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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-110597
333-110597-01
333-110597-02

PROSPECTUS

GRAPHIC

Graphic Packaging International, Inc.

Offers to Exchange
$425,000,000 Outstanding
8.50% Senior Notes due 2011
for $425,000,000 Registered
8.50% Senior Notes due 2011
and
$425,000,000 Outstanding
9.50% Senior Subordinated Notes due 2013
for $425,000,000 Registered
9.50% Senior Subordinated Notes due 2013

The New Notes:

        Investing in the new notes involves risks. You should carefully review the risk factors beginning on page 11 of this prospectus.

The Exchange Offers:

The Guarantees:

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is December 23, 2003.


TABLE OF CONTENTS

 
   Page
Summary   1
Risk Factors   11
Forward-Looking Statements.   22
Market and Industry Data   22
The Exchange Offers   23
Use Of Proceeds   32
Capitalization   33
Unaudited Condensed Pro Forma Combined Financial Statements   34
Selected Historical Financial Data   42
Management's Discussion and Analysis of Financial Condition and Results of Operations   46
Business   83
Management   102
Principal Stockholders   123
Certain Relationships And Related Party Transactions   126
Description of New Credit Facilities   137
Description of Notes   139
Certain United States Federal Tax Considerations   197
Plan of Distribution   203
Legal Matters   204
Experts   204
Where You Can Find More Information   204
Glossary of Terms   206

        We have not authorized anyone to give you any information or to make any representations about the transactions we discuss in this prospectus other than those contained in the prospectus. If you are given any information or representation about these matters that is not discussed, you must not rely on that information. This prospectus is not an offer to sell or a solicitation of an offer to buy securities anywhere or to anyone where or to whom we are not permitted to offer to sell securities under applicable law.

        In making an investment decision investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense.

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SUMMARY

        This summary does not contain all the information that may be important to you. You should carefully read this prospectus in its entirety before making an investment decision. In particular, you should read the section titled "Risk Factors" and the consolidated financial statements and notes related to those statements incorporated by reference in this prospectus. In this prospectus, unless the context requires otherwise, references to "we," "us," "our" and the "combined company" mean Graphic Packaging Corporation and its subsidiaries. See "Glossary of Terms" for definitions of a number of terms that we use in this prospectus.


Our Business

        We are a leading provider of paperboard packaging solutions to multinational consumer products companies. We focus on the paperboard packaging market where we provide companies with packaging solutions designed to deliver marketing and performance benefits at a competitive cost. In doing this, we capitalize on our low-cost paperboard mills and converting plants, proprietary carton designs and packaging machines, and our commitment to customer service. We have long-term relationships with major consumer product companies, including Altria Group, Anheuser-Busch, General Mills, Miller Brewing Company, Coors Brewing Company, and numerous Coca-Cola and Pepsi bottling companies. In 2002, we had combined pro forma net sales of $2.25 billion.

        In August 2003, Riverwood and Graphic merged in a stock-for-stock transaction. The merger creates a global paperboard packaging company with leading market positions serving the beverage, food and other consumer products industries.

        We focus on providing a range of paperboard packaging products to major companies with well-recognized brands. Our customers have prominent market positions in the beer, soft drink, food, household products and tobacco industries. We supply our customers with packaging solutions designed to provide:

        We offer customers our paperboard, cartons and packaging machines, either as an integrated solution or separately. Our packaging products are used in the following end-use markets:


        Our packaging products are made from a variety of grades of paperboard. We make most of our packaging products from coated unbleached kraft paperboard, or CUK board, and coated recycled paperboard, or CRB, that we produce at our mills, and a portion from paperboard purchased from external sources. CUK board is a specialized high-quality grade of paperboard with

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excellent wet and tear strength characteristics and printability for high resolution graphics that make it particularly suited for a variety of packaging applications. Our CRB, a grade of recycled paperboard offering higher quality graphics, strength and appearance characteristics compared to other recycled grades, is specifically designed to maximize throughput on our high-speed web-litho presses. We print and cut, or convert, paperboard into cartons at our converting plants, and manufacture packaging machines designed to package bottles and cans and, to a lesser extent, non-beverage consumer products. We also sell paperboard produced by us to independent converters.

        We believe that we have low-cost, high quality converting plants and paperboard production facilities. We operate 30 carton converting plants in the United States, Canada, the United Kingdom, France, Spain and Brazil. We are the larger of two worldwide producers of CUK board and one of the largest North American producers of CRB. We produce CUK board on paperboard machines at our mills in Macon, Georgia and West Monroe, Louisiana and CRB at our mill in Kalamazoo, Michigan. We also produce white lined chip board at our mill in Norrköping, Sweden.


Our Strategies

        Our objective is to expand our position as a leading provider of paperboard packaging solutions. To achieve this objective, we are implementing the following strategies:


The Merger

        On March 25, 2003, Riverwood Holding, Inc., Riverwood Acquisition Sub LLC and Graphic Packaging International Corporation agreed to merge in a stock-for-stock transaction. On August 8, 2003, Graphic Packaging International Corporation merged with and into Riverwood Acquisition Sub LLC, a wholly owned subsidiary of Riverwood Holding, Inc., with Riverwood Acquisition Sub LLC as the surviving entity. Immediately prior to this merger, Riverwood Holding, Inc. transferred all of the shares of RIC Holding, Inc. to Riverwood Acquisition Sub LLC. After this merger, (1) RIC Holding, Inc. merged into Graphic Packaging Holdings, Inc. which was renamed GPI Holding, Inc., (2) the company formerly known as Graphic Packaging Corporation, or GPC, merged into Riverwood International Corporation, or RIC, which was renamed Graphic Packaging International, Inc., and (3) Riverwood Acquisition Sub LLC merged into Riverwood Holding, Inc. which was renamed Graphic Packaging Corporation.

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        The following charts depict (1) the organizational structures of Riverwood and Graphic, prior to the merger, and (2) our organizational structure subsequent to completion of the merger.

LOGO

*
Guarantors of the new credit facilities.

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Summary of the Terms of the Exchange Offers

        On August 8, 2003, Graphic Packaging International completed an offering of $425,000,000 aggregate principal amount of 8.50% senior notes due 2011, or the old senior notes, and $425,000,000 aggregate principal amount of 9.50% senior subordinated notes due 2013, or the old senior subordinated notes. In this prospectus, we refer to (1) the old senior notes and the old senior subordinated notes together as the old notes, (2) the new senior notes and the new senior subordinated notes together as the new notes, and (3) the old notes and the new notes together as the notes.


Securities Offered
 
Up to $425,000,000 aggregate principal amount of new 8.50% senior notes due 2011, or the new senior notes, which have been registered under the Securities Act of 1933, as amended.

 
 
Up to $425,000,000 aggregate principal amount of new 9.50% senior subordinated notes due 2013, or the new senior subordinated notes, which have been registered under the Securities Act.

 
 
The terms of the new senior notes and the new senior subordinated notes offered in the exchange offers are substantially identical to those of the old senior notes and the old senior subordinated notes, respectively, except that the new senior notes and the new senior subordinated notes are registered under the Securities Act and will not contain restrictions on transfer or provisions relating to additional interest, will bear a different CUSIP number from the old senior notes and the old senior subordinated notes, respectively, and will not entitle their holders to registration rights.

The Exchange Offers
 
You may exchange old senior notes and old senior subordinated notes for new senior notes and new senior subordinated notes, respectively.

Resale of the New Notes
 
We believe the new notes that will be issued in these exchange offers may be resold by most investors without compliance with the registration and prospectus delivery provisions of the Securities Act, subject to certain conditions. You should read the discussion under the heading "The Exchange Offers" for further information regarding the exchange offers and resale of the new notes.

Registration Rights Agreements
 
We have undertaken these exchange offers pursuant to the terms of the exchange and registration rights agreements entered into with the initial purchasers of the old notes. See "The Exchange Offers" and "Description of Notes— Exchange Offers; Registration Rights."

Consequence of Failure to Exchange the Old Notes
 
You will continue to hold old notes that remain subject to their existing transfer restrictions if:

 
 
•
you do not tender your old notes; or

 
 
•
you tender your old notes and they are not accepted for exchange.
       

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With some limited exceptions, we will have no obligation to register the old notes after we consummate the applicable exchange offer. See "The Exchange Offers—Terms of the Exchange Offers" and "—Consequences of Failure to Exchange."

Expiration Date
 
Each exchange offer will expire at 5:00 p.m., New York City time, on January 23, 2004, or the expiration date, unless we extend it, in which case expiration date means the latest date and time to which such exchange offer is extended.

Interest on the New Notes
 
The new notes of each series will accrue interest from the most recent date to which interest has been paid or provided for on the old notes of such series or, if no interest has been paid on the old notes of such series, from the date of original issue of the old notes of such series.

Condition to the Exchange Offers
 
Each exchange offer is subject to several customary conditions, which we may waive. We will not be required to accept for exchange, or to issue new notes in exchange for, any old notes and may terminate or amend an exchange offer if:

 
 
•
we determine in our reasonable judgment that the exchange offer violates applicable law, any applicable interpretation of the SEC or its staff or any order of any governmental agency or court of competent jurisdiction;

 
 
•
at any time any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part; or

 
 
•
at any time any stop order is threatened or in effect with respect to the qualification of the indenture governing the relevant notes under the Trust Indenture Act of 1939, as amended.

 
 
See "The Exchange Offers—Conditions." We reserve the right to terminate or amend the exchange offers at any time prior to the expiration date upon the occurrence of any of the foregoing events.

Procedures for Tendering Old Notes
 
If you wish to accept the exchange offers, you must submit required documentation and effect a tender of old notes pursuant to the procedures for book-entry transfer (or other applicable procedures), all in accordance with the instructions described in this prospectus and in the relevant letter of transmittal. See "The Exchange Offers—Procedures for Tendering," "—Book Entry Transfer" and "—Guaranteed Delivery Procedures."

Guaranteed Delivery Procedures
 
If you wish to tender your old notes, but cannot properly do so prior to the applicable expiration date, you may tender your old notes according to the guaranteed delivery procedures set forth in "The Exchange Offers—Guaranteed Delivery Procedures."
       

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Withdrawal Rights
 
Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the applicable expiration date. If the applicable expiration date has been extended, tenders pursuant to the applicable exchange offer as of the previously scheduled expiration date may not be withdrawn after such previously scheduled expiration date. To withdraw a tender of old notes, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth in "The Exchange Offers—Exchange Agent" prior to 5:00 p.m. on the applicable expiration date.

Acceptance of Old Notes and Delivery of New Notes
 
Except in some circumstances, any and all old notes that are validly tendered in an exchange offer prior to 5:00 p.m., New York City time, on the applicable expiration date will be accepted for exchange. The new notes issued pursuant to the applicable exchange offer will be delivered promptly following the applicable expiration date. See "The Exchange Offers—Terms of the Exchange Offer."

Certain U.S. Federal Tax Considerations
 
We believe that the exchange of the old notes for the new notes will not constitute a taxable exchange for U.S. federal income tax purposes. See "Certain United States Federal Tax Considerations."

Exchange Agent
 
Wells Fargo Bank Minnesota, National Association is serving as the exchange agent.

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Summary of the Terms of the Notes

        The terms of the new senior notes and the new senior subordinated notes offered in the exchange offers are identical in all material respects to the terms of the old senior notes and the old senior subordinated notes, respectively, except that the new notes:


Maturity Dates
 
Senior notes: August 15, 2011.
Senior subordinated notes: August 15, 2013.

Interest Payment Dates
 
February 15 and August 15, commencing on February 15, 2004.

Guarantees
 
Graphic Packaging Corporation and GPI Holding, Inc. will fully and unconditionally guarantee our obligations to pay principal, premium, if any, and interest on the notes, subject to release under certain circumstances. See "Description of Notes — Parent Guarantees."

Ranking and Subordination
 
The senior notes will be our general unsecured obligations and will rank:

 
 
•
equal in right of payment to all of our existing and future unsecured indebtedness and other obligations that are not, by their terms, expressly subordinated in right of payment to the senior notes;

 
 
•
senior in right of payment to any of our future indebtedness and other obligations that are, by their terms, expressly subordinated in right of payment to the senior notes;

 
 
•
effectively subordinated to all of our secured indebtedness and other secured obligations to the extent of the value of the assets securing such indebtedness and other obligations; and

 
 
•
effectively subordinated to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

 
 
The senior note guarantee of each guarantor will be an unsecured senior obligation of that guarantor and will rank:

 
 
•
equal in right of payment to all existing and future unsecured indebtedness and other obligations of that guarantor that are not, by their terms, expressly subordinated in right of payment to the senior note guarantee;

 
 
•
senior in right of payment to any future indebtedness and other obligations of that guarantor that are, by their terms, expressly subordinated in right of payment to the senior note guarantee; and
       

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•
effectively subordinated to all secured indebtedness and other secured obligations of that guarantor to the extent of the value of the assets securing such indebtedness and other obligations.

 
 
The senior subordinated notes will be our unsecured senior subordinated obligations and will rank:

 
 
•
equal in right of payment to all of our existing and future unsecured senior subordinated indebtedness and other obligations;

 
 
•
senior in right of payment to any of our future indebtedness and other obligations that are, by their terms, expressly subordinated in right of payment to the senior subordinated notes;

 
 
•
subordinated in right of payment to all of our existing and future senior indebtedness and other senior obligations, and effectively subordinated to all of our secured indebtedness and other secured obligations to the extent of the value of the assets securing such indebtedness and other obligations; and

 
 
•
effectively subordinated to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

 
 
The senior subordinated note guarantee of each guarantor will be an unsecured senior subordinated obligation of that guarantor and will rank:

 
 
•
equal in right of payment to all existing and future unsecured senior subordinated indebtedness and other obligations of that guarantor;

 
 
•
senior in right of payment to any future indebtedness and other obligations of that guarantor that are, by their terms, expressly subordinated in right of payment to the senior subordinated note guarantee; and

 
 
•
subordinated in right of payment to all existing and future senior indebtedness and other senior obligations of that guarantor, and effectively subordinated to all secured indebtedness and other secured obligations of that guarantor to the extent of the value of the assets securing such indebtedness and other obligations.

 
 
As of September 30, 2003, we had indebtedness on our consolidated balance sheet of approximately $2.2 billion, of which approximately $1.3 billion was secured, approximately $21.5 million was debt of our subsidiaries and structurally senior to the senior notes and the senior subordinated notes, approximately $425.0 million was subordinated to the senior notes and the senior note guarantees, and approximately $1.75 billion was senior to the senior subordinated notes and the senior subordinated note guarantees. As of September 30, 2003, we had availability under our new credit facilities for additional borrowings of up to $281.3 million, all of which would have been secured.
       

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Mandatory Sinking Fund
 
None.

Optional Redemption
 
We may redeem the senior notes and the senior subordinated notes, in whole or in part, at our option, at any time (1) before August 15, 2007 and August 15, 2008, respectively, at a redemption price equal to 100% of their principal amount plus the applicable make-whole premium described under "Description of Notes — Optional Redemption" and (2) on or after August 15, 2007 and August 15, 2008, respectively, at the redemption prices listed under "Description of Notes — Optional Redemption."

 
 
In addition, on or before August 15, 2006, we may on one or more occasions, at our option, use the net proceeds from one or more equity offerings to redeem up to 35% of the senior notes and the senior subordinated notes at the redemption prices listed under "Description of Notes — Optional Redemption."

Change of Control
 
If we experience a change of control, as described under "Description of Notes — Change of Control," we must offer to repurchase all of the senior notes and the senior subordinated notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the repurchase date, unless we have previously exercised the right to redeem the notes as provided under "Description of Notes — Optional Redemption."

Certain Covenants
 
We will issue senior notes and senior subordinated notes under separate indentures. The indentures governing the notes contain covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

 
 
•
incur more debt;

 
 
•
pay dividends, redeem stock or make other distributions;

 
 
•
make investments;

 
 
•
create liens (which limitation, in the case of the senior subordinated notes, will be limited in applicability to liens securing pari passu or subordinated indebtedness);

 
 
•
transfer or sell assets;

 
 
•
merge or consolidate; and

 
 
•
enter into transactions with our affiliates.
       

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These covenants are subject to important exceptions and qualifications, which are described under "Description of Notes — Certain Covenants" and "Description of Notes — Merger and Consolidation."


Risk Factors

        You should consider carefully all of the information included or incorporated by reference in this prospectus and, in particular, the information under the heading "Risk Factors" beginning on page 11 in evaluating the exhange offers and an investment in the new notes.

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RISK FACTORS

        You should carefully consider the risk factors set forth below, as well as the other information included or incorporated by reference in this prospectus, before making an investment decision.


Risks Related to our Indebtedness and the Notes

We have substantial existing debt and may incur substantial additional debt, which could adversely affect our financial health and our ability to obtain financing in the future, react to changes in our business and make payments on the notes.

        As of September 30, 2003, we had an aggregate principal amount of approximately $2.2 billion of outstanding debt and shareholders' equity of approximately $484 million.

        The indentures for the notes permit us to incur or guarantee additional indebtedness, including indebtedness under the new credit facilities, subject to specified limitations. In addition, we have additional borrowing capacity on a revolving credit basis under our new credit facilities. As such, we may incur substantial additional debt in the future.

        Our substantial debt could have important consequences to holders of the notes. Because of our substantial debt:

The agreements and instruments governing our debt contain restrictions and limitations that could significantly impact our ability to operate our business and adversely affect the holders of the notes offered hereby.

        Our new credit facilities contain covenants that, among other things, restrict our ability to:

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        In addition, under our new credit facilities, we are required to comply with financial covenants, comprised of leverage and interest coverage ratio requirements, as well as limitations on the amount of capital expenditures. Our ability to comply with these covenants in future periods will depend on our ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control, and will be substantially dependent on the selling prices for our products, raw material and energy costs, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy.

        The indentures governing the notes also contain restrictive covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to:

        The breach of any of the covenants or restrictions contained in our new credit facilities or our indentures could result in a default under the applicable agreement which would permit the applicable lenders or noteholders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. In any such case, we may be unable to make borrowings under our new credit facilities and may not be able to repay the amounts due under our new credit facilities and our notes. This could have serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.

Our ability to generate the significant amount of cash needed to pay interest and principal amounts on the notes and service our other debt and our ability to refinance all or a portion of our indebtedness or obtain additional financing, depends on many factors beyond our control.

        Because we have substantial debt, to fund our debt service obligations we will require significant amounts of cash. Our ability to generate cash to meet scheduled payments or to refinance our obligations with respect to our debt will depend on our financial and operating performance which, in turn, is subject to prevailing economic and competitive conditions and to the following financial and business factors, some of which may be beyond our control:

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        If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce further or to delay capital expenditures, sell assets or seek to obtain additional equity capital, or restructure our debt. In the future, our cash flow and capital resources may not be sufficient for payments of interest on and principal of our debt, and such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. We also cannot assure you that we will be able to refinance any of our indebtedness or obtain additional financing, particularly because of our anticipated high levels of debt and the debt incurrence restrictions imposed by the agreements governing our debt, as well as prevailing market conditions. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. If required, we cannot be sure as to the timing of such sales or the proceeds that we could realize therefrom.

The guarantors of the notes are holding companies with no significant independent operations and no significant assets except capital stock of their respective subsidiaries. As a result, the guarantors of the notes would be unable to meet their obligations if we fail to make payment of interest or principal on the notes.

        Graphic Packaging Corporation is a holding company with no independent operations and no significant assets other than the capital stock of GPI Holding. Graphic Packaging Corporation, therefore, is dependent upon the receipt of dividends or other distributions from GPI Holding to fund any obligations that it incurs, including obligations under its guarantee of the notes. GPI Holding is also a holding company with no significant independent operations and no significant assets other than the capital stock of Graphic Packaging International. GPI Holding is, therefore, dependent upon the receipt of dividends or other distributions from Graphic Packaging International to fund any obligations that it incurs, including obligations under its guarantee of the notes. The indentures governing the notes do not, however, permit distributions from Graphic Packaging International to Graphic Packaging Corporation or GPI Holding, other than for certain specified purposes as described under "Description of Notes — Certain Covenants — Limitation on Restricted Payments." Our new credit facilities contain similar or more restrictive provisions. Accordingly, if Graphic Packaging International should at any time be unable to pay interest on or principal of the notes, it is highly unlikely that Graphic Packaging Corporation or GPI Holding will be able to distribute the funds necessary to enable GPI Holding or Graphic Packaging Corporation, respectively, to meet its obligations under its respective parent guarantees. If none of GPC's 85/8% senior subordinated notes due 2012, or the prior GPC notes, remain outstanding, under the indentures for the notes, we will have the right to release GPI Holding and Graphic Packaging Corporation from all obligations under their respective parent guarantees.

The notes will be unsecured and structurally subordinated to some of our obligations, including obligations under our new credit facilities.

        The indentures governing the notes permit us to incur certain secured indebtedness, including indebtedness under our new credit facilities, which is secured by a lien on substantially all of our assets (other than assets of foreign subsidiaries), including pledges of all or a portion of the capital stock of certain of our subsidiaries. The notes are unsecured and therefore do not have the benefit of such collateral. Accordingly, if an event of default occurs under our new credit facilities, the senior secured lenders will have a prior right to our assets, to the exclusion of the holders of the notes. In such event, such assets would first be used to repay in full all amounts outstanding under

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our new credit facilities, resulting in all or a portion of our assets being unavailable to satisfy the claims of the holders of notes and other unsecured indebtedness.

        The notes are also structurally subordinated to all indebtedness and other obligations of our subsidiaries (other than subsidiaries that may in the future guarantee the notes). Our new credit facilities are guaranteed by our domestic subsidiaries and are therefore obligations of such subsidiaries. In addition, the senior subordinated notes rank junior in right of payment to all of our existing and future senior debt, including the senior notes and all borrowings under our new credit facilities. As a result of the foregoing, in the event of our bankruptcy, insolvency, liquidation or reorganization, holders of the notes may not be fully paid and may not be paid at all even though other creditors may receive full payment for their claims.

        As of September 30, 2003, we had indebtedness on our consolidated balance sheet of approximately $2.2 billion, of which approximately $1.3 billion was secured, approximately $21.5 million was debt of our subsidiaries and structurally senior to the senior notes and the senior subordinated notes, approximately $425.0 million was subordinated to the senior notes and the senior note guarantees, and approximately $1.75 billion was senior to the senior subordinated notes and the senior subordinated note guarantees. As of September 30, 2003, we had availability under our new credit facilities for additional borrowings of up to $281.3 million, all of which would have been secured.

We may be unable to raise funds necessary to finance the change of control repurchase offers required by the indentures governing the notes.

        If we experience specified changes of control, we are required to make an offer to purchase all of the outstanding notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. The occurrence of specified events that constitute a change of control also constitute a default under our new credit facilities. In addition, our new credit facilities prohibit the purchase of the notes by us in the event of a change of control, unless and until such time as the indebtedness under our new credit facilities is repaid in full. In addition, our failure to purchase the notes after a change of control in accordance with the terms of the indentures, would result in a default under our new credit facilities.

        The inability to repay the indebtedness under our new credit facilities also constitutes an event of default under the indentures for the notes, which would have materially adverse consequences to us and to the holders of the notes. In the event of a change of control, we cannot assure you that we would have sufficient assets to satisfy all of our obligations under our new credit facilities and the notes. Our future indebtedness may also require such indebtedness to be repurchased upon a change of control.

Our being subject to certain fraudulent transfer and conveyance statutes may have adverse implications for the holders of the notes.

        If, under relevant federal and state fraudulent transfer and conveyance statutes, in a bankruptcy or reorganization case or a lawsuit by or on behalf of unpaid creditors of Graphic Packaging International, Graphic Packaging Corporation or GPI Holding, a court were to find that, at the time of issuance of the notes or the relevant guarantees:

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        We believe that at the time the old notes were, or the new notes are, initially issued by Graphic Packaging International and guaranteed by Graphic Packaging Corporation and GPI Holding, Graphic Packaging International and the guarantors were, and will be, neither insolvent nor rendered insolvent thereby, and were, and will be in possession of sufficient capital to run their respective businesses effectively, incurring debts within their respective abilities to pay as the same mature or become due, and had, and will have, sufficient assets to satisfy any probable money judgment against them in any pending action. In reaching these conclusions, we have relied upon our analysis of internal cash flow projections and estimated values of assets and liabilities. However, a court passing on such questions may not reach the same conclusions.

You may have difficulty selling the old notes that you do not exchange.

        If you do not exchange your old notes for the new notes offered in the exchange offers, your old notes will continue to be subject to significant restrictions on transfer. Those transfer restrictions are described in the indentures governing the notes and arose because we originally issued the old notes under exemptions from the registration requirements of the Securities Act.

        The old notes may not be offered, sold or otherwise transferred, except in compliance with the registration requirements of the Securities Act, pursuant to an exemption from registration under the Securities Act or in a transaction not subject to the registration requirements of the Securities Act, and in compliance with applicable state securities laws. We did not register the old notes, and we do not intend to do so under the Securities Act. If you do not exchange your old notes, your ability to sell those notes will be significantly limited.

        If a large number of outstanding old notes are exchanged for new notes issued in the exchange offers, it may be more difficult for you to sell your unexchanged old notes due to the limited amounts of old notes that would remain outstanding following the exchange offers.


Risks Relating to Our Business

If we are unable to implement our business strategies, our business and financial condition could be adversely affected.

        Our future results of operations will depend in significant part on the extent to which we can implement our business strategies successfully. Our business strategies include growing revenues by expanding existing relationships with customers, capitalizing on anticipated business opportunities from the merger, developing and delivering new products, and achieving cost

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reductions and synergies from the merger. We may not be able to fully implement our strategies or realize the anticipated results of our strategies. Our strategies are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.

We will be dependent on key customers and strategic relationships, and the loss of or reduced sales to key customers or changes in these relationships could result in decreased revenues, impact our cash flows and harm our financial position.

        The loss of one or more key customers or strategic relationships, or a declining market in which these customers reduce orders or request reduced prices, may result in decreased revenues, negatively impact our cash flows and harm our financial condition. Our success will depend upon our relationships with our key customers, including Altria Group, General Mills, Coors Brewing Company, Anheuser-Busch, Miller Brewing Company, Pepsi-Cola and Coca-Cola's independent bottling network. Graphic's top ten customers accounted for approximately 66% of its gross sales in 2002, and Riverwood's top ten customers accounted for over 50% of its gross sales in 2002.

        From time to time our contracts with our customers will come up for renewal. We may be unable to renew agreements with our key customers. For example, in the fourth quarter of 2002, we were notified by Coca-Cola Enterprises, or CCE, that CCE would not renew its supply contract with us. CCE represented approximately 5% of Riverwood's consolidated net sales in 2002. We expect our volumes may be negatively impacted as a result of CCE's non-renewal notice. We may not be able to enter contracts with new customers to replace any key customers or strategic relationships that are lost or reduced. In addition, our contracts typically do not require customers to purchase any minimum level of products and many of our contracts will permit customers to obtain price quotations from our competitors, which we would have to meet to retain their business.

We face intense competition and, if we are unable to compete successfully against other manufacturers of paperboard or cartons, we could lose customers and our revenues may decline.

        We are subject to strong competition in most of our markets. A relatively small number of large competitors represent a significant portion of the paperboard packaging industry sales. Our primary competitors in one or more of our markets include Caraustar Industries, Inc., Field Container Company, L.P., Gulf States Paper Corporation, International Paper Company, MeadWestvaco Corporation, Packaging Corporation of America, R.A. Jones Co, Inc., Rock-Tenn Company and Smurfit-Stone Container Corporation. In addition, companies not currently in direct competition with us may introduce competing products in the future.

        There are only two major producers in the United States of CUK board, MeadWestvaco Corporation, or MeadWestvaco, and us. We face significant competition in the CUK board business segment from MeadWestvaco, as well as from other manufacturers of packaging machines. Our highly leveraged nature could limit our ability to respond to market conditions or to make necessary or desirable capital expenditures as effectively as our competitors. In addition, we could experience increased competition if there are new entrants in the CUK board market segment. In beverage multiple packaging, cartons made from CUK board compete with plastics and corrugated packaging for packaging glass or plastic bottles, cans and other primary containers. Plastics and corrugated packaging generally provide lower-cost packaging solutions.

        Our paperboard sales for use in consumer products packaging are affected by competition from other substrates, including MeadWestvaco's CUK board, solid bleached sulfate and clay-coated recycled paperboard and, internationally, white lined chip board and folding boxboard. Paperboard grades compete based on price, strength and printability. There are a large number of suppliers in paperboard packaging markets, which are subject to significant competitive and other

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business pressures. Suppliers of paperboard compete primarily on the basis of strength and printability of their paperboard, quality, service and price.

Our net sales and profitability could be adversely affected by intense pricing pressures.

        The competition in all of our business areas is driven by intense pricing pressures. The installation of state-of-the-art equipment by manufacturers has intensified the competitive pricing in the paperboard packaging industry. If our facilities are not as cost efficient as those of our competitors, or if our competitors otherwise are able to offer lower prices, we may lose customers to our competitors, which would negatively impact our revenues, cash flows and financial condition. We will face pricing pressure in connection with long-term contract renewals and when bidding on new business. Even in strong markets, price pressures may emerge as competitors attempt to gain a greater market share by lowering prices. Competition in the various markets in which we will participate comes from companies of various sizes, many of which are larger and have greater financial and other resources than we have, and thus can better withstand adverse economic or market conditions.

Our ability to generate cash flows is subject to price weaknesses and variability.

        Our financial performance, including, our ability to meet our debt service and other obligations, will depend in significant part on the selling prices that we realize for our paperboard, cartons and containerboard products.

        Our cash flow is influenced by sales volume and selling prices for our products. We have historically experienced moderate cyclical pricing for our CUK board. Depressed selling prices for open market sales of CUK board could have a significant negative impact on our cash flow. Also, under agreements we have with a number of major converters, we are restricted in our ability to raise the selling prices of our CUK board. This could negatively impact our margins if we were to experience increases in our costs due to inflation or otherwise. In addition, competitive factors may adversely affect prices for our CUK board in the future, which would have a negative impact on our margins.

        Our containerboard business segment operates in markets that historically have experienced significant fluctuations in sales. Depressed selling prices for our open market containerboard products have had, and in the future could have, a significant negative impact on our net sales and cash flow. In addition, competitive factors may adversely affect containerboard prices in the future, which would have a negative impact on our margins.

If we fail to realize the anticipated benefits of the merger, our ability to make payments on the notes may be impaired.

        If we fail to realize the anticipated benefits of the merger, our ability to make payments on the notes may be impaired. The success of the merger will depend, in part, on our ability to realize the anticipated growth opportunities and synergies from combining the business of Graphic with that of Riverwood. Integrating two companies with the size and complexity of Riverwood and Graphic is a challenging task that requires substantial time, expense and effort from our management. If management's attention is diverted or there are any difficulties associated with the integration of Riverwood and Graphic, there could be a material adverse effect on our operating results and our ability to pay principal and interest on the notes. Even after successfully combining the two business operations, it may not be possible to realize the full benefits of the integration opportunities between mills and carton converting plants, the synergies and the other benefits that we currently expect to result from the merger, or realize these benefits within the time frame that we currently expect.

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Markets may not be able to absorb our entire CUK board production, which may negatively impact our financial condition and results of operations.

        Our West Monroe and Macon mills have a current combined annual production capacity of approximately 1.2 million gross tons of CUK board. We expect to continue to sell a significant portion of our additional CUK board production in open markets. However, we may not be able to sell additional CUK board output in these markets without experiencing price reductions.

Our reliance on only three mills for our CUK board and CRB production could adversely affect our operating results and financial condition.

        All of our CUK board is produced at our West Monroe and Macon mills. All of our CRB is produced at our Kalamazoo mill. Any prolonged disruption in production due to labor difficulties, equipment failure or destruction of or material damage to these facilities, could have a material adverse effect on our net sales, margins and cash flows. The proceeds of property and business interruption insurance may not be adequate to repair or rebuild our facilities in such event or to compensate us for losses incurred during the period of any such disruption.

Our results from operations and financial condition will be dependent upon our costs, including the cost of energy and raw materials.

        Energy, including natural gas, fuel oil and electricity, represents a significant portion of our manufacturing costs. We believe that higher energy costs will negatively impact our results for 2003. Since negotiated contracts and the market largely determine our pricing, we are limited in our ability to pass through to our customers any energy or other cost increases that we may incur in the future. As such, our operating margins and profitability may be adversely affected by rising energy or other costs.

        The primary raw materials used in the manufacture of our products are pine pulpwood, hardwood and recycled fibers, including old corrugated cardboard, or OCC, newsprint and box cuttings used in the manufacture of paperboard, and various chemicals used in the coating of our paperboard. These materials are purchased in highly competitive, price sensitive markets. These raw materials have in the past, and may in the future, demonstrate price and demand cyclicality. Pricing of recycled paper fiber and OCC, in particular, tends to be very volatile.

        With the October 1996 sale of our timberlands, we now rely on private land owners and the open market for all of our pine pulpwood, hardwood and recycled fiber requirements, except for CUK board clippings from our converting operations. Under the terms of the sale of those timberlands, we and the buyer, Plum Creek Timber Company, L.P., or Plum Creek, entered into a 20-year supply agreement in 1996, with a 10-year renewal option, for the purchase, at market-based prices, of a majority of our West Monroe mill's requirements for pine pulpwood and residual chips, as well as a portion of its needs for hardwood at the West Monroe mill. If the supply agreement were terminated, we may not be able to find an alternative, comparable supplier or suppliers capable of providing our pine pulpwood and hardwood needs on terms or in amounts satisfactory to us. Significant increases in the cost of pine pulpwood, hardwood, recycled fiber or other raw materials, to the extent not reflected in prices for our products, could have a material adverse effect on our margins and income from operations.

We may not be able to adequately protect our intellectual property and proprietary rights, which could harm our future success and competitive position.

        Our future success and competitive position depend in part upon our ability to obtain and maintain protection for certain proprietary carton and packaging machine technologies used in our value added products, particularly those incorporating the Composipac®, Micro-Rite®, Fridge Vendor® and Z-Flute® technologies. Failure to protect our existing intellectual property rights may

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result in the loss of valuable technologies or may require us to license other companies' intellectual property rights. It is possible that:

        Further, others may develop technologies that are similar or superior to our technologies, duplicate our technologies or design around our patents, and steps taken by us to protect our technologies may not prevent misappropriation of such technologies.

We are subject to environmental, health and safety laws and regulations, and costs to comply with such laws and regulations, or any liability or obligation imposed under such laws or regulations, could negatively impact our financial condition and results of operations.

        We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those governing discharges to air, soil and water, the management, treatment and disposal of hazardous substances, the investigation and remediation of contamination resulting from releases of hazardous substances, and the health and safety of employees. Our environmental liabilities and obligations may result in significant costs, which could negatively impact our financial condition and results of operations. Capital expenditures may be necessary for us to comply with such laws and regulations, including the U.S. Environmental Protection Agency's regulations mandating stringent controls on air and water discharges from pulp and paper mills, or the cluster rules. We expect to spend approximately $22 million over the next three years to comply with the cluster rules. Any failure by us to comply with environmental, health and safety laws or any permits and authorizations required thereunder could subject us to fines or sanctions. In addition, some of our current and former facilities, and facilities at which we disposed of hazardous substances, are the subject of environmental investigations and remediations resulting from releases of hazardous substances or other constituents. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations could be imposed in the future or for which indemnification claims could be asserted against us. We cannot predict with certainty future investigation or remediation costs or future costs relating to indemnification claims. Also, potential future closures of facilities may necessitate further investigation and remediation at those facilities.

Loss of key management personnel could adversely affect our business.

        Our future success will depend, in significant part, upon the service of Jeffrey H. Coors, who is our Executive Chairman, Stephen M. Humphrey, who is our President and Chief Executive Officer, David W. Scheible, who is our Executive Vice President of Commercial Operations and John T. Baldwin, who is our Senior Vice President and Chief Financial Officer. We have employment agreements with each of these executive officers. The loss of the services of one or more of these executive officers could adversely affect our future operating results because of their experience and knowledge of our business and customer relationships. We do not expect to maintain key person insurance on any of our executive officers.

Work stoppages and other labor relations matters may make it substantially more difficult or expensive for us to manufacture and distribute our products, which could result in decreased sales or increased costs, either of which would negatively impact our financial condition and results of operations.

        We are subject to risk of work stoppages and other labor relations matters because approximately 53% of our employees, located at 12 different plants, are unionized. We may not be

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able to successfully negotiate new union contracts covering the employees at our various sites without work stoppages or labor difficulties. These events may also occur as a result of other factors. A prolonged disruption at any of our facilities due to work stoppages or labor difficulties could have a material adverse effect on our net sales, margins and cash flows. For example, Graphic experienced a labor dispute at its Kalamazoo mill and carton plant from July 2002 to January 2003 in connection with the negotiation of a new labor contract. Direct, incremental costs associated with the labor dispute were approximately $4.5 million. In addition, if new union contracts contain significant increases in wages or other benefits, our margins would be adversely impacted.

Our operations outside the United States are subject to the risks of doing business in foreign countries.

        We have operating facilities in six foreign countries and sell products worldwide. For 2002, before intercompany eliminations, our combined pro forma net sales from operations outside the United States totaled approximately $342.0 million, representing approximately 15% of our combined pro forma net sales for such period. As a result, we are subject to the following significant risks associated with operating in foreign countries:

        If any of the above events were to occur, our net sales and cash flows could be adversely impacted, possibly materially.

Foreign currency risks and exchange rate fluctuations could hinder our results of operations, and the strength of the U.S. dollar could disadvantage us relative to our foreign competitors.

        Our financial performance will be directly affected by exchange rates as a result of:

We may be limited in the future in the amount of NOLs that we can use to offset income.

        As of December 31, 2002, we had approximately $1.2 billion of NOLs. These NOLs generally may be used by us to offset taxable income earned in subsequent taxable years. However, our ability to use these NOLs to offset our future taxable income may be subject to significant limitation. Imposition of any such limitation on our use of NOLs could have an adverse effect on our anticipated future cash flows. For a discussion of our NOLs, see "Management's Discussion and

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Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources—Net Operating Loss Carryforwards."

We may be subject to losses that might not be covered in whole or in part by existing insurance coverage. These uninsured losses could result in substantial liabilities to the combined company that would negatively impact its financial condition.

        There are various types of risks and losses for which we are not insured, such as environmental liabilities, because they are either uninsurable or not economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could incur liabilities, lose capital invested in that property or lose the anticipated future revenues derived from the manufacturing activities conducted at a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any such loss could result in substantial liabilities to us or adversely affect our ability to replace property or capital equipment that is destroyed or damaged, and our productive capacity may diminish.

A few significant stockholders may influence or control the direction of our business, and their interests may conflict with your interests.

        The interests of Clayton, Dubilier & Rice Fund V Limited Partnership, or the CDR fund, EXOR Group S.A., or Exor, and the Coors family stockholders may not be fully aligned with your interests and this could lead to a strategy that is not in your best interest. The CDR fund and Exor beneficially own approximately 17% and 17%, respectively, and the Coors family stockholders own approximately 32% of our common stock, each calculated on a fully diluted basis. As a result, the CDR fund, Exor and the Coors family stockholders exercise significant influence over matters requiring stockholder approval. We have entered into a new stockholders agreement pursuant to which the CDR fund, Exor and the Coors family stockholders have the right to designate for nomination for election, in the aggregate, three members of our board of directors. We have not instituted any formal plans to address any conflicts of interest that may arise.

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FORWARD-LOOKING STATEMENTS

        This prospectus includes or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management. Generally, statements that are not historical facts, including statements concerning our possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. Forward-looking statements include the information in this prospectus, specifically, regarding:

        Forward-looking statements are not guarantees of performance. You should not place undue reliance on these statements. You should understand that the following important factors, in addition to those discussed in "Risk Factors" and elsewhere in this prospectus, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

        All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.


MARKET AND INDUSTRY DATA

        Market data used throughout this prospectus, including our market position and market share, are based on estimates prepared by using data from various sources and on assumptions made by us. Although data regarding the paperboard packaging industry and our market position and market share within the industry are inherently imprecise, based on management's understanding of the markets in which we compete, management believes that such data is generally indicative of our position and market share within the industry. Our estimates, in particular as they relate to our general expectations concerning the paperboard packaging industry, involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption "Risk Factors."

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THE EXCHANGE OFFERS

        The following contains a summary of the material provisions of the exchange and registration rights agreements, or the registration rights agreements. It does not contain all of the information that may be important to an investor in the notes. Reference is made to the provisions of the registration rights agreements, which have been filed as exhibits to the registration statement. Copies are available as set forth under the heading "Where You Can Find More Information."

