Document:

<PAGE>   1
                                                                   EXHIBIT 10.11

     Certain confidential information has been omitted from this Exhibit
pursuant to a confidential treatment request filed separately with the
Commission. The omitted information is indicated by the symbol "***" at each
place in the Exhibit where the omitted information appeared in the original.

                           PAPERBOARD SUPPLY AGREEMENT

     This PAPERBOARD SUPPLY AGREEMENT (this "Agreement") is entered into
effective the 14th day of May, 1998, by and among REPUBLIC PAPERBOARD COMPANY, a
Kansas corporation (hereinafter referred to as "Republic"), REPUBLIC GROUP
INCORPORATED, a Delaware corporation ("Republic Parent"), and JAMES HARDIE
GYPSUM, INC., a Nevada corporation (hereinafter referred to as "Hardie");

                                   WITNESSETH:

     WHEREAS, Republic is proposing to develop a new paperboard mill (the
"Project Gazelle Mill") to produce recycled gypsum-grade paperboard;

     WHEREAS, potential providers of financing for the Project Gazelle Mill have
indicated that they will require Republic to have in place long-term agreements
for the sale of a substantial portion of the output of the Project Gazelle Mill
as a condition to providing such financing;

     WHEREAS, Hardie desires to ensure that it will have an assured supply of
paperboard on a long-term basis, and Republic desires to have Hardie as a
customer on such basis;

     WHEREAS, Republic has offered to Hardie, pursuant to Hardie's request,
selling prices and pricing formulas designed to meet pricing proposals offered
by other current and potential suppliers competing for Hardie's business;

     WHEREAS, Hardie and Republic have entered into that certain letter of
intent dated April 8, 1998 in which they expressed their intent to enter into,
and outlined their rights and obligations with respect to, a long-term supply
agreement for recycled gypsum-grade paperboard;

     WHEREAS, Hardie and Republic desire to formalize the terms of such
agreement; and

     WHEREAS, Republic Parent expects to derive substantial benefit from its
subsidiary's entry into such an agreement, and Hardie requires that Republic
Parent execute and deliver any such agreement as a condition to its execution
and delivery thereof;

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

<PAGE>   2

     1. PURCHASE AND SALE OF PRODUCTS. Subject to the terms and conditions of
this Agreement, Republic agrees to sell to Hardie, and Hardie agrees to purchase
from Republic, at the Selling Price (as hereinafter defined), a portion of
Hardie's recycled gypsum-grade paperboard requirements (including Creamface,
Grayback, Green-Lined, Brown Sheathing, Shaftwall Liner Green and Veneer Plaster
Base paperboard) which is more specifically identified on Exhibit A attached
hereto. (Any paperboard products sold or agreed to be sold by Republic to Hardie
hereunder are referred to herein as "Products".) Products consisting of
Creamface, Grayback, Green-Lined and Brown Sheathing paperboard will be produced
at the Project Gazelle Mill, except to the extent expressly permitted hereby to
be produced at another of Republic's recycled paperboard mills or as otherwise
agreed by the parties. Products consisting of Shaftwall Liner Green and Veneer
Plaster Base paperboard may be produced at Republic's recycled paperboard mills
other than the Project Gazelle Mill, unless otherwise agreed by the parties.

     2. PRICE AND ADJUSTMENTS.

          (a)  The Selling Price for a particular order shall be computed by a
               formula whereby an initial base price (the "Base Price") is
               adjusted as set forth in this paragraph 2 quarterly (other than
               the adjustments set forth in subparagraphs (c), (d) and (e) of
               this paragraph 2, which will be made annually), or at such other
               times or on such other schedule as agreed by the parties, for
               changes in the cost of certain key grades of paper stock. In each
               case, the selling price shall be F.O.B. the carrier at the
               Project Gazelle Mill or when expressly contemplated by this
               Agreement or when otherwise agreed by the parties at another of
               Republic's paperboard mills (the "Shipping Mill"). In the event
               that Republic ships an order from a Shipping Mill other than the
               Project Gazelle Mill, Republic shall equalize Hardie's freight
               costs so that Hardie's freight cost is no higher or lower than it
               would have been had the order been shipped from the Project
               Gazelle Mill.

          (b)  The initial Base Prices for the Products shall be as set forth on
               Exhibit B attached hereto.

          (c)  As of January 1, 2001, the initial Base Prices of recycled
               gypsum-grade paperboard will be adjusted upward or downward, as
               the case may be, for purchases made during calendar year 2001, by
               an amount per MSF computed as (i) the sum of (A)(x) the
               difference between the actual average cost during the six (6)
               months ended November 30, 2000, of purchased electricity per
               kilowatt hour ("KWH") and the initial projected average base cost
               of purchased electricity of $*** per KWH, multiplied by (y) the
               actual total KWH used during such six-month period and (B)(x) the
               difference between the actual average cost during such six-month
               period of purchased natural gas, which includes transportation
               costs and line shrinkage costs, per million British thermal units
               ("MMBTU") and the initial projected average base cost of
               purchased natural gas, which includes transportation costs and
               line shrinkage costs, of $*** per MMBTU, multiplied by (y) the
               actual total MMBTU's used during such six-month period, divided
               by (ii) the actual gross thousand square feet ("MSF") of
               paperboard produced during such six-month period. The same
               adjustments will be made to be effective each January 1,
               thereafter, based on the actual costs and quantities during the

                                       2

<PAGE>   3

               twelve-month period ending on November 30 of the preceding year.
               Hardie shall have the right to review and audit the underlying
               information and calculations that form the basis for any change
               in price based upon this subparagraph.

          (d)  As of January 1, 2002 and each January 1 thereafter, each of the
               initial Base Prices will be increased or decreased, as the case
               may be, by an amount equal to the sum of (i) $*** per MSF
               multiplied by the percentage increase or decrease in the ***
               Index ***, from September 1997 to the September immediately
               preceding the effective date of the adjustment, which index is
               published by the United States Department of Labor, Bureau of
               Labor Statistics and (ii) $*** per MSF multiplied by the
               percentage increase or decrease in the*** Index *** from
               September 1997 to the September immediately preceding the
               effective date of the adjustment, which index is published by the
               United States Department of Labor, Bureau of Labor Statistics.

          (e)  As of January 1, 2002 and each January 1 thereafter, the average
               basis weight pounds per MSF of each grade of the Products
               purchased by Hardie during the preceding twelve (12) months shall
               be calculated. For each one-half pound that the average basis
               weight for a grade of the Products is less than the average basis
               weight set forth in Exhibit C for such grade, the initial Base
               Price for such grade shall be reduced by $*** per MSF. This
               provision shall apply to reductions of basis weight down to a
               basis weight of *** pounds per MSF. Republic and Hardie will
               cooperate with each other in seeking to achieve reductions in the
               basis weights of the Products. Republic and Hardie each, insofar
               as their own operations are involved, will diligently pursue
               methods of achieving, and use commercially reasonable efforts to
               achieve, reductions in basis weights of the Products, targeting
               an ultimate basis weight of *** pounds per MSF by the fifth
               anniversary of the Commercial Production Date. The parties will
               not be deemed to have succeeded in reducing the basis weight of
               the Products, and Hardie shall be under no obligation to purchase
               such lower basis weight Products under this Agreement, unless,
               all things considered, it is economically feasible for Hardie to
               utilize such lower basis weight Products in Hardie's
               manufacturing process. For example, if utilization of the lower
               basis weight Products causes Hardie to run its equipment at
               slower speeds to accommodate the lower basis weight paper, such
               that the loss of production offsets any benefits of a lower basis
               weight, the parties will not be deemed to have succeeded in
               reducing the basis weight of the Products. Republic and Hardie
               each will furnish the other with regular reports on the plans for
               and the progress of the efforts in achieving lower basis weights.

                                       3

<PAGE>   4

          (f)  The Selling Price for Creamface paperboard will be computed as of
               the first day of each calendar quarter during the term of this
               Agreement by increasing or decreasing the Base Price, as adjusted
               theretofore pursuant to subparagraphs (c), (d) and (e) of this
               paragraph 2, for Creamface paperboard by the sum of the positive
               and negative amounts per MSF computed in (i) through (iv) below,
               as follows:

               (i)  (A)(x) the average of the high per ton transacted prices for
                    ***, as reported in the second issue of the Official Board
                    Markets during the immediately preceding three calendar
                    months, less (y) the high per ton transacted price for ***,
                    as reported in the second issue of the Official Board
                    Markets during February 1998, multiplied by (B) the assumed
                    percentage of the furnish to be composed of *** (***%),
                    multiplied by (C) the assumed ratio of tons of paper stock
                    required to manufacture one ton of paperboard (***),
                    multiplied by (D) the assumed basis weight of Cream Face
                    (*** pounds/MSF), divided by (E) the number of pounds in a
                    short ton (2,000);

               (ii) (A)(x) the average of the high per ton transacted prices for
                    ***, as reported in the second issue of the Official Board
                    Markets during the immediately preceding three calendar
                    months, less (y) the high per ton transacted price for ***,
                    as reported in the second issue of the Official Board
                    Markets during February 1998, multiplied by (B) the assumed
                    percentage of the furnish to be composed of *** (***%),
                    multiplied by (C) the assumed ratio of tons of paper stock
                    required to manufacture one ton of paperboard (***),
                    multiplied by (D) the assumed basis weight of Cream Face
                    (*** pounds/MSF), divided by (E) the number of pounds in a
                    short ton (2,000);

               (iii) (A)(x) the average of the high per ton transacted prices
                    for ***, as reported in the second issue of the Official
                    Board Markets during the immediately preceding three
                    calendar months, less (y) the high per ton transacted price
                    for ***, as reported in the second issue of the Official
                    Board Markets during February 1998, multiplied by (B) the
                    assumed percentage of the furnish to be composed of ***
                    (***%), multiplied by (C) the assumed ratio of tons of paper
                    stock required to manufacture one ton of paperboard (***),
                    multiplied by (D) the assumed basis weight of Cream Face
                    (*** pounds/MSF), divided by (E) the number of pounds in a
                    short ton (2,000); and

                                       4

<PAGE>   5

              (iv)  (A)(x) the average of the high per ton transacted prices for
                    ***), as reported in the second issue of the Official Board
                    Markets during the immediately preceding three calendar
                    months, less (y) the high per ton transacted price for ***,
                    as reported in the second issue of the Official Board
                    Markets during February 1998, multiplied by (B) the assumed
                    percentage of the furnish to be composed of *** (***%),
                    multiplied by (C) the assumed ratio of tons of paper stock
                    required to manufacture one ton of paperboard (***),
                    multiplied by (D) the assumed basis weight of Cream Face
                    (*** pounds/MSF), divided by (E) the number of pounds in a
                    short ton (2,000).

          (g)  The Selling Price for Grayback paperboard will be computed as of
               the first day of each calendar quarter during the term of this
               Agreement by increasing or decreasing the Base Price, as adjusted
               theretofore pursuant to subparagraphs (c), (d) and (e) of this
               paragraph 2, for Grayback paperboard by the sum of the positive
               and negative amounts per MSF computed in (i) and (ii) below, as
               follows:

               (i)  (A)(x) the average of the high per ton transacted prices for
                    ***, as reported in the second issue of the Official Board
                    Markets during the immediately preceding three calendar
                    months, less (y) the high per ton transacted price for ***,
                    as reported in the second issue of the Official Board
                    Markets during February 1998, multiplied by (B) the assumed
                    percentage of the furnish to be composed of *** (***%),
                    multiplied by (C) the assumed ratio of tons of paper stock
                    required to manufacture one ton of paperboard (***),
                    multiplied by (D) the assumed basis weight of Gray Back (***
                    pounds/MSF), divided by (E) the number of pounds in a short
                    ton (2,000); and

               (ii) (A)(x) the average of the high per ton transacted prices for
                    ***, as reported in the second issue of the Official Board
                    Markets during the immediately preceding three calendar
                    months, less (y) the high per ton transacted price for ***,
                    as reported in the second issue of the Official Board
                    Markets during February 1998, multiplied by (B) the assumed
                    percentage of the furnish to be composed of *** (***%),
                    multiplied by (C) the assumed ratio of tons of paper stock
                    required to manufacture one ton of paperboard (***),
                    multiplied by (D) the assumed basis weight of Gray Back (***
                    pounds/MSF), divided by (E) the number of pounds in a short
                    ton (2,000).

