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                                                                   EXHIBIT 10.14

                           CARAUSTAR INDUSTRIES, INC.
                  1998 KEY EMPLOYEE INCENTIVE COMPENSATION PLAN

                   (AMENDED AND RESTATED AS OF APRIL 19, 2000)

                                   ARTICLE 1


                            PURPOSE AND TERM OF PLAN

         1.1 Purpose. The purposes of this Caraustar Industries, Inc. 1998 Key
Employee Incentive Compensation Plan (the "Plan") are to (1) align the interests
of participating employees of Caraustar Industries, Inc. ("Caraustar") and its
Related Companies (the "Company") with the interests of Caraustar's shareholders
by reinforcing the relationship between participants' rewards and shareholder
value; (2) encourage equity ownership in Caraustar by participants; and (3)
provide an incentive to participants for continuous employment with the Company.

         1.2 Term. This Plan will be effective as of March 10, 1998, subject to
the Plan's approval by the shareholders of Caraustar at the 1998 annual
shareholders meeting. No Awards shall be exercisable or payable before such
shareholder approval of the Plan. Awards shall not be granted under this Plan
after April 15, 2003.

                                   ARTICLE 2


                                   DEFINITIONS

         2.1 "1993 Plan" shall mean the Caraustar Industries, Inc. 1993 Key
Employees' Share Ownership Plan.

         2.2 "Award" means any form of Stock Option, Restricted Share Right,
share of Common Stock or Restricted Stock or cash granted under the Plan to a
Participant by the Committee.

         2.3 "Base Salary" shall have the meaning set forth in SECTION 8.2.

         2.4 "Bonus Formula" shall have the meaning set forth in SECTION 8.3(B).

         2.5 "Bonus Matrix" shall have the meaning set forth in SECTION 8.3.

         2.6 "Bonus Period" means the one year periods, as the Committee may
select, over which the attainment of one or more Performance Goals will be
measured for purposes of determining a Participant's right to an Award under the
Bonus Award Program.

         2.7 "Caraustar" shall have the meaning set forth in SECTION 1.1.

         2.8 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.

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         2.9 "Committee" shall have the meaning set forth in SECTION 5.1.

         2.10 "Common Stock" shall have the meaning set forth in SECTION 3.1.

         2.11 "Company" has the meaning set forth in SECTION 1.1.

         2.12 "Covered Employee" means an Employee who is a "covered employee"
within the meaning of Section 162(m) of the Code.

         2.13 "Disability" means a disability under the terms of the Caraustar
Industries, Inc. Long-Term Disability plan maintained by the Company or any
successor plan thereto.

         2.14 "Economic Profit" means a measure of the after-tax operating
profit of the Company less a charge for the cost of all debt and equity capital
of the Company.

         2.15 "Effective Date" means the date an Award is determined to be
effective by the Committee upon its grant of such Award. In the case of Stock
Options, the Effective Date shall be the date of grant.

         2.16 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.

         2.17 "Incentive Stock Option" shall have the meaning set forth in
SECTION 6.2(B).

         2.18 "Key Employee" has the meaning set forth in Article 4.

         2.19 "Negative Discretion" means the discretion authorized by the Plan
to be applied by the Committee in determining the size of a Bonus Award or a
Stock Option Award if, in the Committee's sole judgment, such application is
appropriate. Negative Discretion may only be used by the Committee to eliminate
or reduce the size of an Award.

         2.20 "Non-Qualified Stock Option" shall have the meaning set forth in
SECTION 6.2(C).

         2.21 "Option Period" means the one year periods, as the Committee may
select, over which the attainment of one or more Performance Goals will be
measured for the purpose of determining a Participant's right to an Award under
the Option Program.

         2.22 "Option Target Award" means, for an Option Period, the target
Award amount, expressed as a number of Stock Options, established for each
Participant for the Option Period.

         2.23 "Participant" means any Key Employee who for an Option Period has
been selected to participate in the Option Program pursuant to Article 7 or who
for a Bonus Period has been selected to participate in the Bonus Program
pursuant to Article 8 or who has been selected for an Award of a Non-Qualified
Traditional Stock Option or Restricted Share Rights pursuant to Article 9.

         2.24 "Performance Criteria" means the one or more criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
an Option Period or Bonus


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Period. The Performance Criteria that will be used to establish such Performance
Goal(s) shall be limited to the following: Economic Profit, return on net
assets, return on shareholders' equity, return on assets, return on capital,
earnings per share, net earnings, operating earnings and Common Stock price per
share.

         2.25 "Performance Goal" means, for an Option Period or Bonus Period,
the one or more goals established by the Committee for the Option or Bonus
Period based upon the Performance Criteria. The Committee is authorized at any
time during the first 90 days of an Option Period or Bonus Period, or at any
time thereafter (but only to the extent the exercise of such authority after the
first 90 days of an Option Period or Bonus Period would not cause the Awards
granted to the Covered Employees for the Option Period or Bonus Period to fail
to qualify as "performance-based compensation" under Section 162(m) of the
Code), in its sole and absolute discretion, to adjust or modify the calculation
of a Performance Goal for such Option Period or Bonus Period in order to prevent
the dilution or enlargement of the rights of Participants, (a) in the event of,
or in anticipation of, any unusual or extraordinary corporate item, transaction,
event or development; (b) in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions; and
(c) in view of the Committee's assessment of the business strategy of the
Company, performance of comparable organizations, economic and business
conditions and any other circumstances deemed relevant.

         2.26 "Performance Stock Option" shall have the meaning set forth in
SECTION 6.2(A).

         2.27 "Plan" shall have the meaning set forth in SECTION 1.1.

         2.28 "Related Companies" means any company during any period in which
it is a "parent company" (as that term is defined in Section 424(e) of the Code)
with respect to the Company, or a "subsidiary corporation" (as that term is
defined in Code Section 424(f) of the Code) with respect to Caraustar.

         2.29 "Restricted Share Right" shall have the meaning set forth in
SECTION 6.4.

         2.30 "Restricted Share Right Percentage" shall have the meaning set
forth in SECTION 7.5.

         2.31 "Restricted Stock" means Common Stock subject to the restrictions
set forth in SECTION 6.3 awarded to a Key Employee pursuant to the exercise of a
Restricted Stock Right.

