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                                                                   EXHIBIT 10.08


                                                                  EXECUTION COPY


                               SECURITY AGREEMENT

        THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
September 23, 2002 among (i) CARAUSTAR INDUSTRIES, INC. (the "Borrower"), (ii)
the Subsidiaries of the Borrower listed on the signature pages hereto or that
become parties hereto after the date hereof (individually a "Guarantor" and
collectively the "Guarantors"; together with the Borrower, individually an
"Obligor" and collectively the "Obligors") and (iii) BANK OF AMERICA, N.A., in
its capacity as collateral agent (in such, the "Collateral Agent") for the
Secured Parties (as defined below).

                                    RECITALS

               WHEREAS, pursuant to that certain Credit Agreement, dated as of
March 29, 2001 (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, the Guarantors, the financial
institutions from time to time party thereto (the "Lenders") and Bank of
America, N.A. ("Bank of America"), as Administrative Agent, the Lenders have
agreed to make Loans and issue Letters of Credit upon the terms and subject to
the conditions set forth therein;

               WHEREAS, the Borrower has executed that certain Guaranty
Agreement dated as of July 30, 1999 (as amended, modified, extended, renewed or
replaced from time to time, the "Premier Boxboard Guaranty") in favor of
SunTrust Bank (formerly known as SunTrust Bank, Atlanta; "SunTrust"), pursuant
to which the Borrower has guaranteed 50% of the obligations of Premier Boxboard
Limited LLC ("Premier Boxboard") under a certain revolving credit facility in
favor of Premier Boxboard and evidenced by the Credit Agreement referred to and
defined in the Premier Boxboard Guaranty (the "Premier Boxboard Credit
Agreement");

               WHEREAS, the Borrower has executed that certain Second Amended
and Restated Parent Guaranty dated as of August 1, 1999 (as amended, modified,
extended, renewed or replaced from time to time, the "Standard Gypsum Guaranty")
in favor of Toronto Dominion (Texas), Inc., ("Toronto Dominion"), pursuant to
which the Borrower has guaranteed 50% of the obligations of Standard Gypsum,
L.L.C. ("Standard Gypsum") under a certain credit facility in favor of Standard
Gypsum and evidenced by the Loan Agreement referred to and defined in the
Standard Gypsum Guaranty (the "Standard Gypsum Loan Agreement");

               WHEREAS, the Obligors are required to execute this Security
Agreement in consideration of, and as a condition precedent to the effectiveness
of, that certain Fourth Amendment to Credit Agreement dated as of the date
hereof among the Obligors, the Lenders party thereto and Bank of America, as
Administrative Agent;

               WHEREAS, pursuant to the Premier Boxboard Guaranty, the Obligors
must permit SunTrust to share ratably in any liens granted for the benefit of
the Lenders;

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               WHEREAS, in connection with the Standard Gypsum Guaranty, the
Obligors have agreed to permit Toronto Dominion to share ratably in any liens
granted for the benefit of the Lenders and in any proceeds realized from the
sale or other disposition of any Collateral securing such liens; and

               WHEREAS, Bank of America is acting as Collateral Agent for the
Secured Parties (as defined below) pursuant to the terms of this Security
Agreement.

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

               1.     Definitions.

               (a)    Capitalized terms used and not otherwise defined herein
        shall have the meanings ascribed to such terms in the Credit Agreement,
        and the following terms which are defined in the Uniform Commercial Code
        in effect in the State of North Carolina on the date hereof are used
        herein as so defined: Accounts, As-Extracted Collateral, Chattel Paper,
        Consumer Goods, Farm Products, Instrument, Inventory, Manufactured
        Homes, Tangible Chattel Paper and Proceeds. For purposes of this
        Security Agreement, the term "Lender" shall include any Affiliate of any
        Lender which has entered into a Hedging Agreement with any Obligor.

               (b)    In addition, the following terms shall have the following
        meanings:

               "Documents": the collective reference to the Credit Agreement,
        the Loan Documents, the Premier Boxboard Guaranty, the Standard Gypsum
        Guaranty and any Hedging Agreements between an Obligor and a Lender or
        an Affiliate of a Lender.

               "Fully Satisfied": with respect to the Secured Obligations as of
        any date, that, as of such date, (a) all principal of and interest
        accrued to such date which constitute Secured Obligations shall have
        been indefeasibly paid in full in cash, (b) all fees, expenses and other
        amounts then due and payable which constitute Secured Obligations shall
        have been indefeasibly paid in cash, (c) all outstanding letters of
        credit shall have been (i) terminated and surrendered, (ii) fully cash
        collateralized on terms reasonably satisfactory to (x) with respect to
        Letters of Credit outstanding under the Credit Agreement, the Issuing
        Lender and the Required Lenders and (y) with respect to any other letter
        of credit, the issuer thereof, or (iii) secured by one or more letters
        of credit on terms and conditions, and with one or more financial
        institutions, reasonably satisfactory to (x) with respect to Letters of
        Credit outstanding under the Credit Agreement, the Issuing Lender and
        the Required Lenders and (y) with respect to any other letter of credit,
        the issuer thereof, and (d) the relevant commitments shall have expired
        or been terminated in full.


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               "Required Secured Parties": at any date, any combination of
        Secured Parties collectively holding more than sixty-six and two-thirds
        percent (66-2/3%) of the aggregate unpaid principal amount of the
        Secured Obligations at such time.

               "Secured Obligations": with respect to the Collateral, all of the
        following, whether now existing or hereafter incurred: (i) the prompt
        performance and observance by each Obligor of all of its Obligations to
        the Lenders under the Loan Documents, including, without limitation, (a)
        all obligations consisting of principal of and interest on (including
        interest accruing after the filing of any bankruptcy or similar
        petition) the Loans, all fees, indemnities and other amounts arising
        under any of the Loan Documents and all reimbursement obligations in
        respect of Letters of Credit, (b) all guaranty obligations arising out
        of Article X of the Credit Agreement and (c) all obligations arising
        under any Hedging Agreements between any Obligor and any Lender, or any
        Affiliate of a Lender, (ii) the prompt performance and observance by the
        Borrower of all of its guaranty obligations to SunTrust under the
        Premier Boxboard Guaranty, (iii) the prompt performance and observance
        by the Borrower of all of its guaranty obligations to Toronto Dominion
        under the Standard Gypsum Guaranty and (iv) all other indebtedness,
        liabilities and obligations of any kind or nature, now existing or
        hereafter arising, owing from any Obligor to any Secured Party or the
        Collateral Agent under any of the Documents, howsoever evidenced,
        created, incurred or acquired, whether primary, secondary, direct,
        contingent, or joint and several, and all obligations and liabilities
        incurred in connection with collecting and enforcing the Secured
        Obligations.

               "Secured Parties" : the collective reference to (i) the Lenders
        and any Affiliate of a Lender that has entered into a Hedging Agreement,
        (ii) SunTrust and (iii) Toronto Dominion, as administrative agent, and
        "Secured Party" means any one of them, as applicable.

               2.     Grant of Security Interest in the Collateral. To secure
the prompt payment and performance in full when due, whether by lapse of time,
acceleration or otherwise, of the Secured Obligations, each Obligor hereby
grants to the Collateral Agent, for the ratable benefit of the Secured Parties,
a continuing security interest in, and a right to set off against, any and all
right, title and interest of such Obligor in and to the following, whether now
owned or existing or owned, acquired, or arising hereafter (collectively, the
"Collateral"):

               (a)    all Accounts;

               (b)    all Inventory;

               (c)    all books, records, ledger cards, files, correspondence,
                      computer programs, tapes, disks, and related data
                      processing software (owned by such Obligor or to the
                      extent of its interest therein) that at any time evidence
                      or contain information relating to any Collateral or are
                      otherwise necessary or helpful in the collection thereof
                      or realization thereupon; and


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               (d)    all Proceeds of any and all of the foregoing and, to the
                      extent not included in the foregoing, all payments under
                      any insurance (whether or not the Collateral Agent is the
                      loss payee therefore), indemnity, warranty or guaranty
                      with respect to any of the foregoing Collateral.

               The Obligors and the Collateral Agent, on behalf of the Secured
Parties, hereby acknowledge and agree that the security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
Secured Obligations, whether now existing or hereafter arising.

               3.     Provisions Relating to Accounts and Inventory.

               (a)    Anything herein to the contrary notwithstanding, each of
        the Obligors shall remain liable under each of the Accounts to observe
        and perform all the conditions and obligations to be observed and
        performed by it thereunder, all in accordance with the terms of any
        agreement giving rise to each such Account. Neither the Collateral Agent
        nor any Secured Party shall have any obligation or liability under any
        Account (or any agreement giving rise thereto) by reason of or arising
        out of this Security Agreement or the receipt by the Collateral Agent or
        any Secured Party of any payment relating to such Account pursuant
        hereto, nor shall the Collateral Agent or any Secured Party be obligated
        in any manner to perform any of the obligations of an Obligor under or
        pursuant to any Account (or any agreement giving rise thereto), to make
        any payment, to make any inquiry as to the nature or the sufficiency of
        any payment received by it or as to the sufficiency of any performance
        by any party under any Account (or any agreement giving rise thereto),
        to present or file any claim, to take any action to enforce any
        performance or to collect the payment of any amounts which may have been
        assigned to it or to which it may be entitled at any time or times.

               (b)    At any time after the occurrence and during the
        continuance of an Event of Default, (i) the Collateral Agent shall have
        the right, but not the obligation, to make test verifications of the
        Accounts in any manner and through any medium that it reasonably
        considers advisable, and the Obligors, upon the written request of the
        Collateral Agent, shall furnish all such assistance and information as
        the Collateral Agent may reasonably require in connection with such test
        verifications, (ii) upon the Collateral Agent's request and at the
        expense of the Obligors, the Obligors shall cause independent public
        accountants or others satisfactory to the Collateral Agent to furnish to
        the Collateral Agent reports showing reconciliations, aging and test
        verifications of, and trial balances for, the Accounts and (iii) the
        Collateral Agent in its own name or in the name of others may
        communicate with account debtors on the Accounts to verify with them to
        the Collateral Agent's satisfaction the existence, amount and terms of
        any Accounts.

               (c)    At any time after the occurrence and during the
        continuance of an Event of Default, the Collateral Agent shall have the
        right, but not the obligation, to inspect and evaluate the Inventory in
        any manner and through any medium that it reasonably considers
        advisable, and the Obligors, upon the written request of the Collateral
        Agent, shall furnish all such assistance and information as the
        Collateral Agent may reasonably require in


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        connection with such inspections and evaluations. Each Obligor will
        furnish to the Collateral Agent from time to time statements and
        schedules further identifying and describing the inventory and other
        Collateral of such Grantor and such other reports in connection with
        such Collateral as the Collateral Agent may reasonably request, all in
        reasonable detail.

