Document:

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                                                                    EXHIBIT 10.6

                        SEVERANCE COMPENSATION AGREEMENT

      This Severance Compensation Agreement is entered into as of NOVEMBER 27,
2000 by and between GAYLORD CONTAINER CORPORATION, a Delaware corporation (the
"Company"), and LAWRENCE G. ROGNA (the "Executive").

                                   RECITALS:

      The Company's Board of Directors has determined that the Executive is
among that group of key managers whose services and participation in
management may be critical in any period of transition, such as at the time of
any change in control of the Company or in the face of any proposed corporate
reorganization or acquisition, friendly or hostile, affecting the Company.
Accordingly, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company and its stockholders that
provisions be made to encourage the Executive's continued attention and
undistracted dedication to his duties in the potentially disturbing
circumstances of a possible change in control of the Company, by providing the
Executive some degree of financial security under those circumstances.

      Therefore, in order to induce the Executive to remain in the employ of
the Company and as consideration for the Executive's covenants to continue such
employment in the face of a change in control as set forth in this Agreement,
the Board of Directors has determined that it is desirable to provide for the
severance compensation described in this Agreement if the Executive's
employment with the Company terminates under the circumstances described herein
following a change in control of the Company.

                                   AGREEMENT:

      In consideration of the premises and the mutual covenants herein
contained, the Company and the Executive do hereby agree with each other as
follows:

      1.  Severance Payment. The Company agrees that if the employment of the
Executive by the Company is terminated at any time within twenty-four (24)
months after the effective date of a Change in Control that occurred while the
Executive was an employee of the Company, the Executive shall be entitled to
the severance payment ("the Severance Payment") provided under this Agreement
unless such termination of employment was by reason of the Executive's (a)
death, (b) Disability, (c) Retirement, (d) Termination for Cause, or (e)
voluntary termination of employment by the Executive under circumstances not
constituting a Constructive Termination. (The capitalized terms used in this
paragraph are defined herein below.)

      The Severance Payment shall be payable not later than the fifth (5th)
business day following the Executive's last day of employment.

      2.  Insurance Benefits. In addition to the Severance Payment, upon any
termination of the Executive's employment that entitles the Executive to a
Severance Payment hereunder, the Company agrees to arrange to provide the
Executive with life, medical, dental, disability and

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accident insurance benefits substantially similar to those which the Executive
was receiving immediately prior to the termination of Executive's employment or
in effect immediately prior to the Change in Control, whichever is higher, for
a period ending on the earliest to occur of (a) thirty-six (36) months from the
effective date of termination, or (b) the Executive's death.

      3.  Calculation of Severance Payment. The "Severance Payment" hereunder
shall be a lump sum equal to three (3) times the sum of (i) the Executive's
annual base salary and (ii) the Executive's target bonus as provided in the
Company's Management Incentive Plan, as said salary and target bonus are in
effect immediately prior to the termination of Executive's employment or in
effect immediately prior to the Change in Control, whichever is higher.

      4.  Covenants of the Executive. In consideration for the Company's
agreements in Paragraphs 1 and 2 herein, the Executive hereby agrees as follows:

          (a) The Executive shall remain in the employ of the Company during a
period commencing with any public announcement by any person of any proposed
transaction or transactions which, if effected, would result in a Change in
Control and ending when the Change in Control occurs or when, in the opinion of
the Company's Board of Directors, such person has abandoned or terminated its
efforts to effect a Change in Control. Nothing contained in this Agreement
shall affect the right of the Company to terminate the employment of the
Executive, with or without cause, prior to a Change in Control.

          (b) The Executive shall retain in confidence, and will not directly
or indirectly reveal, report, disclose, publish or transfer to any person or
firm, any confidential information of the Company, or utilize any such
confidential information for any purpose other than in furtherance of the
Executive's work as an employee of the Company. As used in this paragraph,
"confidential information" means information or material proprietary to the
Company or designated as being confidential by the Company which is not
generally known to non-Company personnel, of which or to which the Executive
obtained knowledge or access as a result of the Executive's relationship with
the Company, but information publicly known or generic information or knowledge
which the Executive would have learned in the course of similar employment or
work elsewhere in the industry shall not be deemed part of confidential
information.

