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                                   APPENDIX A

                          SECOND AMENDED AND RESTATED
                           CARAUSTAR INDUSTRIES, INC.
                 1998 KEY EMPLOYEE INCENTIVE COMPENSATION PLAN

                (SECOND AMENDED AND RESTATED AS OF MAY 10, 2001)

                                   ARTICLE 1

                            PURPOSE AND TERM OF PLAN

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

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

                                   ARTICLE 2

                                  DEFINITIONS

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

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

     2.3 "Base Salary" shall have the meaning set forth in Section 9.2.

     2.4 "Bonus Formula" shall have the meaning set forth in Section 9.3(a).

     2.5 "Bonus Matrix" shall have the meaning set forth in Section 9.3.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     2.21 "Operating Profit" shall mean operating income including, in the case
of Operating Profit measured on a Company level, equity in income of
unconsolidated affiliates.

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

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

     2.24 "Participant" means any Key Employee who for an Option Period has been
selected to participate in the Option Program pursuant to Article 7 or 8 or who
for a Bonus Period has been selected to participate in the Bonus Program
pursuant to Article 9 or 10 or who has been selected for an Award of a
Non-Qualified Traditional Stock Option or Restricted Share Rights pursuant to
Article 11.

     2.25 "Performance Criteria" means the one or more criteria that the
Committee shall select for purposes of establishing the Performance Goal(s) for
an Option Period or Bonus Period. The Performance Criteria that will be used to
establish such Performance Goal(s) shall be limited to the following: Economic
Profit, return on net assets, return on shareholders' equity, return on assets,
return on capital, earnings per share, net earnings, gross income, earnings,
earnings growth, Common Stock price per share and Operating Profit. Where
applicable, Performance Criteria will be measured on a Company, division or
facility level, as determined by the Committee.

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

     2.27 "Performance Stock Option" shall have the meaning set forth in Section
6.2(a).

     2.28 "Plan" shall have the meaning set forth in Section 1.1.

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

     2.30 "Restricted Share Right" shall have the meaning set forth in Section
6.4.

     2.31 "Restricted Share Right Percentage" shall have the meaning set forth
in Section 7.5.

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

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

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

     2.35 "Stock Option" means an Award granted to a Key Employee in the form of
a Traditional or Performance Stock Option (either Non-Qualified or Incentive)
pursuant to Article 7, 8, 9 or 11.

     2.36 "Stock Option Matrix" shall have the meaning set forth in Section 7.4
and Section 8.3.

     2.37 "Stock Option Percentage" shall have the meaning set forth in Section
9.4(c).

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

     2.39 "Traditional Stock Option" shall have the meaning set forth in Section
6.2(a).

     2.40 "Underlying Shares" shall have the meaning set forth in Section
6.3(a).

                                   ARTICLE 3

                             SHARES SUBJECT TO PLAN

     3.1 Available Shares.

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

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increased by an amount equal to the number of shares covered by Stock Options
issued pursuant to Section 9.4.

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

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

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

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

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

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

     3.2 Adjustment to Shares.

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

     (b) Covered Employees.  In no event shall the Award of any Participant who
is a Covered Employee be adjusted pursuant to Subsection 3.2(a) to the extent it
would cause such Award to fail to qualify as "performance-based compensation"
under Section 162(m) of the Code.

                                   ARTICLE 4

                                  ELIGIBILITY

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

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                                   ARTICLE 5

                              PLAN ADMINISTRATION

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

     5.2 Authority of Committee.

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

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

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

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

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

     (b) The Committee shall have full discretionary authority in all matters
related to the discharge of its responsibilities and the exercise of its
authority under the Plan, including without limitation its construction of the
terms of the Plan and its determination of eligibility for participation and
Awards under the Plan. The decisions and determinations of the Committee and its
action with respect to the Plan shall be final, binding and conclusive upon all
persons having or claiming to have any right or interest in or under the Plan.

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

     5.3 Section 162(m) of the Code.  With regard to all Covered Employees, the
Plan shall, for all purposes, be interpreted and construed in accordance with
Section 162(m) of the Code, except as provided in Article 11.

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

                                   ARTICLE 6

                                FORMS OF AWARDS

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

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

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

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

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

     (e) Shares of Common Stock (unrestricted), as described in Section 9.4(a);
and

     (f) Cash.

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     6.2 Stock Options.

     (a) Traditional and Performance Options.  Stock Options may be awarded
under the Plan in the form of Traditional Stock Options, Performance Stock
Options, or a combination of both. The price at which Common Stock may be
purchased upon exercise of a Traditional Stock Option shall be 100% of the
closing price at which a share of Common Stock trades on the Effective Date of
the Traditional Stock Option Award, or the next preceding trading day if such
date was not a trading date, on the primary securities exchange on which the
Common Stock is then traded. The price at which Common Stock may be purchased
upon exercise of a Performance Stock Option shall be 120% of the closing price
at which a share of Common Stock trades on the Effective Date of the Performance
Stock Option Award, or the next preceding trading day if such date was not a
trading date, on the primary securities exchange on which the Common Stock is
then traded.

     (b) Incentive Stock Options.  Stock Options may be issued in the form of
incentive stock options, intended to qualify as such under the provisions of
Section 422 of the Internal Revenue Code of 1986, as amended ("Incentive Stock
Options"). To the extent that the aggregate fair market value (determined on the
date the Stock Option is granted) of shares of Common Stock with respect to
which Incentive Stock Options first become exercisable by any Participant in any
calendar year exceeds $100,000, such Stock Options shall be treated as
Non-Qualified Options. The maximum number of shares of Common Stock that may be
issued under this Plan by Incentive Stock Options shall be 3,800,000.