               4.     Representations and Warranties. Each Obligor hereby
represents and warrants to the Collateral Agent, for the benefit of the Secured
Parties, that until such time as the Secured Obligations are Fully Satisfied:

               (a)    Legal Name and Location of Obligor. Each Obligor's exact
        legal name is as shown in this Security Agreement and its state of
        formation is (and for the prior four months has been) as set forth on
        Schedule 4(a) hereto. The principal place of business and chief
        executive office of each Obligor is as set forth on Schedule 4(a)
        hereto. No Obligor has in the past four months changed its name, been
        party to a merger, consolidation or other change in structure or used
        any tradename except as set forth in Schedule 4(a) attached hereto.

               (b)    Location of Collateral. The location of all Collateral
        owned by each Obligor is as shown on Schedule 4(b) hereto.

               (c)    Ownership. Each Obligor is the legal and beneficial owner
        of the Collateral which it purports to own, and each Obligor has the
        right to pledge, sell, assign or transfer the Collateral.

               (d)    Security Interest/Priority. This Security Agreement shall
        create a valid security interest in favor of the Collateral Agent, for
        the ratable benefit of the Secured Parties, in the Collateral of such
        Obligor and, when properly perfected by filing, shall constitute a valid
        perfected security interest in such Collateral, to the extent such
        security interest can be perfected by filing under the UCC, free and
        clear of all Liens except for Liens permitted under Section 9.2 of the
        Credit Agreement as in effect on the date hereof; provided, however, any
        Liens on the Collateral permitted pursuant to Section 9.2(j) of the
        Credit Agreement as in effect on the date hereof shall not exceed
        $1,000,000 in the aggregate at any time outstanding.

               (e)    Types of Collateral. None of the Collateral consists of,
        or is the Proceeds of, (i) As-Extracted Collateral, (ii) Consumer Goods,
        (iii) Farm Products or (iv) Manufactured Homes.

               (f)    Accounts. (i) Each Account of the Obligors and the papers
        and documents relating thereto are genuine and in all material respects
        what they purport to be, (ii) each Account arises out of (A) a bona fide
        sale of goods sold and delivered by such Obligor (or is in the process
        of being delivered) or (B) services theretofore actually rendered by
        such Obligor to, the account debtor named therein, (iii) no Account of
        an Obligor in excess of $50,000 is evidenced by any Instrument or
        Chattel Paper unless such Instrument or Chattel Paper has been
        theretofore endorsed over and delivered to, or submitted to the control
        of, the


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        Collateral Agent and (iv) no surety bond was required or given in
        connection with any Account of an Obligor or the contracts or purchase
        orders out of which they arose.

               (g)    Inventory. No Inventory is held by an Obligor pursuant to
        consignment, sale or return, sale on approval or similar arrangement
        except for raw materials supplied to an Obligor on a sale or return,
        consignment or similar arrangement.

               (h)    Authorization. It has taken all necessary action to
        authorize the execution, delivery and performance of this Security
        Agreement.

               (i)    Execution and Delivery. This Security Agreement has been
        duly executed and delivered by such Person and constitutes such Person's
        legal, valid and binding obligations, enforceable in accordance with its
        terms, except as such enforceability may be subject to (i) bankruptcy,
        insolvency, reorganization, fraudulent conveyance or transfer,
        moratorium or similar laws affecting creditors' rights generally and
        (ii) general principles of equity (regardless of whether such
        enforceability is considered in a proceeding at law or in equity).

               (j)    No Covenants; No Conflict. No consent, approval,
        authorization or order of, or filing, registration or qualification
        with, any court or governmental authority or third party is required in
        connection with the execution, delivery or performance by such Person of
        this Security Agreement. The execution, delivery and performance by such
        Person of this Security Agreement do not and will not conflict with,
        result in a breach of or constitute a default under the articles of
        incorporation, bylaws or other organizational documents of any Obligor
        or any of its Subsidiaries or any indenture or other material agreement
        or instrument to which such Person is a party or by which any of its
        properties may be bound or any Governmental Approval relating to such
        Person except as could not reasonably be expected to have a Material
        Adverse Effect.

        5.     Covenants. Each Obligor covenants that until such time as the
Secured Obligations are Fully Satisfied such Obligor shall:

               (a)    Other Liens and Dispositions. Defend the Collateral
        against the claims and demands of all other parties claiming an interest
        therein, and keep the Collateral free from all Liens, except in each
        case for Liens permitted under Section 9.2 of the Credit Agreement as in
        effect on the date hereof; provided, however, any Liens on the
        Collateral permitted pursuant to Section 9.2(j) of the Credit Agreement
        as in effect on the date hereof shall not exceed $1,000,000 in the
        aggregate at any time outstanding. Neither the Collateral Agent, nor any
        Secured Party authorizes any Obligor to, and no Obligor shall, sell,
        exchange, transfer, assign, lease or otherwise dispose of the Collateral
        or any interest therein, except as permitted under the Credit Agreement
        as in effect on the date hereof; provided, however, that with respect to
        Asset Dispositions of the Collateral permitted pursuant to Section
        9.5(c) of the Credit Agreement as in effect on the date hereof, the
        aggregate amount of all such Asset Dispositions shall not exceed
        $5,000,000 in any Fiscal Year.


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               (b)    Preservation of Collateral. To the extent consistent with
        ordinary prudent business practices, keep the Collateral in good repair,
        working order and condition and not use the Collateral in violation of
        the provisions of this Security Agreement or any other agreement
        relating to the Collateral or any policy insuring the Collateral or any
        applicable statute, law, bylaw, rule, regulation or ordinance; provided,
        however, an Obligor may discontinue the operation or maintenance of a
        property or piece of equipment if the discontinuance (i) is desirable to
        the conduct of such Obligor's business and (ii) does not materially
        adversely affect the business of the Obligors on a consolidated basis.

               (c)    Instruments/Tangible Chattel Paper/Documents. If any
        amount payable in excess of $50,000 under or in connection with any of
        the Collateral in excess of $50,000 shall be or become evidenced by any
        Instrument, or Tangible Chattel Paper, or if any property constituting
        Collateral shall be stored or shipped subject to a Document, such
        Instrument, Tangible Chattel Paper or Document is either in the
        possession of such Obligor at all times or, if requested by the
        Collateral Agent, to perfect its security interest in such Collateral,
        is delivered to the Collateral Agent duly endorsed in a manner
        reasonably satisfactory to the Collateral Agent. Such Obligor shall
        ensure that any Collateral consisting of Tangible Chattel Paper is
        marked with a legend reasonably acceptable to the Collateral Agent
        indicating the Collateral Agent's security interest in such Tangible
        Chattel Paper.

               (d)    Change in Corporate Structure or Location. Not, without
        providing prior written notice to the Collateral Agent, and then only to
        the extent permitted under the Credit Agreement, (i) alter its corporate
        existence or, in one transaction or in a series of transactions, merge
        into or consolidate with any other entity, or sell all or substantially
        all of its assets, (ii) change its state of incorporation or formation
        or (iii) change its registered corporate name; provided that within 30
        days of any such change, the Obligor shall provide the Collateral Agent
        with all such information as the Collateral Agent may reasonably request
        to enable the Collateral Agent to file such amendments to any previously
        filed financing statements as the Collateral Agent may reasonably
        require.

               (e)    Inspection. Upon reasonable notice, and during reasonable
        hours, at all times allow the Collateral Agent or its representatives to
        visit and inspect the Collateral as set forth in Section 8.10 of the
        Credit Agreement.

               (f)    Filing of Financing Statements; Filing of Financing
        Statements, Notices, etc. Each Obligor hereby authorizes the Collateral
        Agent to prepare and file such financing statements (including renewal
        statements) or amendments thereof or supplements thereto or other
        instruments as the Collateral Agent may from time to time reasonably
        deem necessary or appropriate in order to perfect and maintain the
        security interests granted hereunder in accordance with the UCC. Each
        Obligor shall also execute and deliver to the Collateral Agent such
        agreements, assignments or instruments (including affidavits, notices,
        reaffirmations and amendments and restatements of existing documents, as
        the Collateral Agent may reasonably request) and do all such other
        things as the Collateral Agent may reasonably deem necessary or
        appropriate to


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        assure to the Collateral Agent its security interests hereunder. To that
        end, each Obligor agrees that the Collateral Agent may file one or more
        financing statements disclosing the Collateral Agent's security
        interests in any or all of the Collateral of such Obligor without, to
        the extent permitted and/or required by law, such Obligor's signature
        thereon, and further each Obligor hereby irrevocably makes, constitutes
        and appoints the Collateral Agent, its nominee or any other person whom
        the Collateral Agent may designate, as such Obligor's attorney in fact
        with full power and for the limited purpose to sign in the name of such
        Obligor any such financing statements, amendments and supplements to
        financing statements, renewal financing statements, notices or similar
        documents which in the Collateral Agent's reasonable discretion would be
        necessary, appropriate or convenient in order to perfect and maintain
        perfection of the security interests granted hereunder, such power,
        being coupled with an interest, being and remaining irrevocable until
        the Secured Obligations are Fully Satisfied. Each Obligor hereby agrees
        that a carbon, photographic or other reproduction of this Security
        Agreement or any such financing statement is sufficient for filing as a
        financing statement by the Collateral Agent without notice thereof to
        such Obligor wherever the Collateral Agent may in its sole discretion
        desire to file the same. In the event for any reason the law of any
        jurisdiction other than North Carolina becomes or is applicable to the
        Collateral of any Obligor or any part thereof, or to any of the Secured
        Obligations, such Obligor agrees to execute and deliver all such
        instruments and to do all such other things as the Collateral Agent in
        its sole discretion reasonably deems necessary or appropriate to
        preserve, protect and enforce the security interests of the Collateral
        Agent under the law of such other jurisdiction (and, if an Obligor shall
        fail to do so promptly upon the request of the Collateral Agent, then
        the Collateral Agent may execute any and all such requested documents on
        behalf of such Obligor pursuant to the power of attorney granted
        hereinabove). Each Obligor agrees to mark its books and records to
        reflect the security interest of the Collateral Agent in the Collateral.

               (g)    Treatment of Accounts. Not grant or extend the time for
        payment of any Account, or compromise or settle any Account for less
        than the full amount thereof, or release any person or property, in
        whole or in part, from payment thereof, or allow any credit or discount
        thereon, other than as normal and customary in the ordinary course of an
        Obligor's business or to the extent such action would not reasonably be
        expected to have a Material Adverse Effect.

               (h)    Collateral Held by Warehouseman, Bailee, etc. If any
        Collateral having a value in excess of $1,000,000 is at any time in the
        possession or control of a warehouseman, bailee or any agent or
        processor of the Obligors, (i) notify in writing the Collateral Agent of
        such possession, (ii) notify in writing such Person of the Collateral
        Agent's security interest for the ratable benefit of the Secured Parties
        in such Collateral, (iii) instruct in writing such Person to hold all
        such Collateral for the Collateral Agent's account and subject to the
        Collateral Agent's instructions and (iv) use its commercially reasonable
        efforts to obtain an acknowledgment from such Person that is holding
        such Collateral for the benefit of the Collateral Agent.


