Take a deep breath!
1. Don't fiddle with the class path. If you are a beginner with Java - here some advice DO NOT TOUCH THE CLASSPATH. DONT EVEN THINK ABOUT IT.
2. Compiling packages can be tricky when not using an editor. You probably compiling it from the wrong place. Tell us (ok right now there is just me) the following ...
a. Which is the directory in which you are giving the Javac command?
b. Whats the command you are using to compile?
3. Should the java files be in one folder and the class files be in a sub-folder?
Doesn't matter - for someone starting off I'll leave both source and class files in the same directory.
Once you get the hang of things - well you won't be hand coding anyways - Your
IDE will make sure everything happens nicely.
PS - Just some additional help -->
http://www.javaranch.com/name.jsp before a Sheriff catches you