                                       5

<PAGE>   6

          (h)  The Selling Price for Green-Lined paperboard will be computed as
               of the first day of each calendar quarter during the term of this
               Agreement by increasing or decreasing the Base Price, as adjusted
               theretofore pursuant to subparagraphs (c), (d) and (e) of this
               paragraph 2, for Green-Lined paperboard by the sum of the
               positive and negative amounts per MSF computed pursuant to (f)(i)
               through (f)(iv) above.

          (i)  The Selling Price for Brown Sheathing paperboard will be computed
               as of the first day of each calendar quarter during the term of
               this Agreement by increasing or decreasing the Base Price, as
               adjusted theretofore pursuant to subparagraphs (c), (d) and (e)
               of this paragraph 2, for Brown Sheathing paperboard by the sum of
               the positive and negative amounts per MSF computed pursuant to
               (g)(i) through (g)(ii) above.

          (j)  The Selling Price for Shaftwall Liner Green paperboard will be
               computed as of the first day of each calendar quarter during the
               term of this Agreement by increasing or decreasing the Base
               Price, as adjusted theretofore pursuant to subparagraphs (c) and
               (d) of this paragraph 2, for Shaftwall Liner Green paperboard by
               the sum of the positive and negative amounts per MSF computed
               pursuant to (f)(i) through (f)(iv) above; provided, however that
               an assumed basis weight of *** pounds per MSF shall be used.

          (k)  The selling price for Veneer Plaster Base paperboard will be
               computed as of the first day of each calendar quarter during the
               term of this Agreement by increasing or decreasing the Base
               Price, as adjusted theretofore pursuant to subparagraphs (c) and
               (d) of this paragraph 2, for Veneer Plaster Base paperboard by
               the sum of the positive and negative amounts per MSF computed
               pursuant to (g)(i) through (g)(ii) above; provided, however that
               an assumed basis weight of *** pounds per MSF shall be used.

          (l)  With respect to shipments to Hardie's Las Vegas, Nevada and
               Seattle, Washington gypsum wallboard plants, the Selling Prices
               for each grade of recycled gypsum-grade paperboard will be
               reduced by a freight allowance, which is provided in
               acknowledgment of the shipping distances from the Project Gazelle
               Mill to those plants. The freight allowance will be $*** per MSF
               with respect to shipments to the Las Vegas, Nevada plant and $***
               per MSF with respect to shipments to the Seattle, Washington
               plant. As of January 1, 2001, and each January 1 thereafter, each
               of the initial freight allowances will be increased or decreased,
               as the case may be, by an amount equal to such freight allowance
               per MSF multiplied by the percentage increase or decrease in the
               *** from September 1997 to the September immediately preceding
               the effective date of the adjustment, which index is published by
               the United States Department of Labor, Bureau of Labor
               Statistics.

                                       6

<PAGE>   7

          (m)  For purposes of this subparagraph (m), Effective FOB Third Party
               Price ("EFTPP") is the price charged or offered in writing to a
               Non-Affiliate Third Party (measured on a per/MSF basis) adjusted
               to take into account any effective price reductions due to all
               freight, shipping, insurance or other allowances, discounts,
               rebates, price or credit considerations (as such price may be
               adjusted from time to time pursuant to Republic's arrangement
               with the Non-Affiliate Third Party). For purposes of this
               subparagraph (m), the Western Region is defined as that portion
               of North America consisting of ***; the Eastern Region is defined
               as all other portions of North America. If Republic sells or
               contracts to sell one hundred Tons or more of Product to a Non-
               Affiliate Third Party or Parties:

                    (i) all or any portion of which is for delivery in the
                    Eastern Region at an EFTPP lower than the Selling Price,
                    then the Selling Price to Hardie for such Product for any of
                    its plants shall be automatically reduced by the difference
                    between the Selling Price and the EFTPP (the "Adjustment
                    Amount"), for all subsequent Hardie purchases of that
                    Product, up to the volume(s) sold to the Non-Affiliate Third
                    Party or Parties at the EFTPP;

                    (ii) all or any portion of which is for delivery in the
                    Western Region, at an EFTPP, which is lower than the average
                    of the Selling Price for Hardie's Las Vegas and Seattle
                    plants, after adjustment for the freight allowance as
                    described in paragraph 2(l) plus *** cents (the "Hardie
                    Effective Western Region Price" or HEWRP), the Selling Price
                    for such Product to Hardie for any of its plants shall be
                    automatically reduced by an amount equal to the difference
                    between the HEWRP and the EFTPP (the "Adjustment Amount")
                    for all subsequent Hardie purchases of the Product up to the
                    volume(s) sold to the Non-Affiliate Third Party or Parties.

               If a sale or contract to sell that would cause the pricing
               mechanisms under subparagraphs (i) and (ii) above to be operative
               occurs during a period that the pricing mechanism under (i) or
               (ii) is in effect due to a prior sale or contract to sell with a
               Non-Affiliated Third Party, then the volumes as to which such
               prices would be in effect shall be purchased consecutively and
               not concurrently so that at any particular time the Selling Price
               would have been reduced by only one Adjustment Amount. In
               addition to the foregoing, if an EFTPP is established pursuant to
               a contract whose term or pricing provisions are effective for
               more than *** ("Long Term Contract") the Selling Price for the
               Product to Hardie, regardless of volume, shall be automatically
               reduced by the Adjustment Amount for all subsequent Hardie
               purchases of the Product so long as said EFTPP is available to
               the Non-Affiliate Third Party. With respect to Long Term
               Contracts, the Adjustment Amount shall be based upon the lowest
               EFTPP in effect at any

                                       7

<PAGE>   8

               given time. The pricing mechanisms set forth in subparagraphs (i)
               and (ii) above will continue in effect during the time that any
               Long Term Contract is in effect such that if a sale of the kind
               described in subparagraphs (i) and (ii) occurs during such time
               that would cause the Selling Price for a specified volume to be
               lower than the Selling Price as adjusted pursuant to the
               Adjustment Amount calculated on the basis of the Long Term
               Contract, the Selling Price for such specified volume would be
               such lower price. This subparagraph (m) applies only to recycled
               gypsum-grade paperboard Products produced at the Project Gazelle
               Mill and, with respect to Shaftwall Liner Green and Veneer
               Plaster Base paperboard, to such Products produced at Republic's
               other paperboard mills, and further shall not apply to test
               quantities of less than 100 short tons done on an isolated basis
               and sold to third parties to demonstrate the characteristics of
               the paperboard manufactured at Republic's paperboard mills.
               Republic shall cause its outside auditors to certify to Hardie on
               an annual basis that Republic has complied with this
               subparagraph.

          (n)  If any of the high per ton transacted prices referred to in
               subparagraphs (f) and (g) above cease to be reported monthly or
               if the indexes referred to in subparagraphs (d) and (l) cease to
               be published, the parties shall select a similar published
               statistic or index to use as the basis for making the adjustments
               provided in subparagraphs (d), (f), (g), (h), (i), (j), (k) or
               (l), as the case may be. If the parties cannot agree on such new
               statistic or index, the parties will resolve such dispute
               according to the dispute resolution procedures set forth in this
               Agreement.

     3. TERM.

          (a)  Subject to the provisions of paragraph 12 hereof, the term of
               this Agreement shall commence on the date hereof and shall
               terminate on October 1, 2010, or ten (10) years after the
               Commercial Production Date, whichever is later.

          (b)  Republic shall diligently pursue the completion of the Project
               Gazelle Mill and shall use commercially reasonable efforts to
               cause the Project Gazelle Mill to commence production on or
               before the date that is 22 months after the date of this
               Agreement. The obligation of Republic to supply, and, subject to
               Exhibit A, the obligation of Hardie to purchase, Products
               hereunder shall not commence until Commercial Production has been
               achieved (the "Commercial Production Date"). For purposes of this
               Agreement, "Commercial Production" shall mean that the Project
               Gazelle Mill has produced, for two consecutive months, paperboard
               meeting the quality specifications set forth in Exhibit C, in an
               amount equal to or greater than thirty percent (30%) of the
               Project Gazelle Mill's planned monthly capacity. When Republic
               believes that the Project Gazelle Mill has achieved Commercial
               Production, it shall give written notice to that effect to Hardie

                                       8

<PAGE>   9

               (the "Commencement Notice"), and Hardie shall not unreasonably
               object to the propriety of the Commencement Notice. From the date
               on which Hardie receives the Commencement Notice, Hardie shall
               have fifteen (15) days to: (i) observe the production of paper at
               the Project Gazelle Mill; (ii) observe the conversion to
               wallboard of such paper at Republic Parent's wallboard facility
               in Duke, Oklahoma; and (iii) test the conversion of the paper at
               each of Hardie's facilities. The Vice Presidents of Production of
               Hardie and of Republic shall each personally observe the
               production, conversion and testing under clauses (i), (ii) and
               (iii) of the preceding sentence, which shall be performed by the
               parties in good faith. At the end of such fifteen (15) day
               testing period, the Commencement Notice shall become effective.
               If Hardie does not object in writing within fifteen (15) days
               after the Commencement Notice becomes effective, then Commercial
               Production shall be deemed to have been achieved as of the date
               the Commencement Notice became effective. If Hardie does object
               in writing to the propriety of the Commencement Notice, then the
               dispute resolution procedures of paragraph 28 shall be invoked,
               and the achievement of Commercial Production shall be determined
               in accordance therewith or by subsequent agreement of Republic
               and Hardie.

          (c)  Republic shall keep Hardie regularly and adequately informed
               regarding the construction progress of the Project Gazelle Mill
               and shall provide Hardie with monthly written progress reports.
               If Republic is unable to cause the Project Gazelle Mill to
               commence Commercial Production prior to the later of: (i) October
               1, 2000 or (ii) the date that is 22 months after the date of this
               Agreement, Republic shall supply Hardie, at the prices
               established pursuant to this Agreement, the quantity of recycled
               gypsum-grade paperboard that it would otherwise be obligated to
               supply under this Agreement from its other recycled paperboard
               mills, through purchases from recycled paperboard mills owned by
               third parties, or both, until such time as the Project Gazelle
               Mill commences Commercial Production. Any such recycled gypsum-
               grade paperboard supplied otherwise than from the Project Gazelle
               Mill shall have the specifications set forth in Exhibit C hereto,
               excepting the specifications regarding basis weights. If Republic
               is unable to supply the quantity and quality of Products required
               by Hardie under this Agreement at the prices established pursuant
               to this Agreement, Republic will compensate Hardie for the
               additional costs reasonably incurred by Hardie in obtaining
               replacement paperboard. Notwithstanding the foregoing, if, by
               July 1, 2001, Republic has not given the Commencement Notice,
               Hardie may, at its sole discretion and option, terminate this
               Agreement. So long as Republic supplies paper to Hardie from
               mills other than the Project Gazelle Mill, any adjustments to
               price shall be based only upon changes in the price of furnish as
               specified elsewhere in this agreement, and shall not be based
               upon changes in the cost of gas, electricity, or other expenses.

