Document:

Exhibit
10.10

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is
entered into as of this 1st day of January, 2002 by and among Riverwood
International Corporation, a Delaware corporation (“Employer”),
Riverwood Holding, Inc., a Delaware corporation (“Holding”), and Stephen
M. Humphrey (“Executive”).

 

W  I
T  N  E  S  S  E  T  H :

 

WHEREAS, Employer currently employs Executive as its
President and Chief Executive Officer pursuant to an Employment Agreement,
dated as of March 27, 1997 (the “Prior Agreement”);

 

WHEREAS, Holding, Employer and Executive recognize the
importance of providing for successful succession planning for senior
management positions, including those positions held by Executive;

 

WHEREAS, Holding, Employer and Executive mutually
desire to implement certain matters to secure for Holding and Employer the
continued services of Executive; and

 

WHEREAS, Holding, Employer and Executive desire that
Executive continue to serve as, and perform the full-time duties of, President
and Chief Executive Officer through March 31, 2005, and to serve as Chairman of
the Board of Directors of Holding for two years thereafter; and

 

WHEREAS, in order to effectuate the foregoing,
Holding, Employer and Executive desire to implement certain amendments to the
Prior Agreement.

 

NOW, THEREFORE, in consideration of the promises and
mutual covenants contained herein and for other good and valuable
consideration, Employer and Executive hereby agree and the Prior Agreement is
hereby amended and restated in its entirety, as follows:

 

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

 

2.                                         Term;
Position and Responsibilities.

 

(a)                                   Term
of Employment.  Unless Executive’s
employment shall sooner terminate pursuant to Section 7, Employer shall
employ Executive for a term commencing on the date of hereof and ending on
March 31, 2007 (the “Term”).  The
expiration of the Term shall not constitute a termination of employment by
Employer.

 

 

The period during which Executive is employed or serves as Chairman of
the Board of Directors pursuant to this Agreement shall be referred to as the
“Employment Period”.

 

(b)                                 Position
and Responsibilities.

 

(i)  Through March 31, 2005
Executive shall continue to serve as President and Chief Executive Officer of
Employer and have such duties and responsibilities as are customarily assigned
to individuals serving in such position and such other duties consistent with
Executive’s position as the Board of Directors of Employer (“Employer’s
Board”) specifies from time to time. 
Executive shall serve as a member of the respective Boards of Directors
of Employer and Holding during the Employment Period.

 

(ii)  During the period
commencing on April 1, 2005 and ending March 31, 2007, Executive shall cease to
serve as President and Chief Executive Officer of Employer, and shall be
Chairman of the Board of Directors of Holding and of Employer and such other
affiliates thereof as may be agreed from time to time.

 

(iii)  During the portion of the
Employment Period that Executive serves as President and Chief Executive
Officer pursuant to Section 2(b)(i), Executive will devote all of his skill,
knowledge and working time (except for (A) vacation time as set
forth in Section 6(c) hereof and absence for sickness or similar disability and
(B) to the extent that it does not interfere with the performance
of Executive’s duties hereunder, (I) such reasonable time as may be
devoted to service on boards of directors and the fulfillment of civic
responsibilities and (II) reasonable time as may be necessary from time
to time for personal financial matters) to the conscientious performance of the
duties of such position or positions. 
During the portion of the Employment Period that Executive serves as
Chairman of the Board of Directors of Holding pursuant to Section 2(b)(ii)  , Executive will devote all of his skill and
knowledge to, and such portion of his working time as shall be reasonably
necessary to, the conscientious performance of his duties as such.

 

3.                                         Base
Salary.

 

(a)                                  During
the portion of the Employment Period that Executive serves as President and
Chief Executive Officer pursuant to Section 2(b)(i) , as compensation for such
services Employer will pay Executive an annual base salary of (i) $812,000
(Executive’s current base salary) for the period commencing on the date hereof
and ending on March 31, 2002, (ii) $900,000 for the period commencing
on April 1, 2002 and ending on March 31, 2003, (iii) $950,000
for the period commencing on April 1, 2003 and ending on March 31, 2004 and (iv)
$1,000,000 for the period commencing on April 1, 2004 and ending on
March 31, 2005.

 

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(b)                                 During
the portion of the Employment Period that Executive serves as Chairman of the
Board of Directors of Holding pursuant to 2(b)(ii)  as compensation for such services Executive shall be paid
director’s fees at an annual rate of $500,000 per year provided that Executive
shall be paid at an annual rate of $750,000 per year following any initial
public offering of the shares of Holding common stock, in each case in lieu of
any other fee payable to Executives in his capacity as a member of the Holding
or employer Boards.

 

(c)                                  The
annual amounts payable to Executive under this Section 3, as the same may
be increased from time to time and without regard to any reduction therefrom in
accordance with the next sentence, shall hereinafter be referred to as the “Base
Salary”.)  The Base Salary payable
under this Section 3 shall be reduced to the extent that Executive elects
to defer such Base Salary under the terms of any deferred compensation, savings
plan or other voluntary deferral that arrangement may be maintained or
established by Employer.  Employer shall
pay Executive the Base Salary in monthly installments, or in such other
installments as may be mutually agreed upon by Employer and Executive.

