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                                                                EXHIBIT 10.03

                               AMENDMENT AGREEMENT

         AMENDMENT AGREEMENT dated as of July 23, 1997 (this "Amendment") to the
Note Agreement dated as of October 1, 1992 (as heretofore amended, the
"Agreement") between CARAUSTAR INDUSTRIES, INC. (the "Company") and The
Prudential Insurance Company of America ("Prudential"). Capitalized terms used
herein have the meanings ascribed to such terms in the Agreement unless
otherwise defined herein.

                              W I T N E S S E T H:

         WHEREAS, Prudential and the Company have executed and delivered the
Agreement, which has heretofore been amended; and

         WHEREAS, the Company is, simultaneously herewith, entering into the
Credit Agreement dated the date hereof with BANKERS TRUST COMPANY, as
Administrative Agent, NATIONSBANK, N.A., as Syndication Agent, SUNTRUST BANK,
ATLANTA, as Document Agent, FIRST UNION NATIONAL BANK, as Managing Agent, the
Co-Agents party thereto, and the other banks named therein (as amended from time
to time, the "Credit Agreement"); and

         WHEREAS, the Company has requested that Prudential amend the terms of
the Agreement to provide for the Credit Agreement and agree to certain
modifications of the Agreement; and

         WHEREAS, Prudential is willing to amend the Notes and the Agreement on
the terms, and subject to the conditions, contained herein;

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

1.       Amendments to the Agreement.  The Agreement shall be amended such that:

         1.1  Paragraph 5I. Paragraph 5I, is hereby amended to read in its
              entirety as follows:

                    "5I. SUBSIDIARY GUARANTIES. In the event the Company is
               required to issue Bank Guaranties pursuant to the Credit
               Agreement, the Company shall provide notice of such requirement
               to Prudential, and the Company shall, without any notice from
               Prudential cause to be issued and delivered to Prudential
               Subsidiary Guaranties of even date with the Bank Guaranties
               required under the Credit Agreement. This Paragraph 5I shall be
               deleted and shall have no force or effect in the event that the
               Credit Agreement is amended to remove the Company's obligation to
               issue Bank Guaranties pursuant to the Credit Agreement, whereupon
               the Intercreditor Agreement shall terminate and


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               be of no force or effect.

          1.2. Paragraph 6A(1). Paragraph 6A(1) is hereby amended to read in its
               entirety as follows:

                    "6A(1). Interest Coverage Ratio. The Company covenants that
               it will not permit, as of any fiscal quarter end, the ratio of
               (a) Consolidated EBITDA to (b) Consolidated Interest Expense paid
               or payable in cash for the four fiscal quarters immediately
               preceding such date to be less than 2.50 to 1.00."

          1.3. Paragraph 6A(2). Paragraph 6A(2) is hereby amended to read in its
               entirety as follows:

                    "6A(2). Leverage. The Company covenants that it will not
               permit Consolidated Debt as of any fiscal quarter end to exceed
               an amount equal to the product of (x) Consolidated EBITDA for the
               four fiscal quarters immediately preceding such date multiplied
               by (y) 4.00."

          1.4. Subparagraph (i) of Paragraph 6C(2). Subparagraph (i) of
               Paragraph 6C(2) is hereby amended to read in its entirety as
               follows:

                    "(i) Indebtedness of the Company and its Subsidiaries (x)
               incurred under the Credit Agreement and the Security Documents in
               an aggregate principal amount outstanding at any time not to
               exceed the lesser of (A) $500,000,000 and (B) the maximum amount
               of such Indebtedness permitted to be outstanding at such time
               under the Credit Agreement and the Security Documents and (y)
               incurred under Interest Rate Agreements entered into in respect
               of the Obligations";

          1.5. Subparagraph (xi) of Paragraph 6C(2). Subparagraph (xi) of
               Paragraph 6C(2) is hereby amended in its entirety as follows:

                    "(xi) additional Indebtedness of the Company so long as no
               Default or Event of Default shall have occurred and be continuing
               either at the time of any proposed incurrence of any such
               Indebtedness or immediately after giving effect thereto."

          1.6. Paragraph 6C(5). Paragraph 6C(5) is hereby amended by deleting
               the "and" at the end of subparagraph (ii), deleting the period at
               the end of subparagraph (iii) and adding the following:

               "; and

                    (iv) the Company may sell or dispose of assets in any fiscal
               year having a fair market value not exceeding an aggregate amount
               equal to $20,000,000."

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         1.7.     Paragraph 7A.  Paragraph 7A is hereby amended to:

                  (a) amend subparagraph (iii) thereof to delete the number
"$5,000,000" and to replace it with the number "$10,000,000".

                  (b) amend Subparagraph (xiii) thereof to delete the number
"$2,000,000" and to replace it with the number "$10,000,000.