                                       9

<PAGE>   10

          (d)  During the period beginning on October 1, 2005 or the fifth
               anniversary of the Commercial Production Date, whichever is
               later, and ending on October 1, 2007 or the seventh anniversary
               of the Commercial Production Date, whichever is later, Republic
               and Hardie will negotiate in good faith in an effort to agree to
               a long-term extension of the initial term of this Agreement or a
               further long-term supply agreement on such terms as are mutually
               acceptable to each party, in its sole discretion.

          (e)  If: (i) Republic sells or otherwise transfers ownership or
               operating control of the Project Gazelle Mill (otherwise than as
               a Security Device (as that term is defined below) to obtain or
               secure financing) to a party that is not an Affiliate (as that
               term is defined below) of Republic such that Republic no longer
               maintains a direct or indirect majority ownership interest in the
               Project Gazelle Mill or is no longer, directly or indirectly, the
               operator thereof, or a Change of Control (as that term is defined
               below) of Republic occurs, in either case prior to the sixth
               anniversary of the Commercial Production Date and (ii) Hardie and
               Republic (or the then current owner of the Project Gazelle Mill)
               have not negotiated an extension of the initial term of this
               Agreement prior to October 1, 2006 or the sixth anniversary of
               the Commercial Production Date, whichever is later, then the
               initial term of this Agreement shall automatically, and without
               any action by Hardie, Republic or the then-current owner of the
               Project Gazelle Mill or any assignee of Republic's rights
               hereunder, be extended for an additional five (5) years on the
               same terms and conditions applicable to the initial term hereof.
               Notwithstanding the foregoing sentence, Hardie shall have the
               right, exercisable by Hardie for a period of sixty (60) days
               beginning on October 1, 2006 or the sixth anniversary of the
               Commercial Production Date, whichever is later, to terminate such
               five-year extension by delivering a written notice of such
               termination to the then-current owner of the Project Gazelle
               Mill.

          (f)  For purposes of this Agreement,

               (i)  an "Affiliate" of a party shall mean any other person who
                    beneficially owns, directly or indirectly, a majority of the
                    voting securities and a majority of the equity securities of
                    such party or of whom a majority of the voting securities
                    and a majority of the equity securities are beneficially
                    owned, directly or indirectly, by such party;

               (ii) a "Change of Control" shall be deemed to have occurred with
                    respect to Republic if: (A) Republic Parent, no longer
                    beneficially owns a majority of the voting securities and a
                    majority of the equity securities of Republic; (B) a merger
                    or consolidation of Republic Parent has been consummated
                    pursuant to which a majority of the voting securities and a
                    majority of the equity securities of the surviving or
                    resulting entity are not beneficially owned by the persons

                                       10

<PAGE>   11

                    who were the stockholders of Republic Parent immediately
                    prior to the consummation of such merger or consolidation;
                    (C) a sale or transfer of all or substantially all of the
                    assets of Republic Parent other than to an Affiliate of
                    Republic Parent; (D) the stockholders of Republic Parent
                    have approved a plan or proposal for the liquidation or
                    dissolution of Republic Parent; (E) any person or group (as
                    defined in Rule 13d-5(b) under the Securities Exchange Act
                    of 1934, as amended) (other than Phil Simpson, his spouse,
                    his descendants and their spouses, trusts and estates of
                    which any of them are the primary beneficiaries and any
                    entities of which any of them are holders of a majority of
                    the voting securities and a majority of the equity
                    securities) shall become the beneficial owner of a majority
                    of Republic Parent's voting securities or equity securities;
                    or (F) during any period of two years or less individuals
                    who at the beginning of such period constitute the entire
                    board of directors of Republic Parent shall for any reason
                    cease to constitute a majority thereof unless the election
                    or nomination for election by Republic Parent's stockholders
                    or the appointment by the remaining directors, as
                    applicable, of each new director was approved by a majority
                    of the directors then still in office who were directors at
                    the beginning of the period (for purposes of this
                    subparagraph (f)(ii), Republic Parent shall be deemed to
                    include any successor thereto); and

               (iii) "Beneficial ownership" shall be determined in accordance
                    with Rule 13d-3 under the Securities Exchange Act of 1934,
                    as amended.

     4. PRODUCTS. Republic will supply to Hardie, pursuant to this Agreement,
Hardie's requirements (as described in Exhibit A hereto) for recycled gypsum-
grade paperboard meeting the specifications set forth on Exhibit C hereto,
except as otherwise expressly provided herein.

     5. ORDERS AND SHIPMENT.

          (a)  On or before the twentieth day of each calendar month, Hardie
               shall deliver to Republic its orders for the next succeeding
               month specifying the grade, quantity, requested shipment date or
               dates and destination of the Products being ordered. Orders for
               Products, unless rightfully rejected when permitted under
               commercially reasonable standards to be rejected hereunder, will
               be confirmed by Republic's written acknowledgment (by fax or
               otherwise), within five (5) business days after each order is
               placed. All orders and all acknowledgments shall be on the forms
               attached hereto as Exhibit D and Exhibit E, respectively.
               Republic may reject any orders that are not on the form attached
               hereto as Exhibit D or that add any terms thereto. Hardie may
               reject any acknowledgments that are not on the form attached
               hereto as Exhibit E or that add any terms thereto.

                                       11

<PAGE>   12

          (b)  Shipments of Products shall be routed as determined by Hardie.
               Hardie shall arrange for delivery of Products and shall notify
               Republic of its delivery arrangements at the time Hardie places
               an order for Products with Republic. Title to the Products sold
               hereunder shall pass from Republic to Hardie when placed F.O.B.
               the carrier at the Shipping Mill, and Republic shall thereafter
               be released from all responsibility and liability for any loss
               of, or damage to, the Products in transit or delivery to Hardie
               and shall have no responsibility or liability for any delay in
               delivery, provided that the Products have been properly prepared
               for shipment and properly delivered F.O.B. the carrier at the
               Shipping Mill. All shipping and insurance costs shall be at
               Hardie's expense.

          (c)  Commencing on October 1, 2000 and at all times thereafter,
               Republic shall maintain a minimum emergency product inventory of
               *** tons, meeting Hardie's product specifications as set forth in
               Exhibit C hereto, in an approximate ratio of sixty percent (60%)
               Creamface and forty percent (40%) Grayback, *** and which
               inventory will be maintained at the Project Gazelle Mill and will
               be paid for as ordered by Hardie, in accordance with the
               provisions of Paragraph 8 below.

     6. QUALITY.

          (a)  Each grade of the Products to be manufactured and sold by
               Republic hereunder shall, within the customary commercial
               tolerances of the paperboard industry for such grade and except
               as otherwise expressly provided herein, meet the specifications
               for such grades which are attached hereto as Exhibit C (the
               "Specifications"), and Hardie agrees that it will accept Products
               meeting the Specifications. The parties agree that, as a result
               of their experience hereunder and their technical cooperation
               under paragraph 9 hereof, the Specifications may be varied by
               mutual agreement to fit the particular characteristics of
               Hardie's machinery and products. Such Specifications, when and as
               modified, shall be deemed to supersede the Specifications
               attached hereto as Exhibit C, shall become part of this Agreement
               and are hereby incorporated by reference.

          (b)  Republic shall provide Hardie a Certificate of Analysis with
               respect to each set of rolls of the Products purchased by Hardie.
               The Certificate of Analysis shall be delivered to Hardie no later
               than the date on which the set of rolls covered thereby are
               received by Hardie at its gypsum wallboard facility. The
               Certificate of Analysis shall certify that a sample from the set
               was physically tested in accordance with testing methods accepted
               by the recycled paperboard industry. The Certificate of Analysis
               further shall certify that the sample in question met the
               Specifications. Republic shall retain samples for six (6) months
               for purposes of verification of test results.

                                       12

<PAGE>   13

          (c)  EXCEPT AS SPECIFIED IN THIS PARAGRAPH 6, REPUBLIC MAKES NO OTHER
               WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS SOLD
               HEREUNDER AND EXPRESSLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY
               OR FITNESS FOR A PARTICULAR PURPOSE, EITHER EXPRESS OR IMPLIED.

     7. CLAIMS.

          (a)  Hardie shall make a reasonable inspection of the Products and the
               Certificate of Analysis related thereto upon delivery or within
               sixty (60) days thereafter. Hardie shall have the right to reject
               any Products that do not conform to the Specifications. If Hardie
               believes that any Products do not conform to the Specifications,
               it shall promptly, and not later than sixty (60) days after
               receipt thereof, notify Republic in writing of its rejection of
               such Products for failure to conform to the Specifications. If no
               such written notice is received by Republic, pursuant to
               paragraph 21, within sixty (60) days after receipt thereof,
               Hardie shall be deemed to have accepted the Products, except as
               set forth in subparagraph (b) below. Republic may inspect any
               Products that Hardie so rejects. Upon verification by Republic of
               nonconformity of the rejected Products to the Specifications,
               Republic will issue Hardie a credit memorandum for the purchase
               price of the non-conforming Products and the cost of freight from
               the Project Gazelle Mill to Hardie's plant. Republic will arrange
               for the disposition of the non-conforming Products, at Republic's
               expense, in each case within 10 business days after notice of
               rejection by Hardie, unless the parties agree to some other
               settlement of the claim in question. If Republic disputes
               Hardie's rejection of such Products, it shall promptly notify
               Hardie in writing of such dispute and the dispute will be
               determined in accordance with subparagraph (c) hereof.

          (b)  If the nonconformity to the Specifications of any Products could
               not be discovered through a commercially reasonably inspection
               prior to their use by Hardie and such use results in the
               manufacture of defective gypsum wallboard, Hardie shall promptly
               notify Republic in writing. Republic may inspect such defective
               wallboard. Upon verification by Republic that the manufacture of
               the defective wallboard resulted from nonconformity to the
               Specifications of the Products in question, Republic will issue
               Hardie a credit memorandum for: (i) the purchase price of the
               non-conforming Products; (ii) the cost of freight of such
               Products from the Shipping Mill to Hardie's plant; (iii)
               additional Products manufactured by Republic and used by Hardie
               on the other side of such defective wallboard, whether or not
               such additional Products conform to the Specifications; and (iv)
               the cost of freight of such additional Products from the Shipping
               Mill to Hardie's plant. Republic's liability under (i), (ii),
               (iii) and (iv) above shall not extend to defective wallboard
               manufactured after Hardie has discovered, or in the exercise of

                                       13

<PAGE>   14

               commercially reasonable supervision of its manufacturing
               processes should have discovered, that Hardie is manufacturing
               defective wallboard. If Republic disputes the cause of the
               manufacture of the defective gypsum wallboard, it shall promptly
               notify Hardie in writing of such dispute, and the dispute will be
               determined in accordance with subparagraph (c) of this paragraph.

          (c)  Republic's technical support personnel and Hardie's gypsum plant
               quality personnel shall jointly investigate any disputed
               rejection of the Products and any dispute regarding a claim that
               the Products caused the manufacture of defective gypsum
               wallboard. If such joint investigation fails to settle the
               dispute to the mutual satisfaction of both parties, it shall be
               referred to the Vice President, Operations, of each party for
               settlement. Any dispute that cannot be settled in accordance with
               this subparagraph (c) will be determined in accordance with
               paragraph 28 hereof. At Republic's request, Hardie will effect
               trial runs of Products that it has rejected so long as it can do
               so without undue effort or expense.