 

4.                                         Incentive
Compensation Arrangements.

 

(a)                                  Incentive
Compensation.

 

(i)  During the portion of the
Employment Period that Executive serves as President and Chief Executive
Officer of Employer pursuant to Section 2(b)(i)  , Executive shall participate in Employer’s incentive compensation
programs for its executive officers existing from time to time, at a level
commensurate with his position and duties with Employer, which programs shall
provide an aggregate annual target bonus of 100% of Base Salary (with a maximum
annual bonus opportunity equal to 200% of Base Salary), based on such
performance targets as may be established from time to time by Employer’s Board
or a committee thereof.

 

(ii)  During the portion of the
Employment Period that Executive serves as Chairman of the Board of Directors
of Holding and of Employer pursuant to Section 2(b)(ii)  , Executive’s incentive compensation, if
any, shall be determined from time to time by the full Board of Directors of
Holding or Employer, as the case may be.

 

(b)                                 Option
Awards.  Executive shall be granted
non-qualified stock options (the “Service Options”) to purchase up to 150,000
shares of the Class A Common Stock of Holding, par value $.01 per share (the
“Common Stock”), non-qualified stock options (the “Performance Options,”)
to purchase up to an additional 150,000 shares of Common Stock and
non-qualified stock options to purchase up to an additional 150,000 shares of
Common Stock (the “Special Performance Options”, and together with the

 

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Service Options and the Performance Options, the “Options”).  The Options shall be granted to Executive
pursuant to and in accordance with the terms of the Riverwood Holding, Inc.
2002 Management Stock Incentive Plan, have a ten year term and otherwise be
subject to the terms and conditions (which shall include those described in
this Section 4(b)) set forth in a separate Management Stock Option Agreement,
substantially in the form attached hereto as Exhibit A, to be entered into by
Executive and Holding (the “Option Agreement”).

 

(c)                                  Guarantee.  If (i) Executive remains continuously
employed with Employer or one of its Subsidiaries through the expiration of the
Term or (ii) a Change in Control occurs prior to the expiration of the
Term and (x) Executive remains continuously employed with Employer or
one of its Subsidiaries from the date hereof through the date of such Change in
Control or (y) if 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 thereafter, Executive’s
employment is terminated by Employer other than for cause or by Executive for
Good Reason and such Change in Control occurs within six months of the date of
such termination of employment and, in the case of both of the preceding
changes (i) and (ii), no Credit Agreement Shortfall to shall have
occurred, Executive shall be entitled to a cash payment in an amount equal to
the shortfall, of any, between (A) the aggregate realized or realizable
value of all Options (as determined by the Holdings Board), and (B)
$10,000,000 (ten million).  Such amount,
if any, shall be paid in full as soon as reasonably practicable, but in no
event later than thirty days following the expiration of the Term or the Change
in Control, whichever is applicable. 
For these purposes: 
“Affiliates,” “CD&R Fund”, and “Change in Control” shall have the
respective meanings given in the Option Agreement;  “All Options” shall mean any and all options granted to
Executives to purchase shares of Common Stock pursuant to any stock or other
similar incentive compensation plans; and “Credit Agreement Shortfall” shall
mean the failure by Employer to satisfy the minimum Financial Condition
Covenants specified for any period in Section 8.1 if the Amended and Restated
Credit Agreement, dated as of August 10, 2001, among Employer, the other
borrowers party thereto, The Chase Manhattan Bank, as administrative agent, and
the lenders party thereto from time to time, as the same may be amended from
time to time.

 

5.                                         Employee
Benefits. (a)  During the
portion of the Employment Period that Executive serves as President and Chief
Executive Officer of Employer pursuant to Section 2(b)(i)  , employee benefits, including life,
medical, dental, accidental death and dismemberment, business travel accident,
prescription drug and disability insurance, will be provided to Executive in
accordance with the programs of Employer then available to senior executive
employees, as the same may be amended and in effect from time to time (the
“Health and Welfare Benefits”). 
Executive shall also be entitled to participate in all of Employer’s
profit sharing, pension, retirement, deferred compensation and savings plans,
as the same may be amended and in effect from time to time, applicable to
senior executives of Employer.  The
benefits referred to this Section 5 shall be provided to Executive on a basis
that is commensurate with Executive’s position and duties with the Company
hereunder and that is no less favorable than that of similarly situated

 

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employees of Employer.  During
the portion of the Employment Period that Executive serves as Chairman of the
Board of Directors of Holding pursuant to Section 2(b)(ii) , Executive will
continue to be provided with Health and Welfare Benefits that are comparable to
the Health and Welfare Benefits provided to Executive prior to his becoming
Chairman on comparable terms and conditions (taking into account the after-tax
cost to Executive).

 

(b)                                 Supplemental
Retirement Benefit.  Upon
Executive’s retirement following the expiration of the Term or following a
termination of Executives services prior to the expirations of the Term by
Employer other than for Cause or by Executive for Good Reason, Employer shall
provide Executive with a supplemental retirement benefit equal to the
difference, if any, between (i) the combined benefits provided for under
the Riverwood International Employees Retirement Plan and Supplemental Pension
Plan, and (ii) such benefits calculated as if Executive had 10 years
service with Employer.  For purposes of
calculating the benefits payable pursuant to this Section 5(b), (y) the
same assumptions, elections, and other matters used in determining Executive’s
benefit under the Riverwood International Employees Retirement Plan shall
apply, and (z) only Executive’s compensation as President and Chief
Executive Officer shall be taken with account and the period duty which
Executive serves as Chairman of the Holding Board shall be disregarded.