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               (i)    Insurance. Insure, repair and replace the Collateral of
        such Obligor as set forth in the Credit Agreement. All insurance
        proceeds shall be subject to the security interest of the Collateral
        Agent hereunder.

               6.     Advances by Secured Parties. On failure of any Obligor to
perform any of the covenants and agreements contained herein, the Collateral
Agent may, at its sole option and in its sole discretion, perform the same and
in so doing may expend such sums as the Collateral Agent may reasonably deem
advisable in the performance thereof, including, without limitation, the payment
of any insurance premiums, the payment of any taxes, a payment to obtain a
release of a Lien or potential Lien, expenditures made in defending against any
adverse claim and all other expenditures which the Collateral Agent or the
Secured Parties may make for the protection of the security hereof or may be
compelled to make by operation of law. The Collateral Agent or, if applicable,
the relevant Secured Party shall notify the respective Obligor of any such
expenditure. All such sums and amounts so expended (including, without
limitation, reasonable attorneys' fees and court costs in connection therewith)
shall be repayable by the Obligors on a joint and several basis promptly upon
timely notice thereof and demand therefor, shall constitute additional Secured
Obligations and shall bear interest from the date said amounts are expended at
the default rate specified in Section 4.1 of the Credit Agreement for Revolving
Loans that are Base Rate Loans. No such performance of any covenant or agreement
by the Collateral Agent or the Secured Parties on behalf of any Obligor, and no
such advance or expenditure therefor, shall relieve the Obligors of any default
under the terms of this Security Agreement, or the Documents. The Secured
Parties may make any payment hereby authorized in accordance with any bill,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by an Obligor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.

               7.     Events of Default.

               Any of (a) the occurrence of an event which under the Credit
Agreement would constitute an Event of Default thereunder, (b) the occurrence of
an event which gives SunTrust the right to demand payment under the Premier
Boxboard Guaranty or (c) the occurrence of an event which gives Toronto Dominion
the right to demand payment under the Standard Gypsum Guaranty shall be an Event
of Default hereunder (an "Event of Default").

               8.     Remedies.

               (a)    General Remedies. Upon the occurrence and during the
        continuance of an Event of Default, the Secured Parties shall have, in
        addition to the rights and remedies provided herein, in the Documents,
        or by law (including, but not limited to, levy of attachment,
        garnishment and the rights and remedies set forth in the Uniform
        Commercial Code of the jurisdiction applicable to the affected
        Collateral), the rights and remedies of a secured party under the UCC
        (regardless of whether the UCC is the law of the jurisdiction where the
        rights and remedies are asserted and regardless of whether the UCC
        applies to the affected Collateral), and further, the Collateral Agent
        may, with or without judicial process


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        or the aid and assistance of others, (i) enter on any premises on which
        any of the Collateral may be located and, without resistance or
        interference by the Obligors, take possession of the Collateral, (ii)
        dispose of any Collateral on any such premises, (iii) to the extent such
        Collateral may be moved, require the Obligors to assemble and make
        available to the Collateral Agent at the expense of the Obligors any
        Collateral at any place and time designated by the Collateral Agent
        which is reasonably convenient to both parties, (iv) remove any
        Collateral from any such premises for the purpose of effecting sale or
        other disposition thereof, and/or (v) without demand and without
        advertisement, notice, hearing or process of law, all of which each of
        the Obligors hereby waives to the fullest extent permitted by law, at
        any place and time or times, sell and deliver any or all Collateral held
        by or for it at public or private sale, by one or more contracts, in one
        or more parcels, for cash, upon credit or otherwise, at such prices and
        upon such terms as the Collateral Agent deems advisable, in its sole
        discretion (subject to any and all mandatory legal requirements).
        Neither the Collateral Agent's compliance with any applicable state or
        federal law in the conduct of such sale, nor its disclaimer of any
        warranties relating to the Collateral, shall be considered to adversely
        affect the commercial reasonableness of such sale. In addition to all
        other sums due the Collateral Agent and the Secured Parties with respect
        to the Secured Obligations, the Obligors shall pay the Collateral Agent
        and each of the Secured Parties all reasonable documented costs and
        expenses incurred by the Collateral Agent or any such Secured Party,
        including, but not limited to, reasonable attorneys' fees and court
        costs, in obtaining or liquidating the Collateral, in enforcing payment
        of the Secured Obligations, or in the prosecution or defense of any
        action or proceeding by or against the Collateral Agent or the Secured
        Parties or the Obligors concerning any matter arising out of or
        connected with this Security Agreement, any Collateral or the Secured
        Obligations, including, without limitation, any of the foregoing arising
        in, arising under or related to a case under the Bankruptcy Code. To the
        extent the rights of notice cannot be legally waived hereunder, each
        Obligor agrees that any requirement of reasonable notice shall be met if
        such notice is personally served on or mailed, postage prepaid, to the
        Borrower in accordance with the notice provisions of Section 13.1 of the
        Credit Agreement at least 10 days before the time of sale or other event
        giving rise to the requirement of such notice. The Collateral Agent and
        the Secured Parties shall not be obligated to make any sale or other
        disposition of the Collateral regardless of notice having been given. To
        the extent permitted by law, any Secured Party may be a purchaser at any
        such sale. To the extent permitted by applicable law, each of the
        Obligors hereby waives all of its rights of redemption with respect to
        any such sale. Subject to the provisions of applicable law, the
        Collateral Agent and the Secured Parties may postpone or cause the
        postponement of the sale of all or any portion of the Collateral by
        announcement at the time and place of such sale, and such sale may,
        without further notice, to the extent permitted by law, be made at the
        time and place to which the sale was postponed, or the Collateral Agent
        and the Secured Parties may further postpone such sale by announcement
        made at such time and place.

               (b)    Remedies relating to Accounts. Upon the occurrence and
        during the continuance of an Event of Default, whether or not the
        Collateral Agent has exercised any or all of its rights and remedies
        hereunder, each Obligor will promptly upon the written request of the
        Collateral Agent instruct all account debtors to remit all payments in
        respect of Accounts to a mailing location selected by the Collateral
        Agent. In addition, the Collateral


                                       10
<PAGE>

        Agent or its designee may notify any Obligor's customers and account
        debtors that the Accounts of such Obligor have been assigned to the
        Collateral Agent or of the Collateral Agent's security interest therein,
        and may (either in its own name or in the name of an Obligor or both)
        demand, collect (including without limitation by way of a lockbox
        arrangement), receive, take receipt for, sell, sue for, compound,
        settle, compromise and give acquittance for any and all amounts due or
        to become due on any Account, and, in the Collateral Agent's discretion,
        file any claim or take any other action or proceeding to protect and
        realize upon the ratable security interest of the Secured Parties in the
        Accounts. Each Obligor acknowledges and agrees that the Proceeds of its
        Accounts remitted to or on behalf of the Collateral Agent in accordance
        with the provisions hereof shall be solely for the Collateral Agent's
        own convenience and that such Obligor shall not have any right, title or
        interest in such Accounts or in any such other amounts except as
        expressly provided herein. The Collateral Agent and the Secured Parties
        shall have no liability or responsibility to any Obligor for acceptance
        of a check, draft or other order for payment of money bearing the legend
        "payment in full" or words of similar import or any other restrictive
        legend or endorsement or be responsible for determining the correctness
        of any remittance. Each Obligor hereby agrees to indemnify the
        Collateral Agent and the Secured Parties from and against all
        liabilities, damages, losses, actions, claims, judgments, costs,
        expenses, charges and reasonable attorneys' fees suffered or incurred by
        the Collateral Agent or the Secured Parties (each, an "Indemnified
        Party") because of the maintenance of the foregoing arrangements except
        as relating to or arising out of the gross negligence or willful
        misconduct of an Indemnified Party or its officers, employees or agents.
        In the case of any investigation, litigation or other proceeding, the
        foregoing indemnity shall be effective whether or not such
        investigation, litigation or proceeding is brought by an Obligor, its
        directors, shareholders or creditors or an Indemnified Party or any
        other Person or any other Indemnified Party is otherwise a party
        thereto.

               (c)    Access. In addition to the rights and remedies hereunder,
        upon the occurrence and during the continuance of an Event of Default,
        the Collateral Agent shall have the right to enter and remain upon the
        various premises of the Obligors without cost or charge to the
        Collateral Agent, and use the same, together with materials, supplies,
        books and records of the Obligors for the purpose of collecting and
        liquidating the Collateral, or for preparing for sale and conducting the
        sale of the Collateral, whether by foreclosure, auction or otherwise. In
        addition, the Collateral Agent may remove Collateral, or any part
        thereof, from such premises and/or any records with respect thereto, in
        order to effectively collect or liquidate such Collateral.

               (d)    Nonexclusive Nature of Remedies. Failure by the Collateral
        Agent or the Secured Parties to exercise any right, remedy or option
        under this Security Agreement, the Documents, or as provided by law, or
        any delay by the Collateral Agent or the Secured Parties in exercising
        the same, shall not operate as a waiver of any such right, remedy or
        option. No waiver hereunder shall be effective unless it is in writing,
        signed by the party against whom such waiver is sought to be enforced
        and then only to the extent specifically stated, which in the case of
        the Collateral Agent or the Secured Parties shall only be granted as
        provided herein. To the extent permitted by law, neither the Collateral
        Agent, the Secured Parties, nor any party acting as attorney for the
        Collateral Agent or the Secured


                                       11
<PAGE>

        Parties, shall be liable hereunder for any acts or omissions or for any
        error of judgment or mistake of fact or law other than their gross
        negligence or willful misconduct hereunder. The rights and remedies of
        the Collateral Agents and the Secured Parties under this Security
        Agreement shall be cumulative and not exclusive of any other right or
        remedy which the Collateral Agent or the Secured Parties may have.

               (e)    Retention of Collateral. Upon the occurrence and during
        the continuance of an Event of Default, the Collateral Agent may, after
        providing the notices required by Sections 9-620 and 9-621 of the UCC or
        otherwise complying with the requirements of applicable law of the
        relevant jurisdiction accept or, to the extent the Collateral Agent is
        in possession of any of the Collateral, retain the Collateral in
        satisfaction of the Secured Obligations. Unless and until the Collateral
        Agent shall have provided such notices, however, the Collateral Agent
        shall not be deemed to have retained any Collateral in satisfaction of
        any Secured Obligations for any reason.

               (f)    Deficiency. In the event that the proceeds of any sale,
        collection or realization are insufficient to pay all amounts to which
        the Collateral Agent or the Secured Parties are legally entitled, the
        Obligors shall be jointly and severally liable for the deficiency,
        together with interest thereon at the default rate specified in Section
        4.1 of the Credit Agreement for Revolving Loans that are Base Rate
        Loans, together with the costs of collection and the reasonable fees of
        any attorneys employed by the Collateral Agent or Secured Party to
        collect such deficiency. Any surplus remaining after the full payment
        and satisfaction of the Secured Obligations shall be returned to the
        Obligors or to whomsoever a court of competent jurisdiction shall
        determine to be entitled thereto.