          (d)  If a Claim (as defined below) is made by a customer, end-user or
               ultimate consumer that gypsum wallboard manufactured by Hardie
               that contains a Product is defective and Republic has agreed, or
               pursuant to subparagraph (c) and/or paragraph 28 hereof or
               otherwise it has been finally determined, subject to no further
               rights of appeal or reconsideration, that the failure of such
               Product to meet the Specifications as of the date of sale of such
               Product to Hardie has caused the defect in the gypsum wallboard
               asserted in such Claim and that such failure of the Product to
               meet Specifications could not have been discovered through a
               commercially reasonable inspection by Hardie prior to shipment of
               the gypsum wallboard, then in addition to the credit memorandum
               issuable pursuant to subparagraph (b) above, Republic shall pay,
               or reimburse Hardie for, the liability of Hardie to such
               customer, end-user or ultimate consumer resulting from the
               defective paperboard and Hardie's reasonable third party expenses
               in defending against such Claim; provided, that Republic shall
               not be obligated to pay, or reimburse Hardie for, any such
               liability unless such liability exceeds $*** with respect to any
               single Claim or unless the aggregate of all such liabilities with
               respect to Claims exceeds $*** during any calendar year, in which
               cases Republic shall be responsible for all such liabilities in
               excess of such amount or amounts, as applicable. Hardie shall
               promptly notify Republic of any Claim as to which it intends to
               seek reimbursement from Republic or which it intends to apply
               against the $*** limit. Hardie shall, except to the extent not
               reasonably practicable, afford Republic at least three business
               days after such notice to inspect the defective gypsum wallboard
               prior to its demolition or repair. Any authorization by Hardie of
               repairs shall be for the lowest commercially reasonable method of
               repair. Hardie shall consult with Republic regarding any
               settlement of any Claim. Any such settlement not approved by
               Republic

                                       14

<PAGE>   15

               shall not in any way impair the ability of Republic to dispute
               the amount of the settlement in connection with any claim by
               Hardie against Republic for a reimbursement of the related Claim.
               A "Claim" means a claim that gypsum wallboard sold by Hardie was
               defective and that relates to a single dwelling, a single tract
               of dwellings under development by the same owner or developer, or
               a single structure at a commercial or multi-family residential
               project.

          (e)  EXCEPT TO THE EXTENT OTHERWISE PROVIDED IN SUBPARAGRAPH 7(D)
               ABOVE, REPUBLIC SHALL NOT BE LIABLE FOR INDIRECT, SPECIAL,
               INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WITH RESPECT TO
               CLAIMS ASSERTED BY THIRD PARTIES AGAINST HARDIE ARISING FROM
               DEFECTIVE PRODUCTS OR FROM PRODUCT LIABILITY. REPUBLIC SHALL NOT
               BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
               DAMAGES OF ANY KIND FOR WHICH IT OTHERWISE HAS LIABILITY FOR
               LOSSES SUFFERED BY HARDIE AS A RESULT OF A FAILURE OF PRODUCTS TO
               SUCCESSFULLY CONVERT TO PRODUCE ACCEPTABLE GYPSUM WALLBOARD AT
               HARDIE'S PLANTS UNLESS HARDIE HAS FIRST USED COMMERCIALLY
               REASONABLE EFFORTS TO CONVERT THE PRODUCTS INTO GYPSUM WALLBOARD
               AND SUCH COMMERCIALLY REASONABLE EFFORTS HAVE PROVEN
               UNSUCCESSFUL.

     8. PAYMENT.

          (a)  Republic shall render its invoices covering shipments as soon as
               practicable after each shipment. Payment terms shall be net ***
               days after the date Hardie receives Republic's invoice.

          (b)  All payments shall be made at Republic's principal place of
               business or the place specified for payment on the applicable
               Republic invoice.

          (c)  All amounts not paid within seven (7) days after the date due
               hereunder shall bear interest from the date due until paid at a
               rate equal to the lesser of (i) *** percent (***%) per month or
               (ii) the maximum rate permitted under applicable law.

                                       15

<PAGE>   16

          (d)  If any invoice remains unpaid over sixty (60) days after the date
               the invoice is received and the failure to pay is not based upon
               a bona-fide dispute over whether the amount is owed, Republic may
               suspend shipments of Products until payment has been made.

     9. TECHNICAL COOPERATION.

          (a)  The parties agree to use commercially reasonable efforts to
               achieve efficient conversion of the Products at each of Hardie's
               wallboard manufacturing operations, without creating an undue
               burden or expense for either party.

          (b)  Technical support personnel from Republic and production and
               quality management of each Hardie gypsum wallboard plant shall
               meet at least monthly to discuss any operating issues being
               experienced by Hardie that it believes to be related to the
               Products and opportunities for reducing the basis weight of the
               Products, so long as there are technical issues that need to be
               discussed.

          (c)  In the event that Hardie encounters difficulty converting one or
               more rolls of the Products that appear to meet the Specifications
               at any of its gypsum wallboard manufacturing operations, it will
               promptly give Republic notice of the problems that it is
               encountering. Not later than five (5) calendar days after receipt
               of such notice, Republic shall send technical support personnel
               to the operation experiencing difficulty. Hardie shall permit
               Republic access to the affected operation for purposes of
               observation, sampling, testing and inspection, in cooperation
               with Hardie's personnel. Hardie's facility management and
               Republic's technical support personnel will mutually develop a
               plan for reducing problems associated with conversion of the
               Products, which plan may include, without limitation, trial
               modifications to the Specifications, trial adjustments to the
               operation of the gypsum wallboard production line, observations
               of trials by representatives of both parties, data collection and
               statistical evaluation of collected data.

     10. HARDIE'S REPRESENTATIONS AND WARRANTIES. Hardie hereby makes the
following representations and warranties to Republic:

          (a)  All of the assets of the gypsum wallboard plants located at
               Nashville, Arkansas, Las Vegas, Nevada and Seattle, Washington
               referred to in Exhibit A hereto and all of Hardie's gypsum mining
               facilities are owned by Hardie, free and clear of liens and
               encumbrances (other than routine matters of record that have no
               material adverse effect on their value).

          (b)  The net worth of Hardie as of March 31, 1998, determined in
               accordance with generally accepted accounting principles, exceeds
               the consolidated net worth of Republic Parent as of March 31,
               1998, as reflected in Republic Parent's

                                       16

<PAGE>   17

               Form 10-Q for the quarter ended March 31, 1998, and no material
               adverse change in Hardie's net worth has occurred since that
               date.

          (c)  Neither Hardie nor any Affiliate of Hardie has any present
               intention or plan to engage in the manufacture of paperboard, and
               neither Hardie nor any such Affiliate has received any offer to
               sell, lease or otherwise convey to Hardie or any such Affiliate a
               paperboard mill or any interest therein, whether direct or
               indirect, which offer has not been either withdrawn by the
               offeror or rejected by Hardie.

     11. REPUBLIC'S REPRESENTATIONS AND WARRANTIES. Republic hereby makes the
following representations and warranties to Hardie:

          (a)  The Lawton Industrial Foundation either owns or has acquired
               options to purchase land in Lawton, Oklahoma sufficient for the
               construction and operation of the Project Gazelle Mill (the
               "Land") and has proposed to transfer the Land to Republic.

          (b)  The Land has access or will have access to truck and rail
               transportation and loading facilities for same that are
               appropriate for the efficient operation of the Project Gazelle
               Mill.

          (c)  Republic believes it can obtain all necessary permits, approvals,
               consents, and financing necessary to allow it to construct the
               Project Gazelle Mill on the Land.

          (d)  To Republic's knowledge and belief, after investigation, it is
               feasible to construct the Project Gazelle Mill on the Land.

          (e)  Republic has engaged consultants and advisors, has conducted test
               runs with the proposed Project Gazelle Mill technology and, on
               that basis, Republic believes that the Project Gazelle Mill is
               technologically feasible and can meet Hardie's needs.

          (f)  The Project Gazelle Mill will be constructed and outfitted
               substantially in accordance with the summary descriptions
               Republic has provided to Hardie, subject to modifications deemed
               desirable by Republic and, with regard to substantial
               modifications, agreed to by Hardie, as the project progresses.

          (g)  Republic, or its agent, has entered into letters of intent with
               key vendors and contractors.

          (h)  Republic believes that it can meet Hardie's quantity and quality
               requirements for recycled gypsum-grade paperboard, tailored to
               suit the specific

                                       17

<PAGE>   18

               requirements, for both processing and marketing of, and the
               machinery in operation at, each of its facilities.

          (i)  Republic is experienced in and knowledgeable concerning the
               production of recycled gypsum-grade paperboard, and acknowledges
               that Hardie is relying on such expertise. To Republic's knowledge
               and belief, after investigation, the Project Gazelle Mill will
               utilize modified gap-former and Fourdrinier technology, which
               technology is current recycled paperboard production technology
               to Republic's knowledge and belief, after investigation. To
               Republic's knowledge and belief, after investigation, after
               construction, the Project Gazelle Mill will be viable and will be
               able to provide, in a timely manner, sufficient recycled
               gypsum-grade paperboard to meet Hardie's quality and quantity
               requirements for both processing and marketing for its various
               gypsum plants within the limits of the projected furnish
               requirements, energy consumption and labor costs.

          (j)  Republic believes that it can obtain sufficient financing to
               construct and operate the Project Gazelle Mill. Republic has
               received proposals from lenders and investment bankers to lend
               funds or cause the placement of debt securities sufficient to
               finance the Project Gazelle Mill.

          (k)  Republic has reported to Hardie the summary results of its "paper
               trials" and engineering feasibility studies prepared by
               Republic's consultants and advisors in connection with the
               Project Gazelle Mill, and will continue to provide updates
               thereon to Hardie during the course of development of the Project
               Gazelle Mill.

          (l)  Republic anticipates that it initially will sell up to twenty-
               five percent of the capacity of the Project Gazelle Mill to its
               own gypsum plant in Duke, Oklahoma.

     12. OTHER COVENANTS OF REPUBLIC.

          (a)  Republic will review and become familiar with the process
               requirements and unique needs of Hardie's gypsum facilities and
               equipment.

          (b)  Republic will obtain performance guarantees and warranties from
               its key vendors and contractors.

     13. OTHER COVENANTS OF HARDIE. Until the later of October 1, 2005 or the
fifth anniversary of the Commercial Production Date, Hardie will promptly advise
Republic in writing if it or any United States Affiliate of Hardie offers to
buy, lease or otherwise acquire any North American paperboard mill, or any
interest therein, whether direct or indirect.

                                       18

<PAGE>   19

     14. TERMINATION. In the event of a material breach of this Agreement,
either party shall give written notice to the defaulting party of the breach and
of the non-defaulting party's intention to terminate this Agreement if the non-
defaulting party is not, within thirty (30) days from and after receipt of the
written notice of default, provided with a plan of corrective action and if
substantial efforts to cure the default in accordance with the plan have not
commenced. If such substantial efforts to cure the default as provided above
have not commenced within such thirty (30) day period, the non-defaulting party
may terminate this Agreement by sending written notice to the other party of
such termination, whereupon this Agreement shall terminate and the non-
defaulting party, subject to the terms of this Agreement, shall be entitled to
pursue any remedies provided by law. In the event the non-defaulting party
elects to terminate this Agreement, the notice of termination must be sent to
the defaulting party within five (5) days after the expiration of the thirty
(30) day period first mentioned above. The failure of any party to exercise its
option to terminate this Agreement shall not affect any other rights the party
may have in law or equity.

