have become vested and exercisable on or before the
effective date of such termination shall remain exercisable for whichever of
the following periods is applicable, and if not exercised within such period,
shall terminate and be canceled upon the expiration of such period: (i)
if the Grantee’s employment is terminated by reason of an Extraordinary
Termination, then any vested and exercisable Options then held by the Grantee
shall remain exercisable solely until the first to occur of (A) the one
year anniversary of the Grantee’s termination of employment or (B) the
Normal Termination Date and (ii) if the Grantee’s employment is
terminated for any reason other than (x) an Extraordinary Termination or
(y) for Cause, then any vested and exercisable Options then held by the
Grantee shall remain exercisable for a period of 60 days after the earliest of
(x) the expiration of the Second Purchase Period (as defined in
Section 5(c)(i) hereof), (y) the receipt by the Grantee of
written notice that the CD&R Fund does not intend to exercise its right to
purchase the Options pursuant to Section 5(c)(i) and (z) the
applicable Normal Termination Date. 
Notwithstanding anything else contained in this Agreement, if the
Grantee’s employment is terminated for Cause, then all Options (whether or not
then exercisable) shall terminate and be canceled immediately upon such
termination.  Nothing in this Agreement
shall be deemed to confer on the Grantee any right to continue in the employ of
the Company or any Subsidiary, or to interfere with or limit in any way the
right of the Company or any Subsidiary to terminate such employment at any
time.


 


5.  Restrictions
on Exercise; Non-Transferability of Options; Repurchase of Options.


 


(a)  Restrictions
on Exercise.  The Options may be
exercised only with respect to full shares of Common Stock.  No fractional shares of Common Stock shall
be issued.  Notwithstanding any other
provision of this Agreement, the Options may not be exercised in whole or in
part, and no certificates representing Shares shall be delivered,


 


8

















 


(i) (A) unless all requisite approvals and consents
of any governmental authority of any kind having jurisdiction over the exercise
of the Options shall have been secured, (B) unless the purchase of
the Shares upon the exercise of the Options shall be exempt from registration
under applicable U.S. federal and state securities laws, and applicable
non-U.S. securities laws, or the Shares shall have been registered under such
laws, and (C) unless all applicable U.S. federal, state and local
and non-U.S. tax withholding requirements shall have been satisfied or (ii) if
such exercise would  result in a
violation of the terms or provisions of or a default or an event of default
under any of the Financing Agreements. 
The Company shall use commercially reasonable efforts to obtain the
consents and approvals referred to in clause (i)(A) of the preceding
sentence, to satisfy the withholding requirements referred to in
clause (i)(C) of the preceding sentence and to obtain the consent of the
parties to the Financing Agreements referred to in clause (ii) of the preceding
sentence so as to permit the Options to be exercised.


 


(b)  Non-Transferability
of Options.  Except as contemplated
by Section 5(c), the Options may be exercised only by the Grantee or by
the Grantee’s estate.  Except as
contemplated by Section 5(c), the Option is not assignable or
transferable, in whole or in part, and it may not, directly or indirectly, be
offered, transferred, sold, pledged, assigned, alienated, hypothecated or
otherwise disposed of or encumbered (including without limitation by gift,
operation of law or otherwise) other than by will or by the laws of descent and
distribution to the estate of the Grantee upon the Grantee’s death, provided
that the deceased Grantee’s beneficiary or the representative of the Grantee’s
estate shall acknowledge and agree in writing, in a form reasonably acceptable
to the Company, to be bound by the provisions of this Agreement and the Plan as
if such beneficiary or the estate were the Grantee.


 


(c)  Purchase
of Options on Termination of Employment.


 


(i)  Termination of Employment.  If the Grantee’s employment is terminated
for any reason other than for Cause, the Company shall have an option to
purchase all or any portion of the Options that have vested and become exercisable
by the Grantee on or prior to the effective date of termination of employment
(the “Covered Options”) and shall have 30 days from the date of the Grantee’s
termination of employment (such 30-day period being hereinafter referred to as
the “First Purchase Period”) during which to give notice in writing to the
Grantee (or, if the Grantee’s employment was terminated by the Grantee’s death,
the Grantee’s estate) of its election to exercise or not to exercise such right
to purchase the Covered Options.  The
Company hereby undertakes to use reasonable efforts to act as promptly as
practicable following such termination to make such election.  If the Company (i) fails to give
notice that it intends to exercise its right to purchase the Covered Options
within the First Purchase Period, or (ii) chooses to purchase none
or only a portion of the Covered Options, by giving such notice, the CD&R
Fund shall have the right to purchase all or any