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

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

     (e) Exercise.  Upon exercise, the option price of a Stock Option may be
paid in cash, shares of Common Stock, a combination of the foregoing, or such
other consideration as the Committee may deem appropriate. The Committee shall
establish appropriate methods for accepting Common Stock, whether restricted or
unrestricted, and may impose such conditions as it deems appropriate on the use
of such Common Stock to exercise a Stock Option. Subject to Section 15.12, the
Committee may permit a Participant to elect to pay the option price upon the
exercise of a Stock Option by authorizing a third party to sell shares of Common
Stock (or a sufficient portion of the shares) acquired upon exercise of the
Stock Option and remit to the Company a sufficient portion of the sale proceeds
to pay the entire option price and any tax withholding resulting from such
exercise. The Committee may permit a Participant to satisfy any amounts required
to be withheld under the applicable federal, state and local tax laws in effect
from time to time, by electing to have the Company withhold a portion of the
shares of Common Stock to be delivered for the payment of such taxes.

     6.3 Restricted Stock.

     (a) In General.  Restricted Stock may be issued by the Company as a result
of the exercise of a Restricted Share Right upon the purchase of two additional
shares of unrestricted Common Stock, as more fully set forth in Section 6.4. The
two (2) shares of unrestricted Common Stock purchased by the Participant as a
condition precedent to the issuance of a share of Restricted Stock pursuant to a
Restricted Share Right shall be the "Underlying Shares" of such share of
Restricted Stock; provided that during the Restriction Period of a share of
Restricted Stock, the Participant may designate other unrestricted Common Stock
held by the Participant as the "Underlying Shares" of such share of Restricted
Stock, but only to the extent such unrestricted shares are not then Underlying
Shares of any other share of Restricted Stock. The Committee may, at its
discretion, require that the certificates representing Underlying Shares be
deposited with and held by the Company for the Participant until the
restrictions on the related Restricted Stock have lapsed.

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

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

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

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

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

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

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

     6.4 Restricted Share Rights.

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

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

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

                                   ARTICLE 7

                         ORIGINAL STOCK OPTION PROGRAM

     7.1 In General.  Awards may be granted to Key Employees in the form of
Stock Options pursuant to this Article 7. These Stock Options may be Incentive
Stock Options, Non-Qualified Stock Options or a combination of both as
determined by the committee in its sole discretion. All Awards under the Plan
issued

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to Covered Employees in the form of Stock Options shall qualify as
"performance-based compensation" under Section 162(m) of the Code.

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

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

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

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

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

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

     7.6 Option Program Awards.

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

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

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

     (d) Negative Discretion.  In determining the size of an individual Award to
be paid for an Option Period, the Committee may, through the use of Negative
Discretion, reduce or eliminate the number of Stock

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Options earned under the Stock Option Matrix for the Option Period if, in its
sole discretion, such reduction or elimination is appropriate.

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

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

     7.7 Maximum Award Stock Options Per Year Per Participant.  Notwithstanding
any provision contained in the Plan to the contrary, the maximum number of
shares of Common Stock for which Stock Options may be granted under this Article
7 and Article 8, cumulatively, to any Participant in any calendar year is
100,000.

                                   ARTICLE 8

                            NEW STOCK OPTION PROGRAM

     8.1 In General.  Awards may be granted to Key Employees in the form of
Stock Options pursuant to this Article 8. These Stock Options may be Incentive
Stock Options, Non-Qualified Stock Options or a combination of both as
determined by the Committee in its sole discretion. All Awards under the Plan
issued to Covered Employees in the form of Stock Options shall qualify as
"performance-based compensation" under Section 162(m) of the Code.

     8.2 Selection of Key Employee Participants.  The Committee shall select
those Key Employees who will be Participants for such Option Period. However,
designation of a Key Employee as a Participant for an Option Period shall not in
any manner entitle the Participant to receive an Award of Stock Options for the
Option Period. The entitlement of any Participant to payment of a Stock Option
Award for such Option Period shall be decided solely in accordance with the
provisions of this Article 8 and the Plan. Moreover, designation of a Key
Employee as a Participant for a particular Option Period shall not require
designation of such Key Employee as a Participant in any subsequent Option
Period, and designation of one Key Employee as a Participant shall not require
designation of any other Key Employee as a Participant in such Option Period or
in any other Option Period.

     8.3 Calculation of Option Target Award.  The Committee shall establish:

     (a) The Participant's Option Target Award for the Option Period then
beginning;

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

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

                                       A-9
<PAGE>   10

     8.4 Option Program Awards.

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

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

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

     (d) Timing of Award Payments.  The Performance Awards granted by the
Committee for an Option Period shall be paid to Participants as determined by
the Committee.

     8.5 Maximum Award Stock Options Per Year Per Participant.  Notwithstanding
any provision contained in the Plan to the contrary, the maximum number of
shares of Common Stock for which Stock Options may be granted under Article 7
and Article 8, cumulatively, to any Participant in any calendar year is 100,000.

                                   ARTICLE 9

                          ORIGINAL BONUS AWARD PROGRAM

     9.1 Eligibility.  Within the first 90 days of a Bonus Period (or, if
longer, within the maximum period allowed under Section 162(m) of the Code), the
Committee shall select those Key Employees who will be Participants for such
Bonus Period. However, designation of a Key Employee as a Participant for a
Bonus Period shall not in any manner entitle the Participant to receive a Bonus
Award for the Bonus Period. The entitlement of any Participant to payment of a
Bonus Award for such Bonus Period shall be decided solely in accordance with the
provisions of this Article 9. Moreover, designation of a Key Employee as a
Participant for a particular Bonus Period shall not require designation of such
Key Employee as a Participant in any subsequent Bonus Period, and designation of
one Key Employee as a Participant shall not require designation of any other Key
Employee as a Participant in such Bonus Period or in any other Bonus Period. All
of the Bonus Awards issued under the Bonus Award Program to Covered Employees
are intended to qualify as "performance-based compensation" under Section 162(m)
of the Code.

     9.2 Calculation of Base Salary.  Within the first 90 days of a Bonus Period
(or, if longer, within the maximum period allowed under Section 162(m) of the
Code), the Committee shall calculate the Participant's Base Salary for the Bonus
Period then beginning. The Base Salary for any Bonus Period shall be the
Participant's base salary as of the date the Performance Goal(s) for such Bonus
Period is set by the Committee. Once the Base Salary is determined for any Bonus
Period, the Base Salary will not change for that Bonus Period.