               9.     Rights of the Collateral Agent.

               (a)    Power of Attorney. In addition to other powers of attorney
        contained herein, each Obligor hereby designates and appoints the
        Collateral Agent, on behalf of the Secured Parties, and each of its
        designees or agents, as attorney-in-fact of such Obligor, irrevocably
        and with power of substitution, with authority to take any or all of the
        following actions upon the occurrence and during the continuance of an
        Event of Default:

                      (i)    to demand, collect, settle, compromise, adjust,
               give discharges and releases, all as the Collateral Agent may
               reasonably determine;

                      (ii)   to commence and prosecute any actions at any court
               for the purposes of collecting any Collateral and enforcing any
               other right in respect thereof as the Collateral Agent may deem
               reasonably appropriate;

                      (iii)  to defend, settle or compromise any action brought
               and, in connection therewith, give such discharge or release as
               the Collateral Agent may deem reasonably appropriate;


                                       12
<PAGE>

                      (iv)   receive, open and dispose of mail addressed to an
               Obligor and endorse checks, notes, drafts, acceptances, money
               orders, bills of lading, warehouse receipts or other instruments
               or documents evidencing payment, shipment or storage of the goods
               giving rise to the Collateral of such Obligor on behalf of and in
               the name of such Obligor, or securing, or relating to such
               Collateral;

                      (v)    sell, assign, transfer, make any agreement in
               respect of, or otherwise deal with or exercise rights in respect
               of, any Collateral or the goods or services which have given rise
               thereto, as fully and completely as though the Collateral Agent
               were the absolute owner thereof for all purposes;

                      (vi)   adjust and settle claims under any insurance policy
               relating thereto;

                      (vii)  execute and deliver all assignments, conveyances,
               statements, financing statements, renewal financing statements,
               security agreements, affidavits, notices and other agreements,
               instruments and documents that the Collateral Agent may
               reasonably determine necessary in order to perfect and maintain
               the security interests and liens granted in this Security
               Agreement and in order to fully consummate all of the
               transactions contemplated therein;

                      (viii) institute any foreclosure proceedings that the
               Collateral Agent may deem appropriate; and

                      (ix)   do and perform all such other acts and things as
               the Collateral Agent may reasonably deem to be necessary, proper
               or convenient in connection with the Collateral.

        This power of attorney is a power coupled with an interest and shall be
        irrevocable until such time as the Secured Obligations are Fully
        Satisfied. The Collateral Agent shall be under no duty to exercise or
        withhold the exercise of any of the rights, powers, privileges and
        options expressly or implicitly granted to the Collateral Agent in this
        Security Agreement, and shall not be liable for any failure to do so or
        any delay in doing so. The Collateral Agent shall not be liable for any
        act or omission or for any error of judgment or any mistake of fact or
        law in its individual capacity or its capacity as attorney-in-fact
        except acts or omissions resulting from its gross negligence or willful
        misconduct. This power of attorney is conferred on the Collateral Agent
        solely to protect, preserve and realize upon its security interest in
        the Collateral.

               (b)    Performance by the Collateral Agent of Obligations. If any
        Obligor fails to perform any agreement or obligation contained herein on
        a timely basis, the Collateral Agent itself may perform, or cause
        performance of, such agreement or obligation, and the


                                       13
<PAGE>

        expenses of the Collateral Agent incurred in connection therewith shall
        be payable by the Obligors on a joint and several basis pursuant to
        Section 11 hereof.

               (c)    Assignment by the Collateral Agent. The Collateral Agent
        may from time to time assign its own interest (but not the interest of
        any other Secured Party) in the Secured Obligations and any portion
        thereof and/or the Collateral and any portion thereof, and the assignee
        shall be entitled to all of the rights and remedies of the Collateral
        Agent under this Security Agreement in relation thereto.

               (d)    Release of Collateral. Upon a sale of any of the
        Collateral of an Obligor as permitted by both (i) Section 9.5 of the
        Credit Agreement as in effect on the date hereof and (ii) this Security
        Agreement, the Collateral Agent shall (to the extent applicable) deliver
        to the Obligor, upon the Obligor's request and at the Obligor's expense,
        such documentation as is reasonably necessary to evidence the release of
        the Collateral Agent's security interest, if any, in such Collateral,
        including, without limitation, amendments or terminations of UCC
        financing statements, if any, and the release of such Obligor from all
        of its obligations, if any, under this Security Agreement.

               (e)    The Collateral Agent's Duty of Care. Other than the
        exercise of reasonable care to assure the safe custody of the Collateral
        while being held by the Collateral Agent hereunder, the Collateral Agent
        shall have no duty or liability to preserve rights pertaining thereto,
        it being understood and agreed that the Obligors shall be responsible
        for preservation of all rights in the Collateral until surrendered or
        tendered to the Collateral Agent, and the Collateral Agent shall be
        relieved of all responsibility for the Collateral upon surrendering it
        or tendering the surrender of it to the Obligors. The Collateral Agent
        shall be deemed to have exercised reasonable care in the custody and
        preservation of the Collateral in its possession if the Collateral is
        accorded treatment substantially equal to that which the Collateral
        Agent accords its own property, which shall be no less than the
        treatment employed by a reasonable and prudent agent in the industry, it
        being understood that the Collateral Agent shall not have responsibility
        for taking any necessary steps to preserve rights against any parties
        with respect to any of the Collateral. In the event of a public or
        private sale of Collateral pursuant to Section 8 hereof, the Collateral
        Agent shall have no obligation to clean-up, repair or otherwise prepare
        the Collateral for sale.

               10.    Application of Proceeds. Upon the occurrence and during
        the continuance of an Event of Default, any proceeds of any Collateral,
        when received by the Collateral Agent or any of the Secured Parties in
        cash or its equivalent, will be applied in reduction of the applicable
        Secured Obligations then due and payable as follows:

               (a)    FIRST, to the payment of all out-of-pocket costs and
        expenses (including without limitation reasonable attorneys' fees) of
        the Collateral Agent or an applicable Secured Party in connection with
        enforcing the rights of the applicable Secured Parties under this
        Security Agreement and any protective advances made by the Collateral
        Agent or an applicable Secured Party;


                                       14
<PAGE>

               (b)    SECOND, to the payment of all other expenses then due and
        payable by the Obligors under the Documents or otherwise in connection
        with the Secured Obligations, pro rata as set forth below;

               (c)    THIRD, to the payment of all indemnity obligations then
        due and payable by the Obligors under the Documents or otherwise in
        connection with the Secured Obligations, pro rata as set forth below;

               (d)    FOURTH, to the payment of (i) all fees of the
        Administrative Agent and (ii) all fees of SunTrust and Toronto Dominion,
        if any, that are in the nature of administrative agent's fees, in each
        case that are then due and payable under the Documents or otherwise in
        connection with the Secured Obligations, pro rata as set forth below;

               (e)    FIFTH, to the payment of all commitment and other fees and
        commissions then due and payable under the Documents or otherwise in
        connection with the Secured Obligations, pro rata as set forth below;

               (f)    SIXTH, to the payment of all accrued and unpaid interest
        then due and payable under the Documents or otherwise in connection with
        the Secured Obligations (including without limitation any accrued and
        unpaid interest on obligations arising under any Hedging Agreements
        between any Obligor and any Lender, or any Affiliate of a Lender), pro
        rata as set forth below;

               (g)    SEVENTH, to the payment of the principal amount of the
        Secured Obligations then due and payable and to the cash collateral
        account described in Section 11.2(b) of the Credit Agreement to the
        extent of any L/C Obligations then outstanding (including without
        limitation the termination value or other payment obligations (not
        constituting interest or fees) arising under any Hedging Agreements
        between any Obligor and any Lender, or any Affiliate of a Lender), pro
        rata as set forth below;

               (h)    EIGHTH, to all other obligations which shall have become
        due and payable under the applicable Documents and not repaid pursuant
        to clauses "FIRST" through "SEVENTH" above, pro rata as set forth below;
        and

               (i)    NINTH, to the payment of the surplus, if any, to whomever
        may be lawfully entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the applicable Secured Parties shall receive
an amount equal to its pro rata share of amounts available to be applied above
(based on the proportion that the then outstanding obligations owed by the
Obligors to such Secured Party under the Documents bears to the aggregate
outstanding obligations of the Obligors to the applicable Secured Parties under
the Documents); and (iii) to the extent that any amounts available for
distribution pursuant to clause "SEVENTH" above are attributable to L/C
Obligations then outstanding under the Credit Agreement, such amounts shall be
held by the Collateral Agent in


                                       15
<PAGE>

a cash collateral account and applied (x) first, to reimburse the Issuing Lender
and/or the Lenders under the Credit Agreement from time to time for any drawings
under Letters of Credit and (y) then, following the expiration of all such L/C
Obligations, without duplication, to all other obligations of the types
described in clause "SEVENTH" above; provided that the aggregate amount
distributable to a Secured Party (or to its representative on its behalf) on a
given distribution date shall not exceed the aggregate amount of Secured
Obligations which are then due and payable to such Secured Party. Each Obligor
irrevocably waives the right to direct the application of such payments and
proceeds and acknowledges and agrees that the Collateral Agent shall have the
continuing and exclusive right to apply and reapply any and all such payments
and proceeds in the Collateral Agent's sole discretion, notwithstanding any
entry to the contrary upon any of its books and records.

               11.    Costs of Counsel. If at any time hereafter, whether upon
the occurrence of an Event of Default or not, the Collateral Agent or a Secured
Party employs counsel to prepare or consider amendments, waivers or consents
with respect to this Security Agreement, or to take action or make a response in
or with respect to any legal or arbitral proceeding relating to this Security
Agreement or relating to the Collateral, or to protect the Collateral or
exercise any rights or remedies under this Security Agreement or with respect to
the Collateral, then the Obligors agree to promptly pay upon demand any and all
such reasonable documented costs and expenses of the Collateral Agent or the
Secured Parties, all of which costs and expenses shall constitute Secured
Obligations hereunder.

               12.    Continuing Agreement.

               (a)    This Security Agreement shall be a continuing agreement in
        every respect and shall remain in full force and effect until such time
        as the Secured Obligations are Fully Satisfied. Upon such payment and
        termination, this Security Agreement shall be automatically terminated
        and the Collateral Agent and the Secured Parties shall, upon the request
        and at the expense of the Obligors, forthwith release all of its liens
        and security interests hereunder and shall execute and deliver all UCC
        termination statements and/or other documents reasonably requested by
        the Obligors evidencing such termination. Notwithstanding the foregoing
        all releases and indemnities provided hereunder shall survive
        termination of this Security Agreement.