     15. FORCE MAJEURE.

          (a)  In the event of an Act of God, explosion, accident, fire,
               drought, flood, earthquake, tornado, hurricane, strike, labor
               disturbance, insurrection, riot, war, act of a public enemy, the
               acts or orders of a governmental unit, freight embargo, power or
               utility shortage, or any other similar cause beyond Republic's or
               Hardie's reasonable control, interfering with the production,
               supply, transportation or consumption of the Products or with the
               supply of raw materials or utilities used in connection therewith
               (a "Force Majeure Event"), the obligation of Republic to supply,
               and the obligation of Hardie to purchase, Products hereunder
               shall be proportionately reduced or held in abeyance for the
               duration of the Force Majeure Event and the term of this
               Agreement shall be extended for a period equal thereto. The
               failure or inability of any one or all of Republic's advisors,
               agents, consultants, designers, engineers, lenders, suppliers or
               vendors to perform their contractual or other obligations to
               Republic in connection with the development, construction or
               operation of the Gazelle Mill shall not be considered a Force
               Majeure Event. The affected party shall promptly notify the other
               of any Force Majeure Event, and the expected duration of the
               party's inability to perform under the terms of this Agreement.
               If a Force Majeure Event results in or may reasonably be expected
               to result in an inability of Republic to ship Products for more
               than seven days past their scheduled shipping dates, then Hardie
               may purchase the Products covered by any orders so affected by
               the Force Majeure Event from other suppliers. NEITHER REPUBLIC
               NOR HARDIE SHALL BE LIABLE FOR ANY DAMAGES, DIRECT OR
               CONSEQUENTIAL, ARISING OUT OF ANY DELAY IN DELIVERY OR FAILURE TO
               DELIVER OR ACCEPT ANY OF THE PRODUCTS SOLD HEREUNDER IF SUCH
               DELAY OR FAILURE TO DELIVER OR ACCEPT IS DUE TO A FORCE MAJEURE
               EVENT FOR WHICH APPROPRIATE NOTICE HAS BEEN GIVEN.

                                       19

<PAGE>   20

          (b)  Any suspension or reduction of deliveries of Products under this
               Agreement due to the occurrence of any Force Majeure Event shall
               not invalidate or be a basis for termination of this Agreement,
               and, upon the removal or termination of the Force Majeure Event
               during the term of this Agreement, delivery shall be made and
               taken, as the case may be, on the specified terms in effect
               immediately prior to such suspension or reduction. The foregoing
               notwithstanding, if Republic is unable to resume shipments of
               Products from the Project Gazelle Mill within one hundred eighty
               (180) days after the occurrence of a Force Majeure Event, Hardie
               may, in its sole discretion, terminate this Agreement, with no
               further obligation to Republic.

          (c)  If in consequence of any Force Majeure Event, Republic's
               production is partially curtailed, Republic shall limit its
               reductions of shipments to its then-present customers to the same
               percentage in each case.

          (d)  The provisions of this paragraph 15 shall not be available to any
               party hereto that shall fail to use reasonable diligence to
               remedy the situation and that shall fail to remove the Force
               Majeure Event affecting its performance hereunder with all
               reasonable dispatch, or to give timely notice of the occurrence
               of the Force Majeure Event. The requirement that any Force
               Majeure Event be remedied with all reasonable dispatch shall not
               require the settlement of strikes or labor controversies by
               acceding to the demands of the opposing party or parties.

     16. MUTUAL INDEMNIFICATION. Except as otherwise expressly provided herein,
Republic shall indemnify and hold harmless Hardie and its Affiliates and each of
the heirs, executors, successors and assigns of Hardie or any such Affiliate
from and against, and will pay the amount of, any loss, liability, claim,
damage, obligation, fine, proceeding and expense (including reasonable costs of
investigation and defense and reasonable attorney's fees and other incidental
costs and expenses) suffered or incurred by Hardie arising from, relating to or
in connection with: (i) any breach of any representation or warranty made by
Republic in this Agreement; (ii) any breach by Republic of any covenant or
obligation of Republic in this Agreement, including any such breach caused by
the failure of any of Republic's contractors or suppliers to fulfill their
obligations to Republic in connection with the development or construction of
the Project Gazelle Mill; or (iii) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses (including
reasonable legal fees and expenses) incident to any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof or in enforcing this indemnity. Except as otherwise expressly provided
herein, Hardie shall indemnify and hold harmless Republic and its Affiliates and
each of the heirs, executors, successors and assigns of Republic or any such
Affiliate from and against, and will pay the amount of, any loss, liability,
claim, damage, obligation, fine, proceeding and expense (including reasonable
costs of investigation and defense and reasonable attorney's fees and other
incidental costs and expenses) suffered or incurred by Republic arising from,
relating to or in connection with: (x) any breach of any representation or
warranty made by Hardie in this Agreement; (y) any breach by Hardie of its
obligations under this Agreement; or (z) any and all actions, suits,
proceedings, claims, demands,

                                       20

<PAGE>   21

assessments, judgments, costs and expenses (including reasonable legal fees and
expenses) incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof or in enforcing
this indemnity.

     17. BANKRUPTCY. In the event of any voluntary or involuntary bankruptcy,
receivership, insolvency or reorganization proceedings involving either party or
its property, or the assignment of all, or substantially all, of the assets of
either party for the benefit of creditors, or a receiver is appointed for it or
any substantial part of its property, the other party may terminate its
obligations hereunder by giving written notice of such termination which shall
become effective upon the giving of such notice. Such right of termination shall
be in addition to, and not in lieu of, any other rights or remedies available to
the non-breaching party.

     18. ASSIGNMENT.

          (a)  This Agreement shall be binding upon and inure to the benefit of
               the successors of the parties hereto but shall not be assignable
               by either party without the written consent of the other party
               except:

               (i)  subject to compliance with the other subparagraphs of this
                    paragraph 18, this Agreement may be assigned by operation of
                    law to the surviving or resulting entity in connection with
                    a merger or consolidation of such party;

               (ii) subject to compliance with the other subparagraphs of this
                    paragraph 18, this Agreement may be assigned by either party
                    to the purchaser or transferee of substantially all the
                    other assets of the assigning party in connection with a
                    sale or other transfer of all or substantially all of the
                    assets of the assigning party;

               (iii) subject to compliance with the other subparagraphs of this
                    paragraph 18, Hardie may assign this Agreement to the
                    purchaser or transferee of all of Hardie's gypsum wallboard
                    manufacturing plants referenced on Exhibit A hereto (the
                    "Hardie Plants") or Hardie may assign its rights under this
                    Agreement insofar as they relate to any Hardie Plant to the
                    purchaser or transferee of such Hardie Plant;

               (iv) subject to compliance with the other subparagraphs of this
                    paragraph 18, Republic may assign this Agreement to a
                    purchaser or transferee of the Project Gazelle Mill;

               (v)  nothing in this Agreement shall prevent Hardie or Republic
                    from entering into a mortgage, deed of trust, grant of a
                    security interest, sale and leaseback or other security
                    device (a "Security Device") with respect to any or all of
                    the Hardie Gypsum Plants or the Project Gazelle Mill,
                    respectively, to obtain or secure financing; provided,

                                       21

<PAGE>   22

                    that any such Security Device shall expressly provide and
                    require that upon any foreclosure, taking, lease termination
                    or other exercise of remedies pursuant thereto, the parties
                    thereto shall take all such action as shall be required to
                    cause the person or persons owning or controlling the Hardie
                    Gypsum Plants or the Project Gazelle Mill, as applicable,
                    after such exercise of remedies to assume in writing the
                    provisions of this Agreement insofar as they relate to the
                    Hardie Gypsum Plant or the Project Gazelle Mill, as
                    applicable, owned or controlled by such person; provided,
                    further, that Republic shall not enter into any such
                    Security Device with respect to the Project Gazelle Mill
                    without a provision in the Security Device that obligates
                    the secured party to give Hardie notice of any proposed
                    exercise of remedies affecting the Project Gazelle Mill with
                    respect to a default by Republic thereunder, and without
                    first providing such language to Hardie.

          (b)  Notwithstanding subparagraph (a) above, in the event that Hardie
               shall merge or consolidate with another entity or sell or
               otherwise transfer any of the Hardie Plants (whether pursuant to
               a sale or transfer of all or substantially all of its assets or
               the sale or transfer of one or more of the Hardie Plants), Hardie
               shall require the surviving company in such merger or any such
               transferee to assume and agree to perform in writing the
               provisions of this Agreement for the full term of this Agreement
               (or if less than all the Hardie Plants are sold or transferred,
               then the provisions of this Agreement insofar as they relate to
               the Hardie Plants sold or transferred), and in the event that
               Republic shall merge or consolidate with another entity or sell
               or transfer the Project Gazelle Mill, Republic shall require the
               surviving company in such merger or any such transferee to assume
               and agree to perform in writing the provisions of this Agreement
               for the full term of this Agreement.

          (c)  No such assignment or assumption of this Agreement, in whole or
               in part, shall relieve the assigning party of any of its
               obligations hereunder.

          (d)  If Republic proposes to sell, transfer or otherwise dispose of
               the Project Gazelle Mill (other than pursuant to a Security
               Device that complies with paragraph 18(a)(v) hereof) or merge or
               consolidate with another entity or sell or transfer all or
               substantially all of its assets to another person, or receives
               any bona fide, firm proposal from a third party to purchase or
               otherwise acquire the Project Gazelle Mill or for the merger or
               consolidation of Republic into or with another entity or for the
               sale of all or substantially all its assets to another person
               which proposal it proposes to accept, then Republic must first:
               (i) promptly inform Hardie that Republic intends to so dispose of
               the Project Gazelle Mill and (ii) keep Hardie informed of the
               progress Republic is making in disposing of the Project Gazelle
               Mill. Republic shall consult with Hardie concerning methods of
               ensuring, and shall

                                       22

<PAGE>   23

               take commercially reasonable steps to ensure, that any
               disposition of the Project Gazelle Mill will not have a material
               adverse effect on Hardie. Nothing contained herein shall prevent
               Hardie, upon receipt of any such notice from Republic, from
               making an offer to Republic to acquire the Project Gazelle Mill.

     19. CONFIDENTIALITY.

          (a)  Hardie and Republic acknowledge and agree that they may come into
               possession of certain information about each other's operations,
               either through visits to each other's facilities or through an
               exchange of documents or other information, including, but not
               limited to, specific designs and specifications of their
               respective facilities, the speed, throughput and other
               performance characteristics of their respective facilities, their
               cost of production and the specifications and selling prices of
               their products, all of which are confidential and proprietary
               information of the respective parties (the "Confidential
               Information"). Hardie and Republic further acknowledge and agree
               that the other would be damaged by the disclosure of the
               Confidential Information to competitors or to others, and by the
               use of the Confidential Information to compete with the other.
               Accordingly, each of Hardie and Republic agrees that it will
               maintain the confidentiality of, and not disclose to persons
               other than its employees with a specific need to know such
               information and who have been advised of and who have agreed to
               be bound by this covenant, any of the Confidential Information,
               or use such Confidential Information to compete with the other.

          (b)  "Confidential Information" does not include information which:
               (i) is or becomes generally available to the public other than as
               a result of a disclosure by the receiving party, its Affiliates
               or employees; (ii) was within the possession of the receiving
               party, its Affiliates or employees prior to its being furnished
               to such party by or on behalf of the furnishing party, provided
               that the source of such information was not known by the
               receiving party, its Affiliates or employees to be bound by a
               confidentiality agreement with or other contractual, legal or
               fiduciary obligation of confidentiality to the furnishing party
               or any other party with respect to such information; or (iii)
               becomes available to the receiving party on a non-confidential
               basis from a source other than Republic or any of its Affiliates
               or employees, provided that such source is not bound by a
               confidentiality agreement with or other contractual legal or
               fiduciary obligation of confidentiality to the furnishing party
               or any other party with respect to such information.
               Notwithstanding any other provision of this Agreement, the
               Confidentiality Agreement dated March 4, 1997 between Republic
               Parent and James Hardie Industries (USA) Inc. shall remain in
               full force and effect. To the extent there is any conflict
               between such Confidentiality Agreement and this Agreement, this
               Agreement shall control.

