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 Xxxxx
River Paper Company, Inc., a Virginia corporation ("JR"), and WinCup Holdings,
L.P, a Delaware Limited Partnership ("Partnership").
RECITALS
X. Xxxxx River Paper Company ("Xxxxx 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.
----
(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.
-----------------
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.
------------
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
2
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.
-------------------
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.
--------------------------------
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
3
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.
--------------------------------------------------------
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").
4
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.
----------------------------------------
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,
5
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.
6
8. Rates and Charges.
-----------------
(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
7
therefor in writing within a reasonable period of time after receipt of JR's
statement.
9. Corrugate Containers.
--------------------
(a) According to the terms of the agreement known as the "Xxxxx License
Agreement" between JR and the Partnership dated as of the date hereof, the
Partnership shall have the nonexclusive, non transferable right to use certain
corrugated boxes and packaging material (as more fully described in the License
Agreement) to package drinking cups and lids manufactured by the Partnership and
distributed by JR to Sam's.
(b) The wording used on the licensed corrugated boxes and packaging
material used in the shipment of Sam's products shall be changed to read as
"Distributed by Xxxxx River" instead of "Manufactured by Xxxxx River".
10. Specifications and Standards.
----------------------------
The Partnership shall maintain the same specifications, attached hereto
as Exhibit B, for the Products as are presently provided by JR. If JR, in its
reasonable opinion, determines that the Partnership is not meeting such
standards, it shall have the right to terminate this Agreement pursuant to
Section 1(b).
11. Warranties and Liabilities.
--------------------------
After the effective date, as hereunder defined, the Partnership will
retain title to all Products stored in any JR warehouse or facility and the
Partnership will be responsible for insuring such Products against fire and such
other losses which are customarily covered by fire and extended coverage
insurance.
8
JR shall hold the Partnership harmless from any and all liability or losses
arising from the negligent storage and handling of the Product by JR.
The Partnership will indemnify and hold JR harmless from any and all
claims for product liability for the Products sold by JR. The Partnership shall
procure and maintain product liability insurance for such Products in an amount
sufficient to protect the interest of the Partnership and JR. In the event the
Partnership determines that part or all of Products fail to meet acceptable
quality standards, JR shall cooperate with the Partnership in effecting a recall
of such Products.
The Partnership warrants that all Products will comply with applicable
federal, state and local consumer protection laws and regulations, and the
Partnership and JR warrant to each other that all trade and sales practices will
comply with all laws and regulations governing such practices.
The Partnership shall pay all personal property taxes on any Products
stored in JR's warehouses or facilities assessed and payable after the effective
date.
12. Prices.
------
JR will inform the Partnership of the market climate for pricing of
Products from time to time. However, the Partnership shall be responsible for
formulating the current prices for the Products and will inform JR of the
current prices at which JR shall offer the Products for sale from time to time.
9
13. Systems.
-------
The Partnership agrees to maintain JR's systems, including SCOOP and
SAP hookups at each location from which the Products are manufactured and
shipped for Sam's. Equipment supplied by JR listed in Exhibit D will be returned
to JR at the termination of this Agreement.
14. Compliance with Laws, Ordinances, Rules and Regulations.
-------------------------------------------------------
The parties shall comply with all laws, ordinances, rules and
regulations of federal, state, municipal and other governmental authorities and
the like relating to this Agreement.
15. Assignment.
----------
No assignment by any party of its interest in this Agreement shall be
effective unless made with the prior written consent of the other party;
provided, however, that JR may assign its interest to any of its affiliates.
16. Coordination.
------------
JR and the Partnership shall cooperate in carrying out the terms and
provisions of this Agreement.
17. Notices.
-------
All notices and other communications required or permitted hereunder
shall be in writing (including telex, telefax or similar writing) and shall be
given:
10
(a) If to JR to:
Xxxxx River Paper Company, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx X. Xxxx
Telefax: (000)000-0000
with copies to:
McGuire, Woods, Battle & Xxxxxx, L.L.P.
One Xxxxx Center
000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telefax: (000) 000-0000
(b) If to the Partnership to:
Wincup Holdings, L.P.
000 Xxxxxxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxx
Telefax No.: (000) 000-0000
with a copy to:
Duane, Morris & Heckscher
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Telecopy No.: (000) 000-0000
or to such other person or to such other address or telefax number as the party
to whom notice is to be given may have furnished the other parties in writing by
like notice. If mailed, any such communication shall be deemed to have been
given on the third business day following the date on which the communication is
posted by registered or certified mail (return receipt requested). If given by
any other means it shall be deemed to have been given when delivered to the
address specified in this Section.
