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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001
Commission file number 1-15399

PACKAGING CORPORATION OF AMERICA

(Exact Name of Registrant as Specified in its Charter)

Delaware		36-4277050
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
1900 West Field Court, Lake Forest, Illinois (Address of Principal Executive Offices)		60045 (Zip Code)

Registrant's telephone number, including area code (847) 482-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $0.01 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

At March 18, 2002, the aggregate market value of the Registrant's common equity held by nonaffiliates was approximately $1,177,402,219. This calculation of market value has been made for the purposes of this report only and should not be considered as an admission or conclusion by the Registrant that any person is in fact an affiliate of the Registrant.

On March 18, 2002, there were 105,423,918 shares of Common Stock outstanding.

Documents Incorporated by Reference

Specified portions of the Proxy Statement for the Registrant's 2002 Annual Meeting of Shareholders are incorporated by reference to the extent indicated in Part III of this Form 10-K.

INDEX

		Page
PART I
Item 1.	Business	3
Item 2.	Properties	10
Item 3.	Legal Proceedings	10
Item 4.	Submission of Matters to a Vote of Security Holders	11
PART II
Item 5.	Market for Registrant's Common Stock and Related Shareholder Matters	11
Item 6.	Selected Financial Data	12
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	24
PART III
Item 10.	Directors and Executive Officers of the Registrant	24
Item 11.	Executive Compensation	25
Item 12.	Security Ownership of Certain Beneficial Owners and Management	25
Item 13.	Certain Relationships and Related Transactions	25
PART IV
Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	26
SIGNATURES		30
INDEX TO FINANCIAL STATEMENTS		F-1

PART I

Item 1. BUSINESS

General

Packaging Corporation of America, or PCA, is the sixth largest producer of containerboard and corrugated products in the United States, based on production capacity as reported in the Pulp & Paper 2001 North American Fact Book. With 2001 net sales of $1.8 billion, PCA produced about 2.1 million tons of containerboard, about 82% of which was consumed in our corrugated products manufacturing plants, and shipped about 26.1 billion square feet of corrugated products.

In 2001, we produced about 1.3 million tons of kraft linerboard at our mills located in Counce, Tennessee and Valdosta, Georgia. We also produced about 0.8 million tons of semi-chemical corrugating medium at our mills located in Tomahawk, Wisconsin and Filer City, Michigan. We currently lease the cutting rights to approximately 145,000 acres of timberland located near our Counce and Valdosta mills. We also have supply agreements on about 600,000 of the 800,000 acres of timberland we sold during 1999 and 2000.

Our converting operations produce a wide variety of corrugated packaging products, including conventional shipping containers used to protect and transport manufactured goods. We also produce multi-color boxes and displays with strong visual appeal that help to merchandise the packaged product in retail locations. Finally, we are a large producer of meat boxes and wax-coated boxes for the agricultural industry.

Corporate Developments

On April 12, 1999, Pactiv Corporation, formerly known as Tenneco Packaging Inc., a wholly owned subsidiary of Tenneco Inc., sold its containerboard and corrugated products business to PCA, an entity formed by Madison Dearborn Partners, LLC, a private equity investment firm, in January 1999, for $2.2 billion, consisting of $246.5 million in cash, the assumption of $1,760.0 million of debt incurred by Pactiv immediately prior to the contribution, and a 45% common equity interest in PCA valued at $193.5 million. PCA Holdings LLC, an entity organized and controlled by Madison Dearborn, acquired the remaining 55% common equity interest in PCA for $236.5 million in cash, which was used to finance in part the transactions.

The financing of the transactions consisted of (1) borrowings under a new $1,469.0 million senior credit facility for which J.P. Morgan Securities Inc. and BT Alex. Brown Incorporated (the predecessor to Deutsche Banc Alex. Brown) were co-lead arrangers, (2) the offering of $550.0 million of 9⁵/8% senior subordinated notes due 2009, and $100.0 million of 12³/8% senior exchangeable preferred stock due 2010, (3) a cash equity investment of $236.5 million by PCA Holdings LLC and (4) an equity investment by Pactiv valued at $193.5 million. As required by their terms, the $550.0 million of senior subordinated notes and $100.0 million of senior exchangeable preferred stock issued in the April 12, 1999 transactions were exchanged for publicly registered securities in the same amounts in a registered exchange offer completed in October 1999.

The senior credit facility was entered into to finance in part the transactions and to pay related fees and expenses and to provide future borrowings to PCA for general corporate purposes, including working capital. The senior credit facility initially consisted of three term loan facilities in an original aggregate principal amount of $1,219.0 million and a revolving credit facility with up to $250.0 million in availability. Effective December 14, 1999, PCA elected to reduce its availability under the revolving credit facility from $250.0 million to $150.0 million.

On January 28, 2000, PCA became a publicly-traded company with the initial public offering of its common stock. In the offering, Pactiv sold 35,000,000 shares and PCA sold 11,250,000 new shares of common stock, both at an offering price of $12.00 per share. PCA used its net proceeds to redeem all of the outstanding senior exchangeable preferred stock on March 3, 2000.

PCA completed the refinancing of its $735.0 million senior secured debt and $150.0 million senior secured revolving credit facility on June 29, 2000. Completion of the refinancing eliminated Term Loan C, and reduced PCA's average effective interest rate on its senior secured term debt by approximately 100 basis points. PCA's total borrowings under the senior credit facility as of December 31, 2001 consisted of $119.0 million of term loans. No amounts were outstanding under the senior revolving credit facility as of that date.

On November 29, 2000, PCA established an on-balance sheet securitization program for its trade accounts receivable. To effectuate this program, PCA formed a wholly-owned limited purpose subsidiary, Packaging Credit Company, LLC, or PCC, which in turn formed a wholly-owned, bankruptcy-remote, special-purpose subsidiary, Packaging Receivables Company, LLC, or PRC, for the purpose of acquiring receivables from PCC. Both of these entities are included in the consolidated financial statements of PCA. Under this program, PCC purchases on an ongoing basis all of the receivables of PCA and sells such receivables to PRC. PRC and lenders established a $150.0 million receivables-backed revolving credit facility through which PRC obtains funds to purchase receivables from PCC. The receivables purchased by PRC are and will be solely the property of PRC. In the event of a liquidation of PRC, the creditors of PRC would be entitled to satisfy their claims from PRC's assets prior to any distribution to PCC or PCA. Credit available under the receivables credit facility is on a borrowing-base formula. As a result, the full amount of the facility may not be available at all times. As of December 31, 2001, $126.0 million was outstanding and $24.0 million was available for additional borrowing under the receivables credit facility. The highest outstanding principal balance under the receivables credit facility during fiscal 2001 was $142.0 million.

During the first half of 2001, Pactiv sold approximately 6,160,240 shares of PCA common stock which represented its remaining ownership interest.

Industry Overview

According to the Fibre Box Association, the value of industry shipments of corrugated products was over $23 billion in 2001.

The primary end-use markets for corrugated products are shown below:


Food, beverages and agricultural products		41.3%
Paper and fiber products		21.0%
Petroleum, plastic, synthetic and rubber products		11.1%
Toys, amusement, sporting and athletic goods		7.7%
Glass, pottery, fabricated metal and metal containers		5.3%
Electrical and electronic machinery and appliances		3.3%

Converting plants tend to be located in close proximity to customers to minimize freight costs. The corrugated products industry consists of an estimated 676 companies in the United States.

Containerboard, which includes both linerboard and corrugating medium, is the principal raw material used to manufacture corrugated products. Linerboard is used as the inner and outer facings, or liners, of corrugated products. Corrugating medium is fluted and laminated to linerboard in corrugator plants to produce corrugated sheets. The sheets are subsequently printed, cut, folded and glued in corrugator plants or sheet plants to produce corrugated products.

Containerboard may be manufactured from both softwood and hardwood fibers, as well as from recycled fibers from used corrugated and waste from converting operations. Kraft linerboard is made predominantly from softwoods like pine. Semi-chemical corrugating medium is made from hardwoods such as oak. The finished paper product is wound into large rolls, which are slit to size as required by converters, and shipped to them.

Linerboard is made in a range of grades or basis weights. The most common basis weight for linerboard is 42 lb., although linerboard is produced in weights that vary from under 26 lb. to over 90 lb. Basis weight represents the weight in pounds per thousand square feet of linerboard. Producers also market linerboard by performance characteristics, appearance and color. The following table describes different product weight, performance and color characteristics:

Category	Products	Description
Weights (lb./1,000 sq. ft.)	26-38 lb. 41-56 61-90 >90	Lightweights Middleweights Heavyweights Super heavyweights
Performance	High ring crush Tare weight Wet strength	Stacking or compression strength Minimal variations in basis weight Strength while wet
Color	Mottled white	Bleached pulp applied to unbleached sheet; mottled appearance
	White top	Even, white surface appearance
	Full bleached	Solid white throughout

Historically, pricing for containerboard has reflected changes in containerboard supply that resulted from major capacity additions, as well as changes in demand.

PCA Operations and Products

Our two linerboard mills can manufacture a broad range of linerboard grades ranging from 26 lb. to 96 lb. Our two semi-chemical corrugating medium mills can manufacture grades ranging in weight from 21 lb. to 47 lb. All four of our mills have completed an extensive independent review process to become ISO 9002 certified. ISO 9002 is an international quality certification that verifies a facility maintains and follows stringent procedures for manufacturing, sales and customer service.

Counce. Our Counce, Tennessee mill is one of the largest linerboard mills in the United States. Its production capacity is approximately 980,000 tons per year. In 2001, we produced approximately 952,000 tons of kraft linerboard on two paper machines at Counce. We produced a broad range of basis weights from 26 lb. to 96 lb. The mill also produces a variety of performance and specialty grades of linerboard including high-ring crush and wet strength.

Valdosta. Our Valdosta, Georgia mill is a kraft linerboard mill that has a production capacity of approximately 406,000 tons per year. In 2001, our single paper machine at Valdosta produced approximately 391,000 tons of kraft linerboard. Valdosta primarily produces light to middleweight linerboard ranging from 35 lb. to 56 lb., and heavyweight/super heavyweight linerboard ranging from 61 lb. to 96 lb.

Tomahawk. Our Tomahawk, Wisconsin mill is the second largest corrugating medium mill in the United States with production capacity of 547,000 tons per year. In 2001, we produced approximately 528,000 tons of semi-chemical corrugating medium at Tomahawk using three paper machines, one of which is among the largest corrugating medium machines in the world. These machines produce a broad range of basis weights from 21 lb. to 47 lb. Our Tomahawk mill also produces a variety of performance and specialty grades of corrugating medium. This includes high ring crush, wet strength, tare weight and super heavyweight.

Filer City. Our Filer City, Michigan mill is a semi-chemical corrugating medium mill currently operating with two machines with a production capacity of 292,000 tons. In 2001, we produced approximately 254,000 tons of corrugating medium on two paper machines at Filer City. In July 1998,

we shut down one machine at Filer City. Mill production capacity at Filer City is 362,000 tons a year if we run all three paper machines. Filer City produces a range of corrugating medium grades in basis weights from 21 lb. to 40 lb.

We operate 65 corrugated products plants, a supply services group, a technical and development center and five graphic design centers. Of the 65 corrugated products plants, 38 have a corrugator on site and manufacture both combined sheets and finished products. The remaining 27 corrugated products plants purchase combined sheets and create finished products. Two other small specialty facilities include a collating and distribution packaging center, as well as a machine rebuild facility. The five graphic design centers are located in Westmont, Illinois; Cincinnati, Ohio; Dallas, Texas; South Brunswick, New Jersey; and South Gate, California.

These graphic design centers were established in response to customers' increasing need for sophisticated, high impact graphics on their corrugated products. Customers are increasingly using special in-store corrugated displays to market their products and are requiring more intricate packaging designs. Our graphic design centers offer state-of-the-art computers and equipment that are capable of 24-hour design turnaround and reduced product delivery times.

Our converting operations are spread throughout the United States. Each corrugator plant serves a market radius that typically averages 150 miles. Our sheet plants are generally located in close proximity to our larger corrugator plants which enables us to offer additional services and converting capabilities such as small volume and quick turnaround items.

We produce a wide variety of products ranging from basic corrugated shipping containers to specialized packaging such as wax-coated boxes for the agriculture industry. We also have multi-color printing capabilities to make high-impact graphics boxes and displays that offer customers more attractive packaging.

Timberland

We currently lease the cutting rights to approximately 145,000 acres of timberland located near our Counce and Valdosta mills. Virtually all of the acres under cutting rights agreements are located within 100 miles of our mills, which results in lower wood transportation costs and provides a secure source of wood fiber. Most of these leased cutting rights agreements have terms with over 20 years remaining.

During 1999 and 2000, PCA sold about 800,000 acres of timberland. As part of the timberland sale agreements, we entered into supply arrangements covering about 600,000 acres of the total acres sold. We also retained a one-third equity ownership interest in 385,000 acres sold to Southern Timber Venture, LLC in November 2000.

In addition to the timberland we manage ourselves, our Forest Management Assistance Program provides professional forestry assistance to private timberland owners to improve harvest yields and to optimize their harvest schedule. We have managed the regeneration of approximately 120,000 acres by supplying pine seedlings. In exchange for our expertise, we are given the right of first refusal over timber sales from those lands. These private lands include over 185,000 acres of timberland. We expect to harvest approximately 115,000 cords of wood from these forests annually.

PCA also participates in the Sustainable Forestry Initiative, which is organized by the American Forest and Paper Association. This initiative is aimed at ensuring the long-term health and conservation of America's forestry resources. Activities include limiting tree harvest sizes, replanting harvest acreage, participating in flora and fauna research and protecting water streams.

Solid Wood and Recycling Facilities

We own three sawmills located in Ackerman and Fulton, Mississippi and Selmer, Tennessee. During 2001, these three sawmills sold approximately 118 million board feet of lumber used to make

furniture and building products. We also have an air-dry yard operation in Burnsville, Mississippi that holds newly cut lumber while it dries.

We also operate two paper recycling centers, one in Jackson, Tennessee and one in Nashville, Tennessee. These recycling centers collect old corrugated containers, newspapers and other paper that provide a source of recycled fiber to our nearby Counce mill.

Sales and Marketing

Our corrugated products are sold through a direct sales and marketing organization. Sales representatives and a sales manager at each converting operations facility serve local and regional accounts. Corporate account managers serve large national accounts at multiple customer locations. Additionally, our graphic design centers maintain an on-site dedicated graphics sales force. General marketing support is located at our corporate headquarters.

Our containerboard sales group is responsible for the sale of linerboard and corrugating medium to our corrugator plants, to other domestic customers and to the export market. This group handles order processing for all shipments of containerboard from our mills to our corrugator plants. These personnel also coordinate and execute all containerboard trade agreements with other containerboard manufacturers.

In addition to direct sales and marketing personnel, we utilize support personnel that are new product development engineers and product graphics and design specialists. These individuals are located at both the corrugator plants as well as the graphic design centers.

Distribution

Our corrugated products are usually delivered by truck due to our large number of customers and their demand for timely service. Shipping costs represent a relatively high percentage of our total costs due to the high bulk of corrugated products. As a result, our converting operations typically service customers within a 150 miles radius.

Containerboard produced in our mills is shipped by rail or truck. Our individual mills do not own or maintain outside warehousing facilities. We do use some third-party warehouses for short-term storage.

Customers

PCA's corrugated products group sells to over 8,000 customers in over 14,000 locations. About 70% of our corrugated products customers are regional and local accounts, which are broadly diversified across industries and geographic locations. The remaining 30% of our customer base consists primarily of national accounts, or those customers with a national presence. These customers typically purchase corrugated products from several of our box plants throughout the United States.

In 2001, our 65 corrugated products plants consumed approximately 82% of our mills' containerboard production. Of the remaining 18% of our containerboard production that we did not consume at our own converting operations, about 13% is sold to domestic customers, and about 5% is sold to export customers.

Major Raw Materials Used

Fiber supply. Fiber is the single largest cost in the manufacture of containerboard. To reduce our fiber costs, we have invested in processes and equipment to ensure a high degree of fiber flexibility. Our mills have the capability to shift a portion of their fiber consumption between softwood, hardwood and recycled sources. With the exception of our Valdosta mill, our other mills can utilize some recycled fiber in their containerboard production. Our ability to use various types of virgin and recycled fiber helps mitigate the impact of changes in the prices of various fibers.

Energy supply. Energy at the mills is obtained through purchased electricity or through various fuels which are then converted to steam or electricity on-site. Fuel sources include coal, natural gas, oil, internally produced and purchased bark and by-products of the containerboard manufacturing and pulping process. These fuels are burned in boilers to produce steam. Steam turbine generators are used to produce electricity. To reduce our mill energy cost, we have invested in processes and equipment to ensure a high level of purchased fuel flexibility. Approximately 70% of our mill purchased fuel needs are from purchased bark and coal, historically our two lowest cost fuels.

Our two kraft linerboard mills at Counce and Valdosta generate approximately 65% to 70% of their fuel requirements from their own by-products. Approximately 50% of our electricity consumption for the four mills is generated on-site.

Competition

Corrugated products are produced by about 676 U.S. companies operating approximately 1,450 plants. Most corrugated products are custom manufactured to the customer's specifications. Corrugated producers generally sell within a 150-mile radius of their plants and compete with other corrugated producers in their local market. In fact, the Fibre Box Association tracks industry data by 47 distinct market regions.

The larger, multi-plant integrated companies may also solicit larger, multi-plant customers who purchase for all of their facilities on a consolidated basis. These customers are often referred to as national or corporate accounts.

Corrugated products businesses seek to differentiate themselves through pricing, quality, service, design and product innovation. We compete for both local and national account business and we compete against producers of other types of packaging products. On a national level, our competitors include Four M Corporation, Georgia-Pacific Corporation, International Paper Company, Smurfit-Stone Container Corporation, Temple-Inland Inc. and Weyerhaeuser Company. However, with our strategic focus on local and regional accounts, we believe we compete as much with the smaller, independent converters as with the larger, integrated producers.

The competition relative to PCA's containerboard produced but not consumed at our own corrugated products plants are a number of large, diversified paper companies, including Georgia-Pacific Corporation, International Paper Company, Smurfit-Stone Container Corporation, Temple-Inland Inc. and Weyerhaeuser Company, as well as other regional manufacturers. Containerboard is generally considered a commodity-type product and can be purchased from numerous suppliers.

Employees

As of December 31, 2001, we had approximately 7,900 employees. Approximately 2,200 of these employees were salaried and approximately 5,700 were hourly. Approximately 75% of our hourly employees are represented by unions. Our unionized employees are represented primarily by the Paper, Allied Industrial, Chemical, Energy Workers International Union, the International Association of Machinists, the Graphic Communications International Union and the United Steel Workers of America (USWA).

Contracts for our unionized mill employees expire between June 2002 and June 2007. Contracts for unionized converting plant employees expire between January 2002 and June 2007. We are currently in negotiations to renew or extend any union contracts that have recently expired or are expiring in the near future.

In 2001, we experienced a one-month strike at the Filer City mill with the USWA. The strike was settled, and the mill's current agreement expires in May 2006. Prior to this incident we had experienced no instances of significant work stoppages in the previous 15 years. We believe we have satisfactory relations with our employees.

Environmental Matters

Compliance with environmental requirements is a significant factor in our business operations. We commit substantial resources to maintaining environmental compliance and managing environmental risk. We are subject to, and must comply with, a variety of federal, state and local environmental laws, particularly those relating to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater. We believe that we are currently in material compliance with all applicable environmental rules and regulations. Because environmental regulations are constantly evolving, we have incurred, and will continue to incur, costs to maintain compliance with those laws. We work diligently to anticipate and budget for the impact of applicable environmental regulations and do not currently expect that future environmental compliance obligations will materially affect our business or financial condition.

In April 1998, the United States Environmental Protection Agency (EPA) finalized a new Clean Air and Water Act commonly referred to as the Cluster Rules, which govern all pulp and paper mill operations, including those at our mills. Over the next several years, the Cluster Rules will affect our allowable discharges of air and water pollutants. As a result, PCA and its competitors are required to incur costs to ensure compliance with these new rules. From 1997 through 2001, we spent approximately $29.9 million on Cluster Rule compliance to meet Clean Air Act requirements. Total capital costs for environmental matters, including Cluster Rule compliance, were $8.6 million for 2001. We currently estimate 2002 environmental expenditures will be $6.8 million, of which $1.0 million of the expenditures are to meet 2002 to 2005 Cluster Rule requirements. Our current spending projections to complete all Cluster Rule compliance requirements at our four mills is about $23.6 million from 2002 to 2005.

As is the case with any industrial operation, we have in the past incurred costs associated with the remediation of soil or groundwater contamination. From January 1994 through December 2001, remediation costs at our mills and converting plants totaled about $2.8 million. We do not believe that any on-going remedial projects are material in nature. As of December 31, 2001, we maintained an environmental reserve of $3.4 million, which includes funds relating to onsite landfill and surface impoundments as well as on-going and anticipated remedial projects. We believe these reserves are adequate.

We could also incur environmental liabilities as a result of claims by third parties for civil damages, including liability for personal injury or property damage, arising from releases of hazardous substances or contamination. We are not aware of any material claims of this type currently pending against us.

In the transactions, Pactiv agreed to retain all liability for all former facilities and all sites associated with pre-closing offsite waste disposal. Pactiv also retained environmental liability for a closed landfill located near the Filer City mill.

Item 2. PROPERTIES

The table below provides a summary of our containerboard mills, the principal products produced and each mill's capacity.

Location		Function	Capacity (tons)
Counce, TN		Kraft linerboard mill	980,000
Valdosta, GA		Kraft linerboard mill	406,000
Tomahawk, WI		Semi-chemical medium mill	547,000
Filer City, MI		Semi-chemical medium mill	362,000	*

	Total		2,295,000

*: We have operated only two of our three paper machines at Filer City since July 1998, reducing the total productive capacity by 70,000 tons to 292,000 tons, and to 2,225,000 tons for our total mill containerboard system.

Each of the mills is currently subject to a mortgage held by Morgan Guaranty Trust Company of New York on behalf of the lenders under the senior credit facility.

In addition to our mills, we own 42 corrugated products plants. We also own three sawmills, an air-drying yard, one recycling facility, one warehouse and miscellaneous other property, which includes sales offices and woodlands forest management offices. These sales offices and woodlands forest management offices generally have one to four employees and serve as administrative offices. We lease 23 corrugated products plants, five regional design centers, one recycling facility and numerous other distribution centers, warehouses and facilities. PCA has one leased property outside of the continental United States in Nogales, Mexico. All of our owned real property is subject to a first priority mortgage held by Morgan Guaranty Trust Company of New York on behalf of the lenders under the senior credit facility.

We lease the cutting rights to approximately 145,000 acres of timberland located near our Counce and Valdosta mills. Most of these cutting rights agreements have terms with over 20 years remaining.

We currently lease our executive and administrative offices in Lake Forest, Illinois from Pactiv under a lease expiring in January 2003. We currently believe that our facilities and properties are sufficient to meet our operating requirements for the foreseeable future.

Item 3. LEGAL PROCEEDINGS

On May 14, 1999, we were named as a defendant in a Consolidated Class Action Complaint which alleged a civil violation of Section 1 of the Sherman Act. The suit, captioned Winoff Industries, Inc. v. Stone Container Corporation, MDL No. 1261 (E.D. Pa.), names us as a defendant based solely on the allegation that PCA is successor to the interests of Tenneco Packaging Inc. and Tenneco Inc., both of which were also named as defendants in the suit, along with nine other linerboard manufacturers. The complaint alleges that the defendants, during the period October 1, 1993 through November 30, 1995, conspired to limit the supply of linerboard, and that the purpose and effect of the alleged conspiracy was artificially to increase prices of corrugated containers. The plaintiffs have moved to certify a class of all persons in the United States who purchased corrugated containers directly from any defendant during the above period, and seek treble damages and attorneys' fees on behalf of the purported class. The Court granted plaintiffs' motion on September 4, 2001, but modified the proposed class to exclude those purchasers whose prices were "not tied to the price of linerboard". The defendants have appealed the Court's class certification decision, and that appeal is currently pending before the Court of Appeals for the Third Circuit. The case is currently set for trial in January 2003. We believe that the plaintiffs' allegations have no merit and intend to defend against the suit vigorously. We do not believe

that the outcome of this litigation should have a material adverse effect on our financial position, results of operations, or cash flow.

We are also party to various legal actions arising in the ordinary course of our business. These legal actions cover a broad variety of claims spanning our entire business. We believe that the resolution of these legal actions will not, individually or in the aggregate, have a material adverse effect on our financial condition or results of operations.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders in the fourth quarter of 2001.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Market for Common Stock; Dividends

PCA's common stock is listed on the New York Stock Exchange under the symbol "PKG". The following table sets forth the high and low sale prices as reported by the New York Stock Exchange during the last year.

		Fiscal Year 2001
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year
Stock sale prices per share:
	High	$	16.50	$	16.98	$	20.70	$	18.64	$	20.70
	Low	$	12.65	$	12.85	$	14.75	$	14.23	$	12.65

		Fiscal Year 2000
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Year
Stock sale prices per share:
	High	$	12.19	$	12.75	$	13.19	$	16.81	$	16.81
	Low	$	9.25	$	9.88	$	10.25	$	10.88	$	9.25

As of March 1, 2002, there were 72 holders of record of PCA's common stock.

PCA has never paid dividends on the common stock, and PCA currently has no plans to do so. The payment of any future dividends will be determined by PCA's Board of Directors in light of conditions then existing, including PCA's earnings, financial condition and capital requirements, restrictions in financing agreements, business conditions and other factors. Under the terms of the agreements governing our outstanding indebtedness, we are restricted in the amount of dividends we can pay on our common stock. In addition, under Delaware law, we are prohibited from paying any dividends unless we have "capital surplus" or "net profits" available for this purpose, as these terms are defined under Delaware law.

No equity securities of PCA were sold by PCA during fiscal year 2001 which were not registered under the Securities Act of 1933.

Item 6. SELECTED FINANCIAL DATA

The following table sets forth the selected historical financial and other data of PCA and the containerboard and corrugated products business of Pactiv Corporation (the "Group"). The selected historical financial and other data as of and for the years ended December 31, 1997 and 1998, and for the period from January 1, 1999 to April 11, 1999, was derived from the audited combined financial statements of the Group. The historical financial data as of December 31, 1999 and for the period from April 12, 1999 to December 31, 1999, and for the years ended December 31, 2000 and 2001 has been derived from the audited consolidated financial statements of PCA included elsewhere in this report. The information contained in the following table also should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the historical consolidated financial statements of PCA including the notes thereto, contained elsewhere in this report.

		Group							PCA(1)
		Year Ended Dec. 31, 1997		Year Ended Dec. 31, 1998		Jan. 1, 1999 Through April 11, 1999			April 12, 1999 Through Dec. 31, 1999			Year Ended Dec. 31, 2000			Year Ended Dec. 31, 2001
(In thousands, except per share data)
Statement of Income Data:
Net sales		$	1,482,889	$	1,643,823	$	453,207		$	1,317,342		$	1,921,868		$	1,789,956

Income (loss) before cumulative effect of accounting change and extraordinary item		$	27,390	$	71,439	$	(128,599	)	$	47,397		$	172,961		$	107,522
Cumulative effect of accounting change			—		—		—			—			—			(495	)
Extraordinary item			—		—		(6,327	)		(6,897	)		(11,060	)		(609	)

Net income (loss)			27,390		71,439		(134,926	)		40,500			161,901			106,418
Preferred dividends and accretion of preferred stock issuance costs			—		—		—			(9,296	)		(18,637	)		—

Net income (loss) available to common stockholders		$	27,390	$	71,439	$	(134,926	)	$	31,204		$	143,264		$	106,418

Basic earnings per share(2):
	Income (loss) before cumulative effect of accounting change and extraordinary item	$	.29	$	.76	$	(1.36	)	$	.41		$	1.47		$	1.01
	Cumulative effect of accounting change		—		—		—			—			—			—
	Extraordinary item		—		—		(.07	)		(.07	)		(.10	)		(.01	)

Net income (loss) per common share		$	.29	$	.76	$	(1.43	)	$	.34		$	1.37		$	1.00

Diluted earnings per share(2):
	Income (loss) before cumulative effect of accounting change and extraordinary item	$	.29	$	.76	$	(1.36	)	$	.39		$	1.43		$	.99
	Cumulative effect of accounting change		—		—		—			—			—			—
	Extraordinary item		—		—		(.07	)		(.07	)		(.10	)		(.01	)

Net income (loss) per common share		$	.29	$	.76	$	(1.43	)	$	.32		$	1.33		$	.98

Weighted average common shares outstanding			94,600		94,600		94,600			92,108			104,890			106,277

Balance Sheet Data:
Total assets	$	1,317,263	$	1,367,403	$	2,391,089	$	2,153,208	$	1,942,112	$	1,971,780
Total long-term obligations(3)		27,864		17,552		1,760,466		1,432,553		869,414		795,217
Shareholders equity/interdivision account		854,060		908,392		156,697		416,699		687,424		769,834

1): There was no activity for PCA from January 25, 1999, its date of inception, through April 11, 1999.
2): Earnings per share through April 11, 1999 has been calculated using the historical earnings of the Group and the number of common shares resulting from the closing of the acquisition on April 12, 1999 (94,600,000 common shares after giving effect to the 220-for-one stock split). For the PCA historical period from April 12, 1999 to December 31, 1999, earnings available to common stockholders includes a reduction for $9,296 of preferred stock dividends. For the year ended December 31, 2000, earnings available to common stockholders includes reductions of $2,371 of preferred stock dividends and $16,266 for the redemption of PCA's 12³/8% preferred stock. PCA did not declare any dividends on its common shares in 1999, 2000 or 2001.

For all periods presented through April 11, 1999, basic and diluted earnings per share are the same because there are no potentially dilutive other securities. For the PCA historical period from April 12, 1999 to December 31, 1999, and for the years ended December 31, 2000 and 2001, diluted earnings per share includes the dilutive effect of the portion of the 6,576,460 options granted in June 1999 and the 1,059,700 options granted in 2000 that remained unexercised, and the dilutive effect of the 953,350 options granted in 2001. This dilutive effect is calculated using the treasury stock method.
3): Total long-term obligations include long-term debt, the current maturities of long-term debt and redeemable preferred stock. The amount excludes amounts due to Pactiv or other Tenneco affiliates as part of the Group's interdivision account or other financing arrangement.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements about us within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to risks and uncertainties. Forward-looking statements include information concerning our future financial condition and business strategy. Statements that contain words such as "believes," "expects," "anticipates," "intends," "prospects," "estimates," "should," "may" or similar expressions are forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. While we believe these expectations and projections are reasonable, forward-looking statements are inherently subject to risks, uncertainties and assumptions about us.

The following discussion of historical results of operations and financial condition should be read in conjunction with the audited financial statements and the notes thereto which appear elsewhere in this report.

Overview

In connection with the April 12, 1999 transactions, PCA acquired the containerboard and corrugated products business of Pactiv Corporation (the "Group"), formerly known as Tenneco Packaging Inc., a wholly owned subsidiary of Tenneco, Inc. From its formation in January 1999 and through the closing of the acquisition on April 12, 1999, PCA did not have any significant operations. Accordingly, the historical financial results for periods prior to April 12, 1999 described below are those of the Group.

The Group operated prior to April 12, 1999 as a division of Pactiv, and not as a separate, stand-alone entity. As a result, the historical financial information included in this report does not necessarily reflect what the Group's financial position and results of operations would have been had the Group been operated as a separate, stand-alone entity during the periods prior to April 12, 1999.

The April 12, 1999 acquisition was accounted for using historical values for the contributed assets. Purchase accounting was not applied because, under the applicable accounting guidance, a change of control was deemed not to have occurred as a result of the participating veto rights held by Pactiv after the closing of the transactions under the terms of the stockholders agreement entered into in connection with the transactions.

General

Containerboard demand is dependent upon both domestic demand for corrugated products and linerboard export activity.

According to Pulp & Paper Week, after giving effect to price decreases in 2001, average prices in December 2001 for linerboard and corrugating medium were 12% and 15% lower, respectively, than December 2000 prices.

Pulp & Paper Week, in its February 18, 2002 publication, reported that prices for linerboard and corrugating medium decreased $5 per ton, or 1%, and $10 per ton, or 3%, respectively, compared to December 2001 levels. The March 18, 2002 Pulp & Paper Week Publication reported that prices remained unchanged from February 2002 levels.

Results of Operations

The historical results of operations of the Group and PCA are set forth below:

	Group
	Group			PCA
	For the Period From January 1, 1999 Through April 11, 1999			PCA
	For the Period From January 1, 1999 Through April 11, 1999			For the Period From April 12, 1999 Through December 31, 1999			For the Pro Forma Year Ended December 31, 1999			For the Year Ended December 31, 2000			For the Year Ended December 31, 2001
(In millions)
Net Sales	$	453.2		$	1,317.3		$	1,770.5		$	1,921.9		$	1,790.0

Operating Income (Loss)	$	(212.1	)	$	192.2		$	218.2		$	404.8		$	249.5
Interest Expense		(0.2	)		(107.6	)		(151.7	)		(117.6	)		(74.1	)

Income (Loss) Before Taxes, Cumulative Effect of Accounting Change and Extraordinary Item		(212.3	)		84.6			66.5			287.2			175.4
Provision for Income Taxes		83.7			(37.2	)		(30.3	)		(114.2	)		(67.9	)

Income (Loss) Before Cumulative Effect of Accounting Change and Extraordinary Item		(128.6	)		47.4			36.2			173.0			107.5
Cumulative Effect of Accounting Change		—			—			—			—			(0.5	)
Extraordinary Item		(6.3	)		(6.9	)		(6.9	)		(11.1	)		(0.6	)

Net Income (Loss)		(134.9	)		40.5			29.3			161.9			106.4
Preferred Dividends and Accretion of Preferred Stock Issuance Costs		—			(9.3	)		(12.8	)		(18.6	)		—

Net Income (Loss) Available to Common Shareholders	$	(134.9	)	$	31.2		$	16.5		$	143.3		$	106.4

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Net Sales

Net sales decreased by $131.9 million, or 6.9%, for the year ended December 31, 2001 from the year ended December 31, 2000. The decrease was primarily the result of decreased sales prices, reduced volume of containerboard sold to third parties, and slightly lower corrugated products volume.

Total corrugated products volume decreased 1.1% to 26.1 billion square feet in 2001 compared to 26.4 billion square feet in 2000. On a comparable shipment-per-workday basis, corrugated products volume decreased 1.6% in 2001 from 2000. The larger percentage decrease was due to the fact that 2001 had one more workday, those days not falling on a weekend or holiday, than 2000. Containerboard volume to external domestic and export customers decreased 11.2% to 520,000 tons for the year ended December 31, 2001 from 586,000 tons in the comparable period of 2000.

According to Pulp & Paper Week, average industry mid-point linerboard and semi-chemical medium prices for 42 lb. Liner-East and 26 lb. Medium-East, which are representative benchmark grades, were $444 and $404, respectively, per ton in 2001. This compares to $468 and $446, respectively, per ton in 2000.

Income Before Interest Expense and Income Taxes (Operating Income)

Operating income decreased by $95.0 million, or 27.6%, for the year ended December 31, 2001 compared to 2000. The decrease was the result of decreased sales prices, lower volume of containerboard sold to third parties, and slightly lower corrugated products volume. Operating income for 2000 excludes a fourth quarter gain on timberland sales of $60.4 million.

Gross profit decreased $85.5 million, or 17.0%, for the year ended December 31, 2001 from the year ended December 31, 2000. Gross profit as a percentage of sales declined from 26.2% of sales in 2000 to 23.3% of sales in the current year primarily due to the sales price decreases described above.

Corporate overhead for the year ended December 31, 2001, increased by $0.4 million, or 0.9%, from the year ended December 31, 2000.

Selling and administrative expenses increased $5.3 million, or 4.4%, for the year ended December 31, 2001 from the comparable period in 2000. The increase was primarily the result of increased salary and other general selling related expenses.

Interest Expense and Income Taxes

Interest expense decreased by $43.7 million, or 37.1%, for the year ended December 31, 2001 from the comparable period in 2000, primarily due to prepayments PCA made on its term loans under the senior credit facility.

PCA's effective tax rate was 38.7% for the year ended December 31, 2001 and 39.8% for the year ended December 31, 2000. The tax rate is higher than the federal statutory rate of 35.0% due to state income taxes.

Year Ended December 31, 2000 Compared to Pro Forma Year Ended December 31, 1999

Net Sales

Net sales increased by $151.3 million, or 8.5%, for the year ended December 31, 2000 from the pro forma year ended December 31, 1999. The increase was primarily the result of increased sales prices of corrugated products and containerboard to third parties.

Corrugated products volume was essentially flat in 2000 compared to record volume in 1999 of 26.6 billion square feet. Containerboard volume to external domestic and export customers increased 2.6% to 586,000 tons for the year ended December 31, 2000 from 572,000 tons in the comparable period of 1999.

According to Pulp & Paper Week, average industry mid-point linerboard and semi-chemical medium prices for 42 lb. Liner-East and 26 lb. Medium-East, which are representative benchmark grades, were $468 and $446, respectively, per ton in 2000. This compares to $401 and $361, respectively, per ton in 1999.

Income Before Interest Expense and Income Taxes (Operating Income)

Operating income increased by $138.4 million, or 67.2%, for the year ended December 31, 2000 compared to pro forma 1999. The increase was the result of increased sales prices of corrugated products and containerboard to third parties and reduced corporate overhead expenses. Operating income results for both years exclude fourth quarter gains on timberland sales of $60.4 million and $12.2 million for 2000 and 1999, respectively.

Gross profit increased $144.0 million, or 40.1%, for the year ended December 31, 2000 from the pro forma year ended December 31, 1999. Gross profit as a percentage of sales improved from 20.3% of sales in 1999 to 26.2% of sales in 2000 primarily due to the sales price increases described above.

Corporate overhead for the year ended December 31, 2000, decreased by $2.5 million, or 5.8%, from the pro forma year ended December 31, 1999. The reduction primarily reflects the difference in cost between the overhead charged to the Group by Tenneco and Pactiv and overhead expenses incurred by PCA as a stand-alone entity. Corporate overhead for the pro forma year ended December 31, 1999 included three and one-half months of corporate overhead, through April 11, 1999, charged by Tenneco and Pactiv and eight and one-half months of corporate overhead expenses incurred by PCA as a stand-alone entity.

Selling and administrative expenses increased $8.6 million, or 7.8%, for the year ended December 31, 2000 from the comparable period in 1999. The increase was primarily the result of increased salary and other general selling related expenses.

Interest Expense and Income Taxes

Interest expense decreased by $34.0 million, or 22.4%, for the year ended December 31, 2000 from the comparable pro forma period in 1999, primarily due to prepayments PCA made on its term loans under the senior credit facility.

PCA's effective tax rate was 39.8% for the year ended December 31, 2000 and 45.5% for the pro forma year ended December 31, 1999. The tax rate is higher than the federal statutory rate of 35.0% due to state income taxes.

Liquidity and Capital Resources

Operating Activities

Cash flow provided by operating activities decreased $25.6 million, or 7.6%, for the year ended December 31, 2001 from the comparable period in 2000. The decrease was primarily due to lower income.

Cash flow provided by operating activities increased $127.8 million, or 60.5%, for the year ended December 31, 2000 from the comparable pro forma period in 1999. The increase was primarily due to an increase in net income.

Investing Activities

Cash used for investing activities increased by $252.9 million, or 212.7%, for the year ended December 31, 2001 compared to the year ended December 31, 2000. The change was primarily attributable to a reduction in proceeds from timberland sales of $247.9 million.

Cash used for investing activities increased by $31.5 million, or 20.9%, for the year ended December 31, 2000 compared to the pro forma year ended December 31, 1999. The increase was primarily attributable to increased capital expenditures and a reduction in proceeds from timberland sales.

As of December 31, 2001, PCA had commitments for capital expenditures of $44.5 million. PCA believes operating cash flow from continuing operations will be sufficient to fund these commitments.

Financing Activities

Cash used for financing activities decreased by $355.5 million, or 77.2%, for the year ended December 31, 2001 compared to the year ended December 31, 2000, primarily reflecting decreased prepayments made by PCA on its various debt agreements.

Cash used for financing activities increased by $29.4 million, or 6.8%, for the year ended December 31, 2000 compared to the pro forma year ended December 31, 1999, primarily reflecting increased prepayments made by PCA on its term loans under the senior credit facility.

Prior to the 1999 Transactions

As a division of Pactiv, the Group did not maintain separate cash accounts other than for petty cash. The Group's disbursements for payroll, capital projects, operating supplies and expenses were processed and funded by Pactiv through centrally managed accounts. In addition, cash receipts from the collection of accounts receivable and the sales of assets were remitted directly to bank accounts controlled by Pactiv.

Because of Pactiv's centrally managed cash system, in which the cash receipts and disbursements of Pactiv's various divisions were commingled, it was not feasible to segregate cash received from Pactiv, such as financing for the business, from cash transmitted to Pactiv, such as a distribution. Accordingly, the net effect of these cash transactions with Pactiv is represented as a single line item within the financing section of the statement of cash flows. Similarly, the activity of the interdivision account presents the net transfer of funds and charges between Pactiv and the Group as a single line item.

Since April 12, 1999, PCA has maintained its own cash accounts.

After the 1999 Transactions

Following the transactions, PCA's primary sources of liquidity are cash flow from operations and borrowings under PCA's revolving credit facility. PCA's primary uses of cash are for debt service and capital expenditures. PCA expects to be able to fund its debt service and capital expenditures from these sources.

PCA incurred substantial indebtedness in connection with the transactions. On April 12, 1999, PCA had approximately $1,769.0 million of indebtedness outstanding which included $1,219.0 million of senior secured bank debt and $550.0 million of 9⁵/8% subordinated notes. In addition to the indebtedness, PCA also had $100.0 million of 12³/8% preferred stock as of April 12, 1999.

Concurrently with the transactions, PCA issued the notes and preferred stock and entered into the senior credit facility. The senior credit facility initially provided for three term loans in an aggregate amount of $1,219.0 million and a revolving credit facility with up to $250.0 million in availability. Upon the closing of the acquisition, PCA borrowed the full amount available under the term loans and $9.0 million under the senior revolving credit facility, the latter of which was repaid immediately thereafter.

In October and November 1999, PCA completed the sales of approximately 405,000 acres of timberland. Total proceeds received from the sales were $263.3 million, resulting in a pre-tax gain of $12.2 million.

Effective December 14, 1999, PCA elected to reduce its availability under the revolving credit facility from $250.0 million to $150.0 million. On June 29, 2000, PCA completed the refinancing of its $885.0 million senior credit facility.

On January 28, 2000, PCA became a publicly traded company with an initial public offering of its common stock. On March 3, 2000, PCA used the net proceeds from the offering to redeem all of its outstanding shares of 12³/8% senior exchangeable preferred stock due 2010.

On November 16, 2000, PCA completed the sale of approximately 385,000 acres of timberland to Southern Timber Venture, LLC. PCA received $247.9 million in cash and a 33¹/3% equity ownership interest in Southern Timber Venture, LLC. PCA recorded a pre-tax gain of $60.4 million, and a portion of the gain was not recognized as a result of PCA's continuing ownership interest.

The following table provides the outstanding balance and the weighted average interest rate as of December 31, 2001 for each of PCA's outstanding term loans, the revolving credit facility and the receivables credit facility:

Borrowing Arrangement (in thousands)		Balance at December 31, 2001		Weighted Average Interest Rate
Term Loan A		$	82,272	5.84	%
Term Loan B			36,728	6.59	%
Senior Revolving Credit Facility:
	Revolver—Eurodollar		—	N/A
	Revolver—Base Rate		—	N/A
Receivables Credit Facility			126,000	4.09	%

	Total	$	245,000	5.05	%

The borrowings under the senior revolving credit facility are available to fund PCA's working capital requirements, capital expenditures and other general corporate purposes. The Term Loan A must be repaid in quarterly installments from December 2003 through 2006. The Term Loan B must be repaid in quarterly installments from March 2004 through 2007. The senior revolving credit facility will terminate in 2006. The receivables credit facility will terminate in 2003.

In 1999, 2000 and 2001, PCA made prepayments totaling approximately $440.0 million, $460.0 million, and $74.0 million, respectively, using free cash flow from operations of $463.0 million and proceeds from the sales of timberland of $511.0 million to permanently reduce its borrowings under the term loans and variable rate debt.

The instruments governing PCA's indebtedness contain financial and other covenants that restrict, among other things, the ability of PCA and its subsidiaries to:

•: incur additional indebtedness,
•: pay dividends or make certain other restricted payments,
•: consummate certain asset sales,
•: incur liens,
•: enter into certain transactions with affiliates, or
•: merge or consolidate with any other person or sell or otherwise dispose of all or substantially all of the assets of PCA.

These limitations could limit corporate and operating activities.

In addition, we must maintain minimum debt service, minimum net worth and maximum leverage ratios under the senior credit facility. A failure to comply with the restrictions contained in the senior credit facility could lead to an event of default, which could result in an acceleration of such indebtedness. Such an acceleration would also constitute an event of default under the notes indenture and the receivables credit facility.

PCA estimates that it will make approximately $105.0 million in capital expenditures in 2002. These expenditures will be used primarily for maintenance capital, cost reduction, business growth, and environmental compliance.

PCA believes that cash generated from operations will be adequate to meet its anticipated debt service requirements, capital expenditures and working capital needs for the next 12 months, and that cash generated from operations and amounts available under the senior revolving credit facility will be adequate to meet its anticipated debt service requirements, capital expenditures and working capital needs for the foreseeable future. PCA's future operating performance and its ability to service or refinance the notes and to service, extend or refinance the credit facilities will be subject to future economic conditions and to financial, business and other factors, many of which are beyond PCA's control.

Environmental Matters

We are subject to, and must comply with, a variety of federal, state and local environmental laws, particularly those relating to air and water quality, waste disposal and the cleanup of contaminated soil and groundwater. Because environmental regulations are constantly evolving, we have incurred, and will continue to incur, costs to maintain compliance with those laws. In particular, the EPA recently finalized the Cluster Rules which govern pulp and paper mill operations, including those at the Counce, Filer City, Valdosta and Tomahawk mills. Over the next several years, the Cluster Rules will affect our allowable discharges of air and water pollutants, and require us to spend money to ensure compliance with those new rules.

As is the case with any industrial operation, we have, in the past, incurred costs associated with the remediation of soil or groundwater contamination, as required by the federal Comprehensive Environmental Response, Compensation and Liability Act, commonly known as the federal "Superfund" law, and analogous state laws. Cleanup requirements arise with respect to properties we currently own or operate, former facilities and off-site facilities where we have disposed of hazardous substances. Under the terms of the contribution agreement, Pactiv has agreed to retain all liability for all former facilities and all sites associated with pre-closing off-site waste disposal. Pactiv has also retained environmentally impaired real property in Filer City, Michigan unrelated to current mill operations.

Because liability for remediation costs under environmental laws is strict, meaning that liability is imposed without fault, joint and several, meaning that liability is imposed on each party without regard to contribution, and retroactive, we could receive notifications of cleanup liability in the future and this liability could be material. From January 1994 through December 2001, remediation costs at our mills and converting plants totaled about $2.8 million. As of December 31, 2001, we maintained an environmental reserve of $3.4 million, which includes funds relating to onsite landfills and surface impoundments as well as on-going and anticipated remedial projects. Total capital costs for environmental matters, including Cluster Rule compliance, were $8.6 million for 2001 and we currently estimate 2002 environmental expenditures will be $6.8 million, of which $1.0 million of the expenditures are to meet 2002 to 2005 Cluster Rule requirements.

Impact of Inflation

PCA does not believe that inflation has had a material impact on its financial position or results of operations during the past three years.

Critical Accounting Policies

Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, pensions and other post-retirement benefits, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a further discussion on the application of these and other accounting policies, see Note 2 to our audited consolidated financial statements included elsewhere in this report.

Accounts Receivable—Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based upon a combination of factors. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us (e.g., bankruptcy filings, substantial downgrading of credit sources), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on the length of time the receivables are past due ranging from 0.1% for current amounts to 20% for amounts more than 90 days past due based on our historical collection experience. If collection experience deteriorates (i.e., higher than expected defaults or an unexpected material adverse change in a major customer's ability to meet its financial obligations to us), our estimates of the recoverability of amounts due us could be reduced by a material amount.

As of December 31, 2001, the balance in the allowance for doubtful accounts reserves was $5.2 million, compared to $6.4 million at December 31, 2000. Bad debt expense decreased $5.1 million, or 88.4%, from $5.8 million to $0.7 million, for the year ended December 31, 2001 compared to the year ended December 31, 2000 due to specific accounts deemed uncollectable in 2000. For the year ended December 31, 2000 bad debt expenses increased $4.4 million, or 309.6%, from the pro forma year ended December 31, 1999 due to specific accounts deemed uncollectable in 2000.

Inventory

We record our inventory at the lower of LIFO cost or market. The estimated market value is based on assumptions for future demand and related pricing. If actual market conditions are less favorable than those projected by management, reductions in the value of inventory may be required.

Derivatives

We hold derivative financial instruments to hedge our interest rate risk associated with our variable rate long-term debt. These derivatives qualify for hedge accounting as discussed in Note 2 to our audited consolidated financial statements. We do not speculate in derivatives trading. Hedge accounting results when we designate and document the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective or if we did not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in earnings.

To hedge interest rate risk, interest rate collars are used to protect against rising interest rates and simultaneously guarantee minimum interest rates related to our variable rate debt. These instruments are valued using the market standard methodology of netting the discounted future cash receipts and cash payments. The cash receipts and cash payments are based on an expectation of future interest rates derived from observed market interest rate curves. We have not changed our methods of calculating these fair values or developing the underlying assumptions. The values of these derivatives will change over time as cash receipts and payments are made and as market conditions change. Information about the fair values, notional amounts, and contractual terms of these instruments can be found in Notes 6 and 7 to our audited consolidated financial statements and the section titled "Quantitative and Qualitative Disclosures About Market Risk."

In addition to the above derivative financial instruments, we have other contracts covering a portion of our purchases of natural gas and electricity that have the characteristics of derivatives but are not required to be accounted for as derivatives. These contracts for the physical delivery of these items qualify for the normal purchases exception under Statement 133 as we take physical delivery of the item and use it in the production process. This exception is an election and, if not elected, these contracts would be carried in the balance sheet at fair value with changes in fair value reflected in income. These contracts cover natural gas and electricity usage at our mills through 2004. At December 31, 2001, estimated future payments under these contracts amounted to $28.6 million.

Environmental Liabilities

The estimated landfill closure and postclosure maintenance costs expected to be incurred upon and subsequent to the closing of existing operating landfill areas are accrued based on the landfill capacity used to date. Amounts are estimates using current technologies for closure and monitoring and are not discounted.

The potential costs for various environmental matters are uncertain due to such factors as the unknown magnitude of possible cleanup costs, the complexity and evolving nature of governmental laws and regulations and their interpretations, and the timing, varying costs and effectiveness of alternative cleanup technologies. Liabilities recorded for environmental contingencies are estimates of the probable costs based upon available information and assumptions. Because of these uncertainties, however, our estimates may change. We believe that any additional costs identified as further information becomes available would not have a material effect on our financial statements.

Debt Covenants

Our senior credit facility requires us to maintain minimum debt service, minimum net worth, and maximum leverage ratios as discussed in Note 6 to our audited consolidated financial statements. As of December 31, 2001, we were in compliance with these covenants. A failure to comply with the

restrictions contained in the senior credit facility could lead to an event of default, which could result in an acceleration of such indebtedness. Due to cross-default provisions contained in the notes indenture and the receivables credit facility, all of our debt would become due in full if any of our debt is in default. Given our results of our operations for 2001 and our projections for future operating results, the likelihood of our defaulting on our debt covenants is unlikely absent any material negative event affecting the U.S. economy as a whole. We also believe our lenders would provide us waivers if necessary. However, our expectations of future operating results and continued compliance with our debt covenants cannot be assured and our lenders' actions are not controllable by us. If our projections of future operating results are not achieved and our debt is placed in default, we would experience a material adverse impact on our reported financial position and results of operations.

Revenue Recognition

We recognize revenue as title to the products is transferred to customers.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. In the event that facts and circumstances indicate that the carrying amount of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to discounted cash flows were required.

New Accounting Standards

For a description of changes in accounting principles affecting PCA, see Note 2 to PCA's audited consolidated financial statements included elsewhere in this report.

Item 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

While part of Tenneco, PCA has not had any material market risk due to the fact that its debt financing and risk management activities were conducted by Pactiv or Tenneco. As a result of the April 1999 transactions, PCA is exposed to the impact of interest rate changes and changes in the market value of its financial instruments. PCA periodically enters into derivatives in order to minimize these risks, but not for trading purposes.

Under the terms of the senior credit agreement dated as of April 12, 1999, PCA was required to maintain for at least two years after the closing of the transactions interest rate protection agreements establishing a fixed maximum interest rate with respect to at least 50% of the outstanding term loans under the senior credit agreement. Upon the refinancing of the senior credit agreement on June 29, 2000, this requirement was deleted.

PCA currently has interest rate collar agreements that protect against rising interest rates and simultaneously guarantee a minimum interest rate. The original notional amount of these collar agreements was $720.0 million. As PCA has made debt prepayments, the need for these collar agreements has diminished. Accordingly, PCA has reduced the notional amount of the collars to $175.0 million as of December 31, 2001. The weighted average floor of the interest rate collar agreements is 5.02% and the weighted average ceiling of the interest rate collar agreements is 6.85%. The interest rate on approximately 71% of PCA's variable-rate debt at December 31, 2001 is capped. PCA receives payments under the collar agreements if the applicable interest rate (LIBOR or commercial paper) exceeds the ceiling. Correspondingly, PCA makes payments under the collar agreements if the applicable interest rate drops below the floor. In both cases, the amounts received or paid are based upon the notional amount and the difference between the actual interest rate and the

ceiling or floor rate. The weighted average duration of the interest rate collar agreements is approximately 16 months.

As a result of the collar agreements noted above and the interest rate environment, a one percent increase in interest rates would result in an increase in interest expense and a corresponding decrease in income before taxes of approximately $0.7 million and $3.2 million annually for the years ended December 31, 2001 and 2000, respectively. As of December 31, 2001 and 2000, the weighted average LIBOR was 1.91% and 6.73%, respectively, and the weighted average commercial paper rate was 1.92% and 6.60%, respectively. The effect of an interest rate change to the fair market value of the outstanding debt is insignificant. This analysis does not consider any other impact on fair market value that could exist in such an interest rate environment. In the event of a change in interest rates, management could take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in PCA's financial structure.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is included in a separate section of this report on page F-1.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

There were no changes in or disagreements with PCA's accountants during 2001.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to PCA's directors is included under the caption "Board of Directors" in PCA's Proxy Statement, and is incorporated herein by reference. Information regarding certain Section 16(a) compliance is included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in PCA's Proxy Statement, and is incorporated herein by reference.

Executive Officers

Brief statements setting forth the age at March 19, 2002, the principal occupation, employment during the past five years, the year in which such person first became an officer of PCA, and other information concerning each executive officer appears below.

Paul T. Stecko is 57 years old and has served as Chief Executive Officer of PCA since January 1999 and as Chairman of PCA since March 1999. From November 1998 to April 1999, Mr. Stecko served as President and Chief Operating Officer of Tenneco Inc. From January 1997 to November 1998, Mr. Stecko served as Chief Operating Officer of Tenneco. From December 1993 through January 1997, Mr. Stecko served as President and Chief Executive Officer of Tenneco Packaging Inc. Prior to joining Tenneco Packaging, Mr. Stecko spent 16 years with International Paper Company. Mr. Stecko is a member of the board of directors of Pactiv Corporation, Tenneco Automotive Inc., State Farm Mutual Insurance Company, American Forest and Paper Association and Cives Corporation.

William J. Sweeney is 61 years old and has served as Executive Vice President—Corrugated Products of PCA since April 1999. From May 1997 to April 1999, Mr. Sweeney served as Executive Vice President—Paperboard Packaging of Tenneco Packaging Inc. From May 1990 to May 1997, Mr. Sweeney served as Senior Vice President and General Manager—Containerboard Products of Tenneco Packaging. From 1983 to May 1990, Mr. Sweeney served as General Manager and Vice President of Stone Container Corporation. From 1978 to 1983, Mr. Sweeney served as Sales Manager,

Operations Manager and Division Vice President at Continental Group and from 1967 to 1978, as Sales Manager and General Manager of Boise Cascade Corporation.

Mark W. Kowlzan is 47 years old and has served as Senior Vice President—Containerboard of PCA since March 2002 and as Vice President from April 1999 to March 2002. From 1998 to April 1999, Tenneco Packaging Inc. employed Mr. Kowlzan as Vice President and General Manager—Containerboard and from May 1996 to 1998, as Operations Manager and Mill Manager of the Counce mill. Prior to joining Tenneco Packaging, Mr. Kowlzan spent 15 years at International Paper Company, where he held a series of operational positions within its mill organization.

Richard B. West is 49 years old and has served as Chief Financial Officer of PCA since March 1999, as Corporate Secretary since April 1999 and also as Senior Vice President since March 2002. From April 1999 to March 2002, Mr. West served as Vice President and from March 1999 to June 1999, Mr. West also served as Treasurer of PCA. Mr. West served as Vice President of Finance—Paperboard Packaging of Tenneco Packaging Inc. from 1995 to April 1999. Prior to joining Tenneco Packaging, Mr. West spent 20 years with International Paper Company where he served as an Internal Auditor, Internal Audit Manager and Manufacturing Controller for the Printing Papers Group and Director/ Business Process Redesign.

Andrea L. Davey is 45 years old and has served as Vice President—Human Resources of PCA since April 1999. From 1994 to April 1999, Ms. Davey was employed principally by Tenneco Packaging Inc. where she held the positions of Director of Field Employee Relations, Director of Training and Development, Director of Compensation and Benefits, and Project Manager of HRIS project and also served in the capacity of Vice President—Human Resources, Paperboard Packaging from May 1997 to April 1999. From 1992 until joining Tenneco Packaging in 1994, Ms. Davey served as Director of Human Resources for the Bakery division of Sara Lee Corporation. From 1989 to that time, she served as Human Resource Manager for the Converting Group of International Paper Company. Prior to that time, Ms. Davey spent five years with ITT Corporation, where she served in several human resources positions.

Item 11. EXECUTIVE COMPENSATION

Information with respect to executive compensation is included under the caption "Executive Compensation" in PCA's Proxy Statement and is incorporated herein by reference, other than the Report of the Compensation Committee and the Performance Graph.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to security ownership of certain beneficial owners and management is included under the caption "Information Regarding Beneficial Ownership of our Principal Shareholders, Directors and Management" in PCA's Proxy Statement and is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to certain relationships and related transactions is included under the caption "Certain Relationships and Related Transactions" in PCA's Proxy Statement and is incorporated herein by reference.

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

The following documents are filed as a part of this report:

(1): The financial statements listed in the "Index to Financial Statements."
(2): Financial Statement Schedules

The following consolidated financial statement schedule of the Group for the period from January 1, 1999 through April 11, 1999 is included in this report.

Schedule II—The Containerboard Group—Valuation and Qualifying Accounts.

Allowance for doubtful accounts receivable		Balance Beginning of Year		Provision (Benefit)		Additions/Deductions from Reserves*		Translation Adjustments		Balance End of Year
January 1, 1999 through April 11, 1999		5,220		(412	)	(861	)	—		3,947

*: Consists primarily of write-offs and recoveries of bad debts.

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable or not material, or the information called for thereby is otherwise included in the financial statements and therefore has been omitted.

We have audited in accordance with generally accepted auditing standards the financial statements of The Containerboard Group (a division of Tenneco Packaging Inc., which is a Delaware corporation and a wholly owned subsidiary of Tenneco Inc.), included in this report and have issued our report on the April 11, 1999 financial statements dated July 16, 1999. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed above is the responsibility of the company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Chicago, Illinois
August 26, 1999

(2) Financial Statement Schedules (Continued)

The following consolidated financial statement schedule of PCA for the years ended December 31, 2001 and 2000 and for the period from April 12, 1999 through December 31, 1999 is included in this report.

Schedule II—Packaging Corporation of America—Valuation and Qualifying Accounts.

Allowance for doubtful accounts receivable	Balance Beginning of Year	Provision (Benefit)	Additions/Deductions from Reserves*		Translation Adjustments	Balance End of Year
2001	6,394	674	(1,836	)	—	5,232
2000	4,681	5,820	(4,107	)	—	6,394
April 12, 1999 through December 31, 1999	3,947	1,833	(1,099	)	—	4,681

*: Consists primarily of write-offs and recoveries of bad debts.

(b): Reports on Form 8-K

PCA did not file any Reports on Form 8-K during the period covered by this report.

(c): Exhibits

Exhibit Number		Description
2.1		Contribution Agreement, dated as of January 25, 1999, among Pactiv Corporation (formerly known as Tenneco Packaging Inc.) ("Pactiv"), PCA Holdings LLC ("PCA Holdings") and Packaging Corporation of America ("PCA").(2)
2.2		Letter Agreement Amending the Contribution Agreement, dated as of April 12, 1999, among Pactiv, PCA Holdings and PCA.(2)
3.1		Restated Certificate of Incorporation of PCA.(2)
3.2		Form of Certificate of Amendment to Restated Certificate of Incorporation of PCA.(1)
3.3		Form of Second Amended and Restated By-laws of PCA.(1)
4.1		Indenture, dated as of April 12, 1999, by and among PCA, Dahlonega Packaging Corporation ("Dahlonega"), Dixie Container Corporation ("Dixie"), PCA Hydro Inc. ("PCA Hydro"), PCA Tomahawk Corporation ("PCA Tomahawk"), PCA Valdosta Corporation ("PCA Valdosta") and United States Trust Company of New York.(2)
4.2		Intentionally omitted.
4.3		Intentionally omitted.
4.4		Intentionally omitted.
4.5		Intentionally omitted.
4.6		Form of Rule 144A Global Note and Subsidiary Guarantee.(2)

4.7		Intentionally omitted.
4.8		Intentionally omitted.
4.9		Form of certificate representing shares of common stock.(1)
10.1		Amended and Restated Credit Agreement, dated as of April 12, 1999, and Amended and Restated as of June 29, 2000, among PCA, the lenders party thereto from time to time, J.P. Morgan Securities Inc. ("J.P. Morgan"), Deutsche Bank Securities Inc. ("Deutsche Bank"), Goldman Sachs Credit Partners L.P. ("Goldman Sachs") and Morgan Guaranty Trust Company of New York ("Morgan Guaranty").(3)
10.2		First Amendment, dated as of September 11, 2000, among PCA, the lenders party to the Amended and Restated Credit Agreement, J.P. Morgan, Deutsche Bank, Goldman Sachs, and Morgan Guaranty.(4)
10.3		Subsidiaries Guaranty, dated as of April 12, 1999, made by Dahlonega, Dixie, PCA Hydro, PCA Tomahawk, PCA Valdosta and Morgan Guaranty.(2)
10.4		Pledge Agreement, dated as of April 12, 1999, among PCA, Dahlonega, Dixie, PCA Hydro, PCA Tomahawk, PCA Valdosta and Morgan Guaranty.(2)
10.5		TPI Security Agreement, dated as of April 12, 1999, between Pactiv and Morgan Guaranty.(2)
10.6		PCA Security Agreement, dated as of April 12, 1999, among PCA, Dahlonega, Dixie, PCA Hydro, PCA Tomahawk, PCA Valdosta and Morgan Guaranty.(2)
10.7		Intentionally omitted.
10.8		Registration Rights Agreement, dated as of April 12, 1999, by and among Pactiv, PCA Holdings and PCA.(2)
10.9		Holding Company Support Agreement, dated as of April 12, 1999, by and between PCA Holdings and PCA.(2)
10.10		Facility Use Agreement, dated as of April 12, 1999, by and between Pactiv and PCA.(2)
10.11		Human Resources Agreement, dated as of April 12, 1999, by and among Tenneco Automotive Inc. (formerly known as Tenneco Inc.), Pactiv and PCA.(2)
10.12		Purchase/Supply Agreement, dated as of April 12, 1999, between PCA and Tenneco Packaging Speciality and Consumer Products Inc.(2)
10.13		Purchase/Supply Agreement, dated as of April 12, 1999, between PCA and Pactiv.(2)
10.14		Purchase/Supply Agreement, dated as of April 12, 1999, between PCA and Tenneco Automotive Inc.(2)
10.15		Technology, Financial and Administrative Transition Services Agreement, dated as of April 12, 1999, between Pactiv and PCA.(2)
10.16		Letter Agreement Regarding Terms of Employment, dated as of January 25, 1999, between PCA and Paul T. Stecko.*(2)
10.17		Letter Agreement Regarding Terms of Employment, dated as of May 19, 1999, between PCA and Paul T. Stecko.*(2)
10.18		1999 Long-Term Equity Incentive Plan, effective as of October 19, 1999.*(1)

10.19		Management Equity Agreement, dated as of June 1, 1999, among PCA, Paul T. Stecko and the Paul T. Stecko 1999 Dynastic Trust.*(2)
10.20		Form of Management Equity Agreement, dated as of June 1, 1999, among PCA and the members of management party thereto.*(2)
10.21		Memorandum Regarding Special Retention Bonus, dated as of April 16, 1999, from PCA to William J. Sweeney.*(2)
10.22		Amended and Restated 1999 Management Equity Compensation Plan, effective as of June 2, 1999.*(2)
10.23		Credit and Security Agreement, dated as of November 29, 2000, among Packaging Receivables Company, LLC ("PRC"), Packaging Credit Company, LLC ("PCC"), Blue Ridge Asset Funding Corporation and Wachovia Bank, N.A.
10.24		Receivables Sale Agreement, dated as of November 29, 2000, between PCC and PCA.
10.25		Purchase and Sale Agreement, dated as of November 29, 2000, between PCC and PRC.
21.1		Subsidiaries of the Registrant.
23.1		Consent of Arthur Andersen LLP.
23.2		Consent of Ernst & Young LLP.
24.1		Powers of Attorney.