               (b)    This Security Agreement shall continue to be effective or
        be automatically reinstated, as the case may be, if at any time payment,
        in whole or in part, of any of the Secured Obligations is rescinded or
        must otherwise be restored or returned by the Collateral Agent or any
        Secured Party as a preference, fraudulent conveyance or otherwise under
        any bankruptcy, insolvency or similar law, all as though such payment
        had not been made; provided that in the event payment of all or any part
        of the Secured Obligations is rescinded or must be restored or returned,
        all reasonable costs and expenses (including without limitation any
        reasonable legal fees and disbursements) incurred by the Collateral
        Agent or any Secured Party in defending and enforcing such reinstatement
        shall be deemed to be included as a part of the Secured Obligations.


                                       16
<PAGE>

               13.    Amendments; Waivers; Modifications. This Security
Agreement and the provisions hereof may not be amended, waived, modified,
changed, discharged or terminated except with the prior written consent of both
(i) the parties required to give such consent under Section 13.11 of the Credit
Agreement and (ii) the Required Secured Parties; provided that, without the
prior written consent of each Secured Party, no such amendment, waiver or
modification shall (x) alter the pro rata sharing among the Secured Parties of
the Liens granted hereunder (and proceeds thereof) or the order of the
application of proceeds set forth in Section 10 or (y) except as a result of or
in connection with an Asset Disposition permitted by both (i) Section 9.5 of the
Credit Agreement as in effect on the date hereof and (ii) this Security
Agreement, release all or substantially all of the Collateral.

               14.    Successors in Interest. This Security Agreement shall
create a continuing security interest in the Collateral and shall be binding
upon each Obligor, its successors and assigns and shall inure, together with the
rights and remedies of the Collateral Agent and the Secured Parties hereunder,
to the benefit of the Collateral Agent and the Secured Parties, on a ratable
basis, and their successors and permitted assigns; provided, however, that none
of the Obligors may assign its rights or delegate its duties hereunder without
the prior written consent of each Secured Party (or, with respect to the
Lenders, the Required Lenders, as required by the Credit Agreement).

               15.    Notices. All notices required or permitted to be given
under this Security Agreement shall be in conformance with Section 13.1 of the
Credit Agreement and/or, to the extent applicable, the Premier Boxboard Guaranty
and/or the Standard Gypsum Guaranty.

               16.    Counterparts. This Security Agreement may be executed in
any number of counterparts (including telecopy), each of which where so executed
and delivered shall be an original, but all of which shall constitute one and
the same instrument. It shall not be necessary in making proof of this Security
Agreement to produce or account for more than one such counterpart.

               17.    Headings. The headings of the sections hereof are provided
for convenience only and shall not in any way affect the meaning or construction
of any provision of this Security Agreement.

               18.    Governing Law; Submission to Jurisdiction; Venue.

               (a)    THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
        THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
        IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal
        action or proceeding with respect to this Security Agreement may be
        brought in the courts of the State of North Carolina in Mecklenburg
        County, or of the United States for the Western District of North
        Carolina, and, by execution and delivery of this Security Agreement,
        each Obligor hereby irrevocably accepts for itself and in respect of its
        property, generally and unconditionally, the jurisdiction of such
        courts. Each Obligor further irrevocably consents to the service of
        process out of any of the aforementioned courts in any such action or
        proceeding by the mailing of copies thereof by registered or certified
        mail, postage prepaid, to it at the address for notices pursuant to
        Section 13.1 of the Credit Agreement, such service to become


                                       17
<PAGE>

        effective 30 days after such mailing. Nothing herein shall affect the
        right of the Collateral Agent to serve process in any other manner
        permitted by law or to commence legal proceedings or to otherwise
        proceed against any Obligor in any other jurisdiction.

               (b)    Each Obligor hereby irrevocably waives any objection which
        it may now or hereafter have to the laying of venue of any of the
        aforesaid actions or proceedings arising out of or in connection with
        this Security Agreement brought in the courts referred to in clause (a)
        hereof and hereby further irrevocably waives and agrees not to plead or
        claim in any such court that any such action or proceeding brought in
        any such court has been brought in an inconvenient forum.

               19.    Waiver of Jury Trial. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

               20.    Severability. If any provision of any of the Security
Agreement is determined to be illegal, invalid or unenforceable, such provision
shall be fully severable and the remaining provisions shall remain in full force
and effect and shall be construed without giving effect to the illegal, invalid
or unenforceable provisions.

               21.    Entirety. This Security Agreement and the Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Documents, or the
transactions contemplated herein and therein.

               22.    Survival. All representations and warranties of the
Obligors hereunder shall survive the execution and delivery of this Security
Agreement and the Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.

               23.    Other Security. To the extent that any of the Secured
Obligations are now or hereafter secured by property other than the Collateral
(including, without limitation, real property and securities owned by an
Obligor), or by a guarantee, endorsement or property of any other Person, then
the Collateral Agent and the Secured Parties shall have the right to proceed
against such other property, guarantee or endorsement upon the occurrence and
during the continuance of any Event of Default, and the Collateral Agent and the
Secured Parties have the right, in their sole discretion, to determine which
rights, security, liens, security interests or remedies the Collateral Agent and
the Secured Parties shall at any time pursue, relinquish, subordinate, modify or
take with respect thereto, without in any way modifying or affecting any of them
or any of the Collateral Agent's and the Secured Parties' rights or the Secured
Obligations under this Security Agreement or the Documents.


                                       18
<PAGE>

               24.    Joint and Several Obligations of Obligors.

               (a)    Each of the Obligors is accepting joint and several
        liability hereunder in consideration of the financial accommodation to
        be provided by the Secured Parties under the Documents, for the mutual
        benefit, directly and indirectly, of each of the Obligors and in
        consideration of the undertakings of each of the Obligors to accept
        joint and several liability for the obligations of each of them.

               (b)    Each of the Obligors jointly and severally hereby
        irrevocably and unconditionally accepts, not merely as a surety but also
        as a co-debtor, joint and several liability with the other Obligors with
        respect to the payment and performance of all of the Secured Obligations
        arising under this Security Agreement and the Documents, it being the
        intention of the parties hereto that all the Secured Obligations shall
        be the joint and several obligations of each of the Obligors without
        preferences or distinction among them.

               (c)    Notwithstanding any provision to the contrary contained
        herein, in any of the Documents, the obligations of each Guarantor under
        the Credit Agreement and the other Documents shall be limited to an
        aggregate amount equal to the largest amount that would not render such
        obligations subject to avoidance under Section 548 of the Bankruptcy
        Code or any comparable provisions of any applicable state law.

               25.    Rights of Required Lenders. All rights of the Collateral
Agent hereunder, if not exercised by the Collateral Agent, may be exercised by
the Required Lenders.

               26.    Third-Party Beneficiaries. The parties hereto further
acknowledge and agree that SunTrust and Toronto Dominion are intended
third-party beneficiaries of this Security Agreement and this Security Agreement
shall be enforceable by each of them.

               27.    Indemnification. The Borrower hereby reaffirms its
indemnity obligations under Section 13.2(c) of the Credit Agreement and
acknowledges and agrees that this Security Agreement constitutes a Loan Document
for purposes thereof. Without limiting the foregoing, the Obligors hereby agree
to defend, indemnify and hold harmless the Collateral Agent and the Secured
Parties, and their respective parents, Subsidiaries, Affiliates, employees,
agents, officers and directors, from and against any losses, penalties, fines,
liabilities, settlements, damages, costs and expenses, suffered by any such
Person in connection with any claim, investigation, litigation or other
proceeding (whether or not the Collateral Agent or any Secured Party is a party
thereto) and the prosecution and defense thereof, arising out of or in any way
connected with this Security Agreement or the other Documents or as a result of
the breach of any of the Obligors' obligations hereunder or thereunder,
including without limitation reasonable attorney's fees (including the allocated
cost of internal counsel), consultant's fees and settlement costs (but excluding
any losses, penalties, fines liabilities, settlements, damages, costs and
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified (as finally determined by a court of
competent jurisdiction)).

               28.    Collateral Agency Provisions.


                                       19
<PAGE>

               (a)    Appointment. Each of SunTrust, Toronto Dominion and Bank
        of America, as Administrative Agent for the Lenders, hereby irrevocably
        designates and appoints Bank of America as Collateral Agent of such
        Secured Party (or the Secured Parties represented by it) under this
        Security Agreement for the term hereof and each such Person irrevocably
        authorizes Bank of America as Collateral Agent for such Secured Party
        (or the Secured Parties represented by it), to take such action on its
        behalf under the provisions of this Security Agreement and to exercise
        such powers and perform such duties as are expressly delegated to the
        Collateral Agent by the terms of this Security Agreement, together with
        such other powers as are reasonably incidental thereto. Notwithstanding
        any provision to the contrary elsewhere in this Security Agreement, the
        Collateral Agent shall not have any duties or responsibilities, except
        those expressly set forth herein and therein, or any fiduciary
        relationship with any Secured Party, and no implied covenants,
        functions, responsibilities, duties, obligations or liabilities shall be
        read into this Security Agreement or otherwise exist against the
        Collateral Agent. Any reference to the Collateral Agent in this Section
        28 shall be deemed to refer to the Collateral Agent solely in its
        capacity as Collateral Agent and not in its capacity as a Secured Party.

               (b)    Delegation of Duties. The Collateral Agent may execute any
        of its respective duties under this Security Agreement by or through
        agents or attorneys-in-fact and shall be entitled to advice of counsel
        concerning all matters pertaining to such duties. The Collateral Agent
        shall not be responsible for the negligence or misconduct of any agents
        or attorneys-in-fact selected by the Collateral Agent with reasonable
        care.

               (c)    Exculpatory Provisions. Neither the Collateral Agent nor
        any of its officers, directors, employees, agents, attorneys-in-fact,
        Subsidiaries or Affiliates shall be (i) liable for any action lawfully
        taken or omitted to be taken by it or such Person under or in connection
        with this Security Agreement (except for actions occasioned solely by
        its or such Person's own gross negligence or willful misconduct), or
        (ii) responsible in any manner to any of the Secured Parties for any
        recitals, statements, representations or warranties made by any Obligor
        or any of its Subsidiaries or any officer thereof contained in this
        Security Agreement or in any certificate, report, statement or other
        document referred to or provided for in, or received by the Collateral
        Agent under or in connection with, this Security Agreement or for the
        value, validity, effectiveness, genuineness, enforceability or
        sufficiency of this Security Agreement or for any failure of any Obligor
        or any of its Subsidiaries to perform its obligations hereunder. The
        Collateral Agent shall not be under any obligation to any Secured Party
        to ascertain or to inquire as to the observance or performance of any of
        the agreements contained in, or conditions of, this Security Agreement,
        or to inspect the properties, books or records of any Obligor or any of
        its Subsidiaries.

