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                                                                   EXHIBIT 10.16


                           CARAUSTAR INDUSTRIES, INC.

                                AMENDMENT NO. 2
                              TO CREDIT AGREEMENT


     AMENDMENT NO. 2, dated as of October 30, 1998 (the "Amendment"), to the 
CREDIT AGREEMENT, dated as of July 23, 1997, by and among CARAUSTAR INDUSTRIES, 
INC., a North Carolina corporation (the "Borrower"), BANKERS TRUST COMPANY, as 
Administrative Agent, NATIONSBANK, NA, as Syndication Agent, SUNTRUST BANK, 
ATLANTA, as Documentation Agent, FIRST UNION NATIONAL BANK, as Managing Agent, 
and the lenders party thereto (the "Lenders").

                             W I T N E S S E T H :

     WHEREAS, the Borrower, the Administrative Agent, the Syndication Agent, 
the Documentation Agent, the Managing Agent and the Lenders have entered into a 
Credit Agreement, dated as of July 23, 1997 (as amended, the "Credit 
Agreement");

     WHEREAS, the Borrower has requested and the Lenders have agreed to amend 
the Credit Agreement as set forth herein;

     NOW, THEREFORE, upon the terms and conditions hereinafter set forth, the 
parties hereto hereby agree to amend the Credit Agreement as follows:


                                   ARTICLE 1

                                   AMENDMENTS

     Section 1.01 Amendment to Section 1.1 of the Credit Agreement. Section 
1.1 of the Credit Agreement shall be amended by deleting the terms 
"Intercompany Subordination Agreement" and "Subsidiary Guarantee" in their 
entirety and by deleting the references thereto in the term "Loan Documents".

     Section 1.02 Amendment to Section 2.10 of the Credit Agreement. Section 
2.10 of the Credit Agreement shall be deleted in its entirety.

     Section 1.03 Amendment to Section 4.1(c)(i). Whereas Section 9.1 of the 
Credit Agreement has been amended to prohibit the Leverage Ratio of the 
Borrower to be greater than 3.50 to 1.00, reference to the Leverage Ratio of 
"Greater than 3.50 to 1.00" and the corresponding Eurodollar Margin under 
Section 4.1(c)(i) of the Credit Agreement shall be deleted and the words "but 
less than or equal to 3.50 to 1.00" under the Leverage Ratio referred to as 
"Greater than 3.00 to 1.00 but less than or equal to 3.50 to 1.00" under 
Section 4.1(c)(i) shall be deleted.
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     Section 1.04  Amendment to Section 8.11 of the Credit Agreement. Section 
8.11 of the Credit Agreement shall be deleted in its entirety.

     Section 1.05  Amendment to Section 9.1 of the Credit Agreement. Section 
9.1 of the Credit Agreement shall be amended by deleting the words "4.00 to 
1.00" and inserting the words "3.50 to 1.00" in lieu thereof.

     Section 1.06  Amendment to Section 9.2 of the Credit Agreement.  Section 
9.2 of the Credit Agreement shall be amended by deleting the words "2.50 to 
1.00" and inserting the words "3.00 to 1.00" in lieu thereof.

     Section 1.07  Amendment to Section 10.1 of the Credit Agreement. Section
10.1 of the Credit Agreement shall be amended (i) by deleting the last proviso
in clause (e) thereof; (ii) by deleting clause (f) in its entirety and inserting
the following clause (f) in lieu thereof: "(f) additional Debt of the Borrower
(excluding the Subsidiaries); provided, that, after giving effect to the
incurrence of such Debt, there does not exist a Default or Event of Default;
and"; (iii) deleting clauses (g) and (i) in their entirety; and (iv) by
re-lettering clause (h) as clause (g).  

     Section 1.08  Amendment to Section 10.3 of the Credit Agreement. Section 
10.3 (g) of the Credit Agreement shall be amended by deleting subclause (v) 
thereof in its entirety.