                                       23

<PAGE>   24

          (c)  In the event that Hardie or Republic or any of their Affiliates
               or employees are requested or required (by deposition,
               interrogatories, request for information or documents, subpoena,
               civil investigative demand or other similar process in legal
               proceedings) to disclose any of the other's Confidential
               Information, the receiving party shall provide the furnishing
               party with prompt written notice of any such request or
               requirement so that it may seek a protective order or other
               appropriate remedy and/or waive compliance with the provisions of
               this Paragraph. If, in the absence of a protective order or other
               remedy or the receipt of a waiver from the furnishing party, the
               receiving party or any of its Affiliates or employees are
               nonetheless, in the opinion of counsel, legally compelled to
               disclose any Confidential Information to any tribunal or else
               stand liable for contempt or suffer other censure or penalty, the
               receiving party or its Affiliates or employees may, without
               liability hereunder, disclose to such tribunal only that portion
               of the Confidential Information which such counsel advises the
               receiving party is legally required to be disclosed, provided
               that the receiving party exercises its commercially reasonable
               efforts to preserve the confidentiality of the Confidential
               Information including, without limitation, by cooperating with
               the furnishing party to attempt to obtain an appropriate
               protective order or other reliable assurance that confidential
               treatment will be accorded the Confidential Information by such
               tribunal. The furnishing party will promptly reimburse the
               receiving party for any and all costs and expenses (including
               attorneys' fees and expenses) which it may suffer or incur as a
               result of its compliance with this subparagraph (c) unless the
               proceeding in which such disclosure is being sought results in
               substantial part from a breach by the receiving party of its
               obligations hereunder.

     20. NON-SOLICITATION. Hardie and Republic each agree that, during the term
of this Agreement and for a period of one year thereafter, it will not, and will
not permit any of its Affiliates to, directly solicit, other than through normal
advertising for employees, or knowingly hire, any former, present or future
management employee, engineer, technician or salesperson of the other; provided,
that this paragraph 20 shall not apply to any person who has not been employed
by the other party or its Affiliates for a period of at least one year.

     21. NOTICES. All notices, requests or other communications hereunder shall
be in writing, addressed to Republic or Hardie at the following addresses:

          REPUBLIC PAPERBOARD COMPANY OR REPUBLIC GROUP INCORPORATED

          (for notices by personal delivery, overnight express or telecopy):

          811 East 30th Avenue
          Hutchinson, Kansas  67502
          Attention: Mr. Doyle R. Ramsey
          Telecopier: (316) 727-2727

                                       24

<PAGE>   25

          (for notices by registered or certified mail):

          P.O. Box 1307
          Hutchinson, Kansas  67504-1307
          Attn: Mr. Doyle R. Ramsey

          with a copy to:

          Bryan E. Bishop, Esq.
 .         Locke Purnell Rain Harrell
          2200 Ross Avenue, Suite 2200
          Dallas, Texas 75201
          Telecopier: (214) 740-8800

          JAMES HARDIE GYPSUM, INC.

          26300 La Alameda, Suite 250
          Mission Viejo, California 92691
          Attention: Mr. Robert F. Rugg
          Telecopier: (949) 367-1294

          with a copy to:

          Howard J. Barnhorst, Esq.
          Barnhorst, Schreiner & Goonan
          550 West C St., Ste. 1350
          San Diego, CA 92101
          Telecopier: (619) 544-0703

The address of either party may be changed by giving notice in writing at any
time to the other party. Any notice to be given under this Agreement shall be
deemed duly given if: (i) delivered personally; (ii) sent by telecopy (if
followed by delivery of a hard copy by first class mail, postage prepaid); (iii)
delivered by overnight express; or (iv) sent by United States registered or
certified mail, postage prepaid. Any notice that is delivered personally, or
sent by telecopy or overnight express in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party. Any notice that is addressed and mailed in the manner
provided herein shall be conclusively presumed to have been given to the party
to which it is addressed at the close of business, local time of the recipient,
on the third day after it is so placed in the mail.

     22. NON-WAIVER. The failure of either party to insist in any one or more
instances upon strict performance of any of the provisions of this Agreement or
to take advantage of any of its rights hereunder shall not be construed as a
waiver of any such provisions or the relinquishment of any such rights, but the
same shall continue and remain in full force and effect.

                                       25

<PAGE>   26

     23. ENTIRE AGREEMENT. This Agreement (including the Exhibits hereto which
are an integral part hereof) sets forth the entire agreement between the parties
hereto with respect to the subject matter hereof, and the parties shall not be
bound by any representations or agreements which are not expressly set forth in
this Agreement.

     24. AMENDMENTS. No modification, amendment or waiver of any provision of
this Agreement shall be effective unless in writing signed by an authorized
officer of each of the parties hereto.

     25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which together shall constitute one and the same instrument.

     26. CAPTIONS. The captions of the various paragraphs of this Agreement are
for convenience of reference only and shall not affect the interpretation of the
provisions hereof.

     27. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas (other than its choice of law
principles).

     28. DISPUTE RESOLUTION; MEDIATION AND ARBITRATION.

          (a)  If any controversy, dispute, difference or claim between the
               parties hereto shall arise concerning the performance,
               enforcement or interpretation of this Agreement (collectively, a
               "Dispute"), prior to the initiation of any proceedings pursuant
               to any other provisions of this paragraph 28, the Dispute shall
               be referred to the chief executive officers of Republic and
               Hardie for resolution.

          (b)  If a Dispute is not resolved pursuant to subparagraph (a) within
               fifteen (15) business days after it is referred to the chief
               executive officers of Republic and Hardie, either party may by
               notice to the other party require mediation of the Dispute. Each
               party agrees to participate in mediation of the Dispute and will
               in good faith attempt to agree upon a mediator. If the parties
               are unable to agree upon a mediator within ten (10) business days
               after such notice or if such Dispute shall not have been resolved
               by mediation within twenty (20) business days after such notice,
               then either party may file for arbitration pursuant to
               subparagraph (c) below. All expenses of the mediator shall be
               equally shared.

          (c)  If the parties to this Agreement are unable to settle a Dispute
               through direct negotiation in good faith or through mediation
               pursuant to subparagraphs (a) and (b) within the time period
               specified therein, the Dispute shall be submitted to binding
               arbitration. Except as otherwise provided herein, the arbitration
               shall be conducted in accordance with the then effective
               Commercial Rules of Practice and Procedure of American
               Arbitration

                                       26

<PAGE>   27

               Association ("AAA"). The arbitration proceedings shall take place
               in Dallas, Texas.

          (d)  Within five (5) business days after notice from one party to the
               other requesting binding arbitration, the parties shall agree on
               and select one arbitrator from the AAA panel. If within such five
               (5) business-day period, the parties are unable to agree upon an
               arbitrator, each of them shall have five (5) business days
               following the expiration of that period to select an arbitrator
               from the AAA panel that is not an affiliate of a party to this
               Agreement. If either party fails to timely select an arbitrator,
               AAA shall make the selection for such party. Within five (5)
               business days following their selection, the two selected
               arbitrators shall agree upon and select a third arbitrator for
               the AAA panel. The arbitrator or arbitrators, whether one or
               three persons, are hereinafter called "Arbitrators." If the
               parties are unable to agree on a time and place in Dallas, Texas
               for arbitration, the Arbitrators shall decide the time and place.
               The Arbitrators shall hear the matter within thirty (30) days
               after selection and shall render a decision promptly after the
               hearing. The Arbitrators shall make a final decision that, in
               their judgment, (i) is consistent with, and does not add to,
               subtract from, or otherwise modify, the provisions of this
               Agreement or related agreements or (ii) if the subject matter of
               the Dispute is not specifically addressed in this Agreement, is
               determined under this Agreement consistent with the intent of the
               parties as supported by evidence presented in the arbitration
               proceedings. The Arbitrators shall send a signed written
               statement of their decision to AAA and both parties. In awarding
               damages or other remedies or relief, the Arbitrators must honor
               and abide by any applicable limitations or restrictions expressed
               or described in the Agreement. The Arbitrators are not empowered
               to award damages in excess of compensatory damages, and each
               party hereby irrevocably waives any right to recover such damages
               with respect to any Dispute resolved by arbitration.

          (e)  To the extent permissible under Texas law, the parties agree that
               the award of the Arbitrators shall be final and not subject to
               judicial review. Judgment on the arbitration award may be entered
               and enforced in any court having jurisdiction over the parties or
               their respective assets. It is the intent of the parties that the
               arbitration provisions hereof be enforced to the fullest extent
               permitted by Texas law.

          (f)  Nothing in the foregoing arbitration provisions shall limit the
               rights of the parties otherwise described in this Agreement to
               obtain provisional, ancillary, or equitable remedies, such as
               injunctive relief or specific performance.

          (g)  Each party shall pay its own expenses of arbitration and the
               expenses of the Arbitrators shall be equally shared; provided,
               however, if in the opinion of the Arbitrators any claim by either
               party hereunder or any defense or

                                       27

<PAGE>   28

               objection thereto by the other party was unreasonable and not
               made in good faith, the Arbitrators may assess, as part of the
               award, all or any part of the arbitration expense (including,
               without limitation, reasonable attorneys' fees) of the other
               party and of the Arbitrators against the party raising such
               unreasonable claim, defense, or objection. Nothing herein set
               forth shall prevent the parties from settling any dispute by
               mutual agreement at any time.

     29. SPECIFIC PERFORMANCE; INJUNCTIVE AND OTHER EQUITABLE RELIEF. Each party
hereto acknowledges that a violation or attempted violation of any of the
covenants and agreements in paragraphs 3(e), 16, 17, 18 and 19 hereof, and in

Exhibit A hereof, will cause such damage to the other party as will be
irreparable, the exact amount of which would be difficult or impossible to
ascertain and for which there will be no adequate remedy at law, agrees that the
other party hereto shall be entitled as a matter of right to specific
performance and injunctive and other equitable relief in case of such violation
or attempted violation as well as any and all costs and expenses sustained or
incurred in obtaining any such equitable relief, including, without limitation,
reasonable attorneys' fees, and agrees to waive any requirement for the securing
or posting of any bond or other security in connection with the obtaining of any
such injunction or other equitable relief.

     30. PUBLIC ANNOUNCEMENTS. Neither Hardie nor Republic shall make, nor
permit any Affiliate or representative to make, any public statements,
including, without limitation, any press releases, with respect to this
Agreement or the transactions contemplated thereby without the prior written
consent of the other parties hereto, except to the extent required by law or the
rules of any national securities exchange or automated quotation system on which
such party's securities are listed or traded.

     31. TIME OF THE ESSENCE. With regard only to the dates specified in: (i)
the last sentence of paragraph 3(c) hereof; (ii) the last sentence of paragraph
3(e) hereof; and (iii) the last sentence of paragraph 15(b), time is of the
essence.

     32. NO JOINT VENTURE. The parties hereto have not entered into any
partnership, joint venture, agency or other such relationship by virtue of this
Agreement.

            [The remainder of this page is intentionally left blank.]

                                       28

<PAGE>   29

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by the respective officers as of the date first written above.

                              REPUBLIC PAPERBOARD COMPANY

                              By:   /s/ Phil Simpson
                                  -------------------------------
                                    Phil Simpson, Chairman of the
                                    Board, President and Chief
                                    Executive Officer

                              JAMES HARDIE GYPSUM, INC.

                              By:   /s/ Robert F. Rugg
                                  -------------------------------
                                    Robert F. Rugg, President

     Republic Parent shall cause Republic to perform, and hereby guarantees the
performance by Republic of, all of Republic's obligations under this Agreement.
The obligations of Republic Parent under this paragraph shall not be modified,
released, diminished or affected by: (i) any modification, amendment, waiver,
release, adjustment, indulgence, forbearance, compromise, deferral or extension
of or with respect to any obligations of Republic hereunder; (ii) any delay or
forbearance or lack of diligence by Hardie in exercising its rights hereunder
against Republic; (iii) the bankruptcy, insolvency, rearrangement, adjustment,
composition, liquidation or dissolution of Republic or any action taken,
election made, preference or claim for refund asserted or sustained in any
proceeding with respect thereto; (iv) any lack of power or authority of
Republic; (v) the taking or accepting by Hardie of any other security,
collateral or guaranty or other assurance by Republic of performance; or (vi)
any other action taken or omitted to be taken with respect to the covenants,
agreements and obligations of hereunder, whether or not such action or omission
prejudices Republic Parent or increases the likelihood that Republic Parent will
have to perform the obligations of Republic.