         2.32 "Restriction Period" means the period of time beginning on the
Effective Date of an Award of Restricted Stock and ending five (5) year(s) after
such date, or such other period as the Committee shall determine in its sole
discretion.

         2.33 "Retirement" means a termination of employment from the Company on
or after attainment of Normal Retirement Age as defined under the Caraustar
Industries, Inc. Defined Benefit Pension Plan, or such other termination of
employment from the Company after age 55 specifically approved by the Committee,
in its sole discretion, as a "Retirement."


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         2.34 "Stock Option" means an Award granted to a Key Employee in the
form of a Traditional or Performance Stock Option (either Non-Qualified or
Incentive) pursuant to Article 7, 8 or 9.

         2.35 "Stock Option Matrix" shall have the meaning set forth in SECTION
7.4.

         2.36 "Stock Option Percentage" shall have the meaning set forth in
SECTION 8.4(C).

         2.37 "Target Ownership Level" for any Participant shall mean the target
ownership of shares of Common Stock (Restricted or unrestricted) set by the
Committee for such Participant. For purposes of determining a Participant's
Target Ownership Level, there shall be counted all shares of Common Stock
(restricted or unrestricted) owned by (i) the Participant, the Participant's
spouse or dependent children, either directly or indirectly through nominees,
including shares held in the Participant's account in the Caraustar Industries,
Inc. Employee Savings Plan 401(k) and any IRA account of the Participant and
(ii) any trust over which the Participant has voting control, to the extent such
shares were contributed to the trust by the Participant.

         2.38 "Traditional Stock Option" shall have the meaning set forth in
SECTION 6.2(A).

         2.39 "Underlying Shares" shall have the meaning set forth in SECTION
6.3(A).

                                   ARTICLE 3


                             SHARES SUBJECT TO PLAN

         3.1 Available Shares.

         (a) Shares of stock which may be issued under the Plan shall be
authorized and unissued shares of common stock of Caraustar ("Common Stock").
The maximum number of shares of Common Stock which may be issued under the Plan
shall be 3,800,000, subject to adjustment as set forth in this Article 3. On the
date of each annual Caraustar shareholders meeting during the term of this Plan
(other than the 1998 meeting), the number of shares of Common Stock available
for issuance under the Plan shall be increased by an amount equal to 6.3% of the
net increase in the number of issued and outstanding shares of Common Stock
since the previous annual Caraustar shareholders meeting, excluding in each case
shares issued pursuant to director or employee benefit plans of the Company
(including but not limited to this Plan and the 1993 Plan); provided that in the
event the shares available for issuance under this Plan are increased pursuant
to this sentence as a result of a share issuance, no adjustment will be made
pursuant to SECTION 3.2 with respect to such share issuance; provided, further,
that any reduction in shares outstanding resulting from the receipt by the
Company of shares as set forth in SECTION 3.1(B)(III) shall not be counted in
determining such net increase. In addition, the number of shares of Common Stock
available for issuance under the Plan shall be increased by an amount equal to
the number of shares covered by Stock Options issued pursuant to SECTION 8.4.


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         (b) For purposes of calculating the maximum number of shares of Common
Stock which may be issued under the Plan:

                  (i)   all the shares of Common Stock and shares of Restricted
         Stock issued directly or as a result of the exercise of Stock Options
         and Restricted Share Rights (including the shares, if any, withheld for
         tax withholding requirements) shall be counted.

                  (ii)  any shares of Common Stock subject to a Stock Option
         that for any reason is terminated unexercised or expires shall again be
         available for issuance under the Plan, but shares of Restricted Stock
         that are forfeited or shares subject to Restricted Share Rights
         terminated without the issuance of shares shall not again be available
         for issuance under the Plan.

                  (iii) shares of Common Stock received by the Company in
         connection with the exercise of Stock Options by delivery of other
         shares of Common Stock, and received in connection with payment of
         withholding taxes related to Awards under this Plan, shall again be
         available for issuance under the Plan.

         (c) The maximum number of shares available for issuance under the Plan
shall not be reduced to reflect any dividends or dividend equivalents that are
reinvested into additional shares of Common Stock.

         (d) The shares of Common Stock available for issuance under the Plan
may be newly issued shares, authorized and unissued shares, treasury shares,
shares issued and outstanding or shares owned by a Related Company.

         3.2 Adjustment to Shares.

         (a) In General. The provisions of this SUBSECTION 3.2(A) are subject to
the limitation contained in SUBSECTION 3.2(B). If there is any change in the
number of outstanding shares of Common Stock through the declaration of stock
dividends, stock splits or the like, the number of shares available for Awards,
the shares subject to any Award and the option prices or exercise prices of
Awards shall be automatically adjusted. If there is any change in the number of
outstanding shares of Common Stock through any change in the capital account of
Caraustar, or through a merger, consolidation, separation (including a spin-off
or other distribution of stock or property), reorganization (whether or not such
reorganization comes within the meaning of such term in Section 368(a) of the
Code) or partial or complete liquidation, the Committee shall make appropriate
adjustments in the maximum number of shares of Common Stock that may be issued
under the Plan and any adjustments and/or modifications to outstanding Awards as
it, in its sole discretion, deems appropriate. In event of any other change in
the capital structure or in the Common Stock, the Committee shall also be
authorized to make such appropriate adjustments in the maximum number of shares
of Common Stock available for issuance under the Plan and any adjustments and/or
modifications to outstanding Awards as it, in its sole discretion, deems
appropriate.

         (b) Covered Employees. In no event shall the Award of any Participant
who is a Covered Employee be adjusted pursuant to SUBSECTION 3.2(A) to the
extent it would cause such


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Award to fail to qualify as "performance-based compensation" under Section
162(m) of the Code.

                                   ARTICLE 4


                                   ELIGIBILITY

         Participants in the Plan shall be selected by the Committee from the
executive officers and other key employees of the Company who occupy responsible
managerial or professional positions and who have the capability of making a
substantial contribution to the success of the Company ("Key Employees"). In
making this selection and in determining the form and amount of awards, the
Committee shall consider any factors deemed relevant, including the individual's
functions, responsibilities, value of services to the Company and past and
potential contributions to the Company's profitability and sound growth.