Terms of the Exchange Offers

        General.    In connection with the issuance of the old notes pursuant to the purchase agreement, dated as of August 1, 2003, between us and the initial purchasers, the holders of the notes from time to time became entitled to the benefits of the registration rights agreements.

        Under the registration rights agreements, we have agreed (1) to use our reasonable best efforts to file with the SEC within 120 calendar days following the issue date of the old notes, the registration statement, of which this prospectus is a part, with respect to registered offers to exchange the old notes of a series for the new notes of the same series; and (2) to use our reasonable best efforts to cause the registration statement to become effective under the Securities Act within 150 calendar days following the issue date of the old notes. We will keep the exchange offers open for the period required by applicable law.

        Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the applicable expiration date will be accepted for exchange. Relevant new notes will be issued in exchange for an equal principal amount of outstanding old notes accepted in the applicable exchange offer. Old notes may be tendered only in integral multiples of $1,000. This prospectus, together with the Letter of Transmittal, is being sent to all registered holders as of December 22, 2003. Each exchange offer is not conditioned upon any minimum principal amount of old notes being tendered for exchange. However, the obligation to accept old notes for exchange pursuant to the exchange offers is subject to certain customary conditions as set forth herein under "—Conditions".

        Old notes shall be deemed to have been accepted as validly tendered when, as and if we have given oral or written notice of such acceptance to the exchange agent. The exchange agent will act as agent for the tendering holders of old notes for the purposes of receiving the new notes and delivering new notes to such holders.

        Based on interpretations by the Staff of the SEC as set forth in no-action letters issued to third parties (including Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co. Incorporated (available June 5, 1991), K-III Communications Corporation (available May 14, 1993) and Shearman & Sterling (available July 2, 1993)), we believe that the new notes issued pursuant to the exchange offers may be offered for resale, resold and otherwise transferred by any holder of such new notes, other than any such holder that is a broker-dealer or an "affiliate" of us within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:

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        We have not sought and do not intend to seek a no-action letter from the SEC, with respect to the effects of the exchange offers, and there can be no assurance that the Staff would make a similar determination with respect to the new notes as it has in previous no-action letters.

        By tendering old notes in exchange for relevant new notes, and executing the letter of transmittal for such notes, each holder will represent to us that:


        If such holder is a broker-dealer, it will also be required to represent that it will receive the new notes for its own account in exchange for old notes acquired as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of new notes. See "Plan of Distribution." If such holder is not a broker-dealer, it will be required to represent that it is not engaged in and does not intend to engage in the distribution of the new notes. Each holder, whether or not it is a broker-dealer, shall also represent that it is not acting on behalf of any person that could not truthfully make any of the foregoing representations contained in this paragraph. If a holder of old notes is unable to make the foregoing representations, such holder may not rely on the applicable interpretations of the Staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction unless such sale is made pursuant to an exemption from such requirements.

        Each broker-dealer that receives new notes for its own account pursuant to the exchange offers must acknowledge that it will deliver a prospectus in connection with any resale of such new notes. Each letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes, where such old notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 90 days after each applicable expiration date (as defined herein), we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."

        Upon consummation of the exchange offers, any old notes not tendered will remain outstanding and continue to accrue interest at the rate of 8.50% in the case of old senior notes, and 9.50% in the case of old senior subordinated notes, but, with limited exceptions, holders of old notes who do not exchange their old notes for new notes, pursuant to the applicable exchange offer will no longer be entitled to registration rights and will not be able to offer or sell their old notes unless such old notes are subsequently registered under the Securities Act, except pursuant to an exemption from or in a transaction not subject to, the Securities Act and applicable state securities laws. With limited exceptions, we will have no obligation to effect a subsequent registration of the old notes.

        Expiration Date; Extensions; Amendments; Termination.    The expiration date for each exchange offer shall be 5:00 p.m., New York City time, on January 23, 2004, unless Graphic Packaging International, Inc., in its sole discretion, extends an exchange offer, in which case the expiration date for such exchange offer shall be the latest date to which such exchange offer is extended.

        To extend an expiration date, we will notify the exchange agent of any extension by oral or written notice and will notify the holders of the relevant old notes by means of a press release or

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other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date for such exchange offer. Such an announcement may state that we are extending the exchange offers for a specified period of time.

        With regards to each exchange offer, we reserve the right to

        Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice of such delay, extension or termination or amendment to the exchange agent. If the terms of an exchange offer are amended in a manner determined by us to constitute a material change, we will promptly disclose such amendment in a manner reasonably calculated to inform the holders of the relevant old notes of such amendment.

        Without limiting the manner in which we may choose to make public an announcement of any delay, extension or termination of the exchange offers, we shall have no obligations to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency.

        The new senior notes will accrue interest at the rate of 8.50% per annum and the new senior subordinated notes will accrue interest at the rate of 9.50% per annum, each accruing interest from the last interest payment date on which interest was paid on the corresponding old note surrendered in exchange for such new note to the day before the consummation of the applicable exchange offer and thereafter, at the rate of 8.50% per annum for the new senior notes and 9.50% per annum for the new senior subordinated notes, provided, that if an old note is surrendered for exchange on or after a record date for the applicable notes for an interest payment date that will occur on or after the date of such exchange and as to which interest will be paid, interest on the new note received in exchange for such old note will accrue from the date of such interest payment date. Interest on the new notes is payable on February 15 and August 15 of each year, commencing February 15, 2004. No additional interest will be paid on old notes tendered and accepted for exchange.

        To tender in each exchange offer, a holder must complete, sign and date the letter of transmittal, or a facsimile of such letter of transmittal, have the signatures on such letter of transmittal guaranteed if required by such letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile, together with any other required documents, to the exchange agent prior to 5:00 p.m., New York City time, on the applicable expiration date. In addition, either

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        We will only issue new notes in exchange for old notes that are timely and properly tendered. The method of delivery of old notes, letter of transmittal and all other required documents is at the election and risk of the note holders. If such delivery is by mail, it is recommended that registered mail, properly insured, with return receipt requested, be used. In all cases, sufficient time should be allowed to assure timely delivery and you should carefully follow the instructions on how to tender the old notes. No old notes, letters of transmittal or other required documents should be sent to us. Delivery of all old notes (if applicable), letters of transmittal and other documents must be made to the exchange agent at its address set forth below. Holders may also request their respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender for such holders. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your old notes or the tenders thereof.

        The tender by a holder of old notes will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth in this prospectus and in the applicable letter of transmittal. Any beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf.

        Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed by any member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor" institution within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the old notes tendered pursuant to such letter of transmittal or notice of withdrawal are tendered (1) by a registered holder of old notes who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal or (2) for the account of an Eligible Institution.

        If a letter of transmittal is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by us, submit with such letter of transmittal evidence satisfactory to us of their authority to so act.

        All questions as to the validity, form, eligibility, time of receipt and withdrawal of the tendered old notes will be determined by us in our sole discretion, such determination being final and binding on all parties. We reserve the absolute right to reject any and all old notes not properly tendered or any old notes which, if accepted, would, in the opinion of counsel for us, be unlawful. We also reserve the absolute right to waive any irregularities or defects with respect to tender as to particular old notes. Our interpretation of the terms and conditions of each of the exchange offers, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within such time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of old notes, nor shall any of them incur any liability for failure to give such notification. Tenders of old notes will not be deemed to have been made until such irregularities have been cured or waived. Any old notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the exchange agent, unless otherwise provided in the letter of transmittal, promptly following the applicable expiration date.

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        In addition, we reserve the right in our sole discretion, subject to the provisions of each indenture pursuant to which the notes are issued,

        The terms of any such purchases or offers could differ from the terms of the exchange offers.

        Upon satisfaction or waiver of all of the conditions to an exchange offer all old notes properly tendered will be accepted promptly after the applicable expiration date, and the new notes of the same series will be issued promptly after acceptance of such old notes. See "—Conditions." For purposes of each of the exchange offers, old notes shall be deemed to have been accepted as validly tendered for exchange when, as and if we have given oral or written notice thereof to the exchange agent. For each old note accepted for exchange, the holder of such series of old note will receive a new note of the same series having a principal amount equal to that of the surrendered old note.

        In all cases, issuance of new notes for old notes that are accepted for exchange pursuant to the applicable exchange offer will be made only after timely receipt by the exchange agent of

        If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the applicable exchange offer, such unaccepted or such non-exchanged old notes will be returned without expense to the tendering holder of such notes, if in certificated form, or credited to an account maintained with such book-entry transfer facility as promptly as practicable after the expiration or termination of such exchange offer.

        The exchange agent will make a request to establish an account with respect to the old notes at the book-entry transfer facility for purposes of the exchange offers within two business days after the date of this prospectus. Any financial institution that is a participant in the book-entry transfer facility's systems may make book-entry delivery of old notes by causing the book-entry transfer facility to transfer such old notes into the exchange agent's account for the relevant notes at the book-entry transfer facility in accordance with such book-entry transfer facility's procedures for transfer. However, although delivery of old notes may be effected through book-entry transfer at the book-entry transfer facility, the letter of transmittal or facsimile thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the exchange agent at one of the addresses set forth below under "—Exchange Agent" on or prior to the applicable expiration date or the guaranteed delivery procedures described below must be complied with.

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        The exchange agent and the book-entry transfer facility have confirmed that any financial institution that is a participant in the book-entry transfer facility may utilize the book-entry transfer facility Automated Tender Offer Program ("ATOP") procedures to tender old notes.

        Any participant in the book-entry transfer facility may make book-entry delivery of old notes by causing the book-entry transfer facility to transfer such old notes into the exchange agent's account for the relevant notes in accordance with the book-entry transfer facility's ATOP procedures for transfer. However, the exchange for the old notes so tendered will only be made after a book-entry confirmation of the book-entry transfer of such old notes into the exchange agent's account for the relevant notes, and timely receipt by the exchange agent of an agent's message and any other documents required by the letter of transmittal. The term "agent's message" means a message, transmitted by the book-entry transfer facility and received by the exchange agent and forming part of a book-entry confirmation, which states that the book-entry transfer facility has received an express acknowledgement from a participant tendering old notes that are the subject of such book-entry confirmation that such participant has received and agrees to be bound by the terms of the letter of transmittal, and that we may enforce such agreement against such participant.

        If the procedures for book-entry transfer cannot be completed on a timely basis, a tender may be effected if


        Tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the applicable expiration date. If the applicable expiration date has been extended, tenders pursuant to the applicable exchange offer as of the previously scheduled expiration date may not be withdrawn after such previously scheduled expiration date.

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        For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent prior to 5:00 p.m., New York City time, on the applicable expiration date at the address set forth below under "—Exchange Agent." Any such notice of withdrawal must

        All questions as to the validity, form, eligibility and time of receipt of such notice will be determined by us, in our sole discretion, such determination being final and binding on all parties. Any old notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the applicable exchange offer. Any old notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the tendering holder of such notes without cost to such holder, in the case of physically tendered old notes, or credited to an account maintained with the book-entry transfer facility for the old notes promptly after withdrawal, rejection of tender or termination of the applicable exchange offer. Properly withdrawn old notes may be retendered by following one of the procedures described under "—Procedures for Tendering" and—Book-Entry Transfer" above at any time on or prior to 5:00 p.m., New York City time, on the applicable expiration date.

        Notwithstanding any other provision in each of the exchange offers, we shall not be required to accept for exchange, or to issue new notes in exchange for, any old notes and may terminate or amend either or both exchange offers if at any time prior to 5:00 p.m., New York City time, on the applicable expiration date, we determine in our reasonable judgment that the exchange offers violate applicable law, any applicable interpretation of the Staff of the SEC or any order of any governmental agency or court of competent jurisdiction.

        The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition or may be waived by us in whole or in part at anytime and from time to time, prior to the applicable expiration date, in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time.

        In addition, we will not accept for exchange any old notes tendered, and no new notes will be issued in exchange for any such old notes, if at any such time any stop order shall be threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or

29


the qualification of each of the indentures governing the notes under the Trust Indenture Act of 1939, as amended. We are required to use reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible time.

        Wells Fargo Bank Minnesota, National Association has been appointed as exchange agent for each of the exchange offers. Questions and requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent addressed as follows:

By Registered/Certified Mail, Hand Delivery or
Overnight Courier:		   For Information Call:
(860) 704-6217

Wells Fargo Bank Minnesota, National Association
213 Court Street, Suite 703
Middletown, CT 06457
 
Facsimile Number:
(860) 704-6219
Attn: Joseph P. O'Donnell, Corporate Trust Officer    

        The expenses of soliciting tenders pursuant to the exchange offers will be borne by us. The principal solicitation for tenders pursuant to the exchange offers is being made by mail; however, additional solicitations may be made by telegraph, telephone, telecopy or in person by our officers and regular employees.

        We will not make any payments to or extend any commissions or concessions to any broker or dealer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket expenses in connection therewith. We may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of the prospectus and related documents to the beneficial owners of the old notes and in handling or forwarding tenders for exchange.

        The expenses to be incurred by us in connection with the exchange offers will be paid by us, including fees and expenses of the exchange agent and trustee and accounting, legal, printing and related fees and expenses.

        We will pay all transfer taxes, if any, applicable to the exchange of old notes pursuant to the exchange offers. If, however, new notes or old notes for principal amounts not tendered or accepted for exchange are to be registered or issued in the name of any person other than the registered holder of the old notes tendered, or if tendered old notes are registered in the name of any person other than the person signing the letter of transmittal, or if a transfer tax is imposed for any reason other than the exchange of old notes pursuant to the applicable exchange offer, then the amount of any such transfer taxes imposed on the registered holder or any other persons will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder.

30

        Holders of old notes who do not exchange their old notes for new notes pursuant to the applicable exchange offer will continue to be subject to the restrictions on transfer of such old notes as set forth in the legend on such old notes as a consequence of the issuance of the old notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the old notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Graphic Packaging International, Inc. does not currently anticipate that it will register the old notes under the Securities Act. To the extent that old notes are tendered and accepted pursuant to the applicable exchange offer, the trading market for untendered and tendered but unaccepted old notes could be adversely affected due to the liquidity of the old note market being diminished; the restrictions on transfer will make the old notes less attractive to potential investors than the new notes.

        Following the effectiveness of the registration statement covering each of the exchange offers, no material federal or state regulatory requirement must be complied with in connection with these exchange offers.

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USE OF PROCEEDS

        We will not receive any cash proceeds from the issuance of the new notes under the exchange offers. In consideration for issuing the new notes as contemplated by this prospectus, we will receive the relevant old notes in like principal amount, the terms of which are identical in all material respects to the relevant new notes. Old notes surrendered in exchange for new notes will be retired and canceled and cannot be reissued. Accordingly, the issuance of the new notes will not result in any increase in our indebtedness or capital stock.

        We used the net proceeds from the sale of the old notes, together with borrowings under our new credit facilities, to:

32


CAPITALIZATION

        The following table sets forth our capitalization as of September 30, 2003. You should read the following table in conjunction with the information in this prospectus under the captions "Unaudited Condensed Combined Pro Forma Financial Statements," "Selected Historical Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and with the consolidated financial statements and related notes incorporated by reference in this prospectus.

 
   As of September 30, 2003
  
 
   (dollars in thousands)

  
Short-term debt:        
  Short-term debt   $ 21,259  
  Current installments on long-term debt     19,505  
   
 
    Total short-term debt     40,764  

Long-term debt:
 
 
 
 
  New credit facilities:        
    Revolving loans     31,500  
    Tranche A term loan     142,500  
    Tranche B term loan     1,113,750  
  8.50% senior notes due 2011     425,000  
  9.50% senior subordinated notes due 2013     425,000  
  Other     3,237  
   
 
    Total long-term debt     2,140,987  
   
 
      Total debt     2,181,751  

Shareholders' equity:
 
 
 
 
  Non-redeemable common stock     1,983  
  Additional paid-in capital     1,168,436  
  Accumulated deficit     (584,049 )
  Accumulated other comprehensive loss     (102,758 )
   
 
 
Total shareholders' equity
 
 
483,612
 
   
 
    Total capitalization   $ 2,665,363  
   
 

33


UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS

        The following unaudited condensed pro forma combined financial statements are presented to show the estimated effect of the merger of Riverwood and Graphic and the related financing transactions and represent the combined company's pro forma combined statement of operations for the nine months ended September 30, 2003 and the year ended December 31, 2002.

        The accompanying unaudited condensed pro forma combined statements of operations give effect to the merger of Riverwood and Graphic and the related financing transactions as if they occurred on January 1, 2002. The unaudited condensed pro forma combined financial statements include adjustments directly attributable to the merger and the related financing transactions that are expected to have a continuing impact on us. The pro forma adjustments are described in the accompanying notes. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.

        The pro forma financial information was prepared using the purchase method of accounting, with Riverwood treated as the acquirer for accounting purposes. Under purchase accounting, the total cost of the merger is allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the effective date of the merger. A preliminary allocation of the cost of the merger has been made based upon currently available information and management's estimates. The actual allocation and its effect on results of operations may differ significantly from the pro forma amounts included herein.

        The pro forma information is based on historical financial statements. The pro forma information has been prepared in accordance with the rules and regulations of the SEC and is provided for comparison and analysis purposes only. The unaudited condensed pro forma combined financial statements do not purport to represent the combined company's results of operations or financial condition had the merger of Riverwood and Graphic and the related financing transactions actually occurred as of such dates or of the results that the combined company would have achieved after the merger. The unaudited condensed pro forma combined financial statements should be read in conjunction with the information included in this prospectus under the captions "Use of Proceeds," "Capitalization," "Selected Historical Financial Data," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and with the historical consolidated financial statements of Riverwood and Graphic and the notes thereto incorporated by reference in this prospectus.

34


Combined Company
Unaudited Condensed Pro Forma Combined Statement of Operations
For the Nine Months Ended September 30, 2003
(in thousands, except per share data)

 
   Historical
    
    
    
  
 
    
    
   Combined Company
Condensed
Pro Forma
Combined
  
 
   Combined Company
   Graphic
   Pro
Forma
Adjustments
    
  
Net sales   $ 1,114,726   $ 650,812   $ (37,988 ) A   $ 1,727,550  
Cost of goods sold     912,890     581,685     (45,045 ) A     1,448,199  
                  (1,331 ) B        
Selling, general and administrative and research and development expense     114,570     43,958     5,133   B     163,661  
   
 
 
     
 
Operating income     87,266     25,169     3,255         115,690  
Interest expense, net     (107,200 )   (23,011 )   18,372   C     (111,839 )
Loss on early extinguishment of debt     (45,333 )   (1,282 )   —         (46,615 )
   
 
 
     
 
Income (loss) before income taxes, equity earnings of affiliates and cumulative effect of change in accounting principle     (65,267 )   876     21,627         (42,764 )
Income tax (expense) benefit     (4,807 )   (1,027 )   —         (5,834 )
   
 
 
     
 
Income (loss) before equity earnings of affiliates and cumulative effect of change in accounting principle     (70,074 )   (151 )   21,627         (48,598 )
Equity in net earnings of affiliates     1,155     —               1,155  
   
 
 
     
 
(Loss) income before cumulative effect of change in accounting principle     (68,919 )   (151 )   21,627         (47,443 )
Preferred stock dividends declared     —     6,083     (6,083 ) D     —  
   
 
 
     
 
Income (loss) attributable to common stockholders before cumulative effect of change in accounting principle     (68,919 )   (6,234 )   27,710         (47,443 )
   
 
 
     
 
(Loss) per basic share before cumulative effect of change in accounting principle   $ (0.52 )                 $ (0.24 )
   
                 
 
(Loss) per diluted share before cumulative effect of change in accounting principle   $ (0.52 )                 $ (0.24 )
   
                 
 
Weighted average shares outstanding:                              
  Basic     131,402                     198,338  
  Diluted     131,402                     198,338  
   
                 
 

See accompanying Notes to Unaudited Condensed Pro Forma Combined Financial Statements.

35


Combined Company
Unaudited Condensed Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2002
(in thousands, except per share data)

 
   Historical
    
    
   Combined Company
Condensed
Pro Forma
Combined
  
 
   Pro
Forma
Adjustments
    
  
 
   Riverwood
   Graphic
    
  
Net sales   $ 1,247,314   $ 1,057,843   $ (52,852 ) A   $ 2,252,305  
Cost of goods sold     984,771     930,581     (52,852 ) A     1,860,291  
                  (2,209 ) B        
Selling, general and administrative and research and development expense     121,931     64,620     28,141   B     214,692  
   
 
 
     
 
Operating income     140,612     62,642     (25,932 )       177,322  
Interest expense, net     (146,057 )   (44,640 )   33,478   C     (157,219 )
Loss on early extinguishment of debt     (11,509 )   (15,766 )   —         (27,275 )
   
 
 
     
 
Income (loss) before income taxes, equity earnings of affiliates and cumulative effect of change in accounting principle     (16,954 )   2,236     7,546         (7,172 )
Income tax (expense) benefit     4,664     (886 )   —         3,778  
   
 
 
     
 
Income (loss) before equity earnings of affiliates     (12,290 )   1,350     7,546         (3,394 )
Equity in net earnings of affiliates     1,028     —     —         1,028  
   
 
 
     
 
Income (loss) before cumulative effect of change in accounting principle     (11,262 )   1,350     7,546         (2,366 )
Preferred stock dividends declared     —     10,000     (10,000 ) D     —  
   
 
 
     
 
Income (loss) attributable to common stockholders before cumulative effect of change in accounting principle   $ (11,262 ) $ (8,650 ) $ 17,546       $ (2,366 )
   
 
 
     
 
Income (loss) per basic share before cumulative effect of change in accounting principle   $ (1.49 )                 $ (0.01 )
   
                 
 
Income (loss) per diluted share before cumulative effect of change in accounting principle   $ (1.49 )                 $ (0.01 )
   
                 
 
Weighted average shares outstanding:                              
  Basic     7,565                     198,453  
  Diluted     7,565                     201,168  
   
                 
 

See accompanying Notes to Unaudited Condensed Pro Forma Combined Financial Statements.

36


Combined Company
Notes to Unaudited Condensed Pro Forma Combined Financial Statements
(Unaudited)

1.
Basis of Presentation

        These unaudited condensed pro forma combined financial statements have been prepared pursuant to the rules and regulations of the SEC and present the pro forma financial position and results of operations of the combined company based upon historical financial information after giving effect to the merger and the related financing transactions and adjustments described in these footnotes. Certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Under purchase accounting, the merger of Riverwood and Graphic is accounted for such that Riverwood is treated as the acquirer and Graphic as the acquired company. These unaudited condensed pro forma combined financial statements are not necessarily indicative of the results of operations that would have been achieved had the transactions actually taken place at the dates indicated and do not purport to be indicative of future financial position or operating results. The unaudited condensed pro forma combined financial statements should be read in conjunction with the historical financial statements described below which are included in this prospectus.

        The pro forma statement of operations for the nine months ended September 30, 2003 have been prepared by combining the consolidated statement of operations for Riverwood and Graphic from January 1, 2003 to August 8, 2003, the date of the merger, and the combined company from August 9, 2003 to September 30, 2003, assuming that the merger and the related financing transactions had occurred on January 1, 2002. The pro forma statement of operations for the year ended December 31, 2002 have been prepared by combining the consolidated statements of operations for the year ended December 31, 2002 for Riverwood and Graphic, assuming the merger and the related financing transactions had occurred on January 1, 2002.

        The unaudited condensed pro forma combined financial statements do not reflect significant operational and administrative cost savings that management of the combined company estimates may be achieved as a result of the merger.

2.
Pro Forma Transactions

        On March 25, 2003, Riverwood and Graphic entered into a merger agreement, whereby Riverwood would acquire all of the issued and outstanding shares and stock options of Graphic in exchange for the issuance of shares and stock options of Riverwood. In connection with the merger, the combined company refinanced the existing bank financing of RIC and GPC and tendered for the existing senior and senior subordinated notes of RIC and GPC. For accounting purposes the purchase price of Graphic is based upon the estimated fair value of Riverwood stock exchanged plus estimated direct transaction costs to be incurred of approximately $32.9 million (comprised of Riverwood's financial advisory, legal and accounting fees and excluding Graphic's merger-related expenses). The estimated fair value of Riverwood stock of $4.98 per share, giving effect to the 15.21 to 1 split discussed below, used in the calculation of the purchase price is based upon available information and management's best estimates at this time. The actual fair value of

37

Riverwood stock and the purchase price may change subject to final valuation. The following table summarizes the components of the total purchase price:

        The estimated total purchase consideration is as follows (in thousands and as of September 30, 2003):

 
   Riverwood Shares
issued
in the Merger
   Value
Shares of common stock   83,441   $ 415,539
Estimated acquisition costs to be incurred by Riverwood         32,882
Graphic preferred stock conversion payment         19,804
       
Estimated total purchase price, excluding assumed debt       $ 468,225
       

        The purchase consideration was allocated to assets acquired and liabilities assumed based on the estimated fair value of Graphic's tangible and intangible assets and liabilities. A preliminary allocation of the purchase cost has been made to major categories of assets and liabilities in the accompanying unaudited condensed pro forma combined financial statements based on estimates. The actual allocation of purchase cost and its effect on results of operations may differ significantly from the pro forma amounts included herein. The excess of the purchase cost over the net tangible and identifiable intangible assets acquired and liabilities assumed has been allocated to goodwill.

        The preliminary allocation of the purchase consideration, which is subject to change based on a final valuation of the assets acquired and liabilities assumed as of the closing date, is as follows (in thousands):

Net liabilities assumed (exclusive of inventory, properties, goodwill, pension and other post-retirement liabilities)   $ (536,730 )
Properties     493,450  
Inventories     119,086  
Customer contracts and relationships     109,916  
Patents and proprietary technology     28,947  
Non compete agreements     23,100  
Pension and other post-retirement liabilities     (75,599 )
Assumed merger-related liabilities     (50,005 )
Goodwill     356,060  
   
 
Estimated total purchase price, excluding assumed debt   $ 468,225  
   
 

        The amortization of the identifiable intangible assets (customer contracts, patents and proprietary technology) is reflected as a pro forma adjustment to the unaudited condensed pro forma combined statement of operations. We expect to amortize the estimated fair value of the identifiable intangibles of approximately $162.0 million on a straight-line basis over an estimated useful life of eighteen years except for non compete agreements which have an estimated useful life of approximately one year. We expect that depreciation expense would have decreased by $1.3 million and $2.2 million for the nine months ended September 30, 2003 and for the year ended December 31, 2002, respectively, as a result of revising their depreciable asset lives and the fair value of the property purchased in the merger. The net increase in amortization and depreciation of $25.9 million and $3.8 million for the nine months ended September 30, 2003 and the year ended

38


December 31, 2002, respectively, is reflected on the unaudited condensed pro forma combined statements of operations as follows:

 
   Year ended
December 31, 2002
   Nine months
ended
September 30, 2003
  
Cost of goods sold   $ (2,209 ) $ (1,331 )
Selling, general and administrative and research and development expense     28,141     5,133  
   
 
 
Total additional amortization and depreciation of intangible assets and properties   $ 25,932   $ 3,802  
   
 
 
3.
Pro Forma Adjustments

        The unaudited condensed pro forma combined financial statements give effect to the transactions described in note 2, as if they had occurred on January 1, 2002 for purposes of the unaudited condensed pro forma combined statements of operations. The unaudited condensed pro forma combined statements of operations do not include any material non-recurring charges that will arise as a result of the transactions described in note 2. Adjustments in the unaudited condensed pro forma combined financial statements are as follows:

Increase inventory to sales value   $ 7,057  
Increase plant, property and equipment to market value     98,201  
Recognize residual goodwill value     (35,743 )
Recognize value of technology and other proprietary intangible assets     28,947  
Recognize value of customer relationships     109,916  
Recognize value of non-compete agreements     23,100  
Write-off existing debt issuance costs     (35,462 )
Write-off existing debt premium     (5,427 )
Record new debt issuance costs     55,188  
Recognize additional pension and other retirement liabilities     9,551  
Write-off prepaid pension asset     (7,415 )
Record Riverwood's merger-related expenses and debt issuance cost write-offs to the combined company's retained deficit     (50,005 )

39

40

4.
Unaudited Pro Forma Income Per Share

        The following table sets forth the computation of unaudited pro forma basic and diluted income per share before cumulative effect of change in accounting principle (in thousands, except for per share information):

 
   Year Ended
December 31, 2002
   Nine Months
Ended
September 30, 2003
  
 
   (Loss)
   Shares
   Per share
Amount
   (Loss)
   Shares
   Per share
Amount
  
(Loss) income per basic share
before cumulative effect of change in accounting
principle		   $ (2,366 ) 198,453   $ (0.01 ) $ (47,443 ) 198,338   $ (0.24 )
Other dilutive equity securities
(stock options and shares
exchangeable into common stock)		     —   2,715           —   —        
   
 
       
 
       
(Loss) income per diluted share
before cumulative effect of change in accounting
principle		   $ (2,366 ) 201,168   $ (0.01 ) $ (47,443 ) 198,338   $ (0.24 )

        Shares utilized in the calculation of pro forma basic and diluted income per share above give effect to the 15.21 to 1 Riverwood stock split, as follows:

 
   Year Ended
December 31, 2002
   Nine Months
Ended
September 30, 2003
Weighted average Riverwood shares
outstanding		   7,565   7,554
Stock split   15.21   15.21
   
 
    115,064   114,897
Riverwood shares issued in the merger   83,389   83,441
   
 
    198,453   198,338
   
 

        Other potentially dilutive securities, in thousands, totaling 13,794 and 20,859 for the nine months ended September 30, 2003 and the year ended December 31, 2002, respectively, were excluded from the per share calculations above, because of their anti-dilutive effect. The additional securities consist of stock options.

41


SELECTED HISTORICAL FINANCIAL DATA

        The selected consolidated financial information, with the exception of income (loss) per common share before cumulative effect of change in accounting principle and weighted average shares outstanding, at December 31, 2000, 1999 and 1998 and for the years ended December 31, 1999 and 1998 has been derived from our audited consolidated financial statements that are not included in this prospectus. The selected consolidated financial information, with the exception of income (loss) per common share before cumulative effect of change in accounting principle and weighted average shares outstanding, at December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 has been derived from our audited consolidated financial statements and the related notes incorporated by reference in this prospectus. The selected consolidated financial information at September 30, 2003 and for the nine months ended September 30, 2003 and 2002 has been derived from our unaudited consolidated financial statements and the related notes incorporated by reference in this prospectus. You should read the following selected consolidated financial information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes incorporated by reference in this prospectus.

 
   Years Ended December 31,
   Nine Months Ended
September 30,
  
 
   1998
   1999
   2000
   2001
   2002
   2002
   2003
  
 
   (in thousands, except share amounts)

  
Statement of Operations Data:                                            
Net sales   $ 1,196,221   $ 1,174,665   $ 1,192,362   $ 1,201,613   $ 1,247,314   $ 951,673   $ 1,114,726  
Cost of sales(a)     1,001,394     938,800     930,786     953,901     984,771     747,454     912,890  
Selling, general and administrative     112,117     114,402     112,200     116,510     117,335     90,131     105,426  
Research, development and engineering     5,570     4,078     4,554     5,111     5,227     3,727     5,425  
Impairment loss     15,694     —     —     —     —     —     —  
Restructuring (credit) charge(b)     25,580     —     (2,600 )   —     —     —     —  
Gain on sale of investment(c)     —     —     (70,863 )   —     —     —     —  
Other (income) expense, net     11,973     1,798     4,731     18,825     (631 )   (1,840 )   3,719  
   
 
 
 
 
 
 
 
Income from operations     23,893     115,587     213,554     107,266     140,612     112,201     87,266  
Loss on early extinguishment of debt     —     —     (2,117 )   (8,724 )   (11,509 )   (11,509 )   (45,333 )
Interest income     1,274     889     848     944     1,350     1,216     322  
Interest expense     178,030     179,197     181,285     158,910     147,407     112,510     107,522  
   
 
 
 
 
 
 
 
(Loss) income before income taxes and equity in net earnings of affiliates     (152,863 )   (62,721 )   31,000     (59,424 )   (16,954 )   (10,602 )   (65,267 )
Income tax (benefit) expense     (617 )   3,936     3,009     6,627     (4,664 )   2,808     4,807  
   
 
 
 
 
 
 
 
(Loss) income before equity in net earnings of affiliates     (152,246 )   (66,657 )   27,991     (66,051 )   (12,290 )   (13,410 )   (70,074 )
Equity in net earnings of affiliates     8,157     7,110     3,356     993     1,028     713     1,155  
   
 
 
 
 
 
 
 
(Loss) income before cumulative effect of a change in accounting principle     (144,089 )   (59,547 )   31,347     (65,058 )   (11,262 )   (12,697 )   (68,919 )
Cumulative effect of a change in accounting principle net of tax of $0(d)     —     —     —     (499 )   —     —     —  
   
 
 
 
 
 
 
 
Net (loss) income   $ (144,089 ) $ (59,547 ) $ 31,347   $ (65,557 ) $ (11,262 ) $ (12,697 ) $ (68,919 )
   
 
 
 
 
 
 
 
Income (loss) per common share before cumulative effect of change in accounting principle:                                            
Basic   $ (19.05 ) $ (7.88 ) $ 4.14   $ (8.60 ) $ (1.49 ) $ (0.11 ) $ (0.52 )
Diluted     (19.05 )   (7.88 )   4.08     (8.60 )   (1.49 )   (0.11 )   (0.52 )
Weighted average shares outstanding:                                            
Basic     7,562,596     7,556,842     7,563,717     7,568,177     7,564,594     115,061,429     131,401,914  
Diluted     7,562,596     7,556,842     7,684,664     7,568,177     7,564,594     115,061,429     131,401,914  

42

 
   As of December 31,
   As of September 30,
 
   1998
   1999
   2000
   2001
   2002
   2003
 
   (in thousands)

    
Balance Sheet Data:                                    
Cash and cash equivalents   $ 13,840   $ 14,108   $ 18,417   $ 7,369   $ 13,757   $ 14,719
Total assets(a)     2,405,342     2,343,771     2,094,433     2,001,096     1,957,672     3,200,268
Total debt     1,698,028     1,748,237     1,532,789     1,541,164     1,522,360     2,181,751
Total shareholders' equity(a)     324,510     260,277     277,038     196,715     125,575     483,612
 
   Years Ended December 31,
   Nine Months Ended
September 30,
 
   1998
   1999
   2000
   2001
   2002
   2002
   2003
 
   (in thousands)

Other Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization   $ 146,515   $ 142,597   $ 143,541   $ 137,143   $ 133,840   $ 97,583   $ 104,891
Additions to property, plant and equipment(e)     48,551     66,018     62,062     57,297     56,042     34,877     75,873
 
   Years Ended December 31,
    
    
 
   Nine Months Ended
September 30, 2003
 
   1998
   1999
   2000
   2001
   2002
 
    
    
    
    
   Actual

   Pro Forma

   Actual

   Pro Forma
Ratio of earnings to fixed charges(f)   —   —   1.19x   —   —   —   —   —
(a)
During the fourth quarter of 2002, Riverwood changed its method of determining the cost of inventories from the last-in, first-out, or LIFO, method to the first-in, first-out, or FIFO, method. Prior to 2002, the majority of Riverwood's operations used the LIFO method of valuing inventory. Riverwood has concluded that the FIFO method will result in a better measurement of current inventory costs with revenues because Riverwood's operations have realized and expect to continue to realize cost reductions in its manufacturing operations. Riverwood applied this change by retroactively restating its financial statements as required by Accounting Principles Board Opinion No. 20, "Accounting Changes," which resulted in an increase to the accumulated deficit as of January 1, 1998 of approximately $6.8 million. See note 27 in the notes to Riverwood's consolidated financial statements incorporated by reference in this prospectus for the effects of the restatement and change in accounting.

(b)
Net (loss) income for the years ended December 31, 2000 and 1998 included a (credit) charge for the global restructuring program, which was focused on the Riverwood European operations, of $(2.6) million and of $25.6 million, respectively.

(c)
On October 3, 2000, Riverwood, along with its joint venture partner, completed the sale of the jointly-held subsidiary Igaras for approximately $510 million, including the assumption of $112 million of debt. Riverwood recognized a gain of approximately $70.9 million in connection with the sale (see note 6 in the notes to Riverwood's consolidated financial statements incorporated by reference in this prospectus).

(d)
Net loss for the year ended December 31, 2001 included a charge of $0.5 million, net of tax, for the cumulative effect of a change in accounting principle for derivatives.

(e)
Includes amounts invested in packaging machinery and capitalized interest.

(f)
For purposes of computing this ratio, earnings consists of earnings before income taxes and fixed charges, excluding capitalized interest. Fixed charges consist of interest expense, capitalized interest, amortization of discount on indebtedness and one-third of rental expense (the portion deemed representative of the interest factor). The pro forma calculations assume that the merger and the related financing transactions occurred as of January 1, 2002. The foregoing pro forma adjustments take into consideration the increased outstanding indebtedness and the increased interest expense resulting from the related financing transactions. Earnings before income taxes and fixed charges were insufficient to cover fixed charges by $147.3 million, $59.6 million and $60.8 million for the years ended December 31, 1998, 1999 and 2001, respectively, and by $17.6 million and $8.2 million for the year ended December 31, 2002 on an actual and pro forma basis, respectively, and by $65.2 million and $43.0 million for the nine months ended September 30, 2003 on an actual and pro forma basis, respectively.

43

Graphic

        The following table sets forth certain of Graphic's historical consolidated financial information. The selected consolidated financial information at December 31, 2000, 1999 and 1998 and for the years ended December 31, 1999 and 1998 has been derived from Graphic's audited consolidated financial statements that are not included in this prospectus. The selected consolidated financial information at December 31, 2002 and 2001 and for the years ended December 31, 2002, 2001 and 2000 has been derived from Graphic's audited consolidated financial statements and the related notes incorporated by reference in this prospectus. You should read the following selected consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Graphic's consolidated financial statements and related notes thereto incorporated by reference in this prospectus.

 
   Years Ended December 31,
  
 
   1998
   1999
   2000
   2001
   2002
  
 
   (in thousands, except per share data)

  
Statement of Operations Data:                                
Net sales(1)   $ 691,777   $ 850,155   $ 1,102,590   $ 1,112,535   $ 1,057,843  
Cost of goods sold     567,533     721,350     963,979     960,258     930,581  
   
 
 
 
 
 
Gross profit     124,244     128,805     138,611     152,277     127,262  
  Selling, general and administrative expense     68,248     73,357     61,134     62,874     64,620  
  Merger and acquisition transaction costs     —     —     —     —     —  
  Goodwill amortization(2)     7,785     13,276     20,634     20,649     —  
  Asset impairment and restructuring charges     21,391     7,813     5,620     8,900     —  
   
 
 
 
 
 
Operating income     26,820     34,359     51,223     59,854     62,642  
Gain from sale of businesses and other assets(3)     —     30,236     19,172     3,650     —  
Interest expense     (16,616 )   (34,240 )   (82,071 )   (52,811 )   (44,640 )
Loss on early extinguishment of debt     —     (3,645 )   —     —     (15,766 )
   
 
 
 
 
 
Income (loss) from continuing operations before income taxes and cumulative effect of change in accounting principle     10,204     26,710     (11,676 )   10,693     2,236  
  Income tax (expense) benefit     (4,751 )   (10,632 )   4,678     (4,257 )   (886 )
   
 
 
 
 
 
Income (loss) from continuing operations before cumulative effect of change in accounting principle     5,453     16,078     (6,998 )   6,436     1,350  
  Income from discontinued operations, net of tax(4)     15,812     9,181     —     —     —  
   
 
 
 
 
 
Income (loss) before cumulative effect of change in accounting principle     21,265     25,259     (6,998 )   6,436     1,350  
Cumulative effect of change in goodwill accounting, net of tax(2)     —     —     —     —     (180,000 )
   
 
 
 
 
 
Net income (loss)     21,265     25,259     (6,998 )   6,436     (178,650 )
  Preferred stock dividends declared     —     —     (3,806 )   (10,000 )   (10,000 )
   
 
 
 
 
 
Net income (loss) attributable to common shareholders   $ 21,265   $ 25,259   $ (10,804 ) $ (3,564 ) $ (188,650 )
   
 
 
 
 
 
Net income (loss) from continuing operations before cumulative effect of change in accounting principle per common share:                                
  Basic   $ 0.19   $ 0.56   $ (0.37 ) $ (0.11 ) $ (0.27 )
  Diluted     0.19     0.56     (0.37 )   (0.11 )   (0.27 )
Weighted average shares outstanding:                                
  Basic     28,504     28,475     29,337     31,620     32,715  
  Diluted     29,030     28,767     29,337     31,620     32,715  
Other Data:                                
  Depreciation(5)   $ 29,746   $ 43,008   $ 62,460   $ 58,757   $ 61,165  
  Capital expenditures(5)     51,572     75,858     30,931     31,884     27,706  
 
   As of December 31,
 
   1998
   1999
   2000
   2001
   2002
 
   (in thousands)
Balance Sheet Data:                              
Cash and cash equivalents   $ 26,196   $ 15,869   $ 4,012   $ 6,766   $ 28,626
Working capital     152,544     (107,224 )   36,640     22,403     46,112
Working capital, excluding current maturities of debt     238,844     292,776     95,282     59,776     49,544
Total assets     846,022     1,643,171     1,332,518     1,229,335     1,020,866
Total debt     275,881     1,021,097     640,672     525,759     478,331
Total shareholders' equity(6)     447,955     423,310     515,151     497,648     307,038
(1)
Net sales in 2003, 2002 and 2001 are from folding carton sales. Net sales from folding cartons, as opposed to sales of flexible packaging and other businesses disposed of in prior periods, totaled $1,071.9 million in 2000, $691.3 million in 1999, and $468.3 million in 1998.