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

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

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

     (a) Unrestricted Shares.  In the event on the Effective Date of the Bonus
Award the ownership of Common Stock by (i) the Participant, the Participant's
spouse and dependent children, either directly or

                                       A-10
<PAGE>   11

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

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

     (c) Payment in Stock Options.  Bonus Awards for a Bonus Period elected by a
Participant to be paid in fully vested Non-Qualified Traditional Stock Options
shall be paid as follows. The Stock Option Percentage of a Participant's cash
Bonus Award for a Bonus Period (as determined by the certification process set
forth in Section 9.5(c) and after application of Section 9.4(a)), shall be
converted into a number of fully vested Non-Qualified Traditional Stock using
the Black-Scholes option pricing method, with such calculation being done as of
the Effective Date of the Bonus Award. The Participant shall be paid that number
of fully vested Non-Qualified Traditional Stock Options.

     (d) Cash.  The portion of a Participant's Bonus Award not paid in shares of
Common Stock pursuant to Section 9.4(a) or paid in Stock Options pursuant to
Section 9.4(c) shall be paid in cash.

     9.5 Payment of Awards.

     (a) Condition to Receipt of Awards.  Except as provided in Section 9.6, a
Participant must be employed by the Company on the last day of a Bonus Period to
be eligible for a Bonus Award for such Bonus Period.

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

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

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

     (e) Timing of Award Payments.  The Bonus Awards granted by the Committee
for a Bonus Period shall be paid to Participants reasonably soon after the
certifications set forth in Section 9.5(c).

     9.6 Termination of Employment During Bonus Period.  In the event the
employment of a Participant in a Bonus Period terminates because of death,
Disability or Retirement prior to the last day of a Bonus Period, the
Participant shall receive, if Awards are payable for such Bonus Period, a pro
rata Bonus Award. The
                                       A-11
<PAGE>   12

amount of the pro rata Bonus Award shall be determined by multiplying the Bonus
Award the Participant would have otherwise been paid if he or she had been a
Participant for the full Bonus Period by a fraction, the numerator of which is
the number of full months he or she was a Participant during such Bonus Period
and the denominator of which is twelve (12). For purposes of this calculation, a
partial month of participation shall: (1) be treated as a full month of
participation to the extent a Participant is a Participant in the Bonus Period
for 15 or more days of such month; and (2) not be taken into consideration to
the extent the Participant is a Participant in the Bonus Period for less than 15
days of such month. Such pro rata Bonus Award shall be paid in the form of cash.
In the event of Disability or Retirement, the pro rata Bonus Award shall be paid
directly to the Participant and, in the event of death, to the Participant's
estate. In the event a Participant's employment terminates for any reason other
than death, Disability or Retirement, such Participant shall have no right to
any Bonus Award for the Bonus Period in which such Participant's employment is
terminated.

     9.7 Maximum Award Payable.  Notwithstanding any provision contained in the
Plan to the contrary, the maximum Bonus Award payable pursuant to Article 9 or
Article 10, cumulatively, to any Participant in any calendar year is $1,000,000.

                                   ARTICLE 10

                            NEW BONUS AWARD PROGRAM

     10.1 Eligibility.  Within the first 90 days of a Bonus Period (or, if
longer, within the maximum period allowed under Section 162(m) of the Code), the
Committee shall select those Key Employees who will be Participants for such
Bonus Period. However, designation of a Key Employee as a Participant for a
Bonus Period shall not in any manner entitle the Participant to receive a Bonus
Award for the Bonus Period. The entitlement of any Participant to payment of a
Bonus Award for such Bonus Period shall be decided solely in accordance with the
provisions of this Article 10. Moreover, designation of a Key Employee as a
Participant for a particular Bonus Period shall not require designation of such
Key Employee as a Participant in any subsequent Bonus Period, and designation of
one Key Employee as a Participant shall not require designation of any other Key
Employee as a Participant in such Bonus Period or in any other Bonus Period. All
of the Bonus Awards issued under the Bonus Award Program to Covered Employees
are intended to qualify as "performance-based compensation" under Section 162(m)
of the Code.

     10.2 Calculation of Base Salary.  Within the first 90 days of a Bonus
Period (or, if longer, within the maximum period allowed under Section 162(m) of
the Code), the Committee shall calculate the Participant's Base Salary for the
Bonus Period then beginning. The Base Salary for any Bonus Period shall be the
Participant's base salary as of the date the Performance Goal(s) for such Bonus
Period is set by the Committee. Once the Base Salary is determined for any Bonus
Period, the Base Salary will not change for that Bonus Period.

     10.3 Procedure for Determining Awards.  Within the first 90 days of a Bonus
Period (or, if longer, within the maximum period allowed under Section 162(m) of
the Code), the Committee shall establish in writing for such Bonus Period: the
specific Performance Criteria that will be used to establish the Performance
Goal(s) for such Bonus Period and the kind(s) and level(s) of such Performance
Goal(s); and a Bonus Matrix detailing the Bonus Award for each Participant if
such Performance Goals are attained. The amount of a Participant's Bonus Award
will be calculated from the Bonus Formula for the Bonus Period, which Bonus
Formula shall be the product of the Participant's Base Salary and the percentage
derived from the Bonus Matrix.

     10.4 Payment of Awards.

     (a) Condition to Receipt of Awards.  Except as provided in Section 10.6, a
Participant must be employed by the Company on the last day of a Bonus Period to
be eligible for a Bonus Award for such Bonus Period.

                                       A-12
<PAGE>   13

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

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

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

     (e) Method and Timing of Award Payments.  The Bonus Awards granted by the
Committee for a Bonus Period shall be paid to Participants in cash as determined
by the Committee.