                                   ARTICLE 5


                               PLAN ADMINISTRATION

         5.1 Administration of Plan by Committee. The Plan shall be administered
by a committee of two or more members of the Board of Directors of Caraustar
selected by the Board (the "Committee"), as constituted from time to time.

         5.2 Authority of Committee.

         (a) The Committee shall have the authority, in its sole discretion and
from time to time, to:

                  (i)   designate the Key Employees eligible to participate in
         the Plan;

                  (ii)  grant Awards provided in the Plan in such form and
         amount as the Committee shall determine;

                  (iii) impose such terms, limitations, restrictions and
         conditions upon any such Award as the Committee shall deem appropriate,
         including but not limited to an acceleration of the vesting and lapsing
         of the restrictions of such Award upon a change in control of the
         ownership of Caraustar; and

                  (iv)  interpret the Plan, adopt, amend and rescind rules and
         regulations relating to the Plan, correct any default, supply any
         omission and construe any ambiguity in the Plan, accelerate the
         vesting, exercise or payment of any Award when such action would be in
         the best interest of the Company and make all other determinations and
         take all other action necessary or advisable for the implementation and
         administration of the Plan.

         (b) The Committee shall have full discretionary authority in all
matters related to the discharge of its responsibilities and the exercise of its
authority under the Plan, including without


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limitation its construction of the terms of the Plan and its determination of
eligibility for participation and Awards under the Plan. The decisions and
determinations of the Committee and its action with respect to the Plan shall be
final, binding and conclusive upon all persons having or claiming to have any
right or interest in or under the Plan.

         (c) No member of the Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any Award thereunder.

         5.3 Section 162(m) of the Code. With regard to all Covered Employees,
the Plan shall, for all purposes, be interpreted and construed in accordance
with Section 162(m) of the Code, except as provided in Article 9.

         5.4 Delegation by Committee. Except to the extent prohibited by
applicable law or the rules of an applicable stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any person or
persons selected by it. Any such allocation or delegation may be resolved by the
Committee at any time.

                                   ARTICLE 6


                                 FORMS OF AWARDS

         6.1 In General. Awards under the Plan may be in the form of any one or
more of the following:

         (a) Traditional Stock Options (either Non-Qualified or Incentive) as
described in Section 6.2(a);

         (b) Performance Stock Options (either Non-qualified or Incentive) as
described in Section 6.2(a);

         (c) Restricted Stock, as described in Section 6.3;

         (d) Restricted Share Rights, as described in Section 6.4;

         (e) Shares of Common Stock (unrestricted), as described in Section
8.4(a); and

         (f) Cash, as set forth in Article 8.

         6.2 Stock Options.

         (a) Traditional and Performance Options. Stock Options may be awarded
under the Plan in the form of Traditional Stock Options, Performance Stock
Options, or a combination of both. The price at which Common Stock may be
purchased upon exercise of a Traditional Stock Option shall be 100% of the
closing price at which a share of Common Stock trades on the Effective Date of
the Traditional Stock Option Award, or the next preceding trading day if such
date was not a trading date, on the primary securities exchange on which the
Common Stock is then traded. The price at which Common Stock may be purchased
upon exercise of a


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Performance Stock Option shall be 120% of the closing price at which a share of
Common Stock trades on the Effective Date of the Performance Stock Option Award,
or the next preceding trading day if such date was not a trading date, on the
primary securities exchange on which the Common Stock is then traded.

         (b) Incentive Stock Options. Stock Options may be issued in the form of
incentive stock options, intended to qualify as such under the provisions of
Section 422 of the Internal Revenue Code of 1986, as amended ("Incentive Stock
Options"). To the extent that the aggregate fair market value (determined on the
date the Stock Option is granted) of shares of Common Stock with respect to
which Incentive Stock Options first become exercisable by any Participant in any
calendar year exceeds $100,000, such Stock Options shall be treated as
Non-Qualified Options. The maximum number of shares of Common Stock that may be
issued under this Plan by Incentive Stock Options shall be 1,600,000.

         (c) Non-Qualified Stock Options. Stock Options may be issued in the
form of non-qualified stock options (Stock Options that are not Incentive Stock
Options) ("Non-Qualified Stock Options").

         (d) Terms and Conditions of Stock Options. A Stock Option shall be
exercisable in whole or in such installments and at such times as may be
determined by the Committee. All Stock Options shall expire not later than 10
years after the Effective Date of the grant. Stock Options shall not be
repriced, i.e., there shall be no grant of a Stock Option(s) to a Participant in
exchange for a Participant's agreement to cancellation of a higher-priced Stock
Option(s) that was previously granted to such Participant. The Committee may, by
way of an award notice or otherwise, establish such other terms, conditions,
restrictions, and limitations, if any, of any Award of Stock Options, provided
they are not inconsistent with the Plan.

         (e) Exercise. Upon exercise, the option price of a Stock Option may be
paid in cash, shares of Common Stock, a combination of the foregoing, or such
other consideration as the Committee may deem appropriate. The Committee shall
establish appropriate methods for accepting Common Stock, whether Restricted or
unrestricted, and may impose such conditions as it deems appropriate on the use
of such Common Stock to exercise a Stock Option. Subject to SECTION 13.12, the
Committee may permit a Participant to elect to pay the option price upon the
exercise of a Stock Option by authorizing a third party to sell shares of Common
Stock (or a sufficient portion of the shares) acquired upon exercise of the
Stock Option and remit to the Company a sufficient portion of the sale proceeds
to pay the entire option price and any tax withholding resulting from such
exercise. The Committee may permit a Participant to satisfy any amounts required
to be withheld under the applicable Federal, state and local tax laws in effect
from time to time, by electing to have the Company withhold a portion of the
shares of Common Stock to be delivered for the payment of such taxes.