*: Management contract or compensatory plan or arrangement.
(1): Incorporated herein by reference to the same numbered exhibit to PCA's Registration Statement on Form S-1 (Registration No. 333-86963).
(2): Incorporated herein by reference to the same numbered exhibit to PCA's Registration Statement on Form S-4 (Registration No. 333-79511).
(3): Incorporated herein by reference to the same numbered exhibit to PCA's Quarterly Report on Form 10-Q for the period ended June 30, 2000.
(4): Incorporated herein by reference to Exhibit 10.1 to PCA's Quarterly Report on Form 10-Q for the period ended September 30, 2000.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 19, 2002.

	Packaging Corporation of America
	By:		/s/ RICHARD B. WEST Name: Richard B. West Title: Senior Vice President, Chief Financial Officer and Corporate Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 19, 2002.

Signature		Title

* Paul T. Stecko		Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
/s/ RICHARD B. WEST Richard B. West		Senior Vice President, Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer)
* Henry F. Frigon		Director
* Louis A. Holland		Director
* Justin S. Huscher		Director
* Samuel M. Mencoff		Director
* Thomas S. Souleles		Director
* Rayford K. Williamson		Director

*By:

/s/ RICHARD B. WEST

Richard B. West
(Attorney-In-Fact)

INDEX TO FINANCIAL STATEMENTS

Packaging Corporation of America Consolidated Financial Statements as of December 31, 2001, 2000 and 1999
	Report of Ernst & Young LLP, independent public accountants	F-2
	Consolidated balance sheets as of December 31, 2001 and 2000	F-3
	Consolidated statements of income for the years ended December 31, 2001 and 2000 and the period from January 25, 1999 (date of incorporation) through December 31, 1999	F-4
	Consolidated statements of changes in shareholders' equity for the years ended December 31, 2001 and 2000 and the period from January 25, 1999 (date of incorporation) through December 31, 1999	F-5
	Consolidated statements of cash flows for the years ended December 31, 2001 and 2000 and the period from January 25, 1999 (date of incorporation) through December 31, 1999	F-6
	Notes to consolidated financial statements	F-7
The Containerboard Group (a Division of Tenneco Packaging Inc.) Combined Financial Statements as of April 11, 1999
	Report of Arthur Andersen LLP, independent public accountants	F-31
	Combined statement of assets, liabilities and interdivision account as of April 11, 1999	F-32
	Combined statement of revenues, expenses and interdivision account for the period January 1, 1999 through April 11, 1999	F-33
	Combined statement of cash flows for the period January 1, 1999 through April 11, 1999	F-34
	Notes to combined financial statements	F-35

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors and Shareholders of Packaging Corporation of America:

We have audited the accompanying consolidated balance sheets of Packaging Corporation of America as of December 31, 2001 and 2000 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 2001 and 2000 and the period from January 25, 1999 (date of incorporation) to December 31, 1999. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of Packaging Corporation of America management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Packaging Corporation of America at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for the years ended December 31, 2001 and 2000 and the period from January 25, 1999 to December 31, 1999 in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the audited consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, on January 1, 2001.

Ernst & Young LLP

Chicago, Illinois
January 18, 2002

F-2

Packaging Corporation of America
Consolidated Balance Sheets
As of December 31, 2001 and 2000

			2001			2000
(In thousands, except share and per share amounts)
Assets
Current assets:
	Cash and cash equivalents		$	82,465		$	7,892
	Accounts and notes receivable, net of allowance for doubtful accounts of $5,232 and $6,394 as of December 31, 2001 and 2000, respectively			170,175			215,994
	Inventories			170,173			159,712
	Prepaid expenses and other current assets			12,058			5,755
	Deferred income taxes			13,346			14,356

		Total current assets		448,217			403,709
Property, plant and equipment, net				1,451,224			1,455,990
Intangible assets, net of accumulated amortization of $1,647 and $1,380 as of December 31, 2001 and 2000, respectively				4,037			1,758
Other long-term assets				68,302			80,655

		Total assets	$	1,971,780		$	1,942,112

Liabilities and shareholders' equity
Current liabilities:
	Current portion of long-term debt		$	54		$	239
	Accounts payable			93,873			113,701
	Accrued interest			13,590			15,438
	Accrued liabilities			84,378			89,170

		Total current liabilities		191,895			218,548
Long-term liabilities:
	Long-term debt			795,163			869,175
	Deferred income taxes			194,452			151,728
	Other liabilities			20,436			15,237

		Total long-term liabilities		1,010,051			1,036,140
Shareholders' equity:
Common stock (par value $.01 per share, 300,000,000 shares authorized, 105,570,203 shares and 106,248,138 shares issued as of December 31, 2001 and 2000, respectively)				1,056			1,062
Additional paid in capital				490,915			512,208
Retained earnings				280,886			174,468
Accumulated other comprehensive income (loss)				(2,967	)		—
Common stock held in treasury, at cost (3,000 shares and 27,470 shares as of December 31, 2001 and 2000, respectively)				(56	)		(314	)

		Total shareholders' equity		769,834			687,424

		Total liabilities and shareholders' equity	$	1,971,780		$	1,942,112

See notes to consolidated financial statements.

F-3

Packaging Corporation of America
Consolidated Statements of Income

		Year Ended December 31,						January 25, 1999 Through
		Year Ended December 31,						December 31, 1999
		2001			2000			December 31, 1999
(In thousands, except per share amounts)
Net sales		$	1,789,956		$	1,921,868		$	1,317,342
Cost of sales			(1,372,019	)		(1,418,465	)		(1,028,582	)

	Gross profit		417,937			503,403			288,760
Selling and administrative expenses			(123,627	)		(118,373	)		(79,794	)
Other income (expense), net			(4,306	)		59,996			11,020
Corporate overhead			(40,549	)		(40,192	)		(27,756	)

	Income before interest, taxes, cumulative effect of accounting change and extraordinary item		249,455			404,834			192,230
Interest expense, net			(74,021	)		(117,683	)		(107,594	)

	Income before taxes, cumulative effect of accounting change and extraordinary item		175,434			287,151			84,636
Provision for income taxes			(67,912	)		(114,190	)		(37,239	)

	Income before cumulative effect of accounting change and extraordinary item		107,522			172,961			47,397
Cumulative effect of accounting change, net of tax			(495	)		—			—

	Income before extraordinary item		107,027			172,961			47,397
Extraordinary item, net of tax			(609	)		(11,060	)		(6,897	)

Net income			106,418			161,901			40,500
Preferred dividends and accretion of preferred stock issuance costs			—			(18,637	)		(9,296	)

Net income available to common shareholders		$	106,418		$	143,264		$	31,204

Weighted average common shares outstanding
	Basic		106,277			104,890			92,108
	Diluted		108,801			107,518			96,549
Basic earnings per common share:
	Income before cumulative effect of accounting change and extraordinary item	$	1.01		$	1.47		$	0.41
	Cumulative effect of accounting change		—			—			—
	Extraordinary item		(0.01	)		(0.10	)		(0.07	)

	Net income per common share	$	1.00		$	1.37		$	0.34

Diluted earnings per common share:
	Income before cumulative effect of accounting change and extraordinary item	$	0.99		$	1.43		$	0.39
	Cumulative effect of accounting change		—			—			—
	Extraordinary item		(0.01	)		(0.10	)		(0.07	)

	Net income per common share	$	0.98		$	1.33		$	0.32

See notes to consolidated financial statements.

F-4

Packaging Corporation of America
Consolidated Statements of Changes in Shareholders' Equity
For the Period January 25, 1999 (date of incorporation) through December 31, 2001

			Junior Preferred Stock
							Common Stock					Treasury Stock								Accumulated Other Comprehensive Income (Loss)
							Common Stock					Treasury Stock					Additional Paid In Capital						Retained Earnings			Total Shareholders' Equity
(In thousands except share data)			Shares		Amount		Shares		Amount			Shares		Amount			Additional Paid In Capital						Retained Earnings			Total Shareholders' Equity
Balance at January 25, 1999			—		$	—	—		$	—		—		$	—		$	—		$	—		$	—		$	—
	Pactiv contribution of assets to PCA		—			—	193,500			2		—			—			399,323			—			—			399,325
	Payment to Pactiv		—			—	—			—		—			—			(246,500	)		—			—			(246,500	)
	Investment by PCA Holdings		—			—	236,500			2		—			—			236,500			—			—			236,502
	Issuance of junior preferred stock		100			—	—			—		—			—			—			—			—			—
	Non-financing transaction costs		—			—	—			—		—			—			(23,832	)		—			—			(23,832	)
	Post-closing adjustment to contribution of assets		—			—	—			—		—			—			20,000			—			—			20,000
	220-for-one common stock split		—			—	94,170,000			942		—			—			(942	)		—			—			—
	Net income		—			—	—			—		—			—			—			—			40,500			40,500
	Dividends declared on preferred stock		—			—	—			—		—			—			—			—			(9,084	)		(9,084	)
	Accretion of preferred stock costs		—			—	—			—		—			—			—			—			(212	)		(212	)

Balance at December 31, 1999			100		$	—	94,600,000		$	946		—		$	—		$	384,549		$	—		$	31,204		$	416,699

	Net income		—			—	—			—		—			—			—			—			161,901			161,901
	Initial public offering		—			—	11,250,000			112		—			—			125,852			—			—			125,964
	Redemption of preferred stock		—			—	—			—		—			—			—			—			(16,266	)		(16,266	)
	Dividends declared on preferred stock		—			—	—			—		—			—			—			—			(2,291	)		(2,291	)
	Accretion of preferred stock costs		—			—	—			—		—			—			—			—			(80	)		(80	)
	Exercise of stock options		—			—	398,138			4		—			—			1,807			—			—			1,811
	Treasury stock		—			—	—			—		(27,470	)		(314	)		—			—			—			(314	)
	Buyout of preferred stock		(100	)		—	—			—		—			—			—						—			—

Balance at December 31, 2000			—		$	—	106,248,138		$	1,062		(27,470	)	$	(314	)	$	512,208		$	—		$	174,468		$	687,424

	Net income		—			—	—			—		—			—			—			—			106,418			106,418
	Loss on derivatives:
		Loss on derivatives, net of $2,143 income taxes	—			—	—			—		—			—			—			(3,329	)		—			(3,329	)
		Less: reclassification adjustment, net of ($233) income taxes	—			—	—			—		—			—			—			362			—			362

	Total comprehensive income, net of tax																										103,451
	Exercise of stock options		—			—	1,669,735			17		—			—			17,270			—			—			17,287
	Common stock (repurchases)/retirement, net		—			—	(2,347,670	)		(23	)	24,470			258			(38,563	)		—			—			(38,328	)

Balance at December 31, 2001			—		$	—	105,570,203		$	1,056		(3,000	)	$	(56	)	$	490,915		$	(2,967	)	$	280,886		$	769,834

See notes to consolidated financial statements.

F-5

Packaging Corporation of America
Consolidated Statements of Cash Flows

				Year Ended December 31,
				Year Ended December 31,						January 25, 1999 Through December 31, 1999
				2001			2000			January 25, 1999 Through December 31, 1999
(In thousands)
Cash Flows from Operating Activities:
Net income				$	106,418		$	161,901		$	40,500

Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation, depletion and amortization				141,516			140,841			105,935
	Amortization of financing costs				4,851			7,375			6,299
	Cumulative effect of accounting change				495			—			—
	Extraordinary loss—early debt extinguishment				609			11,060			6,897
	Increase in deferred income taxes				46,354			83,276			33,228
	Gain on sale of timberlands				—			(60,414	)		(12,157	)
	(Gain) loss on disposal of property, plant and equipment				1,718			(1,895	)		(947	)
	Tax benefit associated with stock option exercises				9,562			—			—
	Other, net				1,641			2,367			1,917
Changes in components of working capital:
	(Increase) decrease in current assets—
		Accounts receivable			47,077			(6,940	)		(30,007	)
		Inventories			(9,821	)		5,207			(5,625	)
		Prepaid expenses and other			(6,285	)		2,443			(3,379	)
	Increase (decrease) in current liabilities—
		Accounts payable			(21,910	)		(13,663	)		54,738
		Accrued liabilities			(8,799	)		7,490			57,049

			Net cash provided by operating activities		313,426			339,048			254,448

Cash Flows from Investing Activities:
	Additions to property, plant and equipment				(131,158	)		(128,991	)		(88,938	)
	Additions to long term assets				(3,467	)		(4,748	)		(5,302	)
	Acquisition of businesses				(4,827	)		—			—
	Proceeds from disposals of property, plant and equipment				4,570			3,249			1,347
	Proceeds from timberlands sales				—			247,936			263,255
	Payment to Pactiv for contribution of assets				—			—			(246,500	)
	Investments in joint venture				—			(500	)		—
	Other, net				871			1,955			(230	)

			Net cash provided by (used for) investing activities		(134,011	)		118,901			(76,368	)

Cash Flows from Financing Activities:
	Proceeds from preferred stock				—			—			96,500
	Redemption of preferred stock				—			(124,432	)		—
	Proceeds from long-term debt issued				—			142,605			9,619
	Payments on long-term debt				(74,239	)		(602,826	)		(440,075	)
	Proceeds from initial public offering				—			126,364			—
	Financing costs				—			(3,565	)		(90,324	)
	Proceeds from post-closing adjustment				—			—			20,000
	Proceeds from issuance of common stock to PCA Holdings				—			—			236,500
	Repurchases of common stock				(38,328	)		(314	)		—
	Issuance of common stock upon exercise of stock options				7,725			1,811			—

			Net cash used for financing activities		(104,842	)		(460,357	)		(167,780	)

Net Increase (Decrease) in Cash and cash equivalents					74,573			(2,408	)		10,300
Cash and cash equivalents, beginning of period					7,892			10,300			—

Cash and cash equivalents, end of period				$	82,465		$	7,892		$	10,300

See notes to consolidated financial statements.

F-6

Packaging Corporation of America

Notes to Consolidated Financial Statements

December 31, 2001

1. BASIS OF PRESENTATION

Packaging Corporation of America ("PCA" or the "Company") was incorporated on January 25, 1999 pursuant to the General Corporation Law of the State of Delaware. PCA was formed to acquire the containerboard and corrugated packaging products business (the "Group") of Pactiv Corporation, formerly known as Tenneco Packaging Inc., a wholly owned subsidiary of Tenneco Inc. PCA had no operations from the date of incorporation on January 25, 1999 to April 11, 1999.

On April 12, 1999, Pactiv Corporation ("Pactiv") sold the Group to PCA for $2.2 billion. The Group is the predecessor to PCA. The $2.2 billion purchase price paid to Pactiv for the Group consisted of $246.5 million in cash, the assumption of $1.8 billion of debt incurred by Pactiv immediately prior to closing, and the issuance of a 45% common equity interest in PCA. PCA Holdings LLC, an entity organized and controlled by Madison Dearborn Partners, LLC, acquired the remaining 55% common equity interest in PCA for $236.5 million in cash. These events are collectively referred to as the "Transactions." Because significant veto rights were retained by Pactiv, the carryover basis of accounting was used and no goodwill was recognized. Fees of $23.8 million were incurred as part of the Transactions and were recorded as a charge to shareholders' equity.

On August 25, 1999, PCA Holdings LLC and Pactiv agreed that the acquisition consideration should be reduced as a result of a post-closing price adjustment by $20.0 million. On September 23, 1999, Pactiv paid PCA $20.7 million, representing the $20.0 million adjustment and $0.7 million of interest through the date of payment by Pactiv.

The Company is comprised of mills and corrugated products operations. The mill operations (the "Mills") consist of two kraft linerboard mills located in Counce, Tennessee, and Valdosta, Georgia, and two medium mills located in Filer City, Michigan, and Tomahawk, Wisconsin. The Mills also include two recycling centers located in Nashville and Jackson, Tennessee. The Company leases the cutting rights to approximately 145,000 acres of timberland as of December 31, 2001. The Mills transfer the majority of their output to PCA's corrugated products operations ("Corrugated").

PCA's corrugated operations consist of 65 corrugated products plants, a supply services group, a technical and development center, and five graphic design centers. All plants are located in North America. Corrugated combines linerboard and medium (primarily from the Mills) into sheets that are converted into corrugated shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. Corrugated sells to diverse customers primarily in North America.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The accompanying consolidated financial statements of Packaging Corporation of America include all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. The Company has one joint venture that is carried under the equity method.

F-7

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts in the financial statements and the accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of three months or less. Cash equivalents are stated at cost, which approximates market.

Inventories

Raw materials, work in process and finished goods are valued using the lower of last-in, first-out ("LIFO") cost or market method. Supplies and materials inventories are valued using a moving average cost. All inventories are stated at the lower of cost or market. Inventories valued using the LIFO method comprised 73% and 77% of inventories at current cost at December 31, 2001 and 2000, respectively.

The components of inventories are as follows:

		December 31,
		2001			2000
(In thousands)
Raw materials		$	82,540		$	71,256
Work in process			5,989			5,908
Finished goods			46,942			56,157
Supplies and materials			58,118			51,222

Inventories at FIFO cost			193,589			184,543
Excess of FIFO over LIFO cost			(23,416	)		(24,831	)

	Inventory, net	$	170,173		$	159,712

Property, Plant and Equipment

Property, plant and equipment and timber and timberlands are recorded at cost.

F-8

Property, plant and equipment by major classification are as follows:

		December 31,
		2001			2000
(In thousands)
Land		$	71,936		$	64,348
Buildings			292,571			286,505
Machinery and equipment			2,071,048			1,974,677
Other			32,802			33,776

Property, plant and equipment, at cost			2,468,357			2,359,306
Less: Accumulated depreciation			(1,065,425	)		(954,985	)

	Total		1,402,932			1,404,321
Construction in progress			44,997			48,330
Timber and timberlands, at cost, less depletion			3,295			3,339

	Property, plant and equipment, net	$	1,451,224		$	1,455,990

The amount of interest capitalized related to construction in progress was approximately $0.9 million and $0.6 million for the years ended December 31, 2001 and 2000, respectively, and $0.1 million for the period April 12, 1999 through December 31, 1999.

Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. The following lives are used for the various categories of assets:

Buildings and land improvements		5 to 40 years
Machinery and equipment		3 to 25 years
Trucks and automobiles		3 to 10 years
Furniture and fixtures		3 to 20 years
Computers and hardware		3 to 7 years
Leasehold improvements		Period of the lease

Timber depletion is provided on the basis of timber cut during the period related to the estimated quantity of recoverable timber. Assets under capital leases are depreciated on the straight-line method over the term of the lease.

Expenditures for repairs and maintenance are expensed as incurred.

Intangible Assets

The Company has capitalized certain intangible assets based on their estimated fair value at the date of acquisition. Amortization is provided for these intangible assets on a straight-line basis over periods ranging from three to 15 years. Covenants not to compete are amortized on a straight-line basis over the terms of the respective agreements.

F-9

Other Long-Term Assets

PCA has capitalized certain costs related to obtaining its financing. These costs are amortized to interest expense using the effective interest rate method over the terms of the senior credit facility and senior subordinated notes, which range from five years to eight years. Unamortized deferred financing costs were $23.2 million and $29.0 million as of December 31, 2001 and 2000, respectively.

PCA currently leases the cutting rights to approximately 145,000 acres of timberland and capitalizes the annual lease payments and reforestation costs associated with these leases. These costs are recorded as depletion when timber is harvested and used in PCA's business operations. Long-term lease costs were $23.1 million and $25.1 million as of December 31, 2001 and 2000, respectively.

PCA also capitalizes certain costs related to the purchase and development of software which is used in its business operations. The costs attributable to these software systems are amortized over their estimated useful lives based on various factors such as the effects of obsolescence, technology and other economic factors. Capitalized software costs were $12.4 million and $15.7 million as of December 31, 2001 and 2000, respectively.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. In the event that facts and circumstances indicate that the carrying amount of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to discounted cash flows is required.

Financial Instruments

The Company uses interest rate collar agreements to manage interest costs and the risk associated with changing interest rates.

Income Taxes

PCA utilizes the liability method of accounting for income taxes whereby it recognizes deferred tax assets and liabilities for the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets will be reduced by a valuation allowance if, based upon management's estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. The estimates utilized in the recognition of deferred tax assets are subject to revision in future periods based on new facts or circumstances.

Revenue Recognition

The Company recognizes revenue as title to the products is transferred to customers. In the fourth quarter of 2000, the Company adopted EITF 00-10, "Accounting for Shipping and Handling Fees and Costs". Shipping and handling costs are included in cost of sales. Shipping and handling billings to a

F-10

customer in a sales transaction are included in revenue. Prior year amounts have been reclassed to conform to this treatment.

Research and Development

Research and development costs are expensed as incurred. The amount charged was $5.5 million, $3.4 million, and $2.5 million for the years ended December 31, 2001 and 2000 and for the period from April 12, 1999 through December 31, 1999, respectively.

Freight Trades

PCA regularly trades containerboard with other manufacturers primarily to reduce shipping costs. The freight trade transactions are accounted for primarily as transactions in the inventory accounts; the impact on income is not material.

Segment Information

The Company is primarily engaged in one line of business: the manufacture and sale of packaging materials, boxes and containers for industrial and consumer markets. No single customer accounts for more than 10% of total revenues. As a result of a recent acquisition, PCA now has a small warehouse and assembly operation in Nogales, Mexico.

Derivative Instruments and Hedging Activities and Accounting Change

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138. The Statement requires the Company to recognize derivative instruments as either assets or liabilities in the balance sheet at fair value. It further provides criteria for derivative instruments to be designated as fair value, cash flow or foreign currency hedges and establishes respective accounting standards for reporting changes in the fair value of the derivative instruments. The gains or losses resulting from adjusting the derivative instruments to fair value are recorded in net income or accumulated other comprehensive income (loss) (OCI), as appropriate.

The Company recorded a transition adjustment upon adoption of SFAS No. 133 to recognize its derivative instruments at fair value and to recognize the effective and ineffective portions of the cash flow hedges. The effect of this transition adjustment was to decrease reported net income in the first quarter by approximately $0.5 million ($0.8 million pre-tax). The Company also recorded a minimal transition adjustment in OCI and an increase in noncurrent liabilities of approximately $0.8 million.

The Company uses derivative instruments to manage interest costs and the risk associated with changing interest rates. The Company's objectives for holding derivatives are to minimize the risks using the most effective methods to eliminate or reduce the impacts of these exposures. The Company has two interest rate collar agreements that protect against rising interest rates and simultaneously guarantee a minimum interest rate. As interest rates change, the differential paid or received is recognized in interest expense of the period. Interest rate collar agreements are accounted for as cash flow hedges.

F-11

For the year ended December 31, 2001, reported net income increased $0.3 million ($0.5 million pre-tax) for changes in the time value of the interest rate collars, or hedge ineffectiveness. All amounts have been included in other expense in the statement of income. Derivative losses included in OCI as of December 31, 2001, will be reclassified into earnings over the lives of the collar agreements, through June 30, 2003.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," effective for acquisitions completed after June 30, 2001, and SFAS No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their useful lives.

The Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the nonamortization provisions of the Statement will not have a material impact on the Company's consolidated financial position or results of operations. The Company will perform the first of the required impairment tests of goodwill and indefinite lived intangible assets during the first six months of 2002 and has not yet determined what the effect, if any, of these tests will be on the earnings and financial position of the Company.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which is effective for fiscal years beginning after June 15, 2002. The Statement requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. The Company will adopt the new rules on asset retirement obligations on January 1, 2003. The adoption of the Statement is not expected to have a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations" for a disposal of a segment of a business. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The adoption of SFAS No. 144 on January 1, 2002, is not expected to have a material impact on the Company's consolidated financial position or results of operations.

Comprehensive Income (Loss)

For the year ended December 31, 2001, total comprehensive income was $3.0 million less than net income due to derivative losses. There was no difference for the year ended December 31, 2000 or for the period from April 12, 1999 through December 31, 1999.

F-12

Reclassifications

Prior year's financial statements have been reclassified where appropriate to conform with current year presentation.

3. EARNINGS PER SHARE

All share and per share data included in the accompanying consolidated financial statements have been adjusted to reflect a 220-for-one-split of the Company's common stock which became effective on October 19, 1999.

The following table sets forth the computation of basic and diluted income per common share for the periods presented.

		Year Ended December 31,
		Year Ended December 31,				April 12, 1999 Through December 31, 1999
		2001		2000		April 12, 1999 Through December 31, 1999
(In thousands, except per share data)
Numerator:
	Net income available to common stockholders	$	106,418	$	143,264	$	31,204
Denominator:
	Basic common shares outstanding		106,277		104,890		92,108
Effect of dilutive securities:
	Stock options		2,524		2,397		1,949
	Non-vested stock		—		231		2,492

Dilutive common shares outstanding			108,801		107,518		96,549
Basic income per common share		$	1.00	$	1.37	$	0.34
Diluted income per common share		$	0.98	$	1.33	$	0.32

4. ACCRUED LIABILITIES

The components of accrued liabilities are as follows:

		December 31,
		2001		2000
(In thousands)
Benefits		$	20,332	$	21,649
Medical insurance and workers' compensation			16,138		13,430
Vacation and holiday pay			11,290		11,586
Customer volume discounts and rebates			10,841		9,359
Other			25,777		33,146

	Total	$	84,378	$	89,170

F-13

5. EMPLOYEE BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS

In connection with the Transactions, PCA and Pactiv entered into a human resources agreement which, among other items, granted PCA employees continued participation in the Pactiv pension plan for a period of up to five years following the closing of the Transactions for an agreed upon fee. For salaried employees, PCA will pay Pactiv $4.0 million in the first and second years, $6.0 million in the third year, $8.0 million in the fourth year, and $10.0 million in the fifth year following the closing date of the Transactions. For hourly employees, PCA will pay Pactiv $1.2 million per year through December 31, 2000 and then $4.5 million per year for two additional years. These amounts can be adjusted if there are material increases in the pension costs to Pactiv. The fees paid to Pactiv are expensed ratably throughout the year. PCA intends to adopt its own retirement plans with respect to its employees sometime in the future.

The Company adopted a supplemental executive retirement plan in 2000 that provides supplemental pension benefits for certain executive officers of the Company. Benefits are based upon years of service and the highest three year average of compensation. The benefit obligation and pension costs were not significant.

PCA also provides certain medical benefits for retired salaried employees and certain medical and life insurance benefits for certain employees. For salaried employees, the plan covers employees retiring from PCA on or after attaining age 58 who have had at least 10 years of full-time service with PCA after attaining age 48. For hourly employees, the postretirement medical coverage, where applicable, is available according to the eligibility provisions in effect at the employee's work location. Per the human resources agreement referred to above, Pactiv retained the liability relating to retiree medical and life benefits for PCA employees who had retired on or before the closing date of the Transactions or who will be eligible to retire within two years of that date. Any postretirement liability recorded on PCA's balance sheet relates to active employees only.

F-14

Financial data pertaining to the Company's postretirement benefit plans follow:

			2001			2000			April 12, 1999 Through Dec. 31, 1999
(In thousands)
Change in benefit obligation:
	Benefit obligation at beginning of period		$	5,276		$	4,044		$	4,007
	Service cost			855			587			441
	Interest cost			406			304			210
	Plan amendments			132			—			—
	Actuarial loss (gain)			1,034			341			(614	)

	Benefit obligation at September 30		$	7,703		$	5,276		$	4,044

Plan assets at fair value at September 30			$	—		$	—		$	—

Development of net amount recognized:
	Funded status at September 30		$	(7,703	)	$	(5,276	)	$	(4,044	)
	Unrecognized cost:
		Actuarial loss (gain)		567			(479	)		(849	)
		Prior service cost		121			—			—
		Other		371			—			—

	Accrued benefit recognized at December 31		$	(6,644	)	$	(5,755	)	$	(4,893	)

Components of net periodic benefit cost:
	Service cost for benefits earned during the year		$	855		$	587		$	441
	Interest cost on accumulated postretirement benefit obligation			406			304			210
	Net amortization of unrecognized amounts			3			(29	)		(2	)

	Net periodic pension and postretirement benefit cost		$	1,264		$	862		$	649

The accrued postretirement benefit cost has been recorded based upon certain actuarial estimates as of September 30, 2001, 2000 and 1999, as shown below. These estimates are subject to revision in future periods given new facts or circumstances.

		Postretirement Plan
		2001		2000		1999
Discount rate		7.25	%	7.50	%	7.50	%

As of September 30, 2001, the Company assumed health care cost trend rates of 9.50% for 2002 and 2003, 8.00% for 2004, 7.00% for 2005, 6.00% for 2006, and 5.00% for 2007 and thereafter. As of both September 30, 2000 and 1999, the Company assumed a health care cost trend rate of 5.00%.

Increasing the assumed health care cost trend rate by one percentage point would increase the 2001 postretirement benefit obligation by approximately $1.2 million and would increase the net postretirement benefit cost by approximately $0.3 million.

F-15

5. EMPLOYEE BENEFIT PLANS AND OTHER POSTRETIREMENT BENEFITS (Continued)

On February 1, 2000, the Company adopted two defined contribution benefit plans that cover all full-time salaried employees and certain hourly employees at several of the Company's facilities. Employees can make voluntary contributions in accordance with the provisions of their respective plan. The Company expensed $6.7 million and $6.1 million for employer contributions during the years ended December 31, 2001 and 2000, respectively.

6. LONG-TERM DEBT

A summary of long-term debt is set forth in the following table:

		December 31,
		2001		2000
(In thousands)
Senior credit facility—
	Term Loan A, effective interest rate of 3.16% and 8.26% at December 31, 2001 and 2000, respectively, due in varying quarterly installments through June 30, 2006	$	82,272	$	122,371
	Term Loan B, effective interest rate of 3.91% and 8.67% as of December 31, 2001 and 2000, respectively, due in varying quarterly installments through June 30, 2007		36,728		54,629
Receivables credit facility, effective interest rate of 2.30% and 6.95% as of December 31, 2001 and 2000, respectively, due November 29, 2003			126,000		142,000
Senior subordinated notes, interest at 9.625% payable semi-annually, due April 1, 2009			550,000		550,000
Other			217		414

	Total		795,217		869,414
Less: Current portion			54		239

	Total long-term debt	$	795,163	$	869,175

Additional information regarding PCA's variable rate debt before the effects of the interest rate collars described below, is shown below:

		Weighted-Average Reference Interest Rate				Applicable Margin
		December 31,				December 31,
		2001		2000		2001		2000
LIBOR based debt:
Senior credit facility
	Term Loan A	1.91	%	6.76	%	1.25	%	1.50	%
	Term Loan B	1.91	%	6.67	%	2.00	%	2.00	%
Commercial paper based debt:
Receivables credit facility		1.92	%	6.60	%	0.38	%	0.35	%

F-16

Since April 12, 1999, PCA has made debt prepayments totaling approximately $974.0 million using excess cash and proceeds from the sale of certain timberlands to permanently reduce its borrowings under the term loans. As a result of these prepayments, PCA recorded a charge of $1.0 million ($0.6 million after tax), $18.4 million ($11.1 million after tax), and $11.4 million ($6.9 million after tax), respectively, as an early extinguishment of debt for the years ended December 31, 2001 and 2000 and for the period from April 12, 1999 through December 31, 1999. No quarterly installments will be required under any of the term loans until December 31, 2003.

As of December 31, 2001, annual principal payments for debt during the next five years are: $0.1 million (2002), $128.6 million (2003), $35.2 million (2004), $36.3 million (2005), $9.8 million (2006), and $585.3 million (2007 and thereafter).

Interest payments in connection with the Company's debt obligations for the years ended December 31, 2001 and 2000, and for the period from April 12, 1999 through December 31, 1999 amounted to $73.6 million, $112.6 million, and $89.5 million, respectively.

On June 29, 2000, the Company completed the refinancing of its senior credit facility. The new refinancing lowered the Company's margins over LIBOR on Term Loans A and B and eliminated Term Loan C, resulting in an average margin reduction of about 100 basis points. The Company incurred approximately $3.6 million in bank syndication and arrangement fees, which were rolled into the current debt structure.

On November 29, 2000, the Company established an on-balance sheet securitization program for its trade accounts receivable. To effectuate this program, the Company formed a wholly owned limited purpose subsidiary, Packaging Credit Company, LLC ("PCC"), which in turn formed a wholly owned, bankruptcy-remote, special-purpose subsidiary, Packaging Receivables Company, LLC ("PRC"), for the purpose of acquiring receivables from PCC. Both of these entities are included in the consolidated financial statements of the Company. Under this program, PCC purchases on an ongoing basis all of the receivables of the Company and sells such receivables to PRC. PRC and lenders established a $150.0 million receivables-backed revolving credit facility ("Receivables Credit Facility") through which PRC obtains funds to purchase receivables from PCC. The receivables purchased by PRC are and will be solely the property of PRC. In the event of liquidation of PRC, the creditors of PRC would be entitled to satisfy their claims from PRC's assets prior to any distribution to PCC or the Company. Credit available under the receivables credit facility is on a borrowing-base formula. As a result, the full amount of the facility may not be available at all times. At December 31, 2001, $126.0 million was outstanding and $24.0 million was available for additional borrowing under the receivables credit facility. The highest outstanding principal balance under the receivables credit facility during fiscal 2001 was $142.0 million.

The senior credit facility is (1) jointly and severally guaranteed by each of PCA's existing subsidiaries and (2) secured by a first priority lien covering substantially all of the owned timberland, mills, plants and other facilities and substantially all tangible and intangible personal property of PCA and its domestic subsidiaries and by a pledge of all of the capital stock of PCA's domestic subsidiaries. In addition, the senior credit facility will also be secured by a pledge of 65% of the capital stock of any first tier foreign subsidiaries that PCA may acquire or form in the future. PCA's future domestic

F-17

subsidiaries will guarantee the senior credit facility and secure that guarantee with certain of their real property and substantially all of their tangible and intangible personal property.

PCA's various debt agreements contain covenants that restrict the ability of PCA and its subsidiaries to incur additional indebtedness, pay dividends or make certain other restricted payments, consummate certain asset sales, incur liens, enter into certain transactions with affiliates, or merge or consolidate with any other person or sell or dispose of all or substantially all of the assets of the Company. They also require PCA to comply with certain financial covenants, including the ratio of earnings before interest, taxes, depreciation, and amortization (EBITDA) to cash interest expense, the ratio of debt to EBITDA, and minimum net worth levels. A failure to comply with the restrictions contained in the senior credit facility could lead to an event of default, which could result in an acceleration of such indebtedness. Such an acceleration would also constitute an event of default under the notes indenture and the receivables credit facility. At December 31, 2001, the Company was in compliance with all of its covenants.

The Company maintains interest rate collar agreements for its variable rate debt. The interest rate collar agreements protect against rising interest rates while simultaneously guaranteeing minimum interest rates. The notional amount of these collars is $175.0 million and $250.0 million at December 31, 2001 and 2000, respectively. Approximately 71% of PCA's variable rate debt are capped. The weighted average floor of the interest rate collar agreements is 5.02% and the weighted average ceiling is 6.85%. On November 29, 1999, PCA terminated $180.0 million of interest rate collar agreements and received $1.2 million. On January 14, 2000, PCA terminated $110.0 million of interest rate collar agreements and received $1.9 million. The senior credit facility provides PCA with the right to lock-in LIBOR interest rates for any amount of term loans for one, two, three, or six-month periods. With the approval of the lenders, PCA can lock-in LIBOR interest rates for either a two-week or twelve-month period. The receivables credit facility also provides PCA with the right to lock-in commercial paper interest rates for a one, two, or three-month period.

A summary of the Company's drawings under credit facilities as of December 31, 2001 follows:

	Term	Commitments		Utilized		Available
(In thousands)
Receivables credit facility	2003	$	150,000	$	126,000	$	24,000
Senior revolving credit facility	2006		150,000		—		150,000

		$	300,000	$	126,000	$	174,000

PCA is required to pay commitment fees on the unused portions of the credit facilities. In December of 2000, PCA reduced the availability under the senior revolving credit facility from $250.0 million to $150.0 million.

At December 31, 2001 and 2000, letters of credit amounting to approximately $23.8 million and $21.9 million, respectively, were outstanding which relate primarily to various environmental obligations, including landfills and solid waste programs, management equity loans, workers' compensation, and equipment leases.

F-18

7. FINANCIAL INSTRUMENTS

The carrying and estimated fair values of PCA's financial instruments at December 31, 2001 and 2000 were as follows:

		2001						2000
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
(In thousands)
Short-term assets		$	252,640		$	252,640		$	223,886		$	223,886
Short-term liabilities			(93,873	)		(93,873	)		(113,701	)		(113,701	)
Long-term debt—
	Senior credit facility		(119,000	)		(119,000	)		(177,000	)		(177,000	)
	9.625% Senior subordinated notes		(550,000	)		(596,750	)		(550,000	)		(558,250	)
	Receivables credit facility		(126,000	)		(126,000	)		(142,000	)		(142,000	)
	Other		(217	)		(217	)		(414	)		(414	)
Interest rate collars			(5,228	)		(5,228	)		—			(816	)

Short-Term Assets and Liabilities

The fair value of cash and cash equivalents, accounts receivable, notes receivable and accounts payable approximate their carrying amounts due to the short-term nature of these financial instruments.

Long-Term Debt

The fair value of the senior credit facility and the receivables credit facility approximates their carrying amount due to the variable interest-rate feature of the instruments. The fair value of the senior subordinated notes is based on quoted market prices. The fair values of the remaining debt were considered to be the same as or were not determined to be materially different from the carrying amounts.

Interest Rate Collars

The fair values of the interest rate collars are the amounts at which they could be settled and are estimated by obtaining quotes from banks.

8. MANDATORY REDEEMABLE PREFERRED STOCK

On April 12, 1999, PCA issued 1,000,000 shares of 12.375% senior exchangeable preferred stock, liquidation preference of $100 per share. Holders of the preferred shares were entitled to receive cumulative dividends paid in cash or in kind at a rate of 12.375% which were paid semi-annually. If PCA failed to pay dividends, holders of the preferred stock were entitled to elect two additional members to PCA's Board of Directors. Holders of the preferred stock had no voting rights. The preferred stock ranked senior to the common stock. 3,000,000 shares were authorized, and 1,058,094 shares were issued and outstanding as of December 31, 1999. PCA incurred $3.5 million of issuance costs, which were being amortized through 2010 at which time the preferred stock was required to be redeemed.

F-19

PCA used substantially all of the net proceeds from its initial public offering to redeem all outstanding shares of its 12.375% senior exchangeable preferred stock due 2010 (1,058,094 shares as of March 3, 2000) at a redemption price of 112.375% of its liquidation preference, plus accrued and unpaid dividends through March 3, 2000, the date of redemption. The total paid to redeem the senior exchangeable preferred stock was $124.4 million, which included $5.5 million of accrued and unpaid dividends.

9. SHAREHOLDERS' EQUITY

On April 12, 1999, PCA issued 100 shares of Junior Preferred Stock, liquidation preference of $1.00 per share. Holders of the Junior Preferred Stock are not entitled to receive any dividends or distributions and had, prior to February 2, 2000, the right to elect one director to PCA's Board of Directors. Shares of Junior Preferred Stock may not be reissued after being reacquired in any manner by PCA. On December 20, 2000, PCA redeemed the Junior Preferred Stock.

In June 1999, PCA entered into management equity agreements with 125 of its management-level employees. Under these agreements, PCA Holdings LLC and Pactiv Corporation sold 3,132,800 shares of common stock to 113 of these employees at $4.55 per share. The stock purchased under the management equity agreements is subject to vesting. As of August 2001, the stock was fully vested. The management equity agreements also provide for the grant of options (see Note 16).

On October 19, 1999, PCA effected a 220-for-one stock split of its common stock which resulted in an increase in the number of shares outstanding from 430,000 to 94,600,000. All historical share numbers for PCA contained in the financial statements and related notes reflect the 220-for-one split.

On January 28, 2000, PCA became a publicly traded company through the initial public offering of its common stock in which Pactiv Corporation sold 35,000,000 of its 41,160,240 shares of common stock in PCA, and PCA issued an additional 11,250,000 shares. The net proceeds to PCA were approximately $126.4 million, after deducting underwriting discounts and offering expenses at an initial public offering price of $12.00 per share. PCA utilized these proceeds to redeem its senior exchangeable preferred stock (see Note 8).

On May 16, 2001, the Company announced a $100.0 million common stock repurchase program. PCA currently expects to repurchase the shares from time to time. Through December 31, 2001, the Company repurchased 2,323,200 shares of common stock for approximately $38.3 million. Of these shares, 3,000 were held in treasury at December 31, 2001 and were subsequently retired in January 2002. The remaining shares were retired prior to December 31, 2001.

10. COMMITMENTS AND CONTINGENCIES

Capital Commitments

The Company had authorized capital expenditures of approximately $44.5 million and $37.9 million as of December 31, 2001 and 2000, respectively, in connection with the expansion and replacement of existing facilities and equipment.

F-20

Lease Commitments

The Company holds certain of its facilities, equipment, and other assets under long-term leases. The minimum lease payments under non-cancelable operating leases with lease terms in excess of one year are as follows:

(In thousands)
2002		$	18,283
2003			14,584
2004			11,260
2005			8,297
2006			5,204
Thereafter			37,613

	Total	$	95,241

Commitments under capital leases were not significant to the accompanying financial statements. Total lease expense for the years ended December 31, 2001 and 2000, and for the period from April 12, 1999 through December 31, 1999 was $26.7 million, $24.7 million and $15.0 million, respectively. These costs are included primarily in cost of goods sold.

Purchase Commitments

The Company has entered into various minimum purchase agreements to buy energy over periods ranging from one to three years at fixed prices. Total purchase commitments over the next three years are as follows:

(In thousands)
2002		$	23,379
2003			2,622
2004			2,622

	Total	$	28,623

These purchase agreements are not marked to market. The Company purchased approximately $18.8 million during the year ended December 31, 2001, $9.3 million during the year ended December 31, 2000, and $7.8 million during the period from April 12, 1999 through December 31, 1999 under these purchase agreements.

Litigation

On May 14, 1999, PCA was named as a defendant in a Consolidated Class Action Complaint which alleged a civil violation of Section 1 of the Sherman Act. The suit, captioned Winoff Industries, Inc. v. Stone Container Corporation, MDL No. 1261 (E.D. Pa.), names the Company as a defendant based solely on the allegation that PCA is successor to the interests of Tenneco Packaging Inc. and Tenneco Inc., both of which were also named as defendants in the suit, along with nine other linerboard manufacturers. The complaint alleges that the defendants, during the period October 1, 1993

F-21

through November 30, 1995, conspired to limit the supply of linerboard, and that the purpose and effect of the alleged conspiracy was artificially to increase prices of corrugated containers. The plaintiffs have moved to certify a class of all persons in the United States who purchased corrugated containers directly from any defendant during the above period, and seek treble damages and attorneys' fees on behalf of the purported class. The Court granted plaintiffs' motion on September 4, 2001, but modified the proposed class to exclude those purchasers whose prices were "not tied to the price of linerboard". The defendants have appealed the Court's class certification decision, and that appeal is currently pending before the Court of Appeals for the Third Circuit. The case is currently set for trial in January 2003. PCA believes that the plaintiffs' allegations have no merit and intends to defend against the suit vigorously. PCA does not believe that the outcome of this litigation should have a material adverse effect on its financial position, results of operations, or cash flow.

The Company is involved in various legal proceedings and litigation arising in the ordinary course of business. In the opinion of management and in-house legal counsel, the outcome of such proceedings and litigation will not materially affect the Company's financial position or results of operations.

Environmental Liabilities

The potential costs for various environmental matters are uncertain due to such factors as the unknown magnitude of possible cleanup costs, the complexity and evolving nature of governmental laws and regulations and their interpretations, and the timing, varying costs and effectiveness of alternative cleanup technologies. Liabilities recorded by the Company for environmental contingencies are estimates of the probable costs based upon available information and assumptions. Because of these uncertainties, however, PCA's estimates may change. PCA believes that any additional costs identified as further information becomes available would not have a material effect on its financial statements.

F-22

11. INCOME TAXES

Following is an analysis of the components of consolidated income tax expense (benefit):

			2001		2000		April 12, 1999 Through Dec. 31, 1999
(In thousands)
Current—
	U.S.		$	17,816	$	30,273	$	(16,207	)
	State and local			3,742		4,074		(1,083	)

		Total current provision for taxes		21,558		34,347		(17,290	)

Deferred—
	U.S.			40,793		70,948		44,976
	State and local			5,561		8,895		9,533

		Total deferred provision for taxes		46,354		79,843		54,509

		Total provision for taxes	$	67,912	$	114,190	$	37,219

The effective tax rate varies from the U.S. Federal statutory tax rate principally due to the following:

		2001			2000		April 12, 1999 Through Dec. 31, 1999
(In thousands)
Provision computed at U.S. Federal statutory rate of 35%		$	61,402		$	100,503	$	29,623
State and local taxes			7,339			12,963		4,855
Other			(829	)		724		2,761

	Total	$	67,912		$	114,190	$	37,239

F-23

The components of the deferred tax assets (liabilities) were as follows:

		December 31,
		2001			2000
(In thousands)
Current deferred taxes—
	Accrued liabilities	$	1,980		$	2,313
	Employee benefits and compensation		7,929			8,976
	Reserve for doubtful accounts		1,365			1,675
	Inventory		1,064			1,307
	Pensions and postretirement benefits		1,808			85
	Derivatives		(800	)		—

Total current deferred taxes		$	13,346		$	14,356

Noncurrent deferred taxes—
	Pension and postretirement benefits	$	3,042		$	2,279
	Excess of financial reporting over tax basis in plant and equipment		(209,170	)		(181,071	)
	Accrued liabilities		(3,666	)		11,536
	Asset for alternative minimum tax credits		12,495			15,528
	Derivatives		2,847			—

Total noncurrent deferred taxes		$	(194,452	)	$	(151,728	)

Cash payments for income taxes were $23.4 million and $23.7 million for the years ended December 31, 2001 and 2000, respectively, and $4.1 million for the period April 12, 1999 through December 31, 1999. As of December 31, 2001 and 2000, the Company has available for income tax purposes approximately $12.5 million and $15.5 million, respectively, in alternative minimum tax credits which may be used to offset future taxable income.

12. RELATED PARTY TRANSACTIONS

PCA owns 33¹/3% interest in Southern Timber Venture, LLC ("STV"). At December 31, 2001, PCA has not guaranteed the debt of STV and has no future funding requirements.

PCA purchases pulpwood from STV in accordance with the terms of a fiber supply agreement between the two companies which expires December 31, 2017. The price of pulpwood in this agreement is based upon the fair market value of pulpwood and will be adjusted annually for any changes in market value beginning January 2003. PCA purchased $19.7 million and $1.7 million of pulpwood for its Counce, Tennessee and Valdosta, Georgia mills from STV during the year ended December 31, 2001 and from November 16, 2000, through December 31, 2000, respectively.

As Pactiv Corporation sold its remaining interest in PCA during the first half of 2001, it is no longer considered a related party. PCA's sales to Pactiv Corporation, which includes both containerboard and corrugated products, are included in the accompanying consolidated financial statements. The net sales to Pactiv Corporation for the year ended December 31, 2001 and 2000 were

F-24

$92.9 million and $100.5 million, respectively. The net sales to Pactiv Corporation for the period April 12, 1999 through December 31, 1999 were approximately $57.4 million. The accounts receivable relating to these sales as of December 31, 2001 and 2000 were $9.3 million and $13.3 million, respectively.

PCA entered into a transition services agreement with Pactiv which provided for the performance of transitional services by Pactiv and its affiliates to PCA that PCA required to operate its business. These services included: payroll, general accounting, tax support, treasury/cash management, insurance/risk management, procurement, human resources, telecommunications and information services. The initial term of the transition services agreement was for one year, but was extended by PCA for an additional six month term. During the period April 12, 1999 through December 31, 1999, PCA paid Pactiv $6.5 million for these services. For the year 2000, PCA paid Pactiv $2.6 million. As of October 2000, the transition services agreement was terminated.

Pactiv also agreed to reimburse PCA for up to $5.4 million in expenditures incurred by PCA relating to system enhancement and year 2000 compliance in the transition services agreement. The full $5.4 million was received by PCA during 1999.

PCA and Pactiv entered into a facility use agreement which provides for PCA's use of a portion of Pactiv's headquarters located in Lake Forest, Illinois and certain building and business services through January, 2003. PCA paid Pactiv $1.8 million and $2.4 million for the years ended December 31, 2001 and 2000, respectively, and $1.5 million for the period April 12, 1999 through December 31, 1999.

13. RESTRUCTURING AND OTHER CHARGES

As part of the April 12, 1999 Transactions, the Company assumed accruals related to a previously recorded restructuring charge set forth below. This charge was recorded prior to the Transactions following approval by Tenneco's Board of Directors of a comprehensive restructuring plan for all of Tenneco's operations, including those of the Company. In connection with this restructuring plan, four corrugated facilities were closed and 109 positions were eliminated.

The following table reflects the components of this assumed accrual:

		Balance April 12, 1999		Activity		Balance Dec. 31, 1999		Activity		Balance Dec. 31, 2000		Activity		Balance Dec. 31, 2001
(In thousands)
Severance		$	1,087	$	819	$	268	$	268	$	—	$	—	$	—
Facility exit costs			1,920		278		1,642		1,489		153		138		15

	Total accrual	$	3,007	$	1,097	$	1,910	$	1,757	$	153	$	138	$	15

The fixed assets at the closed facilities were written down to their estimated fair value. No significant cash proceeds are expected from the ultimate disposal of these assets. The remaining liability balance at December 31, 2001 will be used for rent payments related to the closed facilities.

F-25

14. SALE OF TIMBERLANDS

In October and November, 1999, PCA completed the sales of approximately 405,000 acres of timberland. Total proceeds received from the sales were $263.3 million, resulting in a pre-tax gain of $12.2 million.

On November 16, 2000, PCA completed the sale of approximately 385,000 acres of timberland to Southern Timber Venture, LLC. The Company received $247.9 million in cash and a 33¹/3% equity ownership interest in Southern Timber Venture, LLC. PCA recorded a pre-tax gain of $60.4 million, and a portion of the gain was not recognized as a result of PCA's continuing ownership interest.

15. ACQUISITIONS

On May 25, 2001, PCA International, Inc. a wholly owned subsidiary of PCA, was formed to acquire the assets of Sunbelt Packaging Services, Inc. for approximately $4.8 million. The transaction was completed on June 1, 2001. The purchase method of accounting was used to account for the acquisition. Sales and total assets of the acquisition were not material.

16. STOCK-BASED COMPENSATION

PCA entered into management equity agreements in June 1999 with 125 of its management-level employees. These agreements provide for the grant of options to purchase up to an aggregate of 6,576,460 shares of PCA's common stock at $4.55 per share, the same price per share at which PCA Holdings LLC purchased common stock in the Transactions. The agreement called for these options to vest ratably over a five-year period, or upon completion of an initial public offering, full vesting with contractual restrictions on transfer for a period of up to 18 months following completion of the offering. The options vested with the initial public offering in January 2000, and the restriction period ended August, 2001.

In October 1999, the Company adopted a long-term equity incentive plan, which provides for grants of stock options, stock appreciation rights (SARs), restricted stock and performance awards to directors, officers and employees of PCA, as well as others who engage in services for PCA. Under the plan, which will terminate on June 1, 2009, up to 4,400,000 shares of common stock is available for issuance under the long-term equity incentive plan.

F-26

A summary of the Company's stock option activity, and related information for the years ended December 31, 2001 and 2000 and for the period January 25, 1999 through December 31, 1999 follows:

		Options		Weighted-Average Exercise Price
Balance, January 25, 1999		—		$	—
	Granted	6,576,460			4.55
	Exercised	—			—
	Forfeited	(7,260	)		4.55

Balance, December 31, 1999		6,569,200		$	4.55

	Granted	1,059,700			11.92
	Exercised	(398,138	)		4.55
	Forfeited	(26,560	)		6.88

Balance, December 31, 2000		7,204,202		$	5.62

	Granted	953,350			15.45
	Exercised	(1,662,475	)		4.59
	Forfeited	(16,634	)		11.18

Balance, December 31, 2001		6,478,443		$	7.31

The following table summarizes information for options outstanding and exercisable at December 31, 2001:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number	Weighted-Avg Remaining Life	Weighted-Avg Exercise Price		Number	Weighted-Avg Exercise Price
$ 4.55	4,505,618	7.50	$	4.55	4,505,618	$	4.55
$10.44-$15.50	1,972,825	8.67		13.62	285,325		12.00

$ 4.55-$15.50	6,478,443	7.86	$	7.31	4,790,943	$	4.99

Black-Scholes option-pricing model assumptions and fair value for these options are shown in the following table:

		Year of Grant
		2001	2000	1999
Actuarial assumptions
	Risk-free interest rate (%)	5.67	6.68	6.65
	Expected life (years)	5	5	5
	Volatility (%)	37.50	39.00	N/A
	Dividend yield (%)	0.00	0.00	N/A
Weighted-average fair value ($)		6.52	5.36	1.29

F-27

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has elected to account for its stock option plan under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and adopt the disclosure only provisions of SFAS No. 123. Under APB No. 25, no compensation costs are recognized because the number of options is fixed and the option exercise price is equal to the fair market price of the common stock on the date of the grant. Under SFAS No. 123, stock options are valued at the grant date using the Black-Scholes valuation model and compensation costs are recognized ratably over the vesting period. Had compensation costs been determined as prescribed by SFAS No. 123, the Company's net earnings and diluted earnings per common share for the years ended December 31, 2001 and 2000, and the period January 25, 1999 through December 31, 1999, would have been lower by $1.4 million or $0.01 per diluted common share, $5.1 million or $0.05 per diluted common share, and $0.6 million or $0.01 per diluted common share, respectively.

F-28

17. SUMMARIZED COMBINED FINANCIAL INFORMATION ABOUT GUARANTOR SUBSIDIARIES

The following is summarized aggregated financial information for PCA International, Inc., Packaging Credit Company, LLC, Dahlonega Packaging Corporation, Dixie Container Corporation, PCA Hydro, Inc., PCA Tomahawk Corporation and PCA Valdosta Corporation, each of which was a wholly-owned subsidiary of PCA and included in the Company's consolidated financial statements. Each of these subsidiaries fully, unconditionally, jointly and severally guaranteed $550.0 million in senior subordinated notes issued by PCA in connection with the Transactions. Effective January 1, 2000, Dahlonega Packaging Corporation, PCA Tomahawk Corporation and PCA Valdosta Corporation were merged into PCA. Separate financial statements of the guarantor subsidiaries are not presented because, in the opinion of management, such financial statements are not material to investors.

		PCA		Guarantor Subs			Non-Guarantor Subs		Eliminations			Total
(In thousands)
December 31, 2001
Current assets		$	260,573	$	69,568		$	197,066	$	(78,990	)	$	448,217
Non-current assets			1,649,244		114,932			—		(240,613	)		1,523,563

	Total assets		1,909,817		184,500			197,066		(319,603	)		1,971,780
Current liabilities			288,009		2,651			100		(98,865	)		191,895
Non-current liabilities			883,799		252			126,000		—			1,010,051

	Total liabilities		1,171,808		2,903			126,100		(98,865	)		1,201,946

Net assets		$	738,009	$	181,597		$	70,966	$	(220,738	)	$	769,834

December 31, 2000
Current assets		$	192,295	$	63,501		$	207,976	$	(60,063	)	$	403,709
Non-current assets			1,663,269		65,883			—		(190,749	)		1,538,403

	Total assets		1,855,564		129,384			207,976		(250,812	)		1,942,112
Current liabilities			278,581		3,441			1,372		(64,846	)		218,548
Non-current liabilities			893,978		162			142,000		—			1,036,140

	Total liabilities		1,172,559		3,603			143,372		(64,846	)		1,254,688

Net assets		$	683,005	$	125,781		$	64,604	$	(185,966	)	$	687,424

Year ended December 31, 2001
Net sales		$	1,784,765	$	5,191		$	—	$	—		$	1,789,956
Pre-tax profit			131,731		76,620			19,865		(52,782	)		175,434
Net income			79,012		48,482			12,549		(33,625	)		106,418
Year ended December 31, 2000
Net sales		$	1,921,868	$	—		$	—	$	—		$	1,921,868
Pre-tax profit			280,075		3,907			1,630		1,539			287,151
Net income			155,432		3,884			1,630		955			161,901
For the period January 25, 1999 through December 31, 1999
Net sales		$	1,273,401	$	43,941		$	—	$	—		$	1,317,342
Pre-tax profit			85,025		(389	)		—		—			84,636
Net income			40,679		(179	)		—		—			40,500

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18. QUARTERLY FINANCIAL DATA (UNAUDITED)

	Fiscal Quarter
	First			Second			Third		Fourth		Total
(In thousands, except per share amounts)
2001:
Net sales	$	454,666		$	466,964		$	455,214	$	413,112	$	1,789,956
Income before interest, taxes, cumulative effect of accounting change and extraordinary item		65,960			69,554			65,364		48,577		249,455
Net income available to common shareholders		27,619			31,259			29,154		18,386		106,418
Basic earnings per share		0.26			0.29			0.27		0.17		1.00
Diluted earnings per share		0.25			0.29			0.27		0.17		0.98
Stock price—high		16.50			16.98			20.70		18.64		20.70
Stock price—low		12.65			12.85			14.75		14.23		12.65
2000:
Net sales	$	475,890		$	492,372		$	487,676	$	465,930	$	1,921,868
Income before interest, taxes and extraordinary item		72,741			88,537			96,568		146,988		404,834
Net income		25,246			33,278			40,009		63,368		161,901
Net income available to common shareholders		6,609			33,278			40,009		63,368		143,264
Basic earnings per share		0.07			0.31			0.38		0.60		1.37
Diluted earnings per share		0.06			0.31			0.37		0.58		1.33
Stock price—high		12.19			12.75			13.19		16.81		16.81
Stock price—low		9.25			9.88			10.25		10.88		9.25
1999(2):
Net sales		N/A	(1)	$	389,277	(1)	$	462,910	$	465,155	$	1,317,342
Income before interest, taxes and extraordinary item		N/A	(1)		45,390	(1)		63,824		83,016		192,230
Net income		N/A	(1)		6,766	(1)		14,167		19,567		40,500
Net income available to common shareholders		N/A	(1)		4,088	(1)		11,036		16,080		31,204
Basic earnings per share		N/A	(1)		0.04	(1)		0.12		0.18		0.34
Diluted earnings per share		N/A	(1)		0.04	(1)		0.11		0.17		0.32

Note: The sum of the quarters may not equal the total of the respective year's earnings per share on either a basic or diluted basis due to changes in the weighted average shares outstanding throughout the year.

(1): PCA acquired the Group on April 12, 1999. As such, operating results for the period prior to April 12, 1999 have been excluded from PCA's 1999 results.
(2): PCA became a publicly traded company on January 28, 2000, as such, there are no stock prices for 1999.

F-30

Report of Independent Public Accountants

To Tenneco Inc.:

We have audited the accompanying combined statements of assets, liabilities and interdivision account of THE CONTAINERBOARD GROUP (a division of Tenneco Packaging Inc., which is a Delaware corporation and a wholly owned subsidiary of Tenneco Inc.) as of April 11, 1999, and the related combined statements of revenues, expenses and interdivision account and cash flows for the period from January 1, 1999, through April 11, 1999. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of The Containerboard Group as of April 11, 1999, and the results of its operations and its cash flows for the period from January 1, 1999, through April 11, 1999, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Chicago, Illinois
July 16, 1999

F-31

The Containerboard Group
(a Division of Tenneco Packaging Inc.)
Combined Statement of
Assets, Liabilities and Interdivision Account
As of April 11, 1999
(In thousands)

ASSETS
Current assets:
	Cash		$	1
	Accounts receivable (net of allowance for doubtful accounts of $3,947)			171,710
	Receivables from affiliated companies			9,037
	Notes receivable			27,933
	Inventories			158,233
	Prepaid expenses and other current assets			32,950

		Total current assets		399,864

Property, plant and equipment, at cost:
	Land, timber, timberlands and buildings			701,922
	Machinery and equipment			1,864,962
	Other, including construction in progress			110,842
	Less—Accumulated depreciation and depletion			(757,476	)

		Property, plant and equipment, net		1,920,250

Intangibles				1,942

Investment				1,388

Other long-term assets				67,645

Total assets			$	2,391,089

LIABILITIES AND INTERDIVISION ACCOUNT
Current liabilities:
	Accounts payable		$	114,050
	Payables to Tenneco affiliates			7,652
	Current portion of long-term debt			31,841
	Accrued liabilities			64,371

		Total current liabilities		217,914

Long-term liabilities:
	Long-term debt, net of current portion			1,728,625
	Deferred taxes			263,936
	Other			23,917

		Total long-term liabilities		2,016,478

Interdivision account				156,697

Total liabilities and interdivision account			$	2,391,089

The accompanying notes to combined financial statements are an integral part of these statements.

F-32

The Containerboard Group
(a Division of Tenneco Packaging Inc.)
Combined Statement of Revenues,
Expenses and Interdivision Account
For the Period from January 1, 1999, Through April 11, 1999
(In thousands)


Net sales		$	453,207
Cost of sales			(387,508	)

	Gross profit		65,699
Selling and administrative expenses			(30,584	)
Impairment loss			(230,112	)
Other expense, net			(2,207	)
Corporate allocations			(14,890	)

	Loss before interest, income taxes and extraordinary loss		(212,094	)
Interest expense, net			(221	)

	Loss before income taxes and extraordinary loss		(212,315	)
Benefit for income taxes			83,716
Extraordinary loss, net of income tax			(6,327	)

Net loss			(134,926	)

Interdivision account, beginning of period			908,392
Interdivision account activity, net			(616,769	)

Interdivision account, end of period		$	156,697

Basic and diluted earnings per share (unaudited):
Loss before extraordinary item		$	(1.36	)
Extraordinary item			(.07	)

Net loss per common share		$	(1.43	)

Weighted average common shares outstanding			94,600

The accompanying notes to combined financial statements are an integral part of these statements.

F-33

The Containerboard Group
(a Division of Tenneco Packaging Inc.)
Combined Statement of Cash Flows
For the Period from January 1, 1999, Through April 11, 1999
(In thousands)

Cash flows from operating activities:
	Net loss				$	(134,926	)

	Adjustments to reconcile net loss to net cash provided by operating activities—
		Depreciation, depletion and amortization				30,905
		Extraordinary loss—early debt extinguishment				6,327
		Loss on sale of assets				230,112
		Amortization of deferred gain				(493	)
		Increase in deferred income taxes				9,782
		Undistributed earnings of affiliated companies				(106	)
		Increase in other noncurrent reserves				56

				Total charges to net income not involving cash		276,583

Changes in noncash components of working capital—
	Working capital transactions, excluding transactions with Tenneco and working capital from acquired businesses—
		Decrease (increase) in current assets—
			Accounts and notes receivable			(8,183	)
			Inventories, net			(7,514	)
			Prepaid expenses and other current assets			4,201
		(Decrease) increase in current liabilities—
			Accounts payable			26,996
			Accrued liabilities			(3,508	)

				Net decrease in noncash components of working capital		11,992

				Net cash provided by operating activities		153,649

Cash flows from investing activities:
	Additions to property, plant and equipment					(1,128,255	)
	Other long-term assets					2,284
	Proceeds from disposals					825
	Other transactions, net					4,001

				Net cash used for investing activities		(1,121,145	)

Cash flows from financing activities:
	Proceeds from long-term debt issued					1,760,000
	Payments on long-term debt					(27,550	)
	Decrease in interdivision account					(616,769	)
	Working capital transactions with Tenneco and affiliated companies—
		Decrease in receivables from affiliated companies				1,353
		Decrease in factored receivables				(150,099	)
		Increase in accounts payable to affiliated companies				561

				Net cash provided by financing activities		967,496

Net change in cash
Cash, beginning of period						1

Cash, end of period					$	1

The accompanying notes to combined financial statements are an integral part of these statements.