      5.  Term of Agreement. This agreement shall remain in effect until the
first to occur of (a) the expiration of twenty-four (24) months after the
effective date of any Change in Control or (b) the termination of the
Executive's employment with the Company prior to the effective day of any
Change in Control for any reason.

      6.  Outplacement Services. In the event a Severance Payment becomes
payable to the Executive, the Company agrees to provide outplacement services
reasonably appropriate to maximize the likelihood of an effective transition to
a comparable new position.

      7.  Management Incentive Plan. In the event of a Change in Control, the
Company's Management Incentive Plan (MIP) shall be terminated and PRO-RATA
payments made as follows:

          (A) A projection of EBITDA for the fiscal year shall be established
by the Board of Directors by reviewing results through the date of MIP
termination and the forecast

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EBITDA for the balance of the fiscal year based on the best available pricing
data and key performance factors available at that time.

         (B) The projected EBITDA will create a pool of award monies based on
the current formula of 1.6%.

         (C) The pool shall be pro-rated based on the number of weeks of the
fiscal year completed at the date of MIP termination.

         (D) The pool shall be distributed to the Executive and all other
participating Executives on the payroll as of the termination date of the MIP,
proportional to each individual's target incentive.

     8. Excise Tax. In the event Executive becomes subject to any excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor provisions thereto), the Company shall pay to
Executive, no later than 30 days following any "change in ownership or control
of the Company" as defined in Code Section 280G (or any successor provision
thereto), an amount ("Gross-Up Payment") equal to (i) any excise tax to which
Executive is subject under Section 4999, including interest and penalties; and
(ii) all federal income, state income, payroll or other taxes to which Executive
may be subject with respect to the Gross-Up Payment. It is the intent of this
provision that Executive receive a Gross-Up Payment sufficient to place him in
the same position as if the excise tax imposed by Code Section 4999 did not
exist.

     9. Definitions of Certain Terms. As used in this Agreement, the following
terms shall have the following meanings:

         (a) "Change in Control" means the occurrence of one of the following
events:
              (1) if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), other than an Exempt Person, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; or

              (2) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election was
previously so approved, cease for any reason to constitute a majority thereof;
or

              (3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in all or a portion of the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately

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after such merger or consolidation, or the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets,
other than a sale to an Exempt Person.

         (b) "Disability" means a total and permanent condition which, on the
basis of competent medical evidence, would wholly and permanently prevent the
Executive from engaging in any occupation or employment for wage or profit as
the result of bodily injury or disease, either occupational or non-occupational
in cause, except such employment as is so irregular as to time and nature
that it should be excepted or is for purposes of rehabilitation.

          (c) "Retirement" means the termination of the Executive's employment
after the Executive's sixty-fifth (65th) birthday under circumstances that
will entitle the Executive to full benefits under one or more of the Company's
retirement or pension plans generally applicable to officers of the Company.

          (d) "Termination for Cause" means termination of the Executive
employment by the Company solely by reason of one or more of: (1) an act by the
Executive constituting a felony, and resulting in a conviction, and resulting or
intended to result directly or indirectly in substantial gain or personal
enrichment at the expense of the Company or any of its affiliated corporations,
or (2) the Executive's willful engagement in gross misconduct that results in
demonstrably material injury to the Company or any of its affiliated
corporations, or (3) the Executive's willful, repeated and continued failure
substantially to perform the Executive's duties to the Company after a written
demand, referencing this paragraph, for substantial performance is delivered to
the Executive by the Company's chief executive officer which specifically
identifies the manner in which it is believed that the Executive has not
substantially performed his or her duties.