         6.3 Restricted Stock.

         (a) In General. Restricted Stock may be issued by the Company as a
result of the exercise of a Restricted Share Right upon the purchase of two
additional shares of unrestricted Common Stock, all as more fully set forth in
SECTION 6.4. The two (2) shares of unrestricted Common Stock purchased by the
Participant as a condition precedent to the issuance of a share


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of Restricted Stock pursuant to a Restricted Share Right shall be the
"Underlying Shares" of such share of Restricted Stock; provided that during the
Restriction Period of a share of Restricted Stock, the Participant may designate
other unrestricted Common Stock held by the Participant as the "Underlying
Shares" of such share of Restricted Stock, but only to the extent such
unrestricted shares are not then Underlying Shares of any other share of
Restricted Stock. The Committee may, at its discretion, require that the
certificates representing Underlying Shares be deposited with and held by the
Company for the Participant until the restrictions on the related Restricted
Stock have lapsed.

         (b) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:

                  (i)   Subject to the provisions of the Plan and such other
         terms, conditions, restrictions and limitations as the Committee may
         establish by way of the Restricted Stock Agreement, the Participant
         shall not be permitted to sell, assign, transfer, pledge, or otherwise
         encumber shares of Restricted Stock during the Restriction Period of
         the Restricted Stock.

                  (ii)  Except to the extent otherwise provided in the
         applicable Restricted Stock Agreement, upon the transfer of any
         Underlying Shares (if any) of a share of Restricted Stock during an
         unexpired Restriction Period applicable to such share of Restricted
         Stock, such share of Restricted Stock shall be forfeited by the holder.

                  (iii) Except as provided in the Restricted Stock Agreement and
         this Plan, the Participant shall have, with respect to the shares of
         Restricted Stock, all of the rights of a shareholder of the Company
         holding shares of the Common Stock, including, if applicable, the right
         to vote the shares and the right to receive any cash dividends. If so
         determined by the Committee in the applicable Restricted Stock
         Agreement, dividends payable in Common Stock shall be paid in the form
         of Restricted Stock on which such dividend was paid, held subject to
         the same conditions and restrictions of the underlying Performance
         Restricted Stock.

                  (iv)  Each Restricted Stock award shall be confirmed by, and
         be subject to the terms of, a Restricted Stock Agreement.

         (c) The Committee may require that the certificates evidencing such
shares of Restricted Stock be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition of any Award of
Restricted Stock, the Participant shall have delivered a stock power, endorsed
in blank, relating to the Common Stock covered by such Award.

         (d) Of the 2,200,000 additional shares of common stock authorized at
the 2000 annual meeting of shareholders for issuance under the Plan, a maximum
of 200,000 of such shares may be issued as Restricted Stock.


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         6.4 Restricted Share Rights.

         (a) In General. The Committee may grant to any Participant the right
("Restricted Share Right") to acquire one share of Restricted Stock contingent
upon the direct purchase of two shares of unrestricted Common Stock (the
"Underlying Shares") by the Participant (either by stock option exercise,
including stock options granted under this Plan and the 1993 Plan, or purchase
of unrestricted shares of Common Stock for full market value).

         (b) Term and Exercise. Each Restricted Share Right shall be fully
exercisable on the date of Effective Date of Award of such Restricted Share
Right and may be exercised up until the date five (5) years after the Effective
Date of the Award of such Restricted Share Right.

         (c) Restricted Share Right Agreement. The award of any Restricted Share
Right shall be evidenced by a written Restricted Share Right Agreement, executed
by the Company and the holder of the Restricted Share Rights, stating the number
of shares of Restricted Stock that may be purchased pursuant to the Restricted
Share Rights, and shall provide for any other terms, restrictions and
limitations as the Committee deems appropriate.

                                   ARTICLE 7


                              STOCK OPTION PROGRAM

         7.1 In General. Awards may be granted to Key Employees in the form of
Stock Options pursuant to this Article 7. These Stock Options may be Incentive
Stock Options, Non-Qualified Stock Options or a combination of both as
determined by the committee in its sole discretion. All Awards under the Plan
issued to Covered Employees in the form of Stock Options shall qualify as
"performance-based compensation" under Section 162(m) of the Code.

         7.2 Selection of Key Employee Participants. Within the first 90 days of
an Option Period (or, if longer, within the maximum period allowed under Section
162(m) of the Code), the Committee shall select those Key Employees who will be
Participants for such Option Period. However, designation of a Key Employee as a
Participant for an Option Period shall not in any manner entitle the Participant
to receive an Award of Stock Options for the Option Period. The entitlement of
any Participant to payment of a Stock Option Award for such Option Period shall
be decided solely in accordance with the provisions of this Article 7 and the
Plan. Moreover, designation of a Key Employee as a Participant for a particular
Option Period shall not require designation of such Key Employee as a
Participant in any subsequent Option Period, and designation of one Key Employee
as a Participant shall not require designation of any other Key Employee as a
Participant in such Option Period or in any other Option Period.

         7.3 Calculation of Option Target Award. Within the first 90 days of an
Option Period (or, if longer, within the maximum period allowed under Section
162(m) of the Code), the Committee shall calculate the Participant's Option
Target Award for the Option Period then beginning.


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         7.4 Procedure for Determining Awards. Within the first 90 days of an
Option Period (or, if longer, within the maximum period allowed under Section
162(m) of the Code), the Committee shall establish in writing for such Option
Period:

         (a) The specific Performance Criteria that will be used to establish
the Performance Goal(s) for such Option Period and the kind(s) and level(s) of
such Performance Goal(s), and

         (b) Stock Option Matrix detailing the number and combination of
Traditional Stock Options and Performance Stock Options to be awarded to the
Participant upon the attainment of the Performance Goal(s).

         7.5 Election of Payment in Restricted Share Rights. Each Participant in
the Stock Option Plan shall have the right to elect to receive up to fifty
percent (50%) of the value of such Participant's Stock Option Award in
Restricted Share Rights in lieu of Stock Options, up to a maximum of Restricted
Share Rights covering that number of Common Stock with a fair market value on
date of grant of $400,000. Such election must be made by written notice to the
Company within the first ninety (90) days of the calendar year in which such
Stock Option Award is granted, or such earlier date determined by the Committee
in its discretion. Such notice shall set forth the percentage (rounded to the
nearest ten percent (10%)) of the Participant's Stock Option Award the
Participant elects to receive in Restricted Share Rights ("Restricted Share
Right Percentage"), and such notice shall be binding on the Participant and
shall not be revocable after the date given.

         7.6 Option Program Awards.

         (a) Condition to Receipt of Awards. A Participant must be employed by
the Company on the last day of an Option Period to be eligible for an Award with
respect to such Option Period.