F-34

The Containerboard Group
(a Division of Tenneco Packaging Inc.)

Notes to Combined Financial Statements

April 11, 1999

1. BUSINESS DESCRIPTION

The Containerboard Group (the "Group") is a division of Tenneco Packaging Inc., ("Packaging") which is a wholly owned subsidiary of Tenneco Inc. ("Tenneco"). The Group is comprised of mills and corrugated products operations. Madison Dearborn Partners, LLC ("MDP"), is a private equity investment firm.

The Mill operations ("The Mills") consist of two Kraft linerboard mills located in Counce, Tennessee, and Valdosta, Georgia, and two medium mills located in Filer City, Michigan, and Tomahawk, Wisconsin. The Mills also include two recycling centers located in Nashville, Tennessee, and Jackson, Tennessee. The Mills also control and manage approximately 950,000 acres of timberlands. The Mills transfer the majority of their output to The Corrugated Products operations ("Corrugated").

Corrugated operations consist of 39 corrugated combining plants, 28 specialty/sheet plants and 5 design centers. All plants are located in North America. Corrugated combines linerboard and medium (primarily from The Mills) into sheets that are converted into corrugated shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. Corrugated sells to diverse customers primarily in North America.

On January 25, 1999, Packaging entered into a definitive agreement (the "Contribution Agreement") to sell its containerboard and corrugated packaging products business to Packaging Corporation of America ("PCA") for $2.2 billion. Under the terms of the Contribution Agreement, PCA Holdings, an entity organized and controlled by MDP and its coinvestors, acquired a 55% common equity interest in PCA, and Packaging contributed the Group to PCA in exchange for cash, the assumption of debt and a 45% common equity interest in PCA (in each case before giving effect to issuances of common equity to management).

The sale was completed on April 12, 1999. The financing of the transaction consisted of borrowings under a new $1.46 billion senior credit facility, the offering of notes and preferred stock, the cash equity investment of $236.5 million by PCA Holdings and a rollover equity investment by Packaging valued at $193.5 million.

The Group's sales to other Packaging entities and other Tenneco entities are included in the accompanying combined financial statements. The net sales to other Packaging entities for the period from January 1, 1999, through April 11, 1999, were approximately $21,350,000. The net sales to other Tenneco entities for the period from January 1, 1999, through April 11, 1999, were approximately $3,298,000. The profit relating to these sales is included in the accompanying combined financial statements.

As a result of the Group's relationship with Packaging, the combined statements of assets, liabilities and interdivision account and the related combined statements of revenues, expenses and interdivision account are not necessarily indicative of what actually would have occurred had the Group been a stand-alone entity. Additionally, these combined financial statements are not necessarily indicative of the future financial position or results of operations of the Group.

F-35

2. SUMMARY OF ACCOUNTING POLICIES

Basis of Presentation

The accompanying combined financial statements include the selected assets and liabilities of the Group as of April 11, 1999, and the revenues and expenses of the Group for the period January 1, 1999, through April 11, 1999. All significant intragroup accounts and transactions have been eliminated.

Revenue Recognition

The Group recognizes revenue as products are shipped to customers.

Accounts Receivable

Historically, a substantial portion of the Group's trade accounts receivable were sold by Packaging, generally without recourse, to a financing subsidiary of Tenneco Inc. Expenses relating to cash discounts, credit losses, pricing adjustments and other allowances on these factored receivables are accrued and charged to the Group. As part of the Containerboard transaction, these receivables were purchased by Packaging from the financing subsidiary and contributed to PCA. All purchase and sale transactions were consummated at fair value, which was the same as the net book value of the receivables as reflected on the Group's financial statements prior to the initial sale. Therefore, due to the pending sale transaction, the amount of trade accounts receivable sold was $0 at April 11, 1999.

Inventories

Raw materials and finished goods are valued using the last-in, first-out ("LIFO") cost method and include material, labor and manufacturing-related overhead costs. Supplies and materials inventories are valued using a moving average cost. All inventories are stated at the lower of cost or market.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Interest costs relating to construction in progress are capitalized based upon the total amount of interest cost (including interest costs on notes payable to Tenneco) incurred by Packaging.

The amount of interest capitalized related to construction in progress at the Group was approximately $19,000 for the period ended April 11, 1999.

Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. The following useful lives are used for the various categories of assets:

Buildings and land improvements		5 to 40 years
Machinery and equipment		3 to 25 years
Trucks and automobiles		3 to 10 years
Furniture and fixtures		3 to 20 years
Computers and software		3 to 7 years
Leasehold improvements		Period of the lease

F-36

Expenditures for repairs and maintenance are expensed as incurred.

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. In the event that facts and circumstances indicate that the carrying amount of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to discounted cash flows is required.

Changes in Accounting Principles

In June, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes new accounting and reporting standards requiring that all derivative instruments (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. This statement is effective for all fiscal years beginning after June 15, 2000. The adoption of this new standard is not expected to have a significant effect on the Group's financial position or results of operations.

In April, 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs of start-up activities to be expensed as incurred. This statement is effective for fiscal years beginning after December 15, 1998. The statement requires capitalized costs related to start-up activities to be expensed as a cumulative effect of a change in accounting principle when the statement is adopted. Tenneco adopted this new accounting principle in the first quarter of 1999. The adoption of this new standard did not have a significant effect on the Group's financial position or results of operations.

In March, 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which establishes new accounting and reporting standards for the costs of computer software developed or obtained for internal use. This statement will be applied prospectively and is effective for fiscal years beginning after December 15, 1998. The adoption of this new standard did not have a significant effect on the Group's financial position or results of operations.

F-37

Freight Trades

The Group regularly trades containerboard with other manufacturers primarily to reduce shipping costs. The freight trade transactions are accounted for primarily as transactions in the inventory accounts; the impact on income is not material.

Environmental Liabilities

The potential costs related to the Group for various environmental matters are uncertain due to such factors as the unknown magnitude of possible cleanup costs, the complexity and evolving nature of governmental laws and regulations and their interpretations, and the timing, varying costs and effectiveness of alternative cleanup technologies. Liabilities recorded by the Group for environmental contingencies are estimates of the probable costs based upon available information and assumptions relating to the Group. Because of these uncertainties, however, the Group's estimates may change. The Group believes that any additional costs identified as further information becomes available would not have a material effect on the combined statements of assets, liabilities and interdivision account or revenues, expenses and interdivision account of the Group.

Combined Statements of Cash Flows

As a division of Packaging, the Group does not maintain separate cash accounts other than for petty cash. The Group's disbursements for payroll, capital projects, operating supplies and expenses are processed and funded by Packaging through centrally managed accounts. In addition, cash receipts from the collection of accounts receivable and the sales of assets are remitted directly to bank accounts controlled by Packaging. In this type of centrally managed cash system in which the cash receipts and disbursements of Packaging's various divisions are commingled, it is not feasible to segregate cash received from Packaging (e.g., as financing for the business) from cash transmitted to Packaging (e.g., as a distribution). Accordingly, the net effect of these cash transactions with Packaging are presented as a single line item within the financing section of the cash flow statements. Similarly, the activity of the interdivision account presents the net transfer of funds and charges between Packaging and the Group as a single line item.

Research and Development

Research and development costs are expensed as incurred. The amounts charged were $1,015,000 from January 1, 1999, through April 11, 1999.

Intangible Assets

The Group has capitalized certain intangible assets, primarily trademarks and patents, based on their estimated fair value at the date of acquisition. Amortization is provided for these intangible assets

F-38

on a straight-line basis over periods ranging from 3 to 10 years. Covenants not to compete are amortized on a straight-line basis over the terms of the respective agreements. Such amortization amounted to $890,000 as of April 11, 1999.

Intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. In the event that facts and circumstances indicate that the carrying amount of any intangible assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows through the remaining amortization period associated with the asset would be compared to the asset's carrying amount to determine if a write-down to discounted cash flows is required.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Segment Information

The Group adopted SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information," in 1998 and determined that the Group is primarily engaged in one line of business: the manufacture and sale of packaging materials, boxes and containers for industrial and consumer markets. No single customer accounts for more than 10% of total revenues. The Group has no foreign operations.

Earnings Per Share (unaudited)

Earnings per share has been calculated using the historical earnings of the Group and the number of shares resulting from the April 12, 1999 transaction (430,000 common shares), as adjusted to reflect the anticipated 220-for-one stock split. For the period presented, basic and diluted earnings per share are the same because there are not potentially dilutive securities.

3. INVESTMENT IN JOINT VENTURE

The Group has a 50% U.S. joint venture with American Cellulose Corporation to manufacture and market hardwood chips. The net investment, which was accounted for under the equity method, was $1,388,000 as of April 11, 1999.

F-39

4. LONG-TERM DEBT

			As of April 11, 1999
(In thousands)
Senior subordinated notes, interest at 9.625%, payable semiannually, due in 2009			$	550,000
Senior credit facility—
	Term loan A, interest at LIBOR plus 2.75%, due in varying quarterly installments through 2005			460,000
	Term loan B, interest at LIBOR plus 3.25%, due in varying quarterly installments through 2007			375,000
	Term loan C, interest at LIBOR plus 3.50%, due in varying quarterly installments through 2008			375,000
Other obligations				466

		Total		1,760,466
Less—Current portion				31,841

		Total long-term debt	$	1,728,625

As of April 11, 1999, the annual payments for debt during the next five years and thereafter are (in thousands): $31,841 (1999), $35,699 (2000), $67,570 (2001), $97,570 (2002), $107,536 (2003) and $1,420,250 (2004 and thereafter).

In February, 1999, Tenneco Inc. paid off the remaining note payable as it relates to the Counce Limited Partnership. The payment was $27,220,000, including a $10,456,000 premium payment (net of tax $6,327,000) for the early extinguishment of debt.

Going-forward, PCA's various debt agreements require that it comply with certain covenants and restrictions, including specific financial ratios that must be maintained on the last day at the end of each fiscal quarter. Under the provisions of the credit agreement dated April 12, 1999 ("Credit Agreement"), PCA must maintain a consolidated interest coverage ratio of a minimum of 1.5 beginning on September 30, 1999, increasing per the guidelines set forth in the Credit Agreement to 2.5 as of March 31, 2005, and each fiscal quarter thereafter. Also, PCA must not exceed a leverage ratio of 6.75 at September 30, 1999, decreasing per the guidelines set forth in the Credit Agreement to 4.0 as of March 31, 2006, and each fiscal quarter thereafter. Lastly, PCA must maintain a minimum consolidated net worth beginning on June 30, 1999 of $315,000,000, increasing per the guidelines set forth in the Credit Agreement to $690,000,000 as of March 31, 2008.

In May through October of 1999, PCA made voluntary prepayments totaling approximately $322,100,000 using excess cash and proceeds from the sale of certain timberlands to permanently reduce its borrowings under the term loans. As a result of this prepayment, no payments will be required under any of the term loans until December, 2001.

F-40

5. PENSION AND OTHER BENEFIT PLANS

Substantially all of the Group's salaried and hourly employees are covered by retirement plans sponsored by Packaging and Tenneco. Benefits generally are based on years of service and, for most salaried employees, on final average compensation. Packaging's funding policies are to contribute to the plans, at a minimum, amounts necessary to satisfy the funding requirements of federal laws and regulations. The assets of the plans consist principally of listed equity and fixed and variable income securities, including Tenneco Inc. common stock.

The Group's eligible salaried employees participate in the Tenneco Inc. Retirement Plan (the "Retirement Plan"), a defined benefit plan, along with other Tenneco divisions and subsidiaries. The pension expense allocated to the Group by Packaging for this plan was approximately $1,696,000 for the period ended April 11, 1999. Amounts allocated are principally determined based on payroll. This plan is overfunded and a portion of the prepaid pension costs has not been allocated to the Group.

The Group's eligible hourly employees participate in the Tenneco Packaging Pension Plan for Certain Hourly-Rated Employees, also a defined benefit plan, along with other Packaging divisions. As stated, due to the fact that other divisions within Packaging participate in the plan, certain of the disclosures required by SFAS No. 132, "Employers' Disclosures About Pension and Other Postretirement Benefits, such as a summary of the change in benefit obligation and the change in plan assets, are not available. Actuarial information as of April 11, 1999 is not available and in connection with the sale of the Group as described in Note 1 to these financial statements, the pension asset allocated to the Group will be excluded from the sale transaction and remain with Tenneco. As such, the actuarial information below is reported as of December 31, 1998.

The net pension income allocated to the Group for this plan was $213,000 for the period ended April 11, 1999. This plan is overfunded, and a portion of the related pension asset of $41,965,000 for April 11, 1999, has been allocated to the Group and is included in Other Long-Term Assets.

Actuarially allocated net pension cost for the Group's defined benefit plans, excluding the Retirement Plan, consists of the following components for the year ended December 31, 1998 (in thousands):

Service cost—benefits earned during the year			$	3,112
Interest cost on projected benefit obligations				6,990
Expected return on plan assets				(11,312	)
Amortization of—
	Transition liability			(164	)
	Unrecognized loss			—
	Prior service cost			908

		Net pension income	$	(466	)

F-41

The funded status of the Group's allocation of defined benefit plans, excluding the Retirement Plan, reconciles with amounts recognized in the 1998 statements of assets and liabilities and interdivision account as follows (in thousands):

Actuarial present value at September 30, 1998—
	Vested benefit obligation	$	(98,512	)
	Accumulated benefit obligation		(108,716	)

Projected benefit obligation		$	(108,716	)
Plan assets at fair value at September 30, 1998			146,579
Unrecognized transition liability			(1,092	)
Unrecognized net gain			(14,623	)
Unrecognized prior service cost			13,455

Prepaid pension cost at December 31, 1998		$	35,603

The weighted average discount rate used in determining the actuarial present value of the benefit obligations was 7.00% for the year ended December 31, 1998. The weighted average expected long-term rate of return on plan assets was 10% for 1998.

Middle management employees participate in a variety of incentive compensation plans. These plans provide for incentive payments based on the achievement of certain targeted operating results and other specific business goals. The targeted operating results are determined each year by senior management of Packaging. The amounts charged to expense for these plans were $1,599,000 for the period ended April 11, 1999.

In June, 1992, Tenneco initiated an Employee Stock Purchase Plan ("ESPP"). The plan allows U.S. and Canadian employees of the Group to purchase Tenneco Inc. common stock through payroll deductions at a 15% discount. Each year, an employee in the plan may purchase shares with a discounted value not to exceed $21,250. The weighted average fair value of the employee purchase right, which was estimated using the Black-Scholes option pricing model and the assumptions described below except that the average life of each purchase right was assumed to be 90 days, was $6.31 for the period ended December 31, 1998. The ESPP was terminated as of September 30, 1996. Tenneco adopted a new employee stock purchase plan effective April 1, 1997. Under the respective ESPPs, Tenneco sold 36,883 shares to Group employees for the period ended April 11, 1999.

In December, 1996, Tenneco adopted the 1996 Stock Ownership Plan, which permits the granting of a variety of awards, including common stock, restricted stock, performance units, stock appreciation rights, and stock options to officers and employees of Tenneco. Tenneco can issue up to 17,000,000 shares of common stock under this plan, which will terminate December 31, 2001.

The April 11, 1999, fair market value of the options granted was calculated using Tenneco's stock price at the grant date and multiplying the amount by the historical percentage of past Black-Scholes pricing values fair value (approximately 25%). The fair value of each stock option issued by Tenneco to the Group in prior periods was estimated on the date of grant using the Black-Sholes option pricing model using the following ranges of weighted average assumptions for grants during the past three

F-42

years: (a) risk-free interest rate ranging from 5.7% to 6.7%, (b) expected lives ranging from 5.0 years to 19.7 years, (c) expected volatility ranging from 24.6% to 27.8%, and (d) dividend yields ranging from $10.91 to $13.99.

The Group applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," to its stock-based compensation plans. The Group recognized after-tax stock-based compensation expense of approximately $146,000 for the period ended April 11, 1999. Had compensation costs for the Group's stock-based compensation plans been determined in accordance with SFAS 123, "Accounting for Stock-Based Compensation," based on the fair value at the grant dates for the awards under those plans, the Group's pro forma net income for the year ended April 11, 1999, would have been lower by $734,000.

6. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

In addition to providing pension benefits, the Group provides certain health care and life insurance benefits for certain retired and terminated employees. A substantial number of the Group's employees may become eligible for such benefits if they reach normal retirement age while working for the Group. The cost of these benefits for salaried employees is allocated to the Group by Packaging through a payroll charge and the interdivision account. Amounts allocated are principally determined based on payroll. The net obligation for these salaried benefits is maintained by Packaging and is not included in the liabilities section of the accompanying combined statements of assets, liabilities and interdivision account for the Group's share of the obligation.

Currently, the Group's postretirement benefit plans are not funded and a portion of the related postretirement obligation has been allocated to the Group. However, due to the fact that other divisions participate in the plan, certain of the disclosures required by SFAS No. 132, such as a summary of the change in benefit obligation, are not available. Actuarial information as of April 11, 1999, is not available and in connection with the sale of the Group as described in Note 1 to these financial statements, the long-term portion of the postretirement liability will not be assumed by PCA but will remain with Tenneco. As such, the actuarial information below is reported as of December 31, 1998, and the portion of the liability allocated as of April 11, 1999, is the same as the allocated amount as of December 31, 1998.

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The obligation of the plans, related to hourly employees, reconciles with amounts recognized in the combined statements of assets, liabilities and interdivision account at December 31, 1998, and April 11, 1999, as follows (in thousands):

Actuarial present value at September 30—
	Accumulated postretirement benefit obligation—
		Retirees and beneficiaries		$	(8,401	)
		Fully eligible active plan participants			(3,582	)
		Other active plan participants			(2,950	)

			Total		(14,933	)
	Plan assets at fair value at September 30				—
	Funded status				(14,933	)
	Claims paid during the fourth quarter				473
	Unrecognized prior service cost				—
	Unrecognized net gain				(1,764	)

Accrued postretirement benefit cost at December 31				$	(16,224	)

The net periodic postretirement benefit costs as determined by actuaries for hourly employees for 1998 consist of the following components (in thousands):

Service cost		$	159
Interest cost			1,024
Amortization of net (gain) loss			(138	)
Amortization of prior service cost			(293	)

	Net periodic postretirement benefit cost	$	752

The amounts expensed by the Group may be different because it was allocated by Packaging.

The weighted average assumed health care cost trend rate used in determining the 1998 accumulated postretirement benefit obligation was 5%.

Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation as of September 30, 1998, by approximately $1,268,000, and would increase the net postretirement benefit cost for 1998 by approximately $130,000.

The discount rate (which is based on long-term market rates) used in determining the accumulated postretirement benefit obligation was 7% for 1998.

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7. INVENTORIES

The components of inventories as of April 11, 1999, are as follows (in thousands):

Raw materials	$	87,159
Work in process and finished goods		22,419
Materials and supplies		48,655

	$	158,233

The amount by which current FIFO cost exceeded the stated LIFO inventory was $22,588,000 as of April 11, 1999.

8. RESTRUCTURING AND OTHER CHARGES

In the fourth quarter of 1998, the Group recorded a pretax restructuring charge of approximately $14 million. This charge was recorded following the approval by Tenneco's Board of Directors of a comprehensive restructuring plan for all of Tenneco's operations, including those of the Group. In connection with this restructuring plan, the Group will close four corrugated facilities and eliminate 109 positions.

The following table reflects components of this charge (in thousands):

Component				Balance, December 31, 1998		Interim Activity		Balance April 11, 1999
Cash charges—
	Severance			$	4,283	$	1,290	$	2,993
	Facility exit costs and other				3,447		748		2,699

			Total cash charges		7,730		2,038		5,692
	Noncash charges—
		Asset impairments			1,596		1,510		86

				$	9,326	$	3,548	$	5,778

Asset impairments are comprised mainly of goodwill totaling approximately $1,510,000 related to two of the facilities. The fixed assets at the closed facilities were written down to their estimated fair value. No significant cash proceeds are expected from the ultimate disposal of these assets. Of the $5,692,000 remaining cash charges at April 11, 1999, approximately $4,514,000 is expected to be spent in 1999. The actions contemplated by the restructuring plan should be substantially completed during 1999.

9. IMPAIRMENT LOSS

As a result of the sale transaction (Note 1), Tenneco recognized a pretax loss in the first quarter of 1999 of approximately $293 million. Part of that loss consisted of an impairment charge relating to the Group's property, plant and equipment and intangible assets, which was pushed down to the

F-45

accompanying combined financial statements. The amount of the impairment charge was approximately $230.1 million.

The impairment charge of $230.1 million has been allocated to the following financial statement line items (in thousands):

Intangibles		$	46,206
Machinery and equipment			183,906

	Total	$	230,112

The impairment charge will first be applied against the goodwill specifically attributable to the containerboard assets and the remaining amount will be applied against plant, property and equipment.

10 INCOME TAXES

The Group's method of accounting for income taxes requires that a deferred tax be recorded to reflect the tax expense (benefit) resulting from the recognition of temporary differences. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in differences between income for tax purposes and income for financial statement purposes in future years.

As a division, this Group is not a taxable entity. For purposes of these combined financial statements, income taxes have been allocated to the Group and represent liabilities to Packaging.

Following is an analysis of the components of combined income tax benefit through April 11, 1999 (in thousands):

Current—
	U.S.		$	82,867
	State and local			10,630

				93,497

Deferred—
	U.S.			(8,670	)
	State and local			(1,111	)

				(9,781	)

		Income tax benefit	$	83,716

The primary difference between income taxes computed at the statutory U.S. federal income tax rate and the income tax benefit in the combined statement of revenues, expenses and interdivision account is due to the effect of state income taxes.

F-46

The components of the deferred tax assets (liabilities) at April 11, 1999, were as follows (in thousands):

Current deferred taxes—
	Accrued liabilities		$	10,232
	Employee benefits and compensation			(6,314	)
	Reserve for doubtful accounts			1,148
	Inventory			829
	Pensions and postretirement benefits			(3,154	)
	State deferred tax			10,695
	Other			(75	)

		Total current deferred taxes		13,361

Noncurrent deferred taxes—
	Pension and postretirement benefits			13,945
	Excess of financial reporting over tax basis in plant and equipment			(302,029	)
	Accrued liabilities			1,130
	Capital leases			9,333
	Other			13,685

		Total noncurrent deferred taxes		(263,936	)

		Net deferred tax liabilities	$	(250,575	)

11. ASSETS, LIABILITIES AND OTHER EXPENSE, NET DETAIL

Prepaid Expenses and Other Current Assets

The components of prepaid expenses and other current assets include (in thousands):

Prepaid stumpage		$	13,877
Deferred taxes			13,361
Prepaid professional services			2,392
Other			3,320

	Total	$	32,950

F-47

Other Long-Term Assets

The components of the other long-term assets include (in thousands):

Prepaid pension cost		$	41,965
Deferred software			12,556
Timberland rights			11,739
Other			1,385

	Total	$	67,645

Accrued Liabilities

The components of accrued liabilities include (in thousands):

Accrued payroll, vacation and taxes		$	29,608
Accrued insurance			11,618
Accrued volume discounts and rebates			5,414
Restructuring			5,778
Current portion of accrued postretirement benefit cost			1,460
Shutdown reserve			988
Other			9,505

	Total	$	64,371

Other Long-Term Liabilities

The components of the other long-term liabilities include (in thousands):

Accrued postretirement benefit cost		$	14,764
Environmental liabilities			7,034
Other			2,119

	Total	$	23,917

Other Expense, Net

The components of other expense, net include (in thousands):

Discount on sale of factored receivables		$	(2,369	)
Other			162

	Total	$	(2,207	)

F-48

12. RELATED-PARTY TRANSACTIONS

Funding of Cash Requirements

As discussed in Note 2, Packaging provides centralized treasury functions and financing for the Group including funding of its cash requirements for processing of accounts payable and payroll requirements.

Corporate Allocations

Packaging and Tenneco provide various services to the Group, including legal, human resources, data processing systems support, training, finance and treasury, public relations and insurance management. These expenses are allocated based on a combination of factors such as actual usage of the service provided, revenues, gross salaries and fixed assets and may not reflect actual costs the Group would incur if it were a stand-alone entity.

Certain receivables and transactions resulting from the financing relationship between Packaging and Tenneco are not reflected in the accompanying financial statements.

Insurance and Benefits

The Group is self-insured for medical benefits and workers' compensation. Expenses related to workers' compensation, health care claims for hourly and salaried workers and postretirement health care benefits for hourly and salaried workers are determined by Packaging and are allocated to the Group. The Group incurred charges of $9,337,000 for health care and $1,801,000 for workers' compensation for the period ended April 11, 1999.

In general, all costs and expenses incurred and allocated are based on the relationship the Group has with Tenneco. If the Group had been a stand-alone entity, the costs and expenses would differ.

13. COMMITMENTS AND CONTINGENCIES

The Group had authorized capital expenditures of approximately $55,358,000 as of April 11, 1999, in connection with the expansion and replacement of existing facilities.

The Group is involved in various legal proceedings and litigation arising in the ordinary course of business. In the opinion of management and in-house legal counsel, the outcome of such proceedings and litigation will not materially affect the Group's financial position or results of operations.

14. LEASES

Rental expense included in the accompanying combined financial statements was $25,411,000 for the period ended April 11, 1999. These costs are primarily included in cost of goods sold.

As a result of the sale of the Group, Packaging received total consideration of $2.2 billion, which includes the $1.1 billion used to buy out certain timber and mill operating leases prior and concurrent

F-49

to the sale transaction on April 12, 1999. Therefore, the remaining outstanding aggregate minimum rental commitments under noncancelable operating leases are as follows:

(In thousands)
Remainder of 1999		$	7,606
2000			7,583
2001			4,891
2002			3,054
2003			1,415
Thereafter			1,178

	Total	$	25,727

15. SALE OF ASSETS

In the second quarter of 1996, Packaging entered into an agreement to form a joint venture with Caraustar Industries whereby Packaging sold its two recycled paperboard mills and a fiber recycling operation and brokerage business to the joint venture in return for cash and a 20% equity interest in the joint venture. Proceeds from the sale were approximately $115 million and the Group recognized a $50 million pretax gain ($30 million after taxes) in the second quarter of 1996.

In June, 1998, Packaging sold its remaining 20% equity interest in the joint venture to Caraustar Industries for cash and a note of $26,000,000. The Group recognized a $15 million pretax gain on this transaction. At April 11, 1999, the balance of the note with accrued interest is $27,122,000. The note was paid in June, 1999.

16. SUBSEQUENT EVENTS

On August 25, 1999, PCA and Packaging agreed that the acquisition consideration should be reduced as a result of a postclosing price adjustment by an amount equal to $20 million plus interest through the date of payment by Packaging. The Group recorded $11.9 million of this amount as part of the impairment charge on the accompanying financial statements, representing the amount that was previously estimated by Packaging. PCA intends to record the remaining amount in September, 1999.

In August, 1999, PCA signed purchase and sales agreements with various buyers to sell approximately 405,000 acres of timberland. PCA has completed the sale of approximately 260,000 of these acres and expects to complete the sale of the remaining acres by mid-November, 1999.

F-50

QuickLinks

Documents Incorporated by Reference
INDEX
PART I

Item 1. BUSINESS

Item 2. PROPERTIES

Item 3. LEGAL PROCEEDINGS

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Item 6. SELECTED FINANCIAL DATA

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Item 11. EXECUTIVE COMPENSATION

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

SIGNATURES
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Packaging Corporation of America Notes to Consolidated Financial Statements December 31, 2001
The Containerboard Group (a Division of Tenneco Packaging Inc.) Notes to Combined Financial Statements April 11, 1999



                                                                   Exhibit 10.23


================================================================================

                          CREDIT AND SECURITY AGREEMENT

                          dated as of November 29, 2000

                                      among

                       PACKAGING RECEIVABLES COMPANY, LLC,
                                   as Borrower

                         PACKAGING CREDIT COMPANY, LLC,
                               as Initial Servicer

                      BLUE RIDGE ASSET FUNDING CORPORATION,
                                   as a Lender

                                       and

                              WACHOVIA BANK, N.A.,
                      individually as a Lender and as Agent

================================================================================



                                TABLE OF CONTENTS



SECTION                                HEADING                                         PAGE
                                                                                  
ARTICLE I           THE CREDIT.........................................................  2

    Section 1.1.    The Facility.......................................................  2
    Section 1.2.    Funding Mechanics; Liquidity Fundings..............................  2
    Section 1.3.    Interest Rates.....................................................  3
    Section 1.4.    Payment Dates; Noteless Agreement..................................  4
    Section 1.5.    Prepayments........................................................  4
    Section 1.6.    Reductions in Aggregate Commitment.................................  5
    Section 1.7.    Requests for Increases in Aggregate Commitment.....................  5
    Section 1.8.    Extension of the Scheduled Termination Date........................  5
    Section 1.9.    Distribution of Certain Notices; Notification of Interest Rates....  6

ARTICLE II          BORROWING AND PAYMENT MECHANICS; CERTAIN
                    COMPUTATIONS.......................................................  6

    Section 2.1.    Method of Borrowing................................................  6
    Section 2.2.    Selection of CP Tranche Periods and Interest Periods...............  6
    Section 2.3.    Computation of Concentration Limits and Unpaid Balance.............  7
    Section 2.4.    Maximum Interest Rate..............................................  7
    Section 2.5.    Payments and Computations, Etc.....................................  7
    Section 2.6.    Non-Receipt of Funds by the Agent..................................  8

ARTICLE III         SETTLEMENTS........................................................  8

    Section 3.1.    Reporting..........................................................  8
    Section 3.2.    Allocations and Distributions......................................  8
    Section 3.3.    Non-Distribution of Servicer's Fee................................. 10
    Section 3.4.    Deemed Collections................................................. 10

ARTICLE IV          FEES AND YIELD PROTECTION.......................................... 11

    Section 4.1.    Fees............................................................... 11
    Section 4.2.    Yield Protection................................................... 11
    Section 4.3.    Funding Losses..................................................... 13

ARTICLE V           CONDITIONS OF ADVANCES............................................. 13

    Section 5.1.    Conditions Precedent to Initial Advance............................ 13
    Section 5.2.    Conditions Precedent to All Advances............................... 15

ARTICLE VI          REPRESENTATIONS AND WARRANTIES..................................... 16

    Section 6.1.    Representations and Warranties of the Borrower..................... 16

ARTICLE VII         GENERAL COVENANTS OF THE BORROWER.................................. 19





                                                                                  
    Section 7.1.    Affirmative Covenants of the Borrower.............................. 19
    Section 7.2.    Reporting Requirements of the Borrower............................. 21
    Section 7.3.    Negative Covenants of the Borrower................................. 23
    Section 7.4.    Separate Corporate Existence of the Borrower....................... 25

ARTICLE VIII        ADMINISTRATION AND COLLECTION...................................... 28

    Section 8.1.    Designation of Servicer............................................ 28
    Section 8.2.    Duties of Servicer................................................. 29
    Section 8.3.    Rights of the Agent................................................ 30
    Section 8.4.    Responsibilities of the Borrower................................... 31
    Section 8.5.    Further Action Evidencing the Security Interest.................... 31
    Section 8.6.    Application of Collections......................................... 32

ARTICLE IX          SECURITY INTEREST.................................................. 32

    Section 9.1.    Grant of Security Interest......................................... 32
    Section 9.2.    Remedies........................................................... 32
    Section 9.3.    Termination after Final Payout Date................................ 32
    Section 9.4.    Limitation on Rights to Collateral Proceeds........................ 32

ARTICLE X           EVENTS OF DEFAULT.................................................. 32

    Section 10.1.   Events of Default.................................................. 32
    Section 10.2.   Remedies........................................................... 35

ARTICLE XI          THE AGENT.......................................................... 35

    Section 11.1.   Appointment........................................................ 35
    Section 11.2.   Delegation of Duties............................................... 36
    Section 11.3.   Exculpatory Provisions............................................. 36
    Section 11.4    Reliance by Agent.................................................. 36
    Section 11.5.   Notice of Events of Default........................................ 37
    Section 11.6.   Non-Reliance on Agent and Other Lenders............................ 37
    Section 11.7.   Indemnification of Agent........................................... 37
    Section 11.8.   Agent in its Individual Capacity................................... 38
    Section 11.9.   Successor Agent.................................................... 38
    Section 11.10.  Agent's Conflict Waivers........................................... 38
    Section 11.11.  UCC Filings........................................................ 38

ARTICLE XII         ASSIGNMENTS AND PARTICIPATIONS..................................... 39

    Section 12.1.   Restrictions on Assignments, etc................................... 39
    Section 12.2.   Rights of Assignees and Participants............................... 39
    Section 12.3.   Terms and Evidence of Assignment................................... 39

ARTICLE XIII        INDEMNIFICATION.................................................... 40

    Section 13.1.   Indemnities by the Borrower........................................ 40
    Section 13.2.   Indemnities by Servicer............................................ 42


                                     - ii -



                                                                                  
ARTICLE XIV         MISCELLANEOUS...................................................... 43

    Section 14.1.   Amendments, Etc. .................................................. 43
    Section 14.2.   Notices, Etc. ..................................................... 43
    Section 14.3.   No Waiver; Remedies................................................ 43
    Section 14.4.   Binding Effect; Survival........................................... 44
    Section 14.5.   Costs, Expenses and Taxes.......................................... 44
    Section 14.6.   No Proceedings..................................................... 45
    Section 14.7.   Confidentiality of Borrower Information............................ 45
    Section 14.8.   Confidentiality of Program Information............................. 47
    Section 14.9.   Captions and Cross References...................................... 48
    Section 14.10.  Integration........................................................ 48
    Section 14.11.  Governing Law...................................................... 48
    Section 14.12.  Waiver of Jury Trial............................................... 48
    Section 14.13.  Consent to Jurisdiction; Waiver of Immunities...................... 49
    Section 14.14.  Execution in Counterparts.......................................... 49
    Section 14.15.  No Recourse Against Other Parties.................................. 49


                                     - iii -


                          CREDIT AND SECURITY AGREEMENT

     THIS CREDIT AND SECURITY AGREEMENT is entered into as of November 29, 2000,
by and among:

          (1)  Packaging Receivables Company LLC, a Delaware limited liability
     company (together with its successors and permitted assigns, the
     "BORROWER"),

          (2)  Packaging Credit Company, LLC, a Delaware limited liability
     company (together with its successors, "INITIAL SERVICER"), as initial
     servicer hereunder (in such capacity, together with any successor servicer
     or sub-servicer appointed pursuant to Section 8.1, the "SERVICER"),

          (3)  Blue Ridge Asset Funding Corporation, a Delaware corporation
     (together with its successors, "BLUE RIDGE"), and Wachovia Bank, N.A., a
     national banking association, in its capacity as a Liquidity Bank to Blue
     Ridge (together with its successors, "WACHOVIA"), as Lenders (hereinafter
     defined), and

          (4)  Wachovia Bank, N.A., as agent for the Lenders (in such capacity,
     together with any successors thereto in such capacity, the "AGENT").

     Unless otherwise indicated, capitalized terms used in this Agreement are
defined in Annex A.

                              W I T N E S S E T H:

     WHEREAS, the Borrower is a wholly-owned subsidiary of Packaging Corporation
of America;

     WHEREAS, Packaging Corporation of America, as Originator, and Packaging
Credit Company, LLC ("SELLER") have entered into a Receivables Sale Agreement
(the "SALE AGREEMENT") pursuant to which the Originator has sold, and hereafter
will sell, to the Seller all of its right, title and interest in and to its
accounts receivable and certain related rights;

     WHEREAS, the Seller sells or contributes to the Borrower under the Purchase
and Sale Agreement all of its right, title and interest in and to its accounts
receivable and certain related rights;

     WHEREAS, the Borrower has requested that the Lenders make revolving loans
to the Borrower from time to time hereafter secured by the Collateral, and,
subject to the terms and conditions contained in this Agreement, the Lenders are
willing to make such secured loans;

     WHEREAS, the Lenders have requested that Initial Servicer act as the
initial Servicer for the Collateral, and, subject to the terms and conditions
contained in this Agreement, Initial Servicer is willing to act in such
capacity; and

     WHEREAS, Wachovia has been requested, and is willing, to act as the Agent
under this Agreement.



     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:

                                    ARTICLE I
                                   THE CREDIT

    SECTION 1.1. THE FACILITY. On the terms and subject to the conditions set
forth in this Agreement, the Borrower (or the Servicer on the Borrower's behalf)
may from time to time during the Revolving Period request Advances by delivering
a Borrowing Request to the Agent in accordance with Section 2.1. Upon receipt of
a copy of each Borrowing Request from the Borrower or Servicer, the Agent shall
advise the Borrower not later than 12:00 noon (New York City time) on the
Business Day following such receipt whether Blue Ridge and/or the Liquidity
Banks will fund a Loan (or Loans) in the aggregate amount of the requested
Advance, and in the event that Blue Ridge elects not to make any such Loan to
the Borrower, each of the Liquidity Banks severally agrees to make its Ratable
Share of such Loan to the Borrower, on the terms and subject to the conditions
hereof, provided that at no time may the aggregate principal amount of Blue
Ridge's and the Liquidity Banks' Loans at any one time outstanding exceed the
lesser of (i) the aggregate amount of the Liquidity Banks' Commitments, and (ii)
the Borrowing Base (such lesser amount, the "ALLOCATION LIMIT"). If the Agent
advises the Borrower that Blue Ridge elects not to fund a Loan, the Borrower or
Servicer may rescind the Borrowing Request. Each Loan shall be in the minimum
amount of $1,000,000 or a larger integral multiple of $500,000. In no event may
the aggregate principal amount of the Advances hereunder exceed the lesser of
(x) the Aggregate Commitment, or (y) the Borrowing Base. All Liquidity Banks'
Commitments shall terminate on the Termination Date. Each of the Loans, and all
other Obligations of the Borrower, shall be secured by the Collateral as
provided in Article IX.

    SECTION 1.2. FUNDING MECHANICS; LIQUIDITY FUNDINGS. (a) Each Advance
hereunder shall consist of Loans made from Blue Ridge and/or the Liquidity
Banks.

     (b) If a Liquidity Bank fails to transfer to the Agent its full Ratable
Share of any Loan when required by Section 1.1 (the aggregate amount not made
available to the Agent by each such Liquidity Bank being the "UNPAID AMOUNT"),
then, upon notice from the Agent by not later than 1:15 p.m. (Chicago time),
each Liquidity Bank not owing an Unpaid Amount shall transfer to the Agent, by
not later than 1:45 p.m. (Chicago time), an amount equal to the lesser of such
Liquidity Bank's proportionate share (based on its Commitment divided by the
Commitments of all Liquidity Banks that have not so failed to pay their full
Ratable Share) of the Unpaid Amount and its Commitment. If the Agent does not
then receive the Unpaid Amount in full, upon notice from the Agent by not later
than 2:00 p.m. (Chicago time) on such day, each Liquidity Bank that has not
failed to fund any part of its obligations on such day under this Section 1.2
shall pay to the Agent, by not later than 2:30 p.m. (Chicago time), its
proportionate share (determined as described above) of the amount of such
remaining deficiency up to the amount of its unused Commitment. Any Liquidity
Bank that fails to make a payment under this Section 1.2 on the date of a
Liquidity Funding shall pay on demand to each other Liquidity Bank that makes a
payment under this subsection (b) the amount paid by it to cover such failure,
together with interest thereon, for each day from the date such payment was made
until the date such other Liquidity Bank has been paid such amount in full, at a
rate per annum equal to the Federal Funds Rate plus two percent (2%) per annum.
In addition, without prejudice to any other rights Blue Ridge may have under
applicable

                                       -2-


law, any Liquidity Bank that has failed to transfer to the Agent under Section
1.1 its full Ratable Share of any Loan shall pay on demand to Blue Ridge the
difference between such unpaid Ratable Share of such Loan and the amount paid by
other Liquidity Banks or the Agent to cover such failure, together with interest
thereon, for each day from the date such Ratable Share of such Loan was due
until the date paid, at a rate per annum equal to the Federal Funds Rate plus
two percent (2%) per annum.

     (c) While it is the intent of Blue Ridge to fund each requested Advance
through the issuance of Commercial Paper Notes, the parties acknowledge that if
Blue Ridge is unable, or determines that it is undesirable, to issue Commercial
Paper Notes to fund all or any portion the Loans at a CP Rate, or is unable to
repay such Commercial Paper Notes upon the maturity thereof, Blue Ridge may put
all or any portion of its Loans to the Liquidity Banks at any time pursuant to
the Liquidity Agreement to finance or refinance the necessary portion of its
Loans through a Liquidity Funding to the extent available. The Liquidity
Fundings may be Alternate Base Rate Loans or Eurodollar Loans, or a combination
thereof, selected by the Borrower in accordance with Article II. In addition,
the parties acknowledge that Commercial Paper Notes are issued at a discount and
at varying discount rates; accordingly, it may not be possible for all CP Rate
Loans to be made in amounts precisely equal to the amounts specified in a
Borrowing Request. Regardless of whether a Liquidity Funding constitutes an
assignment of a Loan or the sale of one or more participations therein, each
Liquidity Bank participating in a Liquidity Funding shall have the rights of a
"Lender" hereunder with the same force and effect as if it had directly made a
Loan to the Borrower in the amount of its Liquidity Funding.

     (d) Nothing herein shall be deemed to commit any Lender to make CP Rate
Loans.

    SECTION 1.3. INTEREST RATES. (a) Each CP Rate Loan shall bear interest on
the outstanding principal amount thereof from and including the first day of the
CP Tranche Period applicable thereto selected in accordance with Article II of
this Agreement to (but not including) the last day of such CP Tranche Period at
the applicable CP Rate.

     (b) Each Eurodollar Loan shall bear interest on the outstanding principal
amount thereof from and including the first day of the Interest Period
applicable thereto selected in accordance with Article II of this Agreement to
(but not including) the last day of such Interest Period at a rate per annum
equal to the sum of (i) the applicable Eurodollar Rate (Reserve Adjusted) for
such Interest Period plus (ii) the Bank Rate Spread.

     (c) Each Alternate Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from and including the date such Loan is
made to but excluding the date it is paid at a rate per annum equal to the
Alternate Base Rate for such day. Changes in the rate of interest on Alternate
Base Rate Loans will take effect simultaneously with each change in the
Alternate Base Rate.

     (d) Notwithstanding anything to the contrary contained in Sections 1.3(a),
(b) or (c), upon the occurrence of an Event of Default, and during the
continuance thereof, all Obligations shall bear interest, payable upon demand,
at the Default Rate.

                                       -3-


     (e) Interest at any of the aforementioned rates shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day a Loan is made but not for the day of any payment on the amount paid
if payment is received prior to noon (local time) at the place of payment. If
any payment of principal of or interest on a Loan shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.

    SECTION 1.4. PAYMENT DATES; NOTELESS AGREEMENT. (a) The Borrower promises to
pay each CP Rate Loan on the last day of its CP Tranche Period.

     (b) The Borrower promises to pay each Eurodollar Loan on the last day of
its Interest Period.

     (c) The Borrower promises to pay each Alternate Base Rate Loan, together
with all accrued and unpaid interest thereon, on or before the earlier to occur
of (i) the Termination Date, and (ii) refinancing of such Loan with a CP Rate
Loan or a Eurodollar Rate Loan.

     (d) The Borrower promises to pay all accrued and unpaid interest on each
Loan on its applicable Interest Payment Date.

     (e) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time hereunder. Upon request of the Borrower or the Agent, such Lender will
confirm the outstanding principal balances of its Loans and the amount of any
accrued and unpaid interest thereon. The entries maintained in the accounts
maintained pursuant to this Section shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded; PROVIDED, HOWEVER,
that the failure of any Lender to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Borrower to repay the
Obligations in accordance with their terms.

    SECTION 1.5. PREPAYMENTS. Subject, in the case of CP Rate Loans and
Eurodollar Loans, to the funding indemnification provisions of Section 4.3:

          (a) The Borrower may from time to time prepay, without penalty or
     premium, all outstanding Loans, or, in a minimum aggregate amount of
     $2,000,000 (or a larger integral multiple of $1,000,000), any portion of
     the outstanding Loans upon two Business Days' prior written notice to the
     Agent (each, a "PREPAYMENT NOTICE"), PROVIDED that each such prepayment of
     principal is accompanied by a payment of all accrued and unpaid interest
     thereon and is made ratably amongst the Lenders; it being understood that
     the Borrower, in its discretion, may designate the outstanding Loans to
     which the Agent will apply each such prepayment or portion thereof, subject
     to, in the case of CP Rate Loans or Eurodollar Loans, the funding
     indemnification provisions of Section 4.3 hereof;

          (b) If on any Business Day, the aggregate outstanding principal amount
     of Blue Ridge's Loans and the Liquidity Fundings made by the Liquidity
     Banks exceeds the

                                       -4-


     Allocation Limit, the Borrower shall prepay such Loans, subject, in the
     case of CP Rate Loans and Eurodollar Loans, to the funding indemnification
     provision of Section 4.3 but otherwise without premium or penalty, by
     initiating a wire transfer to the Agent not later than 11:00 a.m. (New York
     City time) on the second Business Day thereafter in an amount sufficient to
     eliminate such excess, together with interest accrued and to accrue unpaid
     on the amount prepaid; and

          (c) Upon receipt of any wire transfer pursuant to Section 1.5(b), the
     Agent shall initiate a wire transfer to the Lenders of their respective
     shares thereof not later than 11:00 a.m. (New York City time) on the date
     when received.

    SECTION 1.6. REDUCTIONS IN AGGREGATE COMMITMENT. The Borrower may
permanently reduce the Aggregate Commitment in whole, or ratably in part, in a
minimum amount of $5,000,000 (or a larger integral multiple of $1,000,000), upon
at least five Business Days' written notice to the Agent (each, a "COMMITMENT
REDUCTION NOTICE"), PROVIDED, HOWEVER, that (a) the amount of the Aggregate
Commitment may not be reduced below the aggregate principal amount of the
outstanding Advances, and (b) the amount of the Aggregate Commitment may not be
reduced below $5,000,000 unless the Aggregate Commitment is terminated in full.
All accrued and unpaid fees shall be payable on the effective date of any
termination of the Aggregate Commitment. Each Commitment Reduction Notice shall
be irrevocable once delivered to the Agent.

    SECTION 1.7. REQUESTS FOR INCREASES IN AGGREGATE COMMITMENT. The Borrower
may from time to time request increases in the Aggregate Commitment in a minimum
amount of $5,000,000 (or a larger integral multiple of $1,000,000), upon at
least 30 days' prior written notice to the Agent, which notice shall specify the
amount of and proposed effective date for any such requested increase (each, a
"COMMITMENT INCREASE REQUEST"). If each of the Lenders agrees to the requested
increase by notifying the Agent and the Borrower in writing of their
concurrence, such increase shall be made to the Commitments of the Liquidity
Banks, ratably in accordance with their respective Ratable Shares as of the
effective date specified in the Commitment Increase Request. If less than all of
the Lenders agree to such increase, the amount of the Aggregate Commitment shall
remain unchanged.

    SECTION 1.8. EXTENSION OF THE SCHEDULED TERMINATION DATE. Provided that no
Event of Default exists and is continuing, the Borrower may request an extension
of the Scheduled Termination Date by submitting a request for an extension
(each, an "EXTENSION REQUEST") to the Agent no more than 60 days prior to the
Scheduled Termination Date then in effect. The Extension Request must specify
the new Scheduled Termination Date requested by the Borrower and the date (which
must be at least 30 days after the Extension Request is delivered to the Agent)
as of which the Agent, the Lenders and the Liquidity Banks must respond to the
Extension Request (the "RESPONSE DATE"). The new Scheduled Termination Date
shall be no more than 364 days after the Scheduled Termination Date in effect at
the time the Extension Request is received, including the Scheduled Termination
Date as one of the days in the calculation of the days elapsed. Promptly upon
receipt of an Extension Request, the Agent shall notify Blue Ridge and the
Liquidity Banks of the contents thereof and shall request each such Person to
approve the Extension Request. Each Lender and Liquidity Bank approving the
Extension Request shall deliver its written approval to the Agent no later than
the Response Date, whereupon the Agent shall notify the Borrower within one
Business Day thereafter as to whether all of the Lenders have approved the
Extension Request. If all of the Lenders have approved the Extension Request,
the Scheduled Termination Date specified in

                                       -5-


the Extension Request shall become effective on the existing Scheduled
Termination Date, and the Agent shall promptly notify the Borrower and the
Lenders of the new Scheduled Termination Date. If all of the Lenders do not
unanimously agree to an Extension Request, the Scheduled Termination Date shall
remain unchanged.

    SECTION 1.9. DISTRIBUTION OF CERTAIN NOTICES; NOTIFICATION OF INTEREST
RATES. Promptly after receipt thereof, the Agent will notify Blue Ridge and the
Liquidity Banks of the contents of each Information Package, Borrowing Request,
Extension Request, Commitment Reduction Notice, Prepayment Notice, Commitment
Increase Request or notice of default received by it from the Borrower or the
Servicer hereunder. In addition, the Agent shall promptly notify the Lenders and
the Borrower of each determination of and change in Interest Rates.

                                   ARTICLE II
              BORROWING AND PAYMENT MECHANICS; CERTAIN COMPUTATIONS

    SECTION 2.1. METHOD OF BORROWING. The Borrower (or the Servicer on the
Borrower's behalf) shall give the Agent irrevocable notice in the form of
Exhibit 2.1 hereto (each, a "BORROWING REQUEST") not later than 12:00 noon (New
York City time) at least two Business Days before the Borrowing Date of each
Advance. On each Borrowing Date, each Lender shall make available its Loan or
Loans in immediately available funds to the Agent by initiating a wire transfer
in such amount not later than 10:00 a.m. (New York City time). Subject to its
receipt of such wire transfers, the Agent will initiate a wire transfer of the
funds so received from the Lenders to the Borrower at the account specified in
its Borrowing Request not later than 11:00 a.m. (New York City time) on the
applicable Borrowing Date. Neither the Borrower, nor the Servicer on the
Borrower's behalf, may deliver more than 4 Borrowing Requests in any month.

    SECTION 2.2. SELECTION OF CP TRANCHE PERIODS AND INTEREST PERIODS. Prior to
the occurrence of an Event of Default, the Borrower or the Servicer in its
Borrowing Request may request CP Tranche Periods (or, in the case of Liquidity
Fundings, Interest Periods) from time to time to apply to each Lender's CP Rate
Loans or Eurodollar Loans, as applicable; provided, however, that (i) at least
one CP Tranche Period or one Interest Period shall mature on each Settlement
Date, and (ii) no CP Tranche Period or Interest Period which began prior to the
Scheduled Termination Date shall extend beyond the Scheduled Termination Date.

     While the Agent will use reasonable efforts to accommodate the Borrower's
or the Servicer's requests for CP Tranche Periods or Interest Periods prior to
an Event of Default, the Agent shall have the right to subdivide any requested
Loan into one or more Loans of different CP Tranche Periods or Interest Periods,
as the case may be, or, if the requested period is not feasible, to suggest an
alternative CP Tranche Period or Interest Period, provided that not less than
$1,000,000 of principal may be allocated to any CP Tranche Period or Interest
Period of any Lender, and no Alternate Base Rate Loan may have a principal
amount of less than $1,000,000.

     The Borrower (or the Servicer on the Borrower's behalf) may not request an
Interest Period for a Eurodollar Loan unless it shall have given the Agent
written notice of its desire therefor not later than 12:00 noon (New York City
time) at least 3 Business Days prior to the first day of the desired Interest
Period. Accordingly, all Liquidity Fundings shall initially be Alternate Base
Rate Loans.

                                       -6-


     Unless the Agent shall have received written notice by 12:00 noon (New York
City time) on the second Business Day prior to the last day of a CP Tranche
Period that the Borrower intends to reduce or increase the aggregate principal
amount of the CP Rate Loans outstanding, unless an Event of Default exists and
is continuing or Blue Ridge determines that it must avail itself of a Liquidity
Funding, Blue Ridge shall be entitled to assume that the Borrower desires to
refinance the principal and interest maturing CP Rate Loan on the last day of
its CP Tranche Period with a new CP Rate Loan with CP Tranche Periods selected
by the Agent. In addition, in the event and to the extent Blue Ridge cannot
issue Commercial Paper Notes or avail itself of a Liquidity Funding, in either
case, in an amount necessary to refinance the maturing CP Rate Loan and the
accrued and unpaid interest thereon, Blue Ridge may, by notice to the Agent, the
Seller and the Servicer, require the mandatory prepayment of all outstanding CP
Rate Loans in accordance with Section 3.2 hereof.

     Unless the Agent shall have received written notice by 12:00 noon (New York
City time) on the third Business Day prior to the last day of an Interest Period
that the Borrower intends to reduce the aggregate principal amount of the
Eurodollar Loans outstanding from the Liquidity Banks, each of the Liquidity
Banks shall be entitled to assume that the Borrower desires to refinance its
maturing Eurodollar Loans on the last day of such Interest Period with
Eurodollar Loans with an Interest Period of one month.

     The Agent acknowledges and agrees that a Borrowing Request shall not be
required in connection with the refinancing on the last day of an Interest
Period of maturing CP Rate Loans or maturing Eurodollar Loans.

     (c) If the Agent or any Liquidity Bank determines (i) that maintenance of
any Eurodollar Loan would violate any applicable law or regulation, (ii) that
deposits of a type and maturity appropriate to match fund any of such Liquidity
Bank's Eurodollar Loans are not available or (iii) that the maintenance of any
Eurodollar Loans will not adequately and fairly reflect the cost of such
Liquidity Bank of funding Eurodollar Loans, then the Agent, upon the direction
of such Liquidity Bank, shall suspend the availability of future Eurodollar
Loans until such time as the Agent or applicable Liquidity Bank provides notice
that the circumstances giving rise to such suspension no longer exist, and, if
required by any applicable law or regulation, terminate any outstanding
Eurodollar Loan so affected. All Loans allocated to any such terminated
Eurodollar Loan shall be reallocated to an Alternative Base Rate Loan.

    SECTION 2.3. COMPUTATION OF CONCENTRATION LIMITS AND UNPAID BALANCE. The
Obligor Concentration Limits and the aggregate Unpaid Balance of Receivables of
each Obligor and its Affiliated Obligors (if any) shall be calculated as if each
such Obligor and its Affiliated Obligors were one Obligor.

    SECTION 2.4. MAXIMUM INTEREST RATE. No provision of this Agreement shall
require the payment or permit the collection of interest in excess of the
maximum permitted by applicable law.

    SECTION 2.5. PAYMENTS AND COMPUTATIONS, Etc. (a) PAYMENTS. The Borrower or
the Servicer, as the case may be, shall initiate a wire transfer of immediately
available funds of all amounts to be paid or deposited by the Borrower or the
Servicer to the Agent or any of the Lenders (other than amounts payable under
Section 4.2) no later than 11:00 a.m. (New York City time) on the day when due
in lawful money of the United States of America to the Agent at its address
specified in

                                       -7-


Schedule 14.2, and, to the extent such payment is for the account of a Lender,
the Agent shall promptly disburse such funds to the appropriate Lender.

     (b) LATE PAYMENTS. To the extent permitted by law, upon demand, the
Borrower or the Servicer, as applicable, shall pay to the Agent for the account
of each Person to whom payment of any Obligation is due, interest on all amounts
not paid or deposited by 2:00 p.m. (New York City time) on the date when due
(without taking into account any applicable grace period) at the Default Rate as
specified in Section 10.1(a), provided, however, that no such interest rate
shall at any time exceed the maximum rate permitted by applicable law.

     (c) METHOD OF COMPUTATION. All computations of interest, Servicer's Fee,
any per annum fees payable under Section 4.1 and any other per annum fees
payable by the Borrower to the Lenders, the Servicer or the Agent under the Loan
Documents shall be made on the basis of a year of 360 days for the actual number
of days (including the first day but excluding the last day) elapsed.

     (d) AVOIDANCE OR RECISSION OF PAYMENTS. To the maximum extent permitted by
applicable law, no payment of any Obligation shall be considered to have been
paid if at any time such payment is rescinded or must be returned for any
reason.

    SECTION 2.6. NON-RECEIPT OF FUNDS BY THE AGENT. Unless a Lender notifies the
Agent prior to the date and time on which it is scheduled to fund a Loan that it
does not intend to fund, the Agent may assume that such funding will be made and
may, but shall not be obligated to, make the amount of such Loan available to
the intended recipient in reliance upon such assumption. If such Lender has not
in fact funded its Loan proceeds to the Agent, the recipient of such payment
shall, on demand by the Agent, repay to the Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to the Federal
Funds Rate for such day.

                                   ARTICLE III
                                   SETTLEMENTS

    SECTION 3.1. REPORTING. (a) INFORMATION PACKAGES. On the 15th Business Day
after each Cut-Off Date hereafter (each, a "REPORTING DATE"), the Servicer shall
deliver to the Agent, a report in the form of Exhibit 3.1(a) (each, an
"INFORMATION PACKAGE") accompanied by an electronic file in a form reasonably
satisfactory to the Agent; PROVIDED, HOWEVER, that if an Event of Default shall
exist and be continuing, the Agent may request that a computation of the
Borrowing Base be made more frequently than monthly but no more frequently than
once per day.

     (b) INTEREST; OTHER AMOUNTS DUE. At or before 12:00 noon (New York City
time) on the Business Day before each Settlement Date, the Agent shall notify
the Borrower and the Servicer of (i) the aggregate principal balance of all
Loans made by the Lenders that are then outstanding, and (ii) the aggregate
amount of all principal, interest and fees that will be due and payable by the
Borrower to the Agent for the account of the Agent or the Lenders on such
Settlement Date.

    SECTION 3.2. ALLOCATIONS AND DISTRIBUTIONS.

                                       -8-


     (a) MANDATORY PREPAYMENT. On each day which occurs (i) before the
Termination Date and after the date on which Blue Ridge delivers the notice
requiring prepayment of outstanding CP Rate Loans pursuant to Section 2.2
hereof, the Servicer (i) shall set aside and hold in trust solely for the
benefit of Blue Ridge (or deliver to the Collection Account if required pursuant
to Section 7.1(i) hereof) Blue Ridge's Ratable Share in the Percentage Share of
all Collections received on such day (the "RETAINED COLLECTIONS"). To the extent
the Retained Collections are not required to pay interest, fees and Servicing
Fee due on any date prior to the last day of a CP Tranche Period ("PRIOR USES"),
then the Servicer shall distribute the Retained Collections (net of the amount
of Prior Uses) in the following order of priority, in each case only to the
extent of amounts available therefor:

          (i) FIRST, to the Agent (for the benefit of Blue Ridge) all interest
     due but not already paid to Blue Ridge;

          (ii) SECOND, to the Agent (for the benefit of Blue Ridge) the
     outstanding principal balance of all Loans made by Blue Ridge;

          (iii) THIRD, to the Agent (for the benefit of Blue Ridge) all other
     amounts owed to Blue Ridge;

          (iv) FOURTH, to be retained in trust by the Servicer, to the extent of
     the principal and interest that will be due on the last day of any
     subsequent CP Tranche Period with respect to any other outstanding CP Rate
     Loan as to which the Servicer has received a notice requiring prepayment of
     such outstanding CP Rate Loan pursuant to Section 2.2 hereof;

          (v) FIFTH, to the Servicer until all amounts owed to the Servicer
     under the Agreement have been paid in full; and

          (vi) SIXTH, to the Borrower (or as otherwise required by applicable
     law).

     (b) TERMINATION DATE. On each day on and after the Termination Date, the
Servicer shall set aside and hold in trust solely for the account of the Agent,
for the benefit of the Agent and the Lenders, (or delivered to the Collection
Account as required pursuant to Section 7.1(i) hereof) the Percentage Share of
all Collections received on such day and such Collections shall be allocated as
follows:

          (i) FIRST, to the Lenders (ratably, based on their Ratable Share)
     until all Loans of, and interest due but not already paid to, the Lenders
     have been paid in full;

          (ii) SECOND, to the Lenders until all other amounts owed to the
     Lenders have been paid in full;

          (iii) THIRD, to the Agent until all amounts owed to the Agent have
     been paid in full;

          (iv) FOURTH, to any other Person to whom any amounts are owed under
     the Transaction Documents until all such amounts have been paid in full;

                                       -9-


          (v) FIFTH, to the Servicer until all amounts owed to the Servicer
     under the Agreement have been paid in full; and

          (vi) SIXTH, to the Borrower (or as otherwise required by applicable
     law).

On the last day of each Tranche Period, the Servicer shall deposit with the
Agent, from such set aside Collections, all amounts allocated to such Tranche
Period and all Tranche Periods that ended before such date that are due in
accordance with clause (i) above. No distributions shall be made to pay amounts
under clauses (ii) - (vi) until sufficient Collections have been set aside to
pay all amounts described in clause (i) that may become payable for all
outstanding Tranche Periods. All distributions by the Agent shall be made
ratably within each priority level in accordance with the respective amounts
then due each Person included in such level unless otherwise agreed by the Agent
and the Lenders.

    SECTION 3.3. NON-DISTRIBUTION OF SERVICER'S FEE. Each of the Agent and the
Secured Parties hereby consents to the retention by the Servicer of a portion of
the Percentage Share of the Collections equal to the Servicer's Fee (and, if
applicable, any invoiced expenses of such Servicer that are due and owing
pursuant to Section 8.1(d)) so long as the Collections received by the Servicer
are sufficient to pay all amounts pursuant to Section 3.2 of a higher priority
as specified in such Section.

    SECTION 3.4. DEEMED COLLECTIONS. If on any day:

     (a) the Unpaid Balance of any Receivable is reduced as a result of any
defective or rejected goods or services, any cash discount or any other
adjustment by any Loan Party or any Affiliate thereof, or as a result of any
tariff or other governmental or regulatory action, or

     (b) the Unpaid Balance of any Receivable is reduced or canceled as a result
of a setoff in respect of any claim by the Obligor thereof (whether such claim
arises out of the same or a related or an unrelated transaction), or

     (c) the Unpaid Balance of any Receivable is reduced on account of the
obligation of any Loan Party or any Affiliate thereof to pay to the related
Obligor any rebate or refund, or

     (d) the Unpaid Balance of any Receivable is less than the amount included
in calculating the Net Pool Balance for purposes of any Information Package (for
any reason other than such Receivable becoming a Defaulted Receivable), or

     (e) any of the representations or warranties of the Borrower set forth in
Section 6.1(j), (l) or (p) were not true when made with respect to any
Receivable, or any of the representations or warranties of the Borrower set
forth in Section 6.1(k) are no longer true with respect to any Receivable, or
any Receivable is repurchased by the Seller pursuant to the Purchase and Sale
Agreement,

then, on such day, the Borrower shall be deemed to have received a
Collection of such Receivable (1) in the case of clauses (a)-(d) above, in the
amount of such reduction or cancellation or the difference between the actual
Unpaid Balance and the amount included in calculating such Net Pool

                                      -10-


Balance, as applicable; and (2) in the case of clause (e) above, in the amount
of the Unpaid Balance of such Receivable.

                                   ARTICLE IV
                            FEES AND YIELD PROTECTION

    SECTION 4.1. FEES. The Borrower shall pay to the Agent and the Lenders
certain fees from time to time in amounts and payable on such dates as are set
forth in the Fee Letter.