          (e) "Constructive Termination" means any of the following events
unless it occurs with the Executive's express prior written consent or in
connection with the termination of the Executive's employment for Disability,
Retirement, or Termination for Cause:

               (1) a significant and adverse change by the Company of any
duties, responsibilities, reporting relationships or other conditions of
employment inconsistent with, or in derogation of the Executive's position,
duties, offices, responsibilities and status with the Company immediately prior
to the Change in Control;

               (2) a reduction within twenty-four (24) months after the
effective date of a Change in Control in the Executive's base salary as in
effect on the date of the Change in Control, or the Company's failure to
increase the Executive's base salary after a Change in Control at a rate which
is substantially similar to the average increase in base salary received by
such Executive during the prior two years;

                (3) any failure by the Company to continue in effect any
material benefit plan, bonus plan or arrangement in which the Executive was
participating immediately prior to a Change in Control, or to substitute and
continue other plans providing the Executive with substantially similar
benefits, or any action by the Company that would adversely affect the
Executive's participation in or materially reduce the Executive's benefits
under any such material

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benefit plan or deprive the Executive of any material fringe benefit enjoyed by
the Executive at the time of the Change in Control;

         (4) any failure by the Company to continue in effect any incentive plan
or arrangement in which the Executive is participating at the time of a Change
in Control, or to substitute and continue other plans or arrangements providing
the Executive with substantially similar benefits, or the taking of any action
by the Company that would adversely affect the Executive's participation in any
such incentive plan or reduce the Executive's benefits under any such incentive
plan in an amount which is not substantially similar, on a percentage basis, to
the average percentage reduction of benefits under any such incentive plan
effected during the preceding twelve (12) months for all officers of the Company
participating in any such incentive plan;

         (5) the Executive's relocation to any place other than the location at
which the Executive performed the Executive's primary duties prior to the
effective date of the Change in Control; or

         (6) any material breach by the Company of any provision of this
Agreement or any other agreement between the Company and Executive.

     10. Notice of Termination. Any termination of the Executive's employment by
the Company or by the Executive within twenty-four (24) months after a Change in
Control shall be communicated to the other party by a notice of termination in
writing, which shall indicate the specific termination provisions in this
Agreement relied upon and which shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment. The effective date of termination for purposes of this Agreement
shall be the date specified in such notice of termination, or if no date is
therein specified it shall be the date such notice is given, except that any
termination for Disability shall not be effective earlier than the thirtieth
(30th) day after the notice of termination is given.

     11. Successors and Assigns.

         (a) This Agreement and the rights of the Executive hereunder will inure
to the benefit of the heirs, devisees and personal and legal representatives of
the Executive. However, the obligations of the Executive hereunder may not be
assigned or pledged or delegated.

         (b) The rights and obligations of the Company under this Agreement will
inure to the benefit of and will be binding upon the successors and assigns of
the Company, including without limitation successors voluntarily or by operation
of law to the business or the Company or to substantially all its assets as an
entirety.

     12. Governing Law. This Agreement is entered into and the rights and
obligations of the parties thereunder will be governed by and construed in
accordance with the laws of Illinois, although it is understood that the
validity of any corporate action taken by the Company in authorizing and
implementing this Agreement will be governed by the laws of Delaware, the
Company's state of incorporation.

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      13.  Other Effects of Change in Control. Nothing in this Agreement shall
supersede or reduce the Executive benefits under any other arrangement or
contract, whether agreed to heretofore or hereafter, under which interests and
rights that the Executive may have under one or more employee benefits programs
of the Company or its subsidiaries may vest or mature or be accelerated by
reason of a Change in Control, including without limitation under the Company's
stock option, restricted stock, pension, retirement, supplemental retirement
and deferred compensation.

      14.  No Mitigation Required. The Severance Payment provided for under
this Agreement is intended to compensate the Executive for remaining with the
Company in the face of a Change in Control in accordance with the covenants
rendered by the Executive herein. Therefore, the Executive is not required to
mitigate damages by seeking other employment following the term of employment
that triggers the Executive's right to Insurance Benefits hereunder. No wages
earned by the Executive from any source will reduce or mitigate the amount
severance payable to the Executive hereunder.

      15.  General Provisions.

           (a) Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by U.S. mail, return receipt guaranteed, first-class or
express postage prepaid, as follows:

            If to the Company:

                  Gaylord Container Corporation
                  500 Lake Cook Road, Suite 400
                  Deerfield, Illinois 60015

            If to the Executive:

                  Lawrence G. Rogna

or such other addresses as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

            (b) No waiver by either party hereto at any time of any breach of,
or compliance with, any condition or provision of this Agreement to be
performed by the other party hereto shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.