     10.5 Termination of Employment During Bonus Period.  In the event the
employment of a Participant in a Bonus Period terminates because of death,
Disability or Retirement prior to the last day of a Bonus Period, the
Participant shall receive, if Awards are payable for such Bonus Period, a pro
rata Bonus Award. The amount of the pro rata Bonus Award shall be determined by
multiplying the Bonus Award the Participant would have otherwise been paid if he
or she had been a Participant for the full Bonus Period by a fraction, the
numerator of which is the number of full months he or she was a Participant
during such Bonus Period and the denominator of which is twelve (12). For
purposes of this calculation, a partial month of participation shall: (1) be
treated as a full month of participation to the extent a Participant is a
Participant in the Bonus Period for 15 or more days of such month; and (2) not
be taken into consideration to the extent the Participant is a Participant in
the Bonus Period for less than 15 days of such month. Such pro rata Bonus Award
shall be paid in the form of cash. In the event of Disability or Retirement, the
pro rata Bonus Award shall be paid directly to the Participant and, in the event
of death, to the Participant's estate. In the event a Participant's employment
terminates for any reason other than death, Disability or Retirement, such
Participant shall have no right to any Bonus Award for the Bonus Period in which
such Participant's employment is terminated.

     10.6 Maximum Award Payable.  Notwithstanding any provision contained in the
Plan to the contrary, the maximum Bonus Award payable to any Participant
pursuant to Article 9 or Article 10, cumulatively, in any calendar year is
$1,000,000.

                                   ARTICLE 11

                    STOCK OPTION AND RESTRICTED STOCK GRANTS

     The Committee shall have the right to grant Awards of Non-Qualified Stock
Options and Incentive Stock Options to a Key Employee as determined in the
Committee's discretion, which Awards will not be made under the Stock Option
Program or Bonus Award Program. The Committee shall also have the right to grant
Awards of Restricted Share Rights as determined in the Committee's discretion,
which Awards will not be made under the Stock Option Program, and such grants of
Restricted Share Rights may not qualify as "performance-based compensation"
under Section 162(m) of the Code. Notwithstanding any provision to the contrary,
the maximum number of shares of Common Stock for which Stock Options may be
granted to any Participant in any calendar year under this Article 11 is 10,000.

                                   ARTICLE 12

                    TERMINATION OF EMPLOYMENT OF PARTICIPANT

     12.1 Termination Because of Death or Disability.  If a Key Employee's
employment with the Company terminates because of death or Disability, then
issued and outstanding Stock Options, Restricted Share Rights

                                       A-13
<PAGE>   14

and shares of Restricted Stock awarded to such Participant pursuant to this Plan
(whether or not then held by the Participant) shall be treated as follows:

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

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

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

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

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

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

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

                                       A-14
<PAGE>   15

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

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

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

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

                                   ARTICLE 13

                        DIVIDEND AND DIVIDEND EQUIVALENT

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

                                   ARTICLE 14

                               DEFERRAL OF AWARDS

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

                                       A-15
<PAGE>   16

                                   ARTICLE 15

                                 MISCELLANEOUS

     15.1 Transferability.  Except as provided in Section 15.2, any Award under
the Plan will be non-transferable and, accordingly, shall not be assignable,
alienable, salable or otherwise transferable by the holder; provided that:

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

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

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

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

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

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

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

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

                                       A-16
<PAGE>   17

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

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

     15.9 Leave of Absence.  The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in respect
of any leave of absence taken by the recipient of any award. Without limiting
the generality of the foregoing, the Committee shall be entitled to determine
(i) whether or not any such leave of absence shall constitute a termination of
employment within the meaning of the Plan and (ii) the impact, if any, of any
such leave of absence on Awards under the Plan theretofore made to any
Participant who takes such leave of absence.

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

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

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

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

     15.14 Compliance with Section 162(m).  If any provision of the Plan would
cause the Awards, other than an Award of Restricted Share Rights pursuant to
Article 10, granted to a Covered Person not to qualify as "performance-based
compensation" under Section 162(m) of the Code, that provision, insofar as it
pertains to the Covered Person, shall be severed from, and shall be deemed not
to be a part of this Plan, but the other provisions hereof shall remain in full
force and effect.

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

                                       A-17<PAGE>   1
                                                                    Exhibit 10.1

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

         This Amended and Restated Employment Agreement (the "Agreement") is
entered into as of December 31, 2000, between Kellstrom Industries, Inc., a
Delaware corporation, having its principal place of business at 3701 Flamingo
Road, Miramar, FL 33127 (the "Company"), and Fred von Husen, an individual
residing at 2770 N.E. 15 St., #202, Ft. Lauderdale, FL 33304 (the "Employee").

                                    RECITALS

         The Employee and the Company are parties to that certain Employment
Agreement entered into in October, 1996 (the "Prior Employment Agreement"),
pursuant to which the Employee is employed by the Company as its Executive Vice
President. The Company desires to provide for the continued employment of the
Employee by the Company and the Employee desires to continue such employment, on
the terms and conditions set forth herein.

                               TERMS OF AGREEMENT

         In consideration of the above recitals and the mutual promises herein
contained, the Company and the Employee hereby agree as follows:

         1. DEFINITIONS.

         (a)      The "Base Company Bonus" shall mean $125,000.

         (b)      The "Board" shall mean the Board of Directors of the Company.

         (c)      "Change of Control" shall mean (i) any transaction that has
the result that shareholders of the Company immediately before such transaction
cease to own at least 51% of (x) the voting stock of the Company or (y) of any
entity that results from the participation of the Company in a reorganization,
liquidation or any other form of corporate transaction; (ii) a merger,
consolidation, reorganization, liquidation or dissolution in which the Company
does not survive; or (iii) a sale, lease, exchange or other disposition of all
or substantilly all the property and assets of the Company.

         (d)      The "Effective Date" shall mean December 31, 2000.

         (e)      The "Employment Period" shall mean the period commencing on
the Effective Date and continuing until the fifth year anniversary of the
Effective Date, unless earlier terminated in accordance with the terms of this
Agreement. If not earlier terminated, and in the event the Company wishes to
extend this Agreement beyond the fifth year of the Period, this

                                       1
<PAGE>   2

Agreement shall be extended at the Company's option on a month-to-month basis
until such time as a new Agreement is executed.

         (f)      The "Executive Committee" shall mean the Executive Committee
of the Board of Directors of the Company.

         (g)      "GAAP" shall mean generally accepted accounting principles in
the United States as in effect from time to time.