44

(2)
Graphic adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002, and discontinued the amortization of its goodwill in accordance with the new rules.

(3)
Graphic disposed of the following businesses and non-core assets during the periods presented (in thousands):

Pre-tax Gains:      

2001:
 
 
 
Other Assets   $ 3,650
   
2000:      
  Malvern Business   $ 11,365
  Other Assets     7,807
   
    Total   $ 19,172
   
1999:      
  Flexible Business   $ 22,700
  Solar Business     7,536
   
    Total   $ 30,236
   
(4)
Discontinued operations include the spin-off of CoorsTek, Inc. and the sale of the assets of Golden Aluminum Company.

(5)
Excludes the discontinued operations of CoorsTek, Inc. and Golden Aluminum Company for the years ended December 31, 1999 and 1998.

(6)
Includes $100 million of convertible preferred stock issued in 2000.

45


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Historical Financial Data" and "Unaudited Condensed Pro Forma Financial Statements," as well as the consolidated financial statements and notes incorporated by reference in this prospectus.

Overview

        We are a leading provider of paperboard packaging solutions to multinational consumer products companies. We have vertically integrated operations enabling us to offer customers paperboard, cartons and packaging machines, either as an integrated solution or separately.

The Merger

        On August 8, 2003, the corporation formerly known as Graphic Packaging International Corporation merged with and into Riverwood Acquisition Sub LLC, a wholly owned subsidiary of Riverwood Holding, Inc., with Riverwood Acquisition Sub LLC as the surviving entity. At the closing of the merger, one share of common stock of Riverwood Holding, Inc., renamed Graphic Packaging Corporation, was exchanged for each share of common stock of Graphic Packaging International Corporation. Immediately prior to the merger of Graphic Packaging International Corporation with and into Riverwood Acquisition Sub LLC, Riverwood Holding Inc. transferred all of the shares of RIC Holding, Inc. to Riverwood Acquisition Sub LLC. After such merger, (1) RIC Holding, Inc. merged into Graphic Packaging Holdings, Inc. which was renamed GPI Holding, Inc., (2) GPC merged into RIC which was renamed Graphic Packaging International, Inc., and (3) Riverwood Acquisition Sub LLC merged into Riverwood Holding, Inc. which was renamed Graphic Packaging Corporation.

        The merger was accounted for as a purchase by us under GAAP. Under the purchase method of accounting, the assets and liabilities of Graphic were recorded, as of the date of the closing of the merger, at their respective fair values and added to our assets and liabilities. See "Unaudited Condensed Pro Forma Combined Financial Statements."

        Based on our expectations of our future performance, we estimate that we will achieve approximately $52 million of synergies by the third year after the closing of the merger. We are on schedule in merger integration and realizing synergies primarily in corporate and supply chain operations. We anticipate that these synergies will come primarily from savings in corporate and information technology expenses, procurement of raw materials and other commonly purchased items, operating division selling, general and administration expenses, further optimization of paper machine usage and further forward integration of internally produced paperboard. We cannot make assurances as to the amount or timing of synergies, if any, that may be realized. Potential difficulties in realizing such synergies include, among other things, the integration of personnel, the combination of different corporate cultures and the integration of facilities. See "Risk Factors—Risks Relating to Our Business—If we fail to realize the anticipated benefits of the merger, our ability to make payments on the notes may be impaired."

Significant Factors That Impact Our Business

        Our net sales, income from operations cash flows from operations and financial condition are influenced by a variety of factors, many of which are beyond our control.

        Sales.    We sell our packaging products primarily to major consumer product companies in traditionally non-cyclical industries, such as beverage, food and other consumer products, and have long-term relationships with major companies, including Altria Group, Anheuser-Busch, General

46


Mills, Miller Brewing Company, Coors Brewing Company, and numerous Coca-Cola and Pepsi bottling companies. Our products are used primarily in the following end-use markets:

        Riverwood historically experienced stable pricing for its integrated beverage multiple packaging products, and moderate cyclical pricing for its other product offerings. Because some products can be packaged in different types of materials, our sales are affected by competition from other manufacturers' CUK board and other substrates — solid bleached sulfate, or SBS, recycled clay coated news, or CCN, and, internationally, white lined chipboard, or WLC — as well as by general market conditions. Graphic's sales historically were driven primarily by consumer buying habits in the markets its customers serve. Recent economic conditions in the United States have had a significant impact on consumer buying even in traditionally non-cyclical industries. New product introductions and promotional activity by Graphic's customers and Graphic's introduction of new packaging products also impacted its sales. Our containerboard business is subject to conditions in the cyclical worldwide commodity paperboard markets which have a substantial impact on containerboard sales.

        We work to maintain market share through efficiency, product innovation and strategic sourcing to our customers; however, pricing and other competitive pressures may occasionally result in the loss of a customer relationship. In the fourth quarter of 2002, we were notified by CCE that CCE would not renew its supply contract with us. Under this contract, which expired on March 31, 2003, we supplied to CCE beverage cartons made from our CUK board, packaging machines and related services. Our supply contracts with our independent Coca-Cola bottling company customers are not subject to CCE's non-renewal notification. CCE's action did not impact Riverwood's 2002 results of operations. The impact on our 2003 results of operations will depend, in part, on the extent to which we supply beverage cartons to CCE during a phase-out period beginning April 1, 2003 which we continue to discuss with CCE. We continue to explore opportunities to replace the volumes that we will lose as a result of CCE's decision by seeking to increase sales to existing and new customers and to develop new applications for our CUK board. We continue to evaluate the impact of these developments and the recent increase in beverage market competitiveness on our future pricing for our beverage packaging products. We can provide no assurances that we will be able to replace all or any portion of the volumes we had expected to supply to CCE in 2003 and future periods or that we will be able to maintain current pricing levels on our beverage packaging products. If we cannot replace such volumes, we estimate that our volumes will be negatively impacted by approximately 17,000 tons in 2003 and 36,000 tons in 2004 and thereafter. In 2002, the CCE business represented approximately 5% of Riverwood's consolidated net sales.

        Our packaging machinery placements during 2002 increased approximately 27% when compared to 2001 as a result of a 16% increase in packaging machinery orders in 2001 when compared to 2000. Packaging machinery placements during the first nine months of 2003 decreased approximately 35% when compared to the first nine months of 2002, partially due to the timing of shipments. We expect packaging machinery placements for 2003 to be comparable to 2002. We have been and will continue to be selective in future packaging machinery placements to ensure appropriate returns.

47


        Cost of Goods Sold.    Our cost of goods sold consists primarily of energy, pine pulpwood, hardwood, recycled fibers, purchased paperboard, paper, aluminum foil, ink, plastic films and resins and labor, all of which are variable cost components. Energy, including natural gas, fuel oil and electricity, represents a significant portion of our manufacturing costs. During 2002, neither Riverwood nor Graphic was negatively impacted by energy costs when compared to 2001. During the first nine months of 2003, we experienced a significant increase in our energy costs compared to the first nine months of 2002, principally at our mills equal to approximately $7 million. We have entered into fixed price natural gas contracts designed to mitigate the impact of future cost increases for natural gas requirements, at the Macon and West Monroe mills through and including 2004. We also periodically purchase energy contracts for natural gas and/or fuel oil at the Kalamazoo mill, and we will continue to evaluate our hedge positions.

        During 2002, we elected to take 32 days, or approximately 18,000 tons, of linerboard, CUK board and medium market related downtime at our U.S. mills that resulted in approximately $3.7 million of under-absorbed fixed costs. The downtime resulted from a number of factors, but principally a weak containerboard market and production above planned rates.

        Commitment to Cost Reduction.    In light of increasing margin pressure throughout the paperboard packaging industry, we have programs in place that are designed to reduce costs. We are pursuing a number of long-term initiatives designed to improve productivity and profitability.

        We are continuing to implement a global Total Quality Systems, or TQS, initiative which uses statistical process control to help design and manage all types of activities, including production and maintenance. This includes a Six Sigma process to reduce variable manufacturing costs. See "Business — Productivity and Profitability Initiatives."

        We are implementing an initiative designed to enhance the competitiveness of our beverage multiple packaging converting operations. This initiative is expected to add new manufacturing technology, add press capacity and consolidate certain beverage carton converting operations. We expect to make a capital investment of approximately $75 million through 2005 and to realize cost savings relative to 2002 from this initiative of approximately $39 million by 2005. We cannot make assurances as to the amount or timing of cost savings that may be realized.

        We continue to evaluate our current operations and assets with a view to rationalizing our operations and improving profitability. We are also continuing to focus on reducing working capital and increasing liquidity.

Critical Accounting Policies

        This discussion and analysis of financial condition and results of operations is based upon Riverwood's and Graphic's consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

        We believe the following accounting policies are the most critical to us since these policies require significant judgment or involve complex estimations that are important to the portrayal of our financial condition and operating results:

48

49

50

Results of Operations

        The merger was accounted for as a purchase by us under U.S. GAAP. Thus, our results of operations for the nine months ended September 30, 2003 include the results of Graphic from August 8, 2003, the date of the merger, through September 30, 2003. Our results of operations for the nine months ended September 30, 2002 represent the results of Riverwood only. Accordingly, amounts for the nine months ended September 30, 2003 are not comparable to those for the nine months ended September 30, 2002.

        We report our results in two business segments: paperboard packaging and containerboard/other. We historically reported our results in two business segments: coated board (relating to our CUK board used in beverage multiple packaging and consumer products packaging businesses) and containerboard (relating to linerboard, corrugating medium and kraft paper). Graphic historically reported its results in one business segment: packaging.

51


        Business segment information for the nine months ended September 30, 2003 and September 30, 2002 is as follows:

 
   Nine Months Ended
  
(In millions of dollars)
   Sept. 30,
2003
   Sept. 30,
2002
  
Net Sales:              
Paperboard Packaging   $ 1,054.1   $ 892.2  
Containerboard/Other     60.6     59.5  
   
 
 
    $ 1,114.7   $ 951.7  
   
 
 

Income From Operations:
 
 
 
 
 
 
 
Paperboard Packaging   $ 130.5   $ 147.0  
Containerboard/Other     (19.0 )   (18.0 )
Corporate     (24.2 )   (16.8 )
   
 
 
    $ 87.3   $ 112.2  
   
 
 

        Net Sales.    Our Net Sales in the first nine months of 2003 increased by $163.0 million, or 17.1%, to $1,114.7 million from $951.7 million in the first nine months of 2002 due primarily to the addition of Graphic's paperboard packaging business which increased Net Sales by $155.8 million. Foreign currency exchange rates positively impacted Net Sales by $27.7 million. Higher volumes in international beverage markets also contributed to the increase in Net Sales. These increases were somewhat offset by lower volumes and pricing in our North American markets and lower volumes in international consumer products markets, both primarily as a result of increased market competitiveness.

        Gross Profit.    As a result of the factors discussed below, our Gross Profit in the first nine months of 2003 decreased by $2.4 million, or 1.2%, to $201.8 million from $204.2 million in the first nine months of 2002. Our gross profit margin decreased to 18.1% in the first nine months of 2003 from 21.5% in the first nine months of 2002. The decrease in gross profit margin was due primarily to lower volumes and pricing in North American markets as a result of increased market competitiveness, lower margin product mix in North American markets including the addition of Graphic's paperboard packaging business, higher energy and fiber costs, higher non-cash pension costs, and the approximate $7.1 million increase in Cost of Sales relating to the increase in Graphic's inventory to fair value as a result of purchase accounting revaluation. These decreases were somewhat offset by higher Net Sales as a result of the factors discussed above and worldwide cost reductions as a result of savings gained from our cost reduction initiatives.

        Selling, General and Administrative.    Selling, General and Administrative expenses increased by $15.3 million, or 17.0%, to $105.4 million in the first nine months of 2003 from $90.1 million in the first nine months of 2002, due primarily to the addition of Graphic's Selling, General and Administrative expenses of $9.1 million and expenses related to the merger of $6.7 million. As a percentage of Net Sales, Selling, General and Administrative expenses was 9.5% in the first nine months of 2003 and 2002.

        Research, Development and Engineering.    Research, Development and Engineering expenses increased by $1.7 million, or 45.9%, to $5.4 million in the first nine months of 2003 from $3.7 million in the first nine months of 2002, due primarily to higher research and development investing related to our products and packaging machinery, and the addition of Graphic's Research, Development and Engineering expenses of $0.5 million.

        Other Expense (Income), Net.    Other expense (income), net, was $3.7 million in the first nine months of 2003 as compared to $(1.8) million in the first nine months of 2002. This change was

52


principally due to a non-cash pension adjustment recorded in the first nine months of 2002, and the approximate $1.9 million charge to write off deferred costs associated with the withdrawal of the proposed initial public offering of our common stock and higher amortization expense of $3.1 million due to the effects of purchase accounting in connection with the merger recorded in the first nine months of 2003.

        Income from Operations.    Primarily as a result of the factors discussed above, our Income from Operations in the first nine months of 2003 decreased by $24.9 million, or 22.2%, to $87.3 million from $112.2 million in the first nine months of 2002, while its operating margin decreased to 7.8% in the first nine months of 2003 from 11.8% in the first nine months of 2002.

        Fluctuations in U.S. Currency Exchange Rates.    The weakening of the U.S. dollar currency exchange rates as compared to the Euro and other European currencies had a modest impact on Net Sales, Gross Profit, Income from Operations, and operating expenses during the first nine months of 2003.

        Loss on Early Extinguishment of Debt.    In connection with the merger, we entered into the related financing transactions. In the third quarter of 2003, we recorded a non-cash charge to earnings of approximately $16.7 million, related to the write-off of remaining debt issuance costs on our prior senior secured credit facilities and the prior RIC notes and our charge of approximately $28.6 million, related to the call premium paid upon redemption of the prior RIC notes.

        Interest Income.    Interest Income decreased by $0.9 million to $0.3 million in the first nine months of 2003 from $1.2 million in the first nine months of 2002 due primarily to lower average interest rates and interest received in the first nine months of 2002 on monies held in escrow.

        Interest Expense.    Interest Expense decreased by $5.0 million to $107.5 million in the first nine months of 2003 from $112.5 million in the first nine months of 2002, due primarily to lower average interest rates as a result of market interest rates. The second quarter 2002 refinancing was somewhat offset by interest paid on increased indebtedness following the merger.

        Income Tax Expense.    During the first nine months of 2003, we recognized an income tax expense of $4.8 million on (Loss) before Income Taxes of $(65.2) million. During the first nine months of 2002, we recognized an income tax expense of $2.8 million on (Loss) before Income Taxes of $(10.6) million. Income Tax Expense on income earned in the United States and certain foreign countries for the first nine months of both 2003 and 2002 was fully offset by a reduction to valuation allowances recorded for those countries. Income Tax Expense for the first nine months of 2003 and 2002 primarily represents Income Tax Expense on income earned in other foreign countries where no valuation allowance is recorded. Since income earned in those foreign countries was higher for the first nine months of 2003 in comparison to the first nine months of 2002, Income Tax Expense was higher for the same period.

        Equity in Net Earnings of Affiliates.    Equity in Net Earnings of Affiliates increased by $0.4 million to $1.1 million in the first nine months of 2003 from $0.7 million in the first nine months of 2002 as a result of improved operations of our non-consolidated joint venture, Rengo Riverwood Packaging Ltd. or Rengo.

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Riverwood

        The following discussion of Riverwood's results of operations is based upon the years ended December 31, 2002 and 2001. Effective January 1, 2003, Riverwood adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002" and all prior years have been reclassified to give effect to this statement. See "—Recent Accounting Pronouncements." In the fourth quarter of 2002, Riverwood changed its method of valuing inventories from the LIFO method to the FIFO method and all prior years have been restated to give effect to that change. See note 27 to Riverwood's consolidated financial statements incorporated by reference in this prospectus.

 
   Year Ended
December 31,
2002
   Percentage
Increase
(Decrease)
From Prior
Period
   Year Ended
December 31,
2001
  
 
   (In thousands of dollars)

  
Net Sales (Segment Data):                  
  Coated Board   $ 1,165,702   5.2 % $ 1,107,937  
  Containerboard     81,612   (12.9 )   93,676  
   
     
 
Net Sales     1,247,314   3.8     1,201,613  
Cost of Sales     984,771   3.2     953,901  
   
     
 
Gross Profit     262,543   6.0     247,712  
Selling, General and Administrative     117,335   0.7     116,510  
Research, Development and Engineering     5,227   2.3     5,111  
Other (Income) Expense, Net     (631 ) NM     18,825  
   
     
 
Income from Operations   $ 140,612   31.1 % $ 107,266  
   
     
 

Income from Operations (Segment Data):
 
 
 
 
 
 
 
 
 
  Coated board   $ 186,108   25.8 % $ 147,958  
  Containerboard     (23,989 ) (58.0 )   (15,180 )
  Corporate and Eliminations     (21,507 ) 15.7     (25,512 )
   
     
 
Income from Operations   $ 140,612   31.1 % $ 107,266  
   
     
 

Other Financial Data:
 
 
 
 
 
 
 
 
 
Net Sales:                  
  Carrierboard   $ 818,797   5.0 % $ 779,509  
  Cartonboard     234,357   6.7     219,542  
  White lined chip board     80,579   9.9     73,336  
  Containerboard     81,612   (12.9 )   93,676  
  Other(A)     31,969   (10.1 )   35,550  
(A)
Other primarily represents revenue recognized from packaging machinery service and use agreements and sales of certain by-products.

54

        Paperboard Shipments.    The following represents shipments of coated board and containerboard to outside customers. Shipments of coated board represent sales to customers of beverage carrierboard and cartonboard. Shipments of white lined chip board represent sales to customers of WLC produced at the Swedish mill. Shipments of containerboard represent sales to customers of linerboard, corrugating medium, kraft paper and various other items. Other primarily represents shipments of certain by-products. Total shipments for the years ended December 31, 2002 and 2001 were as follows:

 
   Year Ended
December 31,
2002
   Percentage
Increase
(Decrease)
From Prior
Period
   Year Ended
December 31,
2001
 
   (In thousands of tons)
Coated board            
  Carrierboard   671.5   5.6 % 636.1
  Cartonboard   363.0   4.3   348.0
White lined chip board   156.9   4.3   150.4
Containerboard   235.3   (7.8 ) 255.3
Other   22.4   (4.7 ) 23.5
   
     
    1,449.1   2.5 % 1,413.3
   
     

        Net Sales.    As a result of the factors described below, Riverwood's Net Sales in 2002 increased by $45.7 million, or 3.8%, compared with 2001. Net Sales in the coated board business segment increased by $57.8 million in 2002, or 5.2%, to $1,165.7 million from $1,107.9 million in 2001, due primarily to higher sales volume in North American beverage carton markets resulting, in large part, from increased volumes under a multi-year agreement with a beer producer customer and, to a lesser extent, higher sales volumes in worldwide consumer products markets resulting principally from Riverwood's increased efforts designed to generate growth in the consumer packaged goods sector and success in expanding the application of Riverwood's products into frozen food packaging, and higher sales volumes in international beverage from market share gains. Net Sales in the containerboard business segment decreased $12.1 million, or 12.9%, to $81.6 million in 2002 from $93.7 million in 2001, due principally to lower linerboard volumes resulting from the continued shift from linerboard production to value-added coated board production and lower containerboard pricing as a result of weak market conditions.

        Gross Profit.    As a result of the factors discussed below, Riverwood's Gross Profit for 2002 increased by $14.8 million, or 6.0%, to $262.5 million from $247.7 million in 2001. Its gross profit margin increased to 21.0% in 2002 from 20.6% in 2001.

        The following table displays the gross profit for each of Riverwood's segments:

 
   Year Ended
December 31, 2002
   Increase
(Decrease)
From Prior
Period
   Year Ended
December 31, 2001
  
 
   (In thousands of dollars)

  
Coated Board                  
  Net Sales   $ 1,165,702   5.2 % $ 1,107,937  
  Cost of Sales     883,565   4.0     849,753  
   
     
 
  Gross Profit   $ 282,137   9.3 % $ 258,184  
   
     
 
Containerboard                  
  Net Sales   $ 81,612   (12.9 )% $ 93,676  
  Cost of Sales     101,153   (3.9 )   105,218  
   
     
 
  Gross Profit   $ (19,541 ) (69.3 )% $ (11,542 )
   
     
 
Corporate                  
  Net Sales   $ —   0.0%   $ —  
  Cost of Sales     53   NM     (1,070 )
   
     
 
  Gross Profit   $ (53 ) NM   $ 1,070  
   
     
 

55

        Gross Profit in the coated board business segment increased by $24.0 million, or 9.3%, to $282.1 million in 2002 from $258.2 million in 2001, while its gross profit margin increased to 24.2% in 2002 from 23.3% in 2001. The increase in coated board Gross Profit was due primarily to worldwide cost reductions as a result of savings gained from Riverwood's TQS initiative, higher Net Sales as a result of the factors discussed above, and lower depreciation expense. Gross Profit in the containerboard business segment decreased by $8.0 million to a loss of $19.5 million in 2002 from a loss of $11.5 million in 2001, while its gross profit margin decreased to (23.9)% in 2002 from (12.3)% in 2001. The decrease in containerboard Gross Profit resulted principally from lower containerboard pricing as a result of weak market conditions. Gross Profit in corporate decreased by $1.2 million to a loss of $0.1 million in 2002 from a profit of $1.1 million in 2001. The decrease in corporate Gross Profit was due primarily to a purchase accounting depreciation adjustment recorded in 2001 that was not allocated to Riverwood's business segments.

        Selling, General and Administrative.    Selling, General and Administrative expenses increased by $0.8 million, or 0.7%, to $117.3 million in 2002 from $116.5 million in 2001, due primarily to higher incentive expenses and pension costs as a result of the decline in market values of Riverwood's pension assets due to unfavorable market conditions, somewhat offset by lower warehousing and rent expenses. As a percentage of Net Sales, Selling, General and Administrative expenses decreased from 9.7% in 2001 to 9.4% in 2002.

        Research, Development and Engineering.    Research, Development and Engineering expenses increased by $0.1 million, or 2.3%, to $5.2 million in 2002 from $5.1 million in 2001.

        Other (Income) Expense, Net.    Other (Income) Expense, Net, was $(0.6) million in 2002 as compared to $18.8 million in 2001. This change was primarily due to the cessation of goodwill amortization and a non-cash pension adjustment recorded in 2002 as well as certain charges recorded in 2001 relating to non-cash long-lived manufacturing asset retirement charges of approximately $3.9 million and a litigation settlement charge of approximately $2.2 million to settle miscellaneous tort and worker's compensation cases.

        Income from Operations.    Primarily as a result of the factors discussed above, Riverwood's Income from Operations in 2002 increased by $33.3 million, or 31.1%, to $140.6 million from $107.3 million in 2001. Its operating margin increased to 11.3% in 2002 from 8.9% in 2001. Income from Operations in the coated board business segment increased by $38.2 million, or 25.8%, to $186.1 million in 2002 from $148.0 million in 2001, while the operating margin increased to 16.0% in 2002 from 13.4% in 2001, primarily as a result of the factors described above. Income from Operations in the containerboard business segment decreased $8.8 million to a loss of $24.0 million in 2002 from a loss of $15.2 million in 2001, while the operating margin decreased to (29.4)% in 2002 from (16.2)% in 2001, primarily as a result of the factors described above.

        Fluctuations in U.S. Currency Exchange Rates.    The weakening of the U.S. dollar currency exchange rates as compared to the euro and other European currencies had a modest impact on Net Sales, Gross Profit, Income from Operations, and operating expenses during 2002. However, the impact was somewhat offset by the strengthening of the U.S. dollar against the Japanese yen.

        Loss on Early Extinguishment of Debt.    On April 23, 2002, Riverwood borrowed $250 million pursuant to an amendment to its senior secured credit agreement. The proceeds were applied to redeem in full the 1996 senior notes. In addition, it borrowed $12 million under its revolving facility to pay fees, costs and expenses related to the refinancing transaction. In the second quarter of 2002, Riverwood recorded a non-cash charge to earnings of approximately $3.0 million related to

56

the write-off of remaining debt issuance costs on the 1996 senior notes and a charge of approximately $8.6 million related to the call premium paid upon redemption of the 1996 senior notes.

        On August 10, 2001, Riverwood entered into the RIC senior secured credit agreement. The proceeds of the initial borrowings under the facilities of approximately $386 million, including $51 million in revolving credit borrowings, were applied to repay in full the outstanding borrowings under the prior term loan facility and the prior revolving facility and to pay approximately $12 million of the $14 million of fees and expenses incurred in connection with the amendment and restatement of the prior credit agreement. During the third quarter of 2001, Riverwood recorded a non-cash charge to earnings of approximately $6.0 million related to the write-off of the applicable remaining deferred debt issuance costs on the prior term loan facility and the prior revolving facility.

        On June 21, 2001, Riverwood completed an offering of $250 million principal amount of 105/8% senior notes due 2007, bearing interest at 105/8% annually. The net proceeds of this offering were applied to prepay a portion of the RIC term loan facility resulting in a non-cash charge to earnings of approximately $2.8 million related to the write-off of the applicable portion of deferred debt issuance costs on the term loans.

        Interest Income.    Interest Income increased by $0.4 million to $1.3 million in 2002 from $0.9 million in 2001 due primarily to interest earned on the temporary investment of the proceeds associated with the 2002 term loan facility pursuant to a 30-day call notice period required under the indenture governing the 1996 senior notes.

        Interest Expense.    Interest Expense decreased by $11.5 million to $147.4 million in 2002 from $158.9 million in 2001 due primarily to lower average interest rates as a result of market interest rates as well as the second quarter 2002 refinancing, somewhat offset by the additional interest expense incurred on the 1996 senior notes during the 30-day call notice period required under such indenture.

        Income Tax (Benefit) Expense.    During 2002, Riverwood recognized an income tax benefit of $(4.7) million on a (Loss) before Income Taxes and Equity in Net Earnings of Affiliates of $(17.0) million. During 2001, Riverwood recognized an income tax expense of $6.6 million on a (Loss) before Income Taxes and Equity in Net Earnings of Affiliates of $(59.4) million. The income tax benefit in 2002 was due primarily to reductions of valuation allowances related to Riverwood's U.K. and German operations, somewhat offset by the income tax expense on the international operating income (see note 19 to Riverwood's consolidated financial statements incorporated by reference in this prospectus). The income tax expense in 2001 was due primarily to international operating income. These income tax expenses differed from the statutory federal income tax rate primarily because of valuation allowances established on net operating loss carryforward tax assets in the U.S. and certain international locations where the realization of such benefits is not more likely than not.

        Cumulative Effect of a Change in Accounting Principle.    On January 1, 2001, Riverwood adopted Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," or SFAS No. 133, which requires all derivative instruments to be measured at fair value and recognized on the balance sheet as either assets or liabilities. In addition, all derivative instruments used in hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS No. 133. Upon adoption of SFAS No. 133, Riverwood recognized a one-time after-tax transition adjustment to decrease earnings by approximately $0.5 million.

57


        The following discussion of Riverwood's results of operations is based upon the years ended December 31, 2001 and 2000. Effective January 1, 2003, Riverwood adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002" and all prior years have been reclassified to give effect to this statement. See "—Recent Accounting Pronouncements." In the fourth quarter of 2002, Riverwood changed its method of valuing inventories from the LIFO method to the FIFO method and all prior years have been restated to give effect to that change. See note 27 to Riverwood's consolidated financial statements incorporated by reference in this prospectus.

 
   Year Ended
December 31,
2001
   Percentage
Increase
(Decrease)
From Prior
Period
   Year Ended
December 31,
2000
  
 
   (In thousands of dollars)

  
Net Sales (Segment Data):                  
  Coated Board   $ 1,107,937   4.0 % $ 1,065,813  
  Containerboard     93,676   (26.0 )   126,549  
   
     
 
Net Sales     1,201,613   0.8     1,192,362  
Cost of Sales     953,901   2.5     930,786  
   
     
 
Gross Profit     247,712   (5.3 )   261,576  
Selling, General and Administrative     116,510   3.8     112,200  
Research, Development and Engineering     5,111   12.2     4,554  
Restructuring Credit     —   NM     (2,600 )
Gain on Sale of Investment     —   NM     (70,863 )
Other Expense, Net     18,825   297.9     4,731  
   
     
 

Income from Operations
 
$
107,266
 
(49.8
)%
$
213,554
 
   
     
 
Income from Operations (Segment Data):                  
  Coated board   $ 147,958   (5.5 )% $ 156,634  
  Containerboard     (15,180 ) NM     2,986  
  Corporate and Eliminations     (25,512 ) NM     53,934  
   
     
 
Income from Operations   $ 107,266   (49.8 )% $ 213,554  
   
     
 

Other Financial Data:
 
 
 
 
 
 
 
 
 
Net Sales:                  
  Carrierboard   $ 779,509   4.8 % $ 743,569  
  Cartonboard     219,542   4.8     209,395  
  White lined chip board     73,336   (5.1 )   77,273  
  Containerboard     93,676   (26.0 )   126,549  
  Other(A)     35,550   (0.1 )   35,576  
(A)
Other primarily represents revenue recognized from packaging machinery service and use agreements and sales of certain by-products.

        Paperboard Shipments.    The following represents shipments of coated board and containerboard to outside customers. Shipments of coated board represent sales to customers of beverage carrierboard and cartonboard. Shipments of white lined chip board represent sales to customers of WLC produced at the Swedish mill. Shipments of containerboard represent sales to customers of linerboard, corrugating medium, kraft paper and various other items. Other primarily

58

represents shipments of certain by-products. Total shipments for the years ended December 31, 2001 and 2000 were as follows:

 
   Year Ended
December 31, 2001
   Percentage
Increase
(Decrease)
From Prior
Period
   Year Ended
December 31, 2000
 
   (In thousands of tons)
Coated board            
  Carrierboard   636.1   4.0 % 611.7
  Cartonboard   348.0   2.2   340.4
White lined chip board   150.4   0.0   150.4
Containerboard   255.3   (20.1 ) 319.4
Other   23.5   76.7   13.3
   
     
    1,413.3   (1.5 )% 1,435.2
   
     

        Net Sales.    As a result of the factors described below, Riverwood's Net Sales in 2001 increased by $9.3 million, or 0.8%, compared with 2000. Net Sales in the coated board business segment increased by $42.1 million in 2001, or 4.0%, to $1,107.9 million from $1,065.8 million in 2000, due primarily to higher sales volume in North American beverage carton markets resulting, in large part, from the increased volumes under a multi-year agreement with a beer producer customer and increased soft drink can pack volumes, and higher sales volumes in North American consumer product markets resulting principally from Riverwood's increased efforts designed to generate growth in the consumer packaged goods sector including its success in expanding the application of Riverwood's products into frozen food packaging. These increases were somewhat offset by lower sales volumes in international consumer product markets and in Brazil as a result of weak market conditions, and the negative impact of foreign currency exchange rates. Net Sales in the containerboard business segment decreased $32.8 million, or 26.0%, to $93.7 million in 2001 from $126.5 million in 2000, due principally to lower volumes and pricing as a result of weak market conditions.

        Gross Profit.    As a result of the factors discussed below, Riverwood's Gross Profit for 2001 decreased by $13.9 million, or 5.3%, to $247.7 million from $261.6 million in 2000. Its gross profit margin decreased to 20.6% in 2001 from 21.9% in 2000.

59


        The following table displays the gross profit for each of Riverwood's segments:

 
   Year Ended
December 31, 2001
   Increase
(Decrease)
From Prior
Period
   Year Ended
December 31, 2000
  
 
   (In thousands of dollars)

  
Coated Board                  
  Net Sales   $ 1,107,937   4.0 % $ 1,065,813  
  Cost of Sales     849,753   4.2     815,336  
   
     
 
  Gross Profit   $ 258,184   3.1 % $ 250,477  
   
     
 

Containerboard
 
 
 
 
 
 
 
 
 
  Net Sales   $ 93,676   (26.0 )% $ 126,549  
  Cost of Sales     105,218   (12.8 )   120,624  
   
     
 
  Gross Profit   $ (11,542 ) NM   $ 5,925  
   
     
 

Corporate
 
 
 
 
 
 
 
 
 
  Net Sales   $ —   0.0 % $ —  
  Cost of Sales     (1,070 ) 79.3     (5,174 )
   
     
 
  Gross Profit   $ 1,070   79.3 %   5,174  
   
     
 

        Gross Profit in the coated board business segment increased by $7.7 million, or 3.1%, to $258.2 million in 2001 from $250.5 million in 2000, while its gross profit margin decreased to 23.3% in 2001 from 23.5% in 2000. The increase in coated board Gross Profit was due primarily to worldwide cost reductions as a result of savings gained from Riverwood's TQS initiative, higher Net Sales as a result of the factors discussed above, and lower depreciation expense somewhat offset by increased energy costs. Gross Profit in the containerboard business segment decreased by $17.5 million to a loss of $11.5 million in 2001 from a profit of $5.9 million in 2000, while its gross profit margin decreased to (12.3)% in 2001 from 4.7% in 2000. The decrease in containerboard Gross Profit resulted principally from lower containerboard pricing as a result of weak market conditions. Gross Profit in corporate decreased by $4.1 million to a profit of $1.1 million in 2001 from a profit of $5.2 million in 2000. The decrease in corporate Gross Profit was due primarily to a purchase accounting depreciation adjustment recorded in 2000 that was not allocated to Riverwood's business segments.

        Selling, General and Administrative.    Selling, General and Administrative expenses increased by $4.3 million, or 3.8%, to $116.5 million in 2001 from $112.2 million in 2000, due primarily to higher warehousing expenses. As a percentage of Net Sales, Selling, General and Administrative expenses increased from 9.4% in 2000 to 9.7% in 2001.

        Research, Development and Engineering.    Research, Development and Engineering expenses increased by $0.5 million, or 12.2%, to $5.1 million in 2001 from $4.6 million in 2000, due primarily to higher research and development investing relating to Riverwood's new product Z-Flute®, packaging machinery and products of the Swedish mill.

        Restructuring Credit.    During 2000, Riverwood substantially completed the 1998 restructuring plan that related primarily to the restructuring of its European operations, primarily the ongoing rationalization of its international carton converting operations. It reduced the restructuring reserve by $4.8 million. In addition, $2.2 million of new restructuring activities aligned with the overall objectives of the initial plan were recorded and completed during 2000. Riverwood completed the

60


1998 restructuring plan during 2001. See note 23 to Riverwood's consolidated financial statements incorporated by reference in this prospectus.

        Gain on Sale of Investment.    During 2000, Riverwood recognized a $70.9 million gain from the sale of Igaras. See "— Equity in Net Earnings of Affiliates" below.

        Other Expense, Net.    Other Expense, Net, was $18.8 million in 2001 and $4.7 million in 2000. This change was primarily due to certain operating charges recorded in 2001 primarily relating to a litigation charge of approximately $2.2 million to settle miscellaneous tort and worker's compensation cases and certain non-cash long-lived manufacturing asset retirement charges of approximately $3.9 million, and certain operating credits recorded in 2000 of approximately $2.3 million to reduce accruals recorded by Riverwood to reflect its current liabilities based on new events and information.

        Income from Operations.    Primarily as a result of the factors discussed above, Riverwood's Income from Operations in 2001 decreased by $106.3 million, or 49.8%, to $107.3 million from $213.6 million in 2000, while its operating margin decreased to 8.9% in 2001 from 17.9% in 2000. Income from Operations in the coated board business segment decreased by $8.7 million, or 5.5%, to $148.0 million in 2001 from $156.6 million in 2000, while the operating margin decreased to 13.4% in 2001 from 14.7% in 2000, primarily as a result of the factors described above. Income from Operations in the containerboard business segment decreased $18.2 million to a loss of $15.2 million in 2001 from a profit of $3.0 million in 2000, while the operating margin decreased to (16.2)% in 2001 from 2.4% in 2000, primarily as a result of the factors described above. Income from Operations in the Corporate and Eliminations segment decreased $79.4 million to a loss of $25.5 million in 2001 from a profit of $53.9 million in 2000 due primarily to the sale of Igaras during 2000. See "— Equity in Net Earnings of Affiliates" below.

        Fluctuations in U.S. Currency Exchange Rates.    The strengthening of the U.S. dollar currency exchange rates as compared to the Japanese yen, the euro, and other European currencies had a modest impact on Net Sales, Gross Profit, Income from Operations, and operating expenses during 2001.

        Loss on Early Extinguishment of Debt.    On August 10, 2001, Riverwood entered into the RIC senior secured credit agreement. The proceeds of the initial borrowings under the facilities of approximately $386 million, including $51 million in revolving credit borrowings, were applied to repay in full the outstanding borrowings under the prior term loan facility and the prior revolving facility and to pay approximately $12 million of the $14 million of fees and expenses incurred in connection with the amendment and restatement of the prior credit agreement. During the third quarter of 2001, Riverwood recorded a non-cash charge to earnings of approximately $6.0 million related to the write-off of the applicable remaining deferred debt issuance costs on the prior term loan facility and the prior revolving facility.

        On June 21, 2001, Riverwood completed an offering of $250 million principal amount of 105/8% senior notes due 2007, bearing interest at 105/8% annually. The net proceeds of this offering were applied to prepay a portion of the RIC term loan facility resulting in a non-cash charge to earnings of approximately $2.8 million related to the write-off of the applicable portion of deferred debt issuance costs on the term loans.

61


        On October 3, 2000, Riverwood completed the sale of its 50 percent investment in Igaras. It applied $120 million and $25 million of the sale proceeds to its 2001 and 2002 term loan maturities under the prior term loan facility, respectively. It recognized a loss on the early extinguishment of debt of approximately $2.1 million in the fourth quarter of 2000.

        Interest Income.    Interest Income increased by $0.1 million to $0.9 million in 2001 from $0.8 million in 2000.

        Interest Expense.    Interest Expense decreased by $22.4 million to $158.9 million in 2001 from $181.3 million in 2000 due primarily to lower average debt balances and, to a lesser extent, lower average interest rates.

        Income Tax Expense.    During 2001, Riverwood recognized an income tax expense of $6.6 million on a (Loss) before Income Taxes and Equity in Net Earnings of Affiliates of $(59.4) million. During 2000, it recognized an income tax expense of $3.0 million on Income before Income Taxes and Equity in Net Earnings of Affiliates of $31.0 million. The income tax expense, in both 2001 and 2000, was due primarily to international operating income. The increase in income tax expense from 2000 to 2001 was due primarily to an increase in international operating income. These income tax expenses differed from the statutory federal income tax rate primarily because of valuation allowances established on net operating loss carryforward tax assets in the U.S. and certain international locations where the realization of such benefits is not more likely than not.

        Equity in Net Earnings of Affiliates.    In 2000, Equity in Net Earnings of Affiliates was comprised primarily of Riverwood's equity in net earnings of Igaras. On October 3, 2000, Riverwood, along with its joint venture partner, completed the sale of the jointly-held subsidiary Igaras for approximately $510 million, including the assumption of $112 million of debt. Riverwood recognized a gain of approximately $70.9 million in accordance with the sale. Through the date of the sale, Igaras was accounted for under the equity method of accounting. Equity in Net Earnings of Affiliates decreased from $3.4 million in 2000 to $1.0 million in 2001 as a result of the sale of Igaras, somewhat offset by Riverwood's equity in net earnings of Rengo.