               (d)    Reliance by Collateral Agent. The Collateral Agent shall
        be entitled to rely, and shall be fully protected in relying, upon any
        note, writing, resolution, notice, consent, certificate, affidavit,
        letter, cablegram, telegram, telecopy, telex or teletype message,
        statement, order or other document or conversation believed by it to be
        genuine and correct and to have been signed, sent or made by the proper
        Person or Persons and


                                       20
<PAGE>

        upon advice and statements of legal counsel (including, without
        limitation, counsel to the Obligors), independent accountants and other
        experts selected by the Collateral Agent. The Collateral Agent may deem
        and treat the payee of any note as the owner thereof for all purposes
        unless the Collateral Agent shall have actual notice of any transferee.
        The Collateral Agent shall be fully justified in failing or refusing to
        take any action under this Security Agreement unless it shall first
        receive such advice or concurrence of the Required Secured Parties (or,
        when expressly required hereby, all the Secured Parties) as it deems
        appropriate or it shall first be indemnified to its satisfaction by the
        Secured Parties against any and all liability and expense which may be
        incurred by it by reason of taking or continuing to take any such action
        except for its own gross negligence or willful misconduct. The
        Collateral Agent shall in all cases be fully protected in acting, or in
        refraining from acting, under this Security Agreement in accordance with
        a request of the Required Secured Parties (or, when expressly required
        hereby, all the Secured Parties), and such request and any action taken
        or failure to act pursuant thereto shall be binding upon all the Secured
        Parties and all future holders of the Secured Obligations.

               (e)    Notices of Default. The Collateral Agent shall not be
        deemed to have knowledge or notice of the occurrence of any Event of
        Default hereunder unless it has received notice of such Event of Default
        in accordance with the terms of the Credit Agreement or notice from a
        Secured Party or the Obligors referring to this Security Agreement,
        describing such Event of Default and stating that such notice is a
        "notice of default." In the event that the Collateral Agent receives
        such a notice, it shall promptly give notice thereof to the Secured
        Parties. The Collateral Agent shall take such action with respect to
        such Event of Default as shall be reasonably directed by the Required
        Secured Parties; provided that unless and until the Collateral Agent
        shall have received such directions, the Collateral Agent may (but shall
        not be obligated to) take such action, or refrain from taking such
        action, with respect to such Event of Default as it shall deem advisable
        in the best interests of the Secured Parties, except to the extent that
        other provisions of this Security Agreement expressly require that any
        such action be taken or not be taken only with the consent and
        authorization or the request of the Secured Parties or Required Secured
        Parties, as applicable.

               (f)    Non-Reliance on the Collateral Agent and Other Secured
        Parties. Each of SunTrust, Toronto Dominion and Bank of America, as
        Administrative Agent for the Lenders, expressly acknowledges that
        neither the Collateral Agent nor any of its respective officers,
        directors, employees, agents, attorneys-in-fact, Subsidiaries or
        Affiliates has made any representations or warranties to it and that no
        act by the Collateral Agent hereinafter taken, including any review of
        the affairs of the Obligors or any of their respective Subsidiaries,
        shall be deemed to constitute any representation or warranty by the
        Collateral Agent to any Secured Party. Each of SunTrust, Toronto
        Dominion and Bank of America, as Administrative Agent for the Lenders,
        represents that it has made and will continue to make, independently and
        without reliance upon the Collateral Agent or any other Secured Party,
        and based on such documents and information as it shall deem appropriate
        at the time, its own credit analysis, appraisals and decisions in taking
        or not taking action under this Security Agreement and the other
        Documents, and to make such investigation as it deems necessary to
        inform itself as to


                                       21
<PAGE>

        the business, operations, property, financial and other condition and
        creditworthiness of the Obligors and their respective Subsidiaries.
        Except for notices, reports and other documents expressly required to be
        furnished to the Secured Parties by the Collateral Agent hereunder, the
        Collateral Agent shall not have any duty or responsibility to provide
        any Secured Party with any credit or other information concerning the
        business, operations, property, financial and other condition or
        creditworthiness of any Obligor or any of its Subsidiaries which may
        come into the possession of the Collateral Agent or any of its
        respective officers, directors, employees, agents, attorneys-in-fact,
        Subsidiaries or Affiliates.

               (g)    Indemnification. The Lenders under the Credit Agreement
        have agreed, and each of SunTrust and Toronto Dominion, as Secured
        Parties, hereby agree, to indemnify the Collateral Agent in its capacity
        as such and (to the extent not reimbursed by the Obligors and without
        limiting the obligation of the Obligors to do so), ratably according to
        the respective amounts of their Secured Obligations from and against any
        and all liabilities, obligations, losses, damages, penalties, actions,
        judgments, suits, costs, expenses or disbursements of any kind
        whatsoever which may at any time (including, without limitation, at any
        time following the payment of the Secured Obligations) be imposed on,
        incurred by or asserted against the Collateral Agent in any way relating
        to or arising out of this Security Agreement or the other Documents, or
        any documents contemplated by or referred to herein or therein or the
        transactions contemplated hereby or thereby or any action taken or
        omitted by the Collateral Agent under or in connection with any of the
        foregoing; provided that no Secured Party shall be liable for the
        payment of any portion of such liabilities, obligations, losses,
        damages, penalties, actions, judgments, suits, costs, expenses or
        disbursements to the extent they result from the Collateral Agent's bad
        faith, gross negligence or willful misconduct. The agreements in this
        Section 28(g) shall survive the payment of the Secured Obligations and
        all other amounts payable hereunder and the termination of this Security
        Agreement.

               (h)    The Collateral Agent in Its Individual Capacity. The
        Collateral Agent and its respective Subsidiaries and Affiliates may make
        loans to, accept deposits from and generally engage in any kind of
        business with the Obligors as though the Collateral Agent were not an
        Collateral Agent hereunder. With respect to any Loans made or renewed by
        it and any Note issued to it and with respect to any Letter of Credit
        issued by it or participated in by it, the Collateral Agent shall have
        the same rights and powers under this Security Agreement and the other
        Documents as any Secured Party and may exercise the same as though it
        were not an Collateral Agent, and the terms "Secured Party" and "Secured
        Parties" shall include the Collateral Agent in its individual capacity.

               (i)    Resignation of the Collateral Agent; Successor Collateral
        Agent. The Collateral Agent may resign as Collateral Agent at any time
        by giving thirty (30) days advance notice thereof to the Secured Parties
        and the Obligors and, thereafter, the retiring Collateral Agent shall be
        discharged from its duties and obligations hereunder. Upon any such
        resignation, the Required Secured Parties shall have the right, subject
        to the approval of the Borrower (so long as no Event of Default has
        occurred and is continuing), to appoint a successor Collateral Agent. If
        no successor Collateral Agent shall have been


                                       22
<PAGE>

        so appointed by the Required Secured Parties, been approved (so long as
        no Event of Default has occurred and is continuing) by the Borrower or
        have accepted such appointment within thirty (30) days after the
        Collateral Agent's giving of notice of resignation, then the Collateral
        Agent may, on behalf of the Secured Parties, appoint a successor
        Collateral Agent reasonably acceptable to the Borrower (so long as no
        Default or Event of Default has occurred and is continuing). Upon the
        acceptance of any appointment as Collateral Agent hereunder by a
        successor Collateral Agent, such successor Collateral Agent shall
        thereupon succeed to and become vested with all rights, powers,
        privileges and duties of the retiring Collateral Agent. After any
        retiring Collateral Agent's resignation hereunder as Collateral Agent,
        the provisions of this Section 28 shall continue in effect for its
        benefit in respect of any actions taken or omitted to be taken by it
        while it was acting as Collateral Agent. If no successor administrative
        agent has accepted appointment as Collateral Agent by the date which is
        thirty (30) days following a retiring Collateral Agent's notice of
        resignation, the retiring Collateral Agent's resignation shall
        nevertheless thereupon become effective and the Secured Parties shall
        perform all of the duties of the Collateral Agent hereunder until such
        time, if any, as the Required Secured Parties appoint a successor agent
        as provided for above.


                  [remainder of page intentionally left blank]



                                       23
<PAGE>

        Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.

BORROWER:             CARAUSTAR INDUSTRIES, INC.,
                      a North Carolina corporation

                      By:    H. LEE THRASH, III
                             -------------------------------------
                      Name:  H. Lee Thrash, III
                      Title: Vice President Planning & Development
                             and Chief Financial Officer

<PAGE>

GUARANTORS:           AUSTELL HOLDING COMPANY, LLC,
                      a Georgia limited liability company
                      CAMDEN PAPERBOARD CORPORATION,
                      a New Jersey corporation
                      CARAUSTAR CUSTOM PACKAGING GROUP, INC.,
                      a Delaware corporation
                      CARAUSTAR CUSTOM PACKAGING GROUP (MARYLAND), INC.,
                      a Maryland corporation
                      CARAUSTAR INDUSTRIAL AND CONSUMER PRODUCTS GROUP, INC.,
                      a Delaware corporation
                      CARAUSTAR MILL GROUP, INC.,
                      an Ohio corporation f/k/a Caraustar Paperboard Corporation
                      CARAUSTAR RECOVERED FIBER GROUP, INC.,
                      a Delaware corporation
                      CHICAGO PAPERBOARD CORPORATION,
                      an Illinois corporation
                      FEDERAL TRANSPORT, INC.,
                      an Ohio corporation
                      GYPSUM MGC, INC.,
                      a Delaware corporation
                      HALIFAX PAPER BOARD COMPANY, INC.,
                      a North Carolina corporation
                      MCQUEENEY GYPSUM COMPANY,
                      a Delaware corporation
                      MCQUEENY GYPSUM COMPANY, LLC,
                      a Delaware limited liability company
                      PBL INC.,
                      a Delaware corporation
                      SPRAGUE PAPERBOARD, INC.,
                      a Connecticut corporation

                      By:    H. LEE THRASH, III
                             -------------------------------------
                      Name:  H. Lee Thrash, III
                      Title: Vice President Planning & Development
                             and Chief Financial Officer


                             of each of the Foregoing Guarantors
<PAGE>

                      CARAUSTAR, G.P.,
                      a South Carolina general partnership

                      By:  CARAUSTAR INDUSTRIES, INC.,
                           a North Carolina corporation, general partner

                           By:    H. LEE THRASH, III
                                  --------------------------------------
                           Name:  H. Lee Thrash, III
                           Title: Vice President Planning & Development
                                  and Chief Financial Officer

                      By:  CARAUSTAR INDUSTRIAL AND CONSUMER PRODUCTS
                           GROUP, INC., a Delaware corporation, general partner

                           By:    H. LEE THRASH, III
                                  --------------------------------------
                           Name:  H. Lee Thrash, III
                           Title: Vice President Planning & Development
                                  and Chief Financial Officer

<PAGE>

Agreed and Accepted to as of the date first above written.