 


9

















 


portion of the Covered Options not purchased by the
Company, and shall have until the expiration of the earlier of (x) 30
days following the end of the First Purchase Period, or (y) 30 days
from the date of receipt by the CD&R Fund of written notice that the
Company does not intend to exercise its right with respect to all of the
Covered Options (such 30-day period being hereinafter referred to as the
“Second Purchase Period”), to give notice in writing to the Grantee (or the
Grantee’s estate) of the CD&R Fund’s exercise of its right to purchase all
or any portion of such Covered Options. 
If the rights of the Company and the CD&R Fund to purchase all of
the Covered Options granted in this subsection are not fully exercised as provided
herein other than as a result of Section 10 hereof, the Grantee (or the
Grantee’s estate) shall be entitled to retain any Covered Options not so
purchased, subject to all of the provisions of this Agreement (including,
without limitation, Section 4(b)).


 


(ii)  Purchase Price, etc.  All purchases pursuant to this
Section 5(c) by the Company or the CD&R Fund shall be for a purchase
price and in the manner prescribed by Sections 5(f), (g) and (h).


 


(d)  Notice
of Termination.  The Company shall
give written notice of any termination of the Grantee’s employment to the
CD&R Fund, except that if such termination (if other than as a result of
death) is by the Grantee, the Grantee shall give written notice of such
termination to the Company and the Company shall give written notice of such
termination to the CD&R Fund.


 


(e)  Public
Offering.  In the event that a
Public Offering has been consummated, neither the Company nor the CD&R Fund
shall have any rights to purchase the Covered Options pursuant to
Section 5(c).


 


(f)  Purchase
Price.  Subject to Section 10(c)
hereof, the purchase price to be paid to the Grantee (or the Grantee’s estate)
for the Covered Options purchased pursuant to Section 5(c) shall be equal to
the excess, if any, of (i) the Fair Market Value of the Shares
which may be purchased upon exercise of such Covered Options as of the
effective date of the termination of employment that gives rise to the right of
the Company and the CD&R Fund to purchase such Covered Options over (ii) the
aggregate Option Price of such Covered Options.


 


(g)  Payment.  Subject to Section 10 hereof, the
completion of a purchase pursuant to this Section 5 shall take place at
the principal office of the Company on the tenth business day
following the receipt by the Grantee (or the Grantee’s estate) of the
CD&R Fund’s or the Company’s notice of its exercise of the right to
purchase the Covered Options pursuant to Section 5(c).  The purchase price shall be paid by delivery
to the Grantee (or the Grantee’s estate) of a check for the purchase price
payable to the order of the Grantee (or the Grantee’s estate), against delivery
of such instruments as the


 


10

















 


Company may reasonably request, signed by the Grantee (or the Grantee’s
estate), free and clear of all security interests, liens, claims, encumbrances,
charges, options, restrictions on transfer, proxies and voting and other
agreements of whatever nature.


 


(h)  Application
of the Purchase Price to Certain Loans. 
The Grantee agrees that the Company and the CD&R Fund shall be
entitled to apply any amounts to be paid by the Company or the CD&R Fund,
as the case may be, to purchase the Covered Options pursuant to this
Section 5 to discharge any indebtedness of the Grantee to the Company or
any Subsidiary, or indebtedness that is guaranteed by the Company or any
Subsidiary, including, but not limited to, any indebtedness of the Grantee
incurred to purchase any shares of Common Stock.


 


(i)  Withholding.  Whenever Shares are to be issued pursuant to
the Options, the Company may require the recipient of the Shares to remit to
the Company an amount sufficient to satisfy any applicable U.S. federal, state
and local and non-U.S. tax withholding requirements.  In the event any cash is paid to the Grantee or the Grantee’s
estate or beneficiary pursuant to this Section 5, the Company shall have
the right to withhold an amount from such payment sufficient to satisfy any
applicable U.S. federal, state and local and non-U.S. tax withholding
requirements.  If shares of Common Stock
are traded on a national securities exchange or bid and ask prices for shares
of Common Stock are quoted on the NASDAQ, the Company may, if requested by the
Grantee, withhold shares of Common Stock to satisfy the minimum applicable
withholding requirements, subject to the provisions of the Plan and any rules
adopted by the Board regarding compliance with applicable law, including, but
not limited to, Section 16(b) of the Exchange Act.