        Cumulative Effect of a Change in Accounting Principle.    On January 1, 2001, Riverwood adopted SFAS No. 133 which requires all derivative instruments to be measured at fair value and recognized on the balance sheet as either assets or liabilities. In addition, all derivative instruments used in hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS No. 133. Upon adoption of SFAS No. 133, Riverwood recognized a one-time after-tax transition adjustment to decrease earnings by approximately $0.5 million.

62



Graphic

 
   Year Ended
December 31,
2002
   Percentage
Increase
(Decrease)
From Prior
Period
   Year Ended
December 31,
2001
 
   (in thousands of dollars)
Net Sales   $ 1,057,843   (4.9 )% $ 1,112,535
Gross Profit     127,262   (16.4 )%   152,277
Selling, General and Administrative Expenses     64,620   2.8 %   62,874
Goodwill Amortization     —   (100 )%   20,649
Asset Impairment and Restructuring Charges     —   (100 )%   8,900
Operating Income     62,642   4.7 %   59,854
Gain from Sale of Businesses and Other Assets     —   (100 )%   3,650
Interest Expense     44,640   (15.5 )%   52,811

        Net sales for 2002 totaled $1,057.8 million, a 4.9% decrease from 2001 net sales of $1,112.5 million. In the fourth quarter of 2001, a general decline began in the nation's economy, which had a negative impact on Graphic's customers' business well into 2002. This, in turn, reduced sales orders for packaging and negatively impacted Graphic's sales in 2002.

        Sales for the year ended December 31, 2002 to Coors Brewing Company totaled $111.0 million, a decrease of 10% over sales for 2001. The brewery's orders from Graphic depend upon the brewery's sales results in products for which Graphic provides packaging.

        Graphic's business is largely within the United States. Graphic had sales to customers outside the United States, primarily in Canada, which accounted for 0.5% and 0.3% of net sales during 2002 and 2001, respectively.

        Consolidated gross profit was 12.0% and 13.7% in 2002 and 2001, respectively. The packaging industry has experienced over capacity issues which, when coupled with general downturns in the economy, create pressure to reduce prices and lower sales volume. Graphic continued its cost reduction efforts in 2002, but cost savings were more than offset by lower absorption of fixed costs due to lower sales and the following:

Future improvements in gross profit will depend upon management's ability to improve cost efficiencies and to maintain profitable, long-term customer relationships.

63


        Selling, general and administrative expenses, excluding goodwill amortization and asset impairment and restructuring costs, were 6.1% and 5.7% of net sales in 2002 and 2001, respectively. The increasing trend is attributable to increased information technology expense of $2.1 million in 2002, largely due to the increased spending for Graphic's new ERP manufacturing system, of which $1.3 million related to depreciation of this system.

        Consolidated operating income for 2002 was $62.6 million, an increase of $2.8 million, or 5%, over 2001. If goodwill amortization and asset impairment and restructuring charges are excluded from 2001 operating income, Graphic experienced a 30% drop in operating income in 2002. As discussed above, Graphic's lower sales, fiber prices and the Kalamazoo labor dispute contributed to a decline in profitability.

        Interest expense for 2002 and 2001 was $44.6 million and $52.8 million, respectively. The decrease reflects lower debt levels, lower market interest rates, and improvements in Graphic's interest rate spreads due to reductions in its leverage. Graphic capitalized interest of $0.3 million and $1.8 million in 2002 and 2001, respectively. Capitalized interest primarily related to the construction of Graphic's Golden, Colorado facility and its new enterprise resource planning system in 2001. In accordance with the GPC credit agreement and its interest rate risk-management policies, Graphic had contracts in place at December 31, 2001 to hedge the interest rates on its variable rate borrowings. In 2002 and 2001, Graphic incurred interest expense of $6.8 million and $4.8 million, respectively, related to these contracts. Graphic had no interest rate contracts in place at December 31, 2002. Interest expense also includes amortization of debt issuance costs of $3.1 million and $7.8 million in 2002 and 2001, respectively.

        Graphic's consolidated effective tax rate in 2002 was 39%, compared to 40% in 2001.

 
   Year Ended
December 31,
2001
   Percentage
Increase
(Decrease)
From Prior
Period
   Year Ended
December 31,
2000
 
   (in thousands of dollars)
Net sales   $ 1,112,535   1.0 % $ 1,102,590
Gross profit     152,277   9.9 %   138,611
Selling, general and administrative expenses     62,874   2.9 %   61,134
Goodwill amortization     20,649   —     20,634
Asset impairment and restructuring charges     8,900   58.4 %   5,620
Operating income     59,854   16.9 %   51,223
Gain from sale of businesses and other assets     3,650   (81.0 )%   19,172
Interest expense     52,811   (35.7 )%   82,071

        Net sales for 2001 were nominally greater than sales for 2000. However, if the sales from Graphic's Malvern plant that it sold in the fourth quarter 2000 are subtracted from 2000 sales, Graphic's 2001 improvement year-to-year was approximately 4%. Increased sales in 2001 were

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primarily the result of increased sales of promotional packaging to existing customers in the first three quarters of the year.

        Sales for the year ended December 31, 2001 to Coors Brewing Company totaled $122.8 million, an increase of $10.6 million, or 9%, over sales for 2000. As discussed above, orders from Coors Brewing Company fluctuate with its sales of products for which Graphic provides packaging.

        Graphic's business is largely within the United States. Graphic had sales to customers outside the United States, primarily in Canada, which accounted for 0.3% and 0.2% of net sales during 2001 and 2000, respectively.

        Consolidated gross profit was 13.7% and 12.6% of net sales in 2001 and 2000, respectively. The improved profit margins in 2001 were attributable to cost reduction through plant closings, reductions in work force and Six Sigma projects company-wide that have reduced costs and increased productivity.

        Selling, general and administrative expenses, excluding goodwill amortization, and asset impairment and restructuring costs, were 5.7% and 5.5% of net sales in 2001 and 2000, respectively. The increase reflects the increased spending for Graphic's new ERP system.

        Graphic has recorded asset impairment and restructuring charges totaling $8.9 million and $5.6 million in 2001 and 2000, respectively. In addition, asset impairment and restructuring reserves of $7.8 million related to the Perrysburg, Ohio plant closure were recorded in 2000 as a cost of the acquisition of Fort James Corporation's folding carton operations. Graphic reviews the relative cost effectiveness of its assets, including plant facilities and equipment, and the allocation of human resources across all functions while integrating acquisitions and responding to pressures on margins from industry conditions. As a result, Graphic has closed plants and downsized its workforce with the ultimate goal of maximizing its profits and optimizing its resources.

        2001: Graphic recorded an asset impairment charge of $3.5 million in the fourth quarter of 2001 in conjunction with the announcement of the planned closure of the Newnan, Georgia plant, a plant that was more expensive to operate than other plants in Graphic's system and produced margins below Graphic's expectations. Graphic shut down the plant's operations during 2002 and plans to sell the plant's building and land. The net book value of the Newnan building and land was approximately $1.7 million at December 31, 2002. The plant's business has been transferred to other plants in Graphic's system.

        Graphic recorded an asset impairment charge of $1.5 million in the first quarter of 2001 related to its Saratoga Springs, New York building. Operations of the Saratoga Springs plant were transferred to Graphic's other manufacturing locations and the building and real property were sold in June 2001 for cash proceeds of $3.4 million. No gain or loss was recognized on the June 2001 sale.

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        2000: Graphic announced the planned closure of its Perrysburg, Ohio folding carton plant in the second quarter of 2000. The Perrysburg plant was part of Fort James Corporation's folding carton operations and was eliminated due to excess capacity. The shutdown and restructuring plan for the Perrysburg facility included asset impairments totaling $6.5 million, which were recorded in the second quarter of 2000 as a cost of the acquisition, with a resultant adjustment to goodwill. Graphic completed the closure of the plant and transition of the plant's business to Graphic's other facilities by the end of 2000. On July 11, 2001, the remaining real estate was sold for cash proceeds of approximately $1.9 million. No gain or loss was recognized on the sale.

        2001: In connection with the announced closure of the Newnan, Georgia plant discussed above, Graphic recorded restructuring charges totaling $2.4 million in the fourth quarter of 2001. The charges relate to severance packages for 105 plant personnel that were communicated to employees in December 2001. The Newnan restructuring plan was essentially complete by the end of 2002, with approximately $0.5 million of severance and other restructuring payments left to be made in 2003.

        2000: In December 2000 Graphic announced a restructuring plan to reduce fixed-cost personnel. The plan included the elimination of approximately 200 non-production positions, including the closure of Graphic's folding carton plant in Portland, Oregon, and offered severance packages in accordance with its policies. The total cost of the reduction in force was $5.0 million, of which $3.0 million was recognized in the fourth quarter of 2000 results. The remaining cost of approximately $2.0 million was recognized in the first half of 2001 when severance packages were communicated to employees. The restructuring plan was complete at December 31, 2002.

        In connection with the announced closure of the Perrysburg, Ohio plant, restructuring reserves were recorded totaling approximately $1.3 million in the second quarter of 2000. The reserves related to the severance of approximately 100 production positions and other plant closing costs. Consistent with the asset impairments related to the Perrysburg closure, the restructuring costs were accounted for as a cost of the acquisition of Fort James Corporation's folding carton operations with a resultant adjustment to goodwill. At December 31, 2002, all the restructuring charges had been paid relating to the Perrysburg closure.

        Graphic recorded a restructuring charge of $3.4 million in the first quarter of 2000 for anticipated severance costs for approximately 185 employees as a result of the announced closure of the Saratoga Springs, New York plant. Graphic has completed the closure of the Saratoga Springs plant and the transition of the plant's business to other facilities. In the first quarter of 2001, Graphic reversed approximately $0.5 million of severance accruals which were not needed related to the Saratoga Springs facility shutdown to complete the Saratoga Springs restructuring plan. All of the remaining restructuring costs had been paid as of December 31, 2002.

        A 1999 plant rationalization plan included severance and related charges, primarily at Graphic's Lawrenceburg, Tennessee manufacturing plant. However, customer needs in Golden, Colorado and Lawrenceburg, coupled with the timing of the transition of business to Graphic's new Golden, Colorado facility, impacted the completion of the restructuring and resulted in the savings of approximately $800 thousand of anticipated restructuring costs. The 2000 restructuring expense is net of this $800 thousand benefit.

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        The following table summarizes accruals related to Graphic's restructurings (in millions):

 
   1999 Plant
Rationalization
Plan
   2000 S.
Springs
Plant
Closure
   2000
Perrysburg
Plant Closure
   2000/2001
Reduction
In Force
   2001
Newnan
Plant
Closure
   Totals
  
Balance, December 31, 1999   $ 1.9   $ —   $ —   $ —   $ —   $ 1.9  
2000 restructuring charges, net of reversals     (0.8 )   3.4     —     3.0     —     5.6  
2000 restructuring — Perrysburg     —     —     1.3     —     —     1.3  
Cash paid     (1.0 )   (2.0 )   (0.7 )   (0.1 )   —     (3.8 )
   
 
 
 
 
 
 
Balance, December 31, 2000     0.1     1.4     0.6     2.9     —     5.0  
2001 restructuring charges, net of reversals     —     (0.5 )   —     2.0     2.4     3.9  
Transfer of enhanced benefits to pension liabilities     —     —     —     (2.2 )   —     (2.2 )
Cash paid     (0.1 )   (0.8 )   (0.6 )   (2.5 )   —     (4.0 )
   
 
 
 
 
 
 
Balance, December 31, 2001     —     0.1     —     0.2     2.4     2.7  
Cash paid     —     (0.1 )   —     (0.2 )   (1.9 )   (2.2 )
   
 
 
 
 
 
 
Balance, December 31, 2002   $ —   $ —   $ —   $ —   $ 0.5   $ 0.5  
   
 
 
 
 
 
 

        Consolidated operating income for 2001 was $59.9 million, an increase of $8.7 million, or 17%, over operating income for 2000. Increases are due principally to strong sales and cost reductions.

        Graphic disposed of the following businesses and non-core assets during 2001 and 2000, for which the following pre-tax gains were recognized:

 
   Intangible Assets
 
   (in thousands)
2001:      
Cash proceeds   $ 3,650
Net book value     —
   
Gain recognized   $ 3,650
   
 
   Malvern
Plant
   Intangible
Assets
   Other
Long-lived
Assets
   Total
  
 
   (in thousands)

  
2000:                          
Cash proceeds   $ 35,000   $ 5,407   $ 2,600   $ 43,007  
Net book value     (23,635 )   —     (200 )   (23,835 )
   
 
 
 
 
Gain recognized   $ 11,365   $ 5,407   $ 2,400   $ 19,172  
   
 
 
 
 

        Interest expense for 2001 and 2000 was $52.8 million and $82.1 million, respectively. The decrease reflects lower debt levels, lower market interest rates, and improvements in Graphic's interest rate spreads due to reductions in its leverage. Graphic capitalized interest of $1.8 million and $1.1 million in 2001 and 2000, respectively. Capitalized interest primarily related to the

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construction of Graphic's Golden, Colorado facility and its new enterprise resource planning system in 2001 and 2000. In accordance with the GPC credit agreement and its interest rate risk-management policies, Graphic had contracts in place at December 31, 2001 to hedge the interest rates on its variable rate borrowings. In 2001, Graphic incurred interest expense of $4.8 million related to these contracts, and in 2000, Graphic incurred $0.3 million less interest expense as a result of these contracts. Interest expense also includes amortization of debt issuance costs of $7.8 million and $8.9 million in 2001 and 2000, respectively.

        Graphic's consolidated effective tax rate in 2001 was 40%, consistent with the effective tax rate in 2000.

Financial Condition, Liquidity and Capital Resources

        We broadly define liquidity as our ability to generate sufficient funds from both internal and external sources to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments.

        Cash and Equivalents increased by approximately $0.9 million in the first nine months of 2003. Cash provided by operating activities in the first nine months of 2003 totaled $61.7 million, compared to $59.5 million in the first nine months of 2002. Cash used in investing activities in the first nine months of 2003 totaled $158.6 million, compared to $43.2 million in the first nine months of 2002. This change was principally due to approximately $91.8 million in expenses and fees related to the merger and a 117.5% increase in purchases of property, plant and equipment. Cash provided by financing activities in the first nine months of 2003 totaled $97.7 million, compared to a use of cash of $13.1 million in the first nine months of 2002. This change was principally due to higher net borrowings under our revolving credit facilities as well as the net effect in connection with the related financing transactions. Depreciation and amortization during the first nine months of 2003 totaled approximately $104.9 million and is expected to be approximately $155 million to $160 million in 2003.

        Riverwood.    Cash and Equivalents increased by approximately $6.4 million in 2002. Cash provided by operating activities in 2002 totaled $87.5 million, compared to $87.7 million in 2001. This change was principally due to unfavorable changes in operating assets and liabilities, principally receivables (as a result of timing and higher net sales) and accounts payable (as a result of higher inventory balances), somewhat offset by Riverwood's lower net loss in 2002 as compared to 2001 resulting principally from its improved operating margin and lower interest expense. Cash used in investing activities in 2002 totaled $58.7 million, compared to $90.0 million in 2001. This change was principally due to the $29.5 million payment for the settlement of tax matters in 2001. Cash used in financing activities in 2002 totaled $23.6 million, compared to $9.2 million in 2001. In 2002, Riverwood used cash of $23.2 million to reduce debt and pay financing fees, call premiums and other refinancing costs. In 2001, Riverwood used cash of $9.2 million to reduce debt and pay financing fees and other refinancing costs. Depreciation and amortization during 2002 totaled approximately $133.8 million.

        Graphic.    Cash and cash equivalents increased by $21.9 million during 2002, which was the net effect of positive cash flows from operations totaling $122.1 million, capital expenditures of

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$27.7 million, and cash used in financing activities totaling $72.5 million. Cash generated by operations allowed for debt reduction of $47.4 million during 2002, and funded the purchase of capital assets, preferred stock dividend payments, and payment of debt issuance costs related to Graphic's February 2002 refinancing. Cash provided by operations decreased $29.6 million in 2002 compared to 2001, due primarily to reduced operating income before non-cash charges of depreciation, amortization and asset impairment charges. Reductions in working capital again provided positive cash flow from operations, but not to the same extent as in 2001, due primarily to an increase in accounts receivable during 2002. The continued reduction of inventory levels in 2002 again provided cash from operations, but not to the same extent as in 2001.

        Our liquidity needs arise primarily from debt service on our substantial indebtedness and from funding of our capital expenditures, ongoing operating costs and working capital.

        In connection with the merger, substantially all of Riverwood's and Graphic's then outstanding indebtedness was redeemed, repurchased or otherwise repaid and replaced with borrowings under the new credit facilities and indebtedness under the notes.

        The following financing transactions were entered into in connection with the merger:

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        As of September 30, 2003, we had outstanding $2.2 billion of long-term debt, consisting primarily of $850 million aggregate principal amount of notes, $1.275 billion of term loans under the new credit facilities, $31.5 million of revolving credit borrowings under the new credit facilities, and other debt issues and facilities.

        Principal and interest payments under the term loan facility and the revolving credit facility, together with principal and interest payments on the senior notes and the senior subordinated notes, represent significant liquidity requirements for us. The Tranche A term loans mature in 2009 and amortize in semi-annual installments over their term on the following amortization schedule: $3.75 million on December 31, 2003 and June 30, 2004, $7.5 million on December 31, 2004 and June 30, 2005, $11.25 million on December 31, 2005 and June 30, 2006, $15.0 million on December 31, 2006 and June 30, 2007, and $18.75 million on December 31, 2007, June 30, 2008, December 31, 2008 and at maturity. The Tranche B term loans mature in 2010 and amortize in semi-annual installments of $5.625 million payable on December 31 and June 30 of each year commencing on December 31, 2003 through December 31, 2009, with a final bullet payment of approximately $1.05 billion at maturity. The revolving credit facility matures in 2009.

        The loans under the new credit facilities bear interest at fluctuating rates based upon the interest rate option elected by us. The loans under the term loan facility bore interest as of September 30, 2003 at an average rate per annum of 3.9%. The senior notes and the senior subordinated notes bear interest at rates of 8.50% and 9.50%, respectively. The loans under the revolving credit facility bore interest as of September 30, 2003 at an average rate per annum of 4.4%.

        Interest expense in 2003 is expected to be approximately $145 million to $150 million, including approximately $7 million of non-cash amortization of deferred debt issuance costs. During the first nine months of 2003, cash paid for interest was approximately $139 million. Cash paid for interest during 2002 would have been $122.9 million on a combined pro forma basis after giving effect to the merger and the related financing transactions. See "Description of New Credit Facilities" and "Description of Notes" for a more detailed description of the new credit facilities and notes.

        At September 30, 2003, we had the following amounts of commitments, amounts outstanding and amounts available under revolving credit facilities:

(In millions of dollars)
   Total Amount of
Commitments
   Total Amount
Outstanding
   Total Amount
Available (A)
Revolving Credit Facility   $ 325.0   $ 31.5   $ 281.3
International Facilities     19.9     13.2     6.7
   
 
 
    $ 344.9   $ 44.7   $ 288.0
   
 
 

Note:

(A)
Our availability under our revolving credit facility has been reduced by the amount of standby letters of credit issued of approximately $12.2 million.

        We had $11.6 million of letters of credit outstanding as of September 30, 2003, used as security against our self-insurance obligations and an outstanding note payable. These letters of credit expire at various dates through 2003 and 2004 unless extended.

        We are required by our insurance company to have a standby letter of credit to secure payment of Workers' Compensation claims. The letter of credit, with a value of $0.4 million, expired on February 20, 2003 and was subsequently extended. The letter of credit will automatically be extended without amendment for successive one year periods from the current expiration date and

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any future expiration date unless at least 45 days prior to the expiration date we are notified that the financial institution elects not to renew.

        In addition, the Ohio Bureau of Workers' Compensation requires us to have a standby letter of credit for non-performance according to the conditions and obligations as provided under Workers' Compensation law. It is a further condition of the letter of credit to cover all injuries or occupational disease claims incurred in any period prior to and/or during the present term should we not perform. The letter of credit, with a value of $0.2 million, was renewed on September 20, 2002 and is automatically extended without amendment for successive one year periods from the current expiration date and any future expiration date unless at least 60 days prior to the expiration date we are notified that the financial institution elects not to renew.

        Based upon current levels of operations, anticipated cost-savings and expectations as to future growth, we believe that cash generated from operations, together with amounts available under our revolving credit facility and other available financing sources, will be adequate to permit us to meet our debt service obligations, capital expenditure program requirements, ongoing operating costs and working capital needs, although no assurance can be given in this regard. Our future financial and operating performance, ability to service or refinance our debt and ability to comply with the covenants and restrictions contained in our debt agreements will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control and will be substantially dependent on the selling prices and demand for our products, raw material and energy costs, and our ability to successfully implement our overall business and profitability strategies.

        We expect that our working capital and business needs will require us to continue to have access to the revolving credit facility or a similar revolving credit facility after the maturity date, and that we accordingly will have to extend, renew, replace or otherwise refinance such facility at or prior to such date. No assurance can be given that we will be able to do so. We have in the past refinanced and in the future may seek to refinance our debt prior to the respective maturities of such debt.

        We use interest rate swap agreements to fix a portion of our variable rate term loans to a fixed rate in order to reduce the impact of interest rate changes on future income. The difference to be paid or received under these agreements is recognized as an adjustment to interest expense related to that debt. At September 30, 2003, we had interest rate swap agreements with a notional amount of $990 million, under which we will pay fixed rates of 1.89% to 3.52% and receive three month LIBOR.

        The senior secured credit agreement, which governs the term loan facility and the revolving credit facility, imposes restrictions on our ability to make capital expenditures and both the senior secured credit agreement and the indentures governing the notes limit our ability to incur additional indebtedness. Such restrictions, together with our highly leveraged nature, could limit our ability to respond to market conditions, meet our capital spending program, provide for unanticipated capital investments or take advantage of business opportunities. The covenants contained in the senior secured credit agreement, among other things, restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of indentures under which the notes are issued, engage in mergers or consolidations, change the business conducted by us, make capital expenditures, or engage in certain transactions with affiliates.

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        The financial covenants in the senior secured credit agreement specify, among other things, the following requirements for each four quarter period ended during the following test periods:

Test Period
   Consolidated Debt to
Credit Agreement EBITDA
Leverage Ratio
   Credit Agreement
EBITDA to Consolidated
Interest Expense Ratio
October 1, 2003-December 30, 2004   6.40 to 1.00   2.00 to 1.00
December 31, 2004-December 30, 2005   6.15 to 1.00   2.25 to 1.00
December 31, 2005-December 30, 2006   5.75 to 1.00   2.35 to 1.00
December 31, 2006-December 30, 2007   5.25 to 1.00   2.50 to 1.00
December 31, 2007-December 30, 2008   4.75 to 1.00   2.75 to 1.00
December 31, 2008-June 30, 2010   4.50 to 1.00   2.90 to 1.00

        At September 30, 2003, we were in compliance with the financial covenants in the senior secured credit agreement. Our ability to comply in future periods with the financial covenants in the senior secured credit agreement will depend on our ongoing financial and operating performance, which in turn will be subject to economic conditions and to financial, business and other factors, many of which are beyond our control and will be substantially dependent on the selling prices for our products, raw material and energy costs, and our ability to successfully implement our overall business and profitability strategies. If a violation of any of the covenants occurred, we would attempt to get a waiver or an amendment from our lenders, although no assurance can be given that we would be successful in this regard. The senior secured credit agreement and the indentures governing the notes have covenants as well as certain cross-default or cross-acceleration provisions; failure to comply with these covenants in any agreement could result in a violation of such agreement which could, in turn, lead to violations of other agreements pursuant to such cross- default or cross-acceleration provisions.

        The senior secured credit agreement is collateralized by substantially all of our domestic assets.

        The table below sets forth EBITDA as defined in our senior secured credit agreement (defined below), which we refer to as credit agreement EBITDA. Credit agreement EBITDA as presented below is a financial measure that is used in our senior secured credit agreement. Credit agreement EBITDA is not a defined term under accounting principles generally accepted in the United States and should not be considered as an alternative to income from operations or net income as a measure of operating results or cash flows as a measure of liquidity. Credit agreement EBITDA differs from the term "EBITDA" (earnings before interest expense, income tax expense, and depreciation and amortization) as it is commonly used. In addition to adjusting net income to exclude interest expense, income tax expense, and depreciation and amortization, Credit agreement EBITDA also adjusts net income by excluding certain other items and expenses, as specified below. The senior secured credit agreement requires us to comply with a specified debt to credit agreement EBITDA leverage ratio and a specified credit agreement EBITDA to consolidate interest expense ratio for specified periods. The specific ratios are set out under "—Financial Condition, Liquidity and Capital Resources" above.

        Borrowings under the senior secured credit agreement are a key source of our liquidity. Our ability to borrow under the senior secured credit agreement is dependent on, among other things, our compliance with the financial ratio covenants referred to in the preceding paragraph. Failure to comply with these financial ratio covenants would result in a violation of the senior secured credit agreement and, absent a waiver or amendment from the lenders under such agreement, permit the acceleration of all outstanding borrowings under the senior secured credit agreement.

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        The calculation of credit agreement EBITDA for the periods indicated is set forth below. Credit agreement EBITDA for the nine months and the twelve months ended September 30, 2003 is calculated on a pro forma basis giving effect to the merger in accordance with the senior secured credit agreement. Credit agreement EBITDA for the nine months ended September 30, 2002 and twelve months ended December 31, 2002 is also calculated on a pro forma basis giving effect to the merger as if the senior secured credit agreement was in effect with respect to such periods.

 
   Nine Months Ended
   Twelve Months
Ended
   Twelve Months
Ended
  
 
   Sept. 30, 2003
   Sept. 30, 2002
  
(Amounts in Millions)
   Sept. 30, 2003
   Dec. 31, 2002
  
Unaudited Pro Forma Combined Income/(Loss) attributable to common stockholders before cummulative effect of change in accounting principle   $ (47.4 ) $ (10.4 ) $ (39.6 ) $ (2.4 )
Income Tax Expense     5.8     2.2     (0.3 )   (3.8 )
Interest Expense, Net     111.8     123.6     145.5     157.2  
Depreciation and Amortization     146.4     163.0     204.4     220.9  
Equity in Net Earnings of Affiliates     (1.1 )   (0.7 )   (1.5 )   (1.0 )
Other Non-Cash Charges (A)     17.1     4.5     23.6     10.8  
Merger Related Expenses     11.2     —     11.2     —  
Dividends from Equity Investments     0.7     0.6     0.7     0.6  
Loss on Early Extinguishment of Debt     46.6     27.3     46.6     27.3  
   
 
 
 
 
Credit Agreement EBITDA (B)   $ 291.1   $ 310.1   $ 390.6   $ 409.6  
   
 
 
 
 

Notes:

(A)
Other non-cash charges include non-cash charges for pension, postretirement and postemployment benefits, and amortization of premiums on hedging contracts deducted in determining net income.

(B)
Credit agreement EBITDA is calculated in accordance with the definitions contained in our senior secured credit agreement. Credit agreement EBITDA is defined as consolidated net income before consolidated interest expense, non-cash expenses and charges, total income tax expense, depreciation expense, expense associated with amortization of intangible and other assets, non-cash provisions for reserves for discontinued operations, extraordinary, unusual or non-recurring gains or losses or charges or credits, gain or loss associated with sale or write-down of assets not in the ordinary course of business, and any income or loss accounted for by the equity method of accounting.

        Our capital spending for the first nine months of 2003 was approximately $75.9 million, up 117.5% from $34.9 million in the first nine months of 2002. During the first nine months of 2003, we had capital spending of approximately $64.9 million for improving process capabilities (including approximately $17.0 million for our beverage multiple packaging operations initiative and approximately $3.8 million due to the addition of Graphic's capital spending), approximately $8.9 million for manufacturing packaging machinery and approximately $2.1 million for compliance with cluster rules. We expect total capital spending for 2003 to be between $120 million and $130 million which we expect to relate principally to improving our process capabilities (approximately $104 million to $114 million), the production of packaging machinery (approximately $13 million) and environmental cluster rules compliance (approximately $3 million). We are

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accelerating certain capital driven cost reduction projects that we anticipate will deliver benefits in 2004 and 2005. Over the next two years, we anticipate that we will spend approximately $22 million at its U.S. mills to comply with the cluster rules.

        Riverwood.    Riverwood's capital spending for 2002 was approximately $56.0 million, down 2.2% from $57.3 million in 2001. Capital spending during 2002 related primarily to improving Riverwood's process capabilities, manufacturing packaging machinery and environmental cluster rules compliance. During 2002, Riverwood had capital spending of approximately $44.9 million for improving process capabilities, approximately $10.2 million for packaging machinery manufacturing and approximately $0.9 million for compliance with the cluster rules.

        Graphic.    Graphic's capital spending for 2002 was $27.7 million, a decrease of 13% from $31.9 million in 2001. Capital spending related to normally recurring replacements of assets and upgrades to equipment and other assets necessary to support operations. Capital spending was higher in 2002 and 2001 compared to 2000, principally due to information technology upgrades throughout the company.

        As of December 31, 2002, we had approximately $1.2 billion of NOLs. These NOLs generally may be used by us to offset income earned in subsequent taxable years, but will expire between 2011 and 2022 if not used before that time.

        Section 382 of the Code imposes an annual limitation on the amount of taxable income that can be offset by NOLs that are attributable to the period preceding an ownership change. If a corporation undergoes an ownership change, the amount of post-change income for each taxable year after the ownership change that can be offset by pre-change NOLs will be limited to the product of:

Any unused section 382 limitation for a taxable year will be carried forward and will increase the section 382 limitation for the next post-change year.

        Generally, a corporation undergoes an ownership change if one or more 5-percent shareholders increase their percentage ownership of the corporation's stock, in the aggregate, by more than 50 percentage points over such shareholders' lowest percentage ownership at any time during the testing period (generally, the preceding three years). A 5-percent shareholder is generally a person who owns, directly or indirectly, at least 5 percent of the stock of the corporation at any time during the testing period. For this purpose, subject to special rules, shareholders who directly own less than 5 percent of a corporation's stock are aggregated and treated as a single 5-percent shareholder.

        Pursuant to the above rules and based on the information known to Graphic Packaging Corporation as of September 30, 2003, we believe that shifts in the ownership of Graphic Packaging Corporation's stock during the applicable testing period, including as a result of the issuance of Graphic Packaging Corporation's stock to the Graphic stockholders in the merger, have resulted in 5-percent shareholders having increased their percentage ownership of Graphic Packaging Corporation's stock by approximately 43 percentage points. Based on the above, we believe that we did not undergo an ownership change as of September 30, 2003. However, direct

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or indirect transfers of Graphic Packaging Corporation's stock after September 30, 2003 by one or more 5-percent shareholders (including pursuant to a registered offering of shares under the amended and restated registration rights agreement), or issuances or redemptions of Graphic Packaging Corporation's stock, when taken together with the shift in ownership resulting from the merger and other previous shifts in ownership of Graphic Packaging Corporation's stock, could result in an ownership change that would subject our NOLs to a section 382 limitation. If Graphic Packaging Corporation undergoes an ownership change during the two-year period following the merger, it is possible that for the purpose of determining the section 382 limitation, the fair market value of Graphic Packaging Corporation's stock would exclude the value attributable to the receipt by Graphic Packaging Corporation of assets of Graphic pursuant to the merger. Imposition of any section 382 limitation on our NOLs could have an adverse effect on our anticipated future cash flow.

Derivative Instruments and Hedging Activities

        We are exposed to fluctuations in interest rates on our variable rate debt and fluctuations in foreign currency transaction cash flows. We actively monitor these fluctuations and use derivative instruments from time to time to manage our exposure. In accordance with our risk management strategy, we use derivative instruments only for the purpose of managing risk associated with fluctuations in the cash flow of the underlying exposures identified by management. We do not trade or use derivative instruments with the objective of earning financial gains on interest or currency rates, nor do we use leveraged instruments or instruments where there are no underlying exposures identified. Our use of derivative instruments may result in short-term gains or losses and may increase volatility in our earnings.

        On January 1, 2001, we adopted SFAS No. 133 which requires all derivative instruments to be measured at fair value and recognized on the balance sheet as either assets or liabilities. In addition, all derivative instruments used in hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS No. 133. Upon adoption of SFAS No. 133, Riverwood recognized a one-time after-tax transition adjustment to decrease earnings by approximately $0.5 million and decrease other comprehensive income by approximately $1.1 million. These amounts have been presented as a cumulative effect of change in accounting principle in Riverwood's Consolidated Statement of Operations and Comprehensive (Loss) Income for the year ended December 31, 2001 incorporated by reference in this prospectus.

        The following is a summary of our derivative instruments as of September 30, 2003 and the accounting policies we employ:

        Hedges of Anticipated Cash Flows.    We use interest rate swap agreements to fix a portion of our variable rate term loan facility to a fixed rate in order to reduce the impact of interest rate changes on future income. The differential to be paid or received under these agreements is recognized as an adjustment to interest expense related to the debt. At September 30, 2003, we had interest rate swap agreements with a notional amount of $990 million, which expire on various dates through the years 2003 and 2007, under which we will pay fixed rates of 1.89% to 3.52% and receive three-month LIBOR.

        During the third quarter of 2003, we de-designated our interest rate swap agreements due to the early payment of the underlying debt as a result of the merger. As a result, we recognized a marked-to-market loss of approximately $3.6 million in our condensed consolidated statement of operations in interest expense for the nine months ended September 30, 2003. We subsequently re-designated these interest rate swap agreements to hedge our new debt issuance.

        During the nine months ended September 30, 2003, we entered into forward exchange contracts to hedge certain anticipated foreign currency transactions. The purpose of the forward exchange contracts is to protect us from the risk that the eventual functional currency cash flows

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resulting from anticipated foreign currency transactions will be adversely affected by changes in exchange rates. At September 30, 2003, various forward exchange contracts existed, which expire on various dates through the year 2004. When measured in U.S. dollars at quarter-end exchange rates, the notional amount of the purchased forward exchange contracts totaled approximately $128.8 million. Gains and losses, if any, related to these contracts are recognized in income when the anticipated transaction affects income. No amounts were reclassified to earnings during 2003 in connection with forecasted transactions that were no longer considered probable of occurring.

        The balance of $11.7 million recorded in accumulated derivative instruments loss at September 30, 2003 is expected to be reclassified into future earnings, contemporaneously with and offsetting changes in the related hedged exposure. The actual amount that will be reclassified to future earnings over the next twelve months may vary from this amount as a result of changes in market conditions.

        The following is a reconciliation of current period changes in the fair value of the interest rate swap agreements and foreign currency forward and option contracts which have been recorded as accumulated derivative instruments loss in our condensed consolidated balance sheets at September 30, 2003, December 31, 2002 and December 31, 2001 and as derivative instruments (loss) gain in our condensed consolidated statement of operations and comprehensive (loss) income for the nine months ended September 30, 2003.

(In millions of dollars)
    
  
SFAS No. 133 transition adjustment   $ (1.1 )
Reclassification to earnings     3.9  
Current period decrease in fair value     (7.4 )
   
 
Balance at December 31, 2001   $ (4.6 )
Reclassification to earnings     6.0  
Current period decrease in fair value     (7.5 )
   
 
Balance at December 31, 2002     (6.1 )
Reclassification to earnings     0.6  
Current period decrease in fair value     (6.2 )
   
 
Balance at September 30, 2003   $ (11.7 )
   
 

        During the nine months ended September 30, 2003, there was no material ineffective portion related to changes in the fair value of the interest rate swap agreements and no material ineffective portion related to change in the fair value of foreign currency forward and option contracts. Additionally, there were no amounts excluded from the measure of effectiveness.

        Derivatives not Designated as Hedges.    We have foreign currency forward contracts used to hedge the exposure associated with foreign currency denominated receivables. These contracts are presently being and will continue to be marked-to-market through the income statement.

        We enter into fixed price natural gas contracts designed to effectively hedge prices for a substantial portion of our natural gas requirements at our U.S. mills. The purpose of the fixed price natural gas contracts is to eliminate or reduce price risk with a focus on making cash flows more predictable. We have entered into contracts to hedge a portion of our natural gas requirements for our U.S. mills through 2004. These contracts are not accounted for as derivative instruments under SFAS No. 133, as they qualify for the normal purchase exemption.

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Environmental Matters

        We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations, including those governing discharges to air, soil and water, the management, treatment and disposal of hazardous substances, the investigation and remediation of contamination resulting from releases of hazardous substances, and the health and safety of employees. Our environmental liabilities and obligations may result in significant costs, which could negatively impact our financial condition and results of operations. Capital expenditures may be necessary for the combined company to comply with such laws and regulations, including the U.S. Environmental Protection Agency's regulations mandating stringent controls on air and water discharges from pulp and paper mills, or the cluster rules. We expect to spend approximately $22 million over the next two years to comply with the cluster rules. These costs have not been accrued, but rather are a part of our capital expenditure plan. Most of these costs are anticipated to be incurred in the first two quarters of 2005. Any failure by us to comply with environmental, health and safety laws or any permits and authorizations required thereunder could subject us to fines or sanctions. In addition, some of our current and former facilities, and facilities at which we disposed of hazardous substances, are the subject of environmental investigations and remediations resulting from releases of hazardous substances or other constituents. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations could be imposed in the future or for which indemnification claims could be asserted against us. We cannot predict with certainty future investigation or remediation costs or future costs relating to indemnification claims. Also, potential future closures of facilities may necessitate further investigation and remediation at those facilities.

        The federal Clean Air Act imposes stringent limits on air emissions, establishes a federal permit program (Title V) and provides for enforcement sanctions. Where necessary, our plants have received or submitted an application to the appropriate permitting authority for a Title V permit. We upgrade and replace equipment in order to comply with air quality standards.

        The federal Clean Water Act establishes a system of minimum national effluent standards for each industry, water quality standards for the nation's waterways, a permit program that provides discharge limitations and provides for enforcement sanctions. It also regulates releases and spills of oil and hazardous materials and wastewater and stormwater discharges. Many of our operations discharge to publicly owned treatment works and are subject to pretreatment requirements and limitations.

        The federal Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, establishes liability for waste generators, current and former site owners and operators and others in connection with releases of hazardous substances. In several instances, we have been identified as a potentially responsible party, or PRP, under CERCLA and similar state laws with respect to remediation of sites at which hazardous substances have been released. These actions are not material. We are involved in investigation and remediation projects for certain properties that we currently or formerly owned or operated. We have also received demands arising out of alleged contamination of various properties currently or formerly operated by us, and at certain waste disposal sites. Our costs in many instances cannot be reliably estimated until the remediation process is substantially underway or liability has been addressed.

        We could incur significant costs in connection with investigation and remediation activities and other environmental matters. Some current and former facilities have a history of industrial usage for which investigation and remediation obligations could be imposed in the future or for which indemnification claims could be asserted against us.

        The presence of soil and groundwater contamination has been investigated at portions of our Portland, Oregon plant. The site is listed on Oregon's inventory of contaminated sites. We

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periodically monitor groundwater conditions at the site. While we do not currently have any remediation obligations at the site, such obligations could arise in the future.

        Our Kalamazoo mill and carton plant have long histories of industrial usage. Portions of the property on which the mill is located have been found to contain some contamination. Remediation obligations could arise in the future at these facilities. See "Risk Factors — Risks Relating to Our Business — We are subject to environmental, health and safety laws and regulations, and costs to comply with such laws and regulations, or any liability or obligation imposed under such laws or regulations, could negatively impact our financial condition and results of operations."

Related Party Transactions — Coors Brewing Company

        We sell packaging products to Coors Brewing Company, a subsidiary of Adolph Coors Company. Coors Brewing Company accounted for approximately $15 million of our Net Sales for the three months ended September 30, 2003. The loss of Coors Brewing Company as a customer in the foreseeable future could have a material effect on our results of operations. The supply agreement, effective April 1, 2003, with Coors Brewing Company will not expire until December 31, 2006. Total sales under the packaging contract were a material source of revenue for Graphic, accounting for sales of approximately $111 million in 2002, accounting for approximately 10% of Graphic's 2002 net sales.

