Sales Agent Agreement

Confidential Treatment
EXHIBIT 10.7


PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECRETARY OF THE COMMISSION PURSUANT TO REGISTRANT'S APPLICATION OBJECTING TO DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 406. THE OMITTED PORTIONS HAVE BEEN MARKED WITH BRACKETS.


SALES AGENT AGREEMENT


THIS SALES AGENT AGREEMENT is made as of January 20, 1996, between James River Paper Company, Inc., a Virginia corporation ("JR"), and WinCup Holdings, L.P, a Delaware Limited Partnership ("Partnership").


RECITALS


A. James River Paper Company ("James River") and WinCup Holdings, Inc. have entered into a Limited Partnership Agreement dated as of January 20, 1996 (the "Partnership Agreement").


B. Because of JR's relationship with Sam's Club, a division of Wal-Mart Stores, Inc. ("Sam's"), the Partnership has requested JR to act as the Partnership's sales agent to Sam's.


C. Terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Partnership Agreement.


NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, and agreements herein contained, the parties hereto agree as follows:


1. Term.
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(a) The term of this Agreement shall be for one year commencing on the date hereof and ending on the first anniversary of the date hereof unless sooner terminated pursuant to any provision hereof.


(b) Either party may terminate this Agreement upon notice to the other if the other party fails to perform in any material respect any material obligations hereunder and such failure continues for more than 30 days after the defaulting party receives written notice of such failure, without any corrective action taken by such defaulting party.


2. Appointment of JR.
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Subject to the terms and conditions hereinafter set forth, the Partnership appoints JR as its exclusive agent in the United States for solicitation of sales from Sam's and related service functions of the products set forth in Exhibit A (the "Products").


3. Duties of JR.
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In consideration of the compensation provided in Paragraph 8 hereof, JR shall maintain the same efforts to solicit sales of the Products, and in connection therewith JR shall:


(a) Continue to maintain at its same standard and at its own expense a place of business and business organization including its present sales agents and employees as are necessary to perform its obligations with respect to the continued sales and distribution of the Products.


(b) Continue to maintain its standards in actively soliciting the sales of the Products to Sam's as it has in the past.


(c) Continue to provide the same standards for such sales service functions as are presently provided in connection


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with the sale of Products to Sam's including order entry and invoicing; order combinations with other products sold by JR, and credit collection and adjustment, and continue to maintain its present standards of operations for such purposes. JR shall invoice and collect in accordance with its present practices for all Products shipped and remit such monies to the Partnership in accordance with provisions of Paragraph 6 hereof.


4. Records and Reports.
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JR shall retain for a reasonable period of time in accordance with record retention rules required by law, and permit the Partnership to inspect, all orders, invoices, credit memos, freight invoices and inventory records relating to the Products. With respect to such Products, JR shall also provide reports as requested by the Partnership concerning the following:


(i) Analysis of sales by SKU products shipped and net dollar
sales for each JR fiscal period and totals for the JR fiscal year to the
date of such report;


(ii) Monthly distribution and warehouse handling cost reports;


(iii) Such other sales performance reports as may be made
available by JR.


5. Order Transmittal and Acceptance.
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Orders for Products shall be binding upon acceptance by JR. Such acceptance shall include a description of the particular products, price, estimated date of delivery, and all other terms


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and conditions of sale. JR will accept only those orders which comply with the terms and conditions of sale including prevailing list prices and discounts, which prevailing list prices and discounts are hereby authorized and recognized by the Partnership as now effective, or which may become effective in the future.


6. Collection of Receivables and Payment to the Partnership.
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JR shall continue to maintain its present standards in invoicing Sam's for products shipped and continue to use the present procedure to collect the accounts with respect to the Products. JR shall make an estimated payment based on the formula in Exhibit C to the Partnership by the fifth working day following the end of each JR fiscal period. The amount remitted to the Partnership shall be the gross sales price less the following items:


(a) any performance allowances, Sam's spoils allowances and any New Store Allowances (collectively, the "Allowances"); for the purposes of this Section, New Stores Allowance shall be defined as a 10% discount on the first three mixed truckloads of product ordered, the first order of a new item in a club or the first mixed truckload of product ordered by a club that has relocated to a new location; or


(b) any deductions, cash discounts, distribution and warehouse handling charges and brokerage commission paid to JR (collectively, the "Deductions").