             (c) No provisions of this Agreement may be modified or amended
unless such modification or amendment is agreed to in writing signed by the
Executive and the Company.

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         (d) The invalidity or unenforceability of any provision or portion of
this Agreement shall, as far as possible, not affect the validity or
unenforceability of the other provisions or portions of this Agreement.

         (e) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original as against any party that has signed it,
but all of which together will constitute one and the same instrument.

         (f) Each reference is this Agreement to the Executive's being employed
by the Company, or the termination by the Company of the Executive's employment,
or references of similar import, shall also apply to employment and terminations
of employment by any subsidiary of the Company, such subsidiary being any
employer of the Executive of which more than 50% of the outstanding voting
equity securities are directly or indirectly beneficially owned by the Company.

     16. Legal Fees and Expenses. In the event the Executive commences or is
required to defend a claim or litigation in order to obtain or retain the
benefits of this Agreement, and thereafter through litigation or settlement he
is successful in whole or part, then the Company will reimburse the Executive
for reasonable attorney fees (considering the difficulty of the case and fees
charged by other attorneys from nationally-recognized firms engaged in this type
of litigation), and will also pay all other actual out-of-pocket costs or other
expenses (including reduced salary from any other employment due to time spent
in said litigation). Upon written agreement to repay the Company if he is not
entitled to reimbursement hereunder, the Company will advance to Executive all
funds to commence or defend said litigation.

     IN WITNESS WHEREOF, the Company and the Executive have executed this
agreement on the date first above written.

EXECUTIVE                                         GAYLORD CONTAINER CORPORATION

By: /s/ LAWRENCE G. ROGNA                         By: /s/ MARVIN A. POMERANTZ
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                                                                    EXHIBIT 10.7

                                                                  EXECUTION COPY

                             STOCK OPTION AGREEMENT

                  THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of
September 27, 2001, is by and between Temple-Inland Inc., a Delaware corporation
("Parent"), and Gaylord Container Corporation, a Delaware corporation (the
"Company").

                                   WITNESSETH

                  WHEREAS, Parent, Temple-Inland Acquisition Corporation, a
Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Merger
Subsidiary"), and the Company, concurrently with the execution and delivery of
this Agreement, will enter into an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement"), providing for, among other things, the
acquisition of the Company by Parent by means of a cash tender offer for all of
the outstanding shares of Company Common Stock (as defined in Section 1.1) and
for the subsequent merger of Merger Subsidiary with and into the Company (the
"Merger") upon the terms and subject to the conditions set forth in the Merger
Agreement; and

                  WHEREAS, as a condition to the willingness of Parent and
Merger Subsidiary to enter into the Merger Agreement, Parent and Merger
Subsidiary have required that the Company agree, and in order to induce Parent
and Merger Subsidiary to enter into the Merger Agreement the Company has agreed,
to grant Parent the Option (as hereinafter defined) upon the terms and subject
to the conditions of this Agreement.

                  NOW THEREFORE, in consideration of the execution and delivery
by Parent and Merger Subsidiary of the Merger Agreement and the foregoing and
the mutual representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, Parent and the Company hereby
agree as follows:

                                    ARTICLE I

                                   THE OPTION

                  Section 1.1 Grant of Option. The Company hereby grants to
Parent

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an irrevocable option (the "Option") to purchase up to such number of
newly-issued shares (the "Shares") of Class A Common Stock, par value $.0001 per
share, of the Company (the "Company Common Stock") as is equal to 19.9% of the
Shares outstanding on the date of exercise of the Option at a purchase price per
share of $1.80 (the "Exercise Price"), in the manner set forth in Sections 1.2
and 1.3 of this Agreement. The number of Shares that may be received upon the
exercise of the Option and the Exercise Price are subject to adjustment as
herein set forth. This Agreement shall terminate, and the Option hereby granted
shall expire, on the earliest of (i) the Effective Time (as defined in the
Merger Agreement) and (ii) the termination of the Merger Agreement.