    SECTION 4.2. YIELD PROTECTION. If (i) a change to Regulation D or (ii) any
Regulatory Change, in either case, occurring after the date hereof:

          (a) shall subject an Affected Party to any tax, duty or other charge
     with respect to its Obligations or, as applicable, its Commitment or its
     commitment under any Liquidity Agreement, or shall change the basis of
     taxation of payments to the Affected Party of any Obligations, owed to or
     funded in whole or in part by it or any other amounts due under this
     Agreement in respect of its Obligations or, as applicable, its Commitment
     or its commitment under any Liquidity Agreement except for (1) taxes based
     on, or measured by, net income, or changes in the rate of tax on or
     determined by reference to the overall net income, of such Affected Party,
     (2) franchise taxes, taxes on, or in the nature of, doing business taxes or
     capital taxes, or (3) withholding taxes required for payments made to any
     foreign entity which, at the time such foreign entity issues its Commitment
     or Liquidity Commitment or becomes an assignee of a Lender hereunder, fails
     to deliver to the Agent and the Borrower an accurate IRS Form W-8 BEN or
     W-8 ECI, as applicable; or

          (b) shall impose, modify or deem applicable any reserve (including,
     without limitation, any reserve imposed by the Federal Reserve Board, but
     excluding any reserve included in the determination of interest), special
     deposit or similar requirement against assets of any Affected Party,
     deposits or obligations with or for the account of any Affected Party or
     with or for the account of any affiliate (or entity deemed by the Federal
     Reserve Board to be an affiliate) of any Affected Party, or credit extended
     by any Affected Party; or

          (c) shall affect the amount of capital required or expected to be
     maintained by any Affected Party; or

          (d) shall impose any other condition affecting any Obligation owned or
     funded in whole or in part by any Affected Party, or its rights or
     obligations, if any, to make Loans or Liquidity Fundings; or

          (e) shall change the rate for, or the manner in which the Federal
     Deposit Insurance Corporation (or a successor thereto) assesses deposit
     insurance premiums or similar charges;

and the result of any of the foregoing is or would be:

               (x) to increase the cost to or to impose a cost on (I) an
          Affected Party funding or making or maintaining any Loan, any
          Liquidity Funding, or any

                                      -11-


          commitment of such Affected Party with respect to any of the
          foregoing, or (II) any Agent for continuing its or the Borrower's
          relationship with any Affected Party, in each case, in an amount
          deemed to be material by such Affected Party,

               (y) to reduce the amount of any sum received or receivable by an
          Affected Party under this Agreement or under the Liquidity Agreement,
          or

               (z) to reduce the rate of return on such Affected Party's capital
          as a consequence of its Commitment, its Liquidity Commitment or the
          Loans made by it to a level below that which such Affected Party could
          have achieved but for the occurrence of such circumstances,

then, within thirty days after demand by such Affected Party (which demand shall
be accompanied by a certificate setting forth, in reasonable detail, the basis
of such demand and the methodology for calculating, and the calculation of, the
amounts claimed by the Affected Party), the Borrower shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such actual additional cost, actual increased cost or actual
reduction.

          (f) Each Affected Party will promptly notify the Borrower and the
     Agent of any event of which it has knowledge (including any future event
     that, in the judgment of such Affected Party, is reasonably certain to
     occur) which will entitle such Affected Party to compensation pursuant to
     this Section 4.2; PROVIDED, HOWEVER, no failure to give or delay in giving
     such notification shall adversely affect the rights of any Affected Party
     to such compensation.

          (g) In determining any amount provided for or referred to in this
     Section 4.2, an Affected Party may use any reasonable averaging and
     attribution methods (consistent with its ordinary business practices) that
     it (in its reasonable discretion) shall deem applicable. Any Affected Party
     when making a claim under this Section 4.2 shall submit to the Borrower the
     above-referenced certificate as to such actual increased cost or actual
     reduced return (including calculation thereof in reasonable detail), which
     statement shall, in the absence of demonstrable error, be conclusive and
     binding upon the Borrower.

          (h) Each of the Lenders agrees, and will require each Affected Party
     to agree that, with reasonable promptness after an officer of such Lender
     or such Affected Party responsible for administering the Transaction
     Documents becomes aware that it has become an Affected Party under this
     Section 4.2, is entitled to receive payments under this Section 4.2, or is
     or has become subject to U.S. withholding taxes payable by any Loan Party
     in respect of its investment hereunder, it will, to the extent not
     inconsistent with any internal policy of such Person or any applicable
     legal or regulatory restriction, (i) use all reasonable efforts to make,
     fund or maintain its commitment or investment hereunder through another
     branch or office of such Affected Party, or (ii) take such other reasonable
     measures, if, as a result thereof, the circumstances which would cause such
     Person to be an Affected Party under this Section 4.2 would cease to exist,
     or the additional amounts which would otherwise be required to be paid to
     such Person pursuant to this Section 4.2 would be reduced, or such
     withholding taxes would be reduced, and if the making, funding or
     maintaining of such commitment or investment through such other office or
     in accordance with such other

                                      -12-


     measures, as the case may be, would not otherwise adversely affect such
     commitment or investment or the interests of such Person; provided that
     such Person will not be obligated to utilize such other lending office
     pursuant to this Section 4.2 unless the Borrower agrees to pay all
     incremental expenses incurred by such Person as a result of utilizing such
     other office as described in clause (i) above.

    SECTION 4.3. FUNDING LOSSES. In the event that any Lender shall actually
incur any actual loss or expense (including any actual loss or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to make any Loan or any Liquidity Funding, as applicable, or
maintain any Loan or Liquidity Funding, as applicable) as a result of (i) any
payment of principal with respect to such Lender's Loan being made on any day
other than the scheduled last day of an applicable CP Tranche Period or Interest
Period with respect thereto (it being understood that the foregoing shall not
apply to any Alternate Base Rate Loans), or (ii) any Loan not being made in
accordance with a request therefor under Section 2.1, then, upon written notice
from the Agent to the Borrower and the Servicer, the Borrower shall pay to the
Servicer and the Servicer shall pay to the Agent for the account of such Lender
the amount of such actual loss or expense. Such written notice (which notice
shall set forth in reasonable detail the basis to the loss or expense and shall
include the methodology for calculating, and the calculation of, the amount of
such actual loss or expense, in reasonable detail) shall, in the absence of
demonstrable error or unreasonable assumption, methodology or allocations, be
conclusive and binding upon the Borrower and the Servicer.

     Notwithstanding the foregoing, unless the Agent gives notice to the
Borrower and the Servicer that it is obligated to pay an amount pursuant to this
Section 4.3 within one year after the date the Lender incurred the respective
actual loss or expense, then such Lender shall only be entitled to be
compensated for such actual loss or expense as are incurred or suffered on or
after the date which occurs one year prior to the Agent giving notice to the
Borrower and the Servicer unless such loss or expense is incurred on a
retroactive basis, in which case, such Lender shall be entitled to be
compensated for all loss and expense provided the Agent or such Lender gives
notice within one year from the date of such retroactive change. If the Borrower
pays any additional amount under this Section 4.3 to a Lender and such Lender
determines that it has actually received or realized in connection therewith any
refund or any reduction of, or credit against its tax liabilities in or with
respect to the taxable year in which the additional amount is paid (a "TAX
BENEFIT"), such Lender shall pay to the Borrower an amount that such Lender
shall determine is equal to the net benefit, after tax, which was obtained by
such Lender in such year as a consequence of such Tax Benefit; PROVIDED,
HOWEVER, that nothing in this Section 4.3 shall require any Lender to (i) seek a
Tax Benefit or (ii) disclose any confidential information to the Borrower or
Servicer (including, without limitation, its tax returns).

                                    ARTICLE V
                             CONDITIONS OF ADVANCES

    SECTION 5.1. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The initial Advance
pursuant to this Agreement is subject to the condition precedent that the Agent
shall have received, on or before the date of such initial Advance, the
following each (unless otherwise indicated) dated such date and in form and
substance reasonably satisfactory to the Agent:

                                      -13-


          (a) The Sale Agreement and the Purchase and Sale Agreement, duly
     executed by the parties thereto;

          (b) A certificate of the Secretary or Assistant Secretary or other
     appropriate officer of each Loan Party certifying the names and true
     signatures of the officers authorized on its behalf to sign this Agreement
     and the other Transaction Documents to be delivered by it hereunder (on
     which certificate the Agent and the Lenders may conclusively rely until
     such time as the Agent shall receive from such Loan Party a revised
     certificate meeting the requirements of this subsection (b));

          (c) The Certificate of Formation or other organizational documents of
     each Loan Party, duly certified by the Secretary of State of such Loan
     Party's state of incorporation or organization, as of a recent date
     acceptable to the Agent in each case together with a copy of the by-laws or
     other organizational document of such Loan Party, duly certified by the
     Secretary or an Assistant Secretary of such Loan Party or other appropriate
     officer;

          (d) Copies of good standing certificates or similar certificates of
     existence for each Loan Party, issued by the Secretaries of State of the
     state of incorporation or organization of such Loan Party and the state
     where such Loan Party's principal place of business is located;

          (e) Acknowledgment copies (or other evidence of filing reasonably
     acceptable to the Agent) of (i) proper financing statements (Form UCC-1),
     in such form as the Agent may reasonably request, naming the Originator as
     debtor and seller of its Receivables and Related Assets, the Seller as the
     secured party and purchaser thereof and the Agent, as agent for the Secured
     Parties, as assignee, (ii) financing statements (Form UCC-1), in such form
     as the Agent may reasonably request, naming the Seller as debtor and seller
     of its Receivables and Related Assets, the Borrower as the secured party
     and purchaser thereof and the Agent, as agent for the Secured Parties, as
     assignee and (iii) financing statements (Form UCC-1), in such form as the
     Agent may reasonably request, naming the Borrower as the debtor and the
     Agent, as agent for the Secured Parties, as the secured party, or other,
     similar instruments or documents, as may be necessary or, in the opinion of
     the Agent desirable under the UCC or any comparable law of all appropriate
     jurisdictions to perfect the sale by the Originator to the Seller and the
     Seller to the Borrower of, and the Agent's security interest in, the
     Collateral;

          (f) Search reports provided in writing to the Agent (i) listing all
     effective financing statements that name any Loan Party as debtor and that
     are filed in the jurisdictions in which filings were made pursuant to
     subsection (e) above and in such other jurisdictions that the Agent shall
     reasonably request, together with copies of such financing statements (none
     of which (other than any of the financing statements described in
     subsection (e) above or financing statements in favor of the agent pursuant
     to the Senior Credit Agreement) shall cover any Receivables or Related
     Assets), and (ii) listing all tax liens and judgment liens (if any) filed
     against any debtor referred to in clause (i) above in the jurisdictions
     described therein and showing no such Liens;

          (g) The Seller Note, duly executed by the Borrower and the Initial PCA
     Note, duly executed by the Seller;

                                      -14-


          (h) A favorable opinion of counsel to Loan Parties admitted to
     practice in the State of Illinois, covering the matters set forth in
     Exhibit 5.1(h);

          (i) Favorable opinions of counsel to Loan Parties, as to:

               (1) the existence of a "true sale" of the Receivables from the
          Originator to the Seller and from the Seller to the Borrower under the
          Sale Agreement and the Purchase and Sale Agreement, respectively; and

               (2) the inapplicability of the doctrine of substantive
          consolidation to the Borrower and the Originator and to the Borrower
          and the Seller in connection with any bankruptcy proceeding involving
          any Loan Party;

          (j) A pro forma Information Package, prepared as of the Cut-Off Date
     of October 31, 2000;

          (k) A report in form and substance satisfactory to the Agent from the
     Initial Due Diligence Auditor as to a pre-closing due diligence audit by
     the Initial Due Diligence Auditor;

          (l) The Liquidity Agreement, in form and substance satisfactory to the
     Agent, duly executed by the parties thereto;

          (m) With respect to the Performance Guarantor, copies of its most
     recent reports on SEC Forms 10-K and 10-Q;

          (n) The Fee Letter, together with payment of any and all fees due on
     or prior to the date of the initial Advance;

          (o) A certificate of an Authorized Officer of each of the Loan Parties
     certifying that as of the date of the initial Advance, no Event of Default
     or Unmatured Default exists and is continuing; and

          (p) Such other agreements, instruments, certificates, opinions and
     other documents as the Agent may reasonably request.

    SECTION 5.2. CONDITIONS PRECEDENT TO ALL ADVANCES. Each Advance (including
the initial Advance) shall be subject to the further conditions precedent that
on the applicable Borrowing Date, each of the following statements shall be true
(and the Borrower, by accepting the amount of such Advances or by receiving the
proceeds of any Loan comprising such Advance, and each other Loan Party, upon
such acceptance or receipt by the Borrower, shall be deemed to have certified
that):

          (a) the representations and warranties contained in Section 6.1 are
     accurate in all material respects on and as of the date of such Advance as
     though made on and as of such day and shall be deemed to have been made on
     such day,

                                      -15-


          (b) no event has occurred and is continuing, or would result from such
     Advance, that constitutes an Event of Default or Unmatured Default,

          (c) after giving effect to each proposed Advance, the outstanding
     Loans made by Blue Ridge and the Liquidity Banks will not exceed the
     Allocation Limit,

          (d) the Termination Date shall not have occurred, and

          (e) the Agent shall have timely received an appropriate Borrowing
     Request in accordance with Section 2.1;

PROVIDED, HOWEVER, the absence of the occurrence and continuance of an Unmatured
Default shall not be a condition precedent to any Advance which does not
increase the aggregate principal amount of all Advances outstanding over the
aggregate outstanding principal balance of the Advances as of the opening of
business on such day.

                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

    SECTION 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants, as to itself, as follows:

          (a) DUE ORGANIZATION AND GOOD STANDING; OWNERSHIP OF THE BORROWER. The
     Borrower is a limited liability company duly organized, validly existing
     and in good standing under the laws of the jurisdiction of its organization
     or formation. Performance Guarantor owns, directly or indirectly, all
     outstanding membership interests of the Borrower, and all of such
     membership interests are fully paid and non-assessable and free and clear
     of any Liens.

          (b) DUE QUALIFICATION. The Borrower is duly qualified to do business
     as a limited liability company in good standing in all jurisdictions not
     covered by Section 6.1(a) in which the ownership or lease of property or
     the conduct of its business requires such qualification, except where the
     failure to be so qualified or have such licenses or approvals would not
     have a Material Adverse Effect.

          (c) POWER AND AUTHORITY; DUE AUTHORIZATION. The Borrower (i) has all
     necessary power, authority and legal right, and has obtained all necessary
     licenses and approvals, (A) to execute and deliver this Agreement and the
     other Transaction Documents to which it is a party, (B) to carry out the
     terms of the Transaction Documents to which it is a party, (C) in the case
     of the Servicer (or any Affiliate thereof that is acting as a
     sub-servicer), to service the Receivables and the Related Assets in
     accordance with this Agreement and the Purchase and Sale Agreement, and (D)
     in the case of the Borrower, to grant the security interest in the
     Collateral and borrow the Loans on the terms and conditions herein
     provided, and (ii) has duly authorized by all necessary corporate action
     the execution, delivery and performance of this Agreement and the other
     Transaction Documents to which it is a party and, in the case of the
     Borrower, the security interest described in clause (i)(D) above.

                                      -16-


          (d) TITLE TO RECEIVABLES; VALID SECURITY INTEREST. Each Receivable has
     been acquired by the Borrower from the Seller in accordance with the terms
     of the Purchase and Sale Agreement, and the Borrower has thereby
     irrevocably obtained all legal and equitable title to, and has the legal
     right to sell and encumber, such Receivable and the Related Assets. Each
     such Receivable has been transferred to the Borrower free and clear of any
     Lien except as created hereby. Without limiting the foregoing, there have
     been duly filed all financing statements or other similar instruments or
     documents necessary under the UCC of all appropriate jurisdictions to
     perfect the Borrower's ownership interest in such Receivable. This
     Agreement creates a valid security interest in the Collateral in favor of
     the Agent, for the benefit of the Secured Parties, enforceable against
     creditors of and purchasers from the Borrower.

          (e) NONCONTRAVENTION. The execution, delivery and performance by the
     Borrower of this Agreement and each other Transaction Document to which it
     is party do not and will not: (i) contravene the terms of any of its
     articles of organization or by-laws or other appropriate organizational
     documents; (ii) conflict with or result in a material breach or
     contravention of, or the creation of any Lien under, any document
     evidencing any material Contractual Obligation to which such Person is a
     party or any order, injunction, writ or decree of any Governmental
     Authority to which such Person or its property is subject; or (iii) violate
     any Requirement of Law.

          (f) NO PROCEEDINGS. There are no actions, suits, labor controversies,
     proceedings, claims or disputes pending, or to the best knowledge of the
     Borrower, threatened or contemplated, at law, in equity, in arbitration or
     before any Governmental Authority, against the Borrower, or its
     Subsidiaries or any of their respective properties which: (i) purport to
     affect or pertain to this Agreement or any other Transaction Document, or
     any of the transactions contemplated hereby or thereby; or (ii) if
     determined adversely to the Borrower or its Subsidiaries, would reasonably
     be expected to have a Material Adverse Effect. No injunction, writ,
     temporary restraining order or order of any nature has been issued by any
     court or other Governmental Authority purporting to enjoin or restrain the
     execution, delivery or performance of this Agreement or any other
     Transaction Document, or directing that the transactions provided for
     herein or therein not be consummated as herein or therein provided. The
     Borrower is generally subject to suit and it does not nor does any of its
     properties or revenues enjoy any right of immunity from judicial
     proceedings.

          (g) ENFORCEABILITY. This Agreement and each other Transaction Document
     signed by the Borrower constitutes, a legal, valid and binding obligation
     of the Borrower, enforceable in accordance with its terms (except as
     enforceability may be limited by applicable bankruptcy, insolvency, or
     similar laws affecting the enforcement of creditors' rights generally or by
     equitable principles relating to enforceability).

          (h) GOVERNMENT APPROVALS. No approval, consent, exemption,
     authorization, or other action by, or notice to, or filing with, any
     Governmental Authority is necessary or required in connection with the
     execution, delivery or performance by, or enforcement against, the Borrower
     of this Agreement or any other Transaction Document, except for (i) the
     filing of the UCC financing statements referred to in Article V, and (ii)
     the filing of any UCC continuation statements and amendments from time to
     time required in relation to

                                      -17-


     any UCC financing statements filed in connection with this Agreement, as
     provided in Section 8.5, all of which, at the time required in Article V or
     Section 8.5, as applicable, shall have been duly made and shall be in full
     force and effect.

          (i) NATURE OF RECEIVABLES. Each Receivable constitutes an Account.

          (j) MARGIN REGULATIONS. The use of all funds obtained by the Borrower
     under this Agreement or any other Transaction Document will not conflict
     with or contravene any of Regulations T, U and X promulgated by the Board
     of Governors of the Federal Reserve System from time to time.

          (k) QUALITY OF TITLE. (i) Each Receivable, together with the Related
     Assets, is owned by the Borrower free and clear of any Lien (other than any
     Lien arising solely as the result of any action taken by the Agent or one
     of the Secured Parties); (ii) the Agent, on behalf of the Secured Parties,
     has a valid and perfected first priority security interest in the
     Collateral; and (iii) no financing statement or other instrument similar in
     effect covering any portion of the Collateral is on file in any recording
     office except such as may be filed (A) in favor of the Originator in
     accordance with the Contracts, (B) in favor of the Seller in accordance
     with the Sale Agreement (C) in favor of the Borrower and its assigns in
     connection with the Purchase and Sale Agreement, (D) in favor of the Agent
     in accordance with this Agreement or in connection with any Lien arising
     solely as the result of any action taken by the Agent or one of the Secured
     Parties or (E) in favor of the agent pursuant to the Senior Credit
     Agreement.

          (l) ACCURATE REPORTS. No Information Package (if prepared by the
     Borrower, or to the extent information therein was supplied by the
     Borrower), no other information furnished verbally or in writing prior to
     the date of this Agreement, and no other information, exhibit, financial
     statement, document, book, record or report furnished or to be furnished in
     writing after the date of this Agreement, by or on behalf of the Borrower
     to the Agent or any of the Lenders pursuant to this Agreement was or will
     be inaccurate in any material respect as of the date it was or will be
     dated or (except as otherwise disclosed to the Agent or the Lenders at such
     time) as of the date so furnished, or contained or (in the case of
     information or other materials to be furnished in the future) will contain
     any material misstatement of fact or omitted or (in the case of information
     or other materials to be furnished in the future) will omit to state a
     material fact or any fact necessary to make the statements contained
     therein not materially misleading in light of the circumstances made or
     presented.

          (m) OFFICES. The principal places of business and chief executive
     offices of the Servicer and the Borrower are located at the respective
     addresses set forth on Schedule 14.2, and the offices where the books,
     records and documents evidencing the Receivables, the related Contracts and
     all purchase orders and other agreements related to such Receivables are
     located are specified in Schedule 6.1(m) (or at such other locations,
     notified to the Agent in accordance with Section 7.1(f), in jurisdictions
     where all action required by Section 8.5 has been taken and completed).

          (n) LOCK-BOX ACCOUNTS. The names and addresses of all the Lock-Box
     Banks, together with the account numbers of the accounts of the Borrower at
     such Lock-Box Banks,

                                      -18-


     are specified in Schedule 6.1(n) (or have been notified to and approved by
     the Agent in accordance with Section 7.3(d)). Each of the Lock-Box Accounts
     is subject to a Lock-Box Agreement that is in full force and effect.

          (o) ELIGIBLE RECEIVABLES. Each Receivable included as an Eligible
     Receivable in the Net Pool Balance in connection with any computation or
     recomputation of the Borrowing Base is an Eligible Receivable on such date.

          (p) NAMES. In the past five years, the Borrower has not used any
     corporate names, trade names or assumed names other than the name in which
     it has executed this Agreement.

          (q) CREDIT AND COLLECTION POLICY. With respect to each Receivable,
     each of the Originator, the Borrower and the Servicer has complied in all
     material respects with the applicable Credit and Collection Policy, and no
     change has been made to such Credit and Collection Policy since the date of
     this Agreement which would be reasonably likely to materially and adversely
     affect the collectibility of the Receivables or decrease the credit quality
     of any newly created Receivables except for such changes as to which each
     of the Agent have received the notice required under Section 7.2(g) and, to
     the extent that such change is material, has given its prior written
     consent thereto (which consent shall not be unreasonably withheld or
     delayed).

          (r) PAYMENTS TO SELLER. With respect to each Receivable sold to the
     Borrower by the Seller, the Borrower has given reasonably equivalent value
     to the Seller in consideration for such Receivable and the Related Assets
     with respect thereto under the Purchase and Sale Agreement and such
     transfer was not made for or on account of an antecedent debt. No transfer
     by the Seller of any Receivable is or may be voidable under any Section of
     the Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), as
     amended.

          (s) NOT AN INVESTMENT COMPANY. The Borrower is not an "investment
     company" within the meaning of the Investment Company Act of 1940, as
     amended from time to time, or any successor statute.

          (t) BORROWING BASE. As of each Borrowing Date, after giving effect to
     the Loans to be made on such date, the Borrowing Base is at least equal to
     the aggregate outstanding principal balance of the Advances.

                                   ARTICLE VII
                        GENERAL COVENANTS OF THE BORROWER

    SECTION 7.1. AFFIRMATIVE COVENANTS OF THE BORROWER. From the date hereof
until the Final Payout Date, unless the Agent shall otherwise consent in
writing:

          (a) COMPLIANCE WITH LAWS, Etc. The Borrower will comply in all
     material respects with all applicable laws, rules, regulations and orders,
     including those with respect to the Receivables and related Contracts,
     except where the failure to so comply would not individually or in the
     aggregate have a Material Adverse Effect.

                                      -19-


          (b) PRESERVATION OF CORPORATE EXISTENCE. The Borrower will preserve
     and maintain its limited liability existence, rights, franchises and
     privileges in the jurisdiction of its organization, and qualify and remain
     qualified in good standing as a limited liability company in each
     jurisdiction where the failure to preserve and maintain such existence,
     rights, franchises, privileges and qualification would have a Material
     Adverse Effect.

          (c) AUDITS. The Borrower will (i) at any time and from time to time
     upon not less than ten (10) Business Days' notice (unless an Event of
     Default has occurred and is continuing, in which case no such notice shall
     be required) during regular business hours, permit the Agent or any of its
     agents or representatives: (A) to examine and make copies of and abstracts
     from all books, records and documents (including, without limitation,
     computer tapes and disks) in the possession or under the control of or
     accessible to the Borrower relating to Receivables, including, without
     limitation, the related Contracts and purchase orders and other agreements,
     and (B) to visit the offices and properties of the Borrower for the purpose
     of examining such materials described in clause (i) (A) next above, and to
     discuss matters relating to Receivables or the Borrower's performance
     hereunder with any of the officers or employees of the Borrower having
     knowledge of such matters; and (ii) without limiting the provisions of
     clause (i) above, from time to time upon not less than ten (10) Business
     Days notice, at the expense of the Borrower, permit Performance Guarantor's
     outside auditors (except as hereinafter provided) or other certified public
     accountants or auditors acceptable to the Agent to conduct a review of the
     Borrower's books and records with respect to the Receivables and Related
     Assets (each of the reviews described in clause (i) and (ii) hereof, a
     "REVIEW"); PROVIDED, HOWEVER, that, so long as no Event of Default has
     occurred and is continuing, (i) the Borrower shall only be responsible for
     the costs and expenses of one such Review under this Section or under
     Section 7.2(h) in any one calendar year and (ii) there shall be no more
     than two such Reviews under this Section or under Section 7.2(h) in any one
     calendar year.

          (d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Servicer will
     maintain and implement administrative and operating procedures (including,
     without limitation, an ability to recreate records evidencing Receivables
     in the event of the destruction of the originals thereof), and keep and
     maintain, all documents, books, records and other information reasonably
     necessary or advisable for the collection of all Receivables (including,
     without limitation, records adequate to permit the daily identification of
     outstanding Unpaid Balances by Obligor and related debit and credit details
     of the Receivables).

          (e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. The
     Borrower will, at its expense, timely and fully perform and comply with all
     material provisions, covenants and other promises, if any, required to be
     observed by it under the Contracts related to the Receivables and all
     agreements related to such Receivables.

          (f) LOCATION OF CHIEF EXECUTIVE OFFICE. The Borrower will keep its
     chief place of business and chief executive office, and the offices where
     records concerning the Receivables and all related Contracts are kept (and
     all original documents relating thereto), at the address(es) referred to in
     Section 6.1(n) or, upon 15 days' prior written notice to the Agent, at such
     other locations in jurisdictions where all action required by Section 8.5
     shall have been taken and completed.

                                      -20-


          (g) CREDIT AND COLLECTION POLICIES. The Borrower will comply in all
     material respects with the Credit and Collection Policy in regard to each
     Receivable and the related Contracts.

          (h) PURCHASE AND SALE AGREEMENT. The Borrower will perform and comply
     in all material respects with all of its covenants and agreements set forth
     in the Purchase and Sale Agreement, and will enforce the performance by the
     Seller of its obligations under the Purchase and Sale Agreement.

          (i) COLLECTIONS. All Obligors shall be instructed to make payments on
     Receivables directly to a Lock-Box Account which is the subject of a
     Lock-Box Agreement. If, notwithstanding the foregoing, any Collections are
     paid directly to the Borrower, the Borrower shall deposit the same (with
     any necessary endorsements) to such a Lock-Box Account within two (2)
     Business Days after receipt thereof. Upon demand of the Agent to the extent
     that the Agent reasonably determines necessary in order to protect the
     interests of the Agent or the Secured Parties under this Agreement, the
     Borrower or the Servicer shall establish a segregated account at Wachovia
     Bank, N.A. which is subject to a perfected security interest in favor of
     the Agent, for the benefit of the Secured Parties (the "COLLECTION
     ACCOUNT"), into which all deposits from time to time in Lock-Box Accounts,
     and all other Collections, are concentrated pending application in
     accordance with the terms of this Agreement to the Obligations.

          (j) FURTHER ASSURANCES. The Borrower shall take all necessary action
     to establish and maintain (i) in favor of the Borrower, a valid and
     perfected ownership interest in the Receivables and Related Assets (other
     than books and records evidencing or otherwise relating to any
     Receivables), and (ii) in favor of the Agent for the benefit of the Secured
     Parties, a valid and perfected first priority security interest in the
     Receivables and the Related Assets (other than books and records evidencing
     or otherwise relating to any Receivables), including, without limitation,
     taking such action to perfect, protect or more fully evidence the interest
     of the Agent as the Agent may reasonably request.

    SECTION 7.2. REPORTING REQUIREMENTS OF THE BORROWER. From the date hereof
until the Final Payout Date, unless the Agent shall otherwise consent in
writing:

          (a) QUARTERLY FINANCIAL STATEMENTS. (i) The Borrower will cause the
     Performance Guarantor to furnish to the Agent as soon as available and in
     any event within 50 days after the end of each of the first three quarters
     of each fiscal year of Performance Guarantor, copies of its consolidated
     balance sheets and related statements of income and statements of cash
     flow, showing the financial condition of Performance Guarantor and its
     consolidated Subsidiaries as of the close of such fiscal quarter and the
     results of its operations and the operations of such Subsidiaries during
     such fiscal quarter and the then elapsed portion of the fiscal year,
     together with a Certificate of Financial Officer in the form attached
     hereto as Exhibit 7.2 executed by the chief financial officer or treasurer
     of Performance Guarantor; and (ii) the Borrower will furnish to the Agent,
     as soon as available and in any event within 50 days after the end of each
     of the first three quarters of each fiscal year of the Borrower, copies of
     the financial statements of the Borrower, consisting of at least a balance
     sheet as at the close of such quarter and statements of earnings and
     changes in cash flows for such

                                      -21-


     quarter and for the period from the beginning of the fiscal year to the
     close of such quarter, together with a Certificate of Financial Officer in
     the form attached hereto as Exhibit 7.2 executed by the chief financial
     officer or treasurer of the Borrower;

          (b) ANNUAL FINANCIAL STATEMENTS. (i) The Borrower will cause the
     Performance Guarantor to furnish to the Agent, as soon as available and in
     any event within 90 days after the end of each fiscal year of Performance
     Guarantor, copies of its consolidated balance sheets and related statements
     of income and statements of cash flow, showing the financial condition of
     Performance Guarantor and its consolidated Subsidiaries as of the close of
     such fiscal year and the results of its operations and the operations of
     such Subsidiaries during such year, all audited by independent public
     accountants of recognized national standing acceptable to the Agent and
     accompanied by an opinion of such accountants (which shall not be qualified
     in any material respect with respect to any matter related to the
     Receivables or the collectability of the Receivables) to the effect that
     such consolidated financial statements fairly present the financial
     condition and results of operations of Performance Guarantor on a
     consolidated basis (except as noted therein) in accordance with GAAP
     consistently applied; and (ii) the Borrower will furnish to the Agent, as
     soon as available and in any event within 90 days after the end of each
     fiscal year of the Borrower, copies of the financial statements of the
     Borrower, consisting of at least a balance sheet of Borrower for such year
     and statements of earnings, cash flows and shareholders' equity, setting
     forth in each case in comparative form corresponding figures from the
     preceding fiscal year, together with a Certificate of Financial Officer in
     the form attached hereto as Exhibit 7.2 executed by the chief financial
     officer or treasurer of the Borrower;

          (c) REPORTS TO SEC AND EXCHANGES. In addition to the reports required
     by subsections (a) and (b) next above, promptly upon the Agent's reasonable
     request, the Borrower will cause the Performance Guarantor to furnish to
     the Agent copies of any reports or registration statements that Performance
     Guarantor files with the Securities and Exchange Commission or any national
     securities exchange other than registration statements relating to employee
     benefit plans and to registrations of securities for selling
     securityholders;

          (d) ERISA. Promptly after the filing or receiving thereof, the
     Borrower will furnish to the Agent copies of all reports and notices with
     respect to any Reportable Event defined in Article IV of ERISA which the
     Borrower files under ERISA with the Internal Revenue Service, the Pension
     Benefit Guaranty Corporation or the U.S. Department of Labor or which the
     Borrower receives from the Pension Benefit Guaranty Corporation;

          (e) EVENTS OF DEFAULT, ETC. As soon as possible and in any event
     within five (5) Business Days after any Responsible Officer of the Borrower
     obtains knowledge of the occurrence of any Event of Default or any
     Unmatured Default, the Borrower will furnish to the Agent a written
     statement of a Responsible Officer of the Borrower setting forth details of
     such event and the action that the Borrower will take with respect thereto;

          (f) LITIGATION. As soon as possible and in any event within ten
     Business Days after any Responsible Officer of the Borrower obtains
     knowledge thereof, the Borrower will furnish to the Agent notice of (i) any
     litigation, investigation or proceeding which may exist at any time which
     would reasonably be expected to have a Material Adverse Effect and (ii)

                                      -22-


     any development in previously disclosed litigation which development would
     reasonably be expected to have a Material Adverse Effect;

          (g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The Borrower
     will furnish to the Agent prompt written notice of any material change in
     the character of the Borrower's business prior to the occurrence of such
     change, and the Borrower will provide the Agent with not less than 15
     Business Days' prior written notice of any material change in the Credit
     and Collection Policy (together with a copy of such proposed change); and

          (h) OTHER. Promptly, from time to time, the Borrower will furnish to
     the Agent such other information, documents, records or reports respecting
     the Receivables (including all Records) or the condition or operations,
     financial or otherwise, of the Borrower as the Agent may from time to time
     reasonably request in order to protect the interests of the Agent or the
     Secured Parties under or as contemplated by this Agreement.

     Notwithstanding anything herein to the contrary, as long as the Agent is a
party to the Senior Credit Agreement, the Borrower shall be deemed to be in
compliance with Section 7.2(a)(i), 7.2(b)(i) and 7.2(c) to the extent the
Performance Guarantor is in compliance with Section 8.01 of the Senior Credit
Agreement.

    SECTION 7.3. NEGATIVE COVENANTS OF THE BORROWER. From the date hereof until
the Final Payout Date, without the prior written consent of the Agent:

          (a) SALES, LIENS, ETC. (i) The Borrower will not, except as otherwise
     provided herein and in the other Transaction Documents, sell, assign (by
     operation of law or otherwise) or otherwise dispose of, or create or suffer
     to exist any Lien upon or with respect to, any Collateral, or any account
     to which any Collections are sent, or any right to receive income or
     proceeds from or in respect of any of the foregoing (except, prior to the
     execution of Lock-Box Agreements, set-off rights of any bank at which any
     such account is maintained), and (ii) the Servicer will not assert any
     interest in the Receivables, except as the Servicer.

          (b) EXTENSION OR AMENDMENT OF RECEIVABLES. The Borrower will not,
     except as otherwise permitted in Section 8.2(c), extend, amend or otherwise
     modify the terms of any Receivable, or amend, modify or waive any material
     term or condition of any Contract related thereto in any way that
     materially adversely affects the collectibility of any Receivable or any
     Lender's rights therein.

          (c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The Borrower
     will not make or permit to be made any change in the character of its
     business or in the Credit and Collection Policy, which change would, in
     either case, impair the collectibility of any significant portion of the
     Receivables or otherwise materially and adversely affect the interests or
     remedies of each Lender under this Agreement or any other Transaction
     Document.

          (d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The Borrower will not
     add or terminate any bank as a Lock-Box Bank from those listed in Schedule
     6.1(o) or, after the

                                      -23-


     Collection Account has been established pursuant to Section 7.1(i), make
     any material change in its instructions to Obligors regarding payments to
     be made to the Borrower or the Servicer or payments to be made to any
     Lock-Box Bank (which shall not include a change in instructions solely for
     the purpose of directing Obligors to make such payments to another existing
     Lock-Box Bank), unless (i) the Agent shall have received prior written
     notice of such addition, termination or change and (ii) the Agent shall
     have received duly executed copies of Lock-Box Agreements in a form
     reasonably acceptable to the Agent with each new Lock-Box Bank.

          (e) DEPOSITS TO LOCK-BOX ACCOUNTS AND COLLECTION ACCOUNT. The Borrower
     will not deposit or otherwise credit, or cause or permit to be so deposited
     or credited, to any Lock-Box Account or the Collection Account, any cash or
     cash proceeds other than Collections of Receivables.

          (f) CHANGES TO OTHER DOCUMENTS. The Borrower will not, without the
     consent of the Agent, enter into any amendment or modification of, or
     supplement to, the Purchase and Sale Agreement, the Seller Note or the
     Borrower's Certificate of Formation or such other equivalent certificate.

          (g) RESTRICTED PAYMENTS BY THE BORROWER. The Borrower will not:

               (i) declare or pay any distributions in respect of any membership
          or other equity interest in the Borrower or set aside any funds for
          any such purpose, unless, in each of the foregoing cases: (A) such
          distribution is made on, or immediately following, a Settlement Date
          after payment of all Obligations due and owing on such Settlement
          Date, and (B) after giving effect to such distribution, the Borrower's
          net worth (determined in accordance with GAAP) will be at least
          $20,000,000; or

               (ii) Make any payment of principal or interest on the Seller Note
          if any Event of Default exists or would result therefrom or if such
          payment would result in the Borrower's having insufficient cash on
          hand to pay all Obligations that will be due and owing on the next
          succeeding Settlement Date.

          (h) BORROWER INDEBTEDNESS. The Borrower will not incur or permit to
     exist any Indebtedness or liability on account of deposits except: (A)
     current accounts payable arising in the ordinary course of business and not
     overdue in an aggregate amount at any time outstanding not to exceed
     $50,000 (B) Indebtedness incurred in accordance with the Purchase and Sale
     Agreement and evidenced by the Seller Note and (C) current payables not
     mentioned in Clause (A) of this subsection (h) and expense reimbursement
     obligations arising under the Transaction Documents and not overdue.

          (i) PROHIBITION ON ADDITIONAL NEGATIVE PLEDGES. The Borrower will not
     enter into or assume any agreement (other than this Agreement and the other
     Transaction Documents) prohibiting the creation or assumption of any Lien
     upon any Receivables or Related Assets, whether now owned or hereafter
     acquired, except as contemplated by the Transaction Documents, or otherwise
     prohibiting or restricting any transaction contemplated hereby or by the
     other Transaction Documents, and the Borrower will not enter into or assume
     any

                                      -24-


     agreement creating any Lien upon the Seller Note, except as required by the
     Senior Credit Agreement.

          (j) NAME CHANGE, OFFICES. The Borrower will not change its name,
     identity or corporate structure (within the meaning of Section 9-402(7) of
     any applicable enactment of the UCC) or relocate its chief executive office
     unless it shall have: (i) given the Agent at least 15 Business Days' prior
     written notice thereof and (ii) prior to effectiveness of such change,
     delivered to the Agent all financing statements, instruments and other
     documents requested by the Agent in connection with such change or
     relocation.

          (k) MERGERS, CONSOLIDATIONS AND ACQUISITIONS. The Borrower will not
     merge into or consolidate with any other Person, or permit any other Person
     to merge into or consolidate with it, or purchase, lease or otherwise
     acquire (in one transaction or a series of transactions) all or
     substantially all of the assets of any other Person (whether directly by
     purchase, lease or other acquisition of all or substantially all of the
     assets of such Person or indirectly by purchase or other acquisition of all
     or substantially all of the capital stock of such other Person) other than
     the acquisition of the Receivables and Related Assets pursuant to the
     Purchase and Sale Agreement.

          (l) DISPOSITION OF RECEIVABLES AND RELATED ASSETS. Except pursuant to
     this Agreement, the Borrower will not sell, lease, transfer, assign or
     otherwise dispose of (in one transaction or in a series of transactions)
     any Receivables and Related Assets.

          (m) BORROWING BASE. The Borrower will not request any Advance if,
     after giving effect thereto, the aggregate outstanding principal balance of
     the Loans would exceed the Borrowing Base.

    SECTION 7.4. SEPARATE CORPORATE EXISTENCE OF THE BORROWER. The Borrower
hereby acknowledges that the Lenders and the Agent are entering into the
transactions contemplated hereby in reliance upon the Borrower's identity as a
legal entity separate from the Servicer and its other Affiliates. Therefore, the
Borrower shall take all steps specifically required by this Agreement or
reasonably required by the Agent to continue the Borrower's identity as a
separate legal entity and to make it apparent to third Persons that the Borrower
is an entity with assets and liabilities distinct from those of its Affiliates,
and is not a division of Performance Guarantor or any other Person. Without
limiting the foregoing, the Borrower will take such actions as shall be required
in order that:

          (a) The Borrower will be a limited purpose company whose primary
     activities are restricted in its Certificate of Formation or other
     equivalent certificate to purchasing or otherwise acquiring from Seller,
     owning, holding, granting security interests in the Collateral, entering
     into agreements for the financing and servicing of the Receivables, and
     conducting such other activities as it deems necessary or appropriate to
     carry out its primary activities;

          (b) Not less than one member of the Borrower's Board of Managers (the
     "INDEPENDENT MANAGER") shall be an individual who is not, and never has
     been, a direct, indirect or beneficial stockholder (other than through a
     mutual fund the investment decisions of which are not controlled by such
     person), officer, director, employee, affiliate, associate, material
     supplier or material customer of Performance Guarantor or any of its
     Affiliates

                                      -25-


     (other than an Affiliate organized with a limited purpose charter for the
     purpose of acquiring receivables or other financial assets or intangible
     property). The certificate of formation or other equivalent certificate of
     the Borrower shall provide that (a) at least one member of the Borrower's
     Board of Managers or other similar governing body shall be an Independent
     Manager, (b) the Borrower's Board of Managers or other similar governing
     body shall not approve, or take any other action to cause the filing of, a
     voluntary bankruptcy petition with respect to the Borrower unless the
     Independent Manager shall approve the taking of such action in writing
     prior to the taking of such action and (c) the provisions requiring an
     independent director and the provision described in clauses (a) and (b) of
     this paragraph (ii) cannot be amended without the prior written consent of
     the Independent Manager;

          (c) The Independent Manager shall not at any time serve as a trustee
     in bankruptcy for the Borrower or any Affiliate thereof;

          (d) Any director, employee, consultant or agent of the Borrower will
     be compensated from the Borrower's funds for services provided to the
     Borrower. The Borrower will not engage any agents other than its attorneys,
     auditors and other professionals and a servicer (which servicer will be
     fully compensated for its services by payment of the Servicer's Fee) and
     any other agent contemplated by the Transaction Documents for the
     Collateral;

          (e) The Borrower will contract with the Servicer to perform for the
     Borrower all operations required on a daily basis to service the
     Collateral. The Borrower will pay the Servicer the Servicer's Fee pursuant
     hereto. The Borrower will not incur any material indirect or overhead
     expenses for items shared with Performance Guarantor (or any other
     Affiliate thereof) which are not reflected in the Servicer's Fee. To the
     extent, if any, that the Borrower (or any other Affiliate thereof) shares
     items of expenses not reflected in the Servicer's Fee, for legal, auditing
     and other professional services and directors' fees, such expenses will be
     allocated to the extent practical on the basis of actual use or the value
     of services rendered, and otherwise on a basis reasonably related to the
     actual use or the value of services rendered, it being understood that
     Performance Guarantor shall pay all expenses relating to the preparation,
     negotiation, execution and delivery of the Transaction Documents,
     including, without limitation, legal, rating agency and other fees;

          (f) The Borrower's operating expenses will not be paid by any other
     Loan Party or other Affiliate of the Borrower;

          (g) The Borrower will have its own stationery;

          (h) The books of account, financial reports and corporate records of
     the Borrower will be maintained separately from those of Performance
     Guarantor and each other Affiliate of the Borrower;

          (i) Any financial statements of any Loan Party or Affiliate thereof
     which are consolidated to include the Borrower will contain detailed notes
     clearly stating that (A) all of the Borrower's assets are owned by the
     Borrower, and (B) the Borrower is a separate corporate entity with its own
     separate creditors that will be entitled to be satisfied out of the

                                      -26-


     Borrower's assets prior to any value in the Borrower becoming available to
     the Borrower's equity holders; and the accounting records and the published
     financial statements of the Seller will clearly show that, for accounting
     purposes, the Receivables and Related Assets have been sold by the Seller
     to the Borrower;

          (j) The Borrower's assets will be maintained in a manner that
     facilitates their identification and segregation from those of the Servicer
     and the other Affiliates;

          (k) Each Affiliate of the Borrower will strictly observe corporate
     formalities in its dealings with the Borrower, and, except as permitted
     pursuant to this Agreement with respect to Collections, funds or other
     assets of the Borrower will not be commingled with those of any of its
     Affiliates;

          (l) No Affiliate of the Borrower will maintain joint bank accounts
     with the Borrower or other depository accounts with the Borrower to which
     any such Affiliate (other than in the Borrower's or such Affiliate's
     existing or future capacity as the Servicer hereunder or under the Purchase
     and Sale Agreement) has independent access, provided that prior to demand
     by the Agent pursuant to Section 7.1(i) to establish a segregated
     Collection Account, Collections may be deposited into general accounts of
     Performance Guarantor, subject to the obligations of the Servicer
     hereunder;

          (m) No Affiliate of the Borrower shall, directly or indirectly, name
     the Borrower or enter into any agreement to name the Borrower as a direct
     or contingent beneficiary or loss payee on any insurance policy covering
     the property of any Affiliate of the Borrower;

          (n) Each Affiliate of the Borrower will maintain arm's length
     relationships with the Borrower, and each Affiliate of the Borrower that
     renders or otherwise furnishes services or merchandise to the Borrower will
     be compensated by the Borrower at market rates for such services or
     merchandise;

          (o) No Affiliate of the Borrower will be, nor will it hold itself out
     to be, responsible for the debts of the Borrower or the decisions or
     actions in respect of the daily business and affairs of the Borrower.
     Packaging Corporation of America and the Borrower will immediately correct
     any known misrepresentation with respect to the foregoing and they will not
     operate or purport to operate as an integrated single economic unit with
     respect to each other or in their dealing with any other entity;

          (p) The Borrower will keep correct and complete books and records of
     account and minutes of the meetings and other proceedings of its
     stockholder and board of directors, as applicable, and the resolutions,
     agreements and other instruments of the Borrower will be continuously
     maintained as official records by the Borrower; and

          (q) Each of the Borrower, on the one hand, and the Seller and the
     Originator, on the other hand, will conduct its business solely in its own
     corporate name and in such a separate manner so as not to mislead others
     with whom they are dealing.

                                      -27-


                                  ARTICLE VIII
                          ADMINISTRATION AND COLLECTION

    SECTION 8.1. DESIGNATION OF SERVICER. (a) SELLER AS INITIAL SERVICER. The
servicing, administering and collection of the Receivables shall be conducted by
the Person designated as Servicer hereunder from time to time in accordance with
this Section 8.1. Until the Agent gives to Seller a Successor Notice (as defined
in Section 8.1(b)), Seller is hereby designated as, and hereby agrees to perform
the duties and obligations of, Servicer pursuant to the terms hereof.

     (b) SUCCESSOR NOTICE; SERVICER TRANSFER EVENTS. Upon Seller's receipt of a
notice from the Agent following a Servicer Transfer Event of the designation of
a new Servicer (a "SUCCESSOR NOTICE"), Seller agrees that it will terminate its
activities as Servicer hereunder in a manner that will facilitate the transition
of the performance of such activities to the new Servicer, and the Agent (or the
designee of the Agent) shall assume each and all of Seller's obligations to
service and administer such Receivables, on the terms and subject to the
conditions herein set forth, and Seller shall use its reasonable best efforts to
assist the Agent (or the Agent's designee) in assuming such obligations. Without
limiting the foregoing, Seller agrees, at its expense, to take all actions
necessary to provide the new Servicer with access to all computer software
necessary to generate reports useful in collecting or billing Receivables,
solely for use in collecting and billing Receivables. If Seller disputes the
occurrence of a Servicer Transfer Event, Seller may take appropriate action to
resolve such dispute; provided that Seller must terminate its activities
hereunder as Servicer and allow the newly designated Servicer to perform such
activities on the date specified by the Agent as described above,
notwithstanding the commencement or continuation of any proceeding to resolve
the aforementioned dispute, if the Agent reasonably determine, in good faith,
that such termination is necessary or advisable to protect the Secured Parties'
interests hereunder.

     (c) SUBCONTRACTS. So long as Seller is acting as the Servicer, it may
subcontract with the Originator for servicing, administering or collecting all
or any portion of the Receivables, PROVIDED, HOWEVER, that no such subcontract
shall relieve Seller of its primary liability for performance of its duties as
Servicer pursuant to the terms hereof and any such subservicing arrangement may
be terminated at the request of the Agent at any time after a Successor Notice
has been given. In addition to the foregoing, with the prior written consent of
the Agent (which consent shall not be unreasonably withheld or delayed), any
Servicer may subcontract with other Persons for servicing, administering or
collecting all or any portion of the Receivables, provided, however, that no
such subcontract shall relieve such Servicer of its primary liability for
performance of its duties as Servicer pursuant to the terms hereof and any such
subservicing arrangement may be terminated at the request of the Agent at any
time that such Agent reasonably determines that such subservicer is not
performing adequately.

     (d) EXPENSE INDEMNITY AFTER A SERVICER TRANSFER EVENT. In addition to, and
not in lieu of the Servicer's Fee, if Seller or one of its Affiliates is
replaced as Servicer following a Servicer Transfer Event, the Borrower shall
reimburse the Servicer within 10 Business Days after receipt of a written
invoice, any and all reasonable costs and expenses (based on then current market
prices) of the Servicer incurred in connection with its servicing of the
Receivables for the benefit of the Secured Parties.

                                      -28-


    SECTION 8.2. DUTIES OF SERVICER.

     (a) APPOINTMENT; DUTIES IN GENERAL. Each of the Borrower, the Lenders and
the Agent hereby appoints as its agent, the Servicer, as from time to time
designated pursuant to Section 8.1, to enforce its rights and interests in and
under the Receivables, the Related Security and the related Contracts. The
Servicer shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Receivable from time to time, all in accordance with
applicable laws, rules and regulations, with reasonable care and diligence, and
in accordance with the Credit and Collection Policy.

     (b) SEGREGATION OF COLLECTIONS. The Servicer shall not be required (unless
otherwise requested by the Agent) to segregate the funds constituting the
Collections prior to the remittance thereof in accordance with Article III. If
the Agent determines in its reasonable judgment that it is necessary or
desirable and so instructs the Servicer, the Servicer shall segregate and
deposit into the Collection Account Collections not later than the second
Business Day following receipt by the Servicer of such Collections in
immediately available funds.

     (c) MODIFICATION OF RECEIVABLES. Seller, while it is the Servicer, may, in
accordance with the Credit and Collection Policy, so long as no Event of Default
and no Unmatured Default shall have occurred and be continuing, extend the
maturity as Seller may reasonably determine to be appropriate to maximize
Collections thereof or adjust the Unpaid Balance of any Receivable in a manner
consistent with the Credit and Collection Policy (although no such extension or
adjustment shall alter the status of such Receivable as a Defaulted Receivable
or a Delinquent Receivable or, in the case of an adjustment, limit the rights of
the Agent or the Lenders under Section 3.4).

     (d) DOCUMENTS AND RECORDS. The Borrower shall deliver to the Servicer, and
the Servicer shall hold in trust for the Borrower and the Secured Parties, all
documents, instruments and records (including, without limitation, computer
tapes or disks) that evidence or relate to Receivables.

     (e) CERTAIN DUTIES TO THE BORROWER. The Servicer shall, as soon as
practicable following receipt, turn over to the Borrower (i) that portion of the
Collections which are not required to be turned over to the Agent, less the
Servicer's Fee, and, in the event that neither Seller nor any other Loan Party
or Affiliate thereof is the Servicer, all reasonable and appropriate
out-of-pocket costs and expenses of the Servicer of servicing, collecting and
administering the Receivables to the extent not covered by the Servicer's Fee
received by it, and (ii) the Collections of any receivable which is not a
Receivable. The Servicer, if other than Seller or any other Loan Party or
Affiliate thereof, shall, as soon as practicable upon demand, deliver to the
Borrower all documents, instruments and records in its possession that evidence
or relate to Receivables of the Borrower, and copies of documents, instruments
and records in its possession that evidence or relate to Receivables.

     (f) TERMINATION. The Servicer's authorization under this Agreement shall
terminate upon the Final Payout Date.

     (g) POWER OF ATTORNEY. The Borrower hereby grants to the Servicer an
irrevocable power of attorney, with full power of substitution, coupled with an
interest, to take in the name of the Borrower all steps which are necessary or
advisable to endorse, negotiate or otherwise realize on any

                                      -29-


writing or other right of any kind held or transmitted by the Borrower or
transmitted or received by Lender (whether or not from the Borrower) in
connection with any Receivable.

    SECTION 8.3. RIGHTS OF THE AGENT.

     (a) NOTICE TO OBLIGORS. At any time when an Unmatured Default or Event of
Default has occurred and is continuing, the Agent may notify the Obligors of
Receivables, or any of them, of its security interest, for the benefit of the
Secured Parties, in the Collateral.

     (b) NOTICE TO LOCK-BOX BANKS. At any time after the occurrence of an
Unmatured Default or an Event of Default, the Agent is hereby authorized to
direct the Servicer, and the Servicer is hereby authorized and directed to
comply with such direction, to give notice to the Lock-Box Banks, as provided in
the Lock-Box Agreements, of the transfer to the Agent of dominion and control
over the Lock-Boxes and related Lock-Box Accounts to which the Obligors of
Receivables make payments. The Borrower and the Servicer hereby transfer to the
Agent, effective when the Agent shall give notice to the Lock-Box Banks as
provided in the Lock-Box Agreements, the exclusive dominion and control over
such Lock-Boxes and Lock-Box Accounts, and shall take any further action that
the Agent may reasonably request to effect such transfer.

     (c) RIGHTS ON SERVICER TRANSFER EVENT. At any time following the
designation of a Servicer other than Initial Servicer pursuant to Section 8.1:

          (i) The Agent may direct the Obligors of Receivables, or any of them,
     to pay all amounts payable under any Receivable directly to the Agent or
     its designee.

          (ii) The Borrower shall, at the Agent's request and at the Borrower's
     expense, give notice of the Agent's security interest in the Collateral to
     each Obligor of Receivables and direct that payments be made directly to
     the Agent or its designee.

          (iii) The Borrower shall, at the Agent's request: (A) assemble all of
     the documents, instruments and other records (including, without
     limitation, computer programs, tapes and disks) which evidence the
     Collateral, or which are otherwise necessary or desirable to collect the
     Collateral, and make the same available to the successor Servicer at a
     place selected by the Agent, and (B) segregate all cash, checks and other
     instruments received by it from time to time constituting Collections in a
     manner acceptable to the Agent and promptly upon receipt, remit all such
     cash, checks and instruments, duly endorsed or with duly executed
     instruments of transfer, to the successor Servicer.

          (iv) The Borrower and the Lenders hereby authorize the Agent and grant
     to the Agent an irrevocable power of attorney (which shall terminate on the
     Final Payout Date), to take any and all steps in such Person's name and on
     behalf of such Person which are necessary or desirable, in the
     determination of the Agent, to collect all amounts due under any and all
     Receivables, including, without limitation, endorsing the Borrower's name
     on checks and other instruments representing Collections and enforcing such
     Receivables and the related Contracts.

                                      -30-


    SECTION 8.4. RESPONSIBILITIES OF THE BORROWER. Anything herein to the
contrary notwithstanding:

     (a) CONTRACTS. The Borrower shall remain responsible for performing all of
its obligations (if any) under the Contracts related to the Receivables and
under the related agreements to the same extent as if the security interest in
the Collateral had not been granted hereunder, and the exercise by the Agent or
its designee of its rights hereunder shall not relieve the Borrower from such
obligations.

     (b) LIMITATION OF LIABILITY. The Agent and the Lenders shall not have any
obligation or liability with respect to any Receivables, Contracts related
thereto or any other related agreements, nor shall any of them be obligated to
perform any of the obligations of the Borrower or the Seller thereunder.

    SECTION 8.5. FURTHER ACTION EVIDENCING THE SECURITY INTEREST.

     (a) FURTHER ASSURANCES. The Borrower agrees that from time to time, at its
expense, it will promptly execute and deliver all further instruments and
documents, and take all further action that the Agent or its designee may
reasonably request in order to perfect, protect or more fully evidence the
Agent's security interest, on behalf of the Secured Parties, in the Collateral,
or to enable the Agent or its designee to exercise or enforce any of the Secured
Parties' respective rights hereunder or under any Transaction Document in
respect thereof. Without limiting the generality of the foregoing, the Borrower
will:

          (i) upon the request of the Agent, execute and file such financing or
     continuation statements, or amendments thereto or assignments thereof, and
     such other instruments or notices, as may be necessary or appropriate, in
     accordance with the terms of this Agreement;

          (ii) upon the request of the Agent after the occurrence and during the
     continuance of an Event of Default, mark conspicuously each Contract
     evidencing each Receivable constituting chattel paper with a legend,
     acceptable to the Agent, evidencing its security interest therein pursuant
     to this Agreement; and

          (iii) mark its master data processing records evidencing the
     Collateral with a legend, acceptable to the Agent, evidencing that a
     security interest in the Collateral has been granted pursuant to this
     Agreement.

     (b) ADDITIONAL FINANCING STATEMENTS; CONTINUATION STATEMENTS; PERFORMANCE
BY AGENT. The Borrower hereby authorizes the Agent or its designee to file one
or more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Collateral now existing or
hereafter arising in the name of the Borrower. If the Borrower fails to promptly
execute and deliver to the Agent any financing statement or continuation
statement or amendment thereto or assignment thereof requested by the Agent, the
Borrower hereby authorizes the Agent to execute such statement on behalf of the
Borrower. If the Borrower fails to perform any of its agreements or obligations
under this Agreement, the Agent or its designee may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation, and
the reasonable expenses of the Agent or its designee incurred in connection
therewith shall be payable by the Borrower as provided in Section 14.5.

                                      -31-


    SECTION 8.6. APPLICATION OF COLLECTIONS. Any payment by an Obligor in
respect of any indebtedness owed by it to the Originator, the Seller or the
Borrower shall, except as otherwise specified by such Obligor or required by the
underlying Contract or law, be applied, first, as a Collection of any Receivable
or Receivables then outstanding of such Obligor in the order of the age of such
Receivables, starting with the oldest of such Receivables and, second, to any
other indebtedness of such Obligor.

                                   ARTICLE IX
                                SECURITY INTEREST

    SECTION 9.1. GRANT OF SECURITY INTEREST. To secure the due and punctual
payment of the Obligations, whether now or hereafter existing, due or to become
due, direct or indirect, or absolute or contingent, including, without
limitation, all Indemnified Amounts, in each case pro rata according to the
respective amounts thereof, the Borrower hereby pledges to the Agent, for the
benefit of the Secured Parties, and hereby grants to the Agent, for the benefit
of the Secured Parties, a security interest in, all of the Borrower's right,
title and interest now or hereafter existing in, to and under (a) all the
Receivables and Related Assets, (b) the Purchase and Sale Agreement and the
other Transaction Documents (other than the Initial PCA Note and the Seller
Note), and (c) all proceeds of any of the foregoing (collectively, the
"COLLATERAL").

    SECTION 9.2. REMEDIES. Upon the occurrence of an Event of Default, the
Agent, on behalf of the Secured Parties, shall have, with respect to the
Collateral granted pursuant to Section 9.1, and in addition to all other rights
and remedies available to the Secured Parties or the Agent under this Agreement
and the other Transaction Documents or other applicable law, all the rights and
remedies of a secured party upon default under the UCC.

    SECTION 9.3. TERMINATION AFTER FINAL PAYOUT DATE. Each of the Secured
Parties hereby authorizes the Agent, and the Agent hereby agrees, promptly after
the Final Payout Date to execute and deliver to the Borrower such UCC-3
termination statements as may be necessary to terminate the Agent's security
interest in and Lien upon the Collateral, all at the Borrower's expense. Upon
the Final Payout Date, all right, title and interest of the Agent and the
Secured Parties in and to the Collateral shall terminate.

    SECTION 9.4. LIMITATION ON RIGHTS TO COLLATERAL PROCEEDS. Nothing in this
Agreement shall entitle the Secured Parties to receive or retain proceeds of the
Collateral in excess of the aggregate amount of the Obligations owing to such
Secured Party (or to any Indemnified Party claiming through such Secured Party).

                                    ARTICLE X
                                EVENTS OF DEFAULT

    SECTION 10.1. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "EVENT OF DEFAULT" hereunder:

          (a) The Servicer or the Borrower shall fail to make (i) when and as
     required to be made by it herein, payments of or deposits of any amount of
     principal of any Loan, or (ii) within two Business Days after the same
     becomes due, payment of any amount of

                                      -32-


     interest, fees or any other Obligations payable hereunder or under any
     other Transaction Document; PROVIDED THAT any interest, fees or other
     amounts which are not paid on the due date shall bear interest at the
     Default Rate after such due date; or

          (b) Any representation or warranty made or deemed to be made by any
     Loan Party (or any of its officers) under this Agreement or any other
     Transaction Document or any Information Package or other information,
     recomputation of the Borrowing Base or other report delivered pursuant
     hereto shall prove to have been false or incorrect in any material adverse
     respect when made or deemed to have been made; or

       (c)(i) Any Loan Party fails to perform or observe any term, covenant
     or agreement contained in any of SECTIONS 3.1(a), 7.1(i), 7.2(e), 7.2(f),
     7.2(g), 7.2(h), 7.3(a), 7.3(b), 7.3(c), 7.3(d), 7.3(f) or 8.2(b); or

          (ii) Any Loan Party fails to perform or observe any other term or
     covenant contained in this Agreement or any other Transaction Document, and
     such default shall continue unremedied for a period of 30 days after the
     date upon which written notice thereof is given to such Loan Party by the
     Agent; or

       (d)(i)  The Borrower or the Seller shall (A) fail to pay any principal
     or interest, regardless of amount, due in respect of any Indebtedness of
     which the aggregate unpaid principal amount is in excess of $10,000, when
     and as the same shall become due and payable (after expiration of any
     applicable grace period) or (B) fail to observe or perform any other term,
     covenant, condition or agreement (after expiration of any applicable grace
     period) contained in any agreement or instrument evidencing or governing
     any such Indebtedness if the effect of any failure referred to in this
     CLAUSE (B) is to cause, or permit the holder or holders of such
     Indebtedness or a trustee on its or their behalf (with or without the
     giving of notice, the lapse of time or both) to cause, such Indebtedness to
     become due prior to its stated maturity; or

          (ii) Performance Guarantor or any of its Subsidiaries (other than the
     Borrower) (A) shall fail to pay any principal or interest, regardless of
     amount, due in respect of any Indebtedness (other than Indebtedness arising
     under the Senior Credit Agreement) of which the aggregate unpaid principal
     amount is in excess of $10,000,000, when and as the same shall become due
     and payable (after expiration of any applicable grace period) or (B) shall
     fail to observe or perform any other term, covenant, condition or agreement
     (after expiration of any applicable grace period) contained in any
     agreement or instrument evidencing or governing any such (other than
     Indebtedness arising under the Senior Credit Agreement) Indebtedness if the
     effect of any failure referred to in this CLAUSE (B) is to cause, or permit
     the holder or holders of such Indebtedness or a trustee on its or their
     behalf (with or without the giving of notice, the lapse of time or both) to
     cause such Indebtedness to become due prior to its stated maturity;

          (iii) An "EVENT OF DEFAULT" under and as defined in the Senior Credit
     Agreement; shall occur and (i) be continuing for more than 20 consecutive
     days or (ii) result in the acceleration of any amount payable thereunder;
     or

                                      -33-


          (e) An Event of Bankruptcy shall have occurred and remain continuing
     with respect to any Loan Party or, if the Servicer is not Performance
     Guarantor or an Affiliate thereof, with respect to the Servicer; or

          (f) At any Cut-off Date, the average of the Dilution Ratio for the
     period of three calendar months then ended exceeds 1.25%; or

          (g) At any Cut-off Date, the average of the Default Ratio for the
     period of three calendar months then ended exceeds 1.25%; or

          (h) At any Cut-off Date, the average of the Delinquency Ratio for the
     period of three calendar months then ended exceeds 2.00%; or

          (i) On any Settlement Date, after giving effect to the payments made
     under Article II or Article III, the aggregate outstanding principal
     balance of the Advances exceeds the least of the Borrowing Base, the
     Aggregate Commitment or the Allocation Limit; or

          (j) There shall have occurred any event which materially adversely
     impairs the ability of the Originator to originate Receivables of a credit
     quality not materially different than the credit quality of the Receivables
     acquired by the Seller and sold to the Borrower on the Closing Date or any
     other event occurs that is reasonably likely to have a Material Adverse
     Effect; or

          (k) A Change in Control shall occur; or

          (l) The Internal Revenue Service shall file notice of a lien pursuant
     to Section 6323 of the Internal Revenue Code with regard to any of the
     Receivables or Related Assets and such lien has had or would reasonably be
     expected to have a Material Adverse Effect and shall not have been released
     within seven (7) days, or the Pension Benefit Guaranty Corporation shall,
     or shall indicate its intention to, file notice of a lien pursuant to
     Section 4068 of the Employee Retirement Income Security Act of 1974 with
     regard to any of the Receivables or Related Assets and such lien would
     reasonably be expected to have a Material Adverse Effect; or

          (m) The Agent, on behalf of the Secured Parties, for any reason, does
     not have a valid, perfected first priority security interest in the
     Receivables or the Related Assets described in clauses (b), (d) or (e) of
     the definition thereof; or

       (n)(i) One or more non-interlocutory judgments, non-interlocutory orders,
     decrees or arbitration awards is entered against the Borrower or the Seller
     involving in the aggregate a liability (to the extent not covered by
     independent third-party insurance as to which the insurer does not dispute
     coverage) as to any single or related series of transactions, incidents or
     conditions, of $10,000 or more, with respect to the Borrower, or $100,000
     or more, with respect to the Seller, and the same shall remain unsatisfied,
     unvacated and unstayed pending appeal for a period of 60 days after the
     entry thereof, or any non-monetary judgment, order or decree is entered
     against the Borrower or the Seller, as applicable, which has had or would
     reasonably be expected to have a Material Adverse Effect; or

                                      -34-


          (ii) One or more non-interlocutory judgments, non-interlocutory
     orders, decrees or arbitration awards is entered against the Originator
     involving in the aggregate a liability (to the extent not covered by
     independent third-party insurance as to which the insurer does not dispute
     coverage) as to any single or related series of transactions, incidents or
     conditions, of $10,000,000 or more, and the same shall remain unsatisfied,
     unvacated and unstayed pending appeal for a period of 60 days after the
     entry thereof, or any non-monetary judgment, order or decree is entered
     against the Originator which has had or would reasonably be expected to
     have a Material Adverse Effect; or

       (o)(i) An ERISA Event shall occur with respect to a Pension Plan or
     Multiemployer Plan which has resulted or could reasonably be expected to
     result in liability of the Originator under Title IV of ERISA to such
     Pension Plan, such Multiemployer Plan or the PBGC in an aggregate amount in
     excess of $10,000,000; (ii) the aggregate amount of Unfunded-Pension
     Liability among all Pension Plans at any time exceeds $10,000,000; or (iii)
     the Originator or any ERISA Affiliate shall fail to pay when due, after the
     expiration of any applicable grace period, any installment payment with
     respect to its withdrawal liability under Section 4201 of ERISA under a
     Multiemployer Plan in an aggregate amount in excess of $10,000,000.