International Operations

        For 2002, before intercompany eliminations, our combined pro forma net sales from operations outside of the United States totaled approximately $342.0 million, representing approximately 15% of our combined pro forma net sales for such period. At December 31, 2002, pro forma for the merger, approximately 8% of our total net assets were denominated in currencies other than the U.S. dollar. We have significant operations in countries that use the Swedish krona, the British pound sterling, the Japanese yen, or the euro as their functional currencies. The effect of a generally weaker U.S. dollar against the euro and other European currencies, somewhat offset by the effect of a stronger U.S. dollar against the Japanese Yen, produced a net currency translation adjustment gain for Riverwood of approximately $13.0 million, which was recorded as an adjustment to shareholders' equity for the year ended December 31, 2002. The magnitude and direction of this adjustment in the future depends on the relationship of the U.S. dollar to other currencies. We cannot predict major currency fluctuations. Our revenues from export sales fluctuate with changes in foreign currency exchange rates. We pursue a currency hedging program in order to limit the impact of foreign currency exchange fluctuations on financial results. See " — Financial Instruments" below.

Financial Instruments

        The functional currency for most of our international subsidiaries is the local currency for the country in which the subsidiaries own their primary assets. The translation of the applicable currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Any related translation adjustments are recorded directly to shareholders' equity. Gains and losses on foreign currency transactions are included in Other Expense, Net for the period in which the exchange rate changes.

        We pursue a currency hedging program which utilizes derivatives to limit the impact of foreign currency exchange fluctuations on our consolidated financial results. Under this program, we have entered into forward exchange and option contracts in the normal course of business to hedge certain foreign currency denominated transactions. Realized and unrealized gains and losses on

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these forward contracts are included in the measurement of the basis of the related foreign currency transaction when recorded. The premium on an option contract is reflected in Other Expense, Net, during the period in which the contract expires. These instruments involve, to varying degrees, elements of market and credit risk in excess of the amounts recognized in the Consolidated Balance Sheets. We do not hold or issue financial instruments for trading purposes. See " — Quantitative and Qualitative Disclosure About Market Risk."

Impact of Inflation

        In the U.S., the inflation rate was approximately 1.6% for 2002. In Europe, where Riverwood had manufacturing facilities, the inflation rate for 2002 was approximately 2.0%. The impact of inflation on Graphic's financial position and results of operations has been minimal during 2002, 2001 and 2000 and is not expected to adversely affect future results.

Seasonality

        Our net sales, income from operations and cash flows from operations are subject to moderate seasonality with demand usually increasing in the spring and summer due to the seasonality of the worldwide beverage multiple packaging markets.

Recent Accounting Pronouncements

        In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," or SFAS No. 143, which is effective January 1, 2003. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. We adopted SFAS No. 143 effective January 1, 2003 and the adoption did not have a significant impact on our financial position and results of operations.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002," or SFAS No. 145. This statement rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," or SFAS No. 4, and amends SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." This Statement also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers." This statement amends SFAS No. 13, "Accounting for Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. We adopted SFAS No. 145 effective January 1, 2003 and the adoption resulted in a reclassification of expenses from Extraordinary Loss on Early Extinguishment of Debt to Loss on Early Extinguishment of Debt included in (Loss) Income before Income Taxes and Equity in Net Earnings of Affiliates of approximately $11.5 million, $8.7 million and $2.1 million for the years ended December 31, 2002, 2001 and 2000, respectively, associated with the rescission of SFAS No. 4.

        In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," or SFAS No. 146, which was effective December 31, 2002. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, and concludes that an entity's commitment to an exit plan does not by itself create a present obligation that meets the definition of a liability. This Statement also establishes that fair value is the objective of initial measurement of the liability. The provisions of this Statement are effective for exit or disposal activities that are initiated after

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December 31, 2002, with early application encouraged. We adopted SFAS No. 146 effective January 1, 2003 and the adoption did not have a significant impact on its financial position or results of operations.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation — Transition and Disclosure, Amendment of SFAS No. 123," or SFAS No. 148. This Statement provides additional transition guidance for those entities that elect to voluntarily adopt the provisions of SFAS No. 123, "Accounting for Stock Based Compensation." Furthermore, SFAS No. 148 mandates new disclosures in both interim and year-end financial statements within our Significant Accounting Policies footnote. We had elected not to adopt the recognition provisions of SFAS No. 123, as amended by SFAS No. 148.

        In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," or SFAS No. 149. This statement will be applied prospectively and is effective for contracts entered into or modified after June 30, 2003. The statement is applicable to existing contracts and new contracts entered into after June 30, 2003. We adopted SFAS No. 149 and the adoption did not have a significant impact on our financial position and results of operations.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity," or SFAS No. 150. This statement establishes standards for classification of certain financial instruments that have characteristics of both liabilities and equity in the statement of financial position. This Statement is effective for all contracts created or modified after the date the Statement was issued and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. We adopted SFAS No. 150 effective July 1, 2003 and the adoption did not have an impact on our financial position and results of operations.

        The Emerging Issues Task Force ("EITF") issued EITF No. 00-21, "Revenue Arrangements with Multiple Deliverables," or EITF No. 00-21, which is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. EITF No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. We adopted EITF No. 00-21 effective July 1, 2003 and the adoption did not have a significant impact on our financial position and results of operations.

        Financial Accounting Standards Board Interpretation, "Consolidation of Variable Interest Entities," or FIN No. 46, was issued in January 2003. FIN No. 46 defines a variable interest entity as a legal entity in which, among other things, the equity investments at risk are not sufficient to finance the operating and closing activities of the entity without additional subordinated financial support from the entity's investors. We are not a partner to any material variable interest entity.

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Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to market risk from changes in interest rates, foreign currency and commodity prices. To minimize these risks, we enter into various hedging transactions.

        We are exposed to changes in interest rates, primarily as a result of our short-term and long-term debt with both fixed and floating interest rates. We use interest rate swap agreements effectively to fix the LIBOR rate on $990.0 million of variable rate borrowings.

 
   December 31,
    
    
    
 
    
    
   Fair
Value
 
   Q4 2003
   2004
   2005
   2006
   2007
   Thereafter
   Total
 
   (In millions of dollars)
Total debt                                
  Fixed Rate   —   —   —   —   1.0   850.0   851.0   928.6
  Average Interest Rate   N.A.   N.A.   N.A.   N.A.   6.25 % 9.00 %      
  Variable Rate   19.3   26.5   34.5   41.6   48.8   1,137.8   1,308.5   1,315.7
  Average Interest Rate, spread range is 2.75% - 3.00%   LIBOR + spread   LIBOR + spread   LIBOR + spread   LIBOR + spread   LIBOR + spread            
 
   December 31,
    
    
    
  
 
    
    
   Fair
Value
  
 
   Q4 2003
   2004
   2005
   2006
   2007
   Thereafter
   Total
  
 
   (In millions of dollars)

  
Interest rate swap (Pay Fixed/Receive variable):                                  
  Notional   80.0   250.0   330.0   220.0   110.0   —   990.0   (13.8 )
  Average pay rate   3.520 % 2.521 % 2.173 % 2.849 % 3.270 %            
  Average receive rate   3-Month LIBOR   3-Month LIBOR   3-Month LIBOR   3-Month LIBOR   3-Month LIBOR              

        We enter into forward exchange contracts to effectively hedge substantially all accounts receivable and certain accounts payable resulting from transactions denominated in foreign currencies. The purpose of these forward exchange contracts is to protect us from the risk that the eventual functional currency cash flows resulting from the collection of the hedged accounts receivable or payment of the hedged accounts payable will be adversely affected by changes in exchange rates. We also enter into foreign currency options and forward exchange contracts to hedge certain anticipated foreign currency transactions. The purpose of these contracts is to protect us from the risk that the eventual functional currency cash flows resulting from anticipated foreign currency transactions will be adversely affected by changes in exchange rates.

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   December 31,
2002
   Fair
Value
  
 
   (In thousands
of dollars)

  
Forward Exchange Agreements:          
  Functional Currency:          
    Yen          
      Receive $US/Pay Yen   7,500   (113 )
      Weighted average contractual exchange rate   120.55      
     
Pay $US/Receive Yen
 
6,088
 
96
 
      Weighted average contractual exchange rate   120.63      
   
Euro
 
 
 
 
 
      Receive $US/Pay Euro   12,906   (412 )
      Weighted average contractual exchange rate   1.02      
     
Pay $US/Receive Euro
 
2,899
 
93
 
      Weighted average contractual exchange rate   1.02      
   
British Pound
 
 
 
 
 
      Receive $US/Pay GBP   3,568   (64 )
      Weighted average contractual exchange rate   1.58      
     
Pay $US/Receive GBP
 
2,827
 
39
 
      Weighted average contractual exchange rate   1.59      
   
Australian Dollar
 
 
 
 
 
      Receive $US/Pay AUD   3,671   (6 )
      Weighted average contractual exchange rate   0.56      
     
Pay $US/Receive AUD
 
1,092
 
6
 
      Weighted average contractual exchange rate   0.56      
   
Other(A)
 
 
 
 
 
      Net Receive various/Pay various   5,539   (15 )
      Weighted average contractual exchange rate   Various      
(A)
Represents forward exchange agreements involving the Swedish Kroner and several other countries' currencies, including the Euro, British Pound, Norway Kroner and the Denmark Kroner. In each instance, the fair value of the net position of our forward exchange agreements in the respective currencies is not material at December 31, 2002.

        We enter into fixed price natural gas contracts designed to effectively hedge prices for a substantial portion of our natural gas requirements at our U.S. mills. The purpose of the fixed price natural gas contracts is to eliminate or reduce price risk with a focus on making cash flows more predictable. We have entered into contracts to hedge a portion of our natural gas requirements for our U.S. mills through 2004. These contracts are not accounted for as derivative instruments under SFAS No. 133, as they qualify for the normal purchase exemption.

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BUSINESS

Overview

        We are a leading provider of paperboard packaging solutions to multinational consumer products companies. We focus on the paperboard packaging market where we provide companies with packaging solutions designed to deliver marketing and performance benefits at a competitive cost. In doing this, we capitalize on our low-cost paperboard mills and converting plants, our proprietary carton designs and packaging machines, and our commitment to customer service. We have long-term relationships with major companies, including Altria Group, Anheuser-Busch, General Mills, Miller Brewing Company, Coors Brewing Company, and numerous Coca-Cola and Pepsi bottling companies.

        We focus on providing a range of paperboard packaging products to major companies with well-recognized brands. Our customers have prominent market positions in the beverage, food, household products and tobacco industries. We supply our customers with packaging solutions designed to provide: (1) convenience through ease of carrying and storage for consumers; (2) a smooth surface printed with high-resolution, multi-color graphic images that help our customers improve brand awareness and visibility of their products on store shelves; and (3) durability, stiffness, wet and tear strength, abrasion and heat resistance, leakage protection, microwave management, and moisture, gas and solvent barriers for our customers' packaging. We offer customers our paperboard, cartons and packaging machines, either as an integrated solution or separately.

        Our packaging products are made from a variety of grades of paperboard. We make most of our packaging products from CUK board and CRB that we produce at our mills, and a portion from paperboard purchased from external sources.

Productivity and Profitability Initiatives

        During the past several years, we have implemented a number of long-term initiatives designed to improve productivity and financial performance.

        Since 1996, Riverwood has restructured its asset base to lower its cost structure. Riverwood divested non-core assets and closed or shut down underperforming facilities and equipment. It sold its U.S. timberlands/wood products business, closed packaging machinery manufacturing facilities in Marietta, Georgia, and closed other manufacturing facilities in Australia, Brazil, France and Germany. Riverwood made disciplined investments in its business, such as acquiring the remaining 50% interest in its Brazilian multiple packaging equity investment, opening a new beverage multiple packaging converting facility in Perry, Georgia, and converting the second paper machine at its mill in Macon, Georgia from linerboard to CUK board production.

        We have begun to implement an initiative designed to enhance the competitiveness of our beverage carton converting operations. This initiative is expected to add new manufacturing technology, expand press capacity and consolidate certain of its beverage carton converting operations.

        Our TQS initiative is the foundation of our continuous improvement program. TQS is designed to reengineer processes and systems to enhance the value delivered to its customers while simultaneously reducing its costs of operating its businesses. Riverwood began implementing TQS methodologies at individual operations in 1997 and, in the third quarter of 1999, created a dedicated internal TQS team that conducted detailed site audits at each of its North American and European manufacturing facilities. The team analyzed manufacturing processes by interviewing employees, reviewing customer complaints and using statistical data and first-hand observations to understand existing manufacturing systems and their supporting processes. The team then

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calculated each site's overall equipment effectiveness and manufacturing waste to identify deviations from standard quality and establish performance standards to measure Riverwood's progress towards achieving higher product quality and equipment reliability. Project teams at each of the sites were formed to bring the site up to specified quality standards utilizing Riverwood's TQS methodologies. The TQS program is being implemented across the entire company.

        Riverwood significantly reduced the annual cost of operating its business as a result of its cost reduction initiatives implemented during the period from 1996 through 2002. The TQS initiative generated cost savings in the following areas:

        Graphic adopted a company-wide Six Sigma process to reduce its variable manufacturing costs. The term "Six Sigma" refers to a measure of business capability. A company that performs at a Six Sigma level has demonstrated one of the following:

        To achieve Six Sigma, Graphic identified and addressed the cost of poor quality in both the manufacturing and transactional processes through a disciplined project methodology (Measure, Analyze, Improve and Control) executed by skilled project leaders called Black Belts and Green Belts. Graphic had 25 dedicated and numerous shared employees focused on achieving its Six Sigma objectives.

        Graphic also took steps to reduce its fixed manufacturing and corporate overhead costs, consisting of selling, general and administrative costs. In addition to closing plants and moving equipment and business to other facilities, it also undertook downsizing initiatives to reduce fixed personnel costs and used the Six Sigma program to make its transactional processes more cost effective.

Paperboard Packaging Industry Overview

        The paperboard packaging industry encompasses the manufacture and sale of cartons made of paperboard, excluding corrugated containers and solid fiber packaging used as primary packaging for liquids such as juice and milk. We estimate that shipments of folding cartons in the U.S. paperboard packaging industry totaled approximately $8.4 billion in 2002. Manufacturers of paperboard packaging provide cartons to primary manufacturers of dry food, frozen and perishable food, beverages, health and beauty aids, tobacco, and other non-food consumer products. The following chart provides a breakdown of the paperboard packaging industry by end-use markets.

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Paperboard Packaging End-Uses

GRAPHIC

Source: Based on 2002 data from The Trends 2003: Industry Outlook and Market Data Report, published by the Paperboard Packaging Council.

        Folding cartons are produced from various grades of paperboard that are printed, die cut, and sometimes creased, folded, and glued. The converting process may also include additional value-added processes such as laminating of films, foils and paperboard, embossing, stamping, windowing, metalizing, and applying special coatings.

        Paperboard used to manufacture folding cartons is made principally from bleached or unbleached virgin kraft paper or from 100% recycled fiber. The most common grades of folding carton paperboard are:

We estimate that approximately 55% of the paperboard converted for folding cartons is made from kraft paper, with the remaining portion being made from recycled fiber.

        Kraft paperboards are typically produced on a fourdrinier paper machine, while recycled paperboards are produced on multi-ply cylinder machines. However, we produce most of our approximately 330,000 tons of CRB using a fourdrinier 3-ply paper machine that we believe gives it a competitive advantage because it allows us to substitute materials within the plys. This improves cost and performance when compared to the production of other recycled paperboard grades. We produce approximately 1,100,000 tons of CUK board in the United States and approximately 180,000 tons of white lined chip board in Europe.

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        We focus on supplying packaging to two major end-use markets: beverage and food. Riverwood traditionally focused on the beverage end-use market, concentrating on beverage multiple packaging. Riverwood employed a strategy of providing a total packaging "system" including not only the paperboard packaging, but also the machinery used by our customers to set up and fill the cartons. Graphic focused on packaging for the various food end-use markets and, to a lesser extent, packaging for beverages, health and beauty aids, tobacco, and other non-food consumer products. Graphic employed dual strategies of (1) striving to be the low cost producer of cartons for high speed, high volume packaging lines and (2) developing and manufacturing value-added cartons that provide high performance graphics, barrier properties, scuff resistance, enhanced strength, and other desirable characteristics. Both companies had developed a large number of proprietary processes, structures, and designs that support these strategies.

Our Strategies

        Our objective is to expand our position as a leading provider of paperboard packaging solutions. To achieve this objective, we are implementing the following strategies.

        We will seek to expand our market share in our traditional markets. One way we plan to do this is by taking advantage of anticipated opportunities to cross-sell our packaging solutions to existing customers. At the same time, we are focusing on new product development to penetrate new markets and are seeking to develop new applications for the paperboard grades that we produce. We have developed a CUK board packaging carton for bottled water based on our Fridge Vendor® design and a CUK board product for juice pouches using our new Z-Flute® product. We believe that laminated product applications, traditionally used in consumer products packaging, will be a source of innovation and growth in beverage packaging. We also believe that there are opportunities to expand internationally. For instance, we believe that there is significant potential demand outside the United States for our microwaveable products, such as Micro-Rite® and Qwik Wave®, which are currently sold predominantly in North America.

        We believe that the merger enhances our business capabilities and provides our customers with more comprehensive and value-added solutions. First, we believe that the combination of Riverwood's expertise in providing integrated packaging solutions to its customers (that is, paperboard, cartons and packaging machines as an integrated solution designed to provide customers with greater packaging line and supply chain efficiencies) with Graphic's sales and marketing expertise provides us with significant customer and revenue growth opportunities. Second, the combination of the complementary product offerings of Riverwood and Graphic allows us to offer a broader set of products to satisfy the needs of our customers who increasingly require a diverse range of packaging solutions. Third, our international presence provides us with a platform from which to serve multinational customers in international markets. In addition, we believe that the combined company's product development efforts enhance our ability to develop and market new paperboard packaging products. We anticipate that these enhanced capabilities will result in the ability to capture new customer accounts, and further penetrate existing customer accounts.

        To continue to be a leader in the paperboard packaging industry, we must continue to differentiate our products by developing innovative, proprietary technologies to create new

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packaging solutions for our customers. We continue to invest in new technologies and improvements to our existing technologies. We place significant importance on designing our products to meet customers' needs. Examples of our proprietary technology include:

        We plan to continue to reduce our costs by improving our processes and systems. Riverwood and Graphic have a track record of reducing operating costs significantly by implementing company-wide standardized initiatives, including significant investments in advanced technology, process improvements, and plant and press optimization. We believe that there are still significant opportunities to apply our TQS initiative and Six Sigma process to improve productivity and efficiency and realize additional cost savings. In addition, we have identified significant cost savings associated with the merger. Based on our expectations of our future performance, we estimate that we will achieve approximately $52 million of synergies by the third year after the closing of the merger. We are on schedule in merger integration and realizing synergies primarily in our corporate and supply chain operations. We cannot make assurances as to the amount or timing of synergies, if any, that may be realized. Potential difficulties in realizing such synergies include, among other things, integrating personnel, combining different corporate cultures and integrating facilities.

        We intend to use a significant portion of our anticipated future cash flows to repay a portion of our outstanding debt in the future. We believe that, as a result of the merger, we will benefit from enhanced revenue growth and margins, generating significant cash flow. We will continue to employ working capital controls and discipline in making capital expenditures to manage the cash requirements of our operations. In addition, the refinancing of our outstanding debt in connection with the merger results in lower cash interest expense in the future. Finally, we anticipate applying existing net operating loss carryforwards to reduce future cash income tax expense, although we may be limited in the future in the amount of NOLs that we can use to offset income.

Paperboard Packaging

        We provide paperboard packaging products to multinational consumer products companies. We focus on providing companies with packaging solutions designed to deliver marketing and performance benefits at a competitive cost. We supply our customers with paperboard cartons and carriers designed to protect and contain our customers' products while providing:

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In doing this, we capitalize on our low-cost paperboard mills and converting plants, proprietary carton designs and packaging machines, and our commitment to customer service.

        We offer customers our paperboard, cartons and packaging machines, either as an integrated solution or separately. We produce paperboard at our mills, print and cut, or convert, the paperboard into cartons at our converting plants, and design and manufacture specialized, proprietary packaging machines designed to package bottles and cans and, to a lesser extent, non-beverage consumer products. We also sell paperboard produced by us to independent converters. We install our packaging machines at customer plants under long-term leases and provide value-added support, service and advanced performance monitoring of the machines.

        We offer a variety of laminated, coated, and printed structures that are produced from our CUK board and our CRB, as well as other grades of paperboard that are purchased from third party suppliers. We produce cartons using diverse structural designs and combinations of paperboard, films, foils, metalization, holographics, embossing and other characteristics that are tailored to the needs of individual products. We provide a wide range of packaging solutions to consumer products companies in the following end-use markets:

        For our beverage multiple packaging customers, we supply beverage cartons in a variety of designs and formats, including 6, 12 and 24 multi-packs. Our proprietary beverage packaging machines package cans, bottles and other beverage containers into our beverage cartons at high speeds. Our packaging machines are designed to create pull-through demand for our CUK board. We seek to increase the use by customers of our integrated packaging solutions which, we believe, improve our revenue opportunities, enhance customer relationships, provide customers with greater packaging line and supply chain efficiencies, and overall cash benefits, and expand opportunities for us to provide value added support and service. We enter into annual or multi-year carton supply contracts with our beverage packaging customers, which generally require the customer to purchase a fixed portion of its carton requirements from us. Particularly in our international operations, our CUK board may be sold to and converted by joint ventures and licensees of our beverage carton machines who, in turn, sell converted beverage cartons to end-users for use on our proprietary packaging machines. We also sell CUK board, which we produce, to customers for use on third-party packaging machines.

        We develop packaging applications to meet the needs of our customers. Described below are a number of characteristics of our packaging products.

        Strength Packaging.    Through our application of materials and package designs, we provide sturdiness to meet a variety of packaging needs, including tear and wet strength, puncture resistance, durability and compression strength (providing stacking strength to meet store display

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packaging requirements). We achieve such sturdiness characteristics through diverse combinations of paperboard, film laminates and metallized layers tailored on a product-by-product basis.

        Promotional Packaging.    We offer diverse promotional packaging options that help differentiate our customers' products. We provide products designed to enhance point-of-purchase and marketing opportunities through package shapes, portability, metalization, holographics, embossing and micro-embossing, brilliant high-tech inks, specialized coatings, hot-stamp metal foil surfaces, in-pack and on-pack customized promotions, inserts, windows and die-cuts. These promotional enhancements improve brand awareness and visibility on store shelves. For example, we produce a high-tech, "shaped" microwave popcorn bag that appeals to children and health conscious adults. The proprietary package highlights the product's microwave performance.

        Convenience Packaging.    Our packaging solutions improve package usage and food preparation:

        As an example of convenience packaging, we produce a new microwavable product for frozen pizza designed to microwave the pizza in about two minutes. This product has a triangular design with a built-in "susceptor" sleeve which ensures proper microwave cooking.

        Barrier Packaging.    We provide packages that protect against moisture, grease, oil, oxygen, sunlight, insects and other potential product-damaging factors. Our barrier technologies integrate a variety of specialized laminate and film layers, metallized package layers, package sealing, applied coatings, and other techniques — all customized to specific barrier requirements.

        We convert CUK board and CRB, as well as other grades of paperboard, into cartons at 30 carton converting plants at 28 sites that we operate in the United States, Canada, the United Kingdom, Spain, France and Brazil, as well as through converting plants associated with our joint ventures in Japan and Denmark and licensees in other markets outside the United States. The converting plants print, cut and glue paperboard into cartons designed to meet customer specifications. These plants primarily utilize roll-fed printing presses with in-line cutters and web presses to print and cut paperboard. Printed and cut cartons are in turn glued and shipped to our customers.

        Our U.S. converting plants are dedicated to converting paperboard produced by us as well as paperboard supplied by outside producers into cartons. Because these presses have high cutting and printing speeds, they result in less labor hours per ton of cartons produced. We intend to continue to invest in our domestic converting plants to improve their process capabilities.

        Our international converting plants convert paperboard produced by us, as well as paperboard supplied by outside producers, into cartons. Our converting plants outside of the United States are designed to meet the smaller volume orders of these markets.

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        CUK Board Production.    We are the larger of two worldwide producers of CUK board. CUK board is a specialized high-quality grade of paperboard with excellent wet and tear strength characteristics and printability for high resolution graphics that make it particularly suited for a variety of packaging applications. We produce CUK board at our West Monroe, Louisiana mill and our Macon, Georgia mill. We have three paperboard machines at our West Monroe mill and two paperboard machines at our Macon mill. These mills have a current total combined annual production capacity of approximately 1.2 million gross tons of CUK board.

        Our CUK board production at our West Monroe and Macon mills was approximately 688,000 tons and 480,000 tons, respectively, for 2002. CUK board is manufactured from pine and hardwood fibers and, in some cases, recycled fibers, such as old corrugated containers and clippings from our converting operations. Virgin fiber is obtained in the form of wood chips or pulp wood acquired through open market purchases or our long-term purchase contract with Plum Creek Timber Company, L.P. See "— Energy and Raw Materials." These chips are chemically treated to form softwood and hardwood pulp, which are then blended (together, in some cases, with recycled fibers). In the case of carrierboard, a chemical is added to increase moisture resistance. The pulp is then processed through the mill's paper machines, which consist of a paper-forming section, a press section (where water is removed by pressing the wet paperboard between rolls), a drying section and the coating section. Coating on CUK board, principally a mixture of pigments, binding agents and water, provides a white, smooth finish, and is applied in multiple steps to achieve desired levels of brightness, smoothness and shade. After the CUK board is coated, it is wound into rolls, which are then shipped to our converting plants or to outside converters.

        CRB Production.    Our CRB is a grade of recycled paperboard which offers higher quality graphics, strength and appearance characteristics when compared to other recycled grades. We produce CRB at our Kalamazoo, Michigan mill. With approximately 330,000 tons of annual production capacity, the mill is one of the largest CRB facilities in North America. The mill's paperboard is specifically designed to maximize throughput on high-speed web-litho presses. We consume approximately 80% of the Kalamazoo mill's output in our carton converting operations, and the mill is an integral part of our low cost converting strategy.

        White Lined Chip Board.    We produce white lined chip board at our mill in Norrköping, Sweden, and shipped approximately 150,000 tons of such board during 2002. White lined chip board is used for a variety of folding carton applications principally throughout Europe. Our white lined chip board incorporates recycled fibers to meet the demands of the European marketplace.

        We have four research and design centers located in Golden, Colorado, Marietta, Georgia, Neenah, Wisconsin, and Mississauga, Ontario, Canada. At these centers, we design, test, and manufacture prototype packaging for consumer products packaging applications. We design and test packaging machinery at our Marietta, Georgia product development center. Our Golden, Colorado product development center contains full size pilot lines that can simulate the manufacturing environments of customers. We utilize a network of computer equipment at our converting facilities to provide automated computer-to-plate graphic services designed to improve efficiencies and reduce errors associated with the pre-press preparation of printing plates.

        Our engineers create and test packaging designs, processes and materials based on market and customer needs, which are generally characterized as enhanced stacking or tear strength, promotional or aesthetic appeal, consumer convenience, or barrier properties. Concepts go through a rigorous review process through their development to ensure that our resources are being focused on those projects that are most likely to succeed commercially. We also work to refine and

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build on current proprietary materials, processes and designs. One example of our product development is microwaveable food packaging that requires a high degree of sophisticated technology to design packaging capable of actively managing microwave energy to cook food thoroughly and evenly. Another example is the development of specialized laminated packaging structures that provide both the strength of corrugated packaging and the superior graphics of cartons at a competitive price. We also seek to identify consumer needs and meet those needs through structural design, such as our Fridge Vendor®, a carton that dispenses beverage cans in an orderly fashion and fits easily between refrigerator shelves.

        At our product development center in Marietta, Georgia, we integrate carton and packaging machinery designs to create multiple packaging solutions to meet customer needs. We also manufacture and design packaging machines for beverage multiple packaging and other consumer products packaging applications at our principal U.S. manufacturing facility in Crosby, Minnesota and at a facility near Barcelona, Spain. By manufacturing packaging machines in one U.S. and one European location, we expect to improve customer service, simplify our work processes and reduce costs. We lease substantially all of our packaging machines to customers, typically under machinery use agreements with original terms of three to six years.

        We employ a "pull-through" marketing strategy for our beverage multiple packaging customers, the key elements of which are (1) the design and manufacture of proprietary packaging machines capable of packaging plastic and glass bottles, cans and other primary containers, (2) the installation of the machines at beverage customer locations under multi-year machinery use arrangements and (3) the development of propriety beverage cartons with high-resolution graphics for use on those machines.

        Our packaging machines are designed to package polyethylene terephthalate, or PET bottles and glass bottles, cans and other primary beverage containers, as well as non-beverage consumer products, using cartons designed by us, made from our CUK board and converted into cartons by us, our joint venture partners or our licensees. In order to meet customer requirements, we have developed an extensive portfolio of packaging machines consisting of three principal machinery lines, including over eight different models of packaging machines. Our machines package cans and PET or glass bottles in a number of formats including baskets, clips, trays, wraps and fully enclosed cartons. These machines have packaging ranges from 2 to 36 cans per package and have the ability to package cans at speeds of up to 3,000 cans per minute.

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        We manufacture and lease packaging machines to our non-beverage consumer products packaging customers, internationally and in the United States, but to a lesser extent than our beverage multiple packaging customers. Our non-beverage consumer products packaging machines are designed to package cans or bottles in wraps or fully enclosed cartons. We also manufacture ancillary equipment, such as machines for taping cartons and inserting coupons in cartons.

        We have introduced innovative beverage packaging machines such as our Twin-Stack® and Quickflex®. The double-layer multiple packaging design of Twin-Stack® cartons provides better portability and a more visible billboard compared with conventional large-volume multipacks. Double layer packaging allows for cans to be stacked vertically in a double layer in the same paperboard carton. Our other lines of packaging machines include the Marksman®, a machine designed to package bottles, cans, juice boxes and dairy products in a variety of wrap configurations. Our newest packaging machines incorporate an advanced performance monitoring system. This system provides continuous monitoring and reporting to us in real time over the Internet of the performance of packaging machines installed at customers' sites.

        We market our products described in the table below under the following brand names:

Packaging Product Brand Name
   End-use Markets
   Characteristics
Aqua-Kote®   Beverage, including beer, soft drinks and water   •  Specialized, high quality paperboard
•  Superior surface performance and wet strength
•  High resistance to tear, puncture and corner crush
•  Printability for high quality graphics
Composipac®   Beverages, food containers, powdered detergents, soap and other household products   •  High quality graphics, including metallized high gloss effects and holographic imaging
•  Enhanced abrasion protection and strength
•  Moisture, air or other special barrier properties
E-Coat® and E-Coat Plus®   Food containers   •  Laminated food containers made from CRB
•  Grease resistant dual-ovenable coatings

Fridge Vendor®
 
Beverages
 
•  Specialized, high quality paperboard
•  High quality graphics printing ability
•  Superior tear and wet strength
•  Allows for convenient dispensing and storage
IntegraPak™   High barrier food containers and other household products   •  Replacement for bag-in-box cartons
•  Interior-lined, high barrier carton
•  High barrier, high strength film and board laminations
•  Single and multiple opening features
         

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Maravac®   Bacon and bacon products   •  Wax impregnated, poly coated packaging
•  Approved for direct food contact
Multiboard®   Frozen foods, dry foods, toiletries, pet foods   •  Superior strength
•  Superior cost characteristics
•  Multilayer structure with high ply bonding
•  Good creases and stackability
Micro-Rite® and Micro-Flex®   For microwave-active foods, including pizza, fruit pies, pot pies, pastries, casserole dishes and popcorn   •  Offers controlled, predictable oven and microwave heating
•  Foil patterns laminated to paper or paperboard
•  Eliminates the need for outer cartons, while providing moisture barrier and grease resistance
Omni-Kote™   Dry and frozen foods, toys, dairy, electronic components and office supplies   •  Low cost
•  Made from solid unbleached sulfate virgin kraft fiber
•  High resistance to tear, puncture and corner crush
Pacesetter®   Cereal and other consumer products that utilize high quality clay-coated recycled paperboard   •  Made from clay coated recycled paperboard
Pearl-Kote®   Hardware, automotive, canned foods, detergent, electronics   •  Specialized, high quality paperboard
•  Superior surface performance
•  Printability for high quality graphics
•  Made from solid unbleached sulfate virgin kraft fiber
•  High resistance to tear, puncture and corner crush
Qwik Wave® Susceptor, Qwik Wave® Focus and Quilt Wave™   For microwave-active products, including pizza, fruit pies, pot pies, pastries and casserole dishes   •  CRB laminated by susceptor material
•  Using advance technology, including special materials, transforms microwaves into thermal energy for heating
Tite-Pak®   French fries packaging for institutional customers   •  Kraft paper, poly heat sealed bags

Z-Flute®
 
Juice pouches, frozen foods, dry foods, confectionery, toys, software, appliances and electronic components
 
•  Cost efficient compared to corrugated packaging
•  Superior strength and structural characteristics
•  High quality graphics printing ability and elimination of corrugated "washboard effect"
•  Less damage through distribution
•  Improved supply chain efficiencies

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        We market our paperboard and paperboard-based products principally to multinational brewers, soft drink bottlers, food companies, tobacco companies and other well-recognized consumer products companies. We also sell paperboard in the open market to independent paperboard converters. We review a customer's credit history before extending credit to the customer of which the payment terms are generally 30 days domestically, but vary internationally according to local business practices.

        Our major customers for beverage cartons include Anheuser-Busch Companies, Inc., Miller Brewing Company, Coors Brewing Company, numerous Coca-Cola and Pepsi bottling companies, Interbrew and Asahi Breweries. We also sell beverage paperboard in the open market to independent converters, including licensees of our proprietary carton designs, for the manufacture of beverage cartons.

        Our non-beverage consumer products packaging customers include Altria Group, General Mills, Nestle, Unilever and Mattel. We also sell our CUK board to numerous independent converters who convert the CUK board into cartons for consumer products. We have entered into agreements with a number of major independent converters. Under the terms of these agreements, the converters agree to purchase a significant portion of their CUK board requirements from us and to assist us in customer development efforts designed to grow the market for CUK board. The terms of these agreements include certain limitations on our ability to raise the selling prices of our CUK board.

        Distribution is primarily accomplished through direct sales offices in the United States, Argentina, Australia, Brazil, Denmark, Germany, Hong Kong, Italy, Japan, Mexico, Singapore, Spain, Sweden and the United Kingdom and, to a lesser degree, through broker arrangements with third parties. Our selling activities are supported by our technical and developmental staff.

        During 2002, Riverwood had two customers, Anheuser-Busch Companies, Inc. and Miller Brewing Company, who represented approximately 16% and 12%, respectively, of its net sales. During 2002, Graphic had three customers, Altria Group, General Mills, Inc. and Coors Brewing Company, who represented approximately 20%, 11% and 10%, respectively, of its gross sales.

        We are a party to joint ventures with Rengo Company Limited and Danapak Holding A/S, in which we own 50% and 60%, respectively, to market machinery-based packaging systems in Japan and Scandinavia, respectively. The joint ventures cover CUK board supply, use of proprietary carton designs and marketing and distribution of packaging systems.

        A relatively small number of large competitors hold a significant portion of the paperboard packaging industry. Our primary competitors include Caraustar Industries, Inc., Field Container Company, L.P., Gulf States Paper Corporation, International Paper Company, MeadWestvaco Corporation, Packaging Corporation of America, R.A. Jones Co, Inc., Rock-Tenn Company and Smurfit-Stone Container Corporation.

        There are only two major producers in the United States of CUK board, MeadWestvaco Corporation and us. We face significant competition in our CUK board business from MeadWestvaco as well as from other manufacturers of packaging machines. Like us, MeadWestvaco produces and converts CUK board, designs and places packaging machines with customers and sells CUK board in the open market.

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        In beverage multiple packaging, cartons made from CUK board compete with plastics and corrugated packaging for packaging glass or plastic bottles, cans and other primary containers. Although plastics and corrugated packaging are priced lower than CUK board, we believe that cartons made from CUK board offer advantages over these materials, in areas such as distribution, high quality graphics, carton designs, package performance, environmental friendliness and design flexibility.

        In non-beverage consumer products packaging, our paperboard competes principally with MeadWestvaco's CUK board, CCN and SBS and, internationally, white lined chip board and folding boxboard. Paperboard grades compete based on price, strength and printability. CUK board and CRB have generally been priced in a range that is lower than SBS board. CUK board has slightly better tear strength characteristics than SBS board. There are a large number of producers in paperboard markets, which are subject to significant competitive and other business pressures. Suppliers of paperboard compete primarily on the basis of price, strength and printability of their paperboard, quality and service.

Containerboard/Other

        In the United States, we manufacture containerboard — linerboard, corrugating medium and kraft paper — for sale in the open market. Corrugating medium is combined with linerboard to make corrugated containers. Kraft paper is used primarily to make grocery bags and sacks. Our principal paper machines have the capacity to produce both linerboard and CUK board. We have in the past used these machines to produce linerboard. We have shifted significant mill capacity away from linerboard production on our CUK board machines to more profitable packaging applications and intend to stop producing linerboard. We continue to operate two paper machines dedicated to the production of corrugating medium and kraft paper at our West Monroe mill.

        In 2002, we had net sales in our containerboard business of $81.6 million. In 2002, we shipped approximately 8,000 tons of linerboard from the Macon mill and approximately 122,000 tons of corrugating medium, 37,000 tons of kraft bag paper and 46,000 tons of linerboard from our West Monroe mill. In 2002, we also shipped approximately 22,000 tons of various other paperboard products.

        Our primary customers for our U.S. containerboard production are independent and integrated corrugated converters. We sell corrugating medium and linerboard through direct sales offices and agents in the United States. Outside of the United States, linerboard is primarily distributed through independent sales representatives.

        Our containerboard business segment operates within a highly fragmented industry. Most products within this industry are viewed as commodities, consequently, selling prices tend to be cyclical, being affected by economic activity and industry capacity.

Energy and Raw Materials

        Pine pulpwood, hardwood, paper and recycled fibers, including old corrugated containers, used in the manufacture of paperboard, and various chemicals used in the coating of paperboard, represent the largest components of our variable costs of paperboard production. The cost of these materials is subject to market fluctuations caused by factors beyond our control. Old corrugated container pricing tends to be very volatile. With the October 1996 sale of Riverwood's timberlands in Louisiana and Arkansas, we now rely on private landowners and the open market for all of our pine pulpwood, hardwood and recycled fiber requirements, except for CUK board clippings that are obtained from our converting operations. Under the terms of the sale of those timberlands, we entered into a 20-year supply agreement with the buyer, Plum Creek Timber Company, L.P., with a 10-year renewal option, for the purchase by us, at market- based prices, of a majority of the West

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Monroe mill's requirements for pine pulpwood and residual chips, as well as a portion of our needs for hardwood at the West Monroe mill. An assignee of Plum Creek supplies residual chips to us pursuant to this supply agreement. We purchase the remainder of the wood fiber used in CUK board production at the West Monroe mill from other private landowners in this region. We believe that adequate supplies of open market timber currently are available to meet our fiber needs at the West Monroe mill.

        The Macon mill purchases most of its fiber requirements on the open market, and is a significant consumer of recycled fiber, primarily in the form of clippings from our domestic converting plants as well as old corrugated containers and other recycled fibers. We have not experienced any significant difficulties obtaining sufficient old corrugated containers or other recycled fibers for our Macon mill operations, which we purchase in part from brokers located in the eastern United States. Old corrugated containers pricing, however, tends to be very volatile since it is based largely on the demand for this fiber by recycled paper and containerboard mills. The Macon mill purchases substantially all of its pine pulpwood and hardwood requirements from private landowners in central and southern Georgia. Because of the adequate supply and large concentration of private landowners in this area, we believe that adequate supplies of pine pulpwood and hardwood timber currently are available to meet our fiber needs at the Macon mill.

        The Kalamazoo mill produces paperboard made primarily from OCC, old newsprint, or ONP, and boxboard clippings. ONP and OCC recycled fibers are purchased through brokers at market prices and, less frequently, purchased directly from sources under contract. Boxboard clippings are provided by our folding carton converting plants as well as purchased through brokers. The market price of each of the various recycled fiber grades fluctuates with supply and demand. We have many sources for our fiber requirement and believe that the supply is adequate to satisfy our needs.

        Energy, including natural gas, fuel, oil and electricity, represents a significant portion of our manufacturing costs. We have entered into fixed price contracts designed to mitigate the impact of future energy cost increases through 2004, and will continue to evaluate our hedge position. We believe that higher energy costs will negatively impact our results for 2003. Since negotiated contracts and the market largely determine the pricing for our products, we are limited in our ability to pass through to our customers any energy or other cost increases that we may incur in the future.