 

6.                                         Perquisites
and Expenses.

 

(a)                                  General.  During the portion of the Employment Period
that Executive serves as President and Chief Executive Officer of Employer
pursuant to Section 2(b)(i)  , Executive
shall be entitled to participate in all special benefit or perquisite programs
generally available from time to time to senior executive officers of Employer,
on the terms and conditions then prevailing under each such program.

 

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

 

(c)                                  Vacation.  Executive shall be entitled to such vacation
as is available under the prevailing policies of Employer but not less than the
greater of five weeks of paid vacation or the number of weeks of paid vacation
per year calculated in accordance with Employer’s vacation policy applicable to
senior executives, without carry-over accumulation.

 

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7.                                         Termination
of Employment.

 

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

 

(b)                                 Termination
by Employer for Cause.  During the
portion of the Employment Period that Executive serves as President and Chief
Executive Officer of Employer pursuant to Section 2(b)(i)  , Executive may be terminated for “Cause” by
Employer; provided, however, that Executive shall be permitted to attend a
meeting of Employer’s Board within thirty days after delivery to him of a
Notice of Termination pursuant to this Section 7(b) to explain why he should
not be terminated for Cause and, if following any such explanation by
Executive, Employer’s Board determines that Employer does not have Cause to
terminate Executive’s employment, any such prior Notice of Termination
delivered to Executive shall thereupon be withdrawn and of no further force or
effect.  “Cause” shall mean (i) the
willful failure of Executive substantially to perform his duties hereunder
(other than any such failure due to physical or mental illness) or other
willful and material breach by Executive of any of his obligations hereunder or
under the Option Agreement, after a demand for substantial performance is
delivered, and a reasonable opportunity to cure is given, to Executive by
Employer’s Board, which demand identifies the manner in which Employer’s Board
believes that Executive has not substantially performed his duties or breached
his obligations, (ii) Executive’s engaging in willful and serious
misconduct that has caused or would reasonably be expected to result in
material injury to Employer or any of its affiliates or (iii) Executive’s
conviction of, or entering a plea of nolo contendere to, a crime that
constitutes a felony.

 

(c)                                  Termination
Without Cause.  A termination
“Without Cause” shall mean a termination of employment by Employer other than
due to Disability as described in Section 7(a) or for Cause as defined in
Section 7(b) or a failure of the Executive to be elected to the Holding
Board of Directors, and to be named Chairman thereof, during the period
contemplated by Section 2(B)(ii).

 

(d)                                 Termination
by Executive.  Executive may
terminate his employment for any reason. 
A termination of employment by Executive for “Good Reason” shall mean a
termination of employment by Executive within 30 days following the occurrence
of any of the following events without Executive’s consent: (i) the

 

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assignment to Executive of duties that are significantly different from
and that result in a substantial diminution of the duties that he is to assume
on the date hereof, (ii) the failure of Employer to obtain the
assumption of this Agreement by any successor as contemplated by
Section 14, (iii) a reduction of Executive’s Base Salary, or (iv)
a material breach by Employer of any of its obligations hereunder or by Holding
under the Option Agreement or any other option agreement or incentive award
agreement granted to Executive, provided, in the case of any of clauses
(i), (iii) or (iv), Executive has delivered written notice of his intention to
terminate his employment for “Good Reason”, specifying the provisions hereof on
which Executive will rely, and Employer or Holding, as the case may be, shall
have had a reasonable opportunity to cure.

 

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

 

(f)                                    Payments
Upon Certain Terminations.

 

(i)  In the event of a
termination of Executive’s employment by Employer Without Cause or a
termination by Executive of his employment for Good Reason during the
Employment Period, Employer shall pay to Executive (or, following his death, to
Executive’s beneficiary) (A) his Base Salary, payable in
installments based on Employer’s regular payroll practices, for the period
beginning on the Date of Termination and ending on the earlier of (x)
the last day of the Term, and (y) the third anniversary of the Date of
Termination (the “Severance Period”) and (B) if, as of the Date of
Termination, the Company has achieved the performance objectives established
under the Company’s annual incentive compensation plan for the calendar year
that includes the Date of Termination, pro rated on the basis of the fraction
described in the immediately following clause (B)(2) hereof, an amount, payable
in one lump sum as soon as reasonably practicable following receipt by Employer
of Employer’s or Holding’s financial statements for such calendar year
(accompanied by an audit report of its accountants) through the Date of
Termination, equal to the product of (1) the amount of incentive
compensation that would have been payable to Executive for such calendar year
under the annual incentive compensation plan had he remained employed for the
entire calendar year, multiplied by (2) a fraction, the numerator of
which is equal to the number of days in such calendar year that precede the
Date of Termination and the denominator of which is equal to 365 (such product,
the “Pro Rata Bonus”), less (C) any amount paid or payable to
Executive under the terms of any severance plan or program of Holding, Employer
or any of their respective subsidiaries as in effect on the Date of
Termination; provided that Employer may, at any time, pay to Executive
in a single lump sum and in satisfaction of Employer’s obligations under
clauses (A) and (B) of this Section 7(f)(i), an