    SECTION 10.2. REMEDIES.

     (a) OPTIONAL AMORTIZATION. Upon the occurrence of an Event of Default
(other than an Event of Default described in Section 10.1(e) with respect to the
Borrower), the Agent may by notice to the Borrower, declare the Termination Date
to have occurred, whereupon the Aggregate Commitment shall terminate and all
Collections shall be allocated and distributed pursuant to Section 3.2(b)
hereof.

     (b) AUTOMATIC AMORTIZATION. Upon the occurrence of an Event of Default
described in Section 10.1(e) with respect to the Borrower, the Termination Date
shall automatically occur and Collections shall be allocated and distributed
pursuant to Section 3.2(b) hereof.

     (c) ADDITIONAL REMEDIES. Upon the Termination Date pursuant to this Section
10.2, the Aggregate Commitment will terminate, no Loans or Advances thereafter
will be made, and the Agent, on behalf of the Secured Parties, shall have, in
addition to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under the UCC of each applicable jurisdiction
and other applicable laws, which rights shall be cumulative.

                                   ARTICLE XI
                                    THE AGENT

    SECTION 11.1. APPOINTMENT. (a) Each Lender hereby irrevocably designates and
appoints Wachovia Bank, N.A. as its Agent hereunder, and authorizes the Agent to
take such action on its behalf under the provisions of the Transaction Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of the Transaction Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender or Liquidity

                                      -35-


Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities on the part of the Agent shall be read into this Agreement or
otherwise exist against the Agent.

     (b) The provisions of this Article XI are solely for the benefit of the
Agent and the Lenders, and the Borrower shall have any rights as a third-party
beneficiary or otherwise under any of the provisions of this Article XI, except
that this Article XI shall not affect any obligations which the Agent or any
Lender may have to the Borrower under the other provisions of this Agreement.

     (c) In performing its functions and duties hereunder, the Agent shall act
solely as the agent of the Secured Parties and does not assume nor shall be
deemed to have assumed any obligation or relationship of trust or agency with or
for the Borrower or any of their respective successors and assigns.

    SECTION 11.2. DELEGATION OF DUTIES. The Agent may execute any of its duties
under this 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 Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.

    SECTION 11.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of its
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them or any Person described in
Section 11.2 under or in connection with this Agreement (except for its, their
or such Person's own bad faith, gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower contained in this Agreement
or in any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other document furnished in connection herewith, or for
any failure of the Borrower to perform its respective obligations hereunder, or
for the satisfaction of any condition specified in Article V, except receipt of
items required to be delivered to the Agent. The Agent shall not be under any
obligation to any Lender or Liquidity Bank to ascertain or to inquire as to the
observance or performance of any of the agreements or covenants contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
the Borrower. This Section 11.3 is intended solely to govern the relationship
between each Agent, on the one hand, and the Lenders and their respective
Liquidity Banks, on the other.

    SECTION 11.4 RELIANCE BY AGENT.

          (a) The Agent shall in all cases 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 upon advice and
     statements of legal counsel (including, without limitation, counsel to the
     Borrower), independent accountants and other experts selected by the Agent.
     The Agent shall in all cases be fully justified in failing or refusing to
     take any action under this Agreement or any other document furnished in
     connection herewith unless it shall first receive such advice or
     concurrence of such of the Lenders and Liquidity Banks as it shall
     determine to be appropriate under the relevant

                                      -36-


     circumstances, or it shall first be indemnified to its satisfaction by the
     Liquidity Banks against any and all liability, cost and expense which may
     be incurred by it by reason of taking or continuing to take any such
     action.

          (b) Any action taken by the Agent in accordance with Section 11.4(a)
     shall be binding upon all Lenders.

    SECTION 11.5. NOTICE OF EVENTS OF DEFAULT. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default or Unmatured
Default unless the Agent has received notice from a Lender, a Liquidity Bank or
a Loan Party referring to this Agreement, stating that an Event of Default or
Unmatured Default has occurred hereunder and describing such Event of Default or
Unmatured Default. In the event that the Agent receives such a notice, it shall
promptly give notice thereof to the Lenders and Liquidity Banks. The Agent shall
take such action with respect to such Event of Default or Unmatured Default as
shall be directed by the Majority Lenders.

    SECTION 11.6. NON-RELIANCE ON AGENT AND OTHER LENDERS. Each of the Lenders
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by the Agent. Each
of the Lenders also represents and warrants to the Agent and the other Lenders
that it has, independently and without reliance upon any such Person (or any of
their Affiliates) and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Borrower and made its own decision to enter into this
Agreement. Each of the Lenders also represents that it will, independently and
without reliance upon the Agent or any other Liquidity Bank or Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
prospects, financial and other condition and creditworthiness of the Borrower.
Neither of the Agent nor any of the Lenders, nor any of their respective
Affiliates, shall have any duty or responsibility to provide any party to this
Agreement with any credit or other information concerning the business,
operations, property, prospects, financial and other condition or
creditworthiness of the Borrower which may come into the possession of such
Person or any of its respective officers, directors, employees, agents,
attorneys-in-fact or affiliates, except that the Agent shall promptly distribute
to the Lenders and the Liquidity Banks, copies of financial and other
information expressly provided to the Agent by the Borrower pursuant to this
Agreement for distribution to the Lenders.

    SECTION 11.7. INDEMNIFICATION OF AGENT. Each Liquidity Bank agrees to
indemnify the Agent and its officers, directors, employees, representatives and
agents (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably in accordance with their
respective Ratable Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for the Agent or
such Person in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not the Agent in its capacity as
such or such Person shall be

                                      -37-


designated a party thereto) that may at any time be imposed on, incurred by or
asserted against the Agent or such Person as a result of, or arising out of, or
in any way related to or by reason of, any of the transactions contemplated
hereunder or the execution, delivery or performance of this Agreement or any
other document furnished in connection herewith (but excluding any such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the bad faith, gross
negligence or willful misconduct of the Agent or such Person as finally
determined by a court of competent jurisdiction).

    SECTION 11.8. AGENT IN ITS INDIVIDUAL CAPACITY. The Agent in its individual
capacity and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower and their Affiliates
as though it were not the Agent hereunder. With respect to its Loans, if any,
pursuant to this Agreement, the Agent shall have the same rights and powers
under this Agreement as any Lender and may exercise the same as though it were
not an Agent, and the terms "Lender" and "Lenders" shall include the Agent in
its individual capacity.

    SECTION 11.9. SUCCESSOR AGENT. The Agent, upon five (5) days' notice to the
Borrower and the Lenders, may voluntarily resign at any time; PROVIDED, HOWEVER,
that Wachovia Bank, N.A. shall not voluntarily resign as the Agent so long as
any of the Liquidity Banks' respective Commitments remain in effect or Blue
Ridge has any outstanding Loans hereunder. If the Agent (other than Wachovia
Bank, N.A.) shall voluntarily resign, then the Majority Lenders during such
five-day period shall appoint, from amongst the remaining Lenders, a successor
agent, whereupon such successor agent shall succeed to the rights, powers and
duties of the Agent and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement. Upon
replacement of any Agent in accordance with this Section 11.9, the retiring
Agent shall execute such UCC-3 assignments and amendments, and assignments and
amendments of the Transaction Documents, as may be necessary to give effect to
its replacement by a successor Agent. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article XI and Article XIII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.

    SECTION 11.10. AGENT'S CONFLICT WAIVERS. Wachovia acts, or may in the future
act, (i) as administrative agent for Blue Ridge, (ii) as issuing and paying
agent for Blue Ridge's Commercial Paper Notes, (iii) to provide credit or
liquidity enhancement for the timely payment for Blue Ridge's Commercial Paper
Notes and (iv) to provide other services from time to time for Blue Ridge
(collectively, the "WACHOVIA ROLES"). Without limiting the generality of
Sections 11.1 and 11.8, each Agent, Lender and Liquidity Bank hereby
acknowledges and consents to any and all Wachovia Roles and agrees that in
connection with any Wachovia Role, Wachovia may take, or refrain from taking,
any action which it, in its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for Blue Ridge, the giving of
notice to the Liquidity Banks of a mandatory purchase pursuant to the Liquidity
Agreement, and hereby acknowledges that neither Wachovia nor any of its
Affiliates has any fiduciary duties hereunder to any Lender (other than Blue
Ridge) or to any of the Liquidity Banks arising out of any Wachovia Roles.

    SECTION 11.11. UCC FILINGS. Each of the Secured Parties hereby expressly
recognizes and agrees that the Agent may be listed as the assignee or secured
party of record on the various UCC filings required to be made under the
Transaction Documents in order to perfect their respective

                                      -38-


interests in the Collateral, that such listing shall be for administrative
convenience only in creating a record or nominee holder to take certain actions
hereunder on behalf of the Secured Parties and that such listing will not affect
in any way the status of the Secured Parties as the true parties in interest
with respect to the Collateral. In addition, such listing shall impose no duties
on the Agent other than those expressly and specifically undertaken in
accordance with this Article XI.

                                   ARTICLE XII
                         ASSIGNMENTS AND PARTICIPATIONS

    SECTION 12.1. RESTRICTIONS ON ASSIGNMENTS, ETC. (a) Neither the Borrower nor
the Servicer may assign its rights, or delegate its duties hereunder or any
interest herein without the prior written consent of the Agent; PROVIDED,
HOWEVER, that the foregoing shall not be deemed to restrict Seller's right,
prior to delivery of a Successor Notice, to delegate its duties as Servicer to
the Originator, provided that Seller shall remain primarily liable for the
performance or non-performance of such duties.

       (b) Blue Ridge may, at any time, assign all or any portion of a Loan, or
sell participations therein, to the Liquidity Banks (or to the Agent for the
ratable benefit of the Liquidity Banks).

       (c) In addition to, and not in limitation of, assignments and
participations described in Section 12.1(b):

          (i) in the event that any Liquidity Bank becomes a Downgraded
     Liquidity Bank, such Downgraded Liquidity Bank shall give prompt written
     notice of its Downgrading Event to the Agent and to the Borrower, whereupon
     the Agent may identify an Eligible Assignee and the Downgraded Liquidity
     Bank shall promptly assign its rights and obligations to the Eligible
     Assignee designated by the Agent against payment in full of its
     Obligations;

          (ii) each of the Lenders may assign all or any portion of its Loans
     and, if applicable, its Commitment under this Agreement to any Eligible
     Assignee; and

          (iii) each of the Lenders may sell participations in all or any
     portion of their respective rights and obligations in, to and under the
     Transaction Documents and the Obligations in accordance with Sections 12.2
     and 14.7.

    SECTION 12.2. RIGHTS OF ASSIGNEES AND PARTICIPANTS. (a) Upon the assignment
by a Lender in accordance with Section 12.1(b) or (c), the Eligible Assignee(s)
receiving such assignment shall have all of the rights of such Lender with
respect to the Transaction Documents and the Obligations (or such portion
thereof as has been assigned).

       (b) In no event will the sale of any participation interest in any
Lender's or any Eligible Assignee's rights under the Transaction Documents or in
the Obligations relieve the seller of such participation of its obligations, if
any, hereunder or, if applicable, under the applicable Liquidity Agreement.

    SECTION 12.3. TERMS AND EVIDENCE OF ASSIGNMENT. Any assignment to any
Eligible Assignee(s) pursuant to SECTION 1.8, 12.1(b) or 12.1(c) shall be upon
such terms and conditions as the

                                      -39-


assigning Lender and the Agent, on the one hand, and the Eligible Assignee, on
the other, may mutually agree, and shall be evidenced by such instrument(s) or
document(s) as may be satisfactory to such Lender, the Agent and the Eligible
Assignee(s). Any assignment made in accordance with the terms of the Article XII
shall relieve the assigning Lender of its obligations, if any, under this
Agreement (and, if applicable, the Liquidity Agreement) to the extent assigned.

                                  ARTICLE XIII
                                 INDEMNIFICATION

    SECTION 13.1. INDEMNITIES BY THE BORROWER.

     (a) GENERAL INDEMNITY. Without limiting any other rights which any such
Person may have hereunder or under applicable law, the Borrower hereby agrees to
indemnify each of the Agent, the Lenders, each of their respective Affiliates,
and all successors, transferees, participants and assigns and all officers,
directors, shareholders, controlling persons, employees and agents of any of the
foregoing (each, an "INDEMNIFIED PARTY"), forthwith on demand, from and against
any and all damages, losses, claims, liabilities and related costs and expenses,
including attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or incurred
by any of them arising out of or relating to the Transaction Documents, the
Obligations or the Collateral, EXCLUDING, HOWEVER, (i) Indemnified Amounts to
the extent determined by a court of competent jurisdiction to have resulted from
bad faith, gross negligence or willful misconduct on the part of such
Indemnified Party, (ii) recourse (except as otherwise specifically provided in
this Agreement) for Indemnified Amounts to the extent the same includes losses
in respect of Receivables which are uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness of the related Obligor, (iii) Indemnified
Amounts that represent taxes based upon, or measured by, net income, or changes
in the rate of tax or as determined by reference to the overall net income, of
such Indemnified Party, (iv) Indemnified Amounts that represent franchise taxes,
taxes on, or in the nature of, doing business taxes or capital taxes or (v)
Indemnified Amounts that represent withholding taxes required for payments made
to any foreign entity which, at the time such foreign entity issues its
Commitment or Liquidity Commitment or becomes an assignee of a Lender hereunder,
fails to deliver to the Agent and the Borrower an accurate IRS Form W-8 BEN or
W-8 ECI, as applicable. Without limiting the foregoing, the Borrower shall
indemnify each Indemnified Party for Indemnified Amounts arising out of or
relating to:

          (A) the creation of any Lien on, or transfer by any Loan Party of any
     interest in, the Collateral other than the sale of Receivables and related
     property by the Originator to the Seller pursuant to the Sale Agreement and
     by the Seller to the Borrower pursuant to the Purchase and Sale Agreement
     and the grant by the Borrower of a security interest in the Collateral to
     the Agent pursuant to Section 9.1;

          (B) any representation or warranty made by any Loan Party (or any of
     its officers) under or in connection with any Transaction Document, any
     Information Package or any other information or report delivered by or on
     behalf of any Loan Party pursuant hereto, which shall have been false,
     incorrect or misleading in any respect when made or deemed made or
     delivered, as the case may be;

                                      -40-


          (C) the failure by any Loan Party to comply with any applicable law,
     rule or regulation with respect to any Receivable or the related Contract,
     or the nonconformity of any Receivable or the related Contract with any
     such applicable law, rule or regulation;

          (D) the failure to vest and maintain vested in the Agent, for the
     benefit of the Secured Parties, a valid and perfected first priority
     security interest in the Collateral, free and clear of any other Lien,
     other than a Lien arising solely as a result of an act of one of the
     Secured Parties, now or at any time thereafter;

          (E) the failure to file, or any delay in filing, financing statements
     or other similar instruments or documents under the UCC of any applicable
     jurisdiction or other applicable laws with respect to any Collateral;

          (F) any dispute, claim, offset or defense (other than discharge in
     bankruptcy) of the Obligor to the payment of any Receivable (including,
     without limitation, a defense based on such Receivables or the related
     Contract not being a legal, valid and binding obligation of such Obligor
     enforceable against it in accordance with its terms), or any other claim
     resulting from the sale of the services related to such Receivable or the
     furnishing or failure to furnish such services;

          (G) any matter described in SECTION 3.4;

          (H) any failure of any Loan Party, as the Borrower, the Servicer or
     otherwise, to perform its duties or obligations in accordance with the
     provisions of this Agreement or the other Transaction Documents to which it
     is a party;

          (I) any products liability claim or any claim of breach by any Loan
     Party of any related Contract with respect to any Receivable;

          (J) any tax or governmental fee or charge, all interest and penalties
     thereon or with respect thereto, and all out-of-pocket costs and expenses,
     including the reasonable fees and expenses of counsel in defending against
     the same, which may arise by reason of the Agent's security interest in the
     Collateral;

          (K) the commingling of Collections of Receivables at any time with
     other funds;

          (L) any investigation, litigation or proceeding related to or arising
     from this Agreement or any other Transaction Document, the transactions
     contemplated hereby or thereby, the use of the proceeds of any Loan, the
     security interest in the Receivables and Related Assets or any other
     investigation, litigation or proceeding relating to the Borrower, the
     Seller or the Originator in which any Indemnified Party becomes involved as
     a result of any of the transactions contemplated hereby or thereby (other
     than an investigation, litigation or proceeding (1) relating to a dispute
     solely amongst the Lenders (or certain Lenders) and the Agent or (2)
     excluded by SECTION 13.1(a));

                                      -41-


          (M) any inability to litigate any claim against any Obligor in respect
     of any Receivable as a result of such Obligor being immune from civil and
     commercial law and suit on the grounds of sovereignty or otherwise from any
     legal action, suit or proceeding;

          (N) the occurrence of any Event of Default of the type described in
     SECTION 10.1(e); or

          (O) any loss incurred by any of the Secured Parties as a result of the
     inclusion in the Borrowing Base of Receivables owing from any single
     Obligor and its Affiliated Obligors which causes the aggregate Unpaid
     Balance of all such Receivables to exceed the applicable Obligor
     Concentration Limit.

     (b) CONTEST OF TAX CLAIM; AFTER-TAX BASIS. If any Indemnified Party shall
have notice of any attempt to impose or collect any tax or governmental fee or
charge for which indemnification will be sought from any Loan Party under
Section 13.1(a)(xi), such Indemnified Party shall give prompt and timely notice
of such attempt to the Borrower and the Borrower shall have the right, at its
expense, to participate in any proceedings resisting or objecting to the
imposition or collection of any such tax, governmental fee or charge.
Indemnification hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the payment of any of the aforesaid taxes (including any
deduction) and the receipt of the indemnity provided hereunder or of any refund
of any such tax previously indemnified hereunder, including the effect of such
tax, deduction or refund on the amount of tax measured by net income or profits
which is or was payable by the Indemnified Party.

     (c) CONTRIBUTION. If for any reason the indemnification provided above in
this Section 13.1 (and subject to the exceptions set forth therein) is
unavailable to an Indemnified Party or is insufficient to hold an Indemnified
Party harmless, then the Borrower shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, claim, damage or liability
in such proportion as is appropriate to reflect not only the relative benefits
received by such Indemnified Party on the one hand and the Borrower on the other
hand but also the relative fault of such Indemnified Party as well as any other
relevant equitable considerations.

    SECTION 13.2. INDEMNITIES BY SERVICER. Without limiting any other rights
which any Indemnified Party may have hereunder or under applicable law, the
Servicer hereby agrees to indemnify each of the Indemnified Parties forthwith on
demand, from and against any and all Indemnified Amounts awarded against or
incurred by any of them arising out of or relating to the Servicer's performance
of, or failure to perform, any of its obligations under or in connection with
any Transaction Document, or any representation or warranty made by the Servicer
(or any of its officers) under or in connection with any Transaction Document,
any Information Package or any other information or report delivered by or on
behalf of the Servicer, which shall have been false, incorrect or misleading in
any material respect when made or deemed made or delivered, as the case may be,
or the failure of the Servicer to comply with any applicable law, rule or
regulation with respect to any Receivable or the related Contract.
Notwithstanding the foregoing, in no event shall any Indemnified Party be
awarded any Indemnified Amounts (a) to the extent determined by a court of
competent jurisdiction to have resulted from gross negligence or willful
misconduct on the part of such Indemnified Party, (b) as recourse for
Indemnified Amounts to the extent the same includes losses in respect of
Receivables which are uncollectible on account of the insolvency, bankruptcy or

                                      -42-


lack of creditworthiness of the related Obligor, (c) that represent taxes based
upon, or measured by, net income, of changes in the rate of tax or as determined
by reference to the overall net income, of such Indemnified Party, (d) that
represent franchise taxes, taxes on, or in the nature of, doing business taxes
or capital taxes or (e) that represent withholding taxes required for payments
made to any foreign entity which, at the time such foreign entity issues its
Commitment or Liquidity Commitment or becomes an assignee of a Lender hereunder,
fails to deliver to the Agent and the Borrower an accurate IRS Form W-8 BEN or
W-8 ECI, as applicable.

     If for any reason the indemnification provided above in this Section 13.2
(and subject to the exceptions set forth therein) is unavailable to an
Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
the Servicer shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by such
Indemnified Party on the one hand and the Servicer on the other hand but also
the relative fault of such Indemnified Party as well as any other relevant
equitable considerations.

                                   ARTICLE XIV
                                  MISCELLANEOUS

    SECTION 14.1. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by any Loan Party therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Borrower and the Agent, and any such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. The
Borrower acknowledges that, before entering into such an amendment or granting
such a waiver or consent, the Agent will be required to obtain the approval of
the Lenders and the Liquidity Banks.

    SECTION 14.2. NOTICES, ETC. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth on
Schedule 14.2 or at such other address or facsimile number as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, (a) if personally delivered
or sent by express mail or courier or if sent by certified mail, when received,
and (b) if transmitted by facsimile, when sent, receipt confirmed by telephone
or electronic means.

    SECTION 14.3. NO WAIVER; REMEDIES. No failure on the part of any Agent or
any of the Secured Parties to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law. Without limiting the
foregoing, each of the Agent, the Lenders and the Liquidity Banks is hereby
authorized by the Borrower at any time and from time to time, to the fullest
extent permitted by law, to set off and apply to payment of any Obligations that
are then due and owing any and all deposits (general or special, time or demand
provisional or final) at any time held and other indebtedness at any time owing
by such Person to or for the credit or the account of the Borrower.

                                      -43-


    SECTION 14.4. BINDING EFFECT; SURVIVAl. This Agreement shall be binding upon
and inure to the benefit of the Borrower, the Agent, the Lenders and their
respective successors and assigns, and the provisions of Section 4.2 and Article
XIII shall inure to the benefit of the Affected Parties and the Indemnified
Parties, respectively, and their respective successors and assigns; PROVIDED,
HOWEVER, nothing in the foregoing shall be deemed to authorize any assignment
not permitted by Section 12.1. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until the Final Payout Date. The rights
and remedies with respect to any breach of any representation and warranty made
by the Borrower pursuant to Article VI and the indemnification and payment
provisions of Article XIII and Sections 4.2, 14.5, 14.6, 14.7, 14.8 and 14.15
shall be continuing and shall survive any termination of this Agreement.

    SECTION 14.5. COSTS, EXPENSES AND TAXES. In addition to its obligations
under the other provisions of this Agreement, the Borrower agrees to pay:

          (a) within 15 Business Days after receipt of a written invoice
     therefor: all reasonable out-of-pocket costs and expenses incurred by the
     Agent, in connection with (i) the negotiation, preparation, execution and
     delivery of this Agreement, the other Transaction Documents or the
     Liquidity Agreement (subject to the limitations set forth in the Fee
     Letter), or (ii) the administration of the Transaction Documents prior to
     an Event of Default including, without limitation, (A) the reasonable fees
     and expenses of a single law firm acting as counsel to the Agent and the
     Lenders incurred in connection with any of the foregoing, and (B) subject
     to the limitations set forth in the Fee Letter and in Section 7.1(c), the
     reasonable fees and expenses of independent accountants incurred in
     connection with any review of any Loan Party's books and records either
     prior to or after the execution and delivery hereof;

          (b) within 15 Business Days after receipt of a written invoice
     therefor: all reasonable out-of-pocket costs and expenses (including,
     without limitation, the reasonable fees and expenses of counsel and
     independent accountants) incurred by each of the Lenders, the Agent and the
     Liquidity Banks in connection with the negotiation, preparation, execution
     and delivery of any amendment or consent to, or waiver of, any provision of
     the Transaction Documents which is requested or proposed by any Loan Party
     (whether or not consummated), the administration of the Transaction
     Documents following an Event of Default (or following a waiver of or
     consent to any Event of Default), or the enforcement by any of the
     foregoing Persons of, or any actual or claimed breach of, this Agreement or
     any of the other Transaction Documents, including, without limitation, (i)
     the reasonable fees and expenses of counsel to any of such Persons incurred
     in connection with any of the foregoing or in advising such Persons as to
     their respective rights and remedies under any of the Transaction Documents
     in connection with any of the foregoing, and (ii) the reasonable fees and
     expenses of independent accountants incurred in connection with any review
     of any Loan Party's books and records or valuation of the Receivables and
     Related Assets; and

          (c) upon demand: all stamp and other taxes and fees payable or
     determined to be payable in connection with the execution, delivery, filing
     and recording of this Agreement or the other Transaction Documents (and The
     Borrower, jointly and severally agree to

                                      -44-


     indemnify each Indemnified Party against any liabilities with respect to or
     resulting from any delay in paying or omission to pay such taxes and fees).

    SECTION 14.6. NO PROCEEDINGS. Each of the parties hereto hereby agrees that
it will not institute against the Borrower or Blue Ridge, or join any Person in
instituting against the Borrower or Blue Ridge, any insolvency proceeding
(namely, any proceeding of the type referred to in the definition of Event of
Bankruptcy) so long as any Commercial Paper Notes or other senior Indebtedness
issued by Blue Ridge shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such Commercial Paper Notes or
other senior Indebtedness shall have been outstanding.

    SECTION 14.7. CONFIDENTIALITY OF BORROWER INFORMATION.

     (a) CONFIDENTIAL BORROWER INFORMATION. Each party hereto (other than the
Borrower) acknowledges that certain of the information provided to such party by
or on behalf of the Borrower in connection with this Agreement and the
transactions contemplated hereby is or may be confidential, and each such party
severally agrees that, unless Performance Guarantor shall otherwise agree in
writing, and except as provided in subsection (b), such party will not disclose
to any other person or entity any information which is designated by any Loan
Party in writing as confidential, whether furnished by any Loan Party or any
attorney for or other representative thereof (each, a "BORROWER INFORMATION
PROVIDER"), is collectively referred to as the "BORROWER INFORMATION");
PROVIDED, HOWEVER, "BORROWER INFORMATION" shall not include any information
which is or becomes generally available to the general public or to such party
on a nonconfidential basis from a source other than any Borrower Information
Provider, or which was known to such party on a nonconfidential basis prior to
its disclosure by any Borrower Information Provider.

     (b) DISCLOSURE. Notwithstanding subsection (a), each party may disclose any
Borrower Information:

          (i)    to any of such party's attorneys and auditors,

          (ii)   to any dealer or placement agent for such party's Commercial
     Paper Notes, who (A) in the good faith belief of such party, has a need to
     know the Borrower Information, (B) is informed by such party of the
     confidential nature of the Borrower Information and the terms of this
     Section 14.7 and (C) has agreed in writing to be bound by the provisions of
     this Section 14.7,

          (iii)  to any Liquidity Bank (whether or not on the date of
     disclosure, such Liquidity Bank continues to be an Eligible Assignee), to
     any other actual or potential permitted assignee or participant permitted
     under Section 12.1 who has agreed to be bound by the provisions of this
     Section 14.7,

          (iv)   to any rating agency that maintains a rating for such party's
     Commercial Paper Notes or is considering the issuance of such a rating, for
     the purposes of reviewing the credit of any Lender in connection with such
     rating,

                                      -45-


          (v)    to any other party to this Agreement (and any independent
     attorneys and auditors of such party), for the purposes contemplated
     hereby,

          (vi)   as may be required by any municipal, state, federal or other
     regulatory body having or claiming to have jurisdiction over such party, in
     order to comply with any law, order, regulation, regulatory request or
     ruling applicable to such party,

          (vii)  subject to subsection (c), in the event such party is legally
     compelled (by interrogatories, requests for information or copies,
     subpoena, civil investigative demand or similar process) to disclose such
     Borrower Information,

          (viii) to any entity that provides a surety bond or other credit
     enhancement to Blue Ridge, or

          (ix)   in connection with the enforcement of this Agreement or any
     other Transaction Document.

In addition, each of the Lenders and the Agent may disclose on a "no name" basis
to any actual or potential investor in Commercial Paper Notes information
regarding the nature of this Agreement, the basic terms hereof (including
without limitation the amount and nature of the Aggregate Commitment and the
Advances), the nature, amount and status of the Receivables, and the current
and/or historical ratios of losses to liquidations and/or outstandings with
respect to the Receivables.

     (c) LEGAL COMPULSION. In the event that any party hereto (other than any
Loan Party) or any of its representatives is requested or becomes legally
compelled (by interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any of the Borrower
Information, such party will (or will cause its representative to):

          (i) provide Performance Guarantor with prompt written notice so that
     (A) Performance Guarantor may seek a protective order or other appropriate
     remedy, or (B) Performance Guarantor may, if it so chooses, agree that such
     party (or its representatives) may disclose such Borrower Information
     pursuant to such request or legal compulsion; and

          (ii) unless Performance Guarantor agrees that such Borrower
     Information may be disclosed, make a timely objection to the request or
     compulsion to provide such Borrower Information on the basis that such
     Borrower Information is confidential and subject to the agreements
     contained in this SECTION 14.7.

In the event such protective order or remedy is not obtained, or Performance
Guarantor agrees that such Borrower Information may be disclosed, such party
will furnish only that portion of the Borrower Information which (in such
party's good faith judgment) is legally required to be furnished and will
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be afforded the Borrower Information.

     (d) SURVIVAL. This SECTION 14.7 shall survive termination of this
Agreement.

                                      -46-


    SECTION 14.8. CONFIDENTIALITY OF PROGRAM INFORMATION.

     (a) CONFIDENTIAL INFORMATION. Each party hereto acknowledges that Blue
Ridge and the Agent regard the structure of the transactions contemplated by
this Agreement to be proprietary, and each such party agrees that:

          (i) it will not disclose without the prior consent of Blue Ridge or
     the Agent (other than to the directors, employees, auditors, counsel or
     affiliates (collectively, "REPRESENTATIVES") of such party, each of whom
     shall be informed by such party of the confidential nature of the Program
     Information (as defined below) and of the terms of this SECTION 14.8): (A)
     any information regarding the pricing in, or copies of, this Agreement, the
     Liquidity Agreement or the Fee Letter or any transaction contemplated
     hereby or thereby, (B) any information regarding the organization, business
     or operations of Blue Ridge generally or the services performed by the
     Agent for Blue Ridge, or (C) any information which is furnished by Blue
     Ridge or the Agent to such party and which is designated by Blue Ridge or
     the Agent to such party in writing or otherwise as confidential or not
     otherwise available to the general public (the information referred to in
     CLAUSES (A), (B) and (C) is collectively referred to as the "PROGRAM
     INFORMATION"); PROVIDED, HOWEVER, that such party may disclose any such
     Program Information (I) as may be required by any municipal, state, federal
     or other regulatory body having or claiming to have jurisdiction over such
     party, including, without limitation, the SEC, (II) in order to comply with
     any law, order, regulation, regulatory request or ruling applicable to such
     party, (III) subject to SUBSECTION (c) below, in the event such party is
     legally compelled (by interrogatories, requests for information or copies,
     subpoena, civil investigative demand or similar process) to disclose any
     such Program Information, or (IV) in financial statements as required by
     GAAP;

          (ii) it will use the Program Information solely for the purposes of
     evaluating, administering and enforcing the transactions contemplated by
     the Transaction Documents and making any necessary business judgments with
     respect thereto; and

          (iii) it will, upon demand, return (and cause each of its
     representatives to return) to the Agent, all documents or other written
     material received from Blue Ridge or the Agent in connection with (a)(i)
     (B) or (C) above and all copies thereof made by such party which contain
     the Program Information.

     (b) AVAILABILITY OF CONFIDENTIAL INFORMATION. This Section 14.8 shall be
inoperative as to such portions of the Program Information which are or become
generally available to the public or such party on a nonconfidential basis from
a source other than the Agent or were known to such party on a nonconfidential
basis prior to its disclosure by the Agent.

     (c) LEGAL COMPULSION TO DISCLOSE. In the event that any party or anyone to
whom such party or its representatives transmits the Program Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the Program Information, such party will:

                                      -47-


          (i) provide the Agent with prompt written notice so that the Agent may
     seek a protective order or other appropriate remedy and/or, if it so
     chooses, agree that such party may disclose such Program Information
     pursuant to such request or legal compulsion; and

          (ii) unless the Agent agrees that such Program Information may be
     disclosed, make a timely objection to the request or confirmation to
     provide such Program Information on the basis that such Program Information
     is confidential and subject to the agreements contained in this SECTION
     14.8.

In the event that such protective order or other remedy is not obtained, or the
Agent agrees that such Program Information may be disclosed, such party will
furnish only that portion of the Program Information which (in such party's good
faith judgment) is legally required to be furnished and will exercise reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded the Program Information. In the event any Loan Party is required to
file a copy of this Agreement with the SEC or any other governmental authority,
it will (A) provide the Agent with prompt written notice of such requirement and
(B) exercise reasonable efforts to obtain reliable assurance that such
governmental authority will give confidential treatment to this Agreement.

     (d) SURVIVAL. This SECTION 14.8 shall survive termination of this
Agreement.

    SECTION 14.9. CAPTIONS AND CROSS REFERENCES. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.

    SECTION 14.10. INTEGRATION. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.

    SECTION 14.11. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND
DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE SECURITY
INTEREST OF THE AGENT, ON BEHALF OF THE SECURED PARTIES, IN THE COLLATERAL IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

    SECTION 14.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR UNDER
ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING OR OTHER
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL NOT BE TRIED BEFORE
A JURY.

                                      -48-


    SECTION 14.13. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES. EACH SELLER
PARTY HEREBY ACKNOWLEDGES AND AGREES THAT:

          (a) IT IRREVOCABLY (i) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION,
       FIRST, OF ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL
       JURISDICTION IS NOT AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER
       CASE SITTING IN NEW YORK COUNTY, NEW YORK, IN ANY ACTION OR PROCEEDING
       ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND (ii) WAIVES, TO THE
       FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
       FORUM TO THE MAINTENANCE OF AN ACTION OR PROCEEDING IN SUCH COURTS.

          (b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
       FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
       THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
       AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
       PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
       OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT.

    SECTION 14.14. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.

    SECTION 14.15. NO RECOURSE AGAINST OTHER PARTIES. The several obligations of
the Lenders under this Agreement are solely the corporate obligations of such
Lender. No recourse shall be had for the payment of any amount owing by such
Lender under this Agreement or for the payment by such Lender of any fee in
respect hereof or any other obligation or claim of or against such Lender
arising out of or based upon this Agreement, against any employee, officer,
director, incorporator or stockholder of such Lender. Each of the Borrower, the
Servicer and the Agent agrees that Blue Ridge shall be liable for any claims
that such party may have against Blue Ridge only to the extent Blue Ridge has
excess funds and to the extent such assets are insufficient to satisfy the
obligations of Blue Ridge hereunder, Blue Ridge shall have no liability with
respect to any amount of such obligations remaining unpaid and such unpaid
amount shall not constitute a claim against Blue Ridge. Any and all claims
against Blue Ridge or the Agent shall be subordinate to the claims against such
Persons of the holders of Commercial Paper Notes and the Liquidity Banks.

                                      -49-


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

BORROWER:
                                       PACKAGING RECEIVABLES COMPANY, LLC

                                       By:         /s/ Darla J. Vanas
                                          --------------------------------------
                                          Name:        Darla J. Vanas
                                                --------------------------------
                                          Title:  Assistant Secretary
                                                   & Tax Director
                                                --------------------------------
SERVICER:
                                       PACKAGING CREDIT COMPANY, LLC

                                       By:         /s/ Darla J. Vanas
                                          --------------------------------------
                                          Name:        Darla J. Vanas
                                                --------------------------------
                                          Title:  Assistant Secretary
                                                   & Tax Director
                                                --------------------------------

                        Borrower/Servicer Signature Page



AGENT:
                                       WACHOVIA BANK, N.A., as Agent

                                       By:    /s/ W. Adrian Jordan
                                          --------------------------------------
                                          Name:   W. Adrian Jordan
                                                --------------------
                                          Title:  Vice President
                                                --------------------

LENDERS:
                                       BLUE RIDGE ASSET FUNDING CORPORATION

                                       By:  Wachovia Bank, N.A., its
                                            attorney-in-fact

                                       By:    /s/ Kenny Karpowicz
                                          --------------------------------------
                                          Name:   Kenny Karpowicz
                                                --------------------
                                          Title:  Vice President
                                                --------------------

                                             Initial Commitment: not applicable

                                       WACHOVIA BANK, N.A.

                                       By:    /s/ W. Adrian Jordan
                                          --------------------------------------
                                          Name:   W. Adrian Jordan
                                                --------------------
                                          Title:  Vice President
                                                --------------------

                                             Initial Commitment: $150,000,000

                  Agent/Blue Ridge/Wachovia CSA Signature Page



                                     ANNEX A

                                   DEFINITIONS

     A. Certain Defined Terms. As used in this Agreement:

     "ACCOUNT" shall have the meaning specified in Section 9-106 of the UCC.

     "ADJUSTED DILUTION RATIO" at any time means the 12-month rolling average of
the Dilution Ratio for the 12 Settlement Periods then most recently ended.

     "ADVANCE" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made on the same Borrowing Date.

     "AFFECTED PARTY" means each of the Lenders and the Agent.

     "AFFILIATE" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.

     "AFFILIATED OBLIGOR" in relation to any Obligor means an Obligor that is an
Affiliate of such Obligor.

     "AGENT" has the meaning provided in the preamble of this Agreement.

     "AGGREGATE COMMITMENT" means the aggregate of the Commitments of the
Liquidity Banks, as reduced or increased from time to time pursuant to the terms
hereof.

     "AGREEMENT" means this Credit and Security Agreement, as it may be amended
or modified and in effect from time to time.

     "ALLOCATION LIMIT" has the meaning set forth in SECTION 1.1.

     "ALTERNATE BASE RATE" means for any day, the rate per annum equal to the
higher as of such day of (i) the Base Rate, or (ii) one-half of one percent
(0.50%) above the Federal Funds Rate. For purposes of determining the Alternate
Base Rate for any day, changes in the Base Rate or the Federal Funds Rate shall
be effective on the date of each such change. The Alternate Base Rate is not
necessarily intended to be the lowest rate of interest determined by Wachovia in
connection with extensions of credit.

     "ALTERNATE BASE RATE LOAN" means a Loan which bears interest at the
Alternate Base Rate or the Default Rate.

     "ARTICLE" means an article of this Agreement unless another document is
specifically referenced.



     "BASE RATE" means the rate of interest per annum publicly announced from
time to time by Wachovia as its "prime rate." (The "prime rate" is a rate set by
Wachovia based upon various factors including Wachovia's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.) Any change in the prime rate announced by Wachovia shall
take effect at the opening of business on the day specified in the public
announcement of such change.

     "BANK RATE SPREAD" has the meaning provided in the Fee Letter.

     "BLUE RIDGE" has the meaning provided in the preamble of this Agreement.

     "BORROWER" has the meaning provided in the preamble of this Agreement.

     "BORROWER INFORMATION" has the meaning set forth in SECTION 14.7(a).

     "BORROWER INFORMATION PROVIDER" has the meaning set forth in SECTION
14.7(a).

     "BORROWING BASE" means, on any date of determination, the amount determined
by reference to the following formula:

                                (NPB - RR) - EDC

          where:

          NPB   =     the Net Pool Balance as of the most recent Cut-Off Date
                      occurring at least seven Business Days prior to the date
                      of determination;

          RR    =     the Required Reserve as of the most recent Cut-Off Date
                      occurring at least seven Business Days prior to the date
                      of determination; and

          EDC   =     Deemed Collections that have occurred since the most
                      recent Cut-Off Date occurring at least seven Business Days
                      prior to the date of determination to the extent such
                      Deemed Collections exceed the Dilution Reserve.

     "BORROWING DATE" means a date on which an Advance is made hereunder.

     "BORROWING REQUEST" is defined in Section 2.1.

     "BUSINESS DAY" means (i) any day on which banks are not authorized or
required to close in New York, New York, Chicago, Illinois or Atlanta, Georgia,
and The Depository Trust Company of New York is open for business, and (ii) if
the applicable Business Day relates to any computation or payment to be made
with respect to the Eurodollar Rate (Reserve Adjusted), any day on which
dealings in dollar deposits are carried on in the London interbank market.

                                       -2-



     "CHANGE IN CONTROL" means:

          (a) the failure of Performance Guarantor to own (directly or through
     one or more wholly-owned Subsidiaries of Performance Guarantor) 100% of the
     membership interests of the Borrower; or

       (b)(i) the acquisition by any Person, or two or more Persons acting in
     concert, other than the Principal and its Related Parties, of beneficial
     ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
     Commission under the Exchange Act) of 20% or more of the outstanding shares
     of voting stock of Performance Guarantor or (ii) during any period of up to
     12 consecutive months, commencing on the date of this Agreement,
     individuals who at the beginning of such 12-month period were directors of
     Performance Guarantor shall cease for any reason (other than the death,
     disability or retirement of an officer of Performance Guarantor that is
     serving as a director at such time so long as another officer of
     Performance Guarantor replaces such Person as a director) to constitute a
     majority of the Board of Directors of Performance Guarantor.

     "CODE" means the Internal Revenue Code of 1986, as the same may be amended
from time to time.

     "COLLATERAL" has the meaning set forth in Section 9.1.

     "COLLECTION ACCOUNT" has the meaning set forth in Section 7.1(i).

     "COLLECTIONS" means all funds which either (i) are received by the
Borrower, the Seller, the Originator or the Servicer from or on behalf of the
related Obligor in payment of any amounts owed (including, without limitation,
purchase prices, finance charges, interest and all other charges) in respect of
such Receivable, or applied to such amounts owed by such Obligor (including,
without limitation, insurance payments that the Borrower, the Seller, the
Originator or the Servicer applies in the ordinary course of its business to
amounts owed in respect of such Receivable and net proceeds of sale or other
disposition of repossessed goods or other collateral or property of the Obligor
or any other party directly or indirectly liable for payment of such Receivable
and available to be applied thereon), or (ii) are Deemed Collections.

     "COMMERCIAL PAPER NOTES" shall mean the commercial paper promissory notes,
if any, issued by or on behalf of Blue Ridge that fund any CP Rate Loan.

     "COMMITMENT" means, for each Liquidity Bank, its obligation to make Loans
not exceeding the amount set forth opposite its signature to the Agreement, as
such amount may be modified from time to time pursuant to the terms hereof.

     "COMMITMENT INCREASE REQUEST" has the meaning set forth in SECTION 1.7.

     "COMMITMENT REDUCTION NOTICE" has the meaning set forth in SECTION 1.6.

     "CONTRACT" means with respect to any Receivable, any agreement, contract or
other writing with respect to the provision of services by the Originator to an
Obligor, any paper or electronic bill,

                                       -3-



statement or invoice for services rendered by the Originator to an Obligor, and
any instrument or chattel paper now or hereafter evidencing all or any portion
of the same.

     "CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of or other instrument, document or agreement to which
such Person is a party or by which it or any of its property is bound.

     "CP RATE" means, for any CP Tranche Period, the rate equivalent to the rate
(or if more than one rate, the weighted average of the rates) at which
Commercial Paper Notes of Blue Ridge having a term equal to such CP Tranche
Period are sold plus (to the extent not already deducted from the Principal
Amount of such Commercial Paper Notes) the amount of any placement agent or
commercial paper dealer fees incurred in connection with such sale and other
costs associated with funding small or odd-lot amounts; PROVIDED, HOWEVER, that
if the rate (or rates) as agreed between any such agent or dealer and Blue Ridge
is a discount rate (or rates), the "CP Rate" for such Tranche Period shall be
the rate (or if more than one rate, the weighted average of the rates) resulting
from Blue Ridge's converting such discount rate (or rates) to an
interest-bearing equivalent rate per annum.

     "CP RATE LOAN" means a Loan made by Blue Ridge which bears interest at a CP
Rate.

     "CP TRANCHE PERIOD" shall mean a period of 7 to 90 days commencing on a
Business Day selected by the Borrower (or by the Servicer on the Borrower's
behalf) and agreed to by the Agent pursuant to Section 2.2. If such CP Tranche
Period would end on a day which is not a Business Day, such CP Tranche Period
shall end on the preceding Business Day.

     "CREDIT AND COLLECTION POLICY" means those credit and collection policies
and practices of the Originator relating to Contracts and Receivables as in
effect on the date of this Agreement, as modified without violating Section
7.3(c); PROVIDED that if an Event of Default or an Unmatured Default has
occurred, at the request of the Agent, Packaging Corporation of America shall
provide a copy of its existing Credit and Collection Policy.

     "CREDIT EVENT" means, with respect to the Performance Guarantor, the
lowering of the Performance Guarantor's issuer rating or bank debt rating to
below BB- by S&P or the withdrawal or suspension of either such rating.

     "CUT-OFF DATE" means October 31, 2000 and the last day of each month
thereafter.

     "DAYS SALES OUTSTANDING" or "DSO", means, as of any day, an amount equal to
the product of (x) 91, multiplied by (y) the amount obtained by dividing (i) the
aggregate outstanding balance of Receivables as of the most recent Cut-Off Date,
by (ii) the aggregate amount of Receivables created during the three Settlement
Periods including and immediately preceding such Cut-Off Date.

     "DEEMED COLLECTIONS" means Collections deemed received by the Borrower
under Section 3.4.

                                       -4-



     "DEFAULT HORIZON RATIO" at any time means the ratio (expressed as a
percentage) computed as of the Cut-Off Date for the next preceding Settlement
Period by dividing the aggregate sales generated during the most recent five
Settlement Periods by the Net Pool Balance as of the most recent Cut-off Date.

     "DEFAULT RATE" means a rate per annum equal to the sum of (i) the Alternate
Base Rate plus (ii) 2.00%, changing when and as the Alternate Base Rate changes.

     "DEFAULT RATIO" means, as of any Cut-Off Date, the ratio (expressed as a
percentage) computed by dividing (x) the total amount of Receivables which
became Defaulted Receivables during the Settlement Period that includes such
Cut-Off Date, by (y) the aggregate sales generated by the Originator during the
Settlement Period occurring five months prior to the Settlement Period ending on
such Cut-Off Date.

     "DEFAULTED RECEIVABLE" means a Receivable: (a) as to which any payment, or
part thereof, remains unpaid for more than 90 days from the original due date
for such payment; or (b) as to which an Event of Bankruptcy has occurred and
remains continuing with respect to the Obligor thereof.

     "DELINQUENCY RATIO" at any time means the ratio (expressed as a percentage)
computed as of the Cut-Off Date for the next preceding Settlement Period by
dividing (x) the aggregate Unpaid Balance of all Receivables that are Delinquent
Receivables on such Cut-Off Date by (y) the aggregate Unpaid Balance of
Receivables on such Cut-Off Date.

     "DELINQUENT RECEIVABLE" means a Receivable as to which any payment, or part
thereof, remains unpaid for 61-90 days from the original due date for such
payment.

     "DILUTION" means the reduction or cancellation of the Unpaid Balance of a
Receivable as described in SECTION 3.4(a).

     "DILUTION HORIZON RATIO" means, on any Settlement Date, an amount
calculated by dividing (a) cumulative sales generated during the two most recent
Settlement Periods by (b) the Net Pool Balance as of the most recent Cut-off
Date.

     "DILUTION RATIO" means, as of any Settlement Date, a percentage equal to a
fraction, the numerator of which is the total amount of decreases in Unpaid
Balances due to Dilutions during the most recent Settlement Period, and the
denominator of which is the amount of sales generated during the Settlement
Period one month prior to the most recent Settlement Period.

     "DILUTION RESERVE" means, as of any Settlement Date, a percentage equal to
the product of (x) the sum of (i) 2.0 times the Adjusted Dilution Ratio, plus
(ii) the Dilution Volatility Component, multiplied by (y) the Dilution Horizon
Ratio.

     "DILUTION VOLATILITY COMPONENT" means, as of any Settlement Date, an amount
(expressed as a percentage) equal to the product of (i) the difference between
(a) the highest three-month rolling average Dilution Ratio over the preceding 12
Settlement Periods and (b) the Adjusted Dilution Ratio,

                                       -5-



and (ii) a fraction, the numerator of which is equal to the amount calculated in
(i)(a) of this definition and the denominator of which is equal to the amount
calculated in (i)(b) of this definition.

     "DOLLARS" means dollars in lawful money of the United States of America.

     "DOWNGRADED LIQUIDITY BANK" means a Liquidity Bank which has been the
subject of a Downgrading Event.

     "DOWNGRADING EVENT" with respect to any Liquidity Bank means the lowering
of a rating with regard to the short-term securities of such Liquidity Bank to
below (i) A-1 by S&P, or (ii) P-1 by Moody's.

     "ELIGIBLE ASSIGNEE" means (a) any "bankruptcy remote" special purpose
entity which is administered by Wachovia (or any Affiliate of Wachovia) that is
in the business of acquiring or financing receivables, securities and/or other
financial assets and which issues commercial paper notes that are rated at least
A-1 by S&P and P-1 by Moody's, (b) any Qualifying Liquidity Bank having a
combined capital and surplus of at least $250,000,000, or (c) any Downgraded
Liquidity Bank whose liquidity commitment has been fully drawn by Blue Ridge or
the Agent and funded into a collateral account.

     "ELIGIBLE RECEIVABLE" means, at any time, a Receivable:

          (a) which is a Receivable arising out of the sale of goods or services
     by the Originator in the ordinary course of its business that has been sold
     or contributed to the Seller pursuant to the Sale Agreement in a "true
     sale" or "true contribution" transaction and which has been subsequently
     sold or contributed by the Seller to the Borrower in a "TRUE SALE" or "TRUE
     CONTRIBUTION" transaction;

          (b) as to which the perfection of the Agent's security interest, on
     behalf of the Secured Parties, is governed by the laws of a jurisdiction
     where the Uniform Commercial Code-Secured Transactions is in force, and
     which constitutes an "account" as defined in the UCC as in effect in such
     jurisdiction;

          (c) the Obligor of which is a resident of the United States or any of
     its possessions or territories, and is not (i) an Affiliate of any Loan
     Party, or (ii) a Governmental Authority as to which the assignment of
     receivables owing therefrom requires compliance with the Federal Assignment
     of Claims Act or other similar legislation (unless the Borrower has
     complied therewith);

          (d) which is not a Defaulted Receivable at such time;

          (e) with regard to which the representations and warranties of the
     Borrower in SECTIONS 6.1(j) and (l) are true and correct;

          (f) the granting of a security interest therein does not contravene or
     conflict with any law;

                                       -6-



          (g) which is denominated and payable only in Dollars in the United
     States;

          (h) which arises under a Contract and is evidenced by a Contract, in
     each case that has been duly authorized and that, together with such
     Receivable, is in full force and effect and constitutes the legal, valid
     and binding obligation of the Obligor of such Receivable enforceable
     against such Obligor in accordance with its terms and is not subject to any
     dispute, offset (except as provided below), counterclaim or defense
     whatsoever; PROVIDED, HOWEVER, that if such dispute, offset, counterclaim
     or defense affects only a portion of the Unpaid Balance of such Receivable,
     then such Receivable may be deemed an Eligible Receivable to the extent of
     the portion of such Unpaid Balance which is not so affected, and PROVIDED
     FURTHER, that Receivables owing from any Obligor to whom the Originator
     owes accounts payable (thereby giving rise to a potential offset) may be
     treated as Eligible Receivables to the extent the Obligor of such
     receivables has agreed pursuant to a written agreement in form and
     substance satisfactory to the Agent, that such Receivables shall not be
     subject to such offset;

          (i) which, together with the Contract related thereto, does not
     contravene in any material respect any laws, rules or regulations
     applicable thereto (including, without limitation, laws, rules and
     regulations relating to usury, truth in lending, fair credit billing, fair
     credit reporting, equal credit opportunity, fair debt collection practices
     and privacy) and with respect to which no party to the Contract related
     thereto is in violation of any such law, rule or regulation in any material
     respect if such violation would impair the collectibility of such
     Receivable;

          (j) which satisfies in all material respects all applicable
     requirements of the Originator's Credit and Collection Policy;

          (k) which, according to the Contract related thereto, is due and
     payable within 61 days from the invoice date of such Receivable;

          (l) the original term of which has not been extended (except as
     permitted in SECTION 8.2(c)); and

          (m) when aggregated with all other Receivables owing from the same
     Obligor, not more than 35% of the aggregate Unpaid Balance of all
     Receivables owing from such Obligor are Defaulted Receivables.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.

     "ERISA AFFILIATE" means any trade or business (whether or not incorporated)
under common control with Performance Guarantor within the meaning of Section
414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes
of provisions relating to Section 412 of the Code).

     "ERISA EVENT" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by Performance Guarantor or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in

                                       -7-



Section 4001 (a) (2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
withdrawal by Performance Guarantor or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon Performance Guarantor
or any ERISA Affiliate.

     "EURODOLLAR BUSINESS DAY" means a day of the year as defined in CLAUSE (i)
of the definition of Business Day.

     "EURODOLLAR LOAN" means a Loan which bears interest at the applicable
Eurodollar Rate.

     "EURODOLLAR RATE" means, for any Interest Period, the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of the related Liquidity Funding
offered for a term comparable to such Interest Period, which rates appear on a
Bloomberg L.P. terminal, displayed under the address "US0001M [Index] Q [Go]"
effective as of 11:00 A.M., London time, two Eurodollar Business Days prior to
the first day of such Interest Period, PROVIDED that if no such offered rates
appear on such page, the Eurodollar Rate for such Interest Period will be the
arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of
1%) of rates quoted by not less than two major banks in New York City, selected
by the Agent, at approximately 10:00 A.M., New York City time, two Eurodollar
Business Days prior to the first day of such Interest Period, for deposits in
Dollars offered by leading European banks for a period comparable to such
Interest Period in an amount comparable to the principal amount of such
Liquidity Funding.

     "EURODOLLAR RATE (RESERVE ADJUSTED)" applicable to any Interest Period
means a rate PER ANNUM equal to the quotient obtained (rounded upwards, if
necessary, to the next higher 1/100th of 1%) by DIVIDING (i) the applicable
Eurodollar Rate for such Interest Period by (ii) 1.00 minus the Eurodollar
Reserve Percentage.

     "EURODOLLAR RESERVE PERCENTAGE" shall mean, with respect to any Interest
Period, the maximum reserve percentage, if any, applicable to a Liquidity Bank
under Regulation D during such Interest Period (or if more than one percentage
shall be applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be applicable) for
determining such Liquidity Bank's reserve requirement (including any marginal,
supplemental or emergency reserves) with respect to liabilities or assets having
a term comparable to such Interest Period consisting or included in the
computation of "Eurocurrency Liabilities" pursuant to Regulation D. Without
limiting the effect of the foregoing, the Eurodollar Reserve Percentage shall
reflect any other reserves required to be maintained by such Liquidity Bank by
reason of any Regulatory Change against (a) any category of liabilities which
includes deposits by reference to which the "London Interbank Offered Rate" or
"LIBOR" is to be determined or (b) any category of extensions of credit or other
assets which include LIBOR-based credits or assets.

                                       -8-



     "EVENT OF DEFAULT" means an event described in SECTION 10.1.

     "EVENT OF BANKRUPTCY" shall be deemed to have occurred with respect to a
Person if either:

          (a) a case or other proceeding shall be commenced, without the
     application or consent of such Person, in any court, seeking the
     liquidation, reorganization, debt arrangement, dissolution, winding up, or
     composition or readjustment of debts of such Person, the appointment of a
     trustee, receiver, custodian, liquidator, assignee, sequestrator or the
     like for such Person or all or substantially all of its assets, or any
     similar action with respect to such Person under any law relating to
     bankruptcy, insolvency, reorganization, winding up or composition or
     adjustment of debts, and such case or proceeding shall continue
     undismissed, or unstayed and in effect, for a period of 60 consecutive
     days; or an order for relief in respect of such Person shall be entered in
     an involuntary case under the federal bankruptcy laws or other similar laws
     now or hereafter in effect; or

          (b) such Person shall commence a voluntary case or other proceeding
     under any applicable bankruptcy, insolvency, reorganization, debt
     arrangement, dissolution or other similar law now or hereafter in effect,
     or shall consent to the appointment of or taking possession by a receiver,
     liquidator, assignee, trustee, custodian, sequestrator (or other similar
     official) for, such Person or for any substantial part of its property, or
     shall make any general assignment for the benefit of creditors, or shall be
     adjudicated insolvent, or admit in writing its inability to, pay its debts
     generally as they become due, or, if a corporation or similar entity, its
     board of directors shall vote to implement any of the foregoing.

     "EXCESS CONCENTRATION AMOUNT" means, as of any date, the sum of the amounts
by which the aggregate Unpaid Balance of Receivables of each Obligor exceeds the
Obligor Concentration Limit for such Obligor.

     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

     "EXHIBIT" refers to an exhibit to this Agreement, unless another document
is specifically referenced.

     "EXTENSION REQUEST" has the meaning set forth in SECTION 1.8.

     "FACILITY FEE" has the meaning set forth in the Fee Letter.

     "FEDERAL FUNDS RATE" means, for any day, the rate PER ANNUM (rounded
upwards, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, PROVIDED that (i) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions, as reasonably
determined by the Agent.

                                       -9-



     "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve
System, or any successor thereto or to the functions thereof.

     "FEE LETTER" means that certain Fee Letter dated as of November 29, 2000 by
and among Performance Guarantor, the Borrower, Blue Ridge and the Agent.

     "FINAL PAYOUT DATE" means the earlier to occur of (i) the date following
the Termination Date on which all Receivables in existence on the Termination
Date have been paid in full or have been charged-off pursuant to the provisions
of the Credit and Collection Policy and (ii) date following the Termination Date
on which the Obligations have been paid in full.

     "GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
accounting profession, which are applicable to the circumstances as of the date
of determination.

     "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

     "GUARANTEE" of or by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase property, securities or services for the purpose
of assuring the owner of such Indebtedness of the payment of such Indebtedness
or (c) to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; PROVIDED HOWEVER that the term Guarantee shall
not include endorsements for collection or deposit, in either case, in the
ordinary course of business.

     "INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services (other
than trade payables incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, but limited, if such obligations are without
recourse to such Person, to the lesser of the principal amount of such
Indebtedness or the fair market value of such property, (g) all Guarantees by
such Person of

                                      -10-


Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements (the amount of any such obligation to be the amount
that would be payable upon the acceleration, termination or liquidation thereof)
and (j) all obligations of such Person as an account party in respect of letters
of credit and bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any partnership in which such Person is a general partner.

     "INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 13.1(a).

     "INDEMNIFIED PARTY" has the meaning set forth in SECTION 13.1(a).

     "INDEPENDENT DIRECTOR" has the meaning set forth in SECTION 7.4(ii).

     "INFORMATION PACKAGE" has the meaning set forth in SECTION 3.1.

     "INITIAL DUE DILIGENCE AUDITOR" means Arthur Andersen, LLP.

     "INITIAL PCA NOTE" means the Initial PCA Note as defined in the Receivables
Sale Agreement.

     "INTEREST PAYMENT DATE" means:

          (a) with respect to any CP Rate Loan, the last day of its CP Tranche
     Period, the date on which any such Loan is prepaid, in whole or in part,
     and the Termination Date;

          (b) with respect to any Eurodollar Loan, the last day of its Interest
     Period, the date on which any such Loan is prepaid, in whole or in part,
     and the Termination Date;

          (c) with respect to any Alternate Base Rate Loan, each Settlement Date
     while such Loan remains outstanding, the date on which any such Loan is
     prepaid, in whole or in part, and the Termination Date; and

          (d) with respect to any Loan while the Default Rate is applicable
     thereto, upon demand or, in the absence of any such demand, each Settlement
     Date while such Loan remains outstanding, the date on which any such Loan
     is prepaid, in whole or in part, and the Termination Date.

     "INTEREST PERIOD" means, with respect to a Eurodollar Loan, a period of
one, two or three months commencing on a Business Day selected by the Borrower
(or the Servicer on the Borrower's behalf) pursuant to this Agreement and agreed
to by the Agent. Such Interest Period shall end on the day which corresponds
numerically to such date one, two, or three months thereafter, PROVIDED,
HOWEVER, that (i) if there is no such numerically corresponding day in such
next, second or third succeeding month, such Interest Period shall end on the
last Business Day of such next, second or third succeeding month, and (ii) if an
Interest Period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day unless said next

                                      -11-


succeeding Business Day falls in a new calendar month, then such Interest Period
shall end on the immediately preceding Business Day.

     "INTEREST RATE" means a Eurodollar Rate (Reserve Adjusted), a CP Rate, an
Alternate Base Rate or the Default Rate.

     "INTEREST RESERVE" shall mean, on any date of determination, 1.5 times the
Alternate Base Rate multiplied by a fraction the numerator of which is the
12-month high Days Sales Outstanding for the preceding period of 12 months and
the denominator of which is 360.

     "LENDERS" means Blue Ridge, each Liquidity Bank and their respective
successors and permitted assigns.

     "LIEN" means any security interest, lien, encumbrance, pledge, assignment,
title retention, similar claim, right or interest.

     "LIQUIDITY AGREEMENT" means the Liquidity Asset Purchase Agreement dated as
of the date hereof among Blue Ridge, the Agent, and the Liquidity Banks from
time to time party thereto, as the same may be amended, restated, supplemented,
replaced or otherwise modified from time to time.

     "LIQUIDITY BANK" means (a) Wachovia, (b) any other Liquidity Bank which
becomes a party hereto and (c) any Eligible Assignee of such Liquidity Bank's
Commitment hereunder and under the Liquidity Agreement. A Liquidity Bank will
become a "Lender" hereunder at such time as it makes any Liquidity Funding.

     "LIQUIDITY COMMITMENT" means, with respect to each Liquidity Bank, its
commitment to make Liquidity Fundings pursuant to the Liquidity Agreement to
which it is a party.

     "LIQUIDITY FUNDING" means (a) a purchase made by any Liquidity Bank
pursuant to its Liquidity Commitment of all or any portion of one of Blue
Ridge's Loans, or (b) any Loan made by the Liquidity Banks in lieu of Blue Ridge
pursuant to SECTION 1.1.