        We purchase a variety of other raw materials for the manufacture of our paperboard and cartons, such as inks, aluminum foil, plastic filling, plastic resins, adhesives, process chemicals and coating chemicals such as kaolin and titanium dioxide. While such raw materials are readily available from many sources, and we are not dependent upon any one source of such raw materials, we have developed strategic long-standing alliances with some of our vendors, including the use of multi-year supply agreements, in order to provide a guaranteed source of raw materials that satisfies customer requirements, while obtaining the best quality, service and price.

        In addition to paperboard that is supplied to our converting operations from our own mills, we convert a variety of other paperboard grades such as SBS, SUS and uncoated recycled board. We purchase a significant portion of our paperboard requirements, including additional CRB, from outside vendors, including through multi-year supply agreements.

Seasonality

        Our net sales, income from operations and cash flows from operations are subject to moderate seasonality with demand usually increasing in the spring and summer due to the seasonality of the worldwide beverage multiple packaging markets.

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Working Capital

        We continue to focus on reducing working capital needs and increasing liquidity. Our working capital needs arise primarily from maintaining a sufficient amount of inventories to meet the delivery requirements of our customers and our policy to extend credit to customers. We review a customer's credit history before extending credit of which the payment terms are generally 30 days domestically, but vary internationally according to local business practices.

Research, Development and Engineering

        Riverwood's total research, development and engineering expenses were approximately $5.2 million, $5.1 million and $4.6 million in the years ended December 31, 2002, 2001 and 2000 respectively, and primarily related to packaging machines and new products.

        Graphic's total research and development expenditures were $4.0 million, $4.1 million and $4.7 million in the years ended December 31, 2002, 2001 and 2000, respectively, and primarily related to the development of innovative technology, materials, products and processes for consumer packaging products using advanced and cost-efficient manufacturing processes.

        Our research and development staff works directly with our sales and marketing personnel in meeting with customers and pursuing new business. Our development efforts include, but are not limited to, extending the shelf life of customers' products, reducing production costs, enhancing the heat-managing characteristics of food packaging and refining packaging appearance through new printing techniques and materials.

Patents and Trademarks

        As of September 30, 2003, we have a large patent portfolio, presently owning, controlling or holding rights to more than 1,600 U.S. and foreign patents, with more than 1,200 patent applications currently pending. Our operations are not dependent to any significant extent upon any single or related group of patents. We do not believe that the expiration of any of our patents at the end of their normal lives would have a material adverse effect on our financial condition or results of operations. Our patent portfolio consists primarily of patents in the following categories: packaging machinery, manufacturing methods, structural carton designs, and microwave and barrier protection packaging. These patents and processes are significant to our operations and are supported by trademarks such as Z-Flute®, Composipac® and Micro-Rite®. Our operations are not dependent upon any single trademark.

Employees and Labor Relations

        As of October 31, 2003, we had approximately 8,460 employees worldwide (excluding employees of joint ventures), of which approximately 53% were represented by labor unions and covered by collective bargaining agreements. We consider our employee relations to be satisfactory.

        Employees covered by collective bargaining agreements are located at 12 different plants. We are a party to 17 different union contracts, four of which are scheduled to expire by the end of 2004. Our contract with Paper, Allied-Industrial, Chemical & Energy Workers International Union—AFL-CIO, CLC (PACE) that covers employees at the Macon mill, will expire on December 31, 2003. We are currently engaged in negotiations with PACE to reach a new agreement. In addition, both the PACE contract and the Graphic Communication International Union (GCIU) contract covering employees at the Wausau and Menasha, WI converting plants are scheduled to expire on April 30, 2004 and June 30, 2004, respectively, and our contract with the International Brotherhood of

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Teamsters covering certain employees at the Kalamazoo, MI transportation center is scheduled to expire on July 31, 2004.

        In addition to employees at the Macon mill, and the Wausau and Menasha, WI converting plants, PACE represents employees at the Charlotte, NC, Gordonsville, TN, Garden Grove, CA and Cincinnati, Ohio converting plants, the West Monroe mill and converting facility and the Kalamazoo, MI converting plant and mill.

        At the West Monroe Mill, a new six-year contract was negotiated and ratified by the union on March 20, 2003 and covers the six-year period from March 1, 2003 to February 28, 2009. A new contract was also reached in 2003 for the Kalamazoo facility, which will expire in January 2008. In 2002, the Garden Grove, CA contract was extended to April 2007. Our labor agreement for our Cincinnati Ohio converting plant covers the five-year period from February 1, 2001 through January 31, 2006.

        GCIU represents employees in the Fort Atkinson, Wisconsin and Clinton, Mississippi converting plants in addition to employees in the Wausau and Menasha, WI converting plants. The agreement for the Fort Atkinson, Wisconsin converting plant will expire on September 10, 2007.

        A new six-year contract covering our Clinton, Mississippi converting plant was negotiated and ratified by the union on April 12, 2003 and covers the six-year period from February 1, 2003 through January 31, 2009.

        The Association of Western Pulp & Paper Union represents employees at the North Portland converting plant. In 2002, Graphic reached a new four-year contract at the North Portland converting plant which will expire in March 2006.

        The International Association of Machinists and Aerospace Workers and the International Brotherhood of Electrical Workers represent certain maintenance employees at the Macon mill and the International Association of Machinists represents employees at the Fort Atkinson, Wisconsin converting plant. The contract for the Fort Atkinson, Wisconsin converting plant will expire October 1, 2007.

        Our international employees are represented by unions in Brazil, France, Spain, Sweden, the United Kingdom and Canada.

Properties

        Our principal executive offices are located in Marietta, Georgia, where we currently lease approximately 18,000 square feet of office space.

        A listing of the major plants and properties owned, or leased, and operated by us is set forth below. Our buildings are adequate and suitable for our business. We also lease certain facilities, warehouses and office space throughout the United States and in foreign countries.

Type of Facility and Location(1)
   Floor Space in
Square Feet
   Principal Products Manufactured or
Use of Facility
Paperboard Mills:        
West Monroe, LA   1,535,000   CUK board; corrugating medium; kraft paper
Macon, GA   756,000   CUK board; linerboard
Kalamazoo, MI   1,411,000   Coated recycled board
Norrköping, Sweden   417,000   White lined chip board
         

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Converting Plants:
 
 
 
 
West Monroe, LA (2 plants)   621,000   Cartons
Cincinnati, OH   241,800   Cartons
Clinton, MS   210,000   Cartons
Perry, GA(2)   130,000   Cartons
Ft. Atkinson, WI   120,000   Cartons
Bow, NH   170,000   Cartons
Centralia, IL(3)(4)   301,000   Cartons
Charlotte, NC   127,000   Cartons
Fort Smith, AK   183,000   Cartons
Garden Grove, CA   149,592   Cartons
Golden, CO   298,508   Cartons
Gordonsville, TN   98,040   Cartons
Kalamazoo, MI   246,000   Cartons
Kendallville, IN   90,330   Cartons
Lawrenceburg, TN   325,800   Cartons
Lumberton, NC   176,253   Cartons
Menasha, WI   431,000   Cartons
Mitchell, SD   227,500   Cartons
Portland, OR   552,000   Cartons
Richmond, VA   144,650   Cartons
Tuscaloosa, AL(4)   121,000   Cartons
Wausau, WI   611,700   Cartons
Mississauga, Ontario, Canada   44,458   Cartons
Bristol, Avon, United Kingdom   428,000   Cartons
Igualada, Barcelona, Spain   131,000   Cartons
Beauvois en Cambresis, France   70,000   Cartons
Le Pont de Claix, France   120,000   Cartons
Jundiai, Sao Paulo, Brazil   95,216   Cartons

Packaging Machinery/Other:
 
 
 
 
Crosby, MN   188,000   Packaging machinery engineering design and manufacturing
Marietta, GA   64,000   Product development center — research and development; packaging machinery engineering design and carton engineering design
Igualada, Barcelona, Spain   22,400   Packaging machinery engineering design and manufacturing
Kennesaw, GA   62,500   Development and small scale manufacturing facility for Z-Flute® product
Bow, NH   9,500   Offices
Golden, CO   52,148   Research and development/office
Menasha, WI   5,000   Research and development
Mississauga, Ontario, Canada   4,878   Research and development
(1)
We lease the facilities in Marietta, Georgia (3 facilities; leases expire on December 31, 2007 and April 30, 2010); Kennesaw, Georgia (lease expires on June 30, 2006); Clinton, Mississippi (part only; lease renewable annually); Beauvois en Cambresis, France (lease expires on December 31, 2006); Igualada, Barcelona, Spain (2 facilities; leases expire on May 1, 2004 and October 18, 2010); Centralia, Illinois (lease expires on December 31, 2005); and Mississauga, Ontario (lease expires on June 30, 2006). Generally, leases are subject to extension or renewal at the option of the parties to the lease agreement. We own all other facilities listed, except as described below.

(2)
The facility located in Perry, Georgia is leased from the Middle Georgia Regional Development Authority in consideration of the issuance of industrial development bonds by such entity.

(3)
Two facilities, one leased.

(4)
One of the Centralia, Illinois facilities (which is leased) and the Tuscaloosa, Alabama facility were acquired in March 2003.

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Legal Matters

        We are a party to a number of lawsuits arising out of the ordinary course of our business, the most significant of which are listed below. Although the timing and outcome of these lawsuits cannot be predicted, we do not believe that disposition of these lawsuits will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

        On April 2, 2003, two separate lawsuits were filed in the District Court, Jefferson County, Colorado, against Graphic, Graphic's directors and Riverwood relating to the merger between Graphic and Riverwood pursuant to the merger agreement. The complaints were filed by Robert F. Smith and Harold Lightweis, on behalf of themselves and all others similarly situated. Each of the two complaints alleges breach of fiduciary duties by Graphic's directors to Graphic's public shareholders in connection with the merger and that Riverwood aided and abetted the alleged breach. The complaints also allege that the Coors family stockholders negotiated the merger consideration in their own interest and not in the interest of the public stockholders. The complaints seek an injunction against consummation of the merger, rescission of the merger if it is consummated, unspecified damages, costs and other relief permitted by law and equity. These two lawsuits have been consolidated. Messrs. Smith and Lightweis filed a motion asking to dismiss their claims as moot and for an award of attorney's fees of $300,000 plus expenses. We have objected to the request for fees and expenses. On July 3, 2003, a third lawsuit was filed in District Court of Jefferson County in Colorado, on behalf of a purported class of Graphic's stockholders against Graphic, Graphic's directors and Riverwood, alleging that Graphic's directors breached their fiduciary duties to the stockholders of Graphic in connection with the sale of convertible preferred stock to the Grover Coors Trust on August 15, 2003 and the negotiation of the proposed merger and that Graphic and Riverwood aided and abetted the alleged latter breach. The complaint alleges that the defendants negotiated the terms of the merger in their own interest and in the interest of certain other insiders (including the Coors family stockholders), to the detriment of the public stockholders. The complaint, which is encaptioned James A. Bederka, On behalf of Himself and All Other Similarly Situated v. Riverwood Holding Inc., et al., seeks certain equitable relief, including an injunction against the consummation of the merger, rescission of the merger if it is consummated, rescission of the sale of August 15, 2000 of the convertible preferred stock to the Trust, and injunction against the conversion of the convertible preferred stock and costs. Graphic filed motions asking to dismiss the lawsuit or to bifurcate the claim to enjoin the merger from the claim to rescind issuance or enjoin the conversion of the preferred stock and to either stay the claim relating to the preferred stock or consolidate that claim with the lawsuit filed by Chinyun Kim disclosed below. By order dated October 7, 2003, the court dismissed Graphic from the Bederka lawsuit, leaving Graphic's directors and Riverwood as defendants. The court also refused to consolidate the Bederka lawsuit with the Chinyun Kim lawsuit, but stayed all discovery in the Bederka lawsuit relating to the sale of the preferred stock. The court has allowed the parties to proceed, however, with disclosures and discovery relating to the merger. We believe that these three lawsuits are without merit.

        On February 19, 2002, Chinyun Kim filed a putative class action claim in District Court Jefferson County, Colorado against Graphic and certain of its shareholders and directors alleging breach of fiduciary duty in connection with the issuance on August 15, 2000, of the convertible preferred stock to the Trust. Plaintiff is seeking damages in the amount of over $43 million or, alternatively, to require transfer to the class of some or all of the Trust's Graphic Packaging Corporation common stock into which the convertible preferred stock was converted. The court dismissed plaintiff's claims against Graphic for breach of fiduciary duty while allowing the plaintiff to proceed against the named directors and shareholders, including certain other Coors family trusts. Graphic is continuing to provide a defense to this action pursuant to its indemnification obligations. All discovery in this case has been concluded. By order dated June 12, 2003, the court certified a class comprised of

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all owners of Graphic common stock as of August 2, 2000, excluding the defendants and members of the Coors family and their affiliates and excluding any additional shares purchased by class members after August 2, 2000. Trial is scheduled to commence on January 13, 2004. Graphic believes that the transaction was in the best interest of Graphic and its shareholders and that the case is without merit.

        In connection with the resale of its aluminum business in 1999, Graphic guaranteed accounts receivable owed by the former owner of the business. After the resale, the former owner refused to pay the amounts owed, equal to $2.4 million. Pursuant to the terms of the resale agreement, Graphic paid this amount and sued the former owner in the United States District Court for the District of Colorado on April 18, 2000. The former owner counterclaimed for an additional $11.0 million for certain spare parts, and Graphic amended its claim to seek an additional $16.0 million in overpayment for raw materials to run the business prior to resale. This claim increased from $14.3 million to $16.0 million after making an adjustment for certain offsets to which Graphic was entitled. The parties have filed motions for summary judgment, all of which were denied. Graphic does not believe that this litigation will have a material adverse effect on its consolidated financial position, results of operations or cash flows.

        On April 14, 2000, Lemelson Medical, Education & Research Foundation sued Graphic and 75 other defendants in the United States District Court for the District of Arizona for unspecified damages for alleged infringement of certain patents relating to "machine vision" and "automatic identification." This is one of a series of cases brought against 430 defendants and has been stayed pending a determination of a lawsuit for noninfringement brought by equipment manufacturers which utilize the technology. We believe, based upon the advice of counsel, that the Lemelson patents are invalid and therefore the litigation against us will not have a material adverse effect on our financial position, results of operations or cash flows.

Environmental Matters

        We are subject to a broad range of foreign, federal, state and local environmental, health and safety laws and regulations. Some of our current and former facilities are the subject of environmental investigations and remediations resulting from releases of hazardous substances or other constituents. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Environmental Matters."

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MANAGEMENT

Our Directors

        The names, ages as of October 31, 2003 and positions of our directors are set forth below.

Name
   Age
   Position(s)
Jeffrey H. Coors   58   Executive Chairman, Director
Stephen M. Humphrey   59   President and Chief Executive Officer, Director
Kevin J. Conway   45   Director
G. Andrea Botta   50   Director
John D. Beckett   65   Director
Harold R. Logan, Jr.   59   Director
John R. Miller   65   Director
Martin D. Walker   71   Director
Robert W. Tieken   64   Director

        The following is a brief summary of the background of our directors:

        Jeffrey H. Coors has been the Executive Chairman and a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. Mr. Coors was Chairman of Graphic from 2000 and until the closing of the merger, and was its Chief Executive Officer and President from Graphic's formation in 1992 and until the closing of the merger. He was also the President since 1997 and Chairman since 1985 of GPC. Mr. Coors served as Executive Vice President of the Adolph Coors Company from 1991 to 1992 and as its President from 1985-1989, as well as at Coors Technology Companies as its President from 1989 to 1992.

        Stephen M. Humphrey has been the President and Chief Executive Officer and a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From March 1997 until the closing of the merger, Mr. Humphrey was the President and Chief Executive Officer and a director of Riverwood, RIC Holding, Inc. and RIC. From 1994 through 1996, Mr. Humphrey was Chairman, President and Chief Executive Officer of National Gypsum Company, a manufacturer and supplier of building products and services. From 1981 until 1994, Mr. Humphrey was employed by Rockwell International Corporation, a manufacturer of electronic industrial, automotive products, telecommunications systems and defense electronics products and systems, where he held a number of key executive positions.

        Kevin J. Conway has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From December 1995 until the closing of the merger, Mr. Conway served as one of the directors of Riverwood, RIC Holding, Inc. and RIC. Mr. Conway is a principal of Clayton, Dubilier & Rice, Inc., or CD&R, a New York-based private investment firm, a director of CD&R Investment Associates II, Inc., a Cayman Islands exempted company that is the managing general partner of CD&R Associates V Limited Partnership, a Cayman Islands exempted limited partnership, or Associates V, the general partner of the CDR fund, a Cayman Islands exempted limited partnership, and a limited partner of Associates V. Mr. Conway is also a director of Covansys, an IT services company. Prior to joining CD&R in 1994, Mr. Conway worked at Goldman, Sachs & Co., an investment banking firm.

        G. Andrea Botta has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From March 1996 until the closing of the merger, Mr. Botta served as one of the directors of Riverwood, RIC Holding, Inc. and RIC.

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Mr. Botta has been a managing director of Morgan Stanley since September 1999. Previously, he was President of EXOR America, Inc. (formerly IFINT-USA, Inc.) from 1993 until September 1999 and for more than five years prior thereto, Vice President of Acquisitions of IFINT-USA, Inc.

        John D. Beckett has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From 1993 until the closing of the merger, Mr. Beckett served as one of the directors of Graphic. He has been Chairman of the R. W. Beckett Corporation, a manufacturer of components for oil and gas heating appliances, since 1965. From 1965 until 2001, Mr. Beckett also served as its President.

        Harold R. Logan, Jr. has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From 2001 until the closing of the merger, Mr. Logan served as one of the directors of Graphic. He is a director and Chairman of the Finance Committee of TransMontaigne, Inc., a transporter of refined petroleum products. He was a director, Executive Vice President, and was Chief Financial Officer of TransMontaigne, Inc. from 1995 to 2002. Mr. Logan served as a director and Senior Vice President, Finance of Associated Natural Gas Corporation, a natural gas and crude oil company, from 1987 to 1994. He also serves as a director of Suburban Propane Partners, The Houston Exploration Company and Rivington Capital Advisors LLC.

        John R. Miller has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From June 2002 until the closing of the merger, Mr. Miller served as one of the directors of Riverwood, RIC Holding, Inc. and RIC. He has been a director of Cambrex Corporation, a global supplier of goods and services to the life sciences industry since 1998, and since 1985, a director of Eaton Corporation, a global diversified industrial manufacturer. He is a member of the Advisory Board of 5iTech, a company engaged in transplanting technologies from the former Soviet Union to the United States. Effective April 30, 2003, Mr. Miller retired as Chairman, President and Chief Executive Officer of Petroleum Partners, Inc., a provider of outsourcing services to the petroleum industry, a position he held since 2000. From 1988 to 2000, he was Chairman and Chief Executive Officer of TBN Holdings Inc., a buyout firm. Mr. Miller formerly served as President and Chief Operating Officer of The Standard Oil Company and Chairman of the Federal Reserve Bank of Cleveland.

        Martin D. Walker has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since the closing of the merger. From June 2002 until the closing of the merger, Mr. Walker served as one of the directors of Riverwood, RIC Holding, Inc. and RIC. Mr. Walker has been a principal of MORWAL Investments, a private investment group, since August 1997, and is a director of Comerica, Incorporated, a full line bank with operations in Michigan, California, Florida and Texas; Lexmark International, Inc., a producer of laser and ink jet printers; Textron, Inc., a multi-industry company; The Goodyear Tire & Rubber Company, a tire, chemical and automotive rubber parts company; The Timken Company, a producer of bearings, and ArvinMeritor, Inc., a manufacturer of automotive parts. From October 1998 to June 1999 and September 1986 to December 1996, Mr. Walker served as Chairman and Chief Executive Officer of M. A. Hanna Company, a producer of international specialty chemicals. From December 1996 to June 1997, Mr. Walker served as Chairman of M. A. Hanna Company. From July 1997 to October 1998, Mr. Walker was in retirement.

        Robert W. Tieken has been a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International since September 2003. Mr. Tieken has been the Executive Vice President and Chief Financial Officer of The Goodyear Tire & Rubber Company since May 1994. From 1993 until May 1994, Mr. Tieken served as Vice President-Finance for Martin-Marietta

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Corporation, an aerospace and defense company. From 1961 until 1993, Mr. Tieken was employed by General Electric Company, a manufacturing and financial services enterprise, where he served in various financial management positions. In addition, Mr. Tieken currently serves as a director of Summa Health Systems, an integrated health care system committed to full continuum of health care services; the National Inventors Hall of Fame, a foundation honoring those responsible for technological advances; and Summit Education Initiatives, a non-profit organization in Summit County, Ohio which engages and mobilizes the community on behalf of childhood education.

Board of Directors

        We have a classified board of directors consisting of nine members. Three directors are designated as Class I directors to serve until the 2004 annual meeting of stockholders, three directors are designated as Class II directors to serve until the 2005 annual meeting of stockholders and three directors are designated as Class III directors to serve until the 2006 annual meeting of stockholders. Each year thereafter, three directors will be elected for a full term of three years to succeed the directors of the class whose terms expire at that annual meeting.

        The Class I directors consist of Jeffrey H. Coors, Kevin J. Conway and Robert W. Tieken, the Class II directors consist of Stephen M. Humphrey, John R. Miller and John D. Beckett and the Class III directors consist of G. Andrea Botta, Martin D. Walker and Harold R. Logan, Jr. Under the stockholders agreement, Jeffrey H. Coors and the nominees of Exor and the CDR fund are entitled to be allocated to Class III. See "Certain Relationships and Related Party Transactions — Combined Company — Stockholders Agreements."

Our Executive Officers

        The names, ages as of October 31, 2003 and positions of our executive officers are set forth below:

Name
   Age
   Position(s) with us
Jeffrey H. Coors   58   Executive Chairman
Stephen M. Humphrey   59   President and Chief Executive Officer, Director
David W. Scheible   47   Executive Vice President of Commercial Operations
John T. Baldwin   46   Senior Vice President and Chief Financial Officer
Daniel J. Blount   47   Senior Vice President, Integration and Treasurer
Stephen A. Hellrung   56   Senior Vice President, General Counsel and Secretary
Wayne E. Juby   55   Senior Vice President, Human Resources
Steven D. Saucier   50   Senior Vice President, Paperboard Operations
Michael R. Schmal   50   Senior Vice President, Beverage
Robert W. Spiller   44   Senior Vice President, Performance Packaging Division
Donald W. Sturdivant   43   Senior Vice President, Universal Packaging Division

        The following is a brief summary of the background of our executive officers, except for Mr. Humphrey and Mr. Coors, who also serve as directors and whose backgrounds are summarized above:

        David W. Scheible has been our Executive Vice President of Commercial Operations since the closing of the merger. Mr. Scheible served as Graphic's and GPC's Chief Operating Officer from June 1999 until the closing of the merger. He was President of GPC's Flexible Division from January to June 1999. Before joining GPC, he was affiliated with the Avery Denison Corporation, working most recently as its Vice President and General Manager of the Specialty Tape Division

104


from 1995 through January 1999 and Vice President and General Manager of the Automotive Division from 1993 to 1995.

        John T. Baldwin has served as our Senior Vice President and Chief Financial Officer since September 2003. He was Vice President and Chief Financial Officer of Worthington Industries from December 1998 to September 2003 and its Treasurer from August 1997 through December 1998. From 1994 through August 1997 Mr. Baldwin served as Assistant Treasurer of Tenneco, Inc., which manufactured and marketed automotive parts and packaging.

        Daniel J. Blount has been our Senior Vice President, Integration and Treasurer since the closing of the merger. Mr. Blount was the Senior Vice President and Chief Financial Officer of Riverwood, RIC Holding, Inc. and RIC, from September 1999 until the closing of the merger. Mr. Blount was named Vice President and Chief Financial Officer of Riverwood, RIC Holding, Inc. and RIC in September 1998. Prior to joining Riverwood, Mr. Blount spent 13 years at Montgomery Kone, Inc., an elevator, escalator and moving ramp product manufacturer, installer and service provider, most recently as Senior Vice President, Finance.

        Stephen A. Hellrung has been our Senior Vice President, General Counsel and Secretary since October 2003. He was Senior Vice President, General Counsel and Secretary of Lowe's Companies, Inc., a home improvement specialty retailer, from April 1999 until June 2003. Prior to joining Lowe's Companies, Mr. Hellrung held similar positions with Pillsbury Company and Bausch & Lomb, Incorporated.

        Wayne E. Juby has been our Senior Vice President, Human Resources since the closing of the merger. Mr. Juby was the Senior Vice President, Human Resources of Riverwood, RIC Holding, Inc. and RIC, from April 2001 until the closing of the merger. Mr. Juby joined Riverwood in November 2000. From November 2000 until April 2001, Mr. Juby was Director, Corporate Training, of Riverwood. From 1997 until November 2000, Mr. Juby was in retirement. From 1994 until 1996, Mr. Juby was Vice President, Human Resources, of National Gypsum Company.

        Steven D. Saucier has been our Senior Vice President, Paperboard Operations since the closing of the merger. Mr. Saucier was the Senior Vice President, Paperboard Operations of Riverwood. Mr. Saucier joined Riverwood in November 1998. From July 1998 until October 1998, Mr. Saucier was Senior Vice President, Manufacturing, of JPS Packaging, a manufacturer of flexible packaging. From April 1996 until July 1998, Mr. Saucier was Senior Vice President, Supply Chain, of Sealright Co., Inc., a manufacturer of rigid and flexible packaging, and from September 1975 until April 1996, Mr. Saucier was employed by Mobil Corporation, where his last position was General Manager, Manufacturing with Mobil Films division.

        Michael R. Schmal has been our Senior Vice President, Beverage since the closing of the merger and was the Vice President and General Manager, Brewery Group of Riverwood from October 1, 1996 until the closing of the merger. Prior to that time, Mr. Schmal held various positions at Riverwood since 1981.

        Robert W. Spiller has been our Senior Vice President, Performance Packaging Division since the closing of the merger and was the Senior Vice President, Consumer Products Packaging for Riverwood, a position he held since he joined Riverwood in September 2002 until the closing of the merger. During July and August 2002, Mr. Spiller was between positions. From 1997 until June 2002, Mr. Spiller was President and CEO of Sonopress USA, a manufacturing packaging and service subsidiary of Bertelsmann AG. From 1985 until 1997, Mr. Spiller was with Avery Dennison

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Corporation, a manufacturer of office products, pressure sensitive adhesive label materials and labeling systems, in a number of key management positions.

        Donald W. Sturdivant has been our Senior Vice President, Universal Packaging Division since the closing of the merger. He joined Graphic in August 1999 as President of the Performance Packaging Division. Prior to joining Graphic, Mr. Sturdivant was with Fort James Corporation since October 1991, first as General Manager, and then, beginning in June 1995, as Vice President and General Manager. In February 1999, he was promoted to President of the Packaging Business and served in that position until Graphic's acquisition of the folding carton business of Fort James Corporation in August 1999.

Description of Stockholders Agreements

        In connection with the merger, the Riverwood stockholders agreement terminated. We and certain of our stockholders have entered into a new stockholders agreement. For a description of the new stockholders agreement, see "Certain Relationships and Related Party Transactions — Stockholders Agreements."

Compensation of Directors

        Each director who is not our officer or employee receives an annual retainer fee of $30,000, payable in quarterly installments. In addition, each non-employee director receives $1,500 per board meeting attended and $1,000 per each committee meeting attended. Committee chairmen receive a further retainer fee of $5,000. Seventy-five percent of the annual retainer fee and of any committee chairman retainer fee is paid in the form of restricted stock, valued on the date of the grant, that will vest upon the second anniversary of the grant date. At the director's option, the remainder of the annual retainer fee and any committee chairman retainer fee may also be paid in the form of restricted stock. Non-employee directors have the option to defer all or part of the cash compensation payable to them. See "Stock Plans — Directors Stock Incentive Plan."

        Directors who are our officers or employees do not receive any additional compensation for serving as a director. Pursuant to the terms of Mr. Conway's employment with CD&R, Mr. Conway has assigned the right to receive compensation for his service as a director to CD&R. We reimburse all directors for reasonable and necessary expenses they incur in performing their duties as directors.

Board Committees

        Our board committees consist of an audit committee, a compensation and benefits committee and a nominating and corporate governance committee. Our board of directors may from time to time establish other committees to facilitate our management.

        Our audit committee consists of Harold R. Logan, Jr., Robert W. Tieken and John R. Miller as the chair. All members of the audit committee are independent directors as is required under the rules recently enacted by the SEC and as is currently required by NYSE listing standards. The audit

106

committee reports on its activities to the board of directors and is responsible for, among other things:

        Our compensation and benefits committee consists of G. Andrea Botta, Martin D. Walker and John D. Beckett as the chair. The compensation and benefits committee oversees the compensation and benefits of our management and employees and is responsible for, among other things:

        Our nominating and corporate governance committee consists of John D. Beckett, G. Andrea Botta, Kevin J. Conway, Jeffrey H. Coors and John R. Miller as the chair. The nominating and corporate governance committee is responsible for, among other things:

Executive Compensation — Riverwood

        The following sets forth summary information concerning the compensation paid by Riverwood to Stephen M. Humphrey, Daniel J. Blount and Steven D. Saucier during the last three fiscal years. All of the information below is presented after giving effect to the 15.21-to-one stock split that Riverwood effected in connection with the merger.

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   Long-Term
Compensation
Awards
    
 
   Annual Compensation
    
    
   Securities
Underlying
Stock
Options
    
Name
   (2)
Other Annual
Compensation
   (8)
Restricted
Stock Units
   (9)
All Other
Compensation
  Year
   Salary $
   Bonus $
Stephen M. Humphrey
President and Chief Executive Officer		   2002
2001
2000		   $

 879,000
807,667
766,000		   $

 478,890
—
350,000		   $

 206,960
282,535
284,040		 (3)
(4)
(5)		 $

 —
—
—		   6,844,500
—
—		   $

 —
—
—
Daniel J. Blount
Sr. Vice President and Chief Financial Officer		   2002
2001
2000		   $

 300,000
262,583
239,000		   $

 213,444
—
130,000		   $

 —
—
—		   $

 216,000
—
—		   260,639
—
—		   $

 —
—
—
Steven D. Saucier
Sr. Vice President, Paperboard Operations		   2002
2001
2000		   $

 350,000
270,917
246,083		   $

 340,684
—
200,000		 (1)

 $

 —
67,841
20,043
(6)
(7)		 $

 144,000
—
—		   422,078
—
—		   $

 8,359
5,100
5,100
(1)
Includes special retention bonus of $150,000.

(2)
Except as otherwise noted, amounts consist of certain taxable perquisites the value of none of which exceeded 25% of the total value of the perquisites provided.

(3)
Includes $10,460 of perquisites. Also includes $196,500, which is the amount of interest that would have been paid on a $5,000,000 non-interest bearing loan made by Riverwood to the named executive officer had such loan borne interest at 3.93% per annum, the applicable federal rate at time such loan was extended.

(4)
Includes $9,685 of perquisites. Also includes $272,850, which is the amount of interest that would have been paid on a $5,000,000 non-interest bearing loan made by Riverwood to the named executive officer had such loan borne interest at 5.49% per annum through December 18, 2001 and 3.93% per annum from December 19, 2001, the applicable federal rates at the time such loan was made and extended, respectively.

(5)
Includes $9,540 of perquisites. Also includes $274,500 which is the amount of interest that would have been paid by the named executive officer on a $5,000,000 non-interest bearing loan made by Riverwood to the named executive officer had such loan borne interest at 5.49% per annum, the applicable federal rate at the time such loan was made.

(6)
Includes $7,841 of perquisites. Also, includes $60,000 of income attributable to the purchase of shares below the estimated fair market value of Riverwood common stock.

(7)
Includes $5,043 of perquisites of which $100 consisted of tax reimbursements paid in respect of certain taxable perquisites. Also, includes $15,000 of income attributable to the purchase of shares below the estimated fair market value of Riverwood common stock.

(8)
The value of the restricted stock units equals the number of such units granted times the price of the stock ($7.89, taking into account the 15.21-to-one stock split) on January 1, 2002, the date of grant. The restricted stock units will vest on the second anniversary of the date of grant, subject to the named executive officer's continuous employment. No dividends will be payable with respect to the restricted stock units.

(9)
Amounts consist of Riverwood contributions on behalf of the named executive officers to Riverwood's savings plan.

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Name
   Number of Securities Underlying Options Granted
(#)
   Percent of Total Options Granted to Employees in Fiscal Year
   Exercise Price Per Share
($/Share)
   Expiration Date
   (4)
Grant Date Value
Stephen M. Humphrey   2,281,500 (1) 22.5 % $ 7.89   January 1, 2012   $ 5,392,500
    2,281,500 (2) 22.5 % $ 7.89   January 1, 2012   $ 5,888,363
    2,281,500 (3) 22.5 % $ 7.89   January 1, 2012   $ 316,420
Daniel J. Blount   260,639 (1) 2.6 % $ 7.89   March 31, 2012   $ 616,039
Steven D. Saucier   422,078 (1) 4.1 % $ 7.89   March 31, 2012   $ 997,613
(1)
Service options granted under the Riverwood 2002 stock incentive plan will vest as to one-third on the second anniversary of the grant date and the remaining two-thirds on the third anniversary of the grant date, subject to the named executive officer's continuous employment with us. Option grant dates are as follows: for Mr. Humphrey, January 1, 2002; for Mr. Blount, January 1, 2002; and for Mr. Saucier, January 1, 2002.

(2)
Subject to the named executive's continuous employment with us, up to one-third of the performance options granted under the Riverwood 2002 stock incentive plan on January 1, 2002, become vested on each of the first three anniversaries of the grant date if Riverwood achieved certain EBITDA results for the fiscal year ending immediately prior to such anniversary date. Performance options that have not become vested in accordance with the foregoing vesting schedule become vested on the third anniversary of the grant date if Riverwood has achieved 100% of the cumulative three-year EBITDA target for the three fiscal years ending December 31, 2004. Any performance options that do not become vested will vest nine years and six months following the grant date.

(3)
Subject to the named executive's continuous employment with us, the special performance options granted on January 1, 2002, under the Riverwood 2002 stock incentive plan will vest upon the earlier of (a) the occurrence prior to the third anniversary of the grant date of a change in control of Riverwood, and (b) the nine year and six month anniversary of the grant date.

(4)
The dollar amounts set forth under this heading are estimates based on the Black-Scholes option pricing model using the following assumptions: (a) a zero percent stock price volatility based on the lack of volatility of a non-public company's shares; (b) 5.436 percent average risk-free rate of return; (c) zero dividend yield; (d) anticipated exercising at the end of the option term; and (e) no adjustment for non-transferability or risk of forfeiture. This model will produce different results depending on the assumptions made, and the values shown above are merely good faith estimates of the present value of the option grants. Because one of the assumptions in the model is the future volatility of the common stock, the actual present value of such option grants cannot be determined.

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        The following table sets forth information for Messrs. Humphrey, Blount and Saucier, each was a named executive officer of Riverwood, with regard to stock option exercises during 2002 and the aggregate value of options held at December 31, 2002.

Name
   Shares acquired on exercise
(#)
   Value Realized
($)
   Number of securities underlying unexercised options/SARs at fiscal year-end
Exercisable/Unexercisable
   Value of unexercised in-the-money
options/SARs at fiscal year-end ($)
Exercisable/Unexercisable(1)
Stephen M. Humphrey   —   —   3,762,802 / 7,644,699   $ 10,281,500 / $1,256,110
Daniel J. Blount   —   —   96,173 /   392,616   $ 126,460 / $   173,540
Steven D. Saucier   —   —   164,907 /   647,566   $ 216,840 / $   296,500
(1)
The dollar amounts set forth under this heading are calculated based on a price per share of Riverwood common stock of $7.89 (taking into account the 15.21-to-one stock split), the estimated fair market value of Riverwood common stock as of December 31, 2002 as determined considering a wide variety of factors including a valuation report from an independent outside firm and approved by the executive committee of Riverwood's board of directors, minus the exercise price for such options.

        All U.S. salaried employees of Riverwood who satisfied the service eligibility criteria were participants in the Riverwood International Employees Retirement Plan, or the retirement plan. Pension benefits under the retirement plan are limited in accordance with the provisions of the Code governing tax qualified pension plans. Riverwood had adopted a Supplemental Pension Plan, or the supplemental plan and, together with the retirement plan, the pension plans, that provides for payment to participants of the retirement benefits was equal to the excess of the benefits that would have been earned by each such participant had the limitations of the Code not applied to the retirement plan and the amount actually earned by such participant under the retirement plan. Each of the named executive officers was eligible to participate in the pension plans. Benefits under the supplemental plan were not pre-funded; such benefits were paid by Riverwood or through the retirement plan through a qualified supplemental employees retirement plan. The Pension Plan Table below sets forth the estimated annual benefits payable upon retirement, including amounts attributable to the supplemental plan, for specified remuneration levels and years of service.

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Pension Plan Table

 
   Years of Service
Remuneration
  5
   10
   15
   20
   25
   30
   35
$   125,000   $ 8,043   $ 16,086   $ 24,129   $ 32,172   $ 40,215   $ 48,258   $ 56,301
     150,000     9,793     19,586     29,379     39,172     48,965     58,758     68,551
     175,000     11,543     23,086     34,629     46,172     57,715     69,258     80,801
     200,000     13,293     26,586     39,879     53,172     66,465     79,758     93,051
     225,000     15,043     30,086     45,129     60,172     75,215     90,258     105,301
     250,000     16,793     33,586     50,379     67,172     83,965     100,758     117,551
     300,000     20,293     40,586     60,879     81,172     101,465     121,758     142,051
     400,000     27,293     54,586     81,879     109,172     136,465     163,758     191,051
     450,000     30,793     61,586     92,379     123,172     153,965     184,758     215,551
     500,000     34,293     68,586     102,879     137,172     171,465     205,758     240,051
     600,000     41,293     82,586     123,879     165,172     206,465     247,758     289,051
     700,000     48,293     96,586     144,879     193,172     241,465     289,758     338,051
     800,000     55,293     110,586     165,879     221,172     276,465     331,758     387,051
     900,000     62,293     124,586     186,879     249,172     311,465     373,758     436,051
  1,000,000     69,293     138,586     207,879     277,172     346,465     415,758     485,051
  1,100,000     76,293     152,586     228,879     305,172     381,465     457,758     534,051
(A)
Had the named executive officers in the Summary Compensation Table retired as of December 31, 2002, their respective five-year average salaries, plus bonuses, for purposes of the table set forth above, would have been as follows: Daniel J. Blount, $333,869; Stephen M. Humphrey, $1,035,508; and Steven D. Saucier, $344,598.

(B)
On December 31, 2002, the named executive officers in the Summary Compensation Table had the following years of credited service under the retirement plan: Daniel J. Blount, 5; Stephen M. Humphrey, 6; and Steven D. Saucier, 4.

(C)
Salary as defined in the retirement plan includes payment under the annual incentive compensation plan but excludes payments under any equity incentive plan of Riverwood or any predecessor company. Estimated benefits have been calculated on the basis of a straight-life annuity form of payment.

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        The following table sets forth information as of the end of Riverwood's 2002 fiscal year with respect to compensation plans under which equity securities of Riverwood are authorized for issuance.

Plan category
   Number of securities to be issued upon exercise of outstanding options, warrants and rights
   Weighted-average exercise price of outstanding options, warrants and rights
   Number of securities remaining available for future issuance under equity compensation plans (excluding securities
reflected in column (a))
  
 
   (a)

   (b)

   (c)

  
Equity compensation plans approved by Riverwood's stockholders   16,866,643   $ 6.97   9,187,768 (1)
Equity compensation plans not approved by Riverwood's stockholders   0     N/A   0  
  Total   16,866,643   $ 6.97   9,187,768  
(1)
Includes 236,424 shares that may be issued in respect of incentive stock units awarded under the 1999 supplemental long-term incentive plan and 208,377 shares that may be issued in respect of restricted stock units awarded under the 2002 stock incentive plan.

Riverwood Compensation Committee Interlocks

        During fiscal year 2002, Messrs. Leon J. Hendrix, Jr., B. Charles Ames, G. Andrea Botta and Alberto Cribiore served on the compensation and benefits committee of the Riverwood board. Mr. Ames is a principal of CD&R. Mr. Hendrix, one of the two CDR fund-nominated directors, was a principal of CD&R until 2000. CD&R received an annual fee of $470,000 in 2002 for advisory, management, consulting and monitoring services from Riverwood. Riverwood, RIC Holding, Inc. and RIC have also agreed to indemnify the members of the boards employed by CD&R and CD&R against liabilities incurred under securities laws with respect to their services for Riverwood, RIC Holding, Inc. and RIC.