BANK OF AMERICA, N.A.,
in its capacity as Collateral Agent

By: /s/ THOMAS R. SULLIVAN
    -----------------------------------
Name: Thomas R. Sullivan
      ---------------------------------
Title: Vice President
       --------------------------------


The undersigned hereby acknowledge and accept the foregoing Security Agreement
and agree to the terms of Section 28 thereof:

BANK OF AMERICA, N.A.,
in its capacity as Administrative Agent for the Lenders

By: /s/ THOMAS R. SULLIVAN
    -----------------------------------
Name: Thomas R. Sullivan
      ---------------------------------
Title: Vice President
       --------------------------------


SUNTRUST BANK, ATLANTA

By: /s/ J. SCOTT DEVINEY
    -----------------------------------
Name: J. Scott Deviney
      ---------------------------------
Title: Vice President
       --------------------------------


TORONTO DOMINION (TEXAS), INC.

By: /s/ CAROL BRANDT
    -----------------------------------
Name: Carol Brandt
      ---------------------------------
Title: Vice President
       --------------------------------

<PAGE>

                                  SCHEDULE 4(a)

               PRINCIPAL PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICES

<PAGE>
                                                                   SCHEDULE 4(a)



<TABLE>
<CAPTION>
      EXACT LEGAL NAME OF ENTITY AS SPECIFIED
           IN ITS CHARTER AND ADDRESS OF                     JURISDICTION OF
              CHIEF EXECUTIVE OFFICES                           FORMATION
      ---------------------------------------                ---------------
<S>                                                          <C>
Caraustar Industries, Inc.                                   North Carolina
  3100 Joe Jerkins Boulevard
  Austell, GA 30106-3227

Austell Holding Company, LLC                                 Georgia
  3100 Joe Jerkins Boulevard
  Austell, GA 30106-3227

Camden Paperboard Corporation                                New Jersey
  267 Jefferson Avenue
  Camden, NJ 08104

Caraustar, G.P. (a general partnership)                      South Carolina
  2031 Carolina Place
  Ft. Mill, SC 29708

Caraustar Custom Packaging Group, Inc.                       Delaware
  3100 Joe Jerkins Boulevard
  Austell, GA 30106-3227

Caraustar Custom Packaging Group (Maryland), Inc.            Maryland
  1100 Gilroy Road
  Hunt Valley, MD 21031

Caraustar Industrial and Consumer Products Group, Inc.       Delaware
  2031 Carolina Place
  Fort Mill, SC 29708

Caraustar Mill Group, Inc.                                   Ohio
  3100 Joe Jerkins Boulevard
  Austell, GA 30106-3227

Caraustar Recovered Fiber Group, Inc.                        Delaware
  531 Roselane Street, NW
  Suite 650
  Marietta, GA 30061

Chicago Paperboard Corporation                               Illinois
  3100 Joe Jerkins Boulevard
  Austell, GA 30106-3227

Federal Transport, Inc.                                      Ohio
  310 State Route 235 South
  Saint Paris, OH 43072

Gypsum MGC, Inc.                                             Delaware
  3100 Joe Jerkins Boulevard
  Austell, GA 30106
</TABLE>



<PAGE>


<TABLE>
<S>                                                          <C>
Halifax Paper Board Company, Inc.                            North Carolina
  440 Hwy. 48 North
  Roanoke Rapids, NC 27870

McQueeney Gypsum Company                                     Delaware
  3100 Joe Jerkins Boulevard
  Austell, GA 30106

McQueeny Gypsum Company, LLC                                 Delaware
  3100 Joe Jerkins Boulevard
  Austell, GA 30106

PBL, Inc.                                                    Delaware
  3100 Joe Jerkins Boulevard
  Austell, GA 30106-3227

Sprague Paperboard, Inc.                                     Connecticut
  130 Inland Road
  Versailles, CT 06383
</TABLE>


                                       2

<PAGE>

<TABLE>
<CAPTION>
NAME                               OTHER NAMES USED IN LAST 5 YEARS
------------------------------     --------------------------------
<S>                                <C>                                 <C>
Austell Holding Company, LLC       Austell Box Board Corporation       Merged into Austell Holding Company, LLC (06/30/01)

Camden Paperboard Corporation      None

Caraustar Custom Packaging
Group, Inc.                        Atlantic Coast Carton Company       Merged into Caraustar Custom Packaging Group, Inc. 1/1/2000
                                   ACC Services                        Liquidated into Atlantic Coast Carton Company (1999)
                                   Mid-State Paper Box Company         Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Packrite Packaging, Inc.            Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Carolina Paper Box Co. Inc.         Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Mid Packaging Group, Inc.           Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   The Garber Company                  Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Specialty Packaging, Inc.           Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   General Packaging Service, Inc.     Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Oak Tree Packaging Corporation      Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Boxall, Inc                         Merged into Caraustar Custom Packaging Group, Inc. 12/20/99
                                   Caraustar Packaging Group, Inc.     Change Name to Caraustar Custom Packaging Group, (12/15/99)
                                   Mil Pak, Inc.                       Merged into Caraustar Custom Packaging Group, Inc. (03/28/00)
                                   Crane Carton Company, LLC           Merged into Caraustar Custom Packaging Group, Inc. (2/23/01)
                                   Crane Carton Acquisition, Inc.      Merged into Caraustar Custom Packaging Group, Inc. (2/23/01)

Caraustar Custom Packaging Group   Chesapeake Paperboard Company       Change Name to Caraustar Custom Packaging Group
  (Maryland), Inc.                                                       (Maryland), Inc. (03/22/01)
                                                                       Caraustar Custom Packaging Group (Maryland), Inc. merged
                                                                         into (3/5/01)
                                   Chesapeake Fiber Packaging          Change Name to Caraustar Custom Packaging Group (Maryland),
                                     Company, Inc.                       Inc. (1/1/00).

Caraustar Industrial and Consumer  Star Paper Tube, Inc.               Merged into Caraustar Industrial and Consumer Products
  Products Group, Inc.                                                   Group, Inc. (1/1/00)
                                   Federal Packaging Corporation       Change Name to Caraustar Industrial and Consumer Products
                                                                         Group, Inc. (12/8/99)
                                   Arrow Paper Products Company        Merged into Caraustar Industrial and Consumer Products
                                                                         Group, Inc. (9/29/00)

Caraustar Recovered Fiber Group,   Paper Recycling, Inc                Merged into Caraustar Recovered Fiber Group, Inc. (6/30/01)
                                   Carolina Recycling, Inc.            Merged into Caraustar Recovered Fiber Group, Inc. (1/1/00)
                                   Columbus Recycling, Inc.            Merged into Caraustar Recovered Fiber Group, Inc. (6/30/01)
                                   Star Recycling Incorporated         Merged into Caraustar Recovered Fiber Group, Inc. (1/1/00)
                                   Caraustar Paper Sales, Inc.         Merged into Caraustar Recovered Fiber Group, Inc. (1/1/00)
                                   Macon Recycling, Inc.               Closed (2000)
                                   Etowah Recycling, Inc.              Merged into Caraustar Recovered Fiber Group, Inc. (1/1/00)
                                   Caraustar Paperstock Inc.
                                   Richmond Recycling, Inc.
</TABLE>


                                        3

<PAGE>

<TABLE>
<S>                                <C>                                 <C>
Caraustar Mill Group, Inc.         Caraustar Paperboard Corporation    Changed Name to Caraustar Mill Group, Inc. (6/4/01)
                                   New Austell Box Board Corporation   Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Sweetwater Paperboard Company, Inc. Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Buffalo Paperboard Corporation      Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Carolina Component Concepts, Inc.   Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Carolina Converting, Incorporated   Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Carolina Paperboard Corporation     Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Carotell Paper Board Corporation    Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Chattanooga Paperboard Corporation  Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Cincinnati Paperboard Corporation   Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   New Austell Box Board Company       Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Reading Paperboard Corporation      Merged into Caraustar Mill Group, Inc. (6/30/01)
                                   Richmond Paperboard Corporation     Merged into Caraustar Mill Group, Inc. (6/30/01)

Chicago Paperboard Corporation     None

Federal Transport, Inc.            None

Gypsum MGC, Inc.                   None

Halifax Paper Board Company, Inc.  Halifax Acquisition Company         Changed name to Halifax Paper Board Company, Inc. (5/2/00)

McQueeney Gypsum Company LLC       None

McQueeney Gypsum Company           McQueeney Gypsum Company (TX)       Merged into McQueeney Gypsum Company (DE)

PBL, Inc.                          PBL Indiana, Inc.

Sprague Paperboard, Inc.           None
</TABLE>


                                       4

<PAGE>

                                  SCHEDULE 4(b)

                                    LOCATION



<PAGE>


                                  SCHEDULE 4(b)


<TABLE>
<CAPTION>
COMPANY NAME                                                            INVENTORY ADDRESS
------------                                                            -----------------
<S>                                                                 <C>
         CARAUSTAR MILL GROUP, INC.
                                                                    3300 Joe Jerkins Boulevard
                                                                       Austell, GA 30106-3227

                                                                     3400 Joe Jerkins Boulevard
                                                                       Austell, GA 30106-3227

                                                                     3500 Joe Jerkins Boulevard
                                                                       Austell, GA 30106-3227

                                                                           470 Ohio Street
                                                                         Lockport, NY 14094

                                                                         2100 Rossville Ave.
                                                                        Chattanooga, TN 37408

                                                                          5500 Wooster Road
                                                                        Cincinnati, OH 45226

                                                                         873 Alexander Drive
                                                                          Taylors, SC 29687

                                                                     3110 Papermill Rd., Rt. #5
                                                                      Sinking Spring, PA 19608

                                                                           P.O. Box 668305
                                                                         Charlotte, NC 28266

                                                                         17 East 2nd Street
                                                                         Richmond, VA 23224

                                                                        100 Industrial Drive
                                                                       Rittman, OH 44270-1573

                                                                          117 Siegel Street
                                                                         Tama, IA 52339-2616

                                                                       107 Tom Starling Road
                                                                       Fayetteville, NC 28306
                                                                       302 Rolling Hills Road
                                                                        Mooresville, NC 28115

                                                                          4139 Highway 311
         CARAUSTAR CUSTOM PACKAGING GROUP, INC.                          Randleman, NC 27317

                                                                        528 S. Turner Avenue
                                                                      Charlotte, NC 28208-4259

                                                                         3900 Comanche Drive
                                                                         Archdale, NC 27263

                                                                       322 W. Fonville Street
                                                                        Burlington, NC 27215

                                                                           P.O. Box 668305
                                                                         Charlotte, NC 28266

                                                                        167 Luyben Hills Road
                                                                     Kingston Springs, TN 37082

                                                                          600 Union Street
                                                                          Ashland, OH 44805

                                                                        1375 Isaac Beal Road
                                                                          Bucyrus, OH 44820
</TABLE>


<PAGE>

                                  SCHEDULE 4(b)


<TABLE>
<CAPTION>
COMPANY NAME                                                           INVENTORY ADDRESS
------------                                                           -----------------
<S>                                                              <C>
                                                                      216 12th Street, N.E.
                                                                       Strasburg, OH 44680