     "LIQUIDITY TERMINATION DATE" means the earlier to occur of the following:

          (a) the date on which the Liquidity Banks' commitments pursuant to the
     Liquidity Agreement expire, cease to be available to Blue Ridge or
     otherwise cease to be in full force and effect; or

          (b) the date on which a Downgrading Event with respect to a Liquidity
     Bank shall have occurred and been continuing for not less than 30 days, and
     either (i) the Downgraded Liquidity Bank shall not have been replaced by a
     Qualifying Liquidity Bank pursuant to the Applicable Liquidity Agreement,
     or (ii) the commitment of such Downgraded Liquidity Bank under a Liquidity
     Agreement shall not have been funded or collateralized in such a manner
     that will avoid a reduction in or withdrawal of the credit rating applied
     to the Commercial Paper Notes to which such Liquidity Agreement applies by
     any of the rating agencies then rating such Commercial Paper Notes.

                                      -12-


     "LOAN" means any loan made by a Lender to the Borrower pursuant to this
Agreement. Each Loan shall either be a CP Rate Loan, an Alternate Base Rate Loan
or a Eurodollar Rate Loan, selected in accordance with the terms of this
Agreement.

     "LOAN PARTIES" means, collectively, the Borrower, the Seller and the
Performance Guarantor.

     "LOCK-BOX" has the meaning set forth in the Lock-Box Agreements.

     "LOCK-BOX ACCOUNT" means any bank account of the Borrower or the Agent into
which Collections are deposited or transferred and which is subject to a
Lock-Box Agreement.

     "LOCK-BOX AGREEMENT" means a letter agreement, in substantially the form of
Exhibit A (or as otherwise approved by the Agent), among the Originator, the
Borrower, the Agent and a Lock-Box Bank.

     "LOCK-BOX BANK" means any of the banks holding one or more lock-boxes,
blocked accounts or Lock-Box Accounts receiving Collections from Receivables.

     "LOSS RESERVE" as of any Cut-Off Date means a percentage equal the product
of (i) 2.0 times the highest three-month rolling average Default Ratio during
the most recent 12 Settlement Periods and (ii) the Default Horizon Ratio.

     "MATERIAL ADVERSE EFFECT" means:

          (i)   a Credit Event shall have occurred;

          (ii)  a material impairment of the ability of any Loan Party to
     perform under any Transaction Document or to avoid or cure, as applicable,
     any Unmatured Default or Event of Default;

          (iii) a material adverse effect upon the legality, validity, binding
     effect or enforceability against any Loan Party of any Transaction
     Document;

          (iv)  a material adverse effect upon the validity, enforceability or
     collectibility of a material portion of the Receivables; or

          (v)   a material adverse effect upon the validity, perfection,
     priority or enforceability of the Borrower's title to -- or the Agent's
     security interest, on behalf of the Secured Parties, in -- the Collateral.

     "MDP GROUP" shall have the meaning assigned such term in the Senior Credit
Agreement.

     "MOODY'S" means Moody's Investors Service, Inc.

     "MULTIEMPLOYER PLAN" means a "multiemployer plan", within the meaning of
Section 4001 (a) (3) of ERISA, to which Packaging Corporation of America or any
ERISA Affiliate makes, is

                                      -13-


making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.

     "NET POOL BALANCE" means, at any time, an amount equal to (i) the aggregate
Unpaid Balance of all Eligible Receivables at such time, MINUS (ii) the Excess
Concentration Amount at such time.

     "OBLIGATIONS" means all unpaid principal of and accrued and unpaid interest
on the Loans, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders (or any
Lender), the Agent or any Indemnified Party arising under the Transaction
Documents.

     "OBLIGOR" means a Person obligated to make payments with respect to a
Receivable, including any guarantor thereof.

     "OBLIGOR CONCENTRATION LIMIT" means, at any time, in relation to the
aggregate Unpaid Balance of Receivables owed by any single Obligor and its
Affiliated Obligors (if any), the applicable concentration limit (unless the
Agent from time to time upon the Borrower's request agrees to a higher
percentage of Eligible Receivables for a particular Obligor and its Affiliates)
be determined for Obligors who have short term unsecured debt ratings (or, in
the absence of such a rating, the equivalent long term unsecured senior debt
rating as specified below) currently assigned to them by S&P or Moody's;
PROVIDED, HOWEVER, that (a) if such Obligor has a split rating, the applicable
rating will be the lower of the two, (b) if such Obligor is rated by only S&P,
the applicable rating will be deemed to be one ratings tier below the actual
rating by S&P, and (c) if such Obligor is rated by only Moody's, the applicable
rating will be deemed to be one ratings tier below the actual rating by Moody's,
it being understood that if Moody's has assigned a P-1 rating to such Obligor
and S&P has not rated it, the applicable rating will be P-2:



- ---------------------------------------------------------------------------------------------
                    Moody's                                                  Allowable % of
S&P Long-Term     Long-Term        S&P Short-Term          Moody's               Eligible
    Rating          Rating             Rating          Short-Term Rating       Receivables
- ---------------------------------------------------------------------------------------------
                                                                     
 AAA to AA-       Aaa to Aa2            A-1+                P-1                  10%
- ---------------------------------------------------------------------------------------------
    A+                                  A-1                                       8%
- ---------------------------------------------------------------------------------------------
  A to BBB+         Aa3-A2              A-2                 P-2                   6%
- ---------------------------------------------------------------------------------------------
  BBB-BBB-          A3-Baa1             A-3                 P-3                   3%
- ---------------------------------------------------------------------------------------------
  Below BBB- or  Below Baa 1 or     Below A-3 or Not   Below P-3 or Not            2%
    Not Rated      Not Rated            Rated               Rated
- ---------------------------------------------------------------------------------------------


     "ORIGINATOR" means Packaging Corporation of America, a Delaware
corporation.

     "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.

     "PERCENTAGE SHARE" means, as of any time prior to the Termination Date, the
lesser of (i) 100% and (ii) a fraction, expressed as a percentage, the numerator
of which is the sum of (A) the aggregate principal amount of outstanding Loans,
and (B) the Required Reserve as of the most recent Cut-Off Date occurring at
least five Business Days prior to the date of determination and the denominator
of which is the difference between (A) the Net Pool Balance as of the most
recent Cut-Off Date occurring at least five Business Days, prior to the date of
determination and (B) Deemed

                                      -14-


Collections that have occurred since the most recent Cut-Off Date occurring at
least five Business Days prior to the date of determination to the extent such
Deemed Collections exceed the Dilution Reserve. Prior to the Termination Date,
the Percentage Share shall change whenever the aggregate principal amount of the
outstanding Loans, Required Reserve, Net Pool Balance or amount of Deemed
Collections changes. On and after the Termination Date, the Percentage Share
shall remain fixed at the percentage in effect as of the Termination Date as
determined pursuant to the preceding sentence.

     "PENSION PLAN" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which Packaging Corporation of America sponsors or
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five plan years.

     "PERFORMANCE GUARANTEE" means the Performance Guarantee dated as of the
date hereof from Performance Guarantor to Agent.

     "PERFORMANCE GUARANTOR" means Packaging Corporation of America, a Delaware
corporation.

     "PERSON" means any natural Person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.

     "PLAN" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which a Loan Party sponsors or maintains or to which a Loan Party makes, is
making, or is obligated to make contributions and includes any Pension Plan,
other than a Plan maintained outside the United States primarily for the benefit
of Persons who are not U.S. residents.

     "PREPAYMENT NOTICE" has the meaning set forth in SECTION 1.5(a)

     "PRINCIPAL" means MDP Group and its Affiliates.

     "PRINCIPAL AMOUNT" means the actual net cash proceeds received by Blue
Ridge upon issuance of a Commercial Paper Note.

     "PROGRAM FEE" has the meaning set forth Fee Letter.

     "PROGRAM INFORMATION" has the meaning set forth in SECTION 14.8.

     "PROPERTY" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.

     "PURCHASE AND SALE AGREEMENT" means the Purchase and Sale Agreement dated
as of the date hereof between the Seller and the Borrower.

                                      -15-


     "QUALIFYING LIQUIDITY BANK" means a Liquidity Bank with ratings of its
short-term securities equal to or higher than (i) A-1 by S&P and (ii) P-1 by
Moody's.

     "RATABLE SHARE" means (i) with respect to any Lender, the ratio which its
Loans bear to the sum of the Loans of all Lenders and (ii) with respect to any
Liquidity Bank, the ratio which its Commitment bears to the sum of the
Commitments of all Liquidity Banks.

     "RECEIVABLE" means any right to payment arising from the sale of products
by the Originator, including, without limitation, the right to payment of any
interest or finance charges and other amounts with respect thereto, which is
sold to the Seller under the Sale Agreement and to the Borrower under the
Purchase and Sale Agreement. Rights to payment arising from any one transaction,
including, without limitation, rights to payment represented by an individual
invoice, shall constitute a Receivable separate from a Receivable consisting of
the rights to payment arising from any other transaction or evidenced by any
other invoice; PROVIDED, HOWEVER, any right to payment referred to in this
sentence shall be a Receivable regardless of whether the account debtor or the
Borrower treats such right to payment as a separate payment obligation.

     "REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.

     "REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.

     "REGULATORY CHANGE" shall mean any change after the date of this Agreement
in United States (federal, state or municipal) or foreign laws or regulations
(including Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks (including
the Liquidity Banks) of or under any United States (federal, state or municipal)
or foreign, laws, or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

     "RELATED ASSETS" means (a) all rights to, but not any obligations under,
all related Contracts and all Related Security related to any Receivables, (b)
all rights and interests of the Borrower under the Purchase and Sale Agreement
in relation to any Receivables, (c) all books and records evidencing or
otherwise relating to any Receivables, (d) the Collection Account (if any) and
all Lock-Box Accounts and all cash and instruments therein, to the extent
constituting or representing the items in the following clause and (e) all
Collections in respect of, and other proceeds of, any Receivables or any other
Related Assets.

     "RELATED PARTIES" shall have the meaning assigned such term in the Senior
Credit Agreement.

     "RELATED SECURITY" means, with respect to any Receivable, all of the
Borrower's right, title and interest in and to: (a) all Contracts that relate to
such Receivable; (b) all security deposits and

                                      -16-


other security interests or liens and property subject thereto from time to time
purporting to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise; (c) all UCC financing
statements covering any collateral securing payment of such Receivable; (d) all
guarantees and other agreements or arrangements of whatever character from time
to time supporting or securing payment of such Receivable whether pursuant to
the Contract related to such Receivable or otherwise; and (e) all insurance
policies, and all claims thereunder, related to such Receivable, in each case to
the extent directly related to rights to payment, collection and enforcement,
and other rights with respect to such Receivable.

     "REPORTABLE EVENT" means any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.

     "REPORTING DATE" has the meaning set forth in SECTION 3.1(a).

     "REQUIRED AMOUNTS" has the meaning set forth in SECTION 3.2.

     "REQUIRED RESERVE" means, on any day during a Settlement Period, an amount
equal to the product of (A) the greater of (i) 12% and (ii) the sum of (w) the
Loss Reserve, (x) the Dilution Reserve, (y) the Interest Reserve and (z) the
Servicing Reserve (in each case, as of the immediately preceding Settlement
Date) times (B) the Net Pool Balance on such day.

     "REQUIREMENT OF LAW" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or final, nonappealable determination of an
arbitrator or of a Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.

     "RESPONSE DATE" has the meaning set forth in SECTION 1.8.

     "RESPONSIBLE OFFICER" of any Person means any of its Chairman, Chief
Executive Officer, Chief Operating Officer, President, Chief Financial Officer
or Treasurer.

     "REVIEW" has the meaning set forth in SECTION 7.1(c).

     "REVOLVING PERIOD" means the period from and after the date of the initial
Advance under this Agreement to but excluding the Termination Date.

     "S&P" means Standard and Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc.

     "SALE AGREEMENT" means the Receivables Sale Agreement dated as of that date
hereof between the Originator, as seller, and the Seller, as purchaser, as it
may be amended, supplemented or otherwise modified in accordance with SECTION
7.3(f).

     "SCHEDULE" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.

                                      -17-


     "SCHEDULED TERMINATION DATE" means November 29, 2003, unless extended by
unanimous agreement of the Agent, the Lenders and the Liquidity Banks.

     "SEC" means the Securities and Exchange Commission.

     "SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.

     "SECURED PARTIES" means the Agent, the Indemnified Parties and the Affected
Parties.

     "SELLER" means Packaging Credit Company, LLC, a Delaware limited liability
company.

     "SELLER NOTE" means the Seller Note as defined in the Purchase and Sale
Agreement.

     "SENIOR CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement dated as of June 29, 2000 among, the Performance Guarantor, various
Lenders (as defined therein), J.P. Morgan Securities, Inc., Deutsche Bank
Securities, Inc., Goldman Sachs Credit Partners L.P., and Morgan Guaranty Trust
Company of New York, with giving effect to any amendment or modifications made
after the date hereof without the prior written consent of the Agent.

     "SERVICER" has the meaning set forth in the preamble of this Agreement.

     "SERVICER TRANSFER EVENT" means the occurrence of any Unmatured Default or
Event of Default.

     "SERVICER'S FEE" accrued for any day in a Settlement Period means:

          (a) an amount equal to (x) 1.0% PER ANNUM (or, at any time while
     Seller is the Servicer, such lesser percentage as may be agreed between the
     Borrower and the Servicer on an arms' length basis based on then prevailing
     market terms for similar services), TIMES (y) the aggregate Unpaid Balance
     of the Receivables at the close of business on the first day of such
     Settlement Period, TIMES (z) 1/360; or

          (b) on and after the Servicer's reasonable request made at any time
     when Seller shall no longer be the Servicer, an alternative amount
     specified by the Servicer not exceeding (x) 110% of the Servicer's
     reasonable costs and expenses of performing its obligations under the
     Agreement during the Settlement Period when such day occurs, divided by (y)
     the number of days in such Settlement Period.

     "SERVICING RESERVE" shall mean the product of 1.0% and a fraction, the
numerator of which is the highest Days Sales Outstanding calculated for each of
the most recent 12 Settlement Periods and the denominator of which is 360.

     "SETTLEMENT DATE" means (a) the second Business Day after each Reporting
Date, or such later Business Day as the Agent may specify in a written notice to
the Borrower, and (b) the Termination Date.

                                      -18-


     "SETTLEMENT PERIOD" means: (a) the period from and including the date of
the initial Advance to and including the next Cut-Off Date; and (b) thereafter,
each period from but excluding a Cut-Off Date to and including the earlier to
occur of the next Cut-Off Date or the Final Payout Date.

     "SUBSIDIARY" of any Person means (i) a corporation more than 50% of whose
stock of any class or classes having by the terms thereof ordinary voting power
to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned or controlled by such Person, directly or
indirectly through Subsidiaries, and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time.

     "SUCCESSOR NOTICE" has the meaning set forth in SECTION 8.1(b).

     "TERMINATION DATE" means the earliest to occur of:

          (a) the Scheduled Termination Date;

          (b) the Liquidity Termination Date;

          (c) the date designated by the Borrower as the "Termination Date" on
     not less than five (5) Business Days' notice to the Agent, PROVIDED that on
     such date the Obligations have been paid in full;

          (d) the date specified in SECTION 10.2(a) or (b); or

          (e) the date on which the Seller ceases selling Receivables to the
     Borrower under the Purchase and Sale Agreement.

     "TRANSACTION DOCUMENTS" means this Agreement, the Lock-Box Agreements, the
Sale Agreement, the Purchase and Sale Agreement the Fee Letter, the Seller Note,
the Initial PCA Note and the other documents to be executed and delivered in
connection herewith.

     "TRANSFEREE" is defined in SECTION 12.4.

     "UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.

     "UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute an Event of Default.

     "UNPAID BALANCE" of any Receivable means at any time the unpaid amount
thereof, but excluding all late payment charges, delinquency charges and
extension or collection fees.

     "UNUSED FEE" has the meaning set forth in the Fee Letter.

     "WACHOVIA" has the meaning set forth in the preamble of this Agreement.

                                      -19-


     "WACHOVIA ROLES" has the meaning set forth in SECTION 11.10(a).

The foregoing definitions shall be equally applicable to both the singular and
plural forms of the defined terms.

     B. OTHER TERMS. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. All terms used in Article 9 of the UCC in
the State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.

     C. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this Agreement,
in the computation of a period of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".

                                      -20-


                                    EXHIBIT A

                           FORM OF LOCK-BOX AGREEMENT

                        [SEE PURCHASE AND SALE AGREEMENT]



                                   EXHIBIT 2.1

                            FORM OF BORROWING REQUEST

                       Packaging Receivables Company, LLC

                                BORROWING REQUEST

                       For Borrowing On __________________

Wachovia Bank, N.A., as Agent
191 Peachtree Street, N.E., GA-423
Atlanta, Georgia 30303

Attention:  Elizabeth R. Wagner, Fax No. (404) 332-5152

Ladies and Gentlemen:

     Reference is made to the Credit and Security Agreement dated as of November
29, 2000 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT") among Packaging Receivables Company, LLC (the "BORROWER"),
Packaging Credit Company, LLC, as initial Servicer, Blue Ridge Asset Funding
Corporation, and Wachovia Bank N.A., individually and as Agent. Capitalized
terms defined in the Credit Agreement are used herein with the same meanings.

I.   The [SERVICER, ON BEHALF OF THE] Borrower hereby certifies, represents and
     warrants to the Agent and the Lenders that on and as of the Borrowing Date
     (as hereinafter defined):

          (a) all applicable conditions precedent set forth in Article V of the
     Credit Agreement have been satisfied;

          (b) each of its representations and warranties contained in Section
     6.1 of the Credit Agreement will be true and correct, in all material
     respects, as if made on and as of the Borrowing Date;

          (c) no event will have occurred and is continuing, or would result
     from the requested Purchase, that constitutes an Event of Default or
     Unmatured Default;

          (d) the Termination Date has not occurred; and

          (e) after giving effect to the Loans comprising the Advance requested
     below, Blue Ridge's and the Liquidity Banks' Loans at any one time
     outstanding will not exceed the Allocation Limit.

III. The [SERVICER, ON BEHALF OF THE] Borrower hereby requests that Blue Ridge
     (or the Liquidity Banks) make an Advance on ___________, _____ (the
     "BORROWING DATE") as follows:

          (a) AGGREGATE AMOUNT OF ADVANCE: $_____________



          (b) INTEREST RATE REQUESTED: CP Rate (unless you advise the Borrower
     that a Liquidity Funding will be made, in which case the [SERVICER ON
     BEHALF OF THE] Borrower requests that the Liquidity Banks make an Alternate
     Base Rate Loan that converts into Eurodollar Loan with an Interest Period
     approximately equal to the CP Tranche Period specified below on the third
     Business Day after the Borrowing Date).

          (c) CP TRANCHE PERIOD REQUESTED: ________ days

IV.  Please disburse the proceeds of the Loans as follows:

          [APPLY $________ TO PAYMENT OF PRINCIPAL AND INTEREST OF EXISTING
     LOANS DUE ON THE BORROWING DATE]. [APPLY $______ TO PAYMENT OF FEES DUE ON
     THE BORROWING DATE]. [WIRE TRANSFER $________ TO ACCOUNT NO. ________ AT
     ___________ BANK, IN [CITY, STATE], ABA NO. __________, REFERENCE:
     ________].

     IN WITNESS WHEREOF, the [SERVICER, ON BEHALF OF THE] Borrower has caused
this Borrowing Request to be executed and delivered as of this ____ day of
___________, _____.

                                   [_______________________, AS SERVICER,
                                     ON BEHALF OF:] Packaging Receivables
                                     Company, LLC, as Borrower

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

                                       -2-


                                 EXHIBIT 3.1(a)

                           FORM OF INFORMATION PACKAGE



                                 EXHIBIT 5.1(h)

                       SUBSTANCE OF CORPORATE/UCC OPINIONS

- -    All opinions should be addressed to the Agent and the Lenders and should
     permit reliance thereon by (A) the Liquidity Banks and (B) S&P and Moody's.

- -    The opinion giver must be licensed to practice in the state whose law
     governs the Purchase and Sale Agreement and the Credit and Security
     Agreement (i.e., New York)

- -    Corporate/UCC opinions should address the following matters as to the
     Borrower and Originators (collectively, the "COMPANIES"):

     1. Each of the Companies has been duly organized and is validly existing
under the laws of Delaware, with power and authority to conduct its business as
now conducted (or, in the case of the Borrower, proposed to be conducted), to
own, or hold under lease, its assets and to enter into the Transaction Documents
to which it is a party and perform its obligations thereunder. Based solely on
certificates from public officials, we confirm that each of the Companies is
qualified to do business in the following States: Delaware, Illinois.

     2. The execution, delivery and performance of the Transaction Documents to
which any of the Companies is a party and the execution and delivery of the
Financing Statements naming any of the Companies as debtor or seller have been
duly authorized by all necessary action of such Company, and such Transaction
Documents and Financing Statements have been duly executed and delivered by such
Company.

     3. Each of the Transaction Documents constitutes a legally valid and
binding obligation of each of the Companies signatory thereto, enforceable
against such Company in accordance with its terms.

     4. The execution and delivery of the Transaction Documents and the
Financing Statements by each of the Companies signatory thereto, and the
performance of their respective obligations do not: (a) violate any federal or
the State of Delaware or State of Illinois statute, rule or regulation
applicable to the Companies (including, without limitation, Regulations T, U or
X of the Board of Governors of the Federal Reserve System), (b) violate the
provisions of the Companies' respective Governing Documents, (c) result in the
breach of or a default under, the creation of a lien under or the acceleration
of indebtedness pursuant to any indenture, credit agreement, lease, note or
other agreement, instrument or contract or any judgment, writ or other court
order, in any of the foregoing cases, which has been identified to you as being
material to any of the Companies, or (d) require any consents, approvals,
authorizations, registrations, declarations or filings by any of the Companies
under any federal or the State of Delaware or State of Illinois statute, rule or
regulation applicable to any of the Companies of the State of Delaware or State
of Illinois except the filing of the Financing Statements in the Office of the
_______________ (the "Filing Office(s)").

     5. The provisions of the Purchase and Sale Agreement are effective to
create a valid security interest (as defined in Section 1-201(37) of the New
York UCC) in favor of the Borrower



and its assigns in that portion of the Receivables and Related Rights which
constitute accounts or general intangibles. The provisions of the Credit and
Security Agreement are effective to create a valid security interest (as defined
above) in favor of the Agent for the benefit of the Secured Parties in that
portion of the Collateral which constitutes accounts or general intangibles as
security for the payment of the Obligations.

     6. Each of the Financing Statements is in appropriate form for filing in
the Filing Office specified on the face thereof. Upon the proper filing of each
of the Financing Statements in such Filing Office, the security interest in
favor of the Agent for the benefit of the Secured Parties in the Collateral
described therein will be perfected.

     7. Based solely on our review of the Search Reports, and assuming (a) the
proper filing of the Financing Statements in the appropriate Filing Offices, and
(b) the absence of any intervening filings between the date and time of the
Search Reports and the date and time of the filing of the Financing Statements
in the Filing Offices, the security interests of the Agent for the benefit of
Secured Parties in the Collateral described in #6 above will be prior to any
other security interest granted by any of the Companies in such collateral, the
priority of which is determined solely by the filing of a financing statement in
the applicable Filing Office.

     8. None of the Companies is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.

                                       -2-


                                   EXHIBIT 7.2
                    FORM OF CERTIFICATE OF FINANCIAL OFFICER

                              [NAME OF LOAN PARTY]
                        CERTIFICATE OF FINANCIAL OFFICER

     This Certificate is made pursuant to the provisions of the Credit and
Security Agreement dated as of November 29, 2000 (as amended or otherwise
modified from time to time in accordance with the terms thereof, the
"Agreement") among Packaging Receivables Company, LLC, as Borrower, Packaging
Credit Company, LLC, as initial Servicer, Blue Ridge Asset Funding Corporation,
and Wachovia Bank, N.A., individually and as Agent. The capitalized terms used,
but not defined, herein have the meanings assigned to them in the Agreement.

     The undersigned [FINANCIAL OFFICER] of the [BORROWER/INITIAL SERVICER]
hereby certifies that the financial statements being delivered concurrently
herewith fairly present the financial condition and results of operations of the
[BORROWER/INITIAL SERVICER] in accordance with generally accepted accounting
principles[, SUBJECT TO NORMAL YEAR-END AUDIT ADJUSTMENTS], and that no Default
or Event of Default exists as of the date hereof and is continuing.

[NAME OF LOAN PARTY]

By:
   ----------------------------

Name:
     --------------------------

Dated:
      -------------------------



                                 SCHEDULE 6.1(m)

 BORROWER'S FEDERAL TAXPAYER ID NUMBER, CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE
                    OF BUSINESS AND OTHER RECORDS LOCATION(S)

Federal Taxpayer I.D. No.: Borrower: 36-4391046
                           Servicer: 36-4277050

Chief Executive Office (Servicer and Borrower): 1900 West Field Court
                                                Lake Forest, Illinois 60045

Principal Place of Business:(Servicer and Borrower): 1900 West Field Court
                                                     Lake Forest, Illinois 60045

Other Records Locations:

     1001 113th Street
     Arlington, TX 76011

     1610 Winbourne Ct.
     North Little Rock, AR 72116

     21 Leigh Fisher Blvd.
     El Paso, TX 79906

     2510 West Miller Road
     Garland, TX 75041

     4240 Bandini Blvd.
     Vernon, CA 90023

     9200 Old McGregor Road
     Waco, TX 76712

     2325 C Statham Blvd.
     Oxnard, CA 93033

     441 S. 53rd Avenue
     Phoenix, AZ 85043

     1800 E. Plano Parkway
     Plano, TX 75074

     4654 W. 1525 South
     Salt Lake City, UT 84104



     460 W. 500 South
     Salt Lake City, UT 84101

     9700 Frontage Road
     Southgate, CA 90280

     2246 Udell Street
     Filer City, MI 49634

     1824 Baltimore Street
     Middletown, OH 45055

     555 Metro Place North
     Suite 500
     Dublin, OH 43017

     6247 Pine Street
     Burlington, WI 53105

     5600 West Good Hope Rd.
     Milwaukee, WI 53223

     901 Grimes Blvd.
     Lexington, NC 27292

     114 Dixie Blvd.
     Morganton, NC 28655

     6245 Woodlore Drive
     Acworth, GA 30101

     1302 N. Salisbury Ave.
     Salisbury, NC 28144

     3200 Lakewood Ave. S.W.
     East Point, GA 30344

     305 Van Buren Road
     Bolivar, TN 38008

     2313 N. William St.
     Goldsboro, NC 27530

     212 Roelee St.
     Trinity, NC 27370

                                       -2-


     12105 Belton Honea Path Hwy.
     Honea Path, SC 29654

     Highway 178
     Donalds, SC 29654

     112 Edwards Drive
     Jackson, TN 38301

     3936 Fountain Valley Lane
     Knoxville, TN 37918

     3240 Brittain Drive
     Newberry, SC 29108

     3200 Hipack Drive
     Opelika, AL 36801

     4300 Cheyene Drive
     Archdale, NC 27263

     321 Industrial Park Rd.
     Rutherfordton, NC 28139

     Highway 57
     P.O. Box 33
     Counce, TN 38326

     N9090 County Road E
     Tomahawk, WI 54487

     5495 Lake Park
     Clyarrville Road
     Clyarrville, GA 31601

     32745 J Avenue
     Beaman, IA 50609

     1201 Cornerstone Drive
     Windsor, CO 80550

     3200 N. Lake Shore Drive
     #2702
     Chicago, IL 60657

     1110 Military Road
     Buffalo, NY 14217

                                       -3-


     705 South Division Street
     Colby, WI 54421

     502 W. Center Street
     Conrad, IA 50621

     5501 Brighton Blvd.
     Commerce City, CO 80022

     7953 N.E. Beech Street
     Fridley, MN 55432

     4300 Highway 55
     Golden Valley, MN 55422

     1402 South 17th Ave.
     Marshalltown, IA 50158

     1821 NE Marshall St.
     Minneapolis, MN 55418

     400 S. 45th Street East
     Muskogee, OK 74403

     10854 Leroy Drive
     Northglenn, CO 80233

     1002 Missouri Ave.
     Omaha, NE 68107

     6363 John J. Pershing Drive
     Omaha, NE 68110

     789 Elmgrove Rd.
     Bldg. #10
     Rochester, NY 14624

     2262 B Bluestone Hills Dr.
     Harrisonburg, VA 22801

     659 Eastport Road
     Jacksonville, FL 32218

     1200 W. Pike St.
     Grafton, WV 26354

                                       -4-


     400 Pleasant Valley Road
     Harrisonburg, VA 22801

     2000 Jefferson Davis Hwy.
     Richmond, VA 23224

     1005 Industry Circle S.E.
     Roanoke, VA 24013

     2155 42nd Street NW
     Winter Haven, FL 33881

     109 Arrowhead Drive
     Bldg. 2
     Manheim, PA 17545

     3785 Bryn Mawr Street
     Orlando, FL 32808

     54 Shutterlee Mill Lane
     Staunton, VA 24401

     1805 Colonial Drive
     Thomasville, GA 31792

     217 Peach Street
     Vineland, NJ 08360

     24 Park Side Ave.
     West Springfield, MA 01089

     208 Lenoir Drive
     Winchester, VA 22603

     708 Killian Road
     Akron, OH 44319

     929 Faultless Drive
     Ashland, OH 44805

     520 South First Street
     Gas City, IN 46933

     P.O. Box 127
     Middletown, OH 45042

                                       -5-


     P.O. Box 4610
     Newark, OH 43058

     One 28th Street
     Pittsburgh, PA 15222

     408 East St. Clair
     Vincennes, IN 47591

     533 Mt. Tom Road
     Northampton, MA 01060

     5405 Glenway Drive
     Brighton, MI 48116

     925 North Godfrey Street
     Allentown, PA 18103

     8301 Sherwick Court
     Jessup, MD 20794

     33 Glenn Avenue
     Chelmsford, MA 01824

     1106 Industrial Park Drive
     Edmore, MI 48829

     3251 Chicago Drive S.W.
     Grandville, MI 49418

     435 Gitts Run Road
     Hanover, PA 17331

     1530 Fruitville Pike
     Lancaster, PA 17601

     525 Mt. Tom Road
     Northampton, MA 01060

     936 Sheldon Road
     Plymouth, MI 48170

     4471 Steelway Blvd. South
     Liverpool, NY 13088

     2207 Traversfield Drive
     Traverse City, MI 49686

                                       -6-


     7451 Cetronia Road
     Allentown, PA 18106

     20400 Old Rome State Rd.
     Watertown, NY 13601
                                       -7-



                                 SCHEDULE 6.1(n)

                       LOCK-BOXES AND ASSOCIATED ACCOUNTS

Bank One, N.A.
One Bank One Plaza
Chicago, Illinois 60603
Account No.: 10-14950

Lockboxes:

     Chicago Lockbox
     Lockbox Number 21594
     Packaging Corporation of America
     21594 Network Place
     Chicago, IL 60673-1215

     Charlotte Lockbox
     Lockbox Number 905197
     Packaging Corporation of America
     P.O. Box 905197
     Charlotte, NC 28290-5197

     Pasadena Lockbox
     Lockbox Number 100720
     Packaging Corporation of America
     P.O. Box 100720
     Pasadena, CA 91189-0720

     Dallas Lockbox
     Lockbox Number 730758
     Packaging Corporation of America
     P.O. Box 730758
     Dallas, TX 75373-0758



                                  SCHEDULE 14.2

                 NOTICE ADDRESSES AND WIRE TRANSFER INFORMATION

     A. BORROWER AND INITIAL SERVICER

          ADDRESS FOR NOTICES:

          Packaging Receivables Company, LLC
          1900 West Field Court
          Lake Forest, Illinois 60045

          Attention: Fran Hori
          Phone: 847-482-3719
          Fax: 847-482-4516

          Wire Transfer Instructions:

          Account No. 10-48230 at Bank One, N.A.
          in Chicago, Illinois
          ABA No.071000013
          Reference: Blue Ridge Securitization

     with a copy to:

          Packaging Credit Company, LLC
          1900 West Field Court
          Lake Forest, Illinois 60045

          Attention: Fran Hori
          Phone: 847-482-3719
          Fax: 847-482-4516



     B. BLUE RIDGE

          ADDRESS FOR NOTICES (OTHER THAN BORROWING REQUESTS):

          Blue Ridge Asset Funding Corporation
          100 North Main Street
          Winston-Salem, NC 27150
          Attention: John Dillon

          Phone: (336) 732-2690
          Fax: (336) 732-5021

     With a copy to:

          Blue Ridge Asset Funding Corporation
          c/o AMACAR Group, L.L.C.
          6525 Morrison Blvd., Suite 318
          Charlotte, North Carolina 28211
          Attention: Douglas K. Johnson

          Phone: (704) 365-0569
          Fax:   (704) 365-1362

          WIRE TRANSFER INSTRUCTIONS (UNLESS OTHERWISE NOTIFIED):

          Account #8735-098787 at Wachovia Bank, N.A.,
          ABA #053100494,
          Reference: Blue Ridge/Packaging Receivables Company, LLC,
          Attention: John Dillon, tel. (336) 732-2690

     C. WACHOVIA BANK, N.A., individually or as Agent

          ADDRESS FOR NOTICES (OTHER THAN BORROWING REQUESTS):

          Wachovia Bank, N.A.
          191 Peachtree Street, 26th Floor
          GA-423
          Atlanta, Georgia 30303
          Attention: Elizabeth Wagner

          Phone: (404) 332-1398
          Fax:   (404) 332-5152

          WIRE TRANSFER INSTRUCTIONS (UNLESS OTHERWISE NOTIFIED):

          Account #8735-098787 at Wachovia Bank, N.A.,

                                       -2-


          ABA #053100494,
          Reference: Blue Ridge/Packaging Receivables Company, LLC,
          Attention: John Dillon, tel. (336) 732-2690

                     BORROWING REQUESTS SHOULD BE SENT TO THE
                     ADDRESS AND FAX NO. SPECIFIED ON EXHIBIT 2.1

                                       -3-



                                                                   Exhibit 10.24


================================================================================

                           RECEIVABLES SALE AGREEMENT

                          DATED AS OF NOVEMBER 29, 2000

                                     BETWEEN

                          PACKAGING CREDIT COMPANY, LLC

                                       AND

                        PACKAGING CORPORATION OF AMERICA

================================================================================



                                TABLE OF CONTENTS



SECTION                                HEADING                                      PAGE
                                                                                
ARTICLE I            AGREEMENT TO SELL...............................................  3

    Section 1.1.     Sales ..........................................................  3
    Section 1.2.     Timing of Purchases.............................................  4
    Section 1.3.     Consideration for Purchases.....................................  4
    Section 1.4.     Sale Termination Date...........................................  4

ARTICLE II           CALCULATION OF PURCHASE PRICE ..................................  4

    Section 2.1.     Calculation of Purchase Price...................................  4

ARTICLE III          PAYMENT OF PURCHASE PRICE ......................................  5

    Section 3.1.     Initial Purchase Price Payment .................................  5
    Section 3.2.     Subsequent Purchase Price Payments..............................  6
    Section 3.3.     Settlement as to Specific Receivables...........................  6
    Section 3.4.     Settlement as to Dilution.......................................  7
    Section 3.5.     Reconveyance of Receivables.....................................  7

ARTICLE IV           CONDITIONS OF PURCHASERS .......................................  8

    Section 4.1.     Conditions Precedent to Initial Purchase .......................  8
    Section 4.2.     Certification as to Representations and Warranties..............  9

ARTICLE V            REPRESENTATIONS AND WARRANTIES ............................. ...  9

    Section 5.1.     Representations of Seller ......................................  9

ARTICLE VI           COVENANTS OF SELLER............................................. 13

    Section 6.1.     Affirmative Covenants........................................... 13
    Section 6.2.     Reporting Requirements.......................................... 14
    Section 6.3.     Negative Covenants.............................................. 15

ARTICLE VII          ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE
                     RECEIVABLES .................................................... 16

    Section 7.1.     Rights of the Servicer ......................................... 16
    Section 7.2.     Responsibilities of Seller ..................................... 17
    Section 7.3.     Further Action Evidencing Purchases............................. 17
    Section 7.4.     Application of Collections...................................... 17

ARTICLE VIII         INDEMNIFICATION................................................. 18

    Section 8.1.     Indemnities of Seller .......................................... 18

ARTICLE IX           MISCELLANEOUS .................................................. 20

    Section 9.1.     Amendments, Etc. ............................................... 20






SECTION                                HEADING                                       PAGE
                                                                                
    Section 9.2.     Notices, Etc.................................................... 20
    Section 9.3.     No Waiver; Cumulative Remedies.................................. 20
    Section 9.4.     Binding Effect; Assignability................................... 20
    Section 9.5.     Governing Law................................................... 21
    Section 9.6.     Costs, Expenses and Taxes....................................... 21
    Section 9.7.     Submission to Jurisdiction...................................... 21
    Section 9.8.     Waiver of Jury Trial............................................ 21
    Section 9.9.     Captions and Cross  References; Incorporation by Reference ..... 22
    Section 9.10.    Execution in Counterparts....................................... 22
    Section 9.11.    Acknowledgment and Agreement.................................... 22
    Section 9.12.    No Proceedings.................................................. 22


                                      -ii-



    EXHIBITS
    --------

    EXHIBIT A      FORM OF PURCHASE REPORT
    EXHIBIT B      FORM OF THE INITIAL PCA NOTE
    EXHIBIT C      OFFICE LOCATIONS

    SCHEDULES
    ---------

    SCHEDULE 5.1(O)       TRADE NAMES
    SCHEDULE 9.2          NOTICE ADDRESS

                                      -iii-


                           RECEIVABLES SALE AGREEMENT

     THIS RECEIVABLES SALE AGREEMENT (as amended, supplemented or modified from
time to time, this "AGREEMENT"), dated as of November 29, 2000, is between
Packaging Corporation of America, a Delaware corporation ("SELLER"), as seller,
and Packaging Credit Company, LLC, a Delaware limited liability company (the
"COMPANY"), as purchaser.

                                   DEFINITIONS

     Unless otherwise indicated, certain terms that are capitalized and used
throughout this Agreement are defined in Appendix A to the Credit and Security
Agreement dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, (the "CREDIT AND SECURITY AGREEMENT"), among
Packaging Receivables Company, LLC (the "2ND STEP PURCHASER"), Company, as
initial Servicer, Blue Ridge Asset Funding Corporation, as a Lender, Wachovia
Bank, N.A., individually as a Lender and as the agent for the Lenders (the
"AGENT"). The following terms have the respective meanings indicated below:

     AVAILABLE FUNDS: As defined in Section 3.2 hereof.

     DEEMED COLLECTION: Amounts payable by Seller pursuant to Section 3.3 or
3.4.

     EXCESS FUNDS NOTE: A note evidencing the indebtedness of Seller to the
Company pursuant to the Loan Agreement.

     INELIGIBLE RECEIVABLE: As defined in Section 3.3 hereof.

     INITIAL CLOSING DATE: As defined in Section 1.2 hereof.

     INITIAL CUT-OFF DATE: The Business Day immediately preceding the Initial
Closing Date.

     INITIAL PCA NOTE: As defined in Section 3.1 hereof.

     LOAN AGREEMENT: A Loan Agreement dated as of the date hereof between Seller
and the Company pursuant to which the Company shall loan funds to the Seller
from the proceeds of the sale of the Receivables to the 2nd Step Purchaser.

     LOCKBOX ACCOUNTS: One or more lockbox accounts held in Lockbox Banks for
receiving Collections from Receivables.

     MAXIMUM SELLER NOTE BALANCE: As of any date means an amount equal to the
excess of (i) the Net Pool Balance over (ii) the sum of (a) the outstanding
principal balance of all Loans made to the 2nd Step Purchaser under the Credit
and Security Agreement and (b) the Triple-B Loss Reserve Amount, each as of such
date.

     PURCHASE PRICE: As defined in Section 2.1 hereof.

     PURCHASE REPORT: As defined in Section 2.1 hereof.



     RELATED RIGHTS: As defined in Section 1.1(a) hereof.

     SALE INDEMNIFIED AMOUNTS: As defined in Section 8.1 hereof.

     SALE INDEMNIFIED PARTY: As defined in Section 8.1 hereof.

     SALE TERMINATION DATE: As defined in Section 1.4 hereof.

     SELLER MATERIAL ADVERSE EFFECT: With respect to any event or circumstance:

               (i) a Credit Event shall have occurred;

               (ii) a material adverse effect on the ability of Seller to
     perform its obligations under this Agreement or any other Transaction
     Document to which Seller is a party;

               (iii) a material adverse effect on the validity or enforceability
     as against Seller of this Agreement or any other Transaction Document to
     which Seller is a party;

               (iv) a material adverse effect on the status, existence,
     perfection, priority or enforceability of the Company's interest in the
     Receivables and the Related Rights; or

               (v) a material adverse effect on the validity, enforceability or
     collectability of a material portion of the Receivables.

     TRIPLE-B LOSS RESERVE AMOUNT: As of any date means an amount equal to the
product of (i) the Net Pool Balance and (ii) the Loss Reserve as of the
immediately preceding Cut-Off Date (except that such Loss Reserve shall be
calculated with a multiple of 1.5 rather than 2.0).

                                   BACKGROUND

     1. The Company is a limited liability company, all of the membership
interests of which are wholly-owned by Seller.

     2. Seller wishes to sell Receivables and Related Rights to the Company, and
the Company is willing, on the terms and subject to the conditions set forth
herein, to purchase Receivables and Related Rights from Seller.

     3. The Company intends to sell the Receivables and Related Rights it
purchases from Seller hereunder to the 2nd Step Purchaser and the 2nd Step
Purchaser is willing, on the terms and subject to the conditions set forth in
the Purchase and Sale Agreement, to purchase such Receivables and Related Rights
from the Company.

     4. The 2nd Step Purchaser intends to pledge its interests in the
Receivables and Related Rights purchased from the Company as collateral for
loans under the Credit and Security Agreement.

                                       -2-


     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:

                                    ARTICLE I
                                AGREEMENT TO SELL

     SECTION 1.1. SALES.

      (a) AGREEMENT TO SELL. On the terms and subject to the conditions set
forth in this Agreement (including Article V), and in consideration of the
Purchase Price, from the Initial Closing Date until the Sale Termination Date,
Seller agrees to sell, assign and transfer, and does hereby sell, assign and
transfer to the Company, and the Company agrees to purchase, and does hereby
purchase from Seller, all of Seller's right, title and interest in and to:

          (i) each Receivable of Seller that existed and was owing to Seller as
     of the close of Seller's business on the Initial Cut-Off Date;

          (ii) each Receivable created or originated by the Seller from the
     close of the Seller's business on the Initial Cut Off Date, to and
     including the Sale Termination Date;

          (iii) all rights to, but not the obligations under, all related
     Contracts and all Related Security;

          (iv) all monies due or to become due with respect to the foregoing;

          (v) all books and records related to any of the foregoing;

          (vi) all Lockbox Accounts, all amounts on deposit therein and all
     related agreements between Seller and the Lockbox Banks, in each case to
     the extent constituting or representing items described in paragraph (vii)
     below; and

          (vii) all Collections in respect of, and other proceeds of,
     Receivables or any other of the foregoing (as defined in the UCC) received
     on or after the Initial Cut-Off Date including, without limitation, all
     funds which either are received by Seller, the Company, the Borrower or the
     Servicer from or on behalf of the Obligors in payment of any amounts owed
     (including, without limitation, finance charges, interest and all other
     charges) in respect of Receivables, or are applied to such amounts owed by
     the Obligors (including without limitation, insurance payments, if any,
     that Seller, the Company, the Borrower or the Servicer (if other than
     Seller) applies in the ordinary course of its business to amounts owed in
     respect of any Receivable and net proceeds of sale or other disposition of
     repossessed goods or other collateral or property of the Obligors or any
     other party directly or indirectly liable for payment of such Receivable
     and available to be applied thereon).

All purchases hereunder shall be made without recourse, but shall be made
pursuant to and in reliance upon the representations, warranties and covenants
of Seller, in its capacity as seller, set forth in each Transaction Document.
The proceeds and rights described in subsections (iii) through (vii) of this
Section 1.1(a) are herein collectively called the "RELATED RIGHTS."

                                       -3-


     (b) ABSOLUTE TRANSFER. It is the intention of the parties hereto that the
conveyance of the Receivables and Related Rights by the Seller to the Company as
provided in this Section 1.1 be, and be construed as, an absolute sale, without
recourse, of such Receivables and Related Rights by the Seller to the Company.
Furthermore, it is not intended that such conveyance be deemed a pledge of such
Receivables and Related Rights by the Seller to the Company to secure a debt or
other obligation of the Seller. If, however, notwithstanding the intention of
the parties, the conveyance provided for in this Section 1.1 is determined to be
a transfer for security, then this Agreement shall also be deemed to be a
"security agreement" within the meaning of Article 9 of the UCC and the Seller
hereby grants to the Company a "security interest" within the meaning of Article
9 of the UCC in all of the Seller's right, title and interest in and to such
Receivables and Related Rights, now existing and hereafter created, to secure a
loan in an amount equal to the aggregate Purchase Price therefor and the
Seller's other payment obligations under this Agreement.

     SECTION 1.2. TIMING OF PURCHASES.

     (a) INITIAL CLOSING DATE PURCHASES. On the date of the first Loan under the
Credit and Security Agreement (the "INITIAL CLOSING DATE") Seller shall sell to
the Company, and the Company shall purchase, pursuant to Section 1.1, Seller's
entire right, title and interest in (i) each Receivable that existed and was
owing to Seller as of the close of Seller's business on the Initial Cut-Off
Date, and (ii) all Related Rights with respect thereto.

     (b) REGULAR PURCHASES. After the Initial Closing Date, and continuing until
the Sale Termination Date, each Receivable described in Section 1.1(a)(ii)
hereof, and all the Related Rights with respect thereto, created or originated
by Seller shall be sold by Seller to the Company (without any further action)
upon the creation or origination of such Receivable. All such Receivables shall
be sold to the Company on such date.

     SECTION 1.3. CONSIDERATION FOR PURCHASES. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to Seller in accordance with Article III.

     SECTION 1.4. SALE TERMINATION DATE. The "SALE TERMINATION DATE" shall be
the Termination Date under the Credit and Security Agreement.

                                   ARTICLE II
                          CALCULATION OF PURCHASE PRICE

     SECTION 2.1. CALCULATION OF PURCHASE PRICE. On each Reporting Date
(commencing with the first Reporting Date following the Initial Closing Date),
the Servicer shall deliver to the Agent, Seller and the Company (if the Servicer
is other than the Company) a report in substantially the form of Exhibit A (each
such report being herein called a "PURCHASE REPORT") with respect to the
Company's purchases of Receivables from Seller:

               (a) that arose on or prior to the Initial Cut-Off Date (in the
     case of the first Purchase Report to be delivered hereunder) and

                                       -4-


               (b) that arose during the Settlement Period immediately preceding
     such Reporting Date (in the case of each successive Purchase Report).

Each Purchase Report shall designate the amount of such Receivables that were
Eligible Receivables on the date of origination (or, in the case of Receivables
transferred on the Initial Closing Date, on the Initial Closing Date).

     The "PURCHASE PRICE" (to be paid in accordance with the terms of Article
III) for the Receivables and the Related Rights shall be determined in
accordance with the following formula:

          PP    =    AUB - (AUB x FD)

     where:

          PP    =    Purchase Price (to be paid to Seller in accordance with
                     the terms of Article III) as calculated on the relevant
                     Reporting Date.

          AUB   =    (i) for purposes of calculating the Purchase Price on
                     the Initial Closing Date, the aggregate Unpaid Balance of
                     all Receivables that existed and were owing to Seller as
                     measured as at the Initial Cut-Off Date, and

                     (ii) for purposes of calculating the Purchase Price for
                     Receivables on each Reporting Date thereafter, the
                     aggregate Unpaid Balance of the Receivables described in
                     Section 1.1(a)(ii) hereof that were generated by Seller
                     during the immediately preceding Settlement Period.

          FD    =    the Factoring Discount.

     "FACTORING DISCOUNT" as measured on the Initial Closing Date or any
Reporting Date means 1.40%; PROVIDED that the Factoring Discount may be revised
with the mutual written consent of the Seller and the Company based upon a third
party valuation report.

                                   ARTICLE III
                            PAYMENT OF PURCHASE PRICE

     SECTION 3.1. INITIAL PURCHASE PRICE PAYMENT. On the terms and subject to
the conditions set forth in this Agreement, the Company agrees to pay to Seller
on the Initial Closing Date the Purchase Price for the purchase to be made from
Seller with respect to Receivables existing on or prior to the Initial Cut-Off
Date (a) in cash in an amount equal to the amount received by the Company in
connection with the initial sale of the Receivables and Related Rights made
pursuant to the Purchase and Sale Agreement and (b) by the issuance of a
promissory note in the form of Exhibit B to Seller (such promissory note, as it
may be amended, supplemented, endorsed or otherwise modified from time to time
in substitution therefor or renewal thereof in accordance with the Transaction
Documents, being herein called the "INITIAL PCA NOTE") in the initial principal
amount equal to the remainder of the Purchase Price owing on the Initial Closing
Date after subtracting the amount paid in cash.

                                       -5-


SECTION 3.2. SUBSEQUENT PURCHASE PRICE PAYMENTS. After the Initial Closing Date
and until the termination of this Agreement pursuant to Section 9.4 hereof, the
Purchase Price due pursuant to Section 2.1 for each Settlement Period shall be
due on the related Settlement Date. As an advance payment of such Purchase
Price, on each Business Day during a Settlement Period, the Company shall pay to
Seller a portion of the Purchase Price due pursuant to Section 2.1 by depositing
into such account, as Seller shall specify, immediately available funds from
monies then held by or on behalf of the Company solely to the extent that such
monies are not necessary to pay current expenses of the Company (in its
reasonable discretion) (such available monies, the "AVAILABLE FUNDS") and
provided that Seller has paid all amounts then owing by it hereunder. On each
Reporting Date, the Servicer shall calculate the amount of the Purchase Price
remaining to be paid by deducting from the Purchase Price the Available Funds
that have been paid during the corresponding Settlement Period, and such amount
due shall be identified in the Purchase Report. To the extent that the Available
Funds were insufficient to pay the Purchase Price then due in full, the
remaining portion of such Purchase Price shall be paid, first, by decreasing the
principal amount of the Excess Funds Note, effective as of the last day of the
related Settlement Period and second, if the balance of the Excess Funds Note
has been reduced to zero, by increasing the balance of the Initial PCA Note,
effective as of the last day of the related Settlement Period; PROVIDED,
HOWEVER, that the aggregate of the principal amounts outstanding at any time
under the Initial PCA Note may not exceed the Maximum Seller Note Balance; and
PROVIDED FURTHER, that the amount of such decrease in the principal amount of
the Excess Funds Note or increase in the principal amount of the Initial PCA
Note on any Settlement Date may not account for more than 25% of the aggregate
Purchase Price due with respect to the related Settlement Period (the "NON-CASH
MONTHLY MAXIMUM"). To the extent that the amount due with respect to the related
Settlement Period pursuant to Section 2.1 exceeds (x) the Available Funds plus
(y) the Non-Cash Monthly Maximum (such excess amount, the "SHORTFALL"), the
Seller shall contribute to the Company cash in an amount equal to such
Shortfall, and the Company shall use such funds to repay the Shortfall.

     Seller shall make all appropriate record keeping entries with respect to
the Excess Funds Note and the Initial PCA Note to reflect payments by the
Company thereon and Seller's books and records shall constitute rebuttable
presumptive evidence of the principal amount of and accrued interest on the
Excess Funds Note and the Initial PCA Note. Seller shall return the Excess Funds
Note and the Initial PCA Note to the Company upon the final payment thereof
after the termination of this Agreement pursuant to Section 9.4 hereof.

     SECTION 3.3. SETTLEMENT AS TO SPECIFIC RECEIVABLES. If an officer of Seller
obtains knowledge or receives notice from the Company or the Agent that (a) on
the day that any Receivable purchased hereunder was created or originated by
Seller, (or, in the case of Receivables transferred on the Initial Closing Date,
on the Initial Closing Date) any of the representations or warranties set forth
in Section 5.1(l) were not true with respect to such Receivable, or such
Receivable was designated as an Eligible Receivable on the related Purchase
Report and was not an Eligible Receivable or, (b) on any day any of the
representations or warranties set forth in Section 5.1(l) with respect to any
Receivable is no longer true with respect to a Receivable (each such Receivable,
an "INELIGIBLE RECEIVABLE"), then the Purchase Price with respect to Receivables
that arose during the same Settlement Period in which such knowledge is obtained
or notification is received shall be decreased by an amount equal to the Unpaid
Balance of such Ineligible Receivable as of the related Settlement Date;
PROVIDED, HOWEVER, that if there have been no purchases of Receivables (or
insufficiently large purchases of Receivables to create a Purchase Price large
enough to so reduce by the amount of such Unpaid Balances) from Seller during
such Settlement Period, any amount owed by which the

                                       -6-


Purchase Price payable to Seller would have been reduced pursuant to the
immediately preceding clause of this sentence shall be paid by either (at the
option of Seller, unless the Company will, absent such payment in cash, be
unable to meet its obligations under the Purchase and Sale Agreement on the next
occurring Settlement Date, in which case Seller shall make a cash payment on or
before such Settlement Date) an increase in the principal amount of the Excess
Funds Note or by payment within two Business Days after the related Reporting
Date in cash by Seller to the Company by payment of same day funds; PROVIDED,
FURTHER, that if the Company receives payment on account of Collections due with
respect to such Ineligible Receivable after such Settlement Date, the Company
promptly shall deliver such funds to Seller. The enforcement of the obligations
of Seller set forth in this Section 3.3 shall be the sole remedy of the Company
with respect to Ineligible Receivables.

     SECTION 3.4. SETTLEMENT AS TO DILUTION. Each Purchase Report shall include,
in respect of the Receivables previously sold by Seller, a calculation of the
aggregate net reduction in the aggregate Unpaid Balance of such Receivables owed
by particular Obligors on account of any defective, rejected or returned
merchandise or services, any cash discount, any incorrect billings or other
adjustments, or setoffs in respect of any claims by the Obligor(s) thereof
(whether such claims arise out of the same or a related or unrelated
transaction), or any rebate or refund during the most recent Settlement Period.
The Purchase Price to be paid to Seller for the Receivables generated during the
Settlement Period for which such Purchase Report is delivered shall be decreased
by the amount of such net reduction; PROVIDED, HOWEVER, that if there have been
no purchases of Receivables (or insufficiently large purchases of Receivables to
create a Purchase Price large enough to so reduce by the amount of such net
reduction) from Seller during such Settlement Period, any amount owed by which
the Purchase Price payable to Seller would have been reduced pursuant to the
immediately preceding clause of this sentence shall be paid by either (at the
option of Seller, unless the Company will, absent such payment in cash, be
unable to meet its obligations under the Purchase and Sale Agreement on the next
occurring Settlement Date, in which case Seller shall make a cash payment on or
before such Settlement Date) an increase in the principal amount of the Excess
Funds Note or by payment within two Business Days after the related Reporting
Date in cash by Seller to the Company by payment of same day funds.

     SECTION 3.5. RECONVEYANCE OF RECEIVABLES. In the event that Seller has paid
(by effecting a Purchase Price reduction or otherwise) to the Company the full
Unpaid Balance of any Receivable pursuant to Section 3.3 or 3.4, the Company
shall reconvey such Receivable and all Related Rights with respect thereto, to
Seller, without recourse, representation or warranty, but free and clear of all
liens created by the Company; such reconveyed Receivables and all Related Rights
shall no longer be subject to the terms of this Agreement (including any
obligation to turn over Collections with respect thereto).

                                       -7-


                                   ARTICLE IV
                             CONDITIONS OF PURCHASES

     SECTION 4.1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial purchase
hereunder is subject to the condition precedent that the Company shall have
received, on or before the Initial Closing Date, the following, each (unless
otherwise indicated) dated the Initial Closing Date, and each in form, substance
and date reasonably satisfactory to the Company and the Agent:

               (a) A copy of the resolutions of the Board of Directors of Seller
     approving the Transaction Documents to be delivered by it and the
     transactions contemplated hereby and thereby, certified by the Secretary or
     Assistant Secretary of Seller;

               (b) Good standing certificate for Seller issued as of a recent
     date by the Secretary of State of Delaware;

               (c) A certificate of the Secretary or Assistant Secretary of
     Seller certifying the names and true signatures of the officers authorized
     on Seller's behalf to sign the Transaction Documents to be delivered by it
     (on which certificate the Company and Servicer (if other than Seller) may
     conclusively rely until such time as the Company and the Servicer shall
     receive from Seller a revised certificate meeting the requirements of this
     subsection (c);

               (d) The articles of incorporation of Seller, duly certified by
     the Secretary of State of Delaware as of a recent date, together with a
     copy of the by-laws of Seller, duly certified by the Secretary or Assistant
     Secretary of Seller;

               (e) Copies of the proper financing statements (Form UCC-1) that
     have been duly executed and name Seller as the assignor and the Company as
     the assignee (and the 2nd Step Purchaser, as assignee of the Company) of
     the Receivables and the Related Rights or other, similar instruments or
     documents, as may be necessary or, in Servicer's or the Agent's opinion,
     desirable under the UCC of all appropriate jurisdictions or any comparable
     law of all appropriate jurisdictions to perfect the Company's ownership
     interest in all Receivables and Related Rights in which the ownership
     interest may be assigned to it hereunder;

               (f) A written search report from a Person satisfactory to
     Servicer and the Agent listing all effective financing statements that name
     Seller as debtor or assignor and that are filed in the jurisdictions in
     which filings were made pursuant to the foregoing subsection (e), together
     with copies of such financing statements (none of which, except for those
     described in the foregoing subsection (e) and those in favor of the agent
     pursuant to the Senior Credit Agreement shall cover any Receivable or any
     Related Right related to any Receivable) which is to be sold to the Company
     hereunder, and tax and judgment lien search reports from a Person
     satisfactory to Servicer and the Agent showing no evidence of such liens
     filed against Seller;

               (g) Evidence (i) of the execution and delivery by each of the
     parties thereto of each of the other Transaction Documents to be executed
     and delivered in connection herewith and (ii) that each of the conditions
     precedent to the execution, delivery and effectiveness of such other
     Transaction Documents has been satisfied to the Company's satisfaction;

                                       -8-


               (h) The Initial PCA Note in favor of Seller, duly executed by the
     Company; and

               (i) A certificate from an officer of Seller to the effect that
     Servicer and Seller have placed on the most recent, and have taken all
     steps reasonably necessary to ensure that there shall be placed on
     subsequent, summary master control data processing reports the following
     legend (or the substantive equivalent thereof): THE RECEIVABLES DESCRIBED
     HEREIN HAVE BEEN SOLD BY PACKAGING CORPORATION OF AMERICA TO PACKAGING
     CREDIT COMPANY, LLC AND THEN SOLD BY PACKAGING CREDIT COMPANY, LLC TO
     PACKAGING RECEIVABLES COMPANY, LLC; AND A SECURITY INTEREST IN THE
     RECEIVABLES DESCRIBED HEREIN HAS BEEN GRANTED AND ASSIGNED BY PACKAGING
     RECEIVABLES COMPANY, LLC TO WACHOVIA BANK, N.A., AS AGENT.

    SECTION 4.2. CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. Seller, by
accepting the Purchase Price related to each purchase of Receivables (and
Related Rights), shall be deemed to have certified that the representations and
warranties contained in Article V are true and correct on and as of the day of
such purchase, with the same effect as though made on and as of such day.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

    SECTION 5.1. REPRESENTATIONS OF SELLER. In order to induce the Company to
enter into this Agreement and to make purchases hereunder, Seller, in its
capacity as seller under this Agreement, hereby makes the representations and
warranties set forth in this Section 5.1.

     (a) ORGANIZATION AND GOOD STANDING. Seller has been duly organized and is
validly existing as a corporation in good standing under the laws of the state
of its organization, with power and authority to own its properties and to
conduct its business as such properties are presently owned and such business is
presently conducted.

     (b) DUE QUALIFICATION. Seller is duly licensed or qualified to do business
in good standing, and has obtained all necessary approvals, in all jurisdictions
in which the ownership or lease of its property or the conduct of its business
requires such licensing, qualification or approvals, except where the failure to
be so qualified or have such licenses or approvals would not have a Seller
Material Adverse Effect.

     (c) POWER AND AUTHORITY; DUE AUTHORIZATION. Seller has (a) all necessary
power, authority and legal right (i) to execute and deliver, and perform its
obligations under, each Transaction Document to which it is a party and (ii) to
own, sell, and assign Receivables on the terms and subject to the conditions
herein and therein provided; and (b) duly authorized such execution and delivery
and such sale and assignment and the performance of such obligations by all
necessary action.

     (d) VALID SALE; BINDING OBLIGATIONS. Each sale of Receivables and Related
Rights made by Seller pursuant to this Agreement shall constitute a valid sale,
transfer, and assignment thereof to the Company, enforceable against creditors
of, and purchasers from, Seller; and this Agreement constitutes, and each other
Transaction Document to be signed by Seller, when duly executed and delivered,
will constitute, a legal, valid, and binding obligation of Seller, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or

                                       -9-


other similar laws affecting the enforcement of creditors' rights generally and
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or in law.

     (e) NO VIOLATION. The consummation of the transactions contemplated by this
Agreement and the other Transaction Documents to which Seller is a party and the
fulfillment of the terms hereof or thereof will not (a) conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under (i) Seller's organizational
documents, or (ii) any material indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which it is a party or by which it is
bound, (b) result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such material indenture, loan agreement,
mortgage, deed of trust, or other agreement or instrument, other than the
Transaction Documents, or (c) violate any law or any order, rule, or regulation
applicable to it of any court or of any federal, state or foreign regulatory
body, administrative agency, or other governmental instrumentality having
jurisdiction over it or any of its properties.

     (f) PROCEEDINGS. There is no litigation, investigation or proceeding
pending, or to the best of Seller's knowledge, threatened, before any court,
regulatory body, arbitrator, administrative agency, or other tribunal or
governmental instrumentality (a) asserting the invalidity of any Transaction
Document to which Seller is a party, (b) seeking to prevent the sale of
Receivables and the Related Rights to the Company or the consummation of any of
the other transactions contemplated by any Transaction Document to which Seller
is a party, or (c) that would have a Seller Material Adverse Effect. No
injunction, writ, temporary restraining order or order of any nature has been
issued by any court or other regulatory body, arbitrator, administrative agency
or other tribunal or governmental instrumentality purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Transaction Document, or directing that the transaction provided for herein or
therein not be consummated as herein or therein provided. The Seller is
generally subject to suit and it does not nor does any of its properties or
revenues enjoy any right of immunity from judicial proceedings.

     (g) BULK SALES ACT. No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.

     (h) GOVERNMENT APPROVALS. Except for the filing of the UCC financing
statements referred to in Article IV, all of which, at the time required in
Article IV, shall have been duly made and shall be in full force and effect, no
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for Seller's due
execution, delivery and performance of any Transaction Document to which it is a
party.

     (i) FINANCIAL CONDITION. On the date hereof Seller is, and on the date of
each transfer of a new Receivable hereunder (both before and after giving effect
to such transfer), Seller shall be solvent.

     (j) FINANCIAL STATEMENTS AND ABSENCE OF CERTAIN MATERIAL ADVERSE CHANGES.

          (x) Each of the financial statements of Seller and its consolidated
     Subsidiaries previously or hereafter furnished to the Agent, fairly
     presents in all material respects the consolidated financial condition of
     Seller and its consolidated Subsidiaries, taken as a whole, as at the dates
     thereof and the results of their consolidated operations for the periods
     covered

                                      -10-


     thereby and each of such financial statements has been prepared in
     accordance with GAAP consistently applied (subject, in the case of interim
     financial statements, to customary year-end audit adjustments).

          (y) From December 31, 1999 through and including the date of the
     Initial Closing Date, there has been no material adverse change in Seller's
     consolidated financial condition, business or operations. Since the date of
     the Initial Closing Date, there has been no material adverse change in
     Seller's consolidated financial condition, business or operations that has
     had, or would reasonably be expected to have, a material adverse effect
     upon its ability to perform its obligations as an Originator, under the
     Transaction Documents when and as required, and no material adverse effect
     on the collectibility of any material portion of the Receivables.

          (z) Since the Initial Closing Date, no event has occurred which would
     have a Seller Material Adverse Effect.

     (k) MARGIN REGULATIONS. No use of any funds acquired by Seller under this
Agreement will conflict with or contravene any of Regulations T, U and X
promulgated by the Board of Governors of the Federal Reserve System from time to
time.

     (l) QUALITY OF TITLE.