         (h)      "Net Income" shall mean, with respect to any period, actual
net income for such period as determined by the Company in its sole discretion
in accordance with GAAP.

         2. EMPLOYMENT PERIOD. The Company hereby agrees to employ the Employee,
and the Employee hereby agrees to be employed by the Company, for the duration
of the Employment Period and pursuant to the other terms and conditions provided
herein. This Agreement shall terminate at the end of the Employment Period,
unless earlier terminated under Section 5 below.

         3. TERMS OF EMPLOYMENT.

         (a)      POSITION AND DUTIES. During the Employment Period the Employee
shall serve as Executive Vice President of the Company. The Employee shall
perform such duties as the Board or the Chief Executive Officer or other senior
officers of the Company shall from time to time determine. In the performance of
his duties, the Employee shall comply with the stated policies of the Company.

         (b)      LOCATION. The principal place of employment of the Employee
shall be the principal offices of the Company.

         (c)      COMPENSATION.

                  (1) BASE SALARY. The Employee's annual salary (the "Salary")
shall be a rate of no less than $280,000 per annum for the duration of the
Employee's employment hereunder. The Employee shall be considered for increases
in his Salary during the Employment Period in the sole discretion of the Board
(or the Executive Committee). The Salary shall be paid in regular intervals in
accordance with the Company's payroll practices.

                  (2) COMPANY BONUS. Subject to subsection (A) below, for each
calendar year during the Employment Period commencing with the year ending
December 31, 2001, at the end of which year the Employee is employed by the
Company, the Employee shall be eligible to be paid the Base Company Bonus,
pro-rated upward or downward, based on a plan determined annually by the Board
(or the Executive Committee), reliant upon Net Income, cash flow, or other
criteria. The actual sum may be more, less or none, based on the Board's
structure of the calculation of the plan.

                                       2
<PAGE>   3

                          (A) For any calendar year regarding which the Employee
is entitled to a bonus under the foregoing provisions of this subsection (2) but
during which year the Employee did not work the entire calendar year, unless
otherwise provided herein, the Employee shall be entitled to a bonus equal to
the product of the bonus, as calculated under the foregoing provisions,
multiplied by a fraction, the numerator of which is the number of months during
such calendar year that the Employee was employed by the Company and the
denominator of which is twelve.

                  (3) WITHHOLDING, ETC. The payment of any Salary and bonus to
the Employee shall be subject to all applicable withholding and payroll taxes,
and such other deductions as may be required under the Company's employee
benefit plans.

         (d)      BENEFITS. In addition to the compensation payable to the
Employee as set forth in Section 3(c) above, during the Employment Period the
Employee shall be eligible for similar incentive, stock option grants, savings,
welfare (including without limitation medical and dental insurance) plans,
practices, policies and programs applicable on or after the Effective Date to
other employees of the Company as determined in the discretion of the Board (or
the Executive Committee).

         (e)      VACATION. During the Employment Period, the Employee shall be
entitled to paid vacation in accordance with the policies and practices
applicable on or after the Effective Date to other employees of the Company,
PROVIDED that the Employee shall be entitled to a minimum of twenty (20) paid
business days of vacation per full calendar year (pro rated if the Employee
serves for less than the full calendar year). Vacation accrued but unused at the
end of a calendar year may be carried over into the following calendar year or
years, PROVIDED that unused vacation days shall be accrued up to a maximum of
six weeks. All earned, unused and accrued vacation will be paid to the Employee
at the termination of this Agreement.

         (f)      HOLIDAYS & PERSONAL/SICK LEAVE. The Employee shall be entitled
to all holidays that are prescribed by the Company's policies and practices. The
Employee shall be entitled to six (6) days paid personal/sick leave per year
(pro rated if the Employee serves for less than the full calendar year).
Personal/sick days accrued but unused at the end of a calendar year may be
carried over into the following calendar year or years, PROVIDED that unused
personal/sick days shall be accrued up to a maximum of six (6) weeks, according
to current policy, which is subject to change at the sole discretion of the
Company. All earned and unused personal/sick days will not be paid to the
Employee at the termination of Employment, according to current policy, unless
required by prevailing wage and hour laws.

         (g)      AUTOMOBILE. While the Employee is actively employed with the
Company, the Company shall provide to the Employee an allowance for an
automobile, based on a plan determined annually by the Board (or the Executive
Committee) (see Attachment 1, current AUTOMOBILE BENEFIT) for use by the
Employee in connection with the performance of his duties hereunder.

                                       3
<PAGE>   4

         (h)      EXPENSES. The Company shall pay or reimburse the Employee for
reasonable expenses incurred or paid by him during the Employment Period in the
performance of his services under this Agreement upon presentation of expense
statements or such other supporting information as may be required for other
employees of the Company in accordance with the Company's policy.

         (i)      PENSION PLAN. The Company shall contribute an amount equal to
5% of the Salary towards the accumulating investment plan/pension plan selected
and established by the Employee.

         4. EMPLOYEE'S OBLIGATIONS AND REPRESENTATIONS.

         (a)      During the Employment Period, and excluding any periods of
vacation and sick leave to which the Employee is entitled, the Employee agrees
to devote substantially all of his attention and time during normal business
hours to the business and affairs of the Company and to perform faithfully and
efficiently the responsibilities assigned to the Employee by the Company.

         (b)      The Employee represents and warrants to the Company that there
are no agreements or arrangements, whether written or oral, in effect which
would prevent the Employee from rendering the service required of him hereunder
to the Company during the Employment Period. The Employee further represents,
warrants and agrees with the Company that as of the Effective Date he has not
made and will not make during the Employment Period any commitment or do any act
in conflict with this Agreement, or take any action now or in the future that
might divert from the Company any opportunity which would be in the scope of any
then present business of the Company or any subsidiary thereof.