        Messrs. Hendrix and Cribiore were the CDR fund-nominated directors on the compensation and benefits committees of Riverwood, RIC Holding, Inc. and RIC.

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Executive Compensation — Graphic

        The following sets forth summary information concerning the compensation paid by Graphic to Jeffrey H. Coors and David W. Scheible during the last three fiscal years.

 
    
   Annual Compensation
   Long-Term Compensation
    
Name and Principal Position
   Year
   Salary ($)
   Bonus ($)(1)
   Other Annual
Compensation
($)
   Awards
Restricted
Stock
Award(s)
$(2)
   Securities
Underlying
Options/
SARs (#)
   All Other
Compensation
($)(3)
Jeffrey H. Coors
President and Chief Executive Officer		   2002
2001
2000		   $
$
$		 530,000
530,000
526,670		   $
$
 484,000
670,500
0		    

(4)
(4)
(4)		 $

 529,999
0
0		   0
0
300,000		   $
$
$		 18,022
15,435
13,693
David W. Scheible
Chief Operating Officer		   2002
2001
2000		   $
$
$		 393,330
350,000
300,000		   $
$
 304,400
414,000
0		   $
$
$		 43,500
43,500
43,500		 (5)
(5)
(5)		 $

 400,001
0
0		   0
0
250,000		   $
$
$		 8,188
7,708
7,375
(1)
Bonuses shown are the total bonuses for the years shown and are paid 100% in cash except where executives elect to defer a portion of the bonus into either the fixed rate fund or the stock units fund.

(2)
Restricted stock awards were made on December 10, 2002, and the awards will vest in three equal annual increments beginning on December 10, 2003. The number of shares of restricted stock granted was as follows: Jeffrey H. Coors — 86,885 and David W. Scheible — 65,574. On October 1, 1994, 121,343 stock units were granted to Jeffrey H. Coors in an amount approximately equal to Graphic's liability as of January 1, 1994 for the benefit due Jeffrey H. Coors under a salary continuation agreement. The stock units replace a cash liability of Graphic and tie his post-retirement benefit to stock value. The stock units are payable in full upon retirement at age 60 or after. The stock units are 50% vested at age 50 with 10 years of service, and the remaining 50% vests in 5% increments between ages 51 and 60. 85% of the units were vested at year-end 2002. The market value at year-end 2002 was $594,095.

(3)
All Other Compensation includes the value of term life insurance benefiting the executive and Graphic's contribution to the 401(k) Plan. For 2002, the value of term life insurance benefits and Graphic's 401(k) contributions, respectively, were as follows: Jeffrey H. Coors — $11,422 and $6,600; David W. Scheible — $1,588 and $6,600.

(4)
Amounts paid were less than the lesser of $50,000 or 10% of total annual salary and bonus.

(5)
Amounts shown include an annual perquisite of $28,500 and annual car allowance of $15,000.

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   Number of Securities Underlying
Unexercised Options/SARs at
12/31/02 (#)
   Value of Unexercised In-The-Money
Options/SARs at 12/31/02 ($)
 
   Shares
Acquired On
Exercise
(#)
    
Name
   Value
Realized
($)
  Exercisable
   Unexercisable
   Exercisable
   Unexercisable
Jeffrey H. Coors   —   —   929,617   673,872   —   $ 1,260,000
David W. Scheible   —   —   125,000   288,710   —   $ 1,050,000
Plan Category
   Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
   Weighted average
exercise price of
outstanding
options, warrants
and rights
   Number of
securities
remaining available
for future issuance
  
Equity compensation plans approved by stockholders(1)   6,053,347 (2) $ 5.98   2,935,002 (3)
Equity compensation plans not approved by stockholders   0     0   0  
Total   6,053,347   $ 5.98   2,935,002  
(1)
The following equity compensation plans or arrangements were approved by Graphic stockholders: Phantom Equity Plan; ACX Technologies, Inc. Salary Continuation Agreement, as amended; Graphic Packaging Deferred Compensation Plan; Graphic Packaging Equity Incentive Plan; and the Equity Compensation Plan for Non-Employee Directors.

(2)
The breakdown per plan was as follows: Phantom Equity Plan, 58,651 shares; ACX Technologies, Inc. Salary Continuation Agreement, as amended, 121,343 shares; Graphic Packaging Deferred Compensation Plan, 105,825 shares; Graphic Packaging Equity Incentive Plan, 5,729,180 shares; Equity Compensation Plan for Non-Employee Directors, 38,348 shares.

(3)
No securities remain available for future issuance under the Phantom Equity Plan, pursuant to which phantom stock units and phantom stock appreciation units were granted, under the ACX Technologies, Inc. Salary Continuation Agreement, as amended, pursuant to which stock units and non-qualified stock options were granted, and under the Graphic Packaging Deferred Compensation Plan pursuant to which stock units were granted. 2,782,000 shares remain available for future issuance under the Graphic Packaging Equity Incentive Plan, pursuant to which non-qualified stock options and restricted stock awards are granted. The number of shares available for award under the Graphic Packaging Equity Incentive Plan is increased annually by 2% of the Graphic outstanding shares on each December 31. 153,002 shares remain available for future issuance under the Equity Compensation Plan for Non-Employee Directors, pursuant to which non-qualified stock options are granted.

        The estimated total annual retirement benefits payable by us under the defined benefit plan in which Mr. Coors and Mr. Scheible participate are set forth in the table below. The table illustrates

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benefits accrued through fiscal year 2002 and includes years of service and compensation earned while employed by Adolph Coors Company, the former parent of Graphic.

 
   Years of Service
Remuneration
  15
   20
   25
   30
   35
$125,000   $ 31,875   $ 42,813   $ 53,750   $ 64,688   $ 72,500
$150,000   $ 38,250   $ 51,375   $ 64,500   $ 77,625   $ 87,000
$175,000   $ 44,625   $ 59,938   $ 75,250   $ 90,563   $ 101,500
$200,000   $ 51,000   $ 68,500   $ 86,000   $ 103,500   $ 116,000
$225,000   $ 57,375   $ 77,063   $ 96,750   $ 116,438   $ 130,500
$250,000   $ 63,750   $ 85,625   $ 107,500   $ 129,375   $ 145,000
$275,000   $ 70,125   $ 94,188   $ 118,250   $ 142,313   $ 159,500
$300,000   $ 76,500   $ 102,750   $ 129,000   $ 155,250   $ 174,000
$325,000   $ 82,875   $ 111,313   $ 139,750   $ 168,188   $ 188,500
$350,000   $ 89,250   $ 119,875   $ 150,500   $ 181,125   $ 203,000
$375,000   $ 95,625   $ 128,438   $ 161,250   $ 194,063   $ 217,500
$400,000   $ 102,000   $ 137,000   $ 172,000   $ 207,000   $ 232,000
$425,000   $ 108,375   $ 145,463   $ 182,750   $ 219,938   $ 246,500
$450,000   $ 114,750   $ 154,125   $ 193,500   $ 232,875   $ 261,000
$475,000   $ 121,125   $ 162,688   $ 204,250   $ 234,813   $ 275,500
$500,000   $ 127,500   $ 171,250   $ 215,000   $ 258,750   $ 290,000
$525,000   $ 133,875   $ 179,813   $ 225,750   $ 271,688   $ 304,500
$550,000   $ 140,250   $ 188,375   $ 236,500   $ 284,625   $ 319,000
$575,000   $ 146,625   $ 196,938   $ 247,250   $ 297,563   $ 333,500

        Maximum permissible benefit under ERISA from the qualified retirement plan for 2002 was $160,000. In addition, the maximum compensation for 2002 which may be used in determining benefits from the qualified retirement plan is $200,000. Graphic has a non-qualified supplemental retirement plan which provides the benefits which are not payable from the qualified retirement plan because of the limitations. The amounts shown in this table include the benefits payable under the non-qualified supplemental retirement plan. The benefit is computed on the basis of a straight life annuity and is subject to a reduction to reflect, in part, the payment of Social Security benefits.

        The compensation covered by the retirement plan is salary only and does not include any of the other compensation items shown on the Summary Compensation Table above. The salary used to compute benefits is the average highest salary amount over a 36 consecutive month period in the last ten years. As of fiscal year-end 2002, average annual compensation covered by the retirement plan and credited years of service with Graphic, including previous compensation and years of service with Adolph Coors Company and its subsidiaries, for the named executives are as follows: Jeffrey H. Coors — $528,893 and 35 years; David W. Scheible — $345,556 and 4 years.

        During 2002, Graphic directors John Hoyt Stookey and James K. Peterson served on the Graphic compensation committee. There were no compensation committee interlocks during 2002.

Employment Agreements

        Riverwood entered into a new employment agreement, dated March 25, 2003, with Stephen M. Humphrey, who was the President and Chief Executive Officer and a director of Riverwood, RIC Holding, Inc. and RIC. The term of Mr. Humphrey's new employment agreement began on

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March 25, 2003 and ends on March 31, 2007. Pursuant to this new agreement, Mr. Humphrey will continue to serve as the President and Chief Executive Officer of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International.

        Pursuant to this new agreement, Mr. Humphrey's base salary will be $950,000 beginning on April 1, 2003 and ending on March 31, 2004, and shall increase to $1,000,000 thereafter. During the employment term, Mr. Humphrey will also be eligible for an annual target bonus of 100% of base salary (with a maximum annual bonus opportunity equal to 200% of base salary) and welfare benefits including life, medical, dental, accidental death and dismemberment, business travel accident, prescription drug and disability insurance. Mr. Humphrey will be eligible to participate in all of the profit sharing, pension, retirement, deferred compensation and savings plans applicable to the combined company's senior executives.

        If Mr. Humphrey's employment is terminated without cause or he terminates his employment for good reason, we will pay Mr. Humphrey (in addition to accrued amounts) the following severance benefits:

        For purposes of this agreement, a termination for "good reason" is a termination by Mr. Humphrey of his employment within thirty days following:

        Upon his retirement, Mr. Humphrey will receive a supplemental retirement benefit equal to the difference between the benefits provided under the Riverwood International Employees Retirement Plan and Supplemental Pension Plan and the benefits he would receive under such plans if he had ten years of service with Riverwood. Mr. Humphrey will not receive this benefit if his employment is terminated due to death, disability, or cause or if he terminates his employment not for good reason or retires prior to the end of the employment term.

        The new agreement also amends the vesting schedule of special performance options granted to Mr. Humphrey under the Management Stock Option Agreement, dated as of January 1, 2002 between Mr. Humphrey and Riverwood. Pursuant to the terms of the new employment agreement, the special performance options granted under the option agreement vested one-third on the effective time of the merger. The remaining performance options shall vest in equal installments on the second and third anniversaries of the merger date.

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        Pursuant to the terms of his new employment agreement, 1,140,750 of the unvested performance options granted to Mr. Humphrey under Riverwood stock incentive plans were exchanged for 228,150 new stock options and 342,225 restricted units. One-third of these options and restricted units, as well as the other unvested performance options held by Mr. Humphrey, will vest on each of the first three anniversaries of the merger.

        We entered into a new employment agreement, dated as of August 8, 2003, with Daniel J. Blount. Mr. Blount's agreement has a three year term. The agreement provides for a minimum base salary of $325,000 and an annual bonus to be based upon the achievement of synergies, as determined by a committee. The aggregate total of the annual bonuses paid to Mr. Blount for the three years of the agreement, assuming maximum synergy targets have been achieved, may not exceed $2.2 million dollars. The agreement also provides for such other benefits as medical, accidental death and dismemberment, business travel accident, prescription drug and disability insurance in accordance with the programs available to our senior executives as well as reimbursement for certain business-related expenses.

        Pursuant to the agreement, Mr. Blount surrendered 374,364 unvested employee stock options, 22,815 unvested incentive units and 27,378 unvested restricted units awarded to him pursuant to Riverwood benefit plans and was granted 74,879 employee stock options and 162,504 restricted stock units pursuant to the 2003 Riverwood Holding, Inc. Long-Term Incentive Plan. These new options and new restricted units vest 1/3 on each of the first three anniversaries of August 8, 2003. However, no shares shall be delivered in respect of the restricted units until all such units have vested.

        In the event of a termination by us without cause, the executive for good reason or by reason of the expiration of the employment period (in each case as defined in the employment agreement), the agreement provides for severance of a pro-rata annual incentive bonus and base salary and other benefits for eighteen months. Mr. Blount's employment agreement also contains non-competition and non-solicitation provisions.

        Mr. Saucier had an employment agreement with Riverwood. The agreement with Mr. Saucier entered into as of November 1, 1998, as amended on March 18, 2003 and August 8, 2003, has an initial three year term that automatically extends for additional one-year periods following the expiration of the initial term. The agreement provides for a minimum base salary of at least $225,000 and for bonuses and other benefits set forth in the Summary Compensation Table. In the event of termination of employment by us without cause or by the executive for good reason (as defined in the employment agreement), the agreement provides for severance of a pro-rata incentive bonus for the year in which termination of employment occurs, and base salary and continued welfare benefits for the longer of the remainder of the employment term, one year or one month for each full year of service. The agreement also contains certain non-competition and non-solicitation provisions.

        Jeffrey H. Coors, who was Graphic's President and Chief Executive Officer and David W. Scheible, who was Graphic's Chief Operating Officer, each entered into a new employment agreement with Graphic, dated as of March 25, 2003. Graphic Packaging Corporation has succeeded to the rights and obligations of Graphic under these employment agreements following the merger. The term of each employment agreement is three years.

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        Mr. Coors, under this new employment agreement, during the term of his employment, will serve as the Executive Chairman of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International. He will receive an annual base salary of $555,000.

        Mr. Scheible, under this new employment agreement, will serve as our Executive Vice President of Commercial Operations of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International. He will receive an annual base salary of $420,000.

        Both Mr. Coors and Mr. Scheible, under the terms of their respective agreements, will participate in (1) short-term incentive plans existing from time to time and (2) other incentive plans, in each case as determined by our compensation and benefits committee. They will also participate in savings and retirement plans and welfare benefit plans sponsored by us.

        Under the terms of their respective employment agreements, at the time of the merger, Graphic paid to Mr. Coors and Mr. Scheible the following compensation and benefits:

        At the merger, pursuant to his employment agreement, Mr. Coors received a cash payment of approximately $1.1 million, options worth approximately $0.4 million vested (based on the difference between the exercise price of the option and a Graphic common stock price of $3.99 per share on August 8, 2003) and 386,885 shares of Graphic restricted stock were converted into restricted stock units of the combined company.

        At the time of the merger, pursuant to his employment agreement, Mr. Scheible received a cash payment of approximately $0.9 million, options worth $0.3 million vested (based on the difference between the exercise price of the option and a Graphic common stock price of $3.99 per share on August 8, 2003) and 315,574 shares of Graphic restricted stock were converted into restricted stock units of the combined company.

        If, during the term of their respective employment agreements, the employment of either Mr. Coors or Mr. Scheible is terminated without cause or by him for good reason (as defined below), he would be entitled to receive (in addition to accrued amounts), the following amounts and benefits:

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        For purposes of these employment agreements, "good reason" means the termination of employment by the executive officer within 90 days following the occurrence of any of the following events without the executive's consent:

        If any payments that resulted from the merger or from the termination of the executive's employment without cause or for good reason constitute an excess parachute payment (as defined under Section 280G(b)(2) of the Code), the executive would receive a full gross-up payment to compensate the executive for the amount of the tax owed.

        Under the terms of their respective employment agreements, each of Mr. Coors and Mr. Scheible agrees that, during the term of his employment with us and for a period of two years thereafter if his employment with us is terminated for any reason before the end of the three year term, he will not:

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        The employment agreements do provide, however, that neither Mr. Coors nor Mr. Scheible will be in violation of the foregoing by virtue of the fact that he owns 5% or less of the outstanding common stock of a corporation, if such stock is listed on a national securities exchange, is reported on Nasdaq or is regularly traded in the over-the-counter market by a member of a national securities exchange.

        On October 1, 1994, Graphic granted stock units to Jeffrey H. Coors, its President and Chief Executive Officer, in an amount approximately equal to Graphic's liability as of January 1, 1994 for the benefit due Mr. Coors under a salary continuation agreement. The stock units replace a cash liability of Graphic and tie his post-retirement benefit to stock value. The stock units are payable in full upon retirement at age 60 or after. The stock units are 50 percent vested at age 50 with 10 years of service and the remaining 50 percent vests in 5 percent increments between ages 51 and 60. 121,343 units were granted, with 85 percent vested at year-end 2002, and the market value at year-end 2002 was $594,095.

Stock Plans

        Effective March 25, 2003, Riverwood established the 2003 Riverwood Holding, Inc. Long-Term Incentive Plan, or the 2003 LTIP. The 2003 LTIP provides for the award to eligible participants of (1) stock options, including incentive stock options (within the meaning of Section 422 of the Code); (2) restricted stock and restricted units; (3) stock appreciation rights; (4) incentive stock and incentive units; and (5) deferred shares and supplemental units. Any issuance of (1) options to purchase stock in the combined company or (2) restricted stock in the combined company to Mr. Coors or Mr. Scheible pursuant to their employment agreements, as described above, were issued under the 2003 LTIP.

        Awards may be made to any of our directors, officers or employees, including any prospective employee, and to any of our consultants or advisors selected by the compensation and benefits committee. The number of employees participating in the 2003 LTIP will vary from year to year. A total of 1,521,000 shares of common stock plus shares made available by the cancellation of awards granted pursuant to prior Riverwood plans are authorized to be issued under the 2003 LTIP. Taking into account shares made available by canceled awards, as of October 31, 2003 5,434,596 shares of common stock may be issued under the 2003 LTIP. As of October 31, 2003, 4,713,534 shares were subject to awards under the 2003 LTIP.

        The 2003 LTIP will have a ten-year term. The board of directors or the compensation and benefits committee may amend, suspend or terminate the 2003 LTIP. The expiration of the term of the plan, or any amendment, suspension or termination will not adversely affect any outstanding award held by a participant without the consent of the participant.

        In the event of a change in control (as defined in the 2003 LTIP) all outstanding stock options shall, at the discretion of the compensation and benefits committee, become fully exercisable or be canceled in exchange for a payment in cash equal to the product of (1) the excess of the change in control price over the option exercise price, and (2) the number of shares of common stock covered by such stock options. All other awards granted under the 2003 LTIP will become vested and shall be immediately transferable or payable. In the event that a change in control is a result of a merger or consolidation or a result of the sale or transfer of substantially all of our assets to a non-affiliate, a participant whose employment or service is terminated due to death or disability (as defined under the 2003 LTIP) by us for reasons other than cause (as defined under the 2003 LTIP)

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on or after the date that such transaction is approved by our stockholders will be treated as continuing to be employed or retained until the occurrence of the change in control.

        On June 5, 2003, Riverwood's board of directors adopted the 2003 Riverwood Holding, Inc. Directors Stock Incentive Plan, or the directors stock incentive plan. Riverwood's stockholders approved the directors stock incentive plan on June 9, 2003. The directors stock incentive plan provides for the grant of fee share awards, elective share awards and phantom stock.

        Only members of our board of directors who are not our employees are eligible to participate in the directors stock incentive plan. The maximum number of shares of common stock authorized to be issued under the directors stock incentive plan is 3,750,000.

        In the event of a change in control (as defined in the 2003 LTIP) all awards granted to a director will become vested and be immediately transferable or payable.

        Effective January 1, 2002, Riverwood established the Riverwood Holding, Inc. 2002 Stock Incentive Plan, or the 2002 stock incentive plan. The 2002 stock incentive plan provides for the award of nonqualified stock options or restricted stock units, subject to the terms and conditions thereunder. Before the completion of the merger, the 2002 stock incentive plan was amended to preclude the future grant of awards.

        Executive officers and other key management employees of Riverwood selected by the board have been granted awards under the 2002 stock incentive plan. The maximum number of shares of common stock authorized to be issued under the 2002 stock incentive plan is 10,013,549. As of October 31, 2003, 7,018,868 shares of common stock were subject to awards under the 2002 stock incentive plan.

        In the event of a change in control (as defined in the supplemental plan), all outstanding stock options will become vested and will be cancelled in exchange for a payment equal to the product of (1) the excess of the change in control price over the option exercise price and (2) the number of shares of common stock covered by such stock options. All restricted stock units will become fully vested upon a change in control and each holder of such restricted stock units will receive a payment equal to the product of (x) the change in control price and (y) the number of shares of common stock underlying the restricted stock units. Payments with respect to the cancelled stock options and restricted stock units may, at the discretion of the board, be made in shares of publicly traded common stock of the acquiring entity. The merger did not constitute a change in control under this plan.

        Effective February 24, 1999, Riverwood established the Riverwood Holding, Inc. Supplemental Long-Term Incentive Plan, or the 1999 LTIP. The 1999 LTIP provides for the award of nonqualified stock options, incentive stock units and certain payments, subject to the terms and conditions thereunder. Before the completion of the proposed merger, the 1999 LTIP was amended to preclude the future grant of awards.

        Executive officers and other key management employees of Riverwood selected by the board were granted awards under the 1999 LTIP. The number of participants in the 1999 LTIP has varied from year to year. The maximum number of shares of common stock authorized to be issued under the 1999 LTIP is 6,955,533. As of October 31, 2003, 987,530 shares of common stock were subject to awards under the 1999 LTIP.

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        In the event of a change in control (as defined in the 1999 LTIP), all outstanding stock options will become vested and will be cancelled in exchange for a payment equal to the product of (1) the excess of the change in control price over the option exercise price, and (2) the number of shares of common stock covered by such stock options. Payments will be made in respect of the incentive stock units as described above. The merger did not constitute a change in control under this plan.

        Effective April 8, 1996, Riverwood established the Riverwood Holding, Inc. Stock Incentive Plan, or 1996 stock incentive plan. The 1996 stock incentive plan provides for the granting of nonqualified stock options and rights to purchase common stock subject to the terms and conditions thereunder. Before the completion of the merger, the 1996 stock incentive plan was amended to preclude the future grant of awards.

        Executive officers and other key management employees of Riverwood selected by the board have been granted awards under the 1996 stock incentive plan. The number of participants in the 1996 stock incentive plan has varied from year to year.

        The maximum number of shares common stock authorized to be issued under the 1996 stock incentive plan is 10,502,505. As of October 31, 2003, 4,162,494 shares of common stock were subject to awards under the 1996 stock incentive plan.

        In the event of a change in control (as defined in the 1996 stock incentive plan), each unvested option held by an option holder will become vested. Each vested stock option will be cancelled in exchange for a cash payment equal to the product of (1) the excess of the price paid for a share of common stock in the transaction constituting the change in control over the per share exercise price of the vested option and (2) the number of shares of common stock underlying such vested option. The merger did not constitute a change in control under this plan.

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PRINCIPAL STOCKHOLDERS

        The following table sets forth certain information as of October 31, 2003, regarding the beneficial ownership of our common stock. The table includes:

        Except as otherwise indicated, the persons and entities listed below have sole voting and investment power with respect to all shares of common stock beneficially owned by them, except to the extent such power may be shared with a spouse.

Name
   Number of Shares
   Percent of Class
  
5% Stockholders:          
Grover C. Coors Trust(1)(2)(3)   51,211,864   25.8 %
Jeffrey H. Coors(2)(3)(4)(5)   64,000,629   32.0 %
William K. Coors(2)(3)(6)(7)   62,372,278   31.4 %
Clayton, Dubilier & Rice Fund V Limited Partnership(3)(8)   34,222,500   17.3 %
EXOR Group S.A.(3)(9)   34,222,500   17.3 %
The 1818 Fund II, L.P.(10)   11,407,500   5.8 %
HWH Investment Pte Ltd(11)   10,647,000   5.4 %

Directors and Named Executive Officers:
 
 
 
 
 
Kevin J. Conway(12)   0   0  
G. Andrea Botta   0   0  
John R. Miller   0   0  
Martin D. Walker   0   0  
Harold R. Logan, Jr.(13)   18,037   (16 )
John D. Beckett(13)   50,836   (16 )
Robert W. Tieken   0   0  
Stephen M. Humphrey(14)   5,366,665   2.6 %
David W. Scheible(15)   167,963   (16 )
John T. Baldwin   0   0  
Daniel J. Blount(14)   160,055   (16 )
Stephen A. Hellrung   0   0  
Wayne E. Juby   0   0  
Steven D. Saucier(14)   225,747   (16 )
Donald W. Sturdivant(18)   86,491   (16 )
Robert W. Spiller   0   0  
Michael R. Schmal(14)   160,299   (16 )
All directors and executive officers as a group (18 persons)(2)(4)(5)(12)(13)(14)(15)(17)(18)   70,236,722   34.1 %
(1)
Under the trust agreement evidencing the Grover C. Coors Trust, or the Trust, the affirmative vote of a majority of the trustees is required to determine how shares of stock held by the Trust will be voted or to dispose of any shares of stock held by the Trust; therefore, each of the trustees of the Trust disclaims beneficial ownership of shares held by the Trust. The

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(2)
Pursuant to the stockholders agreement, the holder has designated and appointed Jeffrey H. Coors and, in case of his inability to act, William K. Coors, as holder's attorney-in-fact to perform all holder's obligations under the stockholders agreement, including but not limited to, holder's obligations with respect to the election of directors and a business combination involving the company. The holder retains voting power with regard to all other matters and sole dispositive power over such shares. The business address for William K. Coors and Jeffrey H. Coors is Graphic Packaging Corporation, 814 Livingston Court, Marietta, GA 30067.

(3)
Excludes the effects of any attribution of beneficial ownership under the stockholders agreement, except as otherwise disclosed.

(4)
Includes (1) 1,726,652 shares of common stock held by the May Kistler Coors Trust dated September 24, 1965, as to which Jeffrey H. Coors has voting and investment power with William K. Coors, Joseph Coors, Jr., John K. Coors and Peter H. Coors as co-trustees; (2) 1,603,489 shares issuable pursuant to options that are currently exercisable; (3) 500 shares held by Jeffrey H. Coors Family, Ltd.; (4) 53,429 shares of common stock held in joint tenancy with spouse; and (5) 30,000 shares held by spouse. Excludes 226,321 shares of common stock issuable upon the earlier of (i) January 1, 2004; March 1, 2005; and February 10, 2010 (but only with respect to 18,375 shares; 20,826 shares; and 22,965 shares, respectively) or (ii) holder's retirement, death, disability, or termination of employment, with respect to the entire 226,321 shares irrespective of the date of the occurrence.

(5)
Pursuant to the stockholders agreement, Jeffrey H. Coors is deemed to beneficially own 61,747,379 shares of common stock.

(6)
Includes (1) 153,691 shares held in joint tenancy with spouse; (2) 5,638 shares issuable pursuant to options that are currently exercisable; and (3) 1,726,652 shares of common stock held by the May Kistler Coors Trust, as to which William K. Coors has voting and investment power with Jeffrey H. Coors, Joseph Coors, Jr., John K. Coors, and Peter H. Coors as co-trustees.

(7)
Pursuant to the stockholders agreement, William K. Coors is deemed to beneficially own 62,212,949 shares of common stock.

(8)
CD&R Associates V Limited Partnership, a Cayman Islands exempted limited partnership, is the general partner of the CDR fund, a Cayman Islands exempted limited partnership, and has the power to direct the CDR fund as to the voting and disposition of shares held by the CDR fund. CD&R Investment Associates II, Inc., a Cayman Islands exempted company, is the managing general partner of Associates V and has the power to direct Associates V as to its direction of the CDR fund's voting and disposition of the shares held by the CDR fund. No person controls the voting and dispositive power of CD&R Investment Associates II, Inc. with respect to the shares owned by the CDR fund. Each of Associates V and CD&R Investment Associates II, Inc. expressly disclaims beneficial ownership of the shares owned by the CDR fund. The business address for each of the CDR fund, Associates V and CD&R Investment Associates II, Inc. is 1403 Foulk Road, Suite 106, Wilmington, Delaware 19803.

(9)
Giovanni Agnelli e C. S.A.P.A.Z., an Italian company, is the beneficial owner of more than 60% of the equity interests of EXOR Group S.A. The business address for EXOR Group S.A. is 22-24, Boulevard Royal, L-2449 Luxembourg.

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(10)
The business address for The 1818 Fund II, L.P. is c/o Brown Brothers Harriman & Co., 140 Broadway, 16th Floor, New York, NY 10005.

(11)
The beneficial owner of HWH Investment Pte Ltd is Government of Singapore Investment Corporation (Ventures) Pte Ltd which is beneficially owned by Minister for Finance Inc. of the Government of Singapore. The business address for HWH Investment Pte Ltd is 250 North Bridge Road, Singapore 179101, Republic of Singapore.

(12)
Does not include 34,222,500 shares of common stock owned by the CDR fund. Mr. Conway may be deemed to share beneficial ownership of the shares owned of record by the CDR fund by virtue of his status as a stockholder of CD&R Investment Associates II, Inc., the managing general partner of Associates V, but he expressly disclaims such beneficial ownership of the shares owned by the CDR fund. See note 8.

(13)
Includes shares issuable pursuant to options that are exercisable, as follows: John D. Beckett — 5,638; Harold R. Logan, Jr. — 2,000.

(14)
Includes options to purchase 5,214,565, 164,907, 114,425 and 129,879 shares of common stock which may be exercised by Messrs. Humphrey, Saucier, Blount and Schmal, respectively.

(15)
Includes 4,253 shares held by the 401(k) Plan and 163,710 shares issuable pursuant to options that are exercisable.

(16)
Less than 1%.

(17)
Includes for all directors and executive officers, a total of 7,481,378 shares of common stock issuable pursuant to options that are exercisable.

(18)
Includes 2,851 shares held by 401(k) plan and 82,765 shares issuable pursuant to options that are exercisable.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Combined Company

        Riverwood and the Coors family stockholders of Graphic entered into a voting agreement, dated as of March 25, 2003, as amended, with respect to the shares owned by the Coors family stockholders or acquired during the term of the voting agreement. Pursuant to the voting agreement, each of the Coors family stockholders agreed that, at any meeting of the stockholders of Graphic called to vote upon the merger and the merger agreement, each of them would vote all of the shares of common and convertible preferred stock owned by such stockholder in favor of the approval of the merger agreement. Each of the Coors family stockholders further agreed that at any meeting of the stockholders of Graphic, each of them would vote all of the shares owned by such stockholder against:

        The Coors family stockholders, in aggregate, owned 13,481,548 shares of Graphic's outstanding common stock as of March 25, 2003 and had the right to acquire an additional 946,939 shares of common stock upon exercise of currently exercisable options. The Trust owned all 1,000,000 shares of the outstanding convertible preferred stock, which were entitled to vote separately as a class and to cast a total of 24,242,424 votes with the holders of Graphic common stock in the vote on the merger agreement. In aggregate, the shares covered by the voting agreement represented approximately 65.1% of the combined voting power of Graphic's capital stock and 100% of the outstanding voting power of Graphic preferred stock as of March 25, 2003. In addition, the executive officers and directors of Graphic, representing approximately 0.6% of the combined voting power of Graphic's capital stock, had advised us that they intended to vote their shares in favor of the merger agreement.

        In addition, pursuant to the voting agreement, the Trust, the holder of Graphic convertible preferred stock, agreed to convert all of the outstanding shares of the convertible preferred stock into Graphic common stock. In consideration for the Trust's conversion of the convertible preferred stock, Riverwood agreed to pay the Trust, in cash, a conversion payment, in an amount equal to the estimated present value, calculated using a discount rate of 8.5%, of dividends payable to the Trust on the convertible preferred stock from the date of closing of the merger through August 15, 2005, the first date on which Graphic could have redeemed the convertible preferred stock. Such payment made in consideration for the conversion of the convertible preferred stock was approximately $19.8 million.

        Irrevocable Proxy.    Each of the Coors family stockholders agreed to designate and appoint Jeffrey H. Coors and, in the case of his inability to act, William K. Coors, family representative and attorney-in-fact to perform all acts required, authorized or contemplated by the voting agreement to be performed by any of the Coors family stockholders (including voting the shares of Graphic owned by such Coors family stockholder in the manner described above).

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        Transfer Restrictions.    Each of the Coors family stockholders agreed not to transfer any of the shares owned by such Coors family stockholder, or grant any proxies or enter into any voting agreements with respect to such shares other than the voting agreement with Riverwood. There is an exception to the general prohibition on transfer for transfer of shares to other Coors family stockholders or to certain other affiliated parties, if the transferees agree to be bound by the terms of the voting agreement. The Coors family stockholders also were prohibited from acquiring additional shares of Graphic stock except for other Coors family stockholder shares already subject to the voting agreement and acquisitions under employee benefit plans for Coors family stockholders who were employees of Graphic.

        The Coors family stockholders, the CDR fund and Exor (who are stockholders of Graphic Packaging Corporation), and Riverwood (which is succeeded by Graphic Packaging Corporation) entered into a stockholders agreement, dated as of March 25, 2003, as amended, under which the parties thereto have made certain agreements regarding matters further described below, including the voting of their shares and the governance of the combined company. Riverwood and certain other entities that are stockholders of Graphic Packaging Corporation entered into a transfer restrictions and observation rights agreement, dated March 25, 2003, or the other stockholders side letter, under which the parties thereto have made certain agreements regarding matters further described below, including observation rights and restrictions on the transfer of Graphic Packaging Corporation common stock. The parties to the other stockholders side letter are Riverwood, The 1818 Fund II, L.P., HWH Investment Pte Ltd, J.P. Morgan Partners (BHCA), L.P., First Plaza Group Trust, Madison Dearborn Capital Partners, L.P. and Wolfensohn-River LLC. We refer to the parties to the other Riverwood stockholders side letter, other than Riverwood, as the "other Riverwood stockholders."

        Board of Directors.    The stockholders agreement provides that Graphic Packaging Corporation's board of directors would consist of nine members, classified into three classes. Each of the three classes would consist initially of three directors, the initial terms of which would expire, respectively, at the first, second and third annual meetings of stockholders following the merger.

        The board of directors consists of Jeffrey H. Coors (who is Executive Chairman), Harold R. Logan, Jr. and John D. Beckett (who were Graphic directors), Stephen M. Humphrey, Kevin J. Conway, John R. Miller, Martin D. Walker and G. Andrea Botta (who were Riverwood directors) and Robert W. Tieken.

        The stockholders party to the stockholders agreement have further expressed their intention that the board of directors of Graphic Packaging International have the same composition as Graphic Packaging Corporation's board of directors.

        Coors Family Representative.    Pursuant to the stockholders agreement, the Coors family stockholders have appointed Jeffrey H. Coors and, in case of his inability to act, William K. Coors, as the Coors family representative.

        Designation Rights.    The stockholders agreement provides that the Coors family representative, the CDR fund and Exor have the right, subject to requirements related to stock ownership, to designate a person for nomination for election to the board of directors. Each such director is designated to that class of directors whose initial term expires at the third annual meeting of stockholders following the merger.

        The Coors family representative is entitled to designate one person for nomination for election to the board for so long as the Coors family stockholders, in the aggregate, own at least 5% of the fully diluted shares of Graphic Packaging Corporation's common stock. The CDR fund will be

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entitled to designate one person for nomination for election to the board: (1) for so long as it owns at least 5% of the fully diluted shares of Graphic Packaging Corporation's common stock, or (2) for so long as it owns less than 5% of such shares and the other Riverwood stockholders, the CDR fund and Exor continue to own, in the aggregate, at least 30% of such shares. Exor is entitled to designate one person for nomination for election to the board for so long as it owns at least 5% of the fully diluted shares of Graphic Packaging Corporation's common stock.

        Pursuant to the stockholders agreement, at each meeting of Graphic Packaging Corporation's stockholders at which Graphic Packaging Corporation's directors are to be elected, Graphic Packaging Corporation will recommend that the stockholders elect to Graphic Packaging Corporation's board of directors, the designees of the individuals designated by the Coors family representative, the CDR fund and Exor. In addition, for so long as Stephen M. Humphrey serves as Graphic Packaging Corporation's Chief Executive Officer, the stockholders agreement provides that he will be nominated for election to the board at any meeting of the stockholders at which directors of his class are to be elected.

        Independent Directors.    The stockholders agreement further provides that each of the other directors, not designated in the manner described above, will be an independent director (as defined below) designated for nomination by the nominating and corporate governance committee of the board. In the event that the Coors family representative, the CDR fund or Exor loses the right to designate a person to the board, such designee will resign immediately upon receiving notice from the nominating and corporate governance committee that it has identified a replacement director, and will resign in any event no later than 120 days after the designating person or entity loses the right to designate such designee to the board. At such time as Mr. Humphrey is no longer Graphic Packaging Corporation's Chief Executive Officer, he will similarly resign upon receipt of notice from the nominating and corporate governance committee and, in any event, no later than 120 days after ceasing to serve as Chief Executive Officer.

        An "independent director" is a director who (1) is not an officer or employee of Graphic Packaging Corporation or any of its affiliates, (2) is not an officer or employee of any stockholder party to the stockholders agreement or, if such stockholder is a trust, a direct or indirect beneficiary of such trust and (3) meets the standards of independence under applicable law and the requirements applicable to companies listed on the NYSE.

        Agreement to Vote for Directors; Vacancies.    Each party to the stockholders agreement agrees to vote all of the shares owned by such stockholder in favor of Mr. Humphrey (for so long as he is Graphic Packaging Corporation's Chief Executive Officer) and each of the parties' designees to the board, and to take all other steps within such stockholder's power to ensure that the composition of the board is as contemplated by the stockholders agreement.

        As long as the Coors family representative, the CDR fund or Exor, as the case may be, has the right to designate a person for nomination for election to the board, at any time at which the seat occupied by such party's designee becomes vacant as a result of death, disability, retirement, resignation, removal or otherwise, such party will be entitled to designate for appointment by the remaining directors an individual to fill such vacancy and to serve as a director. Graphic Packaging Corporation and each of the stockholder parties to the stockholders agreement has agreed to take such actions as will result in the appointment to the board as soon as practicable of any individual so designated by the Coors family representative, the CDR fund or Exor.

        At any time at which a vacancy is created on the board as a result of the death, disability, retirement, resignation, removal or otherwise of one of the independent directors before the expiration of his or her term as director, the nominating and corporate governance committee will notify the board of a replacement who is an independent director. Each of Graphic Packaging

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Corporation, and the stockholder parties to the stockholders agreement, have agreed to take such actions as will result in the appointment of such replacement to the board as soon as practicable.

        Actions of the Board; Affiliate Agreements.    The stockholders agreement provides that actions of the board will require the affirmative vote of at least a majority of the directors present in person or by telephone at a duly convened meeting at which a quorum is present, or the unanimous written consent of the board, except that a board decision regarding the merger, consolidation or sale of substantially all the assets of Graphic Packaging Corporation would require the affirmative vote of a majority of the directors then in office. In addition, a decision by Graphic Packaging Corporation to enter into, modify or terminate any agreement with an affiliate of the Coors family stockholders, the CDR fund or Exor will require the affirmative vote of a majority of the directors not nominated by a stockholder which, directly or indirectly through an affiliate, has an interest in that agreement.

        Board Committees.    The stockholders agreement provides for the board to have an audit committee, a compensation and benefits committee and a nominating and corporate governance committee as follows:

        Each of Graphic Packaging Corporation, and the stockholders party to the stockholders agreement, have agreed to take all steps within its power to ensure that the composition of the board's committees are as provided in the stockholders agreement. The rights described above of each of the CDR fund, the Coors family representative and Exor to have its director designee sit as a member of board committees will cease at such time as such stockholder holds less than 5% of Graphic Packaging Corporation's fully diluted shares of common stock, except that the CDR fund will continue to have such right so long as the stockholders of Riverwood immediately before the closing of the merger own, in the aggregate, at least 30% of the fully diluted shares of Graphic Packaging Corporation's common stock. The board will fill any committee seats that become vacant in the manner provided in the preceding sentence with independent directors. The board is prohibited from forming an executive committee.

        Observation and Information Rights; Directors Emeritus.    The stockholders agreement provides that The 1818 Fund II, L.P., a stockholder of Riverwood before the merger, would have the right to designate Lawrence C. Tucker to attend meetings of the board of directors and to receive copies of all written materials provided to the board. This right will terminate at such time as The 1818 Fund II, L.P. transfers (other than to affiliated permitted transferees) 50% or more of Graphic

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Packaging Corporation's common stock held by such entity at the closing of the merger. The 1818 Fund II, L.P. has entered into the other stockholders side letter, which obligates it to abide by certain terms and conditions in connection with the exercise of this right. Mr. Tucker will not have any right to vote on any matter presented to the board.