     Section 1.09  Amendment to Section 10.10 of the Credit Agreement. Section 
10.10 of the Credit Agreement shall be amended by inserting the following 
proviso at the end thereof: "provided, that the Borrower may enter into 
agreements evidencing Debt issued by the Borrower pursuant to an effective 
registration statement under the Securities Act of 1933, as amended or under 
Rule 144A thereunder if the covenants set forth in such agreements are no more 
restrictive than the covenants set forth on Annex I to Amendment No. 2 hereto".

     Section 1.10  Amendment to Section 11.1 of the Credit Agreement. Section 
11.1 of the Credit Agreement shall be amended by inserting the following 
subclause (C) to clause (f)(ii) thereof; "(C) an event of default shall occur 
under the indenture (as amended, supplemented or otherwise modified) relating 
to the debt securities described in the Description of Debt Securities 
attached as Annex II to Amendment No. 2 hereto or any other agreement governing 
Debt in an aggregate principal amount in excess of $10,000,000 entered into 
after the date of Amendment No. 2 hereto".


                                   ARTICLE II

                          EFFECTIVENESS OF AMENDMENTS

     This Amendment shall become effective on the opening of business in New 
York on the Business Day on which the Administrative Agent has notified the 
Borrower and the Banks that the Administrative Agent has executed a counterpart


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signature page of this Amendment and has received executed counterpart 
signature pages of this Amendment from the Borrower and the Required Lenders.


                                  ARTICLE III

                                 MISCELLANEOUS


     3.01 Expenses. The Borrower agrees to pay all reasonable expenses incurred 
by the Administrative Agent and the Lenders in connection with the preparation, 
execution and delivery of this Amendment by the Administrative Agent and the 
Lenders, including, without limitation, reasonable fees and expenses of counsel 
to the Administrative Agent and the Lenders.

     3.02 Reference to and Effect on the Credit Agreement and the Other Loan 
Documents.

          (a) This Amendment modifies the Credit Agreement to the extent set 
     forth herein, is hereby incorporated by reference into the Credit 
     Agreement and is made a part thereof. On and after the effective date, 
     each reference in the Credit Agreement to "this Agreement", "hereunder", 
     "hereof", "herein" or words of like import referring to the Credit 
     Agreement, and each reference in the other Loan Documents to the "Credit 
     Agreement", "thereunder", "thereof" or words of like import referring to 
     the Credit Agreement shall mean and be a reference to the Credit Agreement 
     as amended by this Amendment.

          (b) Except as specifically amended by this Amendment, the Credit 
     Agreement and the other Loan Documents shall remain in full force and 
     effect and are hereby ratified and confirmed.

          (c) The execution, delivery and performance of this Amendment shall 
     not, except as expressly provided herein, constitute a waiver of any 
     provision of, or operate as a waiver of any right, power or remedy of the 
     Administrative Agent or any Lender under, the Credit Agreement or any of 
     the other Loan Documents.

     3.03 Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

     3.04 Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE 
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF 
NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

     3.05 Counterparts. This Amendment may be executed in any number of 
counterparts and by different parties hereto in separate counterparts, each of 
which when 


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so executed and delivered shall be deemed an original, but all such 
counterparts together shall constitute one and the same instrument.

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of October 30, 1998.

                                         CARAUSTAR INDUSTRIES, INC.,
                                          as Borrower
                                         
                                         
                                         By: /s/ H. Lee Thrash III
                                            -------------------------------
                                            Name:  H. Lee Thrash III
                                            Title: V.P. & CFO
                                         
                                         
                                         
                                         BANKERS TRUST COMPANY,
                                          as Administrative Agent, a
                                          Lender and Swingline Lender
                                         
                                         
                                         By: /s/ Robert R. Telesca
                                            -------------------------------     
                                            Name:  ROBERT R. TELESCA
                                            Title: ASSISTANT VICE PRESIDENT
                                         
                                         
                                         
                                         NATIONSBANK, N.A.,
                                          as Syndication Agent and a Lender
                                         