         1.8.     Paragraph 10B.   Paragraph 10B is hereby amended to:

                  (a) add the following new definitions in the correct 
alphabetical order:

                                  "'ACQUISITION' means any acquisition by the
                        Company or by any Subsidiary of any Person or business
                        which acquisition results in such Person or business
                        becoming a Subsidiary of (or becoming part of) the
                        Company or any of its Subsidiaries."

                                  "'BANK GUARANTY' shall mean any Unconditional
                        Guaranty Agreement of a Material Subsidiary of the
                        Company delivered pursuant to the Credit Agreement."

                                  "'CONSOLIDATED DEBT' means, with respect to
                        the Company and its Subsidiaries at any date of
                        determination, the sum of the following calculated in
                        accordance with GAAP: (a) all liabilities, obligations
                        and indebtedness for borrowed money including but not
                        limited to obligations evidenced by bonds, debentures,
                        notes or other similar instruments of any such Person,
                        (b) all obligations of any such Person as lessee under
                        Capital Leases, (c) all obligations, contingent or
                        otherwise, of any such Person relative to the face
                        amount of letters of credit, whether or not drawn, and
                        banker's acceptances issued for the account of any such
                        Person and (d) all Contingent Obligations of any such
                        Person with respect to the Debt described in clauses (a)
                        through (c) above of any other Person."

                                  "'CONSOLIDATED EBITDA' means, for any period
                        (the "EBITDA Measurement Period"), the sum of the amount
                        for such EBITDA Measurement Period of: (a) Consolidated
                        Net Income, excluding therefrom any extraordinary items
                        of gain or loss, plus (b) the sum of the following to
                        the extent deducted in the determination of Consolidated
                        Net Income: (i) Consolidated Interest Expense, (ii)
                        income and franchise taxes and (iii) depreciation and
                        amortization expense, in each case determined in
                        accordance with GAAP; provided, however, that for
                        purposes of the calculation of the Leverage Ratio (A)
                        Consolidated EBITDA shall be calculated after giving
                        effect to Acquisitions and dispositions of Subsidiaries
                        or businesses (provided, in


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                        the event of an Acquisition or disposition of
                        a business, the EBITDA of such business is readily
                        ascertainable (whether from stand-alone financial
                        statements or an independent auditor's analysis and
                        review or other reasonable method)) consummated during
                        the EBITDA Measurement Period as if such Acquisitions or
                        dispositions were consummated on the first day of such
                        period, and (B) in the event the Company elects to
                        submit a Cost Adjustment Certificate pursuant to Section
                        7.5 of the Credit Agreement for a Substantial
                        Acquisition, Consolidated EBITDA shall be increased by
                        the amount of estimated cost reduction synergies, which
                        shall be reasonable, set forth on such Cost Adjustment
                        Certificate for each fiscal quarter in the Estimated
                        Cost Synergy Period that is in the EBITDA Measurement
                        Period."

                                  "'COST ADJUSTMENT CERTIFICATE' means a
                        certificate substantially in the form of Exhibit I of
                        the Credit Agreement delivered pursuant to Section 7.5
                        thereof. A Cost Adjustment Certificate shall (i) deem
                        its relevant Substantial Acquisition to have occurred on
                        the first day of the four full fiscal quarter period
                        immediately preceding the date of delivery of such Cost
                        Adjustment Certificate (the "Estimated Cost Synergy
                        Period") and (ii) set forth for each of the four fiscal
                        quarters in the Estimated Cost Synergy Period
                        management's good faith estimate of the amount of cost
                        reduction synergies reasonably likely to have been
                        achieved during the Estimated Cost Synergy Period (as if
                        such Acquisition actually occurred on the first day of
                        the Estimated Cost Synergy Period) as a result of such
                        Substantial Acquisition."

                                  "'DEBT' means, with respect to the Borrower
                        and its Subsidiaries at any date of determination, the
                        sum of the following calculated in accordance with GAAP:
                        (a) all liabilities, obligations and indebtedness for
                        borrowed money including but not limited to obligations
                        evidence d by bonds, debentures, notes or other similar
                        instruments of any such Person, (b) all obligations to
                        pay the deferred purchase price of property or services
                        of any such Person, except trade payables arising in the
                        ordinary course of business not more than ninety (90)
                        days past due unless contested in good faith by
                        appropriate proceedings, (c) all obligations of any such
                        Person as lessee under Capital Leases; (d) all Debt of
                        any other Person secured by a Lien on any asset of any
                        such Person, (e) all obligations, contingent or
                        otherwise, of any such Person relative to the face
                        amount of letters of credit, whether or not drawn, and
                        banker's acceptances issued for the account of any such
                        Person, (f) all termination or settlement payments
                        incurred by any such Person pursuant to Hedging
                        Agreements, (g) all Contingent Obligations of any such
                        Person and (h) the aggregate amount of each class or
                        series of capital stock of any such Person that, prior
                        to the termination of the Credit Agreement, by its terms
                        or by the terms of any security into


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                        which it is convertible or exchangeable, is or upon    
                        the happening of any event or passage of time would    
                        be (i) convertible or exchangeable into Debt or (ii)   
                        required to be redeemed or repurchased, including at   
                        the option of the holder, in whole or in part, or      
                        has, or upon the happening of an event or passage of   
                        time would have, a redemption or similar payment       
                        due."                                                  
                         
                                  "'HEDGING AGREEMENT' means any agreement with
                        respect to an interest rate swap, collar, cap, floor or
                        a forward rate agreement or other agreement regarding
                        the hedging of interest rate risk exposure executed in
                        connection with hedging the interest rate exposure of
                        the Company under this Agreement or the Credit
                        Agreement, and any confirming letter executed pursuant
                        to such hedging agreement, all as amended, amended and
                        restated, supplemented or otherwise modified from time
                        to time in accordance with the terms hereof and
                        thereof."