11
18. Force Majeure.
-------------
(a) Either party may suspend or reduce, in whole or in part, the
performance or supply of any or all of the sales services or any of its
obligations hereunder, to the extent such party is materially impeded in its
ability to provide such sales services as a result of an act of God, labor
dispute, war, fire or other casualty, riot, and act of any governmental body, or
other cause or condition beyond such party's reasonable control. Such party
shall use its reasonable best efforts to restore the suspended or reduced sales
services. Any sales services not provided by reason of this Section shall be
promptly resumed upon the elimination of the force majeure event. Such party
agrees to use all reasonable efforts to restore such reduced or suspended sales
services.
(b) During any period in which any sales services to a party are
reduced or suspended by the other pursuant to Section 19(a), such party shall
not be obligated to make payment or shall be entitled to a refund of any
payments made in advance with respect to the reduced, suspended or terminated
portion of such sales services.
19. Entire Agreement.
----------------
This Agreement constitutes the entire understanding between JR and the
Partnership, and no working arrangement, instructions or operating manuals
intended to facility the effective carrying out of this Agreement shall in any
way affect the liabilities of either party as set forth herein.
12
20. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its conflicts of law or
choice of law rules.
21. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
13
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.
WINCUP HOLDINGS, L.P.
By: [SIGNATURE APPEARS HERE]
-------------------------------------
Title: Chairman
----------------------------------
Date: January 20, 1996
-----------------------------------
XXXXX RIVER PAPER COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Title: Senior V.P., Treasurer
----------------------------------
Date: January 20, 1996
-----------------------------------
14
EXHIBIT A
PACK
SKU DESCRIPTION COUNT
Foam Cups
C6S 6 Ounce 1000
C8S 8 Ounce 1000
C12SC 12 Ounce 1000
C16SC 16 Ounce 500
C20S 20 Ounce 500
C32S 32 Ounce 500
RS9300PKS 8 Ounce 45/300
Lids for Foam Cups
L6SS For 6 Ounce Cup 500
DT8S For 8 Ounce Cup 500
DT12S For 12 Ounce Cup 500
DT16S For 16/20 Ounce Cup 500
L32SS For 32 Ounce Cup 500
EXHIBIT B
SAM'S CLUB CUP WEIGHTS
=====================
BASED ON AGED WT.
====================================================================
CUP FRESH AGED LOW HIGH TOL.
SIZE WEIGHTS WT. TOL.
(3%) WT - 5% WT + 5%
====================================================================
6C6 1.48 1.44 1.36 1.51
--------------------------------------------------------------------
8C8 1.81 1.78 1.67 1.84
--------------------------------------------------------------------
C1213 3.93 3.81 3.62 4.00
--------------------------------------------------------------------
C1618 4.58 4.44 4.22 4.66
--------------------------------------------------------------------
C2022 5.68 5.51 5.23 5.79
--------------------------------------------------------------------
C3234 7.45 7.23 6.87 7.59
--------------------------------------------------------------------
FULL MATRIX WITH TOLERANCES AS NOTATIONS
==============================================================================
CUP BRIM CAP. CUP WT. RIM DIA. O.A. HT. WALL TH.
SIZE FL. OZ. GRAMS INCHES INCHES INCHES
(+/- 1%) (=/- 5%) (+/- 0.5%)(+/- 0.5%) (+/- 1%)
==============================================================================
6C6 6.08 1.44 2.925 3.041 0.078
------------------------------------------------------------------------------
8C8 8.04 1.76 3.146 3.702 0.081
------------------------------------------------------------------------------
C1213 13.10 3.81 3.462 4.520 0.074
------------------------------------------------------------------------------
C1618 18.03 4.44 3.665 5.465 0.090
------------------------------------------------------------------------------
C2022 22.01 5.51 3.665 6.328 0.092
------------------------------------------------------------------------------
C3234 33.97 7.23 4.543 6.445 0.115
==============================================================================
EXHIBIT C
Monthly Summary Report
Gross Sales to Sam's $____________
Less:
Performance Allowances (2.5% & 2.0) ($____________)
Sam's Spoils Allowance (0.3%) ($____________)
New Store Allowance (10%) ($____________)
Returns & Allowances ($____________)
Cash Discounts ($____________)
Sales Base for Brokerage Commission $____________
Less:
Brokerage Commission (2.5% X Sales Base for Commission)
($____________)
Distribution & Warehouse Handling ($____________)
Total Payment to WinCup $____________
EXHIBIT D
Schedule of Computer Equipment
Serial
Model Number Description
----- ------ -----------
IBM VP CPU 23LPNCM6571 Desktop Personal Computer
IBM Monitor 235102G Monitor for Personal Computer
n/a n/a Keyboard, Mouse and Modem
n/a n/a Microsoft Office
n/a n/a Microsoft Windows for Workgroups
n/a n/a FTC (TCP/P)
n/a n/a SAP
n/a n/a SHIVA (Telephone Dial
Capability
Software for the Modem)
SALES AGENT EXTENSION AND MODIFICATION AGREEMENT
This SALES AGENT EXTENSION AND MODIFICATION AGREEMENT ("Agreement") is made
as of December 5, 1996 by and between WINCUP HOLDINGS, L.P., a Delaware limited
partnership (the "Partnership") and XXXXX RIVER PAPER COMPANY, INC., a Virginia
corporation ("JR").