         5. TERMINATION.

         (a)      DEATH. This Agreement shall terminate automatically upon the
Employee's death. If the Employee's employment is terminated by reason of the
Employee's death, the Company shall have no further obligations to the
Employee's legal representatives under this Agreement, other than (i) those
obligations accrued, earned or vested by the Employee as of the date of his
death, (ii) that portion of any bonus determined pursuant to Section 3(c)(2) of
this Agreement in respect of a prior calendar year that had been deferred, which
amount shall be paid to the Employee's legal representatives as soon as
practicable, and (iii) with respect to the calendar year in which the Employee's
death occurs, in the event that a bonus would have been payable to the Employee
pursuant to Section 3(c)(2) of this Agreement in respect of such calendar year
had the Employee not died, the Employee's legal representatives shall be
entitled to receive a pro-rated amount of such bonus based on a fraction in
which the numerator is the number of days the Employee remained employed with
the Company in the calendar year in which the Employee died and the denominator
is 365, with such bonus payment to be paid in one cash lump sum paid as soon as
practicable following delivery of audited financial statements for the year in
which the Employee dies.

                                       4
<PAGE>   5

         (b)      DISABILITY. If the Company determines in good faith that the
Employee has a "disability" (as defined below), it may give the Employee written
notice of its intention to terminate the Employee's employment. In such event,
the Employee's employment with the Company shall terminate effective on the 60th
day after receipt by the Employee of such notice. No such notice of termination
by reason of disability shall be given until the Employee has experienced a
period of three (3) consecutive months of disability and the disability is
continuing. The notice of termination shall not be effective if the Employee
returns to full-time performance of his duties prior to the expiration of the 60
day notice period. For purposes of this Agreement, "disability" shall mean a
physical or mental condition which, three (3) months after its commencement, is
determined by a physician selected by the Company to be a total and permanent
condition which substantially prevents the Employee from performing the services
to be provided by him hereunder. The Employee shall be entitled to all
compensation and benefits provided for under this Agreement during the three
month waiting period for the disability determination and during the 60 day
notice of termination period. In the event that the Company provides disability
benefits for the Employee, such benefits shall, (1) not commence until after the
employment of the Employee has been terminated (2) survive any termination of
this Agreement as prescribed by the Company's then current benefit plans and the
Company has ceased paying the Employee compensation pursuant to the foregoing
sentence. If the Employee's employment is terminated by reason of the Employee's
disability, this Agreement shall terminate without further obligations to the
Employee or the Employee's legal representatives under this Agreement, other
than (i) those obligations accrued, earned or vested by the Employee as of the
date of the termination, (ii) that portion of any bonus determined pursuant to
Section 3(c)(2) of this Agreement in respect of a prior calendar year that had
been deferred, which amount shall be paid to the Employee's legal
representatives as soon as practicable, and (iii) with respect to the calendar
year in which the Employee's employment is terminated, in the event that a bonus
would have been payable to the Employee pursuant to Section 3(c)(2) of this
Agreement in respect of such calendar year had the Employee's employment not
terminated, the Employee shall be entitled to a pro-rated amount of such bonus
based on a fraction in which the numerator is the number of days in the calendar
year in which the Employee was terminated that the Employee was employed with
the Company and which were prior to the period of the Employee's disability and
the denominator is 365, with such bonus payment to be paid in one cash lump sum
paid as soon as practicable following delivery of audited financial statements
for the year in which the Employee's employment is terminated.

         (c)      CAUSE. During the Employment Period, the Company may terminate
the Employee's employment for cause, as determined by the Board (or the
Executive Committee) and as defined below. For purposes of this Agreement,
"cause" shall mean:

                  (i) an act or acts of fraud, embezzlement or any other act by
the Employee that would constitute a felony under the laws of the State of
Florida;

                  (ii) repeated violations by the Employee of his obligations
under Section 4a of this Agreement or a breach by the Employee of his
representations or obligations under any of Sections 3(a), 4(b), 6, 7 or 8 of
this Agreement;

                                       5
<PAGE>   6

                  (iii) the indictment of the Employee of a crime, if the
Company reasonably believes such indictment would impair the Employee's ability
to perform his services under this Agreement;

                  (iv) willful and gross misconduct by the Employee in the
performance of his duties hereunder;

                  (v) the commission by the Employee of an act (other than good
faith exercise of business judgment in the exercise of his responsibilities
pursuant to this Agreement) resulting in material damage to the Company; or

                  (vi) repeated gross harassment, malicious ridicule, or
malicious statements that repudiate the integrity or professional standing of
another Employee.

If the Employee's employment is terminated for cause, this Agreement shall
terminate without further obligations to the Employee under this Agreement,
other than those obligations accrued, earned or vested by the Employee as of the
date of the termination. The Employee shall not be entitled to any bonus in
respect of the year of termination in the event the Employee's employment is
terminated for cause pursuant to this Section 5(c).

         (d)      INVOLUNTARY TERMINATION. Notwithstanding anything herein to
the contrary, the Company shall have the right, at any time upon notice to the
Employee, to terminate the Employee's employment. If during the Employment
Period the Company terminates the Employee's employment other than for cause or
disability it shall be deemed to be an involuntary termination and the Company
shall pay to the Employee the following amounts:

                  (i) to the extent not theretofore paid, the Company shall pay
the Employee's Salary through the date of such involuntary termination and, when
calculated, the pro-rated bonus (if any) as set forth in Section 3(c)(2)(A)
above, in each case payable as and when such Salary and bonus (if any) would
otherwise have been paid to the Employee; and

                  (ii) the Company shall pay in one cash lump sum an amount
equal to four (4) months salary as severance pay; or, in the case of an
involuntary termination following the occurrence of a Change of Control, an
amount equal to twelve (12) months salary as severance pay. Payment to be made
to Employee within fifteen (15) days of the last day of active employment.

         (e)      VOLUNTARY TERMINATION. The Employee agrees to provide the
Company with thirty (30) days' written notice prior to voluntarily terminating
his employment. At the end of such 30-day period, this Agreement shall terminate
automatically and the Company shall have no further obligations to the Employee
under this Agreement, other than those obligations accrued, earned or vested by
the Employee as of the date of the termination. The Employee shall not be
entitled to any bonus in respect of the year of termination in the event the
Employee's employment is terminated pursuant to this Section 5(e).