          (i) Each Receivable (together with the Related Rights with respect to
     such Receivable) which is to be sold to the Company hereunder is or shall
     be, at the time of such sale, owned by Seller, free and clear of any Lien
     and except Liens in favor of the agent pursuant to the Senior Credit
     Agreement. Whenever the Company makes a purchase of a Receivable hereunder,
     it shall have acquired a valid and perfected ownership interest (free and
     clear of any Lien, other than a Lien created by or arising through the
     Company, the Lenders or the Agent and except Liens in favor of the agent
     pursuant to the Senior Credit Agreement) in such Receivable and all
     Collections related thereto, and in Seller's entire right, title and
     interest in and to the Related Rights with respect thereto.

          (ii) No effective financing statement or other instrument similar in
     effect covering any Receivable or any Related Right is on file in any
     recording office except such as may be filed (1) in favor of Seller in
     accordance with the Contracts, (2) in favor of the Company in accordance
     with this Agreement, (3) in favor of the 2nd Step Purchaser in accordance
     with the Purchase and Sale Agreement (4) in favor of the Lenders or the
     Agent in accordance with the Credit and Security Agreement or in connection
     with any Lien arising solely as the result of any action taken by the
     Lender (or any assignee thereof) or by the Agent and (5) in favor of the
     agent pursuant to the Senior Credit Agreement.

     (m) ACCURACY OF INFORMATION. No information heretofore or contemporaneously
furnished in writing (and prepared) by Seller, as seller, to the Company, the
Lenders or the Agent for purposes of or in connection with any Transaction
Document or any transaction contemplated hereby or thereby is, and no other
written information hereafter furnished (and prepared) by Seller, as seller, to
the Company, the Lenders, or the Agent pursuant to or in connection with any
Transaction Document will be, inaccurate in any material respect as of the date
it was furnished or (except as otherwise disclosed to the company at or prior to
such time) as of the date as of which such information is

                                      -11-


dated or certified, or contained or will contain any material misstatement of
fact or omitted or will omit to state any material fact necessary to make such
information not materially misleading.

     (n) OFFICES. Seller's principal place of business and chief executive
office is located at the address set forth in Exhibit C, and the offices where
Seller keeps all its books, records and documents evidencing the Receivables,
the related Contracts and all other agreements related to such Receivables are
located at the address specified in Exhibit C (or at such other locations,
notified to Servicer (if other than Seller), the Company and the Agent in
accordance with Section 6.1(f), in jurisdictions where all action required by
Section 7.3 has been taken and completed).

     (o) TRADE NAMES. Except as disclosed on Schedule 5.1(o), Seller does not
use any trade name other than its actual legal name. From and after the date
that fell five (5) years before the date hereof, Seller has not been known by
any legal name other than Packaging Corporation of America as of the date
hereof, nor has Seller been the subject of any merger or similar change in
structure, except as disclosed on Schedule 5.1(o).

     (p) TAXES. Seller has filed all material tax returns and reports required
by law to have been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes which are not yet delinquent or
are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with generally accepted accounting
principles shall have been set aside on its books.

     (q) COMPLIANCE WITH APPLICABLE LAWS. Seller is in compliance, in all
material respects, with the requirements of all applicable laws, rules,
regulations, and orders of all governmental authorities (including, without
limitation, Regulation Z, laws, rules and regulations relating to usury, truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy and all other consumer
laws applicable to the Receivables and related Contracts), except where such
noncompliance, individually or in the aggregate, would not have a Seller
Material Adverse Effect.

     (r) RELIANCE ON SEPARATE LEGAL IDENTITY. Seller is aware that the Lenders
and the Agent are entering into the Transaction Documents to which they are
parties in reliance upon the Company's identity as a legal entity separate from
Seller and any of its other Affiliates.

     (s) ELIGIBLE RECEIVABLES. Each Receivable included as an Eligible
Receivable in the Net Pool Balance in connection with any computation or
recomputation of the Borrowing Base is an Eligible Receivable on such date.

     (t) CREDIT AND COLLECTION POLICY. With respect to each Receivable, the
Seller has complied in all material respects with its Credit and Collection
Policy, and no change has been made to such Credit and Collection Policy since
the date of this Agreement which would be reasonably likely to materially and
adversely affect the collectibility of the Receivables or decrease the credit
quality of any newly created Receivables except for such changes as to which
each of the Agent has received the notice required under Section 7.2(j) of the
Credit and Security Agreement and has given its prior written consent thereto
(which consent shall not be unreasonably withheld or delayed).

     (u) PAYMENTS TO SELLER. With respect to each Receivable sold to the Company
by the Seller, the Company has given reasonably equivalent value to the Seller
in consideration for such

                                      -12-


Receivable and the Related Assets with respect thereto pursuant hereto and such
transfer was not made for or on account of an antecedent debt. No transfer by
the Seller of any Receivable is or may be voidable under any Section of the
Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 101 et seq.), as amended.

     (v) BORROWING BASE. As of each Borrowing Date made pursuant to the Credit
and Security Agreement, after giving effect to the Loans to be made on such date
made pursuant to the Credit and Security Agreement, the Borrowing Base is at
least equal to the aggregate outstanding principal balance of the Advances made.

                                   ARTICLE VI
                               COVENANTS OF SELLER

    SECTION 6.1. AFFIRMATIVE COVENANTS. From the date hereof until the Final
Payout Date, Seller will, unless the Company and the Agent shall otherwise
consent in writing:

     (a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders, including those with respect to
the Receivables generated by it and the Contracts and other agreements related
thereto, except where such noncompliance, individually or in the aggregate,
would not have a Seller Material Adverse Effect.

     (b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its legal
existence, rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified in good standing in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would have a Seller Material Adverse
Effect.

     (c) RECEIVABLES REVIEW. (i) At any time and from time to time, upon not
less than ten (10) Business Days' notice (unless an Event of Default has
occurred and is continuing (or the Agent believes in good faith that an Event of
Default has occurred and is continuing), in which case no such notice shall be
required) permit the Company and the Agent or their respective agents or
representatives, (A) to examine, to audit and make copies of and abstracts from
all books, records and documents (including, without limitation, computer tapes
and disks) in the possession or under the control of Seller relating to the
Receivables, including, without limitation, the Contracts, and purchase orders
and other agreements related thereto, and (B) to visit Seller's offices and
properties for the purpose of examining such materials described in the
foregoing clause (A) and discussing matters relating to the Receivables
generated by Seller or Seller's performance hereunder with any of the officers
or employees of Seller having knowledge of such matters; (ii) to meet with the
independent auditors of Seller, to review such auditor's work papers and
otherwise to review with such auditors the books and records of Seller with
respect to the Receivables and the Related Rights; and (iii) without limiting
the provisions of clause (i) next above, from time to time, at Seller's expense,
permit certified public accountants or other auditors acceptable to the Agent to
conduct a review of its books and records with respect to the Receivables and
the Related Rights; provided that, so long as no Event of Default has occurred
and is continuing, (x) such reviews described in clauses (i), (ii) and (iii) in
this subsection (c) shall not be done more than two (2) times in any one
calendar year and (y) Seller shall only be responsible for the costs and
expenses of one such review described in clauses (i), (ii) and (iii) in this
subsection (c) in any one calendar year.

                                      -13-


     (d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain an ability to
recreate in all material respects records evidencing the Receivables generated
by it in the event of the destruction of the originals thereof.

     (e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. At its
expense timely and fully perform and comply in all material respects with all
provisions, covenants and other promises required to be observed by it under the
Contracts and all purchase orders and other agreements related to the
Receivables.

     (f) LOCATION OF RECORDS. Keep its principal place of business and chief
executive office, and the offices where it keeps its records concerning or
related to Receivables, at the address(es) referred to in Exhibit C or, upon 30
days' prior written notice to the Company and the Agent, at such other locations
in jurisdictions where all action required by Section 7.3 shall have been taken
and completed.

     (g) CREDIT AND COLLECTION POLICIES. Comply in all material respects with
its Credit and Collection Policy in connection with the Receivables and all
Contracts related thereto.

     (h) SEPARATE CORPORATE EXISTENCE OF THE COMPANY. Take such actions as shall
be required in order to maintain the separate identity of the Company separate
and apart from Seller and its other Affiliates, including those actions set
forth in Section 7.4 of the Credit and Security Agreement.

    SECTION 6.2. REPORTING REQUIREMENTS. From the date hereof until the Final
Payout Date, Seller will, unless the Company and the Agent shall otherwise
consent in writing, furnish to the Company and the Agent:

          (a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any
     event within 50 days after the end of each of the first three quarters of
     each fiscal year of the Seller, copies of its consolidated balance sheets
     and related statements of income and statements of cash flow, showing the
     financial condition of the Seller and its consolidated Subsidiaries as of
     the close of such fiscal quarter and the results of its operations and the
     operations of such Subsidiaries during such fiscal quarter and the then
     elapsed portion of the fiscal year, together with a Certificate of
     Financial Officer in the form attached as Exhibit 7.2 to the Credit and
     Security Agreement executed by the chief financial officer or treasurer of
     the Seller;

          (b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event
     within 90 days after the end of each fiscal year of the Seller, copies of
     its consolidated balance sheets and related statements of income and
     statements of cash flow, showing the financial condition of the Seller and
     its consolidated Subsidiaries as of the close of such fiscal year and the
     results of its operations and the operations of such Subsidiaries during
     such year, all audited by independent public accountants of recognized
     national standing acceptable to the Agent and accompanied by an opinion of
     such accountants (which shall not be qualified in any material respect) to
     the effect that such consolidated financial statements fairly present the
     financial condition and results of operations of the Seller on a
     consolidated basis (except as noted therein) in accordance with GAAP
     consistently applied;

          (c) REPORTS TO SEC AND EXCHANGES. In addition to the reports required
     by subsections (a) and (b) next above, promptly upon the Agent's reasonable
     request, copies of

                                      -14-


     any reports or registration statements that the Seller files with the
     Securities and Exchange Commission or any national securities exchange
     other than registration statements relating to employee benefit plans and
     to registrations of securities for selling securities;

          (d) ERISA. Promptly after the filing or receiving thereof, copies of
     all reports and notices with respect to any Reportable Event defined in
     Article IV of ERISA which the Seller files under ERISA with the Internal
     Revenue Service, the Pension Benefit Guaranty Corporation or the U.S.
     Department of Labor or which the Seller receives from the Pension Benefit
     Guaranty Corporation;

          (e) EVENTS OF DEFAULT, ETC. As soon as possible and in any event
     within five (5) Business Days after any Responsible Officer of the Seller
     obtains knowledge of the occurrence of any Event of Default or any
     Unmatured Default, a written statement of a Responsible Officer of the
     Seller setting forth details of such event and the action that such Loan
     Party will take with respect thereto;

          (f) PROCEEDINGS. As soon as possible and in any event within ten
     Business Days after any Responsible Officer of Seller has knowledge
     thereof, written notice to the Company and the Agent of (i) all pending
     proceedings and investigations of the type described in Section 5.1(f) not
     previously disclosed to the Company and/or the Agent which would reasonably
     be expected to have a Seller Material Adverse Effect and (ii) all material
     adverse developments that have occurred with respect to any previously
     disclosed proceedings and investigations which would reasonably be expected
     to have a Seller Material Adverse Effect;

          (g) CREDIT AND COLLECTION POLICY. Prompt notice of any material change
     in the character of Seller's business or, with not less than 15 Business
     Days' prior written notice, in the Credit and Collection Policy (together
     with a copy of such change); and

          (h) OTHER. Promptly, from time to time, such other information,
     documents, records or reports respecting the Receivables of Seller's
     performance as seller hereunder that the Company or the Agent may from time
     to time reasonably request in order to protect the interests of the
     Company, the Lenders, the Agent, or any other Affected Party under or as
     contemplated by the Transaction Documents.

    SECTION 6.3. NEGATIVE COVENANTS. From the date hereof until the Final Payout
Date, Seller agrees that, unless the Agent shall otherwise consent in writing,
it shall not:

          (a) SALES, LIENS, ETC. Except as otherwise provided herein or in any
     other Transaction Document, sell, assign (by operation of law or otherwise)
     or otherwise dispose of, or create or suffer to exist any Lien upon or with
     respect to, any Receivable or related Contract or other Related Right, or
     any interest therein, or any Collections thereon, or assign any right to
     receive income in respect thereof.

          (b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as otherwise
     permitted in Section 8.2(c) of the Credit and Security Agreement, extend,
     amend or otherwise modify the terms of any Receivable, or amend, modify or
     waive any material term or condition of any Contract related thereto in any
     way that adversely affects the collectibility of any Receivable or any
     Lender's rights therein.

                                      -15-


          (c) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. Take any
     action to cause or permit any Receivable generated by it to become
     evidenced by any "instrument" (as defined in the applicable UCC), except in
     connection with the collection of overdue Receivables, provided that the
     original of such instrument is delivered to the Agent, duly endorsed.

          (d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Add or terminate any
     bank as a Lock-Box Bank from those listed in Schedule 6.1(o) of the Credit
     and Security Agreement or, after the Collection Account has been
     established pursuant to Section 7.1(i) of the Credit and Security
     Agreement, make any change in its instructions to Obligors regarding
     payments to be made to the Servicer or payments to be made to any Lock-Box
     Bank (except for a change in instructions solely for the purpose of
     directing Obligors to make such payments to another existing Lock-Box
     Bank), unless (i) the Agent shall have received prior written notice of
     such addition, termination or change and (ii) the Agent shall have received
     duly executed copies of Lock-Box Agreements in a form reasonably acceptable
     to the Agent with each new Lock-Box Bank.

          (e) DEPOSITS TO LOCK-BOX ACCOUNTS AND COLLECTION ACCOUNT. Deposit or
     otherwise credit, or cause or permit to be so deposited or credited, to any
     Lock-Box Account or the Collection Account, any cash or cash proceeds other
     than Collections of Receivables.

          (f) NAME CHANGE, OFFICES, RECORDS AND BOOKS OF ACCOUNTS. Change its
     name, identity or corporate structure (within the meaning of Section
     9-402(7) of any applicable enactment of the UCC) or relocate its chief
     executive office or any office where Records are kept unless it shall have:
     (i) given the Agent at least 15 Business Days' prior written notice thereof
     and (ii) prior to effectiveness of such change, delivered to the Agent all
     financing statements, instruments and other documents requested by the
     Agent in connection with such change or relocation.

          (g) DISPOSITION OF RECEIVABLES AND RELATED ASSETS. Except pursuant to
     this Agreement, sell, lease, transfer, assign or otherwise dispose of (in
     one transaction or in a series of transactions) any Receivables and Related
     Assets.

          (h) CHANGE IN CREDIT AND COLLECTION POLICY. Make any material change
     in the Credit and Collection Policy that would impair the collectibility of
     any significant portion of the Receivables or otherwise adversely affect
     the interests or remedies of the Company hereunder or the Agent or the
     Lenders under any Transaction Document.

                                   ARTICLE VII
         ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE RECEIVABLES

    SECTION 7.1. RIGHTS OF THE SERVICER. Seller hereby authorizes the Servicer
(if other than Seller) or its respective designees to take any and all steps in
Seller's name necessary or desirable, in its respective determination, to
collect all amounts due under any and all Receivables, including, without
limitation, endorsing Seller's name on checks and other instruments representing
Collections and enforcing such Receivables and the provisions of the related
Contracts that concern payment and/or enforcement of rights to payment.

                                      -16-


    SECTION 7.2. RESPONSIBILITIES OF SELLER. Anything herein to the contrary
notwithstanding:

          (a) COLLECTION PROCEDURES. Seller agrees to direct the Obligors, as
     promptly as practicable after an Event of Default, to make payments of
     Receivables directly to a Lock-Box Account that is the subject of a
     Lock-Box Agreement at a Lock-Box Bank. Seller further agrees to transfer
     any Collections (including any security deposits applied to the Unpaid
     Balance of any Receivable) that it receives directly to the Servicer (if
     other than Seller) within two Business Days of receipt thereof, and agrees
     that all such Collections shall be deemed to be received in trust for the
     Company; provided that, to the extent permitted pursuant to Section 3.2,
     Seller may retain such Collections as a portion of the Purchase Price then
     payable or apply such Collections to the reduction of the outstanding
     balance of the Initial PCA Note.

          (b) PERFORMANCE UNDER CONTRACT. Seller shall remain responsible for
     performing its obligations hereunder and under the Contracts, and the
     exercise by the Company or its designee of its rights hereunder shall not
     relieve Seller from such obligations.

          (c) POWER OF ATTORNEY. Seller hereby grants to the Servicer (if other
     than Seller) an irrevocable power of attorney, with full power of
     substitution, coupled with an interest, to take in the name of Seller all
     steps necessary or advisable to indorse, negotiate or otherwise realize on
     any writing or other right of any kind held or transmitted by Seller or
     transmitted or received by the Company (whether or not from Seller) in
     connection with any Receivable.

    SECTION 7.3. FURTHER ACTION EVIDENCING PURCHASES. Seller agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Company may
reasonably request in order to perfect, protect or more fully evidence the
Company's ownership of the Receivables (and the Related Rights) purchased by the
Company hereunder, or to enable the Company to exercise or enforce any of its
rights hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of the Company, Seller will:

          (a) execute and file such financing or continuation statements, or
     amendments thereto or assignments thereof, and such other instruments or
     notices, as may be necessary or appropriate; and

          (b) mark the summary master control data processing records with the
     legend set forth in Section 4.1(i).

Seller hereby authorizes the Company or its designee to file one or more
financing or continuation statements, and amendments thereto and assignment
thereof, relative to all or any of the Receivables (and the Related Rights) now
existing or hereafter sold by Seller. If Seller fails to perform any of its
agreements or obligations under this Agreement, the Company or its designee may
(but shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of the Company or its designee
incurred in connection therewith shall be payable by Seller as provided in
Section 9.6.

    SECTION 7.4. APPLICATION OF COLLECTIONS. Any payment by an Obligor in
respect of any indebtedness owed by it to Seller in respect of any Contract
shall, except as otherwise specified by

                                      -17-



such Obligor or otherwise required by contract or law, be applied first, as a
Collection of the Receivables of such Obligor, in the order of the age of such
Receivables, starting with the oldest of such Receivables, and second, to any
other indebtedness of such Obligor.

                                  ARTICLE VIII
                                 INDEMNIFICATION

    SECTION 8.1. INDEMNITIES OF SELLER. Without limiting any other rights which
the Company may have hereunder or under applicable law, Seller hereby agrees to
indemnify the Company and each of its permitted assigns, officers, directors,
employees and agents (each of the foregoing Persons being individually called a
"SALE INDEMNIFIED PARTY"), on demand, from and against any and all damages,
losses, claims, judgments, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively called "SALE INDEMNIFIED AMOUNTS") awarded against or incurred by
any of them arising out of or as a result of arising out of or relating to this
Agreement, the Receivables or the Related Rights, EXCLUDING, HOWEVER, (i) Sale
Indemnified Amounts to the extent determined by a court of competent
jurisdiction to have resulted from bad faith, gross negligence or willful
misconduct on the part of such Sale Indemnified Party, (ii) recourse for Sale
Indemnified Amounts to the extent the same includes losses in respect of
Receivables which are uncollectible on account of the insolvency, bankruptcy or
lack of creditworthiness of the related Obligor, (iii) Sale Indemnified Amounts
that represent taxes based upon, or measured by, net income, or changes in the
rate of tax or as determined by reference to the overall net income, of such
Sale Indemnified Party, or (iv) Sale Indemnified Amounts that represent
franchise taxes, taxes on, or in the nature of, doing business taxes or capital
taxes. Without limiting the foregoing, the Seller shall indemnify each Sale
Indemnified Party for Sale Indemnified Amounts arising out of or related to the
following:

          (a) the transfer by Seller of an interest in any Receivable or Related
     Right to any Person other than the Company;

          (b) the breach of any representation or warranty made by Seller under
     or in connection with this Agreement or any other Transaction Document, or
     any information or report delivered by Seller pursuant hereto or thereto
     which shall have been false or incorrect in any material respect when made
     or deemed made;

          (c) the failure by Seller to comply with any applicable law, rule or
     regulation with respect to any Receivable or the related Contract, or the
     nonconformity of any Receivable or the related Contract with any such
     applicable law, rule or regulation;

          (d) (i) the failure to vest and maintain vested in the Company an
     ownership interest in the Receivables and the Related Rights free and clear
     of any Lien (other than Liens imposed by the Credit Agreement), or (ii) the
     failure of the Company to vest in the Borrower an ownership interest in the
     Receivables and the Related Rights free and clear of any Lien, in either
     case other than a Lien arising solely as a result of an act of the Company,
     the Lenders or the Agent, whether existing at the time of the purchase of
     such Receivables or at any time thereafter;

                                      -18-


          (e) the failure of Seller to file with respect to itself, or any delay
     in filing, financing statements or other similar instruments or documents
     under the UCC of any applicable jurisdiction or other applicable laws with
     respect to any Receivables or purported Receivables generated by Seller,
     whether at the time of any purchase or at any subsequent time;

          (f) any dispute, claim, offset or defense (other than discharge in
     bankruptcy) of the Obligor to the payment of any Receivable or purported
     Receivable generated by Seller (including, without limitation, a defense
     based on such Receivables or the related Contracts not being a legal, valid
     and binding obligation of such Obligor enforceable against it in accordance
     with its terms), or any other claim resulting from the services or
     merchandise related to any such Receivable or the furnishing of or failure
     to furnish such services or merchandise;

          (g) any failure of the Seller to perform its duties or obligations in
     accordance with the terms of this Agreement;

          (h) any product liability claim arising out of or in connection with
     services or merchandise with respect to any Receivable;

          (i) any tax or governmental fee or charge, all interest and penalties
     thereon or with respect thereto, and all out-of-pocket costs and expenses,
     including the reasonable fees and expenses of counsel in defending against
     the same, which may arise by reason of the purchase or ownership of the
     Receivables generated by Seller or any Related Right connected with any
     such Receivables;

          (j) the commingling of Collections of Receivables at any time with
     other funds of the Seller;

          (k) any investigation, litigation or proceeding related to or arising
     from this Agreement or the transactions contemplated hereby or any other
     investigation, litigation or proceeding relating to the Seller or any of
     the Originators in which any Indemnified Party becomes involved as a result
     of any of the transactions contemplated hereby (other than an
     investigation, litigation or proceeding relating to a dispute solely
     amongst the Lenders (or certain Lenders) and the Agent); or

          (l) any inability to litigate any claim against any Obligor in respect
     of any Receivable as a result of such Obligor being immune from civil and
     commercial law and suit on the grounds of sovereignty or otherwise from any
     legal action, suit or proceeding;

excluding, however, (i) Sale Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of such Sale Indemnified
Party, (ii) any indemnification which has the effect of recourse to Seller for
non-payment of the Receivables due to credit problems of the Obligors, (iii)
Sale Indemnified Amounts that represent taxes based upon, or measured by, net
income or changes in the rate of tax or as determined by reference to the
overall net income of such Sale Indemnified Party and (iv) Sale Indemnified
Amounts that represent franchise taxes, taxes of, or in the nature of, doing
business taxes or capital taxes.

                                      -19-


     If for any reason the indemnification provided above in this Section 8.1 is
unavailable to a Sale Indemnified Party or is insufficient to hold such Sale
Indemnified Party harmless, then Seller shall contribute to the amount paid or
payable by such Sale Indemnified Party to the maximum extent permitted under
applicable law.

                                   ARTICLE IX
                                  MISCELLANEOUS

    SECTION 9.1. AMENDMENTS, ETC.

     (a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by Seller, the Company, the Agent and the Servicer (if other than
Seller).

     (b) No failure or delay on the part of the Company, the Servicer, Seller or
any third party beneficiary in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Company, the
Servicer, or Seller in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Company or the
Servicer under this Agreement shall, except as may otherwise be stated in such
waiver or approval, be applicable to subsequent transactions. No waiver or
approval under this Agreement shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder.

    SECTION 9.2. NOTICES, ETC. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage-prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth on
Schedule 9.2 or at such other address or facsimile number as shall be designated
by such party in a written notice to the other parties hereto. All such notices
and communications shall be effective, (i) if personally delivered or sent by
express mail or courier or if sent by certified mail, when received, and (ii) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.

    SECTION 9.3. NO WAIVER; CUMULATIVE REMEDIES. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.

    SECTION 9.4. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the Company, Seller and their respective
successors and permitted assigns. Seller may not assign its rights hereunder or
any interest herein without the prior written consent of the Company and the
Agent; subject to Section 9.11, the Company may not assign its rights hereunder
or any interest herein without the prior written consent of Seller and the
Agent. The Agreement shall create and constitute the continuing obligations of
the parties hereto in accordance with its terms, and shall remain in full force
and effect until the date after the Sale Termination Date on which Seller has
received payment in full for all Receivables and Related Rights conveyed
pursuant to Section 1.1 hereof and has paid and performed all of its obligations
hereunder in full. The rights and remedies with respect to any breach of any
representation and warranty made by Seller pursuant to Article V

                                      -20-


and the indemnification and payment provisions of Article VIII and Section 9.6
shall be continuing and shall survive any termination of this Agreement.

    SECTION 9.5. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES
OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF
THE COMPANY IN THE RECEIVABLES OR RELATED RIGHTS IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.

    SECTION 9.6. COSTS, EXPENSES AND TAXES. In addition to the obligations of
Seller under Article VIII, Seller agrees to pay on demand:

          (a) all reasonable costs and expenses, including attorneys' fees, in
     connection with the enforcement against Seller of this Agreement and the
     other Transaction Documents executed by Seller; and

          (b) all stamp and other similar taxes and fees payable or determined
     to be payable in connection with the execution, delivery, filing and
     recording of this Agreement or the other Transaction Documents, and agrees
     to indemnify each Sale Indemnified Party against any liabilities with
     respect to or resulting from any delay in paying or omission to pay such
     taxes and fees.

    SECTION 9.7. SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE
OR UNITED STATES FEDERAL COURT SITTING IN THE STATE OF NEW YORK, OVER ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT; (B) AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR UNITED STATES FEDERAL COURT; (C) WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING; (D) CONSENTS
TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN
SECTION 9.2; AND (E) TO THE EXTENT ALLOWED BY LAW, AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS SECTION 9.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR
PROCEEDING AGAINST SELLER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTIONS.

    SECTION 9.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.

                                      -21-


    SECTION 9.9. CAPTIONS AND CROSS REFERENCES; INCORPORATION BY REFERENCE. The
various captions (including, without limitation, the table of contents) in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to any underscored Section or Exhibit are to such Section or Exhibit of this
Agreement, as the case may be. The Exhibits hereto are hereby incorporated by
reference into and made a part of this Agreement.

    SECTION 9.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be as effective as delivery of a manually executed counterpart
of a signature page to this Agreement.

    SECTION 9.11. ACKNOWLEDGMENT AND AGREEMENT. By execution below, Seller
expressly acknowledges and agrees that on the date hereof the Company has
assigned all of its rights, title, and interests in, to, and under this
Agreement to the 2nd Step Purchaser pursuant to the Purchase and Sale Agreement
(and the 2nd Step Purchaser may further assign such rights in accordance with
the Purchase and Sale Agreement), and Seller consents to such assignment. Each
of the parties hereto acknowledges and agrees that the 2nd Step Purchaser is a
third party beneficiary of the rights of the Company arising hereunder and under
the other Transaction Documents to which Seller is a party as seller. The Seller
hereby further acknowledges that all provisions of this Agreement shall inure to
the benefit of the 2nd Step Purchaser, including in the enforcement of any
provision hereof to the extent set forth in the Purchase and Sale Agreement, but
that the 2nd Step Purchaser shall not have any obligations or duties under this
Agreement. The Seller hereby further acknowledges that the execution and
performance of this Agreement are conditions precedent for the Agent and the
Lenders to enter into the Credit and Security Agreement and that the agreement
of the Agent and the Lenders to enter into the Credit and Security Agreement
will directly or indirectly benefit the Seller and constitutes good and valuable
consideration for the rights and remedies of the Agent and each Lender with
respect hereto.

    SECTION 9.12. NO PROCEEDINGS. Seller agrees that it shall not institute
against the Company, or join any other Person in instituting against the
Company, any insolvency proceeding (namely, any proceeding of the type referred
to in the definition of Event of Bankruptcy) as long as there shall not have
elapsed one year plus one day since the Final Payout Date. The foregoing shall
not limit Seller's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person other
than Seller.

                                      -22-


     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duty authorized, as of the date first
above written.

                                          PACKAGING CREDIT COMPANY, LLC


                                          By            /s/ Darla J. Vanas
                                             -----------------------------------
                                             Name Printed:  Darla J. Vanas
                                                          ----------------------
                                             Title:  Assistant Secretary
                                                   -----------------------------

                                          PACKAGING CORPORATION OF AMERICA


                                          By            /s/ Pamela A. Larson
                                             -----------------------------------
                                             Name Printed:  Pamela A. Larson
                                                          ----------------------
                                             Title:  Treasurer
                                                   -----------------------------



                                    EXHIBIT A
                           RECEIVABLES SALE AGREEMENT
                                 PURCHASE REPORT

                          PACKAGING CREDIT COMPANY, LLC
                        PACKAGING CORPORATION OF AMERICA
                                  as of (Date)

                                                               CUT-OFF DATE
Total Receivables                                  $               Input
Aggregate Unpaid Balance of                 AUB    $             Calculated
Receivables
Purchaser's Total Investment                PTI                    Fixed

Factoring Discount                          FD                   Calculated

Purchase Price (AUB - (AUB*FD))             PP                   Calculated

Eligible Receivables                               $                Input

Ineligible Receivables                             $                Input



                                    EXHIBIT B
                                 PROMISSORY NOTE
                        (NON-NEGOTIABLE INITIAL PCA NOTE)

                                                                [Effective Date]

     FOR VALUE RECEIVED, the undersigned, Packaging Credit Company, LLC, a
Delaware limited liability company (the "COMPANY"), promises to pay to Packaging
Corporation of America, a Delaware corporation ("SELLER"), on the terms and
subject to the conditions set forth herein and in the Purchase Agreement
referred to below, the principal sum of the aggregate unpaid Purchase Price of
all Receivables purchased from time to time by the Company from Seller pursuant
to such Purchase Agreement, as such unpaid Purchase Price is shown in the
records of Seller.

     1. PURCHASE AGREEMENT. This promissory note (this "INITIAL PCA NOTE") is
the Initial PCA Note described in, and is subject to the terms and conditions
set forth in, that certain Receivables Sale Agreement of even date herewith (as
the same may be amended or otherwise modified from time to time, the "PURCHASE
AGREEMENT"), between Seller and the Company. Reference is hereby made to the
Purchase Agreement for a statement of certain other rights and obligations of
Seller and the Company.

     2. DEFINITIONS. Capitalized terms used (but not defined) herein have the
meanings assigned thereto in the Purchase Agreement and in Appendix A to the
Credit and Security Agreement dated as of even date herewith among Packaging
Receivables Company, LLC, the Company, as initial Servicer, Blue Ridge Asset
Funding Corporation and Wachovia Bank, N.A., as Agent (as it may be amended or
otherwise modified from time to time, the "CREDIT AND SECURITY AGREEMENT"). In
addition, as used herein, the following terms have the following meanings:

     BANKRUPTCY PROCEEDINGS: As defined in clause (b) of paragraph 9 hereof.

     FINAL MATURITY DATE: The date that is one year and one day following the
Final Payout Date.

     INTEREST PERIOD: The period from and including a Reporting Date (or, in the
case of the first Interest Period, the date hereof) to but excluding the next
Reporting Date.

     SENIOR INTEREST: Collectively, (i) the obligation of the Company and the
Servicer to set aside, and to turn over, Collections and other proceeds of the
Loans funded by the Agent and Lenders pursuant to the Credit and Security
Agreement, (ii) any Indemnified Amounts and (iii) all other obligations of the
Company that are due and payable to any Affected Party, together with all
interest accruing on any such amounts after the commencement of any Bankruptcy
Proceedings, notwithstanding any provision or rule of law that might restrict
the rights of any Senior Interest Holder, as against the Company of anyone else,
to collect such interest.

     SENIOR INTEREST HOLDERS: Collectively, the Lenders, the Agent, the other
Affected Parties and the Indemnified Parties.



     3. INTEREST. Subject to the provisions set forth below, the Company
promises to pay interest on this Initial PCA Note as follows:

          (a) Prior to the Final Payout Date, the aggregate unpaid Purchase
     Price from time to time outstanding during any Interest Period shall bear
     interest at a rate per annum equal to the LIBO Rate as in effect from time
     to time on the first Business Day of each Settlement Period, as determined
     by Seller, plus 1.00%; and

          (b) From (and including) the Final Payout Date to (but excluding) the
     date on which the entire aggregate unpaid Purchase Price is fully paid, the
     aggregate unpaid Purchase Price from time to time outstanding shall bear
     interest at a rate per annum equal to the LIBO Rate as in effect from time
     to time on the first Business Day of each Settlement Period, as determined
     by Seller, plus 1.00%,

but in no event in excess of the maximum rate permitted by law. In the event
that, contrary to the intent of Seller and Company, Company pays interest
hereunder and it is determined that such interest rate was in excess of the then
legal maximum rate, then that portion of the interest payment representing an
amount in excess of the then legal maximum rate shall be deemed a payment of
principal and applied against the principal then due hereunder.

     4. INTEREST PAYMENT DATES. Subject to the provisions set forth below, the
Company shall pay accrued interest on this Initial PCA Note on each Settlement
Date, and shall pay accrued interest on the amount of each principal payment
made in cash on a date other than a Settlement Date at the time of such
principal payment.

     5. BASIS OF COMPUTATION. Interest accrued hereunder shall be computed for
the actual number of days elapsed on the basis of a 360-day year.

     6. PRINCIPAL PAYMENT DATES. Subject to the provisions set forth below,
payments of the principal amount of this Initial PCA Note shall be made as
follows:

          (a) The principal amount of this Initial PCA Note shall be reduced
     from time to time pursuant to Sections 3.2, 3.3, 3.4 and 7.2 of the
     Purchase Agreement;

          (b) The entire remaining unpaid balance of this Initial PCA Note shall
     be paid on the Final Maturity Date.

Subject to the provisions set forth below, the principal amount of and accrued
interest on this Initial PCA Note may be prepaid on any Business Day without
premium or penalty.

     7. PAYMENTS. All payments of principal and interest hereunder are to be
made in lawful money of the United States of America.

     8. ENFORCEMENT EXPENSES. In addition to and not in limitation of the
foregoing, but subject to the provisions set forth below and to any limitation
imposed by applicable law, the Company agrees to pay all expenses, including
reasonable attorneys' fees and legal expenses, incurred by Seller in seeking to
collect any amounts payable hereunder which are not paid when due.

                                       B-2


     9. PROVISIONS REGARDING RESTRICTIONS ON PAYMENT. The Company covenants and
agrees, and Seller, by its acceptance of this Initial PCA Note, likewise
covenants and agrees on behalf of itself and any holder of this Initial PCA
Note, that the payment of the principal amount of, and interest on, this Initial
PCA Note is hereby expressly subject to certain restrictions set forth in the
following clauses of this paragraph 9:

          (a) No payment or other distribution of the Company's assets of any
     kind or character, whether in cash, securities, or other rights or
     property, shall be made on account of this Initial PCA Note except to the
     extent such payment or other distribution is permitted under the Purchase
     Agreement and the Credit and Security Agreement;

          (b) In the event of any dissolution, winding up, liquidation,
     readjustment, reorganization or other similar event relating to the
     Company, whether voluntary or involuntary, partial or complete, and whether
     in bankruptcy, insolvency or receivership proceedings, or upon an
     assignment for the benefit of creditors, or any other marshaling of the
     assets and liabilities of the Company or any sale of all or substantially
     all of the assets of the Company (such proceedings being herein
     collectively called "BANKRUPTCY PROCEEDINGS"), the Senior Interest shall
     first be paid and performed in full and in cash before Seller shall be
     entitled to receive and to retain any payment or distribution in respect to
     this Initial PCA Note. In order to implement the foregoing, Seller hereby
     irrevocably agrees that the Agent, in the name of Seller or otherwise, may
     demand, sue for, collect, receive and receipt for any and all such payments
     or distributions, and the file, prove and vote or consent in any such
     Bankruptcy Proceedings with respect to any and all claims of Seller
     relating to this Initial PCA Note, in each case until the Senior Interest
     shall have been paid and performed in full and in cash;

          (c) In the event that the Seller receives any payment or other
     distribution of any kind or character from the Company or from other source
     whatsoever, in respect of this Initial PCA Note, other than as expressly
     permitted by the terms of this Initial PCA Note, such payment or other
     distribution shall be received for the sole benefit of the Senior Interest
     Holders and shall be turned over by Seller to the Agent (for the benefit of
     the Senior Interest Holders) forthwith;

          (d) Notwithstanding any payments or distributions received by the
     Senior Interest Holders in respect of this Initial PCA Note, Seller shall
     not be subrogated to the rights of the Senior Interest Holders in respect
     of the Senior Interest;

          (e) The provisions set forth in this Section 9 are intended solely for
     the purpose of defining the relative rights of Seller, on the one hand, and
     the Senior Interest Holders on the other hand;

          (f) Seller shall not, until Final Payout Date, transfer, pledge or
     assign, or commence legal proceedings to enforce or collect this Initial
     PCA Note or any rights in respect hereof except as required by the Senior
     Credit Agreement;

          (g) Seller shall not, without the advance written consent of the
     Agent, commence, take any action to cause any other Person to commence, or
     join with any other Person in

                                       B-3


     commencing, any Bankruptcy Proceedings with respect to the Company until
     the Final Payout Date shall have occurred;

          (h) If, at any time, any payment (in whole or in part) of any Senior
     Interest is rescinded or must be restored or returned by a Senior Interest
     Holder (whether in connection with Bankruptcy Proceedings or otherwise),
     these provisions shall continue to be effective or shall be reinstated, as
     the case may be, as though such payment had not been made;

          (i) Seller hereby waives; (i) notice of acceptance of these provisions
     by any of the Senior Interest Holders; (ii) notice of the existence,
     creation, non-payment or non-performance of all or any of the Senior
     Interest; and (iii) all diligence in enforcement, collection or protection
     of, or realization upon, the Senior Interest, or any thereof, or any
     security therefor;

          (j) These provisions constitute a continuing offer from the holder of
     this Initial PCA Note to all Persons who become the holders of, or who
     continue to hold, the Senior Interest; and these provisions are made for
     the benefit of the Senior Interest Holders, and the Agent or the Lenders
     may proceed to enforce such provisions on behalf of each of such Persons.

     10. GENERAL. No failure or delay on the part of Seller in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power of right preclude any other or further
exercise thereof or the exercise of any other power or right. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Initial PCA Note shall in any event be effective unless (i) the same shall be in
writing and signed and delivered by the Company and Seller and (ii) all consent
required for such actions under the Transaction Documents shall have been
received by the appropriate Persons.

     11. NO NEGOTIATION. This Initial PCA Note is not negotiable.

     12. GOVERNING LAW. THIS PROMISSORY NOTE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

     13. CAPTIONS. Paragraph captions used in this Initial PCA Note are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Initial PCA Note.

                                          PACKAGING CREDIT COMPANY, LLC

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

                                       B-4


                                    EXHIBIT C
                     OFFICE LOCATION WHERE RECORDS ARE KEPT

1900 West Field Court
Lake Forest, Illinois  60045

[LIST OTHER LOCATIONS]

        1001 113th Street
        Arlington, TX 76011

        1610 Winbourne Ct.
        North Little Rock, AR 72116

        21 Leigh Fisher Blvd.
        El Paso, TX 79906

        2510 West Miller Road
        Garland, TX 75041

        4240 Bandini Blvd.
        Vernon, CA 90023

        9200 Old McGregor Road
        Waco, TX 76712

        2325 C Statham Blvd.
        Oxnard, CA 93033

        441 S. 53rd Avenue
        Phoenix, AZ 85043

        1800 E. Plano Parkway
        Plano, TX 75074

        4654 W. 1525 South
        Salt Lake City, UT 84104

        460 W. 500 South
        Salt Lake City, UT 84101

        9700 Frontage Road
        Southgate, CA 90280



        2246 Udell Street
        Filer City, MI 49634

        1824 Baltimore Street
        Middletown, OH 45055

        555 Metro Place North
        Suite 500
        Dublin, OH 43017

        6247 Pine Street
        Burlington, WI 53105

        5600 West Good Hope Rd.
        Milwaukee, WI 53223

        901 Grimes Blvd.
        Lexington, NC 27292

        114 Dixie Blvd.
        Morganton, NC 28655

        6245 Woodlore Drive
        Acworth, GA 30101

        1302 N. Salisbury Ave.
        Salisbury, NC 28144

        3200 Lakewood Ave. S.W.
        East Point, GA 30344

        305 Van Buren Road
        Bolivar, TN 38008

        2313 N. William St.
        Goldsboro, NC 27530

        212 Roelee St.
        Trinity, NC 27370

        12105 Belton Honea Path Hwy.
        Honea Path, SC 29654

        Highway 178
        Donalds, SC 29654

        112 Edwards Drive
        Jackson, TN 38301

                                       C-2


        3936 Fountain Valley Lane
        Knoxville, TN 37918

        3240 Brittain Drive
        Newberry, SC 29108

        3200 Hipack Drive
        Opelika, AL 36801

        4300 Cheyene Drive
        Archdale, NC 27263

        321 Industrial Park Rd.
        Rutherfordton, NC 28139

        Highway 57
        P.O. Box 33
        Counce, TN 38326

        N9090 County Road E
        Tomahawk, WI 54487

        5495 Lake Park
        Clyarrville Road
        Clyarrville, GA 31601

        32745 J Avenue
        Beaman, IA 50609

        1201 Cornerstone Drive
        Windsor, CO 80550

        3200 N. Lake Shore Drive
        #2702
        Chicago, IL 60657

        1110 Military Road
        Buffalo, NY 14217

        705 South Division Street
        Colby, WI 54421

        502 W. Center Street
        Conrad, IA 50621

        5501 Brighton Blvd.
        Commerce City, CO 80022

                                       C-3


        7953 N.E. Beech Street
        Fridley, MN 55432

        4300 Highway 55
        Golden Valley, MN 55422

        1402 South 17th Ave.
        Marshalltown, IA 50158

        1821 NE Marshall St.
        Minneapolis, MN 55418

        400 S. 45th Street East
        Muskogee, OK 74403

        10854 Leroy Drive
        Northglenn, CO 80233

        1002 Missouri Ave.
        Omaha, NE 68107

        6363 John J. Pershing Drive
        Omaha, NE 68110

        789 Elmgrove Rd.
        Bldg. #10
        Rochester, NY 14624

        2262 B Bluestone Hills Dr.
        Harrisonburg, VA 22801

        659 Eastport Road
        Jacksonville, FL 32218

        1200 W. Pike St.
        Grafton, WV 26354

        400 Pleasant Valley Road
        Harrisonburg, VA 22801

        2000 Jefferson Davis Hwy.
        Richmond, VA 23224

        1005 Industry Circle S.E.
        Roanoke, VA 24013

        2155 42nd Street NW
        Winter Haven, FL 33881

                                       C-4


        109 Arrowhead Drive
        Bldg. 2
        Manheim, PA 17545

        3785 Bryn Mawr Street
        Orlando, FL 32808

        54 Shutterlee Mill Lane
        Staunton, VA 24401

        1805 Colonial Drive
        Thomasville, GA 31792

        217 Peach Street
        Vineland, NJ 08360

        24 Park Side Ave.
        West Springfield, MA 01089

        208 Lenoir Drive
        Winchester, VA 22603

        708 Killian Road
        Akron, OH 44319

        929 Faultless Drive
        Ashland, OH 44805

        520 South First Street
        Gas City, IN 46933

        P.O. Box 127
        Middletown, OH 45042

        P.O. Box 4610
        Newark, OH 43058

        One 28th Street
        Pittsburgh, PA 15222

        408 East St. Clair
        Vincennes, IN 47591

        533 Mt. Tom Road
        Northampton, MA 01060

        5405 Glenway Drive
        Brighton, MI 48116

                                       C-5


        925 North Godfrey Street
        Allentown, PA 18103

        8301 Sherwick Court
        Jessup, MD 20794

        33 Glenn Avenue
        Chelmsford, MA 01824

        1106 Industrial Park Drive
        Edmore, MI 48829

        3251 Chicago Drive S.W.
        Grandville, MI 49418

        435 Gitts Run Road
        Hanover, PA 17331

        1530 Fruitville Pike
        Lancaster, PA 17601

        525 Mt. Tom Road
        Northampton, MA 01060

        936 Sheldon Road
        Plymouth, MI 48170

        4471 Steelway Blvd. South
        Liverpool, NY 13088

        2207 Traversfield Drive
        Traverse City, MI 49686

        7451 Cetronia Road
        Allentown, PA 18106

        20400 Old Rome State Rd.
        Watertown, NY 13601

                                       C-6


                                SCHEDULE 5.1 (o)
                                   TRADE NAMES

                                      None



                                  SCHEDULE 9.2
                                NOTICE ADDRESSES

Seller:           1900 West Field Court
                  Lake Forest, Illinois  60045
                  Attn: Fran Hori
                  Telephone:  847-482-3719
                  Telecopy:  847-482-4516

Company:          1900 West Field Court
                  Lake Forest, Illinois 60045
                  Attn:  Fran Hori
                  Telephone:  847-482-3719
                  Telecopy:  847-482-4516



                                                                   Exhibit 10.25


================================================================================

                           PURCHASE AND SALE AGREEMENT

                          DATED AS OF NOVEMBER 29, 2000

                                     BETWEEN

                          PACKAGING CREDIT COMPANY, LLC

                                       AND

                       PACKAGING RECEIVABLES COMPANY, LLC

================================================================================



                                TABLE OF CONTENTS



SECTION                       HEADING                                    PAGE
                                                                     

ARTICLE I            AGREEMENT TO SELL......................................3

   Section 1.1.      Sales and Contributions................................3
   Section 1.2.      Timing of Purchases....................................4
   Section 1.3.      Consideration for Purchases............................5
   Section 1.4.      Sale Termination Date..................................5

ARTICLE II           CALCULATION OF PURCHASE PRICE..........................5

   Section 2.1.      Calculation of Purchase Price..........................5

ARTICLE III          PAYMENT OF PURCHASE PRICE..............................7

   Section 3.1.      Initial Purchase Price Payment.........................7
   Section 3.2.      Subsequent Purchase Price Payments.....................7
   Section 3.3.      Settlement as to Specific Receivables..................8
   Section 3.4.      Settlement as to Dilution..............................9
   Section 3.5.      Reconveyance of Receivables............................9

ARTICLE IV           CONDITIONS OF PURCHASERS...............................9

   Section 4.1.      Conditions Precedent to Initial Purchase...............9
   Section 4.2.      Certification as to Representations and
                     Warranties............................................11

ARTICLE V            REPRESENTATIONS AND WARRANTIES........................11

   Section 5.1.      Representations of Seller.............................11

ARTICLE VI           COVENANTS OF SELLER...................................14

   Section 6.1.      Affirmative Covenants.................................14
   Section 6.2.      Reporting Requirements................................15
   Section 6.3.      Negative Covenants....................................16

ARTICLE VII          ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE
                     RECEIVABLES...........................................16

   Section 7.1.      Rights of the Servicer................................16
   Section 7.2.      Responsibilities of Seller............................16
   Section 7.3.      Further Action Evidencing Purchases...................17
   Section 7.4.      Application of Collections............................17

ARTICLE VIII         INDEMNIFICATION.......................................17

   Section 8.1.      Indemnities of Seller.................................17


                                       -i-



                                                                     
ARTICLE IX           MISCELLANEOUS.........................................20

   Section 9.1.      Amendments, Etc.......................................20
   Section 9.2.      Notices, Etc..........................................20
   Section 9.3.      No Waiver; Cumulative Remedies........................20
   Section 9.4.      Binding Effect; Assignability.........................20
   Section 9.5.      Governing Law.........................................21
   Section 9.6.      Costs, Expenses and Taxes.............................21
   Section 9.7.      Submission to Jurisdiction............................21
   Section 9.8.      Waiver of Jury Trial..................................21
   Section 9.9.      Captions and Cross References;
                     Incorporation by Reference............................22
   Section 9.10.     Execution in Counterparts.............................22
   Section 9.11.     Acknowledgment and Agreement..........................22
   Section 9.12.     No Proceedings........................................22


                                      -ii-


EXHIBITS
- --------

EXHIBIT A    FORM OF PURCHASE REPORT
EXHIBIT B    FORM OF THE SELLER NOTE
EXHIBIT C    OFFICE LOCATIONS
EXHIBIT A-1  FORM OF LOCKBOX AGREEMENT

SCHEDULES
- ---------

SCHEDULE 5.1(n)     TRADE NAMES
SCHEDULE 9.2        NOTICE ADDRESS

                                      -iii-


                           PURCHASE AND SALE AGREEMENT

     THIS PURCHASE AND SALE AGREEMENT (as amended, supplemented or modified from
time to time, this "AGREEMENT"), dated as of November 29, 2000, is between
Packaging Credit Company, LLC, a Delaware limited liability company ("SELLER"),
as seller, and Packaging Receivables Company, LLC, a Delaware limited liability
company (the "COMPANY"), as purchaser.

                                   DEFINITIONS

     Unless otherwise indicated, certain terms that are capitalized and used
throughout this Agreement are defined in Appendix A to the Credit and Security
Agreement dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, (the "CREDIT AND SECURITY AGREEMENT"), among the
Company, Seller, as initial Servicer, Blue Ridge Asset Funding Corporation, as a
Lender, Wachovia Bank, N.A., individually as a Lender and as the agent for the
Lenders (the "AGENT"). The following terms have the respective meanings
indicated below:

     AVAILABLE FUNDS: As defined in Section 3.2 hereof.

     CONTRIBUTED RECEIVABLES: As defined in Section 1.2(b) hereof.

     DEEMED COLLECTION: Amounts payable by Seller pursuant to Section 3.3 or
3.4.

     INELIGIBLE RECEIVABLE: As defined in Section 3.3 hereof.

     INITIAL CLOSING DATE: As defined in Section 1.2 hereof.

     INITIAL CONTRIBUTED RECEIVABLES: As defined in Section 1.1(b).

     INITIAL CUT-OFF DATE: The Business Day immediately preceding the Initial
Closing Date.

     LOCKBOX ACCOUNTS: One or more lockbox accounts held in Lockbox Banks for
receiving Collections from Receivables.

     MAXIMUM SELLER NOTE BALANCE: Means:

          (a) zero as of the date of this Agreement and shall mean zero until
     such time as Seller and the Company mutually agree that the meaning in
     clause (b) below shall apply; and

          (b) at such time as the Seller and the Company mutually agree, an
     amount equal to the excess of (i) the Net Pool Balance over (ii) the sum of
     (a) the outstanding principal balance of all Loans made to the Company
     under the Credit and Security Agreement and (b) the Triple-B Loss Reserve
     Amount, each as of such date.



     PURCHASE PRICE: As defined in Section 2.1 hereof.

     PURCHASE REPORT: As defined in Section 2.1 hereof.

     RELATED RIGHTS: As defined in Section 1.1(a) hereof.

     SALE INDEMNIFIED AMOUNTS: As defined in Section 8.1 hereof.

     SALE INDEMNIFIED PARTY: As defined in Section 8.1 hereof.

     SALE TERMINATION DATE: As defined in Section 1.4 hereof.

     SELLER MATERIAL ADVERSE EFFECT: With respect to any event or circumstance:

              (i) a Credit Event shall have occurred;

             (ii) a material adverse effect on the ability of Seller to perform
     its obligations under this Agreement or any other Transaction Document to
     which Seller is a party;

            (iii) a material adverse effect on the validity or enforceability
     as against Seller of this Agreement or any other Transaction Document to
     which Seller is a party;

             (iv) a material adverse effect on the status, existence,
     perfection, priority or enforceability of the Company's interest in the
     Receivables and the Related Rights; or

              (v) a material adverse effect on the validity, enforceability or
     collectability of a material portion of the Receivables.

     SELLER NOTE: As defined in Section 3.2 hereof.

     TRIPLE-B LOSS RESERVE AMOUNT: As of any date means an amount equal to the
product of (i) the Net Pool Balance and (ii) the Loss Reserve as of the
immediately preceding Cut-Off Date (except that such Loss Reserve shall be
calculated with a multiple of 1.5 rather than 2.0).

                                   BACKGROUND

     1. The Company is a limited liability company, all of the membership
interests of which are wholly-owned by Seller.

     2. Seller is concurrently with the initial sale hereunder transferring
certain Receivables and Related Rights to the Company as part of the
capitalization of the Company.

     3. Seller wishes to sell Receivables and Related Rights to the Company, and
the Company is willing, on the terms and subject to the conditions set forth
herein, to purchase Receivables and Related Rights from Seller.

                                       -2-


     4. The Company intends to pledge its interests in the Receivables and
Related Rights as collateral for loans under the Credit and Security Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:

                                    ARTICLE I
                                AGREEMENT TO SELL

     SECTION 1.1. SALES AND CONTRIBUTIONS.

     (a) AGREEMENT TO SELL. On the terms and subject to the conditions set forth
in this Agreement (including Article V), and in consideration of the Purchase
Price, from the Initial Closing Date until the Sale Termination Date, Seller
agrees to sell, assign and transfer, and does hereby sell, assign and transfer
to the Company, and the Company agrees to purchase, and does hereby purchase
from Seller, all of Seller's right, title and interest in and to:

           (i) each Receivable (other than Initial Contributed Receivables) of
     Seller that existed and was owing to Seller as of the close of Seller's
     business on the Initial Cut-Off Date;

          (ii) each Receivable (other than Contributed Receivables) transferred
     to the Seller pursuant to the Sale Agreement from the close of Seller's
     business on the Initial Cut-Off Date, to and including the Sale Termination
     Date;

         (iii) all rights to, but not the obligations under, all related
     Contracts and all Related Security;

          (iv) all monies due or to become due with respect to the foregoing;

           (v) all books and records related to any of the foregoing;

          (vi) all Lockbox Accounts, all amounts on deposit therein and all
     related agreements between Seller and the Lockbox Banks, in each case to
     the extent constituting or representing items described in paragraph (vii)
     below; and

         (vii) all Collections in respect of, and other proceeds of,
     Receivables or any other of the foregoing (as defined in the UCC) received
     on or after the Initial Cut-Off Date including, without limitation, all
     funds which either are received by Seller, the Company, the Originator or
     the Servicer from or on behalf of the Obligors in payment of any amounts
     owed (including, without limitation, finance charges, interest and all
     other charges) in respect of Receivables, or are applied to such amounts
     owed by the Obligors (including without limitation, insurance payments, if
     any, that the Seller, the Originator, the Company or the Servicer (if other
     than Seller) applies in the ordinary course of its business to amounts owed
     in respect of any Receivable and net proceeds of sale or other disposition
     of repossessed goods or other collateral or property of the Obligors or any

                                       -3-


     other party directly or indirectly liable for payment of such Receivable
     and available to be applied thereon).

All purchases and capital contributions hereunder shall be made without
recourse, but shall be made pursuant to and in reliance upon the
representations, warranties and covenants of Seller, in its capacity as seller,
set forth in each Transaction Document. The proceeds and rights described in
subsections (iii) through (vii) of this Section 1.1(a) are herein collectively
called the "RELATED RIGHTS."

     (b) AGREEMENT TO CONTRIBUTE. In consideration of the membership interests
of the Company issued to Seller, Seller agrees to contribute, and does hereby
contribute to the Company, and the Company agrees to accept, and does hereby
accept, from Seller, in each case, on the Initial Closing Date, all of Seller's
right, title and interest in and to (i) Receivables, and the Related Rights with
respect thereto, existing on the Initial Cut-Off Date, starting with the oldest
such Receivables such that the aggregate Unpaid Balance of all such Receivables
shall be as close as possible to, but not less than, $67,000,000 (the "INITIAL
CONTRIBUTED RECEIVABLES") and (ii) all other Contributed Receivables.

     (c) ABSOLUTE TRANSFER. It is the intention of the parties hereto that the
conveyance of the Receivables and Related Rights by the Seller to the Company as
provided in this Section 1.1 be, and be construed as, an absolute sale or
contribution, without recourse, of such Receivables and Related Rights by the
Seller to the Company. Furthermore, it is not intended that such conveyance be
deemed a pledge of such Receivables and Related Rights by the Seller to the
Company to secure a debt or other obligation of the Seller. If, however,
notwithstanding the intention of the parties, the conveyance provided for in
this Section 1.1 is determined to be a transfer for security, then this
Agreement shall also be deemed to be a "security agreement" within the meaning
of Article 9 of the UCC and the Seller hereby grants to the Company a "security
interest" within the meaning of Article 9 of the UCC in all of the Seller's
right, title and interest in and to such Receivables and Related Rights, now
existing and hereafter created, to secure a loan in an amount equal to the
aggregate Purchase Price therefor and the Seller's other payment obligations
under this Agreement.

     SECTION 1.2. TIMING OF PURCHASES.

     (a) INITIAL CLOSING DATE PURCHASES. On the date of the first Loan under the
Credit and Security Agreement (the "INITIAL CLOSING DATE") Seller shall sell to
the Company, and the Company shall purchase, pursuant to Section 1.1, Seller's
entire right, title and interest in (i) each Receivable (other than the Initial
Contributed Receivables) that existed and was owing to Seller as of the close of
Seller's business on the Initial Cut-Off Date, and (ii) all Related Rights with
respect thereto.

     (b) REGULAR PURCHASES AND CONTRIBUTIONS. After the Initial Closing Date,
and continuing until the Sale Termination Date, each Receivable described in
Section 1.1(a)(ii) hereof, and all the Related Rights with respect thereto,
transferred to the Seller pursuant to the Sale Agreement shall be sold or
contributed by Seller to the Company (without any further action) upon the
transfer of such Receivable. All such Receivables, other than those Receivables

                                       -4-


indicated on a Purchase Report as having been contributed by Seller to the
Company (such other Receivables, together with the Initial Contributed
Receivables, the "CONTRIBUTED RECEIVABLES"), shall be sold to the Company on
such date; all Contributed Receivables shall be contributed by the Seller to the
Company on such date.

     SECTION 1.3. CONSIDERATION FOR PURCHASES. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to Seller in accordance with Article III.

     SECTION 1.4. SALE TERMINATION DATE. The "SALE TERMINATION DATE" shall be
the Termination Date under the Credit and Security Agreement.

                                   ARTICLE II
                          CALCULATION OF PURCHASE PRICE

     SECTION 2.1. CALCULATION OF PURCHASE PRICE. On each Reporting Date
(commencing with the first Reporting Date following the Initial Closing Date),
the Servicer shall deliver to the Company, the Agent and Seller (if the Servicer
is other than Seller) a report in substantially the form of Exhibit A (each such
report being herein called a "PURCHASE REPORT") with respect to the Company's
purchases of Receivables from Seller:

          (a) that arose on or prior to the Initial Cut-Off Date (in the case of
     the first Purchase Report to be delivered hereunder) and

          (b) that arose during the Settlement Period immediately preceding such
     Reporting Date (in the case of each successive Purchase Report).

Each Purchase Report shall designate the amount of such Receivables that were
Eligible Receivables on the date of origination (or, in the case of Receivables
transferred or contributed on the Initial Closing Date, on the Initial Closing
Date).

     The "PURCHASE PRICE" (to be paid in accordance with the terms of
Article III) for the Receivables and the Related Rights shall be determined in
accordance with the following formula:

          PP   =    AUB - (AUB x FMVD)

     where:

          PP   =    Purchase Price (to be paid to Seller in accordance with the
                    terms of Article III) as calculated on the relevant
                    Reporting Date.

          AUB  =    (i) for purposes of calculating the Purchase Price on the
                    Initial Closing Date, the aggregate Unpaid Balance of all
                    Receivables that existed and were owing to Seller as
                    measured as at the Initial Cut-

                                       -5-


                    Off Date, less an amount equal to the sum of the aggregate
                    Unpaid Balance of all Initial Contributed Receivables, and

                    (ii) for purposes of calculating the Purchase Price for
                    Receivables on each Reporting Date thereafter, the
                    aggregate Unpaid Balance of the Receivables described in
                    Section 1.1(a)(ii) hereof that were generated by Seller
                    during the immediately preceding Settlement Period, less an
                    amount equal to the sum of the aggregate Unpaid Balance of
                    all Contributed Receivables, if any, indicated on the
                    related Purchase Report.

          FMVD =    Fair Market Value Discount Factor on the determination
                    date, which is the sum of the Loss Discount and the Cost
                    Discount, in each case as calculated on the most recent
                    Reporting Date as set forth in the definitions below.

     "LOSS DISCOUNT" as measured on the Initial Closing Date or any Reporting
Date means the ratio, expressed as a percentage, of (i) the losses (i.e.
write-offs to the bad debt reserve or other write-offs consistent with the
Credit and Collection Policy, in each case, net of recoveries) recognized for
all Receivables during the period equal to twelve (12) successive months ending
on the Cut-Off Date immediately preceding the Initial Closing Date or such
Reporting Date, as the case may be, divided by (ii) the Collections on all
Receivables received during such period.

     "COST DISCOUNT" as measured on the Initial Closing Date or any Reporting
Date means a percentage determined in accordance with the following formula:

          CD   =    (DSO/360) x CR

     where:

          CD   =    the Cost Discount as measured on such Monthly Reporting
                    Date;

          DSO  =    the Days Sales Outstanding, as set forth in the most recent
                    Purchase Report; and

          CR   =    the Cost Rate as measured on such Reporting Date.

     "COST RATE" as measured on the Initial Closing Date or any Reporting Date
means a per annum percentage rate equal to the sum of (i) the LIBO Rate for the
Initial Closing Date or the related Settlement Period, as the case may be, plus
(ii) 1.00%.

     "LIBO RATE" for the Initial Closing Date or any Settlement Period means the
offered rate per annum (rounded upwards, if necessary, to the nearest 1/16th of
one percent) appearing in The Wall Street Journal for three month LIBOR loans on
the Initial Closing Date or the first Business Day of such Settlement Period, as
the case may be.

                                       -6-


                                   ARTICLE III
                            PAYMENT OF PURCHASE PRICE

     SECTION 3.1. INITIAL PURCHASE PRICE PAYMENT. On the terms and subject to
the conditions set forth in this Agreement, the Company agrees to pay to Seller
on the Initial Closing Date the Purchase Price for the purchase to be made from
Seller with respect to Receivables existing on or prior to the Initial Cut-Off
Date (other than the Initial Contributed Receivables) in cash in an amount equal
to the amount received by the Company in connection with the first Loan made
pursuant to the Credit and Security Agreement.

     SECTION 3.2. SUBSEQUENT PURCHASE PRICE PAYMENTS. After the Initial Closing
Date and until the termination of this Agreement pursuant to Section 9.4 hereof,
the Purchase Price due pursuant to Section 2.1 for each Settlement Period shall
be due on the related Settlement Date. As an advance payment of such Purchase
Price, on each Business Day during a Settlement Period, the Company shall pay to
Seller a portion of the Purchase Price due pursuant to Section 2.1 by depositing
into such account, as Seller shall specify, immediately available funds from
monies then held by or on behalf of the Company solely to the extent that such
monies do not constitute Collections that are required to be set aside or
segregated and held by the Servicer pursuant to the Credit and Security
Agreement or to be distributed to the Agent or the Lenders pursuant to the
Credit and Security Agreement or required to be paid to the Servicer as the
Servicer's Fee on the next Settlement Date, or otherwise necessary to pay
current expenses of the Company (in its reasonable discretion) (such available
monies, the "AVAILABLE FUNDS") and provided that Seller has paid all amounts
then owing by it hereunder. On each Reporting Date, the Servicer shall calculate
the amount of the Purchase Price remaining to be paid by deducting from the
Purchase Price the Available Funds that have been paid during the corresponding
Settlement Period, and such amount due shall be identified in the Purchase
Report.

     To the extent that the Available Funds were insufficient to pay the
Purchase Price then due in full (an "AVAILABLE FUNDS SHORTFALL"), the remaining
portion of such Purchase Price shall be paid by:

          (i) if the Maximum Seller Note Balance is then zero, by a contribution
     to the Company of an amount equal to the Available Funds Shortfall;

         (ii) upon the first occurrence of an Available Funds Shortfall when
     the Maximum Seller Note Balance is greater than zero, by issuing a
     promissory note in the form of Exhibit B to Seller in the amount of such
     Available Funds Shortfall (such promissory note, as it may be amended,
     supplemented, endorsed or otherwise modified from time to time in
     substitution therefor or renewal thereof in accordance with the Transaction
     Documents, being herein called the "SELLER NOTE"); or

        (iii) otherwise, by increasing the principal amount of the Seller
     Note, effective as of the last day of the related Settlement Period in the
     amount of such Available Funds Shortfall;

                                       -7-


PROVIDED, HOWEVER, that the aggregate of the principal amounts outstanding at
any time under the Seller Note may not exceed the Maximum Seller Note Balance
(which is zero as of the date hereof); and PROVIDED FURTHER, that the amount of
such increase in the principal amount of the Seller Note on any Settlement Date
may not account for more than 25% of the aggregate Purchase Price due with
respect to the related Settlement Period (the "SELLER NOTE MONTHLY MAXIMUM").