                  Section 1.2 Exercise Of Option. At any time or from time to
time prior to the termination of the Option in accordance with the terms of this
Agreement, Parent (or its designee) may exercise the Option, in whole or in
part, if on or after the date hereof, Merger Subsidiary accepts for payment
pursuant to the Offer (as defined in the Merger Agreement) shares of Company
Common Stock constituting more than 66 2/3% but less than 90% of the shares of
Company Common Stock then outstanding on a fully diluted basis and the exercise
of the Option would result in Merger Subsidiary and its affiliates holding
shares of Company Common Stock representing 90% or more of the shares of Company
Common Stock then outstanding on a fully diluted basis.

                  In the event that Parent wishes to exercise all or any part of
the Option, Parent shall give written notice (the "Option Notice," with the date
of the Option Notice being hereinafter called the "Notice Date") to the Company,
specifying the number of Shares it will purchase and a place and date (not
earlier than three nor later than 20 business days from the Notice Date) for
closing such purchase (a "Closing"). Parent's obligation to purchase Shares, and
the Company's obligation to issue Shares, upon any exercise of the option is
subject (at its election) to the conditions that (i) no preliminary or permanent
injunction or other order against the purchase, issuance or delivery of the
Shares issued by any Federal, state or foreign court of competent jurisdiction
shall be in effect (and no action or proceeding shall have been commenced or
threatened for purposes of obtaining such an injunction or order) and (ii) any
applicable waiting period under the HSR Act (as defined in the Merger Agreement)
and any foreign antitrust or competition laws and regulations shall have expired
and (iii) there shall have been no material breach of the representations,
warranties, covenants or agreements of the other party contained in this
Agreement or the Merger Agreement; provided, however, that any failure by Parent
to purchase Shares, or any failure by the Company to issue Shares, upon exercise
of the Option at any Closing as a result of the nonsatisfaction of any of such
conditions shall not affect or prejudice Parent's right

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to purchase such Shares upon the subsequent satisfaction of such conditions.

                  Section 1.3 Purchase of Shares. At any Closing, (i) the
Company will deliver to Parent the certificate or certificates representing the
number of Shares being purchased in proper form for transfer upon exercise of
the Option in the denominations designated by Parent in the Option Notice, and,
if the Option has been exercised in part, a new Option evidencing the rights of
Parent to purchase the balance of the Shares subject thereto, and (ii) Parent
shall pay the aggregate purchase price for the Shares to be purchased by wire
transfer to a bank account designated in writing by the Company in an amount
equal to the Exercise Price times the number of shares to be purchased.

                  Section 1.4 Adjustments Upon Share Issuances, Changes in
Capitalization, etc. (a) In the event of any change in Company Common Stock or
in the number of outstanding shares of Company Common Stock by reason of a stock
dividend, split-up, recapitalization, combination, exchange of shares or similar
transaction or any other change in the corporate or capital structure of the
Company (including, without limitation, the declaration or payment of a dividend
of cash, securities or other property), the type and number of the Shares to be
issued by the Company upon exercise of the Option shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, so that Parent shall receive upon exercise of the Option the
number and class of shares or other securities or property that Parent would
have received with respect to the Company Common Stock if the Option had been
exercised immediately prior to such event or the record date therefor, as
applicable, and such Company Common Stock had elected to the fullest extent it
would have been permitted to elect, to receive such securities, cash or other
property.

                  (b) In the event that the Company shall enter into an
agreement (i) to consolidate with or merge into any person, other than Parent or
one of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than Parent or one of its subsidiaries, to merge into the Company and the
Company shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Company Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other person or cash or any other property, or the then outstanding shares of
Company Common Stock shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the surviving corporation or (iii)
to sell or otherwise transfer all or substantially all of its assets to any
person, other than Parent or one of its subsidiaries, then, and in each

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such case, proper provision shall be made in the agreements governing such
transaction so that Parent shall receive upon exercise of the Option the number
and class of shares or other securities or property that Parent would have
received with respect to Company Common Stock if the Option had been exercised
immediately prior to such transaction or the record date therefor, as
applicable, and such Company Common Stock had elected to the fullest extent it
would have been permitted to elect, to receive such securities, cash or other
property.