                                         
                                         By: /s/ Michael L. Short
                                            -------------------------------
                                            Name:  Michael L. Short
                                            Title: Senior Vice President
                                         
                                         
                                         
                                         SUNTRUST BANK, ATLANTA,
                                          as Documentation Agent and a
                                          Lender
                                         
                                         
                                         By: /s/ Jenna H. Kelly
                                            -------------------------------
                                            Name:  Jenna H. Kelly
                                            Title: Vice President
                                         

                                         By: /s/ Samuel M. Jannetta, Jr.
                                            -------------------------------
                                            Name:  Samuel M. Jannetta, Jr.
                                            Title: Banking Officer
                                         
                                         
                                         FIRST UNION NATIONAL BANK,
                                          as Managing Agent and a Lender
                                         
                                         
                                         By: /s/ Scott Santa Cruz
                                            ------------------------------
                                            Name:  Scott Santa Cruz
                                            Title: Vice President
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                                    THE BANK OF TOKYO - MITSUBISHI LTD.,
                                    as Co-Agent and a Lender


                                    By:
                                        --------------------------------
                                        Name:
                                        Title:


                                    THE BANK OF NEW YORK,
                                    as Co-Agent and a Lender
                                    
                                    
                                    By: /s/ David C. Siegel
                                        --------------------------------
                                        Name:  DAVID C. SIEGEL
                                        Title: Vice President
                                    
                                    
                                    THE BANK OF NOVA SCOTIA,
                                    as Co-Agent and a Lender
                                    
                                    
                                    By: /s/ William E. Zarrett
                                        --------------------------------
                                        Name: William E. Zarrett
                                        Title: Senior Relationship Manager
                                    
                 
                                    CREDIT LYONNAIS ATLANTA AGENCY,           
                                    as Co-Agent and a Lender                  
                                                                              
                                                                              
                                    By:                                       
                                       ---------------------------------     
                                       Name:                                  
                                       Title:                                 
                                                                              
                                                                              
                                    WACHOVIA BANK,                            
                                    as Co-Agent and a Lender                  
                                                                              
                                                                              
                                    By: /s/ TAMMIE S. FABBRINI                
                                       ---------------------------------      
                                       Name:  Tammie S. Fabbrini              
                                       Title: Vice President                  
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                                    CHRISTIANA BANK,
                                    as a Lender
                 
                 
                                    By: /s/ Carl Petter Svendsen   
                                       --------------------------------
                                       Name: CARL PETTER SVENDSEN  
                                       Title: SENIOR VICE PRESIDENT
                                                    
                 
                                        /s/ Peter M. Dodge
                                       --------------------------------
                                       Name: PETER M. DODGE
                                       Title: SENIOR VICE PRESIDENT
                 

                                    FLEET BANK,
                                    as a Lender
                                    
                                    
                                    By: /s/ Barrett O. Bencivenga
                                        --------------------------------
                                        Name: Barrett O. Bencivenga
                                        Title: SVP
                                    

                                    THE FUJI BANK, LIMITED,
                                    as a Lender
                                    
                 
                                    By: 
                                        --------------------------------
                                        Name:  
                                        Title: 


                                    THE INDUSTRIAL BANK OF JAPAN,
                                    LIMITED, ATLANTA AGENCY,
                                    as a Lender
                                    
                 
                                    By: 
                                        --------------------------------
                                        Name:
                                        Title: 


                                    MELLON BANK, N.A.,
                                    as a Lender
                                    
                 
                                    By: 
                                        --------------------------------
                                        Name:
                                        Title:
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                                    THE SANWA BANK LIMITED,
                                    as a Lender
                                    
                 
                                    By:
                                        --------------------------------
                                        Name:
                                        Title:

                 
                                    TORONTO DOMINION (TEXAS), INC.
                                    as a Lender
                                    
                 
                                    By: /s/ Debbie A. Greene
                                        --------------------------------
                                        Name:  DEBBIE A. GREENE
                                        Title: VICE PRESIDENT