                              REPUBLIC GROUP INCORPORATED

                              By:   /s/ Phil Simpson
                                  --------------------------------
                                    Phil Simpson, Chairman of the
                                    Board, President and Chief
                                    Executive Officer

                                       29

<PAGE>   30

EXHIBIT A

RECYCLED GYPSUM GRADE PAPERBOARD REQUIREMENTS

     The volume of recycled gypsum-grade paperboard to be purchased by Hardie
and to be supplied by Republic is as follows:

     (i)  7% of the recycled gypsum-grade paperboard requirements of the gypsum
          wallboard plant located near Nashville, Arkansas that is currently
          owned by Hardie until December 31, 2000;

     (ii) 95% (plus or minus 5%) of the recycled gypsum-grade paperboard
          requirements of the gypsum wallboard plant located near Nashville,
          Arkansas that is currently owned by Hardie beginning on January 1,
          2001; and

     (iii) 95% (plus or minus 5%) of the recycled gypsum-grade paperboard
          requirements of the gypsum wallboard plants located at or near Las
          Vegas, Nevada and Seattle, Washington that are currently owned by
          Hardie beginning on October 1, 2000.

     Prior to the Commencement Notice, Republic and Hardie contemplate that test
quantities of the Products produced at the Project Gazelle Mill will be
furnished by Republic and purchased by Hardie and manufactured into gypsum
wallboard. In addition, prior to the Commercial Production Date, Hardie may
purchase and, if requested, Republic will supply, Shaftwall Liner Green and
Veneer Plaster Base pursuant to subparagraph (i) above from its mills other than
the Project Gazelle Mill, provided that, with respect to such Products sold
prior to the Commercial Production Date, the porosity Specification shall be
determined by mutual agreement between the Vice Presidents, Operations, of
Hardie and Republic.

                                       ***

<PAGE>   31
     If during the term of this Agreement Hardie shall desire to expand the
gypsum wallboard capacity of any of its Nashville, Arkansas, Las Vegas, Nevada
or Seattle, Washington gypsum wallboard plants, Hardie shall promptly notify
Republic in writing of such desire to expand capacity. Republic shall supply and
Hardie shall purchase the recycled gypsum-grade paperboard requirements of such
expanded capacity at the Nashville, Arkansas, Las Vegas, Nevada or Seattle,
Washington gypsum wallboard plants on the same terms and conditions that are
specified in this Paperboard Supply Agreement.

     Notwithstanding the foregoing paragraphs on this Exhibit A, the parties
anticipate that the output of the Project Gazelle Mill will be ramping up during
approximately the first twelve months of Commercial Production. During such
ramp-up period, the obligations of Hardie to purchase its requirements and
Republic to sell such amounts will be adjusted proportionally to the mutual
satisfaction of both parties, to accommodate an orderly transition of supply.

     During the term of this Agreement, wallboard production technology may
change so as to make it substantially more economical to utilize paper of a kind
that is not presently commercially available and that Republic does not
contemplate producing at the Project Gazelle Mill. In such a case, Republic
agrees that it will use commercially reasonable efforts to develop the
production capacity at the Project Gazelle Mill for such paper, and Hardie and
Republic will negotiate in good faith to include such paper within the ambit of
this Agreement to be sold pursuant to pricing mechanism similar to this
Agreement. During such development phase, or if Republic is unwilling or unable
to produce such paper at the Project Gazelle Mill, or if the parties cannot
reach agreement regarding such paper after negotiating in good faith, commencing
on October 1, 2004 and during the remainder of the term of this Agreement,
Hardie may purchase such paper from other suppliers, and Hardie's demand for
such paper will not be considered part of Hardie's recycled gypsum-grade
paperboard requirements for purposes of this Agreement.

                                       2

<PAGE>   32

EXHIBIT B

INITIAL BASE PRICES

     The initial Base Prices are as follows:

<TABLE>
<CAPTION>
GRADE                      $/MSF
-----                      -----
<S>                        <C>
Cream Face                 $ ***

Gray Back                    ***

Green-Lined                  ***

Brown Sheathing              ***

Shaftwall Liner Green        ***

Veneer Plaster Base          ***
</TABLE>

                                       3

<PAGE>   33

EXHIBIT  C

All specifications on this Exhibit C refer to the test value to be obtained at
the Paperboard Mill at the time of manufacture. For purposes of this Exhibit C,
"NS" shall be defined to mean none specified.

                               JAMES HARDIE GYPSUM
                              PAPER SPECIFICATIONS

TYPE: CREAMFACE

<TABLE>
<CAPTION>
                                           MIN.      AVE.          MAX.
                                           ----      ----          ----
<S>                                        <C>       <C>           <C>
BASIS WEIGHT: (#/MSF)                      ***       ***           ***

MOISTURE CONTENT (%):                      ***       ***           ***

CALIPER: (INCHES)                          ***       ***           ***

POROSITY: ( SECONDS)                       ***       ***           ***

WATER ABSORPTION: (COBB)

TOP LINER: (GRAMS)                         ***       ***           ***

(CURED) BOND LINER: (GRAMS)                ***       ***           ***

TENSILE STRENGTH:

MACHINE DIRECTION (#/INCH):                ***       ***           ***

ACROSS MACHINE DIRECTION (#/INCH):         ***       ***           ***

SATURATION: ( SECONDS)                     ***       ***           ***

WIDTH: (INCHES)

     a.                                    ***       ***           ***
     b.                                    ***       ***           ***
     c.                                    ***       ***           ***

DIAMETER: (INCHES)                         ***       ***           ***

BRIGHTNESS (% REFLECTANCE @457 NM):        ***       ***(desired)  ***
MULLEN PLY-BOND (PSI):                     ***       ***           ***

SHEFFIELD SMOOTHNESS (SHEFFIELD UNITS):    ***       ***(desired)  ***

APPEARANCE:    ***

CONVERSION
PROPERTIES:    ***
</TABLE>

                                       4

<PAGE>   34

                               JAMES HARDIE GYPSUM
                              PAPER SPECIFICATIONS

TYPE: GREYBACK

<TABLE>
<CAPTION>
                                        MIN.       AVE.       MAX.
                                        ----       ----       ----
<S>                                     <C>        <C>        <C>
BASIS WEIGHT: (#/MSF)                   ***        ***        ***

MOISTURE CONTENT (%):                   ***        ***        ***

CALIPER: (INCHES)                       ***        ***        ***

POROSITY: ( SECONDS)                    ***        ***        ***

WATER ABSORPTION: (COBB)

TOP LINER: (GRAMS)                      ***        ***        ***

(CURED) BOND LINER: (GRAMS)             ***        ***        ***

TENSILE STRENGTH:

MACHINE DIRECTION (#/INCH):             ***        ***        ***

ACROSS MACHINE DIRECTION (#/INCH):      ***        ***        ***

SATURATION: ( SECONDS)                  ***        ***        ***

WIDTH: (INCHES)

    a.                                  ***
    b.                                  ***
    c.                                  ***

DIAMETER: (INCHES)                      ***        ***        ***

MULLEN PLY-BOND (PSI):                  ***        ***        ***

APPEARANCE:    ***

CONVERSION
PROPERTIES:    ***
</TABLE>

                                       5

<PAGE>   35

                               JAMES HARDIE GYPSUM
                              PAPER SPECIFICATIONS

TYPE: GREEN-LINED

<TABLE>
<CAPTION>
                                        MIN.       AVE.       MAX.
                                        ----       ----       ----
<S>                                     <C>        <C>        <C>
BASIS WEIGHT: (#/MSF)                   ***        ***        ***

MOISTURE CONTENT (%):                   ***        ***        ***

CALIPER: (INCHES)                       ***        ***        ***

POROSITY: ( SECONDS)                    ***        ***        ***

WATER ABSORPTION: (COBB)

TOP LINER: (GRAMS)                      ***        ***        ***

(CURED) BOND LINER: (GRAMS)             ***        ***        ***

TENSILE STRENGTH:

MACHINE DIRECTION (#/INCH):             ***        ***        ***

ACROSS MACHINE DIRECTION (#/INCH):      ***        ***        ***

SATURATION: ( SECONDS)                  ***        ***        ***

WIDTH: (INCHES)                         ***        ***        ***

    a.                                  ***        ***        ***

DIAMETER: (INCHES)                      ***        ***        ***

MULLEN PLY-BOND (PSI):                  ***        ***        ***

SHEFFIELD SMOOTHNESS (SHEFFIELD UNITS): ***        ***        ***

APPEARANCE:        ***

CONVERSION
PROPERTIES:        ***
</TABLE>

                                      6

<PAGE>   36

                               JAMES HARDIE GYPSUM
                              PAPER SPECIFICATIONS

TYPE:  BROWN SHEATHING

<TABLE>
<CAPTION>
                                        MIN.       AVE.       MAX.
                                        ----       ----       ----
<S>                                     <C>       <C>        <C>
BASIS WEIGHT: (#/MSF)                   ***        ***        ***

MOISTURE CONTENT (%):                   ***        ***        ***

CALIPER: (INCHES)                       ***        ***        ***

POROSITY: ( SECONDS)                    ***        ***        ***

WATER ABSORPTION: (COBB)

TOP LINER: (GRAMS)                      ***        ***        ***

(CURED) BOND LINER: (GRAMS)             ***        ***        ***

TENSILE STRENGTH:

MACHINE DIRECTION (#/INCH):             ***        ***        ***

ACROSS MACHINE DIRECTION (#/INCH):      ***        ***        ***

SATURATION: ( SECONDS)                  ***        ***        ***

WIDTH: (INCHES)
    a.                                  ***        ***        ***
    b.                                  ***        ***        ***
    c.                                  ***        ***        ***
    d                                   ***        ***        ***

DIAMETER: (INCHES)                      ***        ***        ***

MULLEN PLY-BOND (PSI):                  ***        ***        ***

APPEARANCE:        ***

CONVERSION
PROPERTIES:        ***
</TABLE>

                                       7

<PAGE>   37

                               JAMES HARDIE GYPSUM
                              PAPER SPECIFICATIONS

TYPE: SHAFTWALL LINER GREEN

<TABLE>
<CAPTION>
                                        MIN.       AVE.       MAX.
                                        ----       ----       ----
<S>                                     <C>        <C>        <C>
BASIS WEIGHT: (#/MSF)                   ***        ***        ***

MOISTURE CONTENT (%):                   ***        ***        ***

CALIPER: (INCHES)                       ***        ***        ***

POROSITY: ( SECONDS)                    ***        ***        ***

WATER ABSORPTION: (COBB)

TOP LINER: (GRAMS)                      ***        ***        ***

(CURED) BOND LINER: (GRAMS)             ***        ***        ***

TENSILE STRENGTH:

MACHINE DIRECTION (#/INCH):             ***        ***        ***

ACROSS MACHINE DIRECTION (#/INCH):      ***        ***        ***

SATURATION: ( SECONDS)                  ***        ***        ***

WIDTH: (INCHES)                         ***        ***        ***

    a.                                  ***        ***        ***
    b.                                  ***        ***        ***