                                       6
<PAGE>   7

         (f)      GOOD REASON. During the Employment Period, the Employee may
terminate his employment for "good reason" as defined below. For purposes of
this Agreement, "good reason" shall mean:

                  (i) the assignment to the Employee of any duties inconsistent
in any respect with Employee's position, duties and responsibilities as set
forth in Section 3(a) of this Agreement or any action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose any isolated, insubstantial and inadvertent action by
the Company which is not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Employee;

                  (ii) any failure by the Company to comply with any of the
provisions of Sections 3(c) through 3(h) of this Agreement regarding the
Employee's compensation, benefits, expenses, fringe benefits, vacation, holidays
and sick leave other than an isolated, insubstantial and inadvertent action by
the Company which is not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Employee;

                  (iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 3(b) of this Agreement,
except for travel reasonably required in the performance of the Employee's
responsibilities; or

                  (iv) any failure by the Company to comply with and satisfy
Section 10 of this Agreement with respect to successors.

In the event that the Employee terminates his employment for good reason as
defined in this Section 5(f), it shall be deemed to be an "involuntary
termination" as set forth in Section 5(d) above and the Employee shall be
entitled to all payments and obligations set forth in Sections 5(d)(i) and
5(d)(ii) of this Agreement as if the Employee's employment had been
involuntarily terminated.

         6.       CONFIDENTIALITY.

                  (a) ACKNOWLEDGMENT AND PURPOSES. The Employee acknowledges
that during the Employment Period he will learn, develop and have access to
Confidential Information relating to the business and affairs of the Company and
its affiliates. As used in this Agreement, "Confidential Information" shall mean
any and all trade secrets and other confidential information concerning the
Company and/or its affiliates including, without limitation, information
regarding the operations, future plans, projected and historical sales,
marketing, costs, production, growth and distribution, customer lists, customer
information, information relating to governmental relations and information
relating to products or services of such companies, in each case whether
patentable or not.

         The Company is engaged in a highly competitive business; its
competitive position depends in great measure upon the ability to develop or
acquire and maintain the confidentiality of Confidential Information; and it may
have expended and is likely to continue to expend

                                       7
<PAGE>   8

considerable efforts and resources in the development or acquisition of
Confidential Information. Based upon the foregoing, the Employee recognizes that
the unauthorized disclosure of Confidential Information in violation of the
terms hereof is likely to result in serious and irrevocable harm to the Company.

                  (b) RESTRICTIONS ON THE USE OF CONFIDENTIAL INFORMATION. The
Employee agrees and covenants as follows:

                           (i) All documents and other materials made or
compiled by or made available to the Employee prior to the date hereof or at any
time hereafter, including during the Employment Period, by the Company or any of
its affiliates and any copies thereof, whether or not containing Confidential
Information, are and shall be the property of the Company or its affiliates and
shall, at the request of the Company or its affiliates, be delivered to the
Company by the Employee immediately upon the conclusion of his engagement as an
employee. Except as required in connection with the services to be performed
hereunder, the Employee agrees not to remove from the premises of the Company or
any of its affiliates, without permission, any papers or drawings belonging to
the Company or its affiliates, including those prepared or worked on by him. The
Employee will treat as trade secrets all Confidential Information acquired by
him prior to the date hereof or at any time hereafter, including during the
Employment Period, and shall not at any time use any Confidential Information
for his own benefit nor disclose it or any part of it to any other person, firm
or corporation not connected with the Company or its affiliates (a) without the
prior written consent of the Company, or (b) unless such disclosure is required
by law or in response to a legal order or (c) unless such Confidential
Information has become generally available to the public other than through the
breach by the Employee of the terms hereof.

                           (ii) All ideas, reports, and other creative works
conceived by the Employee during the Employment Period and relating to
Confidential Information, shall be disclosed to the Company and shall be the
sole property of the Company.

         7.       NON-COMPETITION. The Employee agrees that during the
Non-Compete Period (as defined below) he will not, within the continental United
States, or any other country in which the Company has operations, directly or
indirectly, engage or participate or make any financial investments in or become
employed by or render advisory or other services to or for any person, firm or
corporation, or in connection with any business activity which directly or
indirectly is in competition with any of the business operations or activities
of the Company or any of its affiliates as of the date of termination of his
employment, whether such companies are presently existing or hereafter acquired.
Nothing herein contained, however, shall restrict the Employee from making any
investments in any company (but without otherwise participating in the
activities of such company) whose stock is listed on a national securities
exchange or actively traded in the over-the-counter market, as long as such
investment does not give him the right to control or influence the policy
decisions of any such business or enterprise which is or might be directly or
indirectly in competition with any of such business operations or activities of
the Company or its affiliates. For purposes of this Section, the Non-Compete
Period shall mean the period beginning on the date hereof and ending:

                                       8
<PAGE>   9

                  (i) If the Company shall terminate the Employee's employment
with the Company "for cause" under Section 5(c) of this Agreement or the
Employee shall voluntarily terminate his employment with the Company other than
for "good reason" pursuant to Section 5(f) of this Agreement, two (2) years
following the last day on which the Employee is actively employed by the
Company; or

                  (ii) If the Company shall terminate the Employee's employment
with the Company other than "for cause" under Section 5(c) of this Agreement or
the Employee shall involuntarily terminate his employment with the Company for
"good reason" pursuant to Section 5(f) of this Agreement, four (4) months (or,
if any such termination of the Employee's employment with the Company occurs
following a "Change of Control" of the Company, one (1) year) following the last
day on which the Employee is actively employed by the Company; provided,
however, that the Company shall have the right exercisable by delivery of
written notice to the Employee at least thirty (30) days prior to the date on
which such Non-Compete Period would otherwise have ended to extend such period
for up to an additional eight (8) months (unless such termination of the
Employee's employment with the Company occurs following a "Change of Control" of
the Company) by agreeing to pay the Employee an amount equal to one twelfth of
the Employee's Base Salary in effect on the last day of the Employee's
employment by the Company for each month by which the Company desires to extend
such period.