                  (c) The rights of Parent under this Section 1.4 shall be in
addition to, and shall in no way limit, its rights against the Company for any
breach of the Merger Agreement.

                  (d) The provisions of this Agreement shall apply with
appropriate adjustments to any securities for which the Option becomes
exercisable pursuant to this Section 1.4.

                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  The Company hereby represents and warrants to Parent as
follows:

                  Section 2.1 Authority Relative to this Agreement. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company, and no other corporate proceeding on the part
of the Company is necessary to authorize this Agreement or for the Company to
consummate such transactions. This Agreement has been duly and validly executed
and delivered by the Company and, assuming this Agreement constitutes the legal,
valid and binding obligation of Parent, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium and
similar laws, now or hereafter in effect, relating to or affecting creditors'
rights and remedies and to general principles of equity.

                  Section 2.2 No Conflict; Required Filings and Consents. The

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execution and delivery of this Agreement by the Company do not, and the
consummation of the transactions contemplated by and compliance with the
provisions of this Agreement will not, (i) conflict with or violate the
Certificate of Incorporation or By-laws of the Company, in each case as amended
to the date of this Agreement, (ii) conflict with or violate any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or by which the Company is bound or affected, (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance of any kind on any of the Shares pursuant to, any agreement,
contract, indenture, notice or instrument to which the Company is a party or by
which the Company is bound or affected, or (iv) except for applicable
requirements, if any, of the HSR Act, the Exchange Act and the Securities Act of
1933, as amended (the "Securities Act"), require any filing by the Company with,
or any permit, authorization, consent or approval of, any governmental or
regulatory authority, domestic or foreign.

                  Section 2.3 Option Shares. The Company has taken all necessary
corporate action to authorize and reserve for issuance such number of Shares as
may be issuable upon exercise of the Option, and the Shares, when issued and
delivered by the Company to Parent upon exercise of the Option, will be duly
authorized, validly issued, fully paid and nonassessable shares of Company
Common Stock, and will be free and clear of any preemptive rights, security
interests, liens, claims, pledges, charges or encumbrances of any kind.

                                   ARTICLE III

                    REPRESENTATIONS AND WARRANTIES OF PARENT

                  Parent hereby represents and warrants to the Company as
follows:

                  Section 3.1 Authority Relative to this Agreement. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Parent has all requisite power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Parent, and no other

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corporate proceeding on the part of Parent is necessary to authorize this
Agreement or for Parent to consummate such transactions. This Agreement has been
duly executed and delivered by Parent and, assuming this Agreement constitutes
the legal, valid and binding obligation of the Company, constitutes a legal,
valid and binding obligation of Parent, enforceable against Parent in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and similar laws, now or hereafter in effect, relating to or affecting
creditors' rights and remedies and to general principles of equity.

                  Section 3.2 No Conflict, Required Filing and Consents. The
execution and delivery of this Agreement by Parent do not, and the consummation
of the transactions contemplated by and compliance with the provisions of this
Agreement will not, (i) conflict with or violate the Certificate of
Incorporation or By-laws of Parent, in each case as amended to the date of this
Agreement, (ii) conflict with or violate any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or by which Parent is
bound or affected, (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, contract, indenture, note or instrument to which
Parent is a party or by which it is bound or affected or (iv) except for
applicable requirements, if any, of the HSR Act, the Exchange Act, and the
Securities Act, require any filing by Parent with, or any permit, authorization,
consent or approval of, any governmental or regulatory authority, domestic or
foreign, except in the case of each of the foregoing clauses (i) through (iv)
for any such conflicts, violations, breaches, defaults, failures to file or
obtain the consent or approval of, or other occurrences that would not cause or
create a material risk of non-performance or delayed performance by Parent of
its obligations under this Agreement.

                  Section 3.3 Investment Intent. The purchase of Shares pursuant
to this Agreement is for the account of Parent for the purpose of investment and
not with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act and the rules and regulations
promulgated thereunder.