BACKGROUND
----------
a. The Partnership, WinCup Holdings, Inc. ("WinCup"), Radnor
Holdings Corporation ("Radnor") and JR intend to enter into a
Partnership Interest Purchase Agreement pursuant to which Radnor shall
purchase the entire limited partnership interest of JR in the
Partnership, as such interest is described in the Limited Partnership
Agreement between WinCup and JR dated as of January 20, 1996.
b. The Partnership and JR are parties to that certain Sales Agent
Agreement, dated as of January 20, 1996 (the "Agent Agreement"), which
such agreement appoints JR to serve as sales agent of the Partnership
to Sam's Club, a division of Wal-Mart Stores, Inc. ("Sam's Club") and
permits the Partnership to use certain packaging materials carrying
JR's trademarks in connection with the products manufactured by the
Partnership and sold to Sam's Club.
c. JR and Xxxxx River Corporation of Virginia (collectively, the
"Licensor") and the Partnership are parties to that certain License
Agreement dated as of January 20, 1996 (the "License Agreement"), as
amended by that certain License Extension and Modification Agreement
made by and between the Partnership and JR, dated the date hereof.
d. The Partnership and JR have determined that it would be in each
of their best interests to enter into an extension and modification of
the Agent Agreement, in order to extend the term of the Agent
Agreement.
e. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agent Agreement.
NOW THEREFORE, in consideration of the agreements contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
i. Extension Period. Section 1 (a) of the Agent Agreement is deleted
----------------
in its entirety and is replaced with:
"The Term of this Agreement shall expire on January 20, 2002."
ii. Sales Agent. Pursuant and subject to the terms and conditions of
-----------
the Agent Agreement, JR shall act as sales agent for WinCup in
connection with Sam's Club during the Term, as extended by this
Agreement.
iii. Collection of Receivables and Payment to the Partnership.
--------------------------------------------------------
(1) The following is inserted as the third sentence of the first
paragraph of Section 6 of the Agent Agreement:
"All such JR payments shall be made by electronic funds transfer to the
Partnership, in accordance with the instructions attached hereto as Exhibit
E. Interest at the annual rate of twelve percent (12%) on such amounts due
to the Partnership shall accrue, and shall be payable by JR, commencing on
the sixth working day following the end of each JR fiscal period."
(2) Exhibit E to the Agent Agreement, containing the Partnership
wiring instructions, is attached hereto as Exhibit E.
iv. Assignment of Agent Agreement. The Partnership shall have the
-----------------------------
right to assign the Agent Agreement to any Affiliate of the
Partnership without the consent of Xxxxx River, provided that such
assignee assumes all of the Partnership's rights, obligations and
liabilities in connection with the Agent Agreement and this Agreement
in writing and the Partnership shall remain primarily obligated for
the performance by such assignee of all of its rights, obligations and
liabilities under the Agent Agreement and this Agreement. For purposes
of this Paragraph 3, "Affiliate" shall mean any person, corporation,
partnership, association, joint stock company, trust or unincorporated
organization which, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control
with the Partnership.
v. Effect of Amendment. Except as hereby expressly extended,
-------------------
amended and modified, all of the terms, conditions, provisions and
covenants of the Agent Agreement shall continue in full force and
effect.
Sales Agent Extension Agreement - 2
vi. Successors and Assigns. This Agreement shall bind and enure to
----------------------
the benefit of the parties to the Agent Agreement and their
respective successors and assigns.
vii. Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware,
without regard to its conflict of laws or choice of law rules.
viii. Counterparts. This Agreement may be executed in