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JR will determine the actual amount due to or from the Partnership by the 15th working day following the end of each JR fiscal period. If JR owes the Partnership an amount in excess of the estimated amount, it will send a check for the balance due to the Partnership by the 15th working day following the end of each JR fiscal period accompanied by a detailed accounting of such invoice represented in such payment showing the quantity of the Products sold, a detailed accounting of Allowances and Deductions and net invoice value. If the Partnership owes JR an amount in excess of the estimated amount, all balances due to JR for such excess amounts will be deducted from the next scheduled payment. JR fiscal year is based on a calendar year and is divided into twelve (12) fiscal periods based on thirteen (13) calendar weeks per quarter. For purposes of this Agreement, JR's reporting and payment obligations as recited herein shall be on a fiscal period basis, and it is understood that any reference herein shall be on a fiscal period basis, and it is understood that any reference herein to "month" or "monthly" shall be to JR's fiscal period system.


7. Warehouse, Handling and Customer Freight.
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The Partnership shall deliver the Products, freight prepaid, to JR at JR's warehouses and shall, as has been done in the past, maintain a quantity of Products at such warehouses as shall be reasonably necessary to service the requirements of Sam's customers. JR agrees to provide, as it has in the past, adequate warehouse space to store such anticipated requirements,


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and to permit the Partnership to inspect and/or audit such inventories at reasonable times.


JR shall deduct from the monthly payment to the Partnership monthly warehouse handling costs at the rate of $0.37 per case with respect to such Products. Distribution shall be deducted from the Partnership at the actual costs for customer freight and where appropriate allocated to the Products based upon the cube of shipment. JR shall submit to the Partnership monthly written reports specifically detailing the amount of warehouse handling and distribution.


JR shall continue to take inventory counts as in the past. An inventory reconciliation report will be forwarded to the Partnership within forty-five calendar days following the end of the applicable JR fiscal quarter. JR will absorb the Partnership book value of cumulative fiscal year inventory losses in excess of 0.2% of the cumulative fiscal year Partnership book value of total customer Products shipments. Any net inventory gain for a JR fiscal year will be excluded from any calculation for reimbursement. Any payments to the Partnership for inventory losses will be made at the end of the applicable JR fiscal year.


Disputable Sam's reported inventory shortages will be handled as an adjustment on the quarterly inventory reconciliation. Disputed Sam's reported shortages are not considered to be a part of the 0.3% Sam's shipments allowed for inventory losses. Adjustments for disputed shortages will show as a credit memo on the sales recap.


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8. Rates and Charges.
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(a) The Partnership will pay JR a brokerage commission of [ ]% of the selling price of the Products, net of Allowances and cash discounts. Brokerage commissions shall be paid on every order procured, delivered or invoiced by JR, for which a sale is actually consummated, except for in the case of returns and allowances (applied proportionately against the respective invoices), the gross sales amount for the period shall be adjusted. JR shall deduct returns and allowances from payments due the Partnership in the periods in which such returns and allowances are recognized and make corresponding adjustments in commissions. For the purpose of calculating the amount of brokerage commission on gross sales, "gross sales" shall be deemed to be the gross invoice price.


(b) JR shall send the Partnership a summary report in the form attached as Exhibit C (the "Report") of Products sold monthly, including a statement of total gross sales and statements supporting the deductions reflected in the calculation of the brokerage commission due to JR for such month. Brokerage commissions shall be settled monthly and shall be deducted by JR directly from payments owed to the Partnership as a result of the monthly sales of the Products. Upon request, JR shall provide such information as reasonably necessary to enable the Partnership to verify the information contained in the Report. If the Partnership disputes the amount of JR commission, the Partnership shall notify JR of such dispute and the reasons


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therefor in writing within a reasonable period of time after receipt of JR's statement.


9. Corrugate Containers.
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(a) According to the terms of the agreement known as the "Dixie License Agreement" between JR and the Partnership dated as of the date hereof, the Partnership shall have the nonexclusive, ...