         (b) Limitation. A Participant shall be eligible to receive Stock
Options for an Option Period only if the Stock Option Matrix for such Option
Period as applied against such Performance Goals for such Option Period
determines that Stock Options have been earned by that Participant.

         (c) Certification. Following the completion of an Option Period, the
Committee shall meet to review and certify in writing whether, and to what
extent, the Performance Goals for the Option Period have been achieved and,
based upon application of the Performance Matrix to the Performance Goals and a
Participant's Option Target Award for such Option Period, also shall calculate
and certify in writing for each Participant what number of Traditional Options
and Performance Options have been earned for the Option Period and which of such
Stock Options are Incentive Stock Options and which are Non-Qualified Stock
Options.

         (d) Negative Discretion. In determining the size of an individual Award
to be paid for an Option Period, the Committee may, through the use of Negative
Discretion, reduce or eliminate the number of Stock Options earned under the
Stock Option Matrix for the Option Period if, in its sole discretion, such
reduction or elimination is appropriate.


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         (e) Timing of Award Payments. The Performance Awards granted by the
Committee for an Option Period shall be paid to Participants on or reasonably
soon after the certification set forth in Section 7.6(c).

         (f) Payment in Restricted Share Rights and Options. If a Participant
has elected (pursuant to Section 7.5) to receive a portion of a Stock Option
Award in Restricted Share Rights (in lieu of Stock Options) such Restricted
Share Rights shall be granted as follows. The Award for an Option Period (as
determined by the certification process set forth in SECTION 7.6(C), whether
paid in Traditional Stock Options or Performance Stock Options, Incentive Stock
Options or Non-Qualified Stock Options), shall be converted into a cash value
using the Black-Scholes option pricing method, with such calculation being done
as of the Effective Date of the Stock Option Award. The Participant shall be
granted a number of Restricted Share Rights equal to the quotient of (a) the
product of (i) the Restricted Share Right Percentage multiplied by (ii) the cash
value of the Stock Option Award so determined, divided by (b) the closing price
at which Common Stock trades on the Effective Date of the Stock Option Award, or
the next preceding trading day if such date was not a trading date, on the
primary securities exchange or quotation system on which the Common Stock is
then traded (such quotient to be rounded to the nearest whole). The remainder of
the Award shall be paid in Stock Options as determined pursuant to Section
7.6(c).

         7.7 Maximum Award Stock Options Per Year Per Participant.
Notwithstanding any provision contained in the Plan to the contrary, the maximum
number of shares of Common Stock for which Stock Options may be granted under
this Article 7 to any Participant in any calendar year is 100,000.

                                   ARTICLE 8


                               BONUS AWARD PROGRAM

         8.1 Eligibility. Within the first 90 days of a Bonus Period (or, if
longer, within the maximum period allowed under Section 162(m) of the Code), the
Committee shall select those Key Employees who will be Participants for such
Bonus Period. However, designation of a Key Employee as a Participant for a
Bonus Period shall not in any manner entitle the Participant to receive a Bonus
Award for the Bonus Period. The entitlement of any Participant to payment of a
Bonus Award for such Bonus Period shall be decided solely in accordance with the
provisions of this Article 8. Moreover, designation of a Key Employee as a
Participant for a particular Bonus Period shall not require designation of such
Key Employee as a Participant in any subsequent Bonus Period, and designation of
one Key Employee as a Participant shall not require designation of any other Key
Employee as a Participant in such Bonus Period or in any other Bonus Period. All
of the Bonus Awards issued under the Bonus Award Program to Covered Employees
are intended to qualify as "performance-based compensation" under Section 162(m)
of the Code.

         8.2 Calculation of Base Salary. Within the first 90 days of a Bonus
Period (or, if longer, within the maximum period allowed under Section 162(m) of
the Code), the Committee shall calculate the Participant's Base Salary for the
Bonus Period then beginning. The Base


                                       12
<PAGE>   13

Salary for any Bonus Period shall be the Participant's base salary as of the
date the Performance Goal(s) for such Bonus Period is set by the Committee. Once
the Base Salary is determined for any Bonus Period, the Base Salary will not
change for that Bonus Period.

         8.3 Procedure for Determining Awards. Within the first 90 days of a
Bonus Period (or, if longer, within the maximum period allowed under Section
162(m) of the Code), the Committee shall establish in writing for such Bonus
Period:

         (a) the specific Performance Criteria that will be used to establish
the Performance Goal(s) for such Bonus Period and the kind(s) and level(s) of
such Performance Goal(s); and a Bonus Matrix detailing the Bonus Award for each
Participant if such Performance Goals are attained. The amount of a
Participant's Bonus Award will be calculated from the Bonus Formula for the
Bonus Period, which Bonus Formula shall be the product of the Participant's Base
Salary and the percentage derived from the Bonus Matrix.

         8.4 Form of Payment of Bonus Award. The form of Bonus Awards shall be
determined as follows:

         (a) Unrestricted Shares. In the event on the Effective Date of the
Bonus Award the ownership of Common Stock by (i) the Participant, the
Participant's spouse and dependent children, either directly or indirectly
through nominees, including shares held in such Participant's account in the
Caraustar Industries, Inc. Employee Savings Plan (401(k)) and any IRA account of
the Participant and (ii) any trust over which the Participant has voting power,
to the extent such shares were contributed to the trust by the Participant, is
less than the Participant's Target Ownership Level (if applicable to such
Participant), then a portion of the Participant's Bonus Award shall be paid in
shares of Common Stock, with such number of Common Stock shares equal to the
quotient of (a) thirty-percent (30%) of the Participant's Bonus Award divided by
(b) the price at which a share of Common Stock trades on the Effective Date of
the Bonus Award, or the next preceding date if such date was not a trading date,
on the primary securities exchange system on which the Common Stock is then
traded (with such quotient being rounded by the nearest whole); provided that
such Participant's Bonus Award shall be paid in shares of Common Stock hereunder
only up to the point such Participant reaches his or her Target Ownership Level.