                                  "'SUBSTANTIAL ACQUISITION' means an
                        Acquisition the purchase price (including any deferred
                        portion thereof) of which is greater than $20,000,000
                        (in cash or otherwise)."

                  (b) amend the definitions of "Consolidated Interest Expense"
                  "Credit Agreement," and "Material Subsidiary" to read in their
                  entirety as follows:

                                  "'CONSOLIDATED INTEREST EXPENSE' means the
                        total interest expense, net of interest income, of the
                        Company and its Subsidiaries (including any amount
                        attributable to interest in respect of payments under
                        Capital Leases and any net amount payable under any
                        Hedging Agreement) for such period, all determined on a
                        consolidated basis in accordance with GAAP."

                                  "'CREDIT AGREEMENT' shall mean the Credit
                        Agreement dated as of July 23, 1997 among the Company,
                        the banks party thereto, Bankers Trust Company, as
                        Administrative Agent, NationsBank, N.A., as Syndication
                        Agent, SunTrust Bank, Atlanta, as Documentation Agent,
                        First Union National Bank, as Managing Agent, the
                        Co-Agents party thereto, and the other banks named
                        therein or any successor agreement, together with the
                        documents related thereto, including, without
                        limitation, any guaranties, in each case as such
                        agreements may be amended, restated, supplemented or
                        otherwise modified from time to time, and shall include
                        any agreement renewing, extending the maturity of,
                        refinancing (including by way of placement or issuance
                        of notes) or restructuring all or any portion of the
                        Indebtedness under such agreements."


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                                  "'MATERIAL SUBSIDIARY' means a Subsidiary of
                        the Company which has total annual revenue or total
                        assets equal to or in excess of $10,000,000 as of the
                        date of formation or acquisition of such Subsidiary, as
                        applicable, or at any time thereafter."

                  (c) delete the definitions of "Consolidated Funded Debt" and
                  "Fixed Charge Coverage Ratio" in their entirety.

2.       Conditions to Effectiveness.  This Amendment shall be effective and the
         Agreement shall be deemed amended hereby upon the following:

         2.1      Prudential's receipt of a fully executed copy hereof;

         2.2      Prudential's receipt of a fully executed copy of the
                  Intercreditor Agreement between Prudential and the Banks party
                  to the Credit Agreement in the form attached hereto as Exhibit
                  1.

         2.3      Prudential's receipt of such documents relating to this
                  Amendment as Prudential may request, including, without
                  limitation, officers' certificates, financial statements,
                  opinions of counsel, board resolutions, charter documents, and
                  certificates of existence and authority to do business.

3.       Company Representations. The Company hereby represents and warrants
         that (a) no Default or Event of Default exists or, after giving effect
         to this Amendment, will exist and (b) each of the representations and
         warranties of the Company contained in Article VI of the Credit
         Agreement (referred to therein as Representations and Warranties of the
         Borrower) is true and correct in all material respects as of the date
         hereof.

4.       GOVERNING LAW.  THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN 
         ACCORDANCE WITH, AND THE RIGHTS OF PARTIES SHALL BE GOVERNED BY, THE 
         LAWS OF THE STATE OF NEW YORK.

5.       Effect of Agreement.  Except as expressly provided herein, the
         Agreement shall remain in full force and effect and this Amendment
         shall not operate as a waiver of any right, power or remedy of any
         holder of a Note, nor constitute a waiver of any provision of the
         Agreement.

6.       Counterparts. This Amendment may be executed in two or more 
         counterparts, each of which shall be deemed an original, and it shall
         not be necessary in making proof of this Amendment to produce or 
         account for more than one such counterpart.




                      [SIGNATURES APPEAR ON THE NEXT PAGE.]


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         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers as of the date and year first above
written.


                                       CARAUSTAR INDUSTRIES, INC.

                                       By:/s/ H. Lee Thrash, III           
                                          -------------------------------------
                                          Title: Vice President and Chief 
                                                 Financial Officer



                                       THE PRUDENTIAL INSURANCE
                                       COMPANY OF AMERICA


                                       By:/s/ Robert R. Derrick           
                                          ------------------------------------- 
                                          Senior Vice President


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Attachments:

         Exhibit 1:        Form of Intercreditor Agreement


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