DIAMETER: (INCHES)                      ***        ***        ***

MULLEN PLY-BOND (PSI):                  ***        ***        ***

SHEFFIELD SMOOTHNESS (SHEFFIELD UNITS): ***        ***        ***

APPEARANCE:       ***

CONVERSION
PROPERTIES:       ***
</TABLE>

                                       8

<PAGE>   38

                               JAMES HARDIE GYPSUM
                              PAPER SPECIFICATIONS

TYPE:  VENEER PLASTER BASE

<TABLE>
<CAPTION>
                                        MIN.       AVE.       MAX.
                                        ----       ----       ----
<S>                                     <C>        <C>        <C>
BASIS WEIGHT: (#/MSF)                   ***        ***        ***

MOISTURE CONTENT (%):                   ***        ***        ***

CALIPER: (INCHES)                       ***        ***        ***

POROSITY: ( SECONDS)                    ***        ***        ***

WATER ABSORPTION: (COBB)

TOP LINER: (GRAMS)                      ***        ***        ***

(CURED) BOND LINER: (GRAMS)             ***        ***        ***

TENSILE STRENGTH:

MACHINE DIRECTION (#/INCH):             ***        ***        ***

ACROSS MACHINE DIRECTION (#/INCH):      ***        ***        ***

SATURATION: ( SECONDS)                  ***        ***        ***

WIDTH: (INCHES)

    a.                                  ***        ***        ***

DIAMETER:                               ***        ***        ***

MULLEN PLY-BOND (PSI):                  ***        ***        ***

APPEARANCE:     ***

CONVERSION
PROPERTIES:     ***
</TABLE>

                                        9

<PAGE>   39

EXHIBIT D

HARDIE'S REQUIRED FORM OF PURCHASE ORDER

                                      10

<PAGE>   40

[LOGO OF JAMES HARDLE                                            PURCHASE ORDER
    APPEARS HERE]                                                 DATE
                                                          PAGE

SUPPLIER:                    DELIVER TO:                  INVOICE TO:
---------------------        ---------------------        ---------------------

Phone                        Phone                        Phone
Fax                          Fax                          Fax
---------------------        ---------------------        ---------------------

                                       11
<PAGE>   41

<TABLE>
<S>                      <C>                      <C>                           <C>                             <C>
-
-----------------------------------------------------------------------------------------------------------------------------------
   CONTACT NAME           BUYER                   PREFERRED CARRIER             SHIPPING TERMS                  CREDIT TERMS

-
-----------------------------------------------------------------------------------------------------------------------------------

-
------------------------------------------------------------------------------------------------------------------------------------
ITEM       QUANTITY           QTY            PART DESCRIPTION              UNIT        PER       REQUIRED          EXTENDED PRICE
CODE                          U/M                                          PRICE                   DATE            (EXCLUDING TAX)
-
------------------------------------------------------------------------------------------------------------------------------------

-
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                 TOTAL LINE VALUE
             MARK OUR ORDER NO. ON INVOICE AND ALL CORRESPONDENCE                                       SALES TAX
                                                                                                          FREIGHT
                                                                                                      GRAND TOTAL
</TABLE>

-------------------------------------
PURCHASING AND ADMINISTRATION MANAGER

EXHIBIT E

REPUBLIC'S REQUIRED FORM OF ACKNOWLEDGMENT

                                      12

<PAGE>   42

             ORDER DATE                         REPUBLIC ORDER
                                            MANUFACTURING FACILITY:

[LOGO OF REPUBLIC GYPSUM COMPANY
        APPEARS HERE]

<TABLE>
<S>              <C>          <C>          <C>            <C>                 <C>                   <C>                <C>
-
------------------------------------------------------------------------------------------------------------------------------------
CUSTOMER NO      TERMS:       F.O.B.       FREIGHT        CUSTOMER P.O.#      SALES TERRITORY       CPA # OR FORMULA   REQUIRED
DATE

-
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

        Sold                                                     Ship
         to:                                                      to:

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                                 END OF DOCUMENT<PAGE>   1
                                                                    EXHIBIT 10.1

                       DAISYTEK INTERNATIONAL CORPORATION
                         DIRECTOR AND OFFICER LOAN PLAN
                             Dated November 9, 2000

         Daisytek International Corporation, a Delaware corporation (the
"COMPANY"), hereby adopts the following loan plan (the "PLAN") for non-employee
directors and executive officers of the Company ("PARTICIPANTS"):

1.       Objective.

         The objective of the Plan is to provide additional incentive to
Participants by granting loans ("LOANS") to such persons, the proceeds of which
are to be used by such persons for the sole purpose of purchasing Common Stock
of the Company ("COMMON STOCK") in the open market. The acquisition of Common
Stock with Loans is intended to (i) provide an increased incentive for
Participants to exert their best efforts on behalf of the Company, (ii)
strengthen the ability of the Company to recruit and retain those persons
possessing outstanding competence and the ability to contribute significantly to
the Company's success, (iii) award those Participants who have made significant
contributions to the Company in the past and (iv) further identify the interests
of such Participants with those of the Company and its stockholders by
increasing the desire of such officers to maximize the value of the Company.

2.       Definitions.

         2.1      "ACCEPTANCE DATE" means the date when a Participant accepts
                  the offer by the Company to loan the Participant the purchase
                  price to acquire Shares in the open market.

         2.2      "APPLICABLE INTEREST RATE" means the Cost of Funds plus one
                  percent.

         2.3      "BOARD" means the Board of Directors of the Company provided
                  that if any action taken by the Board relates to a Participant
                  who is a director of the Company, the majority of the
                  directors approving such action shall be disinterested
                  directors.

         2.4      "COMMITTEE" means the Compensation Committee of the Board.

         2.5      "COMMON STOCK" means shares of Common Stock of the Company.

         2.6      "COST OF FUNDS" means the Floating Rate (as defined in the
                  Company's Credit Agreement with Bank One, Texas, NA, and
                  certain other lenders dated December 18, 2000) as of the
                  Acceptance Date.

         2.7      "CREDIT AGREEMENT" means a credit facility or syndicated loan
                  led by Bank One, N.A. or any replacement thereof as determined
                  by the Board.

         2.8      "EFFECTIVE DATE OF THE PLAN" is defined under Section 14
                  hereof.

         2.9      "EXCHANGE ACT" means the Securities and Exchange Act of 1934
                  as amended.

         2.10     "LOAN" means a loan made to a Participant to purchase Shares
                  under the Plan.

         2.11     "LOAN AVAILABILITY PERIOD" means the one-year period in which
                  Loans will be available, commencing on the Effective Date and
                  ending one year thereafter. Such period may be extended or
                  renewed by the Committee in its sole discretion.

<PAGE>   2

         2.12     "PARTICIPANT" means any non-employee director or any executive
                  officer of the Company who has accepted to receive a Loan
                  pursuant to this Plan for the purpose of purchasing Shares in
                  the open market.

         2.13     "SHARES" means shares of Common Stock purchased by a
                  Participant pursuant to the Plan.

3.       Eligibility.

         Participation in the Plan shall be limited to non-employee directors
and officers of the Company. All Participants shall be required to complete an
"accredited investor questionnaire," or such other documents as the Company may
require to establish that such Participants are aware of the risks of
investment.

         Participants shall be designated by the Board from time to time upon
the recommendation of the Committee. Eligibility confers no vested right to the
grant of any Loans under this Plan.

4.       Grant of Loans.

         During the Loan Availability Period, the Committee may make
recommendations to the Board concerning the granting of Loans under the Plan to
Participants. The Board will meet to consider the recommendations of the
Committee (or will act by written consent in lieu of such a meeting) and will
make a final determination as to the granting of Loans under the Plan to
Participants. The Board's determination may vary from the Committee's
recommendations and the Board may choose to make no Loans at all. Immediately
after the action of the Board, the Committee will notify individuals to whom the
Loans have been granted and will permit such Participants to borrow money upon
the execution and delivery of a Loan Agreement and a Note (each as defined in
Paragraph 5 herein).

5.       Terms of Loans.

         The Company shall make a Loan to a Participant in an amount not to
exceed $50,000 per Participant, for 100% of the purchase price for Shares to be
purchased by a Participant during the 30-day period immediately following the
date the Loan is made to the Participant.

         Each Loan will be made pursuant to the terms and conditions of a loan
agreement (the "LOAN AGREEMENT") in form and substance acceptable to the Company
and evidenced by a promissory note (the "NOTE") in form and substance acceptable
to the Company. Each Loan will comply with all applicable laws, regulations and
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction. No funds will be advanced until the
Participant has executed and delivered copies of such Loan Agreement and Note to
the Committee.

     Each Note will bear interest at the Applicable Interest Rate and shall be
payable at the earlier of (i) 30 days after the Company makes demand for payment
or (ii) the third anniversary of the date of the Loan. The Board will have sole
discretion concerning when demand for payment of any Loan will be made, but the
Board will consider the following factors:

         (i)      Whether the Company's needs for cash flow or financing make
                  the calling of any Loan advisable;

         (ii)     Whether the Participant's service with the Company has been
                  terminated; and

                                       2
<PAGE>   3

         (iii)    Whether the Participant is able to repay the Loan without
                  undue difficulty.

         Upon direction from the Board, the Committee will make demand for
payment and will seek to collect on each Loan not later than three years from
the date funds are advanced under such Loan.

6.       Conditions to Loans.

         As a condition to the granting of any Loan to a Participant, the
Participant shall represent and warrant that he/she shall use the proceeds for
the sole purpose of purchasing Shares. The Board may require the Participant to
execute and deliver to the Company any appropriate or necessary agreements,
representations, or documents in this regard.

7.       Limitation on Loans.

         The total amount of Loans outstanding at any time under this Plan and
at any time during the term of this Plan will not exceed $1,000,000.

8.       Term of Plan.

         This Plan will be effective until terminated by the Board, but no later
than November 9, 2010. Determination of when demand for payment of the Loans
will be made will be vested in the Board (subject to the restriction that all
Loans must be paid within three years from the date funds are advanced, as set
forth in Paragraph 5 above).

9.       Disinterested Persons.

         All actions by the Committee regarding a Loan to a member of the
Committee will be taken without the participation of the Committee member and
all actions by the Board regarding a Loan to a member of the Board will be taken
without the participation of the Board member, but the Committee member and the
Board member, respectively, may be counted for purposes of a quorum.

10.      Administration.

         The Plan will be administered by the Board upon the recommendations of
the Committee.

11.      No Employment Rights.

         The Plan does not constitute a contract of employment, and
participation in the Plan will not give any Participant the right to be retained
in the employ of the Company or an affiliate or the right to continue as an
officer or director of the Company or any right or claim to any benefit under
the Plan unless such right or claim has specifically accrued under the terms of
the Plan or the terms of any award under the Plan.

                                       3
<PAGE>   4

12.      Compliance with Applicable Law and Withholding.

         The Company shall have the right to require a Participant to pay to the
Company the amount of any taxes that are required to be withheld with respect to
a Participant's participation in the Plan, including any such taxes required to
be withheld in connection with (i) the purchase by the Participant of any
purchased Shares, (ii) any dividend or distribution in respect of purchased
Shares, (iii) any repayment of a Loan, (iv) the lapse of the period during which
the purchased Shares are restricted by the Loan Agreement, (v) any release of
purchased Shares or (vi) any sale of purchased Shares. To the extent permitted
by the Committee, a Participant may elect to have any distribution otherwise
required to be made under the Plan to be withheld to fulfill any tax withholding
obligation.

13.      Governing Law.

         The Plan and all determinations made and actions taken thereunder, to
the extent not otherwise governed by the laws of the United States, shall be
governed by the internal laws of the State of Texas and construed accordingly.

14.      Effective Date of Plan.

         The "EFFECTIVE DATE" of this Plan shall be November 9, 2000.

                                       4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00026-of-00352.parquet"}]]