     To the extent that the amount due with respect to the related Settlement
Period pursuant to Section 2.1 exceeds (x) the Available Funds plus (y) the
Seller Note Monthly Maximum (such excess amount, the "SHORTFALL"), the Seller
shall contribute to the Company cash in an amount equal to such Shortfall, and
the Company shall use such funds to repay the Shortfall. To the extent that (x)
the amount due pursuant to Section 2.1 with respect to all Receivables sold by
Seller that arose during the corresponding Settlement Period is exceeded by (y)
the amount paid for such Receivables to Seller during such Settlement Period
pursuant to the second sentence of this Section 3.2, such excess shall be
treated as a reduction in the principal amount of the Seller Note, effective as
of the last day of the related Settlement Period, and, if the principal amount
of the Seller Note is zero, such excess shall be refunded to the Company.

     Seller shall make all appropriate record keeping entries with respect to
the Seller Note to reflect payments by the Company thereon and Seller's books
and records shall constitute rebuttable presumptive evidence of the principal
amount of and accrued interest on the Seller Note. Seller shall return the
Seller Note to the Company upon the final payment thereof after the termination
of this Agreement pursuant to Section 9.4 hereof.

     SECTION 3.3. SETTLEMENT AS TO SPECIFIC RECEIVABLES. If an officer of Seller
obtains knowledge or receives notice from the Company or the Agent that (a) on
the day that any Receivable purchased or contributed hereunder was transferred
to the Seller pursuant to the Sale Agreement, (or, in the case of Receivables
transferred or contributed on the Initial Closing Date, on the Initial Closing
Date) any of the representations or warranties set forth in Section 5.1(k) were
not true with respect to such Receivable, or such Receivable was designated as
an Eligible Receivable on the related Purchase Report and was not an Eligible
Receivable or, (b) on any day any of the representations or warranties set forth
in Section 5.1(k) with respect to any Receivable is no longer true with respect
to a Receivable (each such Receivable, an "INELIGIBLE RECEIVABLE"), then the
Purchase Price with respect to Receivables that arose during the same Settlement
Period in which such knowledge is obtained or notification is received shall be
decreased by an amount equal to the Unpaid Balance of such Ineligible Receivable
as of the related Settlement Date; PROVIDED, HOWEVER, that if there have been no
purchases of Receivables (or insufficiently large purchases of Receivables to
create a Purchase Price large enough to so reduce by the amount of such Unpaid
Balances) from Seller during such Settlement Period, any amount owed by which
the Purchase Price payable to Seller would have been reduced pursuant to the
immediately preceding clause of this sentence shall be paid by either (at the
option of Seller, unless the Company will, absent such payment in cash, be
unable to meet its obligations under the Credit and Security Agreement on the
next occurring Settlement Date, in which case Seller shall make a cash payment
on or before such Settlement Date) a reduction in the principal amount of the
Seller Note (but not below zero) or by payment within two Business Days after
the related Reporting Date in cash by Seller to the Company by payment of same
day funds;

                                       -8-


PROVIDED, FURTHER, that if the Company receives payment on account of
Collections due with respect to such Ineligible Receivable after such Settlement
Date, the Company promptly shall deliver such funds to Seller. The enforcement
of the obligations of Seller set forth in this Section 3.3 shall be the sole
remedy of the Company with respect to Ineligible Receivables.

     SECTION 3.4. SETTLEMENT AS TO DILUTION. Each Purchase Report shall include,
in respect of the Receivables previously contributed or sold by Seller
(including the Initial Contributed Receivables), a calculation of the aggregate
net reduction in the aggregate Unpaid Balance of such Receivables owed by
particular Obligors on account of any defective, rejected or returned
merchandise or services, any cash discount, any incorrect billings or other
adjustments, or setoffs in respect of any claims by the Obligor(s) thereof
(whether such claims arise out of the same or a related or unrelated
transaction), or any rebate or refund during the most recent Settlement Period.
The Purchase Price to be paid to Seller for the Receivables generated during the
Settlement Period for which such Purchase Report is delivered shall be decreased
by the amount of such net reduction; PROVIDED, HOWEVER, that if there have been
no purchases of Receivables (or insufficiently large purchases of Receivables to
create a Purchase Price large enough to so reduce by the amount of such net
reduction) from Seller during such Settlement Period, any amount owed by which
the Purchase Price payable to Seller would have been reduced pursuant to the
immediately preceding clause of this sentence shall be paid by either (at the
option of Seller, unless the Company will, absent such payment in cash, be
unable to meet its obligations under the Credit and Security Agreement on the
next occurring Settlement Date, in which case Seller shall make a cash payment
on or before such Settlement Date) a reduction in the principal amount of the
Seller Note (but not below zero) or by payment within two Business Days after
the related Reporting Date in cash by Seller to the Company by payment of same
day funds.

     SECTION 3.5. RECONVEYANCE OF RECEIVABLES. In the event that Seller has paid
(by effecting a Purchase Price reduction or otherwise) to the Company the full
Unpaid Balance of any Receivable pursuant to Section 3.3 or 3.4, the Company
shall reconvey such Receivable and all Related Rights with respect thereto, to
Seller, without recourse, representation or warranty, but free and clear of all
liens created by the Company; such reconveyed Receivables and all Related Rights
shall no longer be subject to the terms of this Agreement (including any
obligation to turn over Collections with respect thereto).

                                   ARTICLE IV
                             CONDITIONS OF PURCHASES

     SECTION 4.1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial purchase
and contribution hereunder is subject to the condition precedent that the
Company shall have received, on or before the Initial Closing Date, the
following, each (unless otherwise indicated) dated the Initial Closing Date, and
each in form, substance and date reasonably satisfactory to the Company and the
Agent:

          (a) A copy of the resolutions of the Board of Managers of Seller
     approving the Transaction Documents to be delivered by it and the
     transactions contemplated hereby and thereby, certified by the Secretary or
     Assistant Secretary of Seller;

                                       -9-


          (b) Certificate of Existence for Seller issued as of a recent date by
     the Secretary of State of Delaware;

          (c) A certificate of the Secretary or Assistant Secretary of Seller
     certifying the names and true signatures of the officers authorized on
     Seller's behalf to sign the Transaction Documents to be delivered by it (on
     which certificate the Company and Servicer (if other than Seller) may
     conclusively rely until such time as the Company and the Servicer shall
     receive from Seller a revised certificate meeting the requirements of this
     subsection (c);

          (d) The Certificate of Limited Liability Company of Seller, duly
     certified by the Secretary of State of Delaware as of a recent date,
     together with a copy of the Operating Agreement of Seller, duly certified
     by the Secretary or Assistant Secretary of Seller;

          (e) Copies of the proper financing statements (Form UCC-1) that have
     been duly executed and name Seller as the assignor and the Company as the
     assignee (and Agent, on behalf of the Lenders, as assignee of the Company)
     of the Receivables and the Related Rights or other, similar instruments or
     documents, as may be necessary or, in Servicer's or the Agent's opinion,
     desirable under the UCC of all appropriate jurisdictions or any comparable
     law of all appropriate jurisdictions to perfect the Company's ownership
     interest in all Receivables and Related Rights in which the ownership
     interest may be assigned to it hereunder;

          (f) A written search report from a Person satisfactory to Servicer and
     the Agent listing all effective financing statements that name Seller as
     debtor or assignor and that are filed in the jurisdictions in which filings
     were made pursuant to the foregoing subsection (e), together with copies of
     such financing statements (none of which, except for those described in the
     foregoing subsection (e) shall cover any Receivable or any Related Right
     related to any Receivable) which is to be sold to the Company hereunder,
     and tax and judgment lien search reports from a Person satisfactory to
     Servicer and the Agent showing no evidence of such liens filed against
     Seller;

          (g) Evidence (i) of the execution and delivery by each of the parties
     thereto of each of the other Transaction Documents to be executed and
     delivered in connection herewith and (ii) that each of the conditions
     precedent to the execution, delivery and effectiveness of such other
     Transaction Documents has been satisfied to the Company's satisfaction; and

          (h) A certificate from an officer or other appropriate manager of
     Seller to the effect that Servicer and Seller have placed on the most
     recent, and have taken all steps reasonably necessary to ensure that there
     shall be placed on subsequent, summary master control data processing
     reports the following legend (or the substantive equivalent thereof):  THE
     RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD BY PACKAGING CORPORATION OF
     AMERICA TO PACKAGING CREDIT COMPANY, LLC AND THEN SOLD BY PACKAGING CREDIT
     COMPANY, LLC TO PACKAGING RECEIVABLES COMPANY,

                                      -10-


     LLC; AND A SECURITY INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS BEEN
     GRANTED AND ASSIGNED BY PACKAGING RECEIVABLES COMPANY, LLC TO WACHOVIA
     BANK, N.A., AS AGENT.

     SECTION 4.2. CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. Seller, by
accepting the Purchase Price related to each purchase of Receivables (and
Related Rights), shall be deemed to have certified that the representations and
warranties contained in Article V are true and correct on and as of the day of
such purchase, with the same effect as though made on and as of such day.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

     SECTION 5.1. REPRESENTATIONS OF SELLER. In order to induce the Company to
enter into this Agreement and to make purchases hereunder, Seller, in its
capacity as seller under this Agreement, hereby makes the representations and
warranties set forth in this Section 5.1.

     (a) ORGANIZATION AND GOOD STANDING. Seller has been duly organized and is
validly existing as a limited liability company in good standing under the laws
of the state of its organization, with power and authority to own its properties
and to conduct its business as such properties are presently owned and such
business is presently conducted.

     (b) DUE QUALIFICATION. Seller is duly licensed or qualified to do business
in good standing, and has obtained all necessary approvals, in all jurisdictions
in which the ownership or lease of its property or the conduct of its business
requires such licensing, qualification or approvals, except where the failure to
be so qualified or have such licenses or approvals would not have a Seller
Material Adverse Effect.

     (c) POWER AND AUTHORITY; DUE AUTHORIZATION. Seller has (a) all necessary
power, authority and legal right (i) to execute and deliver, and perform its
obligations under, each Transaction Document to which it is a party and (ii) to
own, sell, contribute and assign Receivables on the terms and subject to the
conditions herein and therein provided; and (b) duly authorized such execution
and delivery and such sale, contribution and assignment and the performance of
such obligations by all necessary action.

     (d) VALID SALE; BINDING OBLIGATIONS. Each sale or contribution of
Receivables and Related Rights made by Seller pursuant to this Agreement shall
constitute a valid sale (or contribution, as the case may be), transfer, and
assignment thereof to the Company, enforceable against creditors of, and
purchasers from, Seller; and this Agreement constitutes, and each other
Transaction Document to be signed by Seller, when duly executed and delivered,
will constitute, a legal, valid, and binding obligation of Seller, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or in law.

                                      -11-


     (e) NO VIOLATION. The consummation of the transactions contemplated by this
Agreement and the other Transaction Documents to which Seller is a party and the
fulfillment of the terms hereof or thereof will not (a) conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under (i) Seller's organizational
documents, or (ii) any material indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which it is a party or by which it is
bound, (b) result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such material indenture, loan agreement,
mortgage, deed of trust, or other agreement or instrument, other than the
Transaction Documents, or (c) violate any law or any order, rule, or regulation
applicable to it of any court or of any federal, state or foreign regulatory
body, administrative agency, or other governmental instrumentality having
jurisdiction over it or any of its properties.

     (f) PROCEEDINGS. There is no litigation, investigation or proceeding
pending, or to the best of Seller's knowledge, threatened, before any court,
regulatory body, arbitrator, administrative agency, or other tribunal or
governmental instrumentality (a) asserting the invalidity of any Transaction
Document to which Seller is a party, (b) seeking to prevent the sale or
contribution of Receivables and the Related Rights to the Company or the
consummation of any of the other transactions contemplated by any Transaction
Document to which Seller is a party, or (c) that would have a Seller Material
Adverse Effect.

     (g) BULK SALES ACT. No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.

     (h) GOVERNMENT APPROVALS. Except for the filing of the UCC financing
statements referred to in Article IV, all of which, at the time required in
Article IV, shall have been duly made and shall be in full force and effect, no
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for Seller's due
execution, delivery and performance of any Transaction Document to which it is a
party.

     (i) FINANCIAL CONDITION. On the date hereof Seller is, and on the date of
each transfer of a new Receivable hereunder (both before and after giving effect
to such transfer), Seller shall be solvent.

     (j) MARGIN REGULATIONS. No use of any funds acquired by Seller under this
Agreement will conflict with or contravene any of Regulations T, U and X
promulgated by the Board of Governors of the Federal Reserve System from time to
time.

     (k) QUALITY OF TITLE.

               (i) Each Receivable (together with the Related Rights with
     respect to such Receivable) which is to be sold or contributed to the
     Company hereunder is or shall be, at the time of such sale or contribution,
     owned by Seller, free and clear of any Lien. Whenever the Company makes a
     purchase or accepts a contribution of a Receivable hereunder, it shall have
     acquired a valid and perfected ownership interest (free  and clear of any
     Lien, other than a Lien created by or arising through the Company, the
     Lenders or

                                      -12-


     the Agent) in such Receivable and all Collections related thereto, and in
     Seller's entire right, title and interest in and to the Related Rights with
     respect thereto.

              (ii) No effective financing statement or other instrument similar
     in effect covering any Receivable or any Related Right is on file in any
     recording office except such as may be filed (1) in favor of Seller in
     accordance with the Contracts, (2) in favor of the Company in accordance
     with this Agreement, (3) in favor of the Seller in accordance with the Sale
     Agreement, (4) in favor of the Lenders or the Agent in accordance with the
     Credit and Security Agreement or in connection with any Lien arising solely
     as the result of any action taken by the Lender (or any assignee thereof)
     or by the Agent and (5) in favor of the agent pursuant to the Senior Credit
     Agreement.

     (l) ACCURACY OF INFORMATION. No information heretofore or contemporaneously
furnished in writing (and prepared) by Seller, as seller, to the Company, the
Lenders or the Agent for purposes of or in connection with any Transaction
Document or any transaction contemplated hereby or thereby is, and no other
written information hereafter furnished (and prepared) by Seller, as seller, to
the Company, the Lenders, or the Agent pursuant to or in connection with any
Transaction Document will be, inaccurate in any material respect as of the date
it was furnished or (except as otherwise disclosed to the company at or prior to
such time) as of the date as of which such information is dated or certified, or
contained or will contain any material misstatement of fact or omitted or will
omit to state any material fact necessary to make such information not
materially misleading.

     (m) OFFICES. Seller's principal place of business and chief executive
office is located at the address set forth in Exhibit C, and the offices where
Seller keeps all its books, records and documents evidencing the Receivables,
the related Contracts and all other agreements related to such Receivables are
located at the address specified in Exhibit C (or at such other locations,
notified to Servicer (if other than Seller), the Company and the Agent in
accordance with Section 6.1(f), in jurisdictions where all action required by
Section 7.3 has been taken and completed).

     (n) TRADE NAMES. Except as disclosed on Schedule 5.1(n), Seller does not
use any trade name other than its actual legal name. From and after the date of
its organization, Seller has not been known by any legal name other than
Packaging Credit Company, LLC as of the date hereof, nor has Seller been the
subject of any merger or similar change in structure, except as disclosed on
Schedule 5.1(n).

     (o) TAXES. Seller has filed all material tax returns and reports required
by law to have been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes which are not yet delinquent or
are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with generally accepted accounting
principles shall have been set aside on its books.

     (p) COMPLIANCE WITH APPLICABLE LAWS. Seller is in compliance, in all
material respects, with the requirements of all applicable laws, rules,
regulations, and orders of all governmental authorities (including, without
limitation, Regulation Z, laws, rules and regulations relating to usury, truth
in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt

                                      -13-


collection practices and privacy and all other consumer laws applicable to the
Receivables and related Contracts), except where such noncompliance,
individually or in the aggregate, would not have a Seller Material Adverse
Effect.

     (q) RELIANCE ON SEPARATE LEGAL IDENTITY. Seller is aware that the Lenders
and the Agent are entering into the Transaction Documents to which they are
parties in reliance upon the Company's identity as a legal entity separate from
Seller and any of its other Affiliates.

                                   ARTICLE VI
                               COVENANTS OF SELLER

     SECTION 6.1. AFFIRMATIVE COVENANTS. From the date hereof until the Final
Payout Date, Seller will, unless the Company and the Agent shall otherwise
consent in writing:

     (a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders, including those with respect to
the Receivables generated by it and the Contracts and other agreements related
thereto, except where such noncompliance, individually or in the aggregate,
would not have a Seller Material Adverse Effect.

     (b) PRESERVATION OF LEGAL EXISTENCE. Preserve and maintain its legal
existence, rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified in good standing in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would have a Seller Material Adverse
Effect.

     (c) RECEIVABLES REVIEW. (i) At any time and from time to time, upon not
less than ten (10) Business Days' notice (unless an Event of Default has
occurred and is continuing (or the Agent believes in good faith that an Event of
Default has occurred and is continuing), in which case no such notice shall be
required) permit the Company and the Agent or their respective agents or
representatives, (A) to examine, to audit and make copies of and abstracts from
all books, records and documents (including, without limitation, computer tapes
and disks) in the possession or under the control of Seller relating to the
Receivables, including, without limitation, the Contracts, and purchase orders
and other agreements related thereto, and (B) to visit Seller's offices and
properties for the purpose of examining such materials described in the
foregoing clause (A) and discussing matters relating to the Receivables
generated by Seller or Seller's performance hereunder with any of the officers
or employees of Seller having knowledge of such matters; (ii) to meet with the
independent auditors of Seller, to review such auditor's work papers and
otherwise to review with such auditors the books and records of Seller with
respect to the Receivables and the Related Rights; and (iii) without limiting
the provisions of clause (i) next above, from time to time, at Seller's expense,
permit certified public accountants or other auditors acceptable to the Agent to
conduct a review of its books and records with respect to the Receivables and
the Related Rights; provided that, so long as no Event of Default has occurred
and is continuing, (x) such reviews mentioned in clauses (i), (ii) and (iii) in
this Section 6.1(c) shall not be done more than two (2) times in any one
calendar year and (y) Seller shall only be responsible for the costs and
expenses of one such review mentioned in clauses (i), (ii) and (iii) in this
Section 6.1(c) in any one calendar year.

                                      -14-


     (d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain an ability to
recreate in all material respects records evidencing the Receivables generated
by it in the event of the destruction of the originals thereof.

     (e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. At its
expense timely and fully perform and comply in all material respects with all
provisions, covenants and other promises required to be observed by it under the
Contracts and all purchase orders and other agreements related to the
Receivables.

     (f) LOCATION OF RECORDS. Keep its principal place of business and chief
executive office, and the offices where it keeps its records concerning or
related to Receivables, at the address(es) referred to in Exhibit C or, upon 30
days' prior written notice to the Company and the Agent, at such other locations
in jurisdictions where all action required by Section 7.3 shall have been taken
and completed.

     (g) CREDIT AND COLLECTION POLICIES. Comply in all material respects with
its Credit and Collection Policy in connection with the Receivables and all
Contracts related thereto.

     (h) SEPARATE CORPORATE EXISTENCE OF THE COMPANY. Take such actions as shall
be required in order to maintain the separate identity of the Company separate
and apart from Seller and its other Affiliates, including those actions set
forth in Section 7.4 of the Credit and Security Agreement.

     SECTION 6.2. REPORTING REQUIREMENTS. From the date hereof until the Final
Payout Date, Seller will, unless the Company and the Agent shall otherwise
consent in writing, furnish to the Company and the Agent:

          (a) PROCEEDINGS. As soon as possible and in any event within ten
      Business Days after any Responsible Officer of Seller has knowledge
      thereof, written notice to the Company and the Agent of (i) all pending
      proceedings and investigations of the type described in Section 5.1(f) not
      previously disclosed to the Company and/or the Agent and (ii) all material
      adverse developments that have occurred with respect to any previously
      disclosed proceedings and investigations;

          (b) CREDIT AND COLLECTION POLICY. Prior to its effective date, notice
      of any material change in the character of Seller's business or in the
      Credit and Collection Policy; and

          (c) OTHER. Promptly, from time to time, such other information,
      documents, records or reports respecting the Receivables of Seller's
      performance as seller hereunder that the Company or the Agent may from
      time to time reasonably request in order to protect the interests of the
      Company, the Lenders, the Agent, or any other Affected Party under or as
      contemplated by the Transaction Documents.

                                      -15-


     SECTION 6.3. NEGATIVE COVENANTS. From the date hereof until the Final
Payout Date, Seller agrees that, unless the Agent shall otherwise consent in
writing, it shall not:

          (a) SALES, LIENS, ETC. Except as otherwise provided herein or in any
      other Transaction Document, sell, assign (by operation of law or
      otherwise) or otherwise dispose of, or create or suffer to exist any Lien
      upon or with respect to, any Receivable or related Contract or other
      Related Right, or any interest therein, or any Collections thereon, or
      assign any right to receive income in respect thereof.

          (b) CHANGE IN CREDIT AND COLLECTION POLICY. Make any material change
      in the Credit and Collection Policy that would impair the collectibility
      of any significant portion of the Receivables or otherwise adversely
      affect the interests or remedies of the Company hereunder or the Agent or
      the Lenders under any Transaction Document.

          (c) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. Take any
      action to cause or permit any Receivable generated by it to become
      evidenced by any "instrument" (as defined in the applicable UCC), except
      in connection with the collection of overdue Receivables, provided that
      the original of such instrument is delivered to the Agent, duly endorsed.

                                   ARTICLE VII
         ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE RECEIVABLES

     SECTION 7.1. RIGHTS OF THE SERVICER. Seller hereby authorizes the Servicer
(if other than Seller) or its respective designees to take any and all steps in
Seller's name necessary or desirable, in its respective determination, to
collect all amounts due under any and all Receivables, including, without
limitation, endorsing Seller's name on checks and other instruments representing
Collections and enforcing such Receivables and the provisions of the related
Contracts that concern payment and/or enforcement of rights to payment.

     SECTION 7.2. RESPONSIBILITIES OF SELLER. Anything herein to the contrary
notwithstanding:

          (a) COLLECTION PROCEDURES. Seller agrees to direct the Obligors, as
      promptly as practicable after an Event of Default, to make payments of
      Receivables directly to a Lock-Box Account that is the subject of a
      Lock-Box Agreement at a Lock-Box Bank. Seller further agrees to transfer
      any Collections (including any security deposits applied to the Unpaid
      Balance of any Receivable) that it receives directly to the Servicer (if
      other than Seller) within two Business Days of receipt thereof, and agrees
      that all such Collections shall be deemed to be received in trust for the
      Company; provided that, to the extent permitted pursuant to Section 3.2,
      Seller may retain such Collections as a portion of the Purchase Price then
      payable or apply such Collections to the reduction of the outstanding
      balance of the Seller Note.

          (b) PERFORMANCE UNDER CONTRACT. Seller shall remain responsible for
      performing its obligations hereunder and under the Contracts, and the
      exercise by the

                                      -16-


      Company or its designee of its rights hereunder shall not relieve Seller
      from such obligations.

          (c) POWER OF ATTORNEY. Seller hereby grants to the Servicer (if other
      than Seller) an irrevocable power of attorney, with full power of
      substitution, coupled with an interest, to take in the name of Seller all
      steps necessary or advisable to indorse, negotiate or otherwise realize on
      any writing or other right of any kind held or transmitted by Seller or
      transmitted or received by the Company (whether or not from Seller) in
      connection with any Receivable.

     SECTION 7.3. FURTHER ACTION EVIDENCING PURCHASES. Seller agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Company may
reasonably request in order to perfect, protect or more fully evidence the
Company's ownership of the Receivables (and the Related Rights) purchased by the
Company hereunder, or to enable the Company to exercise or enforce any of its
rights hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of the Company, Seller will:

          (a) execute and file such financing or continuation statements, or
      amendments thereto or assignments thereof, and such other instruments or
      notices, as may be necessary or appropriate; and

          (b) mark the summary master control data processing records with the
      legend set forth in Section 4.1(i).

Seller hereby authorizes the Company or its designee to file one or more
financing or continuation statements, and amendments thereto and assignment
thereof, relative to all or any of the Receivables (and the Related Rights) now
existing or hereafter contributed or sold by Seller. If Seller fails to perform
any of its agreements or obligations under this Agreement, the Company or its
designee may (but shall not be required to) itself perform, or cause performance
of, such agreement or obligation, and the expenses of the Company or its
designee incurred in connection therewith shall be payable by Seller as provided
in Section 9.6.

     SECTION 7.4. APPLICATION OF COLLECTIONS. Any payment by an Obligor in
respect of any indebtedness owed by it to Seller in respect of any Contract
shall, except as otherwise specified by such Obligor or otherwise required by
contract or law, be applied first, as a Collection of the Receivables of such
Obligor, in the order of the age of such Receivables, starting with the oldest
of such Receivables, and second, to any other indebtedness of such Obligor.

                                  ARTICLE VIII
                                 INDEMNIFICATION

     SECTION 8.1. INDEMNITIES OF SELLER. Without limiting any other rights which
the Company may have hereunder or under applicable law, Seller hereby agrees to
indemnify the Company and each of its permitted assigns, officers, directors,
employees and agents (each of the foregoing Persons being individually called a
"SALE INDEMNIFIED PARTY"), on demand, from and against any

                                      -17-


and all damages, losses, claims, judgments, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively called "SALE INDEMNIFIED AMOUNTS") awarded against
or incurred by any of them arising out of or as a result of arising out of or
relating to this Agreement, the Receivables or the Related Rights, EXCLUDING,
HOWEVER, (i) Sale Indemnified Amounts to the extent determined by a court of
competent jurisdiction to have resulted from bad faith, gross negligence or
willful misconduct on the part of such Sale Indemnified Party, (ii) recourse for
Sale Indemnified Amounts to the extent the same includes losses in respect of
Receivables which are uncollectible on account of the insolvency, bankruptcy or
lack of creditworthiness of the related Obligor, (iii) Sale Indemnified Amounts
that represent taxes based upon, or measured by, net income, or changes in the
rate of tax or as determined by reference to the overall net income, of such
Sale Indemnified Party, or (iv) Sale Indemnified Amounts that represent
franchise taxes, taxes on, or in the nature of, doing business taxes or capital
taxes. Without limiting the foregoing, the Seller shall indemnify each Sale
Indemnified Party for Sale Indemnified Amounts arising out of or related to the
following:

          (a) the transfer by Seller of an interest in any Receivable or Related
     Right to any Person other than the Company;

          (b) the breach of any representation or warranty made by Seller under
     or in connection with this Agreement or any other Transaction Document, or
     any information or report delivered by Seller pursuant hereto or thereto
     which shall have been false or incorrect in any material respect when made
     or deemed made;

          (c) the failure by Seller to comply with any applicable law, rule or
     regulation with respect to any Receivable or the related Contract, or the
     nonconformity of any Receivable or the related Contract with any such
     applicable law, rule or regulation;

          (d) the failure to vest and maintain vested in the Company an
     ownership interest in the Receivables and the Related Rights free and clear
     of any Lien, other than a Lien arising solely as a result of an act of the
     Company, the Lenders or the Agent, whether existing at the time of the
     purchase of such Receivables or at any time thereafter;

          (e) the failure of Seller to file with respect to itself, or any delay
     in filing, financing statements or other similar instruments or documents
     under the UCC of any applicable jurisdiction or other applicable laws with
     respect to any Receivables or purported Receivables generated by Seller,
     whether at the time of any purchase or at any subsequent time;

          (f) any dispute, claim, offset or defense (other than discharge in
     bankruptcy) of the Obligor to the payment of any Receivable or purported
     Receivable generated by Seller (including, without limitation, a defense
     based on such Receivables or the related Contracts not being a legal, valid
     and binding obligation of such Obligor enforceable against it in accordance
     with its terms), or any other claim resulting from the services or
     merchandise related to any such Receivable or the furnishing of or failure
     to furnish such services or merchandise;

                                      -18-


          (g) any failure of the Seller to perform its duties or obligations in
     accordance with the terms of this Agreement;

          (h) any product liability claim arising out of or in connection with
     services or merchandise with respect to any Receivable;

          (i) any tax or governmental fee or charge, all interest and penalties
     thereon or with respect thereto, and all out-of-pocket costs and expenses,
     including the reasonable fees and expenses of counsel in defending against
     the same, which may arise by reason of the purchase or ownership of the
     Receivables generated by Seller or any Related Right connected with any
     such Receivables;

          (j) the commingling of Collections of Receivables at any time with
     other funds of the Seller;

          (k) any investigation, litigation or proceeding related to or arising
     from this Agreement or the transactions contemplated hereby or any other
     investigation, litigation or proceeding relating to the Seller or any of
     the Originators in which any Indemnified Party becomes involved as a result
     of any of the transactions contemplated hereby (other than an
     investigation, litigation or proceeding relating to a dispute solely
     amongst the Lenders (or certain Lenders) and the Agent); or

          (l) any inability to litigate any claim against any Obligor in respect
     of any Receivable as a result of such Obligor being immune from civil and
     commercial law and suit on the grounds of sovereignty or otherwise from any
     legal action, suit or proceeding;

excluding, however, (i) Sale Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of such Sale Indemnified
Party, (ii) any indemnification which has the effect of recourse to Seller for
non-payment of the Receivables due to credit problems of the Obligors,
(iii) Sale Indemnified Amounts that represent taxes based upon, or measured by,
net income or changes in the rate of tax or as determined by reference to the
overall net income of such Sale Indemnified Party and (iv) Sale Indemnified
Amounts that represent franchise taxes, taxes of, or in the nature of, doing
business taxes or capital taxes.

     If for any reason the indemnification provided above in this Section 8.1 is
unavailable to a Sale Indemnified Party or is insufficient to hold such Sale
Indemnified Party harmless, then Seller shall contribute to the amount paid or
payable by such Sale Indemnified Party to the maximum extent permitted under
applicable law.

                                      -19-


                                   ARTICLE IX
                                  MISCELLANEOUS

     SECTION 9.1. AMENDMENTS, ETC.

      (a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by Seller, the Company, the Agent and the Servicer (if other than
Seller).

      (b) No failure or delay on the part of the Company, the Servicer, Seller
or any third party beneficiary in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Company, the
Servicer, or Seller in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Company or the
Servicer under this Agreement shall, except as may otherwise be stated in such
waiver or approval, be applicable to subsequent transactions. No waiver or
approval under this Agreement shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder.

     SECTION 9.2. NOTICES, ETC. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage-prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth on
Schedule 9.2 or at such other address or facsimile number as shall be designated
by such party in a written notice to the other parties hereto. All such notices
and communications shall be effective, (i) if personally delivered or sent by
express mail or courier or if sent by certified mail, when received, and (ii) if
transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.

     SECTION 9.3. NO WAIVER; CUMULATIVE REMEDIES. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.

     SECTION 9.4. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the Company, Seller and their respective
successors and permitted assigns. Seller may not assign its rights hereunder or
any interest herein without the prior written consent of the Company and the
Agent; subject to Section 9.11, the Company may not assign its rights hereunder
or any interest herein without the prior written consent of Seller and the
Agent. The Agreement shall create and constitute the continuing obligations of
the parties hereto in accordance with its terms, and shall remain in full force
and effect until the date after the Sale Termination Date on which Seller has
received payment in full for all Receivables and Related Rights conveyed
pursuant to Section 1.1 hereof and has paid and performed all of its obligations
hereunder in full. The rights and remedies with respect to any breach of any
representation and warranty made by Seller pursuant to Article V and the
indemnification and payment provisions of Article VIII and Section 9.6 shall be
continuing and shall survive any termination of this Agreement.

                                      -20-


     SECTION 9.5. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES
OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF
THE COMPANY IN THE RECEIVABLES OR RELATED RIGHTS IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.

     SECTION 9.6. COSTS, EXPENSES AND TAXES. In addition to the obligations of
Seller under Article VIII, Seller agrees to pay on demand:

          (a) all reasonable costs and expenses, including attorneys' fees, in
      connection with the enforcement against Seller of this Agreement and the
      other Transaction Documents executed by Seller; and

          (b) all stamp and other similar taxes and fees payable or determined
      to be payable in connection with the execution, delivery, filing and
      recording of this Agreement or the other Transaction Documents, and agrees
      to indemnify each Sale Indemnified Party against any liabilities with
      respect to or resulting from any delay in paying or omission to pay such
      taxes and fees.

     SECTION 9.7. SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE
OR UNITED STATES FEDERAL COURT SITTING IN THE STATE OF NEW YORK, OVER ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO ANY TRANSACTION DOCUMENT; (B) AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE OR UNITED STATES FEDERAL COURT; (C) WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING; (D) CONSENTS
TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN
SECTION 9.2; AND (E) TO THE EXTENT ALLOWED BY LAW, AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS SECTION 9.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR
PROCEEDING AGAINST SELLER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTIONS.

     SECTION 9.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.

                                      -21-


     SECTION 9.9. CAPTIONS AND CROSS REFERENCES; INCORPORATION BY REFERENCE. The
various captions (including, without limitation, the table of contents) in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to any underscored Section or Exhibit are to such Section or Exhibit of this
Agreement, as the case may be. The Exhibits hereto are hereby incorporated by
reference into and made a part of this Agreement.

     SECTION 9.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be as effective as delivery of a manually executed counterpart
of a signature page to this Agreement.

     SECTION 9.11. ACKNOWLEDGMENT AND AGREEMENT. By execution below, Seller
expressly acknowledges and agrees that all of the Company's rights, title, and
interests in, to, and under this Agreement shall be assigned by the Company to
the Agent and the Lenders pursuant to the Credit and Security Agreement (and the
Agent and the Lenders may further assign such rights in accordance with the
Credit and Security Agreement), and Seller consents to such assignment. Each of
the parties hereto acknowledges and agrees that the Agent and the Lenders are
third party beneficiaries of the rights of the Company arising hereunder and
under the other Transaction Documents to which Seller is a party as seller.

     SECTION 9.12. NO PROCEEDINGS. Seller agrees that it shall not institute
against the Company, or join any other Person in instituting against the
Company, any insolvency proceeding (namely, any proceeding of the type referred
to in the definition of Event of Bankruptcy) as long as there shall not have
elapsed one year plus one day since the Final Payout Date. The foregoing shall
not limit Seller's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person other
than Seller.

                                      -22-


     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duty authorized, as of the date first
above written.

                                    PACKAGING CREDIT COMPANY, LLC

                                    By              /s/ Darla J. Vanas
                                       ----------------------------------------
                                       Name Printed:    Darla J. Vanas
                                                     --------------------------
                                       Title:    Assistant Secretary
                                                  & Tax Director
                                              ---------------------------------

                                    PACKAGING RECEIVABLES COMPANY, LLC

                                    By              /s/ Darla J. Vanas
                                       ----------------------------------------
                                       Name Printed:    Darla J. Vanas
                                                     --------------------------
                                       Title:    Assistant Secretary
                                                  & Tax Director
                                              ---------------------------------

                               PSA Signature Page



                                    EXHIBIT A
                           PURCHASE AND SALE AGREEMENT
                                 PURCHASE REPORT

                          PACKAGING CREDIT COMPANY, LLC
                       PACKAGING RECEIVABLES COMPANY, LLC
                                  as of (Date)

                                                                    CUT-OFF DATE
Total Receivables                                           $          Input
Initial Contributed Receivables                             $          Fixed
Aggregate Unpaid Balance of             AUB                 $       Calculated
Receivables
LIBOR                                                                  Input
Turnover Days                                                          Input
12 Month Losses                                             $          Input
12 Month Collections                                        $          Input
Purchaser's Total Investment            PTI                            Fixed

Cost Rate (LIBOR + 1.00%)               CR                           Calculated

Cost Discount (DSO/360)*CR              CD                           Calculated

Loss Discount (12 Month                 LD                           Calculated
Losses/12 Month Collections)

Fair Market Value Discount             FMVD                          Calculated
(CD + LD)

Purchase Price (AUB -                   PP                           Calculated
(AUB*FMVD))

Eligible Receivables                                        $          Input

Ineligible Receivables                                      $          Input



                                    EXHIBIT B
                                 PROMISSORY NOTE
                          (NON-NEGOTIABLE SELLER NOTE)

                                                                [Effective Date]

     FOR VALUE RECEIVED, the undersigned, Packaging Receivables Company, LLC, a
Delaware limited liability company (the "COMPANY"), promises to pay to Packaging
Credit Company, LLC, a Delaware limited liability company ("SELLER"), on the
terms and subject to the conditions set forth herein and in the Purchase
Agreement referred to below, the principal sum of the aggregate unpaid Purchase
Price of all Receivables purchased from time to time by the Company from Seller
pursuant to such Purchase Agreement, as such unpaid Purchase Price is shown in
the records of Seller.

     1. PURCHASE AGREEMENT. This promissory note (this "SELLER NOTE") is the
Seller Note described in, and is subject to the terms and conditions set forth
in, that certain Purchase and Sale Agreement of even date herewith (as the same
may be amended or otherwise modified from time to time, the "PURCHASE
AGREEMENT"), between Seller and the Company. Reference is hereby made to the
Purchase Agreement for a statement of certain other rights and obligations of
Seller and the Company.

     2. DEFINITIONS. Capitalized terms used (but not defined) herein have the
meanings assigned thereto in the Purchase Agreement and in Appendix A to the
Credit and Security Agreement dated as of even date herewith among Seller, as
initial Servicer, the Company, Blue Ridge Asset Funding Corporation and Wachovia
Bank, N.A., as Agent (as it may be amended or otherwise modified from time to
time, the "CREDIT AND SECURITY AGREEMENT"). In addition, as used herein, the
following terms have the following meanings:

     BANKRUPTCY PROCEEDINGS: As defined in clause (b) of paragraph 9 hereof.

     FINAL MATURITY DATE: The date that is one year and one day following the
Final Payout Date.

     INTEREST PERIOD: The period from and including a Reporting Date (or, in the
case of the first Interest Period, the date hereof) to but excluding the next
Reporting Date.

     SENIOR INTEREST: Collectively, (i) the obligation of the Company and the
Servicer to set aside, and to turn over, Collections and other proceeds of the
Receivables for the benefit of the Agent and Lenders pursuant to the Credit and
Security Agreement, (ii) any Indemnified Amounts and (iii) all other obligations
of the Company that are due and payable to any Affected Party, together with all
interest accruing on any such amounts after the commencement of any Bankruptcy
Proceedings, notwithstanding any provision or rule of law that might restrict
the rights of any Senior Interest Holder, as against the Company of anyone else,
to collect such interest.



     SENIOR INTEREST HOLDERS: Collectively, the Lenders, the Agent, the other
Affected Parties and the Indemnified Parties.

     3. INTEREST. Subject to the provisions set forth below, the Company
promises to pay interest on this Seller Note as follows:

          (a) Prior to the Final Payout Date, the aggregate unpaid Purchase
     Price from time to time outstanding during any Interest Period shall bear
     interest at a rate per annum equal to the LIBO Rate as in effect from time
     to time on the first Business Day of each Settlement Period, as determined
     by Seller, plus 1.00%; and

          (b) From (and including) the Final Payout Date to (but excluding) the
     date on which the entire aggregate unpaid Purchase Price is fully paid, the
     aggregate unpaid Purchase Price from time to time outstanding shall bear
     interest at a rate per annum equal to the LIBO Rate as in effect from time
     to time on the first Business Day of each Settlement Period, as determined
     by Seller, plus 1.00%,

but in no event in excess of the maximum rate permitted by law. In the event
that, contrary to the intent of Seller and Company, Company pays interest
hereunder and it is determined that such interest rate was in excess of the then
legal maximum rate, then that portion of the interest payment representing an
amount in excess of the then legal maximum rate shall be deemed a payment of
principal and applied against the principal then due hereunder.

     4. INTEREST PAYMENT DATES. Subject to the provisions set forth below, the
Company shall pay accrued interest on this Seller Note on each Settlement Date,
and shall pay accrued interest on the amount of each principal payment made in
cash on a date other than a Settlement Date at the time of such principal
payment.

     5. BASIS OF COMPUTATION. Interest accrued hereunder shall be computed for
the actual number of days elapsed on the basis of a 360-day year.

     6. PRINCIPAL PAYMENT DATES. Subject to the provisions set forth below,
payments of the principal amount of this Seller Note shall be made as follows:

          (a) The principal amount of this Seller Note shall be reduced from
     time to time pursuant to Sections 3.2, 3.3, 3.4 and 7.2 of the Purchase
     Agreement;

          (b) The entire remaining unpaid balance of this Seller Note shall be
     paid on the Final Maturity Date.

Subject to the provisions set forth below, the principal amount of and accrued
interest on this Seller Note may be prepaid on any Business Day without premium
or penalty.

     7. PAYMENTS. All payments of principal and interest hereunder are to be
made in lawful money of the United States of America.

                                       B-2


     8. ENFORCEMENT EXPENSES. In addition to and not in limitation of the
foregoing, but subject to the provisions set forth below and to any limitation
imposed by applicable law, the Company agrees to pay all expenses, including
reasonable attorneys' fees and legal expenses, incurred by Seller in seeking to
collect any amounts payable hereunder which are not paid when due.

     9. PROVISIONS REGARDING RESTRICTIONS ON PAYMENT. The Company covenants and
agrees, and Seller, by its acceptance of this Seller Note, likewise covenants
and agrees on behalf of itself and any holder of this Seller Note, that the
payment of the principal amount of, and interest on, this Seller Note is hereby
expressly subject to certain restrictions set forth in the following clauses of
this paragraph 9:

          (a) No payment or other distribution of the Company's assets of any
     kind or character, whether in cash, securities, or other rights or
     property, shall be made on account of this Seller Note except to the extent
     such payment or other distribution is permitted under the Purchase
     Agreement and the Credit and Security Agreement;

          (b) In the event of any dissolution, winding up, liquidation,
     readjustment, reorganization or other similar event relating to the
     Company, whether voluntary or involuntary, partial or complete, and whether
     in bankruptcy, insolvency or receivership proceedings, or upon an
     assignment for the benefit of creditors, or any other marshaling of the
     assets and liabilities of the Company or any sale of all or substantially
     all of the assets of the Company (such proceedings being herein
     collectively called "BANKRUPTCY PROCEEDINGS"), the Senior Interest shall
     first be paid and performed in full and in cash before Seller shall be
     entitled to receive and to retain any payment or distribution in respect to
     this Seller Note. In order to implement the foregoing, Seller hereby
     irrevocably agrees that the Agent, in the name of Seller or otherwise, may
     demand, sue for, collect, receive and receipt for any and all such payments
     or distributions, and the file, prove and vote or consent in any such
     Bankruptcy Proceedings with respect to any and all claims of Seller
     relating to this Seller Note, in each case until the Senior Interest shall
     have been paid and performed in full and in cash;

          (c) In the event that the Seller receives any payment or other
     distribution of any kind or character from the Company or from other source
     whatsoever, in respect of this Seller Note, other than as expressly
     permitted by the terms of this Seller Note, such payment or other
     distribution shall be received for the sole benefit of the Senior Interest
     Holders and shall be turned over by Seller to the Agent (for the benefit of
     the Senior Interest Holders) forthwith;

          (d) Notwithstanding any payments or distributions received by the
     Senior Interest Holders in respect of this Seller Note, Seller shall not be
     subrogated to the rights of the Senior Interest Holders in respect of the
     Senior Interest;

          (e) The provisions set forth in this Section 9 are intended solely for
     the purpose of defining the relative rights of Seller, on the one hand, and
     the Senior Interest Holders on the other hand;

                                       B-3


          (f) Seller shall not, until Final Payout Date, transfer, pledge or
     assign, or commence legal proceedings to enforce or collect this Seller
     Note or any rights in respect hereof except as required by the Senior
     Credit Agreement;

          (g) Seller shall not, without the advance written consent of the
     Agent, commence, take any action to cause any other Person to commence, or
     join with any other Person in commencing, any Bankruptcy Proceedings with
     respect to the Company until the Final Payout Date shall have occurred;

          (h) If, at any time, any payment (in whole or in part) of any Senior
     Interest is rescinded or must be restored or returned by a Senior Interest
     Holder (whether in connection with Bankruptcy Proceedings or otherwise),
     these provisions shall continue to be effective or shall be reinstated, as
     the case may be, as though such payment had not been made;

          (i) Seller hereby waives; (i) notice of acceptance of these provisions
     by any of the Senior Interest Holders; (ii) notice of the existence,
     creation, non-payment or non-performance of all or any of the Senior
     Interest; and (iii) all diligence in enforcement, collection or protection
     of, or realization upon, the Senior Interest, or any thereof, or any
     security therefor;

          (j) These provisions constitute a continuing offer from the holder of
     this Seller Note to all Persons who become the holders of, or who continue
     to hold, the Senior Interest; and these provisions are made for the benefit
     of the Senior Interest Holders, and the Agent or the Lenders may proceed to
     enforce such provisions on behalf of each of such Persons.

     10. GENERAL. No failure or delay on the part of Seller in exercising any
power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power of right preclude any other or further
exercise thereof or the exercise of any other power or right. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Seller Note shall in any event be effective unless (i) the same shall be in
writing and signed and delivered by the Company and Seller and (ii) all consent
required for such actions under the Transaction Documents shall have been
received by the appropriate Persons.

     11. NO NEGOTIATION. This Seller Note is not negotiable.

     12. GOVERNING LAW. THIS PROMISSORY NOTE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

                                       B-4


     13. CAPTIONS. Paragraph captions used in this Seller Note are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Seller Note.

                                    PACKAGING RECEIVABLES COMPANY, LLC

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

                                       B-5


                                    EXHIBIT C
                     OFFICE LOCATION WHERE RECORDS ARE KEPT

1900 West Field Court
Lake Forest, Illinois  60045

[LIST OTHER LOCATIONS]

         1001 113th Street
         Arlington, TX  76011

         1610 Winbourne Ct.
         North Little Rock, AR  72116

         21 Leigh Fisher Blvd.
         El Paso, TX  79906

         2510 West Miller Road
         Garland, TX  75041

         4240 Bandini Blvd.
         Vernon, CA  90023

         9200 Old McGregor Road
         Waco, TX  76712

         2325 C Statham Blvd.
         Oxnard, CA  93033

         441 S. 53rd Avenue
         Phoenix, AZ  85043

         1800 E. Plano Parkway
         Plano, TX  75074

         4654 W. 1525 South
         Salt Lake City, UT  84104

         460 W. 500 South
         Salt Lake City, UT  84101



         9700 Frontage Road
         Southgate, CA  90280

         2246 Udell Street
         Filer City, MI 49634

         1824 Baltimore Street
         Middletown, OH  45055

         555 Metro Place North
         Suite 500
         Dublin, OH  43017

         6247 Pine Street
         Burlington, WI  53105

         5600 West Good Hope Rd.
         Milwaukee, WI  53223

         901 Grimes Blvd.
         Lexington, NC  27292

         114 Dixie Blvd.
         Morganton, NC  28655

         6245 Woodlore Drive
         Acworth, GA  30101

         1302 N. Salisbury Ave.
         Salisbury, NC  28144

         3200 Lakewood Ave. S.W.
         East Point, GA  30344

         305 Van Buren Road
         Bolivar, TN  38008

         2313 N. William St.
         Goldsboro, NC  27530

         212 Roelee St.
         Trinity, NC  27370

         12105 Belton Honea Path Hwy.
         Honea Path, SC  29654

                                       C-2


         Highway 178
         Donalds, SC  29654

         112 Edwards Drive
         Jackson, TN  38301

         3936 Fountain Valley Lane
         Knoxville, TN  37918

         3240 Brittain Drive
         Newberry, SC  29108

         3200 Hipack Drive
         Opelika, AL  36801

         4300 Cheyene Drive
         Archdale, NC  27263

         321 Industrial Park Rd.
         Rutherfordton, NC  28139

         Highway 57
         P.O. Box 33
         Counce, TN  38326

         N9090 County Road E
         Tomahawk, WI  54487

         5495 Lake Park
         Clyarrville Road
         Clyarrville, GA  31601

         32745 J Avenue
         Beaman, IA  50609

         1201 Cornerstone Drive
         Windsor, CO  80550

         3200 N. Lake Shore Drive
         #2702
         Chicago, IL  60657

         1110 Military Road
         Buffalo, NY  14217

                                       C-3


         705 South Division Street
         Colby, WI  54421

         502 W. Center Street
         Conrad, IA  50621

         5501 Brighton Blvd.
         Commerce City, CO  80022

         7953 N.E. Beech Street
         Fridley, MN  55432

         4300 Highway 55
         Golden Valley, MN  55422

         1402 South 17th Ave.
         Marshalltown, IA  50158

         1821 NE Marshall St.
         Minneapolis, MN  55418

         400 S. 45th Street East
         Muskogee, OK  74403

         10854 Leroy Drive
         Northglenn, CO  80233

         1002 Missouri Ave.
         Omaha, NE  68107

         6363 John J. Pershing Drive
         Omaha, NE  68110

         789 Elmgrove Rd.
         Bldg. #10
         Rochester, NY  14624

         2262 B Bluestone Hills Dr.
         Harrisonburg, VA  22801

         659 Eastport Road
         Jacksonville, FL  32218

         1200 W. Pike St.
         Grafton, WV  26354

                                       C-4


         400 Pleasant Valley Road
         Harrisonburg, VA  22801

         2000 Jefferson Davis Hwy.
         Richmond, VA  23224

         1005 Industry Circle S.E.
         Roanoke, VA  24013

         2155 42nd Street NW
         Winter Haven, FL  33881

         109 Arrowhead Drive
         Bldg. 2
         Manheim, PA  17545

         3785 Bryn Mawr Street
         Orlando, FL  32808

         54 Shutterlee Mill Lane
         Staunton, VA  24401

         1805 Colonial Drive
         Thomasville, GA  31792

         217 Peach Street
         Vineland, NJ  08360

         24 Park Side Ave.
         West Springfield, MA  01089

         208 Lenoir Drive
         Winchester, VA  22603

         708 Killian Road
         Akron, OH  44319

         929 Faultless Drive
         Ashland, OH  44805

         520 South First Street
         Gas City, IN  46933

         P.O. Box 127
         Middletown, OH  45042

                                       C-5


         P.O. Box 4610
         Newark, OH  43058

         One 28th Street
         Pittsburgh, PA  15222

         408 East St. Clair
         Vincennes, IN  47591

         533 Mt. Tom Road
         Northampton, MA  01060

         5405 Glenway Drive
         Brighton, MI  48116

         925 North Godfrey Street
         Allentown, PA  18103

         8301 Sherwick Court
         Jessup, MD  20794

         33 Glenn Avenue
         Chelmsford, MA  01824

         1106 Industrial Park Drive
         Edmore, MI  48829

         3251 Chicago Drive S.W.
         Grandville, MI  49418

         435 Gitts Run Road
         Hanover, PA  17331

         1530 Fruitville Pike
         Lancaster, PA  17601

         525 Mt. Tom Road
         Northampton, MA  01060

         936 Sheldon Road
         Plymouth, MI  48170

         4471 Steelway Blvd. South
         Liverpool, NY  13088

                                       C-6


         2207 Traversfield Drive
         Traverse City, MI  49686

         7451 Cetronia Road
         Allentown, PA  18106

         20400 Old Rome State Rd.
         Watertown, NY  13601

                                       C-7


                                SCHEDULE 5.1 (n)
                                   TRADE NAMES

                                      None


                                  SCHEDULE 9.2
                                NOTICE ADDRESSES

Seller:          1900 West Field Court
                 Lake Forest, Illinois  60045
                 Attn: Fran Hori
                 Telephone:  847-482-3719
                 Telecopy:  847-482-4516

Company:         1900 West Field Court
                 Lake Forest, Illinois  60045
                 Attn: Fran Hori
                 Telephone:  847-482-3719
                 Telecopy:  847-482-4516



                                   EXHIBIT A-1
                          [FORM OF LOCK-BOX AGREEMENT]

                          [Letterhead of Account Owner]

                          _____________________, 200__

[LOCK-BOX BANK]

Ladies and Gentlemen:

     Reference is made to our lockbox account no. __________________ maintained
with you (the "ACCOUNT") pursuant to a lockbox agreement between the undersigned
and you, the terms and conditions of which are incorporated herein by reference
(the "LOCKBOX AGREEMENT"). Pursuant to a Receivables Sale Agreement, dated as of
November 29, 2000, as amended, supplemented or otherwise modified from time to
time (the "SALE AGREEMENT"), between Packaging Corporation of America ("PCA" or
"WE") and Packaging Credit Company, LLC ("PCC"), as purchaser thereunder, PCC
has purchased and/or may hereafter purchase certain of the accounts chattel
paper, instruments or general intangibles (collectively "RECEIVABLES") with
respect to which payments are or may hereafter be made to the Account. Further,
pursuant to a Purchase and Sale Agreement, dated as of November 29, 2000, as
amended, supplemented or otherwise modified from time to time, between PCC, as
seller, and Packaging Receivables Company, LLC ("PURCHASER"), as purchaser, PCC
has sold and/or may hereafter sell to Purchaser Receivables PCC purchased
pursuant to the Sale Agreement with respect to which payments are or may
hereafter be made to the Account. Pursuant to a Credit and Security Agreement,
dated as of November 29, 2000 (as amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT"), among Purchaser, as borrower, PCC,
as initial servicer (Purchaser and the undersigned being referred to hereinafter
collectively as the "SELLER PARTIES"), Blue Ridge Asset Funding Corporation
("BLUE RIDGE"), as lender and Wachovia Bank, N.A., individually as a lender
(collectively with Blue Ridge and any other entity that becomes a lender under
the Credit Agreement, the "LENDERS") and as Agent (the "AGENT") for Blue Ridge
and itself, Purchaser has assigned and/or may hereafter assign to Agent, for the
benefit of lenders, interest in the Receivables as collateral for loans made by
the Lenders thereunder.

     For purposes of this letter agreement, Wachovia Bank, N.A. is acting as
Agent for Lenders. We hereby transfer exclusive ownership and control of the
Account to the Agent, for the benefit of Lenders, subject only to the condition
subsequent that the Agent shall have given you notice of its election to assume
such ownership and control, which notice shall be substantially in the form
attached hereto as Annex A.

     We hereby authorize and direct you to change the ownership of the Account
to the Purchaser. We hereby irrevocably instruct you, at all times from and
after the date of your



receipt of notice from the Agent of its assumption of control of the Account as
described above, (i) to make all payments to be made by you out of or in
connection with the Account directly to the Agent in accordance with the
instructions of the Agent, (ii) to hold all moneys and instruments delivered to
the Account or any lockbox administered by you for the order of the Agent (for
the benefit of Lenders), (iii) to refrain from initiating any transfer from the
Account to any Seller Party and (iv) to change the name of the Account to
"Wachovia Bank, N.A., as Agent". The Agent agrees to execute you standard wire
transfer documentation in effect from time to time, or other customary
documentation related to wire transfers, prior to the initiation of any wire
transfers.

     We also hereby notify you that, at all times from and after the date of
your receipt of notice from the Agent as described above, the Agent shall be
irrevocably entitled to exercise in our place and stead any and all rights in
respect of or in connection with the Account, including, without limitation,
(a) the right to specify when payments are to be made out of or in connection
with the Account and (b) the right to require preparation of duplicate monthly
bank statements on the Account for the Agent's audit purposes and mailing of
such statements directly to the Agent at an address specified by the Agent.

     Notices from the Agent and other notices or communications under this
letter agreement may be personally served or sent by facsimile or by certified
mail, return receipt requested, or by express mail or courier, to the address or
facsimile number set forth under the signature of the relevant party to this
letter agreement (or to such other address or facsimile number as the relevant
party shall have designated by written notice to the party giving the aforesaid
notice or other communication). Notwithstanding the foregoing, any notice
delivered by you may be delivered by regular mail. If notice is given by
facsimile, it will be deemed to have been received when the notice is sent and
receipt is confirmed by telephone or other electronic means. All other notices
will be deemed to have been received when actually received or, in the case of
personal delivery, delivered.

     By executing this letter agreement, you acknowledge the existence of the
Agent's right to ownership and control of the Account and its ownership (on
behalf of Lenders and Purchaser as the parties having interests in such amounts)
of the amounts from time to time on deposit therein, and agree that from the
date hereof the Account shall be maintained by you for the benefit of, and
amounts from time to time therein held by you for, the Agent (on behalf of
Lenders and Purchaser) on the terms provided herein. Except as otherwise
provided in this letter agreement, payments to the Account are to be processed
in accordance with the standard procedures currently in effect. All service
charges and fees with respect to the Account shall continue to be payable by us
under the arrangements currently in effect.

     By executing this letter agreement, you irrevocably waive and agree not to
assert, claim or endeavor to exercise, irrevocably bar and estop yourself from
asserting, claiming or exercising, and acknowledge that you have not heretofore
received a notice, writ, order or any form of legal process from any other party
asserting, claiming or exercising, any rights of set-off, banker's lien or other
purported form of claim with respect to the Account or any funds from time to
time therein. Except for your right to payment of your service charges and fees
and your right to make deductions for returned items, you shall have no rights
in the Account or funds

                                      A-1-2


therein. To the extent you may ever have such rights, you hereby expressly
subordinate all such rights to all rights of the Agent.

     You may terminate this letter agreement by canceling the Account maintained
with you, which cancellation and termination shall become effective only upon 90
days' prior written notice thereof from you to the Agent. Incoming mail
addressed to the Account received after such cancellation shall be forwarded in
accordance with the Agent's instructions. This letter agreement may also be
terminated upon written notice to you by the Agent stating that the Credit
Agreement is no longer in effect. Except as otherwise provided in this
paragraph, this letter agreement may not be terminated or amended without the
prior written consent of the Agent.

     Notwithstanding any other provision of this letter agreement, it is agreed
by the parties hereto that you shall not be liable to Lenders or the Agent for
the any action taken by you or any of your directors, officer, agents or
employees in accordance with this letter agreement at the request of the Agent,
except for your or such person's own gross negligence or willful misconduct.

     This letter agreement may be executed by the signatories hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall together constitute but one and the same letter agreement. This letter
agreement shall be governed by and interpreted under the laws of the State of
[_________].

                                      A-1-3


     Please acknowledge your agreement to the terms set forth in this letter
agreement by signing the six copies of this letter agreement enclosed herewith
in the space provided below and returning each of such signed copies to the
Agent.

                                            Very truly yours,

                                            PACKAGING CORPORATION OF AMERICA

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

                                            Address for notice:

                                            -----------------------------------

                                            -----------------------------------

                                            -----------------------------------
                                            Attention:
                                                      -------------------------
                                            Facsimile No.:
                                                          ---------------------

Accepted and confirmed as of
the date first written above:

WACHOVIA BANK, N.A.,
 as Agent

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

Address for notice:

- ------------------------------------

- ------------------------------------

- ------------------------------------
Attention:
          --------------------------
Facsimile No.:
              ----------------------

                                      A-1-4


Acknowledged and agreed to as of
the date first written above:

PACKAGING RECEIVABLES COMPANY, LLC

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

Address for notice:

- ------------------------------------

- ------------------------------------

- ------------------------------------
Attention:
          --------------------------
Facsimile No.:
              ----------------------

PACKAGING CREDIT COMPANY, LLC

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

Address for notice:

- ------------------------------------

- ------------------------------------

- ------------------------------------
Attention:
          --------------------------
Facsimile No.:
              ----------------------

[LOCKBOX BANK]

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

Address for notice:

- ------------------------------------

- ------------------------------------

- ------------------------------------
Attention:
          --------------------------
Facsimile No.:
              ----------------------

                                      A-1-5


                                   ANNEX A TO
                                LOCKBOX AGREEMENT

              [Form of Notice of Assumption of Control of Account]

                       [Letterhead of Wachovia Bank, N.A.]

                            ________________, _______

- ------------------------------------

- ------------------------------------

- ------------------------------------

- ------------------------------------

         Re:                            Seller
                                 Lockbox Account No.
                                 ------------------------------

Ladies and Gentlemen:

     Reference is made to the letter agreement dated _________________, ______
(as amended, supplemented or otherwise modified from time to time, the "LETTER
AGREEMENT") among Seller, Packaging Receivables Company, LLC, Packaging
Corporation of America, Packaging Credit Company, LLC, Blue Ridge Asset Funding
Corporation ("BLUE RIDGE"), Wachovia Bank, N.A., and you, concerning the above
described lockbox account (the "ACCOUNT").

     We hereby give you notice of our assumption of ownership and control of the
Account as provided in the Letter Agreement.

     We hereby instruct you to make all payments to be made by you out of or in
connection with the Account [DIRECTLY TO THE UNDERSIGNED, AT [OUR ADDRESS SET
FORTH ABOVE], for the account of the Lenders (account no. ________________ ).

     [OTHER INSTRUCTIONS]

                                            Very truly yours,

                                            WACHOVIA BANK, N.A., as Agent

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



                                                                    EXHIBIT 21.1



                         SUBSIDIARIES OF THE REGISTRANT



              o  Dixie Container Corporation
                             State of Incorporation:      Virginia
                             Other trade names used:      none
              o  PCA Hydro, Inc.
                             State of Incorporation:      Delaware
                             Other trade names used:      none
              o  PCA International, Inc.
                             State of Incorporation:      Delaware
                             Other trade names used:      none
              o  Packaging Credit Company, LLC
                             State of Incorporation:      Delaware
                             Other trade names used:      none
                     o  Packaging Receivables Company, LLC
                                    State of Incorporation:      Delaware
                                    Other trade names used:      none



                                                                    EXHIBIT 23.1


                  CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in the Registration Statement (Form S-8 No. 333-33176) pertaining
to the Packaging Corporation of America Thrift Plan for Hourly Employees,
Packaging Corporation of America Retirement Savings Plan for Salaried
Employees and Packaging Corporation of America 1999 Long-Term Equity
Incentive Plan of our report dated July 16, 1999 for the period ended April
11, 1999, included in Packaging Corporation of America's Form 10-K for the
year ended December 31, 2001 and to all references to our Firm included in
this registration statement.

ARTHUR ANDERSEN LLP

Chicago, Illinois
March 19, 2002



                                                                    EXHIBIT 23.2



                         Consent of Independent Auditors



We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-33176) pertaining to the Packaging Corporation of America Thrift
Plan for Hourly Employees, Packaging Corporation of America Retirement Savings
Plan for Salaried Employees and Packaging Corporation of America 1999 Long-Term
Equity Incentive Plan of our report dated January 18, 2002, with respect to the
consolidated financial statements and schedule of Packaging Corporation of
America included in its Annual Report (Form 10-K) for the year ended December
31, 2001, filed with the Securities and Exchange Commission.


                                                               ERNST & YOUNG LLP


Chicago, Illinois
March 18, 2002


                                                                    EXHIBIT 24.1


                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.


      DATED:  March 19, 2002


      /s/ PAUL T. STECKO
      ------------------------------------------------------
      Paul T. Stecko







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.


      DATED:  March 19, 2002


      /s/ RICHARD B. WEST
      ------------------------------------------------------
      Richard B. West







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.


      DATED:  March 19, 2002


      /s/ SAMUEL M. MENCOFF
      ------------------------------------------------------
      Samuel M. Mencoff







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.


      DATED:  March 19, 2002


      /s/ JUSTIN S. HUSCHER
      ------------------------------------------------------
      Justin S. Huscher







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.

      DATED:  March 19, 2002


      /s/ THOMAS S. SOULELES
      ------------------------------------------------------
      Thomas S. Souleles







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.

      DATED:  March 19, 2002


      /s/ HENRY F. FRIGON
      ------------------------------------------------------
      Henry F. Frigon







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.

      DATED:  March 19, 2002


      /s/ RAYFORD K. WILLIAMSON
      ------------------------------------------------------
      Rayford K. Williamson







                            SPECIAL POWER OF ATTORNEY

      The undersigned constitutes and appoints Paul T. Stecko, Richard B. West
and Samuel M. Mencoff, and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign the Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission by Packaging Corporation of America, a
Delaware corporation, together with any and all amendments to such Form 10-K,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.


      DATED:  March 19, 2002


      /s/ LOUIS A. HOLLAND
      ------------------------------------------------------
      Louis A. Holland