         (b) Election of Payment in Non-Qualified Traditional Stock Options.
Each Participant in the Plan shall have the right to elect to receive up to
fifty percent (50%) of the Participant's Bonus Award (after application of
Section 8.4(a)) in fully vested Non-Qualified Traditional Stock Options in lieu
of cash. Such election must be made by written notice to the Company within the
first ninety (90) days of the Bonus Period to which such Award relates. Such
notice shall set forth the percentage (rounded to the nearest ten percent (10%))
of the Participant's Bonus Award the Participant elects to receive in fully
vested Non-Qualified Traditional Stock Options ("Stock Option Percentage"), and
such notice shall be binding on the Participant and shall not be revocable after
the date given.

         (c) Payment in Stock Options. Bonus Awards for a Bonus Period elected
by a Participant to be paid in fully vested Non-Qualified Traditional Stock
Options shall be paid as follows. The Stock Option Percentage of a Participant's
cash Bonus Award for a Bonus Period


                                       13
<PAGE>   14

(as determined by the certification process set forth in Section 8.5(c) and
after application of Section 8.4(a)), shall be converted into a number of fully
vested Non-Qualified Traditional Stock using the Black-Scholes option pricing
method, with such calculation being done as of the Effective Date of the Bonus
Award. The Participant shall be paid that number of fully vested Non-Qualified
Traditional Stock Options.

         (d) Cash. The portion of a Participant's Bonus Award not paid in shares
of Common Stock pursuant to Section 8.4(a) or paid in Stock Options pursuant to
Section 8.4(c) shall be paid in cash.

         8.5 Payment of Awards.

         (a) Condition to Receipt of Awards. Except as provided in SECTION 8.6,
a Participant must be employed by the Company on the last day of a Bonus Period
to be eligible for a Bonus Award for such Bonus Period.

         (b) Limitation. A Participant shall be eligible to receive Bonus Award
for a Bonus Period only if the Bonus Matrix for such Bonus Period determines
that all or some portion of the Bonus Award has been earned by that Participant
for the Bonus Period.

         (c) Certification. Following the completion of a Bonus Period, the
Committee shall meet to review and certify in writing whether, and to what
extent, the Performance Goals for the Bonus Period have been achieved and, based
upon application of the Bonus Matrix to the Performance Goals for such Bonus
Period and application of the Bonus Formula, also shall calculate and certify in
writing for each Participant the Bonus Award earned for the Bonus Period.

         (d) Negative Discretion. In determining the size of an individual Bonus
Award to be paid for a Bonus Period, the Committee may, through the use of
Negative Discretion, reduce or eliminate the amount of the Bonus Award earned
under the Bonus Matrix (after application of the Bonus Formula) for the Bonus
Period if, in its sole discretion, such reduction or elimination is appropriate.

         (e) Timing of Award Payments. The Bonus Awards granted by the Committee
for a Bonus Period shall be paid to Participants reasonably soon after the
certifications set forth in SECTION 8.5(C).

         8.6 Termination of Employment During Bonus Period. In the event the
employment of a Participant in a Bonus Period terminates because of death,
Disability or Retirement prior to the last day of a Bonus Period, the
Participant shall receive, if Awards are payable for such Bonus Period, a pro
rata Bonus Award. The amount of the pro rata Bonus Award shall be determined by
multiplying the Bonus Award the Participant would have otherwise been paid if he
or she had been a Participant for the full Bonus Period by a fraction, the
numerator of which is the number of full months he or she was a Participant
during such Bonus Period and the denominator of which is twelve (12). For
purposes of this calculation, a partial month of participation shall: (1) be
treated as a full month of participation to the extent a Participant is a
Participant in the Bonus Period for 15 or more days of such month; and (2) not
be taken into consideration to the extent the Participant is a Participant in
the Bonus Period for less than 15


                                       14
<PAGE>   15

days of such month. Such pro rata Bonus Award shall be paid in the form of cash.
In the event of Disability or Retirement, the pro rata Bonus Award shall be paid
directly to the Participant and, in the event of death, to the Participant's
estate. In the event a Participant's employment terminates for any reason other
than death, Disability or Retirement, such Participant shall have no right to
any Bonus Award for the Bonus Period in which such Participant's employment is
terminated.

         8.7 Maximum Award Payable. Notwithstanding any provision contained in
the Plan to the contrary, the maximum Bonus Award payable to any Participant for
any Bonus Period is the Participant's Base Salary with respect to such Bonus
Period; provided further that the maximum Bonus Award payable to any Participant
in any calendar year is $1,000,000.

                                   ARTICLE 9


                    STOCK OPTION AND RESTRICTED STOCK GRANTS

         The Committee shall have the right to grant Awards of Non-Qualified
Stock Options to a Key Employee as determined in the Committee's discretion,
which Awards will not be made under the Stock Option Program or Bonus Award
Program. The Committee shall also have the right to grant Awards of Restricted
Share Rights as determined in the Committee's discretion, which Awards will not
be made under the Stock Option Program, and such grants of Restricted Share
Rights may not qualify as "performance-based compensation" under Section 162(m)
of the Code. Notwithstanding any provision to the contrary, the maximum number
of shares of Common Stock for which Stock Options may be granted to any
Participant in any calendar year under this Article 9 is 10,000.

                                   ARTICLE 10


                    TERMINATION OF EMPLOYMENT OF PARTICIPANT

         10.1 Termination Because of Death or Disability. If a Key Employee's
employment with the Company terminates because of death or Disability, then
issued and outstanding Stock Options, Restricted Share Rights and shares of
Restricted Stock awarded to such Participant pursuant to this Plan (whether or
not then held by the Participant) shall be treated as follows:

         (a) Restricted Stock. To the extent permitted under Rule 16b-3, in the
event of the termination of employment of a Participant because of death or
Disability, the unexpired Restriction Period(s) of outstanding Restricted Stock
awarded to such Participant shall lapse and such Restricted Stock shall become
unrestricted Common Stock.

         (b) Stock Options. To the extent permitted under Rule 16b-3, on the
date of a Participant's termination of employment with the Company because of
death or Disability, all of the unexercised and outstanding Stock Options
awarded to the Participant under this Plan shall become fully vested and
exercisable, and shall remain exercisable for a period of up to one year after
the date of such Participant's termination (but in no event beyond the original
expiration


                                       15
<PAGE>   16

date of such Stock Option), but otherwise shall be subject to all other
restrictions and limitations of such Stock Option.