 

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amount equal
to (x) the installments of the Base Salary then remaining to be
paid to Executive pursuant to clause (A) above, and the amount, if any,
then remaining to be paid to Executive pursuant to clause (B) above, less
(y) the amount, if any, remaining to be paid to Executive pursuant
to any plan or program identified under clause (C) above.  If Executive’s employment shall terminate
and he is entitled to receive continued payments of his Base Salary under
clause (A) of this Section 7(f)(i), Employer shall (x) continue to
provide to Executive during the Severance Period the life, medical, dental,
accidental death and dismemberment and prescription drug benefits referred to
in Section 5 (the “Continued Benefits”) and (y) reimburse Executive
for expenses incurred by him for outplacement and career counseling services
provided to Executive for an aggregate amount not in excess of the lesser of (i)
$25,000 and (ii) 20% of Executive’s Base Salary.  Executive shall not have a duty to mitigate
the costs to Employer under this Section 7(f)(i), except that payments of Base
Salary and Continued Benefits shall be reduced or canceled to the extent of any
compensation, fees or comparable benefit coverage earned by (whether or not
paid currently) or offered to Executive during the Severance Period by a
subsequent employer or other entity for whom Executive performs services
including consulting services.

 

(ii)  If Executive’s employment
shall terminate upon his death or Disability or if Employer shall terminate
Executive’s employment for Cause or Executive shall terminate his employment
without Good Reason during the Employment Period, Employer shall pay Executive
his full Base Salary through the Date of Termination, plus, in the case of
termination upon Executive’s death or Disability, if the Company has achieved
the pro rated performance target for such calendar year (determined as provided
in Section 7(e)(ii)), the Pro Rata Bonus for the portion of the calendar year
preceding Executive’s Date of Termination (exclusive of any time between the
onset of a physical or mental disability that prevents the performance by
Executive of his duties hereunder and the resulting Date of Termination), plus
in the case of termination upon Executive’s death, his full Base Salary for the
remainder of the pay period in which death occurs and for one month thereafter.

 

(iii)  Any benefits payable to
Executive under any otherwise applicable plans, policies and practices of
Employer shall not be limited by this Section 7(e), other than any such
severance plan.

 

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

 

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(h)                                 Resignation
from Board Memberships.  Effective
as of any Date of Termination under this Section 7 or otherwise as of the date
of Executive’s termination of employment with Employer, Executive shall resign,
in writing, from all Board memberships then held by him on the Boards of
Holding, Employer or any of their respective subsidiaries, if so requested by
the Board of Directors of Holding.

 

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

 

9.                                         Non-Competition.  During the period of Executive’s employment
and, following any termination thereof, the period ending on the later of (i)
the first anniversary of the Date of Termination and (ii) the last day
of the Severance Period, Executive shall not, directly or indirectly, engage in
business with, serve as an agent or consultant to, become a partner, member,
principal or stockholder (other than a holder of less than 1% of the
outstanding voting shares of any publicly held company) of or become employed
in an executive capacity by, any person, firm or other entity that competes or
has a reasonable potential for competing anywhere in the United States or
Europe with any part of the business of Holding, Employer or any of their
respective subsidiaries that relates to producing, marketing, manufacturing,
designing or installing packaging or paper products, machines or related
materials.  Whether any such person,
firm or entity so competes or so has a reasonable potential for competing shall
be determined in good faith by Employer’s Board.  For purposes of this Section 9, the phrase employment “in an
executive capacity” shall mean employment in any position in connection with
which Executive has or reasonably would be viewed as having powers and
authorities with respect to any other person, firm or other entity or any part
of the business thereof that are substantially similar, with respect thereto,
to the powers and authorities assigned to the President and Chief Executive
Officer of Employer in the By-Laws of Employer as in effect on the date hereof,
a copy of the relevant portions of which

 

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has been delivered to and reviewed by Executive in connection with the
Prior Agreement..

 

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

 

11.                                   Non-Solicitation
of Customers.  During the
Restriction Period, Executive shall not, directly or indirectly, solicit or
otherwise attempt to establish for himself or any other person, firm or entity
anywhere in the United States or Europe any business relationship of a nature
that is competitive with the business or relationship of Holding, Employer or
any of their respective subsidiaries with any person, firm or corporation which
was a customer, client or distributor of Holding, Employer or any of their
respective subsidiaries at any time during the Employment Period (in the case
of any such activity during the Employment Period) or during the twelve-month
period preceding the date of Executive’s termination of employment with
Holding, Employer and their respective subsidiaries, other than any such
solicitation during Executive’s employment with Holding or Employer on behalf
of Holding, Employer or any of their respective subsidiaries.