                                                                     8902 U. S. Hwy. 64 East
                                                                     Robersonville, NC 27871

                                                                        43 Samworth Road
                                                                        Clifton, NJ 07012

                                                                     50 Chestnut Ridge Road
                                                                       Montvale, NJ 07645

                                                                        1850 Lemon Street
                                                                         York, PA 17404

                                                                           Inland Road
                                                                      Versailles, CT 06383

                                                                       4226 Church Street
                                                                       Thorndike, MA 01079

                                                                           Inland Road
                                                                      Versailles, CT 06383

                                                                        11000 Gilroy Road
                                                                      Hunt Valley, MD 21031

                                                                   2624 Commerce Square Drive
                                                                      Birmingham, AL 35210

                                                                     1957 Beverly Avenue, SW
                                                                     Grand Rapids, MI 49509

                                                                     1957 Beverly Avenue, SW
                                                                     Grand Rapids, MI 49509

                                                                      10750 Baur Boulevard
                                                                       St. Louis, MO 63132

                                                                      7777 St. Clair Avenue
                                                                        Mentor, OH 44060

                                                                     1377 South Jason Street
                                                                        Denver, CO 80223

                                                                 23230 Chagrin Blvd., Suite 232
                                                                       Beachwood, OH 44122

                                                                       7960 Lorain Avenue
                                                                       Cleveland, OH 44102

                                                                         11 Chapin Road
                                                                      Pine Brook, NJ 07058

                                                                      555 North Tripp Avenue
                                                                        Chicago, IL 60624

                                                                     531 Roselane Street, NW
         CARAUSTAR RECOVERED FIBER GROUP                                    Suite 650
                                                                        Marietta, GA 30060
</TABLE>


<PAGE>

                                  SCHEDULE 4(b)



<TABLE>
<CAPTION>
COMPANY NAME                                                           INVENTORY ADDRESS
------------                                                           -----------------
<S>                                                                 <C>
                                                                    4069 Winters Chapel Road
                                                                       Doraville, GA 30360

                                                                      2426 Chamberlain Ave.
                                                                       Charlotte, NC 28208

                                                                        756 Lindsey Drive
                                                                       Columbus, GA 31906

                                                                        121 Callahan Road
                                                                        Dalton, GA 30720

                                                                        3400 Vega Street
                                                                       Cleveland, OH 44113

                                                                      100 Industrial Drive
                                                                     Rittman, OH 44270-1573

                                                                       111 Railroad Street
                                                                        Canton, GA 30114

                                                                       Highway 17, US 321
                                                                      Hardeeville, SC 29927

                                                                     112 South Lelia Street
                                                                    Texarkana, TX 75501-7451

                                                                       711 Hospital Street
                                                                     Richmond, VA 23219-6008

         CARAUSTAR INDUSTRIAL & CONSUMER PRODUCTS                     2031 Carolina Place
               GROUP, INC.                                             Fort Mill, SC 29708

                                                                     410 Washington Street
                                                                      Cantonment, FL 32533

                                                                        4201 Waco Street
                                                                       Texarkana, TX 75501

                                                                         Rt. 5, Box 150
                                                                        Silsbee, TX 77656

                                                                       1511 S. Shiloh St.
                                                                        Linden, AL 36748

                                                                      Barge Port Ind. Park
                                                                          Comfort Road
                                                                        Palatka, FL 32177

                                                                       1800 S. Peyco Drive
                                                                       Arlington, TX 76001

                                                                           Highway 370
                                                                     Cedar Springs, GA 31732

                                                                       1900 Herbert Street
                                                                        Mobile, AL 36610

                                                                       612 Grantham Avenue
                                                                      West Monroe, LA 71292

                                                                        601 E. 2nd Street
                                                                       Amarillo, TX 79101
</TABLE>


<PAGE>

                                  SCHEDULE 4(b)


<TABLE>
<CAPTION>
COMPANY NAME                                                           INVENTORY ADDRESS
------------                                                           -----------------
<S>                                                              <C>
                                                                      100 Industrial Drive
                                                                        McGehee, AR 71654

                                                                        1379 McDow Drive
                                                                       Rock Hill, SC 29732

                                                                       875 Alexander Drive
                                                                        Taylors, SC 29687

                                                                        3082 Pacific Ave.
                                                                        Austell, GA 30106

                                                                        121 Callahan Road
                                                                        Dalton, GA 30720

                                                                        1504 Fulton Drive
                                                                        Corinth, MS 38834

                                                                        200 Learner Lane
                                                                        Blairs, VA 24527

                                                                      1601 Carrsville Hwy.
                                                                       Franklin, VA 23851

                                                                    1820 Olde Homestead Lane
                                                                       Lancaster, PA 17605

                                                                      2585 South, 2570 West
                                                                    Salt Lake City, UT 84119

                                                                  22 North 47th Ave., Suite One
                                                                        Phoenix, AZ 85043

                                                                     310 Industrial Parkway
                                                                      West Point, VA 23181

                                                                    1045 Industrial Park Dr.
                                                                     Kernersville, NC 27284

                                                                        201 Perrow Street
                                                                       Altavista, VA 24517

                                                                 902 East 11th Street, Suite 300
                                                                        Tacoma, WA 98421

                                                                        25221 Miles Road
                                                                    Warrensville Heights, OH
                                                                           44128-5499

                                                                     Ampoint Industrial Park
                                                                        715 Fifth Street
                                                                      Perrysburg, OH 43551

                                                                         460 Knox Court
                                                                        Minerva, OH 44657

                                                                  780 Keezletown Rd., Suite 108
                                                                      Weyers Cave, VA 24486

                                                                    310 State Route 235 South
                                                                      Saint Paris, OH 43072

                                                                      702 East Main Street
                                                                      Saint Paris, OH 43072
</TABLE>

<PAGE>

                                  SCHEDULE 4(b)



<TABLE>
<CAPTION>
COMPANY NAME                                                           INVENTORY ADDRESS
------------                                                           -----------------
<S>                                                          <C>
                                                                        425 Collins Blvd.
                                                                       Orrville, OH 44667

                                                                  South Hwy. 25, Lexington Road
                                                                      Georgetown, KY 40324

                                                                        1601 Tionia Road
                                                                   New Smyrna Beach, FL 32168

                                                                      1485 Plaza South Dr.
                                                                     Kernersville, NC 27284

                                                                       1800 S. Peyco Drive
                                                                       Arlington, TX 76001

                                                                        3082 Pacific Ave.
                                                                        Austell, GA 30106

                                                                    1820 Olde Homestead Lane
                                                                       Lancaster, PA 17605

                                                                   3200 Joe Jerkins Boulevard
                                                                     Austell, GA 30106-3227

                                                                         5500 Clems Way
                                                                     Stevens Point, WI 54481

                                                                    945 Rice Avenue Extension
                                                                         Union, SC 29379

         FEDERAL TRANSPORT, INC.                                          No Inventory

         CAMDEN PAPERBOARD CORP                                              Closed

         CHICAGO PAPERBOARD CORP                                             Closed

                                                                        440 Hwy. 48 North
                                                                    Roanoke Rapids, NC 27870
         HALIFAX PAPER BOARD CO., INC.

                                                                     Richmond, VA 23219-6008


                                                                         130 Inland Road
                                                                      Versailles, CT 06383
         SPRAGUE PAPERBOARD INC.

         PBL, INC.                                           Own JV interest. JV owns the Inventory

         MCQUEENEY GYPSUM COMPANY LLC                        Own JV interest. JV owns the Inventory

         MCQUEENEY GYPSUM COMPANY                                         No Inventory

         GYPSUM MGC, INC.                                    Own JV interest. JV owns the Inventory
</TABLE>


<PAGE>


                              SCHEDULE 4(b) CONT.
                        INVENTORY HELD BY THIRD PARTIES



CARAUSTAR CUSTOM PACKAGING GROUP
Tom Younkin
818 Virginia Avenue
Ashland, OH 44805

Grand Warehouse and Distribution Corporation
W. Ohio
Chicago, IL 60624

Grand Warehouse and Distribution Corporation
531 N. Kilbourn
Chicago, IL 60624

Adaptive Warehouse
G-644 S. Dort Hwy.
Grand Blank, MI 48439

CW&T Corporate
245 15th Street
St. James, MN

Handl-It
7800 Tyler Blvd.
Mentor, OH 44060

DT Johnson
825 West 2500 South
Salt Lake City, UT 84119

David K. Watkins
632 Railroad Avenue
Brevard, NC

Schneider Property LLC
1220 Long Green Pike
Glan Arm, MD 21057

Marion Industrial Center
3007 Harding Hwy. East
Marion, OH 43302

Central Ohio Warehouse
18 Allison Drive
Shelby, OH 44875


<PAGE>

New Utrecht Properties
350 Allwood Road
Clfton, NJ 07012

Sulco Warhousing & Logistics
655 Page Blvd.
Springfield, MA 01104

Rock Commercial RealRock
1701 West King
York, PA 17404

CARAUSTAR RECOVERED FIBER GROUP, INC.

None

CARAUSTAR INDUSTRIAL AND CONSUMER PRODUCTS GROUP, INC.

Arkansas Packaging
2150 Ford Avenue
Springdale, AR 72764

American Warehouse
5150 Colorado Blvd.
Denver, CO 80216

Precision Warehouse
4012 West Turney
Phoenix, AZ 85019

JIT Warehouse
200 Champion Way
North Lake, IL 60164

Merit Distribution
2460 Frisco Ave.
Memphis, TN 38114

Mallory Distribution Center
4824 S. Mendenhall RD
Memphis, TN 38141

CARAUSTAR MILL GROUP, INC.

R.R. Donnelly & Sons Co.
2347 Kratzer Rd.
Harrisonburg, VA 22802


<PAGE>

Tri-Gen Tubes
1144 Military Road
Buffalo, NY 14217

K&S Custom Warehouse
1245 Montgomery Dr.
Meridian, MS 39305

Freemont Flask
1000 Wolfe Avenue
Freemont, OH 43420

Plastic Film Corp.
7725 South Quincy
Willowbrook, IL 60521

Uniek, Inc.
805 Uniek Drive
Waunakee, WI 53597

Landis Company Warehousing and Distribution
4201 Pottsville Pike
Reading, PA 19605

Keck Realty Company
2200 Decatur Street
Richmond, VA 23224

Lagrou Distribution Systems
551 Joliet Road
Bolington, 1160660

Lagrou Distributions Centers
21399 Torrence Avenue
Sauk Billage, IL 06411

CRL Warehouse
802 North 23rd Street
Wilmington, NC 28405

Manchester Industries
63 Paul Foulke Parkway
Hagerstown, IN 47346

Expedx Converting
3900 Spring Garden Street
Greensboro NC 27407


<PAGE>

Schrafel Paperboard Converting Corp.
82 West Clark Street
West Haven, CT 06516

Earl Furman, LLC
113 Mill Road
Taylors, SC 29687