         (c) Restricted Share Rights. To the extent permitted under Rule 16b-3,
on the date of a Participant's termination of employment with the Company
because of death or Disability, all of the unexercised and outstanding
Restricted Share Rights awarded to the Participant under this Plan shall remain
exercisable for a period of up to one year after the date of such Participant's
termination (but in no event beyond the original expiration date of such
Restricted Share Rights), provided that such Restricted Share Right shall be
exercisable for Shares of unrestricted Common Stock instead of shares of
Restricted Stock.

         10.2 Termination Because of Retirement. If a Key Employee's employment
with the Company terminates because of Retirement, then issued and outstanding
Stock Options, Restricted Share Rights and shares of Restricted Stock awarded to
such Participant pursuant to this Plan (whether or not then held by the
Participant) shall be treated as follows:

         (a) Restricted Stock. To the extent permitted by Rule 16b-3, in the
event of the termination of employment of a Participant because of Retirement,
the outstanding shares of Restricted Stock awarded to a Participant shall remain
outstanding and the terms of such Restricted Stock shall not be affected by such
termination of employment by Retirement; provided that in the event of the
Participant's death subsequent to such Retirement, upon the Participant's death,
the unexpired Restriction Period(s) of then outstanding Restricted Stock awarded
to such Participant shall lapse and such Restricted Stock shall become
unrestricted Common Stock.

         (b) Stock Options. To the extent permitted under Rule 16b-3, on the
date of a Participant's termination of employment with the Company because of
Retirement, the unexercised and outstanding Stock Options awarded to the
Participant shall remain outstanding and the terms of such Stock Options shall
not be affected by such termination of employment by Retirement; provided that
in the event of the Participant's death subsequent to such Retirement, all of
the unexercised and outstanding Stock Options awarded to the Participant under
this Plan shall become fully vested and exercisable, and shall remain
exercisable for a period of up to one year after the date of such Participant's
death (but in no event beyond the original expiration date of such Stock
Option), but otherwise shall be subject to all other restrictions and
limitations of such Stock Option. Incentive Stock Options awarded to a
Participant and not exercised within ninety (90) days of the termination of a
Participant's employment because of Retirement will, to the extent required by
law, become Non-Qualified Stock Option.

         (c) Restricted Share Rights. To the extent permitted under Rule 16b-3,
on the date of a Participant's termination of employment with the Company
because of Retirement, all of the unexercised Restricted Share Rights awarded to
the Participant under this Plan shall remain outstanding and the terms of such
Restricted Share Rights shall not be affected by such termination of employment
by Retirement; provided that in the event of the Participant's death subsequent
to such Retirement, all of the unexercised and outstanding Restricted Share
Rights awarded to the Participant under this Plan shall remain exercisable for a
period of up to one year after the date of such Participant's death (but in no
event beyond the original expiration date of


                                       16
<PAGE>   17

such Restricted Share Rights) and that such Restricted Share Right shall be
exercisable for shares of unrestricted Common Stock instead of shares of
Restricted Stock.

         10.3 Termination for any Reason Other Than Death, Disability or
Retirement. Upon the termination of Participant's employment by reason other
than Death, Disability or Retirement, issued and outstanding Stock Options,
Shares of Restricted Stock and Stock Rights awarded to a Participant (whether or
not then held by the Participant) shall be treated as follows:

         (a) Restricted Stock. Upon a Participant's termination of employment
during an unexpired Restriction Period for any reason other than death,
Disability or Retirement, all outstanding shares of Restricted Stock awarded to
such Participant still subject to such unexpired Restriction Period shall be
forfeited by the holder.

         (b) Stock Options. If a Participant's employment with the Company
terminates for any reason other than death, Disability or Retirement, all of the
unexercised and outstanding Stock Options awarded to such Participant shall
remain exercisable for a period of up to 90 days after the Participant's
termination (but not beyond the original expiration date of such Stock Options)
to the same extent as they were exercisable on the date of Participant's
termination. The remaining portion of the Stock Option shall be forfeited by the
holder.

         (c) Restricted Share Rights. If a Participant's employment with the
Company terminates for any reason other than death, Disability or Retirement,
all of the unexercised Restricted Share Rights awarded to the Participant under
this Plan shall terminate and shall be forfeited by such Participant.

                                   ARTICLE 11


                        DIVIDEND AND DIVIDEND EQUIVALENT

         If an Award is granted in the form of a Restricted Share Right, Stock
Option, shares of Restricted Stock or Common Stock, or in the form of any other
stock-based grant, the Committee may choose, at the time of the grant of the
Award or any time thereafter up to the time of the Award's payment, to include
as part of such Award an entitlement to receive dividends or dividend
equivalents, subject to such terms, conditions, restrictions, and limitations,
if any, as the Committee may establish. Dividends and dividend equivalents shall
be paid in such form and manner (i.e., lump sum or installments) and at such
time(s) as the Committee shall determine. All dividends or dividend equivalents
that are not paid currently may, at the Committee's discretion, accrue interest
or be reinvested into additional shares of Common Stock. The total number of
shares available for grant under SECTION 3.1 shall not be reduced to reflect any
dividends or dividend equivalents that are reinvested into additional shares of
Common Stock.


                                       17
<PAGE>   18

                                   ARTICLE 12


                               DEFERRAL OF AWARDS

         At the discretion of the Committee, payment of any Award, dividend, or
dividend equivalent, or any portion thereof, may be deferred by a Participant
until such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose, on
a form provided by the Company. Further, all deferrals shall be made in
accordance with administrative guidelines established by the Committee to ensure
that such deferrals comply with all applicable requirements of the Code.
Deferred payments shall be paid in a lump sum or installments, as determined by
the Committee. Deferred Awards may also be credited with interest, at such rates
to be determined by the Committee and, with respect to those deferred Awards
denominated in the form of Common Stock, with dividends or dividend equivalents.