 

12.                                   Return
of Documents.  In the event of the
termination of Executive’s employment for any reason, Executive will deliver to
Employer all of Holding’s, Employer’s or any of their respective subsidiaries’
property and Holding’s, Employer’s or any of their respective, subsidiaries’
non-personal documents and data of any nature and in whatever medium pertaining
to Executive’s employment with Holding, Employer or any of their respective
subsidiaries, and he will not take with him any such property, documents or
data of any description or any reproduction thereof, or any documents
containing or pertaining to any Confidential Information.  Whether documents or data are “personal” or
“non-personal” shall be determined as follows: 
Executive shall present any documents or data that he wishes to take
with him to the chief legal officer of Employer for his review.  The chief legal officer shall make an
initial determination whether any such documents or data are personal or non-personal,
and with respect to such documents or data that he determines to be
non-personal, shall notify Executive either that such documents or data must be
retained by Employer or that Employer must make and retain a copy thereof
before Executive takes such documents or data with him.  Any disputes as

 

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to the personal or non-personal nature of any such documents or data
shall first be presented to the Chairman of Employer’s Board or to another
representative designated by Employer’s Board (such Chairman or representative,
the “Chairman”), and if such disputes are not promptly resolved by Executive
and the Chairman, such disputes shall be resolved through arbitration pursuant
to Section 17(b).

 

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

 

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

 

11

 

(c)                                  (i)
in the course of his employment with Employer, Executive has obtained and will
obtain confidential information and trade secrets concerning the worldwide
business and operations of Holding and the Subsidiaries that could be used to
compete unfairly with Holding and the Subsidiaries; (ii) the covenants
and restrictions contained in Sections 8 through 13, inclusive, are intended to
protect the legitimate interests of Employer and Holding to protect their
respective goodwill, trade secrets and other confidential information and (iii)
Executive desires to agree to be bound by such covenants and restrictions and
to enter into the Agreement;

 

14.                                   Assumption
of Agreement.  Employer will require
any successor (by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of Employer, by agreement in form and
substance reasonably satisfactory to Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that
Employer would be required to perform it if no such succession had taken
place.  Failure of Employer to obtain
such agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Executive to compensation from
Employer in the same amount and on the same terms as Executive would be
entitled hereunder if Employer terminated his employment Without Cause as
contemplated by Section 7, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.

 

15.                                   Entire
Agreement.  This Agreement
(including the Exhibit hereto) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof, and all promises,
representations, understandings, arrangements. 
All prior correspondence and proposals (including summaries of proposed
terms) and all prior promises, representations, understandings, arrangements
and agreements relating to such subject matter (including but not limited to
those made to or with Executive by any other person or entity) are merged
herein and superseded hereby.

 

16.                                   Indemnification.  Employer agrees that it shall indemnify and
hold harmless Executive to the fullest extent permitted by Delaware law from
and against any and all liabilities, costs, claims and expenses including
without limitation all costs and expenses incurred in defense of litigation,
including attorneys’ fees, arising out of the employment of Executive
hereunder, except to the extent arising out of or based upon the gross
negligence or willful misconduct of Executive. 
Costs and expenses incurred by Executive in defense of litigation,
including attorneys’ fees, shall be paid by Employer in advance of the final
disposition of such litigation upon receipt of an undertaking adequate under
Delaware law made by or on behalf of Executive to repay such amount if it shall
ultimately be determined that Executive is not entitled to be indemnified by
Employer under this Agreement.

 

17.                                   Miscellaneous.

 

(a)                                  Binding
Effect; Assignment.  This Agreement
shall be binding on and inure to the benefit of Employer and its successors and
permitted assigns.  This

 

12

 

Agreement shall also be binding on and inure to the benefit of
Executive and his heirs, executors, administrators and legal
representatives.  This Agreement shall
not be assignable by any party hereto without the prior written consent of the
other parties hereto, except pursuant to this Section 17(a) as hereinafter
provided.  Each of Holding and Employer
may effect such an assignment without prior written approval of Executive upon
the transfer of all or substantially all of its business and/or assets (whether
by purchase, merger, consolidation or otherwise), provided that the
successor to such business and/or assets shall expressly assume and agree to
perform this Agreement in accordance with the provisions of Section 14.

 

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

 

(c)                                  Governing
Law.  This Agreement shall be
governed by and constructed in accordance with the laws of the State of New
York without reference to principles of conflict of laws.

 

(d)                                 Taxes.  Employer may withhold from any payments made
under this Agreement all federal, state, city or other applicable taxes as
shall be required by law.

 

(e)                                  Amendments.  No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by Employer’s Board or a person authorized thereby and is agreed to in
writing by Executive and, in the case of any such modification, waiver or
discharge effecting the rights or obligations of Holding, is approved by the
Board of Directors of Holding or such officer of Holding as may be specifically
designated for such purpose by such Board of Directors.  No waiver by any party hereto at any time of
any breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.  No waiver
of any provision of this Agreement shall be implied from any course of dealing
between or

 

13

 

among the parties hereto or from any failure by any party hereto to
assert its rights hereunder on any occasion or series of occasions.

