Exhibit 10.26

Confidential treatment has been requested for portions of this document. This
copy of the document filed as an exhibit omits the confidential information
subject to the confidential treatment request. Omissions are designated by three
asterisks (***). A complete version of this document is being filed separately
with the Securities and Exchange Commission.

SEVENTH AMENDMENT TO CREDIT AGREEMENT

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made and
entered into as of December 27, 2005, among Caraustar Industries, Inc., a North
Carolina corporation (“Caraustar”), and each Subsidiary of Caraustar listed on
the signature pages hereto as a “Borrower” (Caraustar and each such Subsidiary,
individually, a “Borrower”, and collectively, “Borrowers”), and each Subsidiary
of Caraustar listed on the signature pages hereto as a “Guarantor” (each such
Subsidiary, individually, a “Guarantor”, and, collectively, “Guarantors”;
Borrowers and Guarantors, collectively, “Obligors”), the Lenders party to this
Amendment (the “Lenders”), and the Bank of America, N.A., as Agent for the
Lenders (the “Agent”).

W I T N E S S E T H:

WHEREAS, Borrowers, Guarantors, the Lenders and the Agent entered into that
certain Credit Agreement, dated as of June 24, 2003, pursuant to which the
Lenders agreed to make certain loans to Borrowers (as amended, modified,
supplemented and restated from time to time, the “Credit Agreement”);

WHEREAS, Borrowers have informed the Agent and Lenders that certain Obligors
desire to sell certain of their assets and to purchase certain assets as more
fully described herein, which sales and purchases of assets are not permitted
under the terms of the Credit Agreement;

WHEREAS, Borrowers have requested that the Agent and Lenders consent to such
sales and purchase of assets, and the Agent and Lenders are willing to do so as
more fully set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

1. All capitalized terms used herein and not otherwise expressly defined herein
shall have the respective meanings given to such terms in the Credit Agreement.

2. The Agent and Lenders agree that, notwithstanding the limitations set forth
in Section _9 of the Credit Agreement, the consummation of the following Asset
Dispositions shall be permitted:

(a) The sale by Gypsum MGC, Inc. and McQueeny Gypsum Company, LLC of their
equity interests in Standard Gypsum to Temple-Inland Inc. or one or more
Subsidiaries of Temple-Inland Inc. (the “Standard Gypsum Sale”) for net cash
proceeds of at least $145,000,000 to be received upon the consummation of such
sale;

(b) The sale by the applicable Obligors of the assets comprising their coated
recycled board business, consisting of Caraustar’s mill facilities located at
Versailles, Connecticut (Sprague), Tama, Iowa and Rittman, Ohio together with
related assets (the “CRB Sale”), for net cash proceeds of at least $*** to be
received upon the consummation of such sale;

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(c) The sale by the applicable Obligors of the assets comprising the Hunt
Valley, Maryland carton plant and business (the “Hunt Valley Sale”) for net cash
proceeds of at least $10,000,000 to be received upon the consummation of such
sale; and

(d) The sale by the applicable Obligors of the assets comprising their partition
business, consisting of leased facilities located at Covington, Georgia,
Litchfield, Illinois and Frenchtown, New Jersey together with related assets
(the “Partition Business Sale”), for net cash proceeds of at least $4,000,000 to
be received upon the consummation of such sale.

The Standard Gypsum Sale, the CRB Sale, the Hunt Valley Sale and the Partition
Business Sale are collectively referred to as the “Designated Sales”.

3. The consummation of each of the Designated Sales shall be subject to the
following terms and conditions:

(a) no Event of Default shall exist immediately before or after any such
Designated Sale;

(b) neither the consummation of any such Designated Sale, nor the application of
the proceeds thereof as set forth in clause(c) below, shall result in a breach
or default of (i) any of the Indentures or any other material contract,
mortgage, lease, agreement, indenture, or instrument to which any Obligor is a
party or which is binding upon it, (ii) any Requirement of Law applicable to any
Obligor, or (iii) the certificate or articles of incorporation or by-laws or the
limited liability company or limited partnership agreement of any Obligor;

(c) if any of the assets sold or disposed of pursuant to a Designated Sale
consist of Accounts or Inventory, then , on the date of such Designated Sale,
Borrowers shall prepay the outstanding Loans (if any) in an amount at least
equal to the net book value of such Accounts and Inventory in accordance with
Section 3.3(a) of the Credit Agreement from the net proceeds of such Designated
Sale and provide the Agent an updated Borrowing Base Certificate giving effect
to such Designated Sale;

(d) no Designated Sale may be consummated after *** 2006; and

(e) in connection with each Designated Sale, Caraustar shall provide a
certification from a Responsible Officer to the Agent that such Designated Sale
was made in compliance with the terms and conditions set forth in Sections 2 and
3 of this Amendment.