         8.       RESTRICTION ON SOLICITATION. The Employee will observe the
following restrictions for a period of two (2) years from the termination of
Employment for any reason:

                  (i) directly or indirectly solicit, raid, entice or induce any
employee of the Company or any of its affiliates to become an employee of any
person, firm or corporation which is, directly or indirectly, in competition
with the business or activities of the Company or any of its affiliates; or

                  (ii) directly or indirectly approach any such employee for
these purposes; or

                  (iii) authorize or knowingly approve the taking of such
actions by other persons on behalf of any such person, firm or corporation, or
assist any such person, firm or corporation in taking such action; or

                  (iv) directly or indirectly solicit, raid, entice or induce
any person, firm or corporation who or which on the date hereof is, or at the
time during his employment with the Company or any of its affiliates shall be, a
customer of the Company or any of its affiliates, to become a customer for the
same or similar products which it purchased from the Company or any of its
affiliates, of any other person, firm or corporation, and the Employee shall not
approach any such customer for such purpose or authorize or knowingly approve
the taking of such actions by any other person.

         9.       REMEDIES. The Employee hereby acknowledges that in the event
of a breach by him of the provisions of Sections 6, 7 or 8 of this Agreement,
the Company would suffer irreparable harm for which there would be no adequate
remedy at law. Accordingly, the

                                       9
<PAGE>   10

Employee agrees that in such event, in addition to any other remedies which the
Company may have in law or in equity for money damages or other relief, the
Company shall be entitled to temporary and/or injunctive relief to enforce the
provisions hereof. In addition, the parties hereto agree and acknowledge if any
provision of Section 6, 7 or 8 as applied to any party or to any circumstance is
adjudged by a court to be invalid or unenforceable, the same shall in no way
affect any other circumstance or the validity or enforceability of any other
provision of this Agreement. If any such provision, or any part thereof, is held
to be unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision,
and/or to delete specific words or phrases, and in its reduced form, such
provision shall then be enforceable and shall be enforced.

         10.      SUCCESSORS. This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be assignable by the
Employee. The Company may assign its rights and obligations hereunder, provided
that the Company will require the assignee to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such assignment had taken place.

         11.      BINDING ARBITRATION. In the event that the Company and the
Employee cannot agree on an interpretation of any provision of this Agreement,
or in the event that either of the parties fails to make any payments or
otherwise fulfill any obligations required by the terms of this Agreement, the
Company and the Employee agree to resolve any such dispute through arbitration
in Broward County, Florida, under the then-current rules of the American
Arbitration Association in the State of Florida. For the purposes of confirming
any such award and entering judgment thereon, each party hereby submits to the
exclusive jurisdiction and venue of the State and Federal courts located in
Broward County, Florida. In the event the Employee prevails in an arbitration
with the Company, any legal fees, expenses or other costs incurred by the
Employee in connection with such arbitration shall be borne by the Company.

         12.      MISCELLANEOUS.

                  (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida. Each party to this Agreement
hereby irrevocably (a) accepts and consents to the exclusive personal
jurisdiction of the courts of Broward County, Florida or in the U.S. District
Court for the Southern District of Florida for the purpose of any suit, action
or proceeding against the Employee, the Company, Kellstrom or any affiliate of
Kellstrom arising out of, or relating in any way to, this Agreement or the
Company's employment of the Employee, (b) waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding or any judgment entered by any
court in respect thereof brought in such courts and (c) waives any claim that
any suit, action or proceedings brought in such courts has been brought in an
inconvenient forum. Each party further agrees that service of process, summons,
notice or document by U.S. registered mail in accordance with this Agreement
shall be effective service of process for any action, suit or proceeding brought
against a party in any such court.

                                       10
<PAGE>   11

                  (b) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

                  (c) All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been given if sent by
facsimile transmission, delivered by overnight or other carrier service, or
mailed, certified first class mail, postage prepaid, return receipt requested,
to the parties hereto at the following addresses:

         If to the Company, to:

         Kellstrom Industries, Inc.
         3701 Flamingo Road
         Miramar, FL  33127
         Attn:  Chief Executive Officer
         Telecopier:  (954) 858-2449

         If to the Employee, to:

         Fred von Husen
         2770 N.E. 15 St., #202
         Ft. Lauderdale, FL  33304

or to such other address as either party shall have furnished to the other in
accordance herewith.

                  (d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

                  (e) A party's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.

                  (f) This Agreement embodies the entire agreement between the
Company and the Employee and supersedes all prior agreements and understandings
(including, without limitation, the Prior Employment Agreement), oral or
written, with respect to the subject matter hereof.

                  (g) 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.

                         [signatures on following page]

                                       11
<PAGE>   12

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

                                   KELLSTROM INDUSTRIES, INC.

                                   By:
                                       -----------------------------------------
                                   Name:  Zivi R. Nedivi
                                   Title:  President and Chief Executive Officer

                                   EMPLOYEE

                                   ---------------------------------------------
                                   Fred von Husen

                                       12
<PAGE>   13

                                                                    ATTACHMENT 1

                            EVP - AUTOMOBILE BENEFIT

The Company's current Automobile Benefit plan, as determined by the Board (or
the Executive Committee) provides for the following in connection with the
performance of the Employee's duties:

     o   An automobile allowance, thru payroll, in the amount of $575.00
         semi-monthly ($13,800.00 annualized), to cover the automobile lease or
         purchase and insurance;

     o   Reimbursement for fuel, yearly registration fees and routine
         maintenance (e.g., oil changes, tire rotations and other scheduled
         service items) thru an Expense Report and;

     o   A $3,000.00 maximum reimbursement ($1,000.00 maximum per year of lease
         or purchase), thru payroll, for documented "up-front fees" (e.g.,
         security deposits, taxes, dealer preparation, etc.)

The Employee, NOT THE COMPANY, will be responsible for:

     o   Major repairs or maintenance;

     o   Tolls, unless incurred as a result of a business trip exceeding the
         Employee's "regular" roundtrip work commute and;

     o   Any "termination fees" (e.g., excess mileage costs, unreasonable wear
         and tear, disposition fees, etc.)

This benefit ceases upon termination of active employment. It is subject to
change annually and is in the sole discretion of the Board (or the Executive
Committee).

-----------------------
Fred von Husen

-----------------------
Date

                                       13

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