 

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

 

(g)                                 Notices.  Any notice or other communication required
or permitted to be delivered under this Agreement shall be (i) in
writing, (ii) delivered personally, by courier service or by
certified or registered mail, first-class postage prepaid and return receipt
requested, (iii) deemed to have been received on the date of
delivery or on the third business day after the mailing thereof, provided
that the party giving such notice or communication shall have attempted to telephone
the party or parties to which notice is being given during regular business
hours on or before the day such notice or communication is being sent, to
advise such party or parties that such notice is being sent, and (iv) addressed
as follows (or to such other address as the party entitled to notice shall
hereafter designate in accordance with the terms hereof):

 

14

 

(A)                              if
to Employer or Holding, to it at:

 

Riverwood International Corporation

3350 Riverwood Parkway S.E.

Suite 1400

Atlanta, Georgia 30339

Attention:  General Counsel

 

(B)                                if
to Executive, to him at his last known address on the books and records of the
Company.

 

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

 

Clayton, Dubilier & Rice, Inc.

375 Park Avenue

New York, New York 10152

Attention:  Mr. Kevin J. Conway

 

and

 

Debevoise & Plimpton

875 Third Avenue

New York, New York 10022

Attention:  Franci J. Blassberg, Esq.

 

15

 

(h)                                 Survival.  Sections 8, 9, 10, 11, 12, 13, 14, 15,
16, 17, and, if Executive’s employment terminates in a manner giving rise to a
payment under Section 7(f), Section 7(f), shall survive the
termination of the employment of Executive hereunder.

 

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

 

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

 

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

 

16

 

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

 

	
   

  	
  RIVERWOOD INTERNATIONAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RIVERWOOD HOLDING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Executive:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Stephen M. Humphrey

  
					

 

17Exhibit
10.18

 

MANAGEMENT STOCK OPTION
AGREEMENT

 

MANAGEMENT STOCK OPTION AGREEMENT, dated as of January
1, 2002, between Riverwood Holding, Inc., a Delaware corporation (the
“Company”), and Stephen M. Humphrey (the “Grantee”).

 

W  I
T  N  E  S  S  E  T  H:

 

WHEREAS, to motivate key employees of the Company and
the Subsidiaries by providing them an ownership interest in the Company, the
Board of Directors of the Company (the “Board”) has established the Riverwood
Holding, Inc. 2002 Management Stock Incentive Plan, as the same may be amended
from time to time (the “Plan”); and

 

WHEREAS, on the date hereof, the Company, its
indirect, wholly-owned subsidiary, Riverwood International Corporation, a
Delaware corporation (“Riverwood”), and the Grantee have entered into an
amended and restated Employment Agreement (as the same may be amended from time
to time, the “Employment Agreement”), providing for, among other things, the
grant to the Grantee of the stock options described herein;

 

WHEREAS, the Grantee and the Company desire to enter
into an agreement to evidence and confirm the grant of such stock 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)  “Acquisition” shall mean the series
of transactions resulting in the indirect acquisition of all of the issued and
outstanding capital stock of Former Riverwood by the Company on March 27, 1996
pursuant to the Merger Agreement.

 

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

 

(c)  “Applicable Percentage” shall mean,
with respect to an EBITDA Target for any Fiscal Year, the portion of such
EBITDA Target actually achieved by the Company and the Subsidiaries as of the
end of such Fiscal Year, expressed as a percentage.

 

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

 

(e)  “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.

 

 

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

 

(g)  “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 Riverwood’s then outstanding voting securities;

 

(ii)  the merger or consolidation of the Company
or Riverwood, as a result of which persons who were stockholders of the Company
or Riverwood, 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 Riverwood other than a liquidation of Riverwood 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 Riverwood to one or
more persons or entities that are not, immediately prior to such sale, transfer
or other disposition, Affiliates of the Company, Riverwood, the CD&R Fund
or any Investor.

 

(h)  “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).

 

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

 

(j)  “Company” shall have the meaning set
forth in the introductory paragraph hereto.

 

(k)  “Covered Options” shall have the
meaning set forth in Section 4(b) hereof.

 

(l)  “Cumulative EBITDA Target”  shall mean the sum of the EBITDA Targets for
each of the fiscal years of the Company ending December 31, 2002, 2003 and
2004, or, in the case of a determination of the Cumulative EBITDA Target prior
to December 31, 2004 pursuant to Section 3(b), the sum of such

 

2

 

EBITDA Targets for each of the Fiscal Years ending
prior to such date of determination and a pro rata portion of the EBITDA Target
for the Fiscal Year which includes such date of determination, pro-rated
through the end of the most recent calendar quarter ending on or prior to such
date of determination, as the same may be adjusted from time to time in
accordance with this Agreement.

 

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

 

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

 

(o)  “EBITDA” shall have the meaning
assigned to such term in the Amended and Restated Credit Agreement, dated as of
August 10, 2001, among Riverwood, the other borrowers party thereto, The Chase
Manhattan Bank, as administrative agent, and the lenders party thereto from
time to time, as such agreement may be further amended from time to time.

 

(p)  “EBITDA Target” shall mean, with respect
to the 2002, 2003 and 2004 Fiscal Year, the EBITDA targeted for such Fiscal
Year in the business plan of the Company and the Subsidiaries for such Fiscal
Year approved by the Board; provided, however, that in the event the Company or
any Subsidiary consummates a significant acquisition, disposition or other
corporate transaction or series of transactions that, in the judgment of the
Executive Committee of the Board, would reasonably be expected to impact the
consolidated earnings of the Company and its subsidiaries, the EBITDA Target
for the relevant fiscal years may be appropriately adjusted by the Board to
reflect such transaction or series of transactions.