        With certain specified exceptions, each of the other Riverwood stockholders had the right to receive copies of all written materials provided to the board. This right will terminate, with respect to each other stockholder, at such time as such other stockholder transfers (other than to affiliated permitted transferees) 50% or more of Graphic Packaging Corporation's common stock held by such other stockholder at the closing of the merger. The other stockholders side letter obligates each other stockholder to abide by certain terms and conditions in connection with the exercise of this right.

        Under the stockholders agreement, the Coors family representative has the right to designate William K. Coors as an emeritus director of the combined company, and the CDR fund has the right to designate B. Charles Ames as an emeritus director of the combined company. In such capacities, Mr. William Coors and Mr. Ames have the right to attend meetings of the board and to receive copies of all written materials provided to the board. Mr. William Coors' position as emeritus director will terminate at such time as the Coors family stockholders, in the aggregate, hold less than 5% of the fully diluted shares of Graphic Packaging Corporation's common stock. Mr. Ames' position as emeritus director will terminate at such time as the CDR fund holds less than 5% of the fully diluted shares of Graphic Packaging Corporation's common stock and the stockholders of Riverwood immediately before the time of the closing of the merger hold, in the aggregate, less than 30% of the fully diluted shares of Graphic Packaging Corporation's common stock. Mr. William Coors and Mr. Ames do not have any right to vote on any matter presented to the board.

        Mr. Tucker, Mr. William Coors, Mr. Ames and each of the recipients of information rights are obliged to the maintain the confidentiality of information received in connection with the exercise of their respective rights. As Mr. Tucker, Mr. William Coors and Mr. Ames are not serving as our directors, neither of them will be subject to the duties of care and loyalty (including the duty not to seize corporate opportunities for himself) that a director would have to us or our stockholders. We do not believe that usurpation of corporate opportunities by Mr. Tucker, Mr. William Coors or Mr. Ames is a material risk to us.

        Transfer Restrictions.    The stockholders party to the stockholders agreement have agreed not to transfer any of Graphic Packaging Corporation's shares of common stock during the restricted period (defined below), except for (1) transfers to certain affiliated permitted transferees that agree to be bound by the stockholders agreement, and (2) a sale to the public pursuant to an effective registration statement filed under the Securities Act. After the expiration of the restricted period, each such stockholder may also transfer Graphic Packaging Corporation's common stock pursuant to Rule 144 or other applicable exemptions from registration, subject to any holdback obligations that such stockholder may have under the amended and restated registration rights agreement described below. The "restricted period" begins at the time of the merger and continues until the earlier of (1) such time as 50% or more of the issued and outstanding shares of Graphic Packaging Corporation's common stock have been publicly distributed or sold, or are being actively traded on a national securities exchange or interdealer quotation system, and (2) 18 months after the effective time of the merger.

        The stockholders of Riverwood before the completion of the merger other than the CDR fund and Exor, who are each party to the other stockholders side letter, had separately agreed pursuant to that side letter to abide by the transfer restrictions applicable to the stockholder parties to the stockholders agreement, except that such stockholders were permitted to transfer shares of Graphic Packaging Corporation's common stock under Rule 144 and other exemptions after the

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later of (1) 90 days following the closing of Graphic Packaging Corporation's first secondary offering for which a request is made under the amended and restated registration rights agreement (or immediately following the earlier termination or withdrawal of such offering) and, in any event, no later than March 31, 2004 and (2) December 31, 2003.

        The share certificates owned by each of the stockholder parties to the stockholders agreement and the other stockholders side letter bear customary legends with respect to transfer restrictions.

        Fee Payable to CD&R.    Under the terms of the stockholders agreement, we paid a transaction fee of $10 million to CD&R for assistance in connection with negotiation of all aspects of the merger, including the contribution analysis, financial and business due diligence, structure of the proposed refinancing and arranging for proposals by and handling negotiations with financing sources to provide funds for the refinancing.

        Termination.    The stockholders agreement will remain in effect until terminated by unanimous agreement by us and the stockholder parties or until such time as no more than one of the CDR fund, Exor, the CDR fund and the other stockholders in the aggregate, or the Coors family stockholders holds 5% or more of Graphic Packaging Corporation's outstanding common stock on a fully diluted basis. In addition, the stockholders agreement will terminate as to any stockholder party at such time as such stockholder no longer owns any of Graphic Packaging Corporation's shares of common stock. The confidentiality provisions of the agreement will survive termination.

        The other stockholders side letter will terminate upon the unanimous consent by us and the other stockholders. In addition, the other stockholders side letter will terminate with respect to specified other stockholders at the times provided in the letter. The confidentiality obligations of the other stockholders side letter will survive termination.

        Graphic Packaging Corporation, the parties to the stockholders agreement and the other stockholders of Riverwood immediately before the merger, are parties to an amended and restated registration rights agreement, dated as of March 25, 2003, under which the parties agreed to amend and restate Riverwood's previous registration rights agreement in connection with the transactions contemplated by the merger agreement. The parties to the amended and restated registration rights agreement are the Coors family stockholders, the CDR fund, Exor and the other Riverwood stockholders.

        The amended and restated registration rights agreement provides that, after the expiration of 90 days from the time of the merger, holders of 15% or more of Graphic Packaging Corporation's outstanding shares of common stock may request that we effect the registration under the Securities Act of all or part of such holder's registrable securities (as defined below). Upon receipt of such a request, we are required to promptly give written notice of such requested registration to all holders of registrable securities and, thereafter, to use our reasonable best efforts to effect the registration under the Securities Act of all registrable securities which we have been requested to register pursuant to the terms of the amended and restated registration rights agreement. After the expiration of 180 days after the closing of an initial secondary offering, holders of 5% or more of Graphic Packaging Corporation's outstanding shares of common stock may again request that we effect the registration under the Securities Act of all or part of such holder's registrable securities. In all cases, our obligations to register the registrable securities are subject to the minimum and maximum offering size limitations set forth below.

        With respect to the first two requests to effect registration of registrable securities, we are not required to effect such registration if such requests relate to less than 15% of the outstanding shares of common stock or, without the approval of the board of directors, more than 25% of the

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outstanding shares. Any request for registration of registrable securities after the first two requests will be subject to a minimum offering size of 5% of Graphic Packaging Corporation's outstanding shares of common stock.

        "Registrable securities" means:

        If a stockholder party to the amended and restated registration rights agreement requests registration of any of its shares, we are required to prepare and file a registration statement with the SEC as soon as possible, and no later than 60 days after receipt of the request.

        We will pay all expenses in connection with the first four successfully effected registrations requested.

        The stockholders party to the amended and restated registration rights agreement have the right to request that any offering requested by them under the amended and restated registration rights agreement be an underwritten offering. We have the right to select one or more underwriters to administer the requested offering, but the selection of underwriters is subject to approval by the holders of a majority of the shares to be included in the offering.

        The amended and restated registration rights agreement also provides that, with certain exceptions, the parties thereto have certain incidental registration rights in the event that we at any time propose to register any of Graphic Packaging Corporation's equity securities and the registration form to be used may be used for the registration of securities otherwise registrable under the registration rights agreement.

        In addition to the provisions set forth above, the amended and restated registration rights agreement contains other terms and conditions including those customary to agreements of this kind.

        Termination.    The amended and restated registration rights agreement terminates on the earliest of its termination by unanimous consent of the parties, the date on which no shares subject to the agreement are outstanding, or Graphic Packaging Corporation's dissolution, liquidation or winding up.

Riverwood

        The CDR fund, which was one of Riverwood's largest stockholders, is a private investment fund managed by CD&R. The general partner of the CDR fund is CD&R Associates V Limited Partnership, or Associates V, and the general partners of Associates V are CD&R Investment Associates II Inc., or Associates II, Inc., CD&R Investment Associates, Inc., a Delaware corporation,

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and CD&R Cayman Investment Associates, Inc., a Cayman Islands exempted company. Mr. Ames, who is a principal of CD&R, a director of Investment Associates II and a limited partner of Associates V, was Riverwood's Chairman. Mr. Conway, who is a principal of CD&R, a director of Investment Associates II and a limited partner of Associates V, is one of our directors. See "Management." The CDR fund purchased $225 million of equity of Riverwood in connection with the 1996 merger.

        CD&R is a private investment firm which is organized as a Delaware corporation. CD&R is the manager of a series of investment funds, including the CDR fund. CD&R generally assists in structuring, arranging financing for and negotiating the transactions in which the funds it manages invest. After the consummation of such transactions, CD&R generally provides management and financial advisory and consulting services to the companies in which its investment funds have invested during the period of such fund's investment. Such services include helping the company to establish effective banking, legal and other business relationships and assisting management in developing and implementing strategies for improving the operational, marketing and financial performance of the company.

        Pursuant to a consulting agreement dated as of March 27, 1996, CD&R received an annual fee (and reimbursement of out-of-pocket expenses) for providing management and financial consulting services to Riverwood. Pursuant to the new stockholders agreement, CD&R no longer has a consulting agreement with us. During the year ended December 31, 2002, Riverwood paid CD&R annual fees in the amount of $470,000 for providing such management and financial consulting services. Under the terms of the stockholders agreement, we paid a transaction fee of $10 million to CD&R for assistance in connection with negotiation of all aspects of the merger, including the contribution analysis, financial and business due diligence, structure of the proposed refinancing and arranging for proposals by and handling negotiations with financing sources to provide funds for the refinancing.

        CD&R, the CDR fund, Riverwood, RIC and RIC Holding, Inc. entered into an indemnification agreement dated as of March 27, 1996, pursuant to which Riverwood, RIC Holding, Inc. and RIC, agreed to indemnify CD&R, the CDR fund, Associates V, Associates II, Inc., together with any other general partner of Associates V, and their respective directors, officers, partners, employees, agents, advisors, representatives and controlling persons against certain liabilities which arose under the federal securities laws, liabilities arising out of the performance of the consulting agreement and certain other claims and liabilities.

        Riverwood did not have any formal policy to address conflicts of interest with related parties.

        Each of the 5% stockholders and certain other holders of Riverwood's common stock and options to purchase Riverwood's common stock, including certain executive officers and key employees, were parties to a registration rights and participation agreement, dated March 27, 1996. This agreement has been superseded by the amended and restated registration rights agreement which became effective in connection with the merger. See "— Combined Company — Amended and Restated Registration Rights Agreement."

        Riverwood's stockholders agreement terminated at the time of the closing of the merger. The Coors family stockholders, the CDR fund, Exor and we are parties to a new stockholders agreement, dated as of March 25, 2003, as amended by amendment no. 1, dated as of April 29, 2003, and by amendment no. 2, dated as of June 12, 2003. Certain other stockholders of

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Riverwood are party to the other Riverwood stockholders side letter. See "— Combined Company — Stockholders Agreements."

        In November 1999, Riverwood lent Mr. Humphrey $5,000,000 pursuant to a full-recourse non-interest bearing promissory note entered into by Mr. Humphrey and Riverwood, which was amended in December 2001. The promissory note will generally become due and payable on March 26, 2007, or, earlier, if Mr. Humphrey voluntarily terminates his employment other than for "good reason" or if we terminate his employment for "cause," in each case, as defined in Mr. Humphrey's employment agreement. If payment on the note is not made when due, the payment will bear interest, payable on demand, equal to 5.93% per year. Interest will also be payable on any amount that is prepaid. The note, together with any interest accrued thereon, will be forgiven and will not have to be repaid if, on or prior to March 26, 2007, Mr. Humphrey terminates his employment for "good reason," we terminate Mr. Humphrey's employment without "cause" or because of his "disability," in each case as defined in his employment agreement, or Mr. Humphrey's employment terminates because of his death.

        During 2002 and through March 1, 2003, Riverwood repurchased 12,500 shares of Riverwood common stock (before giving effect to Riverwood's stock split) from management investors at $120.00 per share.

        Effective January 1, 2002, Riverwood adopted a 2002 Stock Incentive Plan that provided for, among other things, the grant of options to purchase shares of Riverwood common stock and restricted stock units with respect to a maximum of 658,353 shares of Riverwood common stock (before giving effect to Riverwood's stock split).

        Effective March 25, 2003, Riverwood established the 2003 Long-Term Incentive Plan that provided for, among other things, the grant of options to purchase shares of Riverwood common stock, restricted stock and restricted units, stock appreciation rights, incentive stock and incentive units, and deferred shares and supplemental units with respect to 100,000 shares of Riverwood common stock (before giving effect to Riverwood's stock split).

Graphic

        William K. Coors, Joseph Coors, Jr., Jeffrey H. Coors (who was Graphic's President and Chief Executive Officer), John K. Coors, J. Bradford Coors, Peter H. Coors and Melissa E. Coors are co-trustees of one or more of the Coors family trusts, which collectively owned approximately 41% of Graphic's common stock, 100% of the convertible preferred stock, and 31% of the non-voting common stock of Adolph Coors Company. In addition, one of those trusts owns 100% of the voting common stock of Adolph Coors Company and a related entity owns 100% of CoorsTek, Inc., Jeffrey H. Coors, John K. Coors, Joseph Coors, Jr., and Peter H. Coors are brothers. Jeffrey H. Coors is Executive Chairman and a director of Graphic Packaging Corporation, GPI Holding and Graphic Packaging International. J. Bradford Coors is the son of Joseph Coors, Jr. J. Bradford Coors is an employee of Coors Brewing Company. Melissa E. Coors is Peter H. Coors' daughter and she is an employee of Coors Brewing Company. William K. Coors is an emeritus director of Graphic Packaging Corporation. Peter H. Coors is an executive officer and director of Adolph Coors Company and chairman of Coors Brewing Company. John K. Coors is an executive officer and director of CoorsTek, Inc. Graphic, Adolph Coors Company, and CoorsTek, Inc., or their subsidiaries, have certain business relationships and have engaged or propose to engage in certain transactions with one another, as described below.

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        On December 28, 1992, Graphic was spun off from Adolph Coors Company and since that time Adolph Coors Company had no ownership interest in Graphic. However, certain Coors family trusts had significant interests in both Graphic and Adolph Coors Company. Graphic also entered into various business arrangements with the Coors family trusts and related entities from time-to-time since its spin-off. Graphic's policy was to negotiate market prices and competitive terms with all third parties, including related parties.

        Graphic originated as the packaging division of Coors Brewing Company, a subsidiary of Adolph Coors Company. At the time of spin-off from Adolph Coors Company, Graphic entered into an agreement with Coors Brewing Company to continue to supply its packaging needs. The initial agreement had a stated term of five years. Graphic subsequently entered into a new agreement which extended the supply relationship through March 2003. In the first quarter of 2003, Graphic executed a new supply agreement, effective April 1, 2003, with Coors Brewing Company that will not expire until December 31, 2006. We continue to sell packaging products to Coors Brewing Company. Coors Brewing Company accounted for approximately $15 million of our consolidated net sales for the three months ended September 30, 2003. Total sales under the packaging contract have been a material source of revenue for Graphic, accounting for sales of approximately $111 million in 2002 (representing approximately 10% of Graphic's consolidated gross revenue in 2002). The loss of Coors Brewing Company as a customer in the foreseeable future could have a material effect on our results of operations and cash flows.

        One of our subsidiaries, Golden Equities, Inc., is the general partner in a limited partnership in which Coors Brewing Company is the limited partner. Prior to the merger, Golden Equities, Inc. was a subsidiary of Graphic. The partnership owns, develops, operates and sells certain real estate previously owned directly by Coors Brewing Company or Adolph Coors Company. Distributions were allocated equally between the partners until late 1999 when Coors Brewing Company recovered its investment. Thereafter, distributions were made 80% to Graphic as the general partner and 20% to Coors Brewing Company. No distributions were made in the first nine months of 2003, and distributions to Coors Brewing in the remainder of 2003 are estimated to be less than $100,000. Distributions in 2002 were $2.0 million to Graphic and $0.5 million to Coors Brewing Company. No distributions were made in 2001. Distributions in 2000 were approximately $0.8 million to Coors Brewing Company and $3.2 million to Graphic. Coors Brewing Company's share of the partnership net assets at December 31, 2002 and 2001 was $3.9 million and $4.4 million, respectively, and is reflected as minority interest on our consolidated balance sheet. Coors Brewing Company's allocated share of the partnership's profit was $0 in 2002, 2001 and 2000.

        The spin-off of CoorsTek, Inc. from Graphic was made pursuant to a distribution agreement between Graphic and CoorsTek, Inc. in December 1999. It established the procedures to effect the spin-off and contractually provided for the distribution of the CoorsTek, Inc. common stock to the stockholders of Graphic, the allocation to CoorsTek, Inc. of certain assets and liabilities and the transfer to and assumption by CoorsTek, Inc. of those assets and liabilities. In the distribution agreement, CoorsTek, Inc. agreed to repay all outstanding intercompany debt owed by CoorsTek, Inc. to Graphic together with a special dividend. The total amount of the repayment and the special dividend was $200 million. Under the distribution agreement, Graphic and CoorsTek, Inc. each agreed to retain, and to make available to the other, books and records and related assistance for audit, accounting, claims defense, legal, insurance, tax, disclosure, benefit administration and other business purposes. CoorsTek, Inc. also agreed to indemnify Graphic if the

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CoorsTek, Inc. spin-off is taxable under certain circumstances or if Graphic incurred certain liabilities.

        The tax sharing agreement defines the parties' rights and obligations with respect to deficiencies and refunds of federal, state and other taxes relating to the CoorsTek, Inc. business for tax years prior to the CoorsTek, Inc. spin-off and with respect to certain tax attributes of CoorsTek, Inc. after the CoorsTek, Inc. spin-off. In general, Graphic was responsible for filing consolidated federal and combined or consolidated state tax returns and paying the associated taxes for periods through December 31, 1999. CoorsTek, Inc. was required to pay Graphic an amount equal to the taxes that CoorsTek, Inc. would have been required to pay on a stand-alone basis with respect to such combined or consolidated tax returns. Graphic and CoorsTek, Inc. agreed to cooperate with each other and to share information in preparing such tax returns and in dealing with other tax matters. Graphic and CoorsTek, Inc. each were responsible for their own taxes other than those described above.

        On March 31, 2000, Graphic sold the net assets of its GTC Nutrition subsidiary to an entity controlled by a member of the Coors family for approximately $0.7 million. GTC Nutrition was a non-core asset that was not strategically in line with Graphic's packaging focus. No gain or loss was recognized as a result of the sale.

        In August 2000, Graphic issued $100.0 million of convertible preferred stock to the Trust. Proceeds were used to fund principal amortization on Graphic's debt due in August 2000. See further discussion of the convertible preferred stock in note 13 to Graphic's consolidated financial statements incorporated by reference in this prospectus.

        In August 2001, Graphic completed a $50.0 million private placement of 10% subordinated unsecured notes. The purchaser of the notes was Golden Heritage, LLC, a company owned by certain Coors family trusts. Proceeds were used to fund principal amortization on Graphic's debt due in August 2001. On February 28, 2002, Graphic repaid the notes in connection with certain refinancing transactions discussed in note 5 to Graphic's consolidated financial statements incorporated by reference in this prospectus.

        In September 2002, Graphic entered into a warehouse sublease with Rocky Mountain Bottle Company, a partnership partially owned by Coors Brewing Company. Graphic's Golden, Colorado facility uses this warehouse space. Annual rent under the sublease is approximately $100 thousand. The sublease term expires in July 2006.

Riverwood—Graphic Supply Agreement

        RIC and GPC, formerly a wholly-owned subsidiary of Graphic, entered into a supply agreement, effective as of July 1, 2000, pursuant to which RIC agreed to sell to GPC, and GPC agreed to purchase from RIC, CUK board through June 30, 2003. Under the terms of the supply agreement, GPC agreed to purchase from RIC its requirements for CUK board for use in certain folding carton manufacturing operations of GPC. Through June 30, 2001, prices for CUK board were based upon pricing terms specified in the agreement. Thereafter, prices for CUK board were adjusted annually based on the Price Watch column of the March edition of the Pulp & Paper Week, or the SBS Index. Notwithstanding any increase or decrease to the SBS Index, the supply agreement provided that prices for CUK board will not be less than the initial pricing terms. Riverwood's revenues under the supply agreement were approximately $52.9 million for the year ended December 31, 2002 and approximately $38.0 million for the period January 1, 2003 to August 8, 2003, the date of the merger. Graphic's purchases under the supply agreement represented approximately 5.7% of cost of goods sold for the year ended December 31, 2002 and approximately 6.5% of cost of goods sold for the period January 1, 2003 to August 8, 2003, the date of the merger. Following the merger, such revenues have been eliminated through consolidation in our consolidated financial statements.

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DESCRIPTION OF NEW CREDIT FACILITIES

New Credit Facilities

        On August 8, 2003, we, with a syndicate of lenders, led by JPMorgan Chase Bank, as administrative agent, Deutsche Bank Securities Inc., as syndication agent and Goldman Sachs Credit Partners L.P. and Morgan Stanley Senior Funding, Inc., as documentation agents, entered into a new senior secured credit agreement. Graphic Packaging International is the borrower under the new credit facilities. The following summary is a description of the principal terms of the senior secured credit agreement and the related documents governing the facility, which we refer to as the credit documentation, and is subject to and qualified in its entirety by reference to the credit documentation, copies of which will be made available by us upon request.

        The new credit facilities provide for aggregate maximum borrowings of $1.6 billion under (1) a term loan facility providing for term loans in an aggregate principal amount of $1.275 billion in two tranches, consisting of Tranche A term loans and Tranche B term loans, and (2) a revolving credit facility, providing for up to $325 million in revolving loans to the borrower (including standby and commercial letters of credit) outstanding at any time. In connection with the merger and the refinancing, $1.275 billion was drawn under the term loan facility and approximately $68.0 million was drawn under the revolving credit facility. Undrawn amounts under the revolving credit facility are available on a revolving credit basis for general corporate purposes of the borrower and its subsidiaries.

        The availability of additional loans under the revolving credit commitment is subject to various conditions precedent including, but not limited to the renewal of the representations and warranties made under the senior secured credit agreement and the absence of any event of default as defined in the senior secured credit agreement.

        The Tranche A term loans and the revolving credit facility mature in 2009. The Tranche B term loans mature in 2010. The principal amount of the Tranche A term loan facility is to be amortized in semi-annual installments over its term on the following amortization schedule: $3.75 million on December 31, 2003 and June 30, 2004, $7.5 million on December 31, 2004 and June 30, 2005, $11.25 million on December 31, 2005 and June 30, 2006, $15.0 million on December 31, 2006 and June 30, 2007, and $18.75 million on December 31, 2007, June 30, 2008, December 31, 2008 and at maturity. The principal amount of the Tranche B term loan facility is to be amortized in semi-annual installments of $5.625 million payable on December 31 and June 30 of each year commencing on December 31, 2003 through December 31, 2009, with a final bullet payment of approximately $1.05 billion at maturity. The amortization schedules for the term loan facilities are adjusted pro rata in the event that less than $1.275 billion in term loans are drawn under the credit agreement.

        Subject to certain exceptions, the new credit facilities are subject to mandatory prepayment and reduction in an amount equal to:

        The new credit facilities may also be prepaid at the borrower's option, in whole or in part, without premium or penalty, subject to certain conditions.

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        The obligations of the borrower under the new credit facilities are guaranteed by us and each of our existing or future domestic subsidiaries. In addition, the new credit facilities and the guarantees thereunder are secured by security interests in and pledges of or liens on substantially all of our, and the guarantors', material tangible and intangible assets, including pledges of all the capital stock of certain direct or indirect domestic subsidiaries of the combined company and of up to 65% of the capital stock of each direct foreign subsidiary of the borrower.

        At the borrower's election, the interest rates per annum applicable to the loans under the new credit facilities are to be a fluctuating rate of interest measured by reference to either (1) an adjusted London inter-bank offered rate, or LIBOR, plus a borrowing margin or (2) an alternate base rate, or ABR, plus a borrowing margin.

        We agreed to certain fees with respect to the new credit facilities, including (1) fees on the unused commitments of the lenders, (2) letter of credit fees on the aggregate face amount of outstanding letters of credit plus a fronting bank fee for the letter of credit issuing bank, (3) quarterly administration fees and (4) arrangement and other similar fees.

        The new credit facilities contain a number of covenants that, among other things, limit or restrict our ability to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness, make dividends and other restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the indentures under which the new notes are issued, engage in mergers or consolidations, change the business conducted by us, make capital expenditures, or engage in certain transactions with affiliates. In addition, under the new credit facilities, we are required to comply with specified financial ratios and tests, including a minimum interest expense coverage ratio, a maximum leverage ratio and maximum capital expenditures.

        The financial covenants in the senior secured credit agreement for the new credit facilities specify, among other things, the following requirements for each four quarter period ended during the following test periods:

Test Period
   Consolidated Debt to
Credit Agreement
EBIDTA Leverage Ratio
   Consolidated Credit
Agreement EBITDA to
Interest Expense Ratio
October 1, 2003 - December 30, 2004   6.40 to 1.00   2.00 to 1.00
December 31, 2004 - December 30, 2005   6.15 to 1.00   2.25 to 1.00
December 31, 2005 - December 30, 2006   5.75 to 1.00   2.35 to 1.00
December 31, 2006 - December 30, 2007   5.25 to 1.00   2.50 to 1.00
December 31, 2007 - December 30, 2008   4.75 to 1.00   2.75 to 1.00
December 31, 2008 - June 30, 2010   4.50 to 1.00   2.90 to 1.00

        The new credit facilities contain customary events of default including non-payment of principal, interest or fees, failure to comply with covenants, inaccuracy of representations or warranties in any material respect, cross default to certain other indebtedness, loss of lien perfection or priority, material judgments and change of ownership or control.

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DESCRIPTION OF NOTES

General

        We issued the old senior notes, and will issue the new senior notes, under an Indenture, dated as of August 8, 2003 (the "Senior Indenture"), among Graphic Packaging International, Inc., as issuer (the "Company"), Graphic Packaging Corporation ("Holding") and GPI Holding, Inc. ("GPI Holding"), as Note Guarantors, and Wells Fargo Bank Minnesota, National Association, as Trustee (the "Senior Note Trustee"). We issued the old senior subordinated notes, and will issue the new senior subordinated notes, under an Indenture, dated as of August 8, 2003 (the "Senior Subordinated Indenture" and, together with the Senior Indenture, the "Indentures"), among the Company, as issuer, Holding and GPI Holding, as Note Guarantors, and Wells Fargo Bank Minnesota, National Association, as Trustee (the "Senior Subordinated Note Trustee" and, together with the Senior Note Trustee, the "Trustees"). The terms of the new senior notes and new senior subordinated notes are identical to the terms of the old senior notes and old senior subordinated notes, respectively, except that the new senior notes and new senior subordinated notes are registered under the Securities Act and will not contain restrictions on transfer or provisions relating to additional interest, will bear a different CUSIP number from the old senior notes and old senior subordinated notes, respectively, and will not entitle their holders to registration rights. New notes will otherwise be treated as old notes for purposes of the Indentures.

        The following is a summary of certain provisions of the Indentures and the notes. It does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Indentures, including the definitions of certain terms therein and those terms to be made a part thereof by the Trust Indenture Act of 1939, as amended ("TIA"). The term "Company" and the other capitalized terms defined in "—Certain Definitions" below are used in this "Description of Notes" as so defined. Any reference to a "Holder" or a "Noteholder" in this Description of Notes refers to the Holders of the Senior Notes or the Senior Subordinated Notes, as applicable. Any reference to "Notes" or a "series" of Notes in this Description of Notes refers to the Senior Notes or the Senior Subordinated Notes, as applicable.

Brief Description of the Notes

The Senior Notes

        The Senior Notes are:

The Senior Subordinated Notes

        The Senior Subordinated Notes are:

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Principal, Maturity and Interest

The Senior Notes

        The Senior Notes will mature on August 15, 2011. Each Senior Note will bear interest at a rate per annum shown on the front cover of this prospectus from the date of issuance, or from the most recent date to which interest has been paid or provided for. Interest will be payable semiannually in cash to Holders of record at the close of business on the February 1 or August 1 immediately preceding the interest payment date, on February 15 and August 15 of each year, commencing February 15, 2004. Interest will be paid on the basis of a 360-day year consisting of twelve 30-day months.

        An aggregate principal amount of $425.0 million of Senior Notes are currently outstanding. Additional securities may be issued under the Senior Indenture in one or more series from time to time ("Additional Senior Notes"), subject to the limitations set forth under "—Certain Covenants—Limitation on Indebtedness," which will vote as a class with the Senior Notes and otherwise be treated as Senior Notes for purposes of the Senior Indenture.

The Senior Subordinated Notes

        The Senior Subordinated Notes will mature on August 15, 2013. Each Senior Subordinated Note will bear interest at a rate per annum shown on the front cover of this prospectus from the date of issuance, or from the most recent date to which interest has been paid or provided for. Interest will be payable semiannually in cash to Holders of record at the close of business on the February 1 or August 1 immediately preceding the interest payment date, on February 15 and August 15 of each year, commencing February 15, 2004. Interest will be paid on the basis of a 360-day year consisting of twelve 30-day months.

        An aggregate principal amount of $425.0 million of Senior Subordinated Notes are currently outstanding. Additional securities may be issued under the Senior Subordinated Indenture in one or more series from time to time ("Additional Senior Subordinated Notes" and, together with any Additional Senior Notes, the "Additional Notes"), subject to the limitations set forth under "—Certain Covenants—Limitation on Indebtedness," which will vote as a class with the Senior Subordinated Notes and otherwise be treated as Senior Subordinated Notes for purposes of the Senior Subordinated Indenture.

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Other Terms

        Principal of, and premium, if any, and interest on, the applicable Notes will be payable, and such Notes may be exchanged or transferred, at the office or agency of the Company in the Borough of Manhattan, The City of New York (which initially shall be the corporate trust office of the applicable Trustee), except that, at the option of the Company, payment of interest may be made by check mailed to the address of the registered holders of such Notes as such address appears in the applicable Note Register.

        The Notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith.

        The Notes are expected to be designated for trading in The PORTALsm Market.

Optional Redemption

        The applicable series of Notes will be redeemable, at the Company's option, at any time prior to maturity at varying redemption prices in accordance with the applicable provisions set forth below.

        The Senior Notes will be redeemable, at the Company's option, in whole or in part, and from time to time on and after August 15, 2007 and prior to maturity at the applicable redemption price set forth below. Such redemption may be made upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the redemption date. The Company may provide in such notice that payment of the redemption price and the performance of the Company's obligations with respect to such redemption may be performed by another Person. Any such redemption and notice may, in the Company's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a Change of Control. The Senior Notes will be so redeemable at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on August 15 of the years set forth below:

Period
   Redemption
Price
  
2007   104.250 %
2008   102.125 %
2009 and thereafter   100.000 %

        The Senior Subordinated Notes will be redeemable, at the Company's option, in whole or in part, and from time to time on and after August 15, 2008 and prior to maturity at the applicable redemption price set forth below. Such redemption may be made upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the redemption date. The Company may provide in such notice that payment of the redemption price and the performance of the Company's obligations with respect to such redemption may be performed by another Person. Any such redemption and notice may, in the Company's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a change of control. The Senior Subordinated Notes will be so redeemable at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, to the relevant redemption date (subject to the right of Holders of record on

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the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on August 15 of the years set forth below:

Period
   Redemption
Price
  
2008   104.750 %
2009   103.167 %
2010   101.583 %
2011 and thereafter   100.000 %

        In addition, at any time and from time to time on or prior to August 15, 2006, the Company at its option may redeem Notes of either series in an aggregate principal amount equal to up to 35% of the original aggregate principal amount of such Notes (including the principal amount of any Additional Notes of such series), with funds in an aggregate amount (the "Redemption Amount") not exceeding the aggregate proceeds of one or more Equity Offerings (as defined below) at a redemption price (expressed as a percentage of principal amount thereof) of 108.500%, for the Senior Notes, and 109.500%, for the Senior Subordinated Notes, in each case plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that an aggregate principal amount of Notes of the applicable series equal to at least 65% of the original aggregate principal amount of such Notes (including the principal amount of any Additional Notes of such series) must remain outstanding after each such redemption. "Equity Offering" means a sale of Capital Stock (x) that is a sale of Capital Stock of the Company (other than Disqualified Stock), or (y) proceeds of which in an amount equal to or exceeding the Redemption Amount are contributed to the Company or any of its Restricted Subsidiaries. The Company may make such redemption upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the redemption date (but in no event more than 180 days after the completion of the related Equity Offering). The Company may provide in such notice that payment of the redemption price and performance of the Company's obligations with respect to such redemption may be performed by another Person. Any such notice may be given prior to the completion of the related Equity Offering, and any such redemption or notice may, at the Company's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the completion of the related Equity Offering.

        At any time prior to August 15, 2007, in the case of the Senior Notes, and August 15, 2008, in the case of the Senior Subordinated Notes, such Notes may also be redeemed or purchased (by the Company or any other Person) in whole or in part, at the Company's option, at a price (the "Redemption Price") equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the date of redemption or purchase (the "Redemption Date") (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). Such redemption or purchase may be made upon notice mailed by first-class mail to each Holder's registered address, not less than 30 nor more than 60 days prior to the Redemption Date. The Company may provide in such notice that payment of the Redemption Price and performance of the Company's obligations with respect to such redemption or purchase may be performed by another Person. Any such redemption, purchase or notice may, at the Company's discretion, be subject to the satisfaction of one or more conditions precedent, including but not limited to the occurrence of a Change of Control.

        "Applicable Premium" means, with respect to a Note at any Redemption Date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess of (A) the present value at such Redemption Date of (1) the redemption price of such Note on August 15, 2007, in the case of a Senior Note, and August 15, 2008, in the case of a Senior Subordinated Note (such redemption price being that described in the second or third paragraph, respectively, of this "Optional

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Redemption" section) plus (2) all required remaining scheduled interest payments due on such Note through such date, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the principal amount of such Note on such Redemption Date. Calculation of the Applicable Premium will be made by the Company or on behalf of the Company by such Person as the Company shall designate; provided that such calculation shall not be a duty or obligation of the applicable Trustee.

        "Treasury Rate" means, with respect to a Redemption Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business Days prior to such Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Redemption Date to August 15, 2007, in the case of a Senior Note, and August 15, 2008, in the case of a Senior Subordinated Note; provided, however, that if the period from the Redemption Date to such date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from the Redemption Date to such date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

Selection

        In the case of any partial redemption, selection of the Notes for redemption will be made by the applicable Trustee on a pro rata basis, by lot or by such other method as such Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note.

Parent Guarantees

        Holding and GPI Holding will, as primary obligors and not merely as sureties, irrevocably and fully and unconditionally Guarantee (the "Parent Guarantees," and each of Holding and GPI Holding in such capacity, a "Parent Guarantor"), on an unsecured senior basis, in the case of Senior Notes, and an unsecured senior subordinated basis, in the case of Senior Subordinated Notes, the punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all monetary obligations of the Company under the applicable Indenture and the applicable Notes, whether for principal of or interest on the applicable Notes, expenses, indemnification or otherwise (all such obligations guaranteed by each Parent Guarantor being herein called the "Parent Guaranteed Obligations"). Each Parent Guarantor, pursuant to its Parent Guarantee, will agree to pay, in addition to the amount stated above, any and all reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) incurred by the applicable Trustee or the applicable Holders in enforcing any rights under its Parent Guarantee.

        Each Parent Guarantee shall be a continuing Guarantee and shall (i) subject to the next two sentences, remain in full force and effect until payment in full of the principal amount of all outstanding Notes of the applicable series (whether by payment at maturity, purchase, redemption, defeasance, retirement or other acquisition) and all other applicable Parent Guaranteed Obligations of the applicable Parent Guarantor then due and owing, (ii) be binding upon such Parent Guarantor

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and (iii) inure to the benefit of and be enforceable by the applicable Trustee, the applicable Holders and their permitted successors, transferees and assigns.

        Each Parent Guarantor will automatically and unconditionally be released from all obligations under its Parent Guarantee, and its Parent Guarantee shall thereupon terminate and be discharged and of no further force of effect, (i) upon any merger or consolidation of such Parent Guarantor with and into the Company or the other Parent Guarantor, (ii) upon legal or covenant defeasance of the Company's obligations under, or satisfaction and discharge of, the applicable Indenture, or (iii) subject to customary contingent reinstatement provisions, upon payment in full of the aggregate principal amount of all Notes of the applicable series then outstanding and all other applicable Parent Guaranteed Obligations of such Parent Guarantor then due and owing.

        In addition, at the Company's option, each of Holding and GPI Holding will automatically and unconditionally be released from all obligations under its Parent Guarantee, and its Parent Guarantee shall thereupon terminate and be discharged and of no further force and effect, upon the payment in full (by redemption, repurchase, satisfaction and discharge or otherwise), in connection with the Transactions or otherwise, of all outstanding Existing Notes.

        Upon any such occurrence specified in the two preceding paragraphs, the applicable Trustee shall execute any documents reasonably required in order to evidence such release, discharge and termination in respect of the applicable Parent Guarantee. Neither the Company nor either Parent Guarantor shall be required to make a notation on the Notes to reflect either Parent Guarantee or any such release, termination or discharge.

Subsidiary Guarantees

        After the Issue Date, the Company will cause each Significant Domestic Subsidiary that guarantees payment by the Company of any Bank Indebtedness of the Company to execute and deliver to the applicable Trustee a supplemental indenture or other instrument pursuant to which such Subsidiary will guarantee payment of the applicable series of Notes, whereupon such Subsidiary will become a Subsidiary Guarantor for all purposes under the applicable Indenture. The Company will also have the right to cause any other Subsidiary so to guarantee payment of the applicable series of Notes. No Subsidiaries will be Subsidiary Guarantors as of the Issue Date. Subsidiary Guarantees will be subject to release and discharge under certain circumstances prior to payment in full of the applicable series of Notes. See "—Certain Covenants—Future Subsidiary Guarantors."

Ranking

Senior Notes

        The indebtedness evidenced by the Senior Notes will be unsecured Senior Indebtedness of the Company, will rank pari passu in right of payment with all existing and future Senior Indebtedness of the Company and will be senior in right of payment to all existing and future Subordinated Obligations of the Company. The Senior Notes will also be effectively subordinated to all secured Indebtedness and other liabilities (including trade payables) of the Company to the extent of the value of the assets securing such Indebtedness, and to all Indebtedness of its Subsidiaries (other than any Subsidiaries that become Note Guarantors pursuant to the provisions described above under "—Subsidiary Guarantees").

        Each Note Guarantee in respect of Senior Notes will be unsecured Senior Indebtedness of the applicable Note Guarantor, will rank pari passu in right of payment with all existing and future Senior Indebtedness of such Person and will be senior in right of payment to all existing and future Guarantor Subordinated Obligations of such Person. Such Note Guarantee will also be effectively

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subordinated to all secured Indebtedness of such Person to the extent of the value of the assets securing such Indebtedness, and to all Indebtedness and other liabilities (including trade payables) of the Subsidiaries of such Person (other than any Subsidiaries that become Note Guarantors pursuant to the provisions described above under "—Subsidiary Guarantees").

Senior Subordinated Notes

        The indebtedness evidenced by the Senior Subordinated Notes will be unsecured Senior Subordinated Indebtedness of the Company, will be subordinated in right of payment, as set forth in the Senior Subordinated Indenture, to the payment when due of all existing and future Senior Indebtedness of the Company, including the Company's obligations under the Senior Notes and the Senior Credit Facility, will rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Company and will be senior in right of payment to all existing and future Subordinated Obligations of the Company. The Senior Subordinated Notes will also be effectively subordinated to any secured Indebtedness of the Company to the extent of the value of the assets securing such Indebtedness, and to all Indebtedness and other liabilities (including trade payables) of the Company's Subsidiaries (other than any Subsidiaries that become Note Guarantors pursuant to the provisions described above under "—Subsidiary Guarantees").

        Each Note Guarantee in respect of Senior Subordinated Notes will be unsecured Senior Subordinated Indebtedness of the applicable Note Guarantor, will be subordinated in right of payment, as set forth in the Senior Subordinated Indenture, to the payment when due of all existing and future Senior Indebtedness of such Person, including such Person's obligations under its Note Guarantee, if any of the Senior Notes and such Person's guarantee, if any, of the Senior Credit Facility, will rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of such Person and will be senior in right of payment to all existing and future Guarantor Subordinated Obligations of such Person. Such Note Guarantee will also be effectively subordinated to any secured Indebtedness of such Person to the extent of the value of the assets securing such Indebtedness, and to all Indebtedness and other liabilities (including trade payables) of the Subsidiaries of such Person (other than any Subsidiaries that become Note Guarantors pursuant to the provisions described above under "—Subsidiary Guarantees").

        However, payment fr