                                   ARTICLE IV

                              ADDITIONAL AGREEMENTS

                  Section 4.1 Transfer of Shares; Restrictive Legend. Parent
agrees to the placement on the certificate(s) representing the Shares of the
following legend:

                                       6
<PAGE>

                  THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
         SECURITIES LAWS AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR
         IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

It is understood and agreed that the reference to restrictions arising under the
Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Shares have been sold in
compliance with the registration and prospectus delivery requirements of the
Securities Act or Parent has delivered to the Company a copy of a letter from
the staff of the Securities and Exchange Commission, or an opinion of counsel in
form and substance reasonably satisfactory to the Company and its counsel, to
the effect that such legend is not required for purposes of the Securities Act.

                  Section 4.2 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, Parent and the Company shall each use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. Each party shall promptly consult with the other
and provide any necessary information and material with respect to all filings
made by such party with any governmental or regulatory authority in connection
with this Agreement or the transactions contemplated hereby.

                  Section 4.3 Further Assurances. The Company shall perform such
further acts and execute such further documents and instruments as may
reasonably be required to vest in Parent the power to carry out the provisions
of this Agreement. If Parent shall exercise the Option, or any portion thereof,
in accordance with the terms of this Agreement, the Company shall, without
additional consideration, execute and deliver all such further documents and
instruments and take all such further action as Parent may reasonably request
for the purpose of effectively carrying out the transactions contemplated by
this Agreement.

                  Section 4.4 Survival. All of the representations, warranties
and covenants contained herein shall survive a Closing and shall be deemed to
have been made as of the date hereof and as of the date of each Closing.

                                       7
<PAGE>

                                    ARTICLE V

                                  MISCELLANEOUS

                  Section 5.1 Amendment. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto and specifically
referencing this Agreement.

                  Section 5.2 Notices. All notices, requests and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) or by telecopy (with copies by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):

                  (a)      if to Parent, to

                           Temple-Inland Inc.
                           303 South Temple Drive
                           Diboll, TX 75941
                           Attention: M. Richard Warner, Esq.
                           Fax:  936-829-3333

                           with a copy to (which shall not constitute notice):

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           1440 New York Avenue, N.W.
                           Washington, DC  20005
                           Attention:  Stephen W. Hamilton, Esq.
                           Fax:  202-393-5760

                  (b)      if to the Company, to

                           Gaylord Container Corporation
                           500 Lake Cook Road, Suite 400
                           Deerfield, IL 60015
                           Attention: Daniel P. Casey
                           Fax:  847-405-5628

                                       8
<PAGE>
                           with a copy to (which shall not constitute notice):

                           Kirkland & Ellis
                           200 East Randolph Drive
                           Chicago, IL  60601
                           Attention:  William S. Kirsch, P.C.
                                       John A. Schoenfeld
                           Fax: 312-861-2200

                  Section 5.3 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.

                  Section 5.4 Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Merger Agreement (including the documents and the
instruments referred to herein and therein): (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and (b) are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.

                  Section 5.5 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.

                  Section 5.6 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties; any instrument purporting to
make such assignment shall be void. Notwithstanding the foregoing, the rights
and obligations of Parent hereunder may, upon written notice to the Company
prior to or promptly following such action, be assigned by Parent to any of its
corporate affiliates so long as such party remains an affiliate of Parent, but
no such transfer shall relieve Parent of its obligations hereunder if such
transferee does not perform such obligations. Subject to the first sentence of
this Section 5.6, this Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their respective successors and assigns.

                  Section 5.7 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is

                                       9
<PAGE>

accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal or state court sitting in the
State of Delaware.

                  Section 5.8 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.

                            [Signature pages follow]

                                       10
<PAGE>

                  IN WITNESS WHEREOF, each of Parent and the Company have caused
this Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.

                                            TEMPLE-INLAND INC.

                                            By: /s/ M. Richard Warner
                                               ---------------------------------
                                               Name:  M. Richard Warner
                                               Title: Vice President and Chief
                                                      Administrative Officer

                                            GAYLORD CONTAINER CORPORATION

                                            By: /s/ Daniel P. Casey
                                               ---------------------------------
                                               Name:  Daniel P. Casey
                                               Title: Executive Vice President

                                       11

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