 

(q)  “Employment Agreement” shall have the
meaning set forth in the recitals hereto.

 

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

 

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

 

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

 

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

 

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

 

(w)  “Fair Market Value” shall mean, as of
any date, the fair market value on such date of a share of Common Stock as
determined in good faith by the Executive Committee of the Board.  In making a determination of Fair Market

 

3

 

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, with respect to any
Fiscal Year, as promptly as practicable following the first business day of the
subsequent Fiscal Year 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.

 

(x)  “Fiscal Year” shall mean a fiscal
year of the Company ending December 31.

 

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

 

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

 

(aa)  “Fiscal Year” shall mean a fiscal
year of the Company ending December 31.

 

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

 

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

 

(dd)  “Grantee” shall have the meaning set
forth in the introductory paragraph hereto.

 

(ee)  “Installment” shall mean Performance
Options with respect to 50,000 Shares.

 

(ff)  “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,

 

4

 

and their “specified affiliates”, within the meaning
of the Stockholders Agreement of the Company, as amended from time to time.

 

(gg)  “Management Stock Subscription Agreement”
shall mean the management stock subscription agreement to be 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.

 

(hh)  “Merger Agreement” shall mean the
Agreement and Plan of Merger, dated as of October 25, 1995, by and among RIC
Holding, its wholly owned subsidiary, CDRO Acquisition Corporation, a Delaware
corporation, and Prior Riverwood.

 

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

 

(jj)  “Normal Termination Date” shall mean
the tenth anniversary of the date hereof.

 

(kk)  “Option Price” shall mean, with
respect to an Option, the exercise price under such Option determined in
accordance with Section 2(b) hereof.

 

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

 

(mm)  “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 the financial
performance of the Company and the Subsidiaries and/or the continued employment
of the Grantee.  Performance Options
have been granted to the Grantee pursuant to this Agreement with respect to
150,000 Shares.

 

(nn)  “Plan” shall have the meaning set
forth in the recitals hereto.

 

(oo)  “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.

 

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

 

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

 

(rr)  “Riverwood” shall have the meaning
set forth in the recitals hereto.

 

5

 

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

 

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

 

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

 

(vv)  “Service Options” shall mean those
Options that are subject to the provisions of Section 3(a) hereof providing for
the vesting of such Option on the basis of the Grantee’s completion of
service.  Service Options have been
granted to the Grantee pursuant to this Agreement with respect to 150,000
Shares.

 

(ww)  “Shares” shall mean the shares of
Common Stock subject to the Options.

 

(xx)  “Special Performance Options” shall
mean those Options that are subject to the provisions of Section 3(c) hereof
providing for the vesting of such Options on the basis of the occurrence of a
Change in Control and/or the continued employment of the Grantee.  Special Performance Options have been
granted to the Grantee pursuant to this Agreement with respect to 150,000
Shares.

 

(yy)  “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.  Grant of
Options.

 

(a)  Confirmation
of Grant.  The Company hereby
evidences and confirms its grant to the Grantee, effective as of the date
hereof, of (i) Service Options to purchase 150,000 Shares and (ii)
Performance Options to purchase 150,000 Shares and (iii) Special performance
Options to purchase 150,000 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 per share.

 

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 or more of the Subsidiaries until the
applicable vesting date, the Service Options shall become vested and
exercisable in two annual installments, one-third on the second anniversary of
the

 

6

 

Grant Date and the remaining two-thirds on the Third anniversary of the
Grant Date; provided that, if, on or prior to the third anniversary of
the Grant Date, (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, the Grantee’s employment is
terminated by the Company other than for Cause or by the Grantee for Good
Reason, 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 of the Subsidiaries until the
applicable vesting date as follows:

 

(i)  the Applicable Percentage of an Installment
of Performance Options shall become vested and exercisable on each of the first
three anniversaries of the Grant Date, provided in the case of any such
Installment, that the Executive Committee of the Board determines that Company
has achieved at least 75% of the EBITDA Target for the Fiscal Year ending
immediately prior to such anniversary date;

 

(ii)  100% of any Performance Options that, as of
the third anniversary of the Grant Date, have not become vested and exercisable
in accordance with the preceding clause (i) shall become vested and exercisable
as of the date of such third anniversary if the Executive Committee of the
Board determines that Company has achieved 100% of the Cumulative EBITDA Target
for the three Fiscal Years ending December 31, 2004; and

 

provided that if, on or prior to the
third anniversary of the Grant Date, (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)(i) 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 EBITDA actually achieved by the Company during the period commencing
on January 1, 2002 and ending on the last day of the most recent calendar
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) the Cumulative EBITDA Target,
multiplied by (ii) the total number of Shares subject to such
Performance Options.  Any

 

7

 

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 EBITDA Target has been achieved, subject to the continuous
employment of the Grantee with the Company or one or more of the Subsidiaries
until such date.

 

(c)  Special
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 of the Subsidiaries until the
applicable vesting date, 100% of the Special performance Options shall vest and
become exercisable upon the earliest of (i) the occurrence, prior to the
third anniversary of the Grant Date, of a Change in Control, and (ii)
the nine year and six month anniversary of the Grant Date.