                                   ARTICLE 13


                                  MISCELLANEOUS

         13.1 Transferability. Except as provided in SECTION 13.2, any Award
under the Plan will be non-transferable and, accordingly, shall not be
assignable, alienable, salable or otherwise transferable by the holder; provided
that:

         (a) Awards may be transferred by a Participant by will or the laws of
descent and distribution;

         (b) Awards other than Incentive Stock Options may be transferred by a
Participant pursuant to a qualified domestic relations order, to the extent
permitted by the Committee, either at the time of grant or subsequently; and

         (c) Awards other than Incentive Stock Options may be transferred to a
Participant by gift or other transfer to, either (i) a trust in which the
Participant or such person's spouse, or other immediate family member, or entity
owned by such a person, has an exclusive interest, or (ii) the Participant's
spouse, or other immediate family member, in each case to the extent permitted
by the Committee, either at time of grant or subsequently.

         13.2 Third Party Exercises. In the event a Participant terminates
employment with the Company to assume a position with a governmental,
charitable, educational or similar non-profit institution, the Committee may
subsequently authorize a third party, including but not limited to a "blind"
trust, to act on behalf of and for the benefit of the respective Participant
with respect to any outstanding grants held by the Participant subsequent to
such termination of employment. If permitted by the Committee, a Participant may
designate a beneficiary or beneficiaries to exercise the rights of the
Participant and receive any distributions under the Plan upon the death of the
Participant.

         13.3 Withholding Taxes. The Company shall be entitled to deduct from
any payment under the Plan, regardless of the form of such payment, the amount
of all applicable income and


                                       18
<PAGE>   19

employment taxes required by law to be withheld with respect to such payment or
may require the Participant to pay to it such tax prior to and as a condition of
the making of such payment. In accordance with any applicable administrative
guidelines it establishes, the Committee may allow a Participant to pay the
amount of taxes required by law to be withheld from an Award by withholding from
any payment of Common Stock due as a result of such Award, or by permitting the
Participant to deliver to the Company shares of Common Stock having a
fair-market value (as determined by the Committee) equal to the amount of such
required withholding taxes.

         13.4 Amendments to Awards. The Committee may at any time unilaterally
amend any unexercised, unearned, or unpaid Award, including, but not by way of
limitation, Awards earned but not yet paid, to the extent it deems appropriate;
provided, however, that any such amendment which, in the opinion of the
Committee, is adverse to the Participant shall require the Participant's
consent.

         13.5 Regulatory Approvals and Listings. Notwithstanding anything
contained in this Plan to the contrary, the Company shall have no obligation to
issue or deliver certificates of Common Stock evidencing any Award resulting in
the payment of Common Stock prior to (i) the obtaining of any approval from any
governmental agent which the Company shall, in its sole discretion, determine to
be necessary or advisable, (ii) the admission of such shares to listing on the
stock exchange on which the Common Stock may be listed and (iii) the completion
of any registration or other qualification of said shares under any state or
Federal law or ruling of any governmental body that the Company shall, in its
sole discretion, determine to be necessary or advisable.

         13.6 No Right to Continued Employment or Grants. Participation in the
Plan shall not give any Key Employee any right to remain in the employ of the
Company. Caraustar, or, in the case of employment with a Related Company, the
Related Company, reserves the right to terminate any Employee at any time.
Further, the adoption of this Plan shall not be deemed to give any Key Employee
or any other individual any right to be selected as a Participant or to be
granted an Award.

         13.7 Amendment/Termination. The Committee may suspend or terminate the
Plan at any time with or without prior notice. In addition, the Committee may,
from time to time and with or without prior notice, amend the Plan in any
manner, but may not without shareholder approval adopt any amendment that would
require the vote of the shareholders of Caraustar pursuant to Section 16 of the
Exchange Act or Section 162(m) of the Code, but only insofar as such amendment
affects Covered Employees.

         13.8 Non-Uniform Determinations. Under the Plan (including without
limitation determinations of the persons to receive Awards, the form, amount and
timing of such Awards, the terms and provisions of such Awards and the
agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards under
the Plan, whether or not such persons are similarly situated.

         13.9 Leave of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of


                                       19
<PAGE>   20

absence taken by the recipient of any award. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (i) whether or not
any such leave of absence shall constitute a termination of employment within
the meaning of the Plan and (ii) the impact, if any, of any such leave of
absence on Awards under the Plan theretofore made to any Participant who takes
such leave of absence.

         13.10 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of North Carolina, except as superseded by
applicable federal law.

         13.11 No Right, Title, or Interest in Company Assets. No Participant
shall have any rights as a shareholder as a result of participation in the Plan
until the date of issuance of a stock certificate. To the extent any person
acquires a right to receive payments from the Company under the Plan, such
rights shall be no greater than the rights of an unsecured creditor of the
Company and the Participant shall not have any rights in or against any specific
assets of the Company. All of the Awards granted under the Plan shall be
unfunded.

         13.12 Section 16 of the Exchange Act. In order to avoid any Exchange
Act violations, the Committee may, from time to time, impose additional
restrictions upon an Award, including but not limited to, restrictions regarding
tax withholdings and restrictions regarding the Participant's ability to
exercise Awards under any broker or third-party assisted exercise program.

         13.13 No Guarantee of Tax Consequences. No person connected with the
Plan in any capacity, including, but not limited to, Caraustar and its Related
Companies and their directors, officers, agents and employees makes any
representation, commitment, or guarantee that any tax treatment, including, but
not limited to, Federal, state and local income, estate and gift tax treatment,
will be applicable with respect to amounts deferred under the Plan, or paid to
or for the benefit of a Participant under the Plan, or that such tax treatment
will apply to or be available to a Participant on account of participation in
the Plan.

         13.14 Compliance with Section 162(m). If any provision of the Plan
would cause the Awards, other than an Award of Restricted Share Rights pursuant
to Article 9, granted to a Covered Person not to qualify as "performance-based
compensation" under Section 162(m) of the Code, that provision, insofar as it
pertains to the Covered Person, shall be severed from, and shall be deemed not
to be a part of this Plan, but the other provisions hereof shall remain in full
force and effect.

         13.15 Other Benefits. No Award granted under the Plan shall be
considered compensation for purposes of computing benefits under any retirement
plan of the Company nor affect any benefits or compensation under any other
benefit or compensation plan of the Company now or subsequently in effect,
provided however that any Bonus Award paid in cash shall be considered
compensation for purposes of the Caraustar Industries, Inc. Defined Benefit
Pension Plan.


                                       20