 


6.  Manner
of Exercise.  To the extent that any
of the Options shall have become and remain vested and exercisable as provided
in Section 3 and subject to such reasonable administrative regulations as
the Board may have adopted, such Options may be exercised, in whole or in part,
by notice to the Secretary of the Company in writing given on the date as of
which the Grantee will so exercise the Options (the “Exercise Date”),
specifying the number of Shares with respect to which the Options are being
exercised (the “Exercise Shares”), subject to the execution by the Company and
the Grantee of a  Management Stock Subscription Agreement substantially in the
form attached to the Plan as Exhibit A (“Management Stock Subscription
Agreement”), or in such other form as may be agreed upon by the Company and the
Grantee, such Management Stock Subscription Agreement to contain (unless a
Public Offering shall have occurred prior to the Exercise Date) provisions
corresponding to Section 5(c) hereof, and the delivery to the Company by
the Grantee, on or within five days following the Exercise Date, in accordance
with the Management Stock Subscription Agreement, full payment for the Exercise
Shares in United States dollars in cash, or cash equivalents satisfactory to
the Company, and in an amount equal to the product of the number of Exercise
Shares, multiplied by the Option Price (the “Exercise Price”).  Upon execution


 


11

















 


by the Company and the Grantee of the Management Stock Subscription
Agreement and delivery to the Company by the Grantee of the Exercise Price, the
Company shall deliver to the Grantee a certificate or certificates representing
the Exercise Shares, registered in the name of the Grantee and bearing
appropriate legends as provided in Section 7(b) hereof.  If shares of Common Stock are traded on a
U.S. national securities exchange or bid and ask prices for shares of Common
Stock are quoted over NASDAQ, the Grantee may, in lieu of cash, tender shares
of Common Stock that have been owned by the Grantee for at least six months,
having a Fair Market Value on the Exercise Date equal to the Exercise Price or
may deliver a combination of cash and such shares of Common Stock having a Fair
Market Value equal to the difference between the Exercise Price and the amount
of such cash as payment of the Exercise Price, subject to such rules and
regulations as may be adopted by the Board to provide for the compliance of
such payment procedure with applicable law, including Section 16(b) of the
Exchange Act.  The Company may require
the Grantee to furnish or execute such other documents as the Company shall
reasonably deem necessary (i) to evidence such exercise, (ii) to
determine whether registration is then required under the Securities Act and (iii) to
comply with or satisfy the requirements of the Securities Act, applicable state
or non-U.S. securities laws or any other law.


 


7.  Grantee’s
Representations, Warranties and Covenants.


 


(a)  Investment
Intention.  The Grantee represents
and warrants that the Options have been, and any Exercise Shares will be, acquired
by the Grantee solely for the Grantee’s own account for investment and not with
a view to or for sale in connection with any distribution thereof.  The Grantee agrees that the Grantee will
not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or
otherwise dispose of all or any of the Options or any of the Exercise Shares
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of all or any of the Options or any of the Exercise Shares), except in
compliance with the Securities Act and the rules and regulations of the
Commission thereunder, and in compliance with applicable state securities or
“blue sky” laws and non-U.S. securities laws. 
The Grantee further understands, acknowledges and agrees that none of
the Exercise Shares may be transferred, sold, pledged, hypothecated or
otherwise disposed of unless the provisions of the related  Management Stock
Subscription Agreement shall have been complied with or have expired.


 


(b)  Legends.  The Grantee acknowledges that any
certificate representing the Exercise Shares shall bear an appropriate legend,
which will include, without limitation, the following language:


 


“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED
AS OF          
    ,
         , AND NEITHER THIS
CERTIFICATE NOR THE SHARES REPRESENTED


 


12

















 


BY IT ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF SUCH MANAGEMENT STOCK SUBSCRIPTION
AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.  THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE ENTITLED TO CERTAIN OF THE BENEFITS OF AND ARE BOUND BY CERTAIN OF THE
OBLIGATIONS SET FORTH IN A REGISTRATION AND PARTICIPATION AGREEMENT, DATED AS
OF MARCH 27, 1996, AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.”


 


“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE OR NON-U.S.
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF UNLESS (i) (A) SUCH DISPOSITION
IS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH DISPOSITION IS EXEMPT FROM
THE PROVISIONS OF SECTION 5 OF SUCH ACT OR (C) A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL
FOR THE COMPANY, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH DISPOSITION AND
(ii) SUCH DISPOSITION IS PURSUANT TO REGISTRATION UNDER ANY
APPLICABLE STATE AND NON-U.S. SECURITIES LAWS OR AN EXEMPTION THEREFROM.”


 


(c)  Securities
Law Matters.  The Grantee
acknowledges receipt of advice from the Company that (i) the
Exercise Shares have not been registered under the Securities Act or qualified
under any state securities or “blue sky” or non-U.S. securities laws, (ii) it
is not anticipated that there will be any public market for the Exercise
Shares, (iii) the Exercise Shares must be held indefinitely and the
Grantee must continue to bear the economic risk of the investment in the
Exercise Shares unless the Exercise Shares are subsequently registered under
the Securities Act and such state laws or an exemption from registration is
available, (iv) Rule 144 is not presently available with respect to
sales of securities of the Company and the Company has made no covenant to make
Rule 144 available, (v) when and if the Exercise Shares may be
disposed of without registration in


 


13

















 


reliance upon Rule 144, such disposition can be made only in limited
amounts in accordance with the terms and conditions of such Rule, (vi) the
Company does not plan to file reports with the Commission or make public
information concerning the Company available unless required to do so by law or
the terms of its Financing Agreements, (vii) if the exemption
afforded by Rule 144 is not available, sales of the Exercise Shares may be
difficult to effect because of the absence of public information concerning the
Company, (viii) a restrictive legend in the form heretofore set
forth shall be placed on the certificates representing the Exercise Shares and
(ix) a notation shall be made in the appropriate records of the
Company indicating that the Exercise Shares are subject to restrictions on
transfer set forth in this Agreement and, if the Company should in the future
engage the services of a stock transfer agent, appropriate stop-transfer
restrictions will be issued to such transfer agent with respect to the Exercise
Shares.


 


(d)  Compliance
with Rule 144.  If any of the
Exercise Shares are to be disposed of in accordance with Rule 144, the Grantee
shall transmit to the Company an executed copy of Form 144 (if required by Rule
144) no later than the time such form is required to be transmitted to the
Commission for filing and such other documentation as the Company may
reasonably require to assure compliance with Rule 144 in connection with such
disposition.


 


(e)  Ability
to Bear Risk.  The Grantee covenants
that the Grantee will not exercise all or any of the Options unless (i) the
financial situation of the Grantee is such that the Grantee can afford to bear
the economic risk of holding the Exercise Shares for an indefinite period and (ii) the
Grantee can afford to suffer the complete loss of the Grantee’s investment in
the Exercise Shares.


 


(f)  Registration;
Restrictions on Sale upon Public Offering. 
The Grantee acknowledges and agrees that in respect of any Exercise
Shares purchased upon exercise of all or any of the Options, the Grantee shall
be entitled to the rights and subject to the obligations created under the
Registration and Participation Agreement, dated as of March 27, 1996, among the
Company and certain stockholders of the Company, as the same may be amended,
modified or supplemented from time to time (the “Registration and Participation
Agreement”), to the extent set forth therein.  The
Grantee agrees that, in the event that the Company files a registration
statement under the Securities Act with respect to any underwritten public
offering of any shares of its capital stock, the Grantee will not
effect any public sale or distribution of any shares of the Common Stock (other
than as part of such public offering), including but not limited to, pursuant
to Rule 144 or Rule 144A under the Securities Act, during the 20 days prior to
and the 180 days after the effective date of any such registration
statement.  The Grantee further
understands and acknowledges that any sale, transfer or other disposition of
the Exercise Shares by him following a public offering will be subject to
compliance with, and may be limited under, the federal securities laws and/or
state “blue sky” and/or Non-U.S. securities laws.


 


14

















 


(g)  Section
83(b) Election.  The Grantee agrees
that, within 20 days of any Exercise Date that occurs prior to a Public
Offering, the Grantee shall give notice to the Company in the event the Grantee
has made or intends to make an election pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, with respect to the Exercise Shares
purchased on such date, and acknowledges that the Grantee will be solely
responsible for any and all tax liabilities payable by the Grantee in
connection with the Grantee’s receipt of the Exercise Shares or attributable to
the Grantee’s making or failing to make such an election.


 


8.  Representations
and Warranties of the Company.  The
Company represents and warrants to the Grantee that (a) the Company
has been duly incorporated and is an existing corporation in good standing
under the laws of the State of Delaware, (b) this Agreement has
been duly authorized, executed and delivered by the Company and constitutes a
valid and legally binding obligation of the Company enforceable against the
Company in accordance with its terms and (c) the Exercise Shares,
when issued, delivered and paid for, upon exercise of the Options in accordance
with the terms hereof and the Management Stock Subscription Agreement, will be
duly authorized, validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement, the Management Stock Subscription Agreement or otherwise in
connection with the transactions contemplated hereby.


 


9.  Change
in Control.


 


Accelerated Vesting and
Payment.  In the event
of a Change in Control, each then outstanding Option (regardless of whether
such Option is at such time otherwise vesting or exercisable) shall be canceled
in exchange for a payment in an amount equal to the product of (i) the
excess, if any, of the Change in Control Price over the Option Price,
multiplied by (ii) the aggregate number of Shares covered by such
Option. Such payment shall be made in cash or, if so determined by the Board
(as constituted immediately prior to the Change in Control) in shares of the
stock of the New Employer having an aggregate fair market value equal to such
amount (provided that the shares of such New Employer are of a class that is
publicly traded) and shall be made as soon as reasonably practicable, but in no
event later than, 30 days following the Change in Control.


 


10.  Certain
Restrictions on Repurchases


 


(a)  Financing
Agreements, etc.  Notwithstanding
any other provision of this Agreement, the Company shall not be obligated or
permitted to purchase any Options from the Grantee if (i) such
purchase would result in a violation of the terms or provisions of, or result
in a default or an event of default under, the Amended and Restated Credit
Agreement, dated as of August 10, 2001 (the “Credit Agreement”), among RIC, the
other borrowers party thereto, The Chase Manhattan Bank, as administrative
agent, and the lenders party thereto from time to time or any other


 


15

















 


guarantee, financing or security agreement or document entered into by
the Company or any of its subsidiaries from time to time (the “Financing
Agreements”), in each case as the same may be amended, modified or supplemented
from time to time, (ii) such purchase would violate any of the
terms or provisions of the Certificate of Incorporation of the Company or (iii) the
Company has no funds legally available therefor under the General Corporation
Law of the State of Delaware.


 


(b)  Delay
of Purchase.  In the event that a
purchase of Options by the Company otherwise permitted under Section 5(c)
is prevented solely by the terms of Section 10(a), (i) such
purchase will be postponed and will take place without the application of
further conditions or impediments (other than as set forth in Section 5
hereof or in this Section 10) at the first opportunity thereafter when the
Company has funds legally available therefor and when such purchase will not
result in any default, event of default or violation under any of the Financing
Agreements or in a violation of any term or provision of the Certificate of
Incorporation of the Company and (ii) such purchase right shall
rank against other similar purchase rights with respect to shares of Common
Stock or options in respect thereof according to priority in time of the
effective date of the event giving rise to any such purchase right, provided
that any such purchase right as to which a common date determines priority
shall be of equal priority and shall share pro rata in any purchase payments
made pursuant to clause (i) above.


 


(c)  Purchase
Price Adjustment.  In the event that
a purchase of the Options from the Grantee is delayed pursuant to this
Section 10, the purchase price for such Options when the purchase of such
Options eventually takes place as contemplated by Section 10(b) shall be
the sum of (a) the purchase price of such Options determined in
accordance with Section 5(f) at the time that the purchase of such Options
would have occurred but for the operation of this Section 10, plus (b) an
amount equal to interest on such purchase price for the period from the date on
which the completion of the purchase would have taken place but for the
operation of this Section 10 to the date on which such purchase actually
takes place (the “Delay Period”), at an annual rate of interest equal to the
weighted average cost of the Company’s bank indebtedness outstanding during the
Delay Period.


 


11.  No
Rights as Stockholder.  The Grantee
shall have no voting or other rights as a stockholder of the Company with
respect to any Shares covered by the Options until the exercise of the Options
and the issuance of a certificate or certificates to the Grantee for such
Shares.  No adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.


 


12.  Capital
Adjustments.  The number and price
of the Shares covered by the Options shall be proportionately adjusted to
reflect any stock dividend, stock split or share combination of the Common
Stock or any recapitalization of the Company. 
Subject to any required action by the stockholders of the Company and
Section 9 hereof,


 


16

















 


in any merger, consolidation, reorganization, exchange of shares,
liquidation or dissolution, the Options shall pertain to the securities and
other property, if any, that a holder of the number of shares of Common Stock
covered by the Options would have been entitled to receive in connection with
such event.


 


13.  Miscellaneous.


 


(a)  Notices.  All notices and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given if delivered personally or sent by certified
or express mail, return receipt requested, postage prepaid, or by any
recognized international equivalent of such delivery, to the Company, the
CD&R Fund or the Grantee, as the case may be, at the following addresses or
to such other address as the Company, the CD&R Fund or the Grantee, as the
case may be, shall specify by notice to the others:


 


(i)                                     if
to the Company, to it at:


 


Riverwood Holding, Inc.

Suite 1200

1105 North Market Street

P.O. Box 8985

Wilmington, Delaware 19899

Attention:  General Counsel


 


(ii)                                  if
to the Grantee, to the Grantee at the address set forth on the signature page
hereof.


 


(iii)                               if
to the CD&R Fund, to:


 


Clayton, Dubilier & Rice Fund V

Limited Partnership

Foulkstone Plaza, Suite 102

1403 Foulk Road

Wilmington, Delaware 19803

Attention:  Joseph L. Rice, III


 


All such notices and communications shall be deemed to have been
received on the date of delivery if delivered personally or on the third
business day after the mailing thereof. 
Copies of any notice or other communication given under this Agreement
shall also be given to:


 


Clayton, Dubilier & Rice, Inc.

375 Park Avenue


 


17

















 


New York, New York 10152

Attention:  Kevin J. Conway


 


and


 


Debevoise & Plimpton

875 Third Avenue

New York, New York 10022

Attention:  Franci J. Blassberg,
Esq.


 


The CD&R Fund also shall be given a copy of any notice or other
communication between the Grantee and the Company under this Agreement at its
address as set forth above.


 


(b)  Binding
Effect; Benefits.  This Agreement
shall be binding upon and inure to the benefit of the parties to this Agreement
and their respective successors and assigns. 
Except as provided in Section 5, nothing in this Agreement, express
or implied, is intended or shall be construed to give any person other than the
parties to this Agreement or their respective successors or assigns any legal
or equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.


 


(c)  Waiver;
Amendment.


 


(i)  Waiver.  Any party hereto or beneficiary hereof may by written notice to
the other parties (A) extend the time for the performance of any of
the obligations or other actions of the other parties under this Agreement, (B) waive
compliance with any of the conditions or covenants of the other parties
contained in this Agreement and (C) waive or modify performance of
any of the obligations of the other parties under this Agreement, provided
that any waiver of the provisions of Section 5 must be consented to in
writing by the CD&R Fund.  Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party
or beneficiary, shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any representations,
warranties, covenants or agreements contained herein.  The waiver by any party hereto or beneficiary hereof of a breach
of any provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by a party or
beneficiary to exercise any right or privilege hereunder shall be deemed a
waiver of such party’s or beneficiary’s rights or privileges hereunder or shall
be deemed a waiver of such party’s or beneficiary’s rights to exercise the same
at any subsequent time or times hereunder.


 


18

















 


(ii)  Amendment.  This Agreement may not be amended, modified or supplemented
orally, but only by a written instrument executed by the Grantee and the
Company, and (in the case of any amendment, modification or supplement that
adversely affects the rights of the CD&R Fund hereunder) consented to by
the CD&R Fund in writing.  The
parties hereto acknowledge that the Company’s consent to an amendment or
modification of this Agreement may be subject to the terms and provisions of
the Financing Agreements.


 


(d)  Assignability.  Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company or the Grantee without the prior written consent of
the other parties and the CD&R Fund. 
The CD&R Fund may assign from time to time all or any portion of its
rights under Section 5 to one or more persons or other entities designated
by it.


 


(e)  Applicable
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE CORPORATE LAW OF THE STATE OF DELAWARE
SPECIFICALLY AND MANDATORILY APPLIES.


 


(f)  Section
and Other Headings, etc.  The
section and other headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.


 


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


 


(h)  Delegation
by the Board.  All of the powers,
duties and responsibilities of the Board specified in this Agreement may, to
the full extent permitted by applicable law, be exercised and performed by any
duly constituted committee thereof to the extent authorized by the Board to
exercise and perform such powers, duties and responsibilities.


 


19

















 


IN WITNESS WHEREOF, the Company and the Grantee have
executed this Agreement as of the date first above written.


 


	
   

  	
  RIVERWOOD HOLDING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wayne E. Juby

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  Human Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE GRANTEE:

  
	
   

  	
   

  
	
   

  	
  Robert Spiller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert W. Spiller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address of the Grantee:

  
	
   

  	
   

  
	
   

  	
  11 Cedarcliff Road

  Asheville, NC  28803

  



 


20