 

(d)  Conditions.  The Board, in its sole discretion, 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 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 Sections 5 and 6 hereof and the provisions contained in the
Management Stock Subscription Agreement related to the purchase of 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 cancelled 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 become vested and exercisable on or
before the effective date of such termination shall terminate and be cancelled
immediately upon such termination of employment.  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 (such
Options, the “Covered Options”) shall remain exercisable for whichever
of the following periods is applicable, and if not exercised within such
period, shall terminate and be cancelled upon the expiration of such period: (i)
if the Grantee’s employment is terminated by reason of an Extraordinary
Termination, the Covered Options 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, the Covered Options shall
remain

 

8

 

exercisable for a period of 60 days after the earliest to occur 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 Covered Options pursuant to Section 5(c)(i) and (z)
the Normal Termination Date. 
Notwithstanding anything else contained in this Agreement, if the
Grantee’s employment is terminated for Cause, all Options (whether or not then
exercisable) shall terminate and be cancelled 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, (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 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

 

9

 

to purchase all or any portion of 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 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 any deferral of the payment of the
Purchase Price therefor pursuant to 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 effected 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,
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, of the Shares which may be
purchased upon exercise of such Covered Options over (ii) the
aggregate Option Price of such Covered Options.

 

10

 

(g)                                 Payment.  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).  Subject to
Section 10 hereof, 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 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 as a condition to the
issuance of such Shares.  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 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
outstanding Options shall have become and remain vested and exercisable as
provided in Sections 3 and 4 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 whole 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

 

11

 

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 aggregate Option Price for such Exercise Shares (such amount, the “Exercise
Price”).  Upon execution 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, as of
the Exercise Date, 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 tendering cash, tender shares of
Common Stock that have been owned by the Grantee for at least six months,
having an aggregate 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 an aggregate 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, AS THE SAME MAY BE AMENDED FROM TIME TO TIME 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, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, 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) while the Company is currently obligated under its
Financing Agreements to file periodic reports with the Commission and,
accordingly, Rule 144 may be presently available with respect to sales of
securities of the Company, the Company has made no covenant to the Grantee to continue
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 an 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 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.

 

(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

 

14

 

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 exercise of any Options or receipt
of any 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.

 

(a)  Service
Options and Vested Performance Options. 
In the event of a Change in Control, each then outstanding (i)
Service Option, (ii) Performance Option and (iii) if such Change
in Control occurs on or before the third anniversary of The Grant Date, Special
Performance Option, (regardless of whether at such time otherwise exercisable)
shall be canceled in exchange for a payment in cash of an amount equal to the
excess, if any, of (i) the product of the Change in Control Price
multiplied by  the aggregate number of
Shares covered by all such Options, (ii) over the aggregate Option Price
for all such Options.  Any Options that
have not so vested shall be cancelled upon a Change in Control.

 

(b)  Timing
of Option Cancellation Payments; Discretionary Acceleration.  Notwithstanding the provisions of the
preceding paragraph (a), the Board (as constituted immediately prior to the
Change in Control) may determine, in its discretion, to accelerate the
exercisability or cause the cancellation and payment, calculated as provided in
Section 9(a), in respect of all or any Options prior to a Change in Control
that occurs after the third anniversary of the Grant Date.  The cash payments described in paragraph (a)
above shall be payable in full, 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 pay the purchase price for any Covered Options that the Company
may elect to purchase from the Grantee pursuant to Section 5(c) if (i) the
payment of such purchase price 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 Riverwood, the other borrowers party thereto, The Chase
Manhattan Bank, as

 

15

 

administrative agent, and the lenders party thereto from time to time,
any other guarantee, financing or security agreement or document entered into
by the Company or any Subsidiary from time to time in (“Financing Agreements”),
in each case as the same may be amended, modified or supplemented from time to
time, (ii) the payment of such purchase price 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 the
payment of the purchase price for any Covered Options by the Company otherwise
permitted under Section 5(c) is prevented solely by the terms of
Section 10(a), (i) the payment of such purchase price will be
postponed and will be made 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 the payment of such purchase price 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) the Grantee’s right to
receive payment of such purchase price shall rank against other similar 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
right, provided that any such 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
the payment of the purchase price for any Covered Options from the Grantee is
delayed pursuant to this Section 10, the purchase price for such Covered
Options when the purchase price is eventually paid as contemplated by
Section 10(b) shall be the sum of (a) the purchase price of
such Covered Options determined in accordance with Section 5(f) at the
time that the purchase would have been paid 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 purchase price would
have been paid but for the operation of this Section 10 to the date on
which such purchase price is actually paid (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, 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

 

16

 

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 his last known address set forth on the books
and records of the Company.

 

(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, provided that the party giving
such notice or communication shall have attempted to telephone the party or
parties to which notice is being given during regular business hours on or
before the day such notice or communication is being sent, to advise such party
or parties that such notice is being sent. 
Copies of any notice or other communication given under this Agreement
shall also be given to:

 

Clayton, Dubilier & Rice, Inc.

375 Park Avenue

New York, New York 10152

Attention:  Kevin J. Conway

 

and

 

17

 

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.

 

(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

 

18

 

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:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE GRANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Stephen Humphrey

  

 

20

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00050-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00050-of-00352.parquet"}]]