4. Each of the Lenders hereby (a) authorizes the Agent to release any Agent’s
Liens upon any Collateral constituting property being sold or disposed of
pursuant to a Designated Sale in accordance with the terms and conditions set
forth in Sections 2 and 3 of this Amendment, (b) agrees that, in connection with
any such release of any Agent’s Liens, the Agent shall be entitled to rely
conclusively, without further inquiry, on any certificate received by the Agent
pursuant to Section 3(e) of this Amendment, and (c) acknowledges that none of
the Designated Sales shall

 

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constitute a sale under Section 7.9(e) of the Credit Agreement for purposes of
determining the aggregate net book value of assets sold thereunder.

5. Borrowers have informed the Agent and the Lenders that Borrowers desire to
acquire a carton plant and related assets in a location separately identified to
the Agent and the Lenders (the “Carton Plant Acquisition”). The Agent and
Lenders agree that Borrower shall be permitted to consummate the Carton Plant
Acquisition as a Permitted Acquisition, without regard to the limitations
contained in clause (b) of the definition of “Permitted Acquisition” set forth
in Annex A to the Credit Agreement, so long as (a) Borrowers comply with all of
the other provisions set forth in the definition of “Permitted Acquisition” in
connection with the Carton Plant Acquisitions (other than clause (a) thereof),
and (b) the purchase price for the Carton Plant Acquisition does not exceed
$13,000,000.

6. To induce the Agent and Lenders to enter into this Amendment, Borrowers and
Guarantors hereby represent and warrant that, as of the date hereof, there
exists no Default or Event of Default under the Credit Agreement.

7. Borrowers and Guarantors hereby restate, ratify, and reaffirm each and every
representation and warranty heretofore made by each of them under or in
connection with the execution and delivery of the Credit Agreement, as modified
hereby, and the other Loan Documents, as fully as though such representations
and warranties had been made on the date hereof and with specific reference to
this Amendment except to the extent that any such representation or warranty
relates solely to a prior date.

8. Except as expressly set forth herein, the Credit Agreement and the other Loan
Documents shall be and remain in full force and effect as originally written,
and shall constitute the legal, valid, binding and enforceable obligations or
Borrowers and Guarantors to the Agent and the Lenders.

9. Borrowers agree to pay on demand all reasonable costs and expenses of the
Agent in connection with the preparation, execution, delivery and enforcement of
this Amendment and all other Loan Documents and any other transactions
contemplated hereby, including, without limitation, the reasonable fees and
out-of-pocket expenses of legal counsel to the Agent.

10. Borrowers and Guarantors agree to take such further action as the Agent
shall reasonably request in connection herewith to evidence the agreements
herein contained.

11. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
This Amendment shall become effective upon the execution and delivery of
counterpart copies hereof by Borrowers, Guarantors, the Agent and the Required
Lenders; provided that, notwithstanding the foregoing, with respect to any
Designated Sale or the Carton Plant Acquisition (each, a “Designated
Transaction”), the consent contained in Section 2 or Section 5 of this Amendment
(as the case may be) shall automatically become effective upon the earlier to
occur of (i) the first action or event in connection with such Designated
Transaction that would (absent

 

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such consent) constitute a breach of Section 7.9 of the Credit Agreement (or, in
the case of the Carton Plant Acquisition, a breach of the applicable
requirements set forth in the definition of “Permitted Acquisition” in Annex A
to Credit Agreement) and (ii) Caraustar’s public announcement of such Designated
Transaction.

12. This Amendment shall be binding upon and inure to the benefit of the
successors and permitted assigns, and legal representatives and heirs, of the
parties hereto.

13. This Amendment shall be governed by, and construed in accordance with, the
laws of the State of Georgia.

 

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IN WITNESS WHEREOF, the parties have entered into this Seventh Amendment to
Credit Agreement on the date first above written.

 

BORROWERS:     CARAUSTAR INDUSTRIES, INC.       By:   /s/ Ronald J. Domanico    
    Ronald J. Domanico, Senior Vice President     CARAUSTAR CUSTOM PACKAGING
GROUP, INC.       By:   /s/ Ronald J. Domanico         Ronald J. Domanico, Vice
President     CARAUSTAR RECOVERED FIBER GROUP, INC.       By:   /s/ Ronald J.
Domanico         Ronald J. Domanico, Vice President     CARAUSTAR INDUSTRIAL AND
CONSUMER PRODUCTS GROUP, INC.       By:   /s/ Ronald J. Domanico         Ronald
J. Domanico, Vice President     CARAUSTAR MILL GROUP, INC.       By:   /s/
Ronald J. Domanico         Ronald J. Domanico, Vice President     SPRAGUE
PAPERBOARD, INC.       By:   /s/ Ronald J. Domanico         Ronald J. Domanico,
Vice President

 

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GUARANTORS:     PBL INC.       By:   /s/ Ronald J. Domanico         Ronald J.
Domanico, Vice President     GYPSUM MGC, INC.       By:   /s/ Ronald J. Domanico
        Ronald J. Domanico, Vice President     McQUEENEY GYPSUM COMPANY      
By:   /s/ Ronald J. Domanico         Ronald J. Domanico, Vice President    
CARAUSTAR, G.P.       By:  

CARAUSTAR INDUSTRIES, INC.,

general partner

        By:   /s/ Ronald J. Domanico          

Ronald J. Domanico,

Senior Vice President

      By:   CARAUSTAR INDUSTRIAL AND CONSUMER PRODUCTS GROUP, INC., general
partner         By:   /s/ Ronald J. Domanico          

Ronald J. Domanico,

Vice President

    McQUEENEY GYPSUM COMPANY, LLC       By:  

McQUEENEY GYPSUM COMPANY,

sole member

        By:   /s/ Ronald J. Domanico           Ronald J. Domanico, Vice
President

 

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    RECCMG, LLC       By:  

CARAUSTAR MILL GROUP, INC.,

sole member

        By:   /s/ Ronald J. Domanico           Ronald J. Domanico, Vice
President     FEDERAL TRANSPORT, INC.       By:   /s/ Ronald J. Domanico        
Ronald J. Domanico, Vice President     AUSTELL HOLDING COMPANY, LLC      
     By:  

CARAUSTAR INDUSTRIES, INC.,

sole member

        By:   /s/ Ronald J. Domanico           Ronald J. Domanico, Senior Vice
President     CAMDEN PAPER BOARD CORPORATION       By:   /s/ Ronald J. Domanico
        Ronald J. Domanico, Vice President     CHICAGO PAPER BOARD CORPORATION  
    By:   /s/ Ronald J. Domanico         Ronald J. Domanico, Vice President    
HALIFAX PAPER BOARD COMPANY, INC.       By:   /s/ Ronald J. Domanico        
Ronald J. Domanico, Vice President    

CARAUSTAR CUSTOM PACKAGING

(MARYLAND), INC.

      By:   /s/ Ronald J. Domanico         Ronald J. Domanico, Vice President

 

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    PARAGON PLASTIC, INC.       By:  

/s/ Ronald J. Domanico

       

Ronald J. Domanico, Vice President

LENDERS:     BANK OF AMERICA, N.A.       By:  

/s/ John Yankauskas

       

John Yankauskas, Senior Vice President

    MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial
Services Inc.       By:  

/s/ Troy A. Oder

       

Name:

 

Troy A. Oder

       

Title:

 

Vice President

    THE CIT GROUP/BUSINESS CREDIT, INC.       By:  

/s/ Carl Giordano

       

Name:

 

Carl Giordano

       

Title:

 

Assistant Vice President

AGENT:     BANK OF AMERICA, N.A.       By:  

/s/ John Yankauskas

       

John Yankauskas, Senior Vice President

 

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LENDERS:     BANK OF AMERICA, N.A.       By:             

Walter T. Shellman, Vice President

AGENT:     BANK OF AMERICA, N.A.       By:             

Walter T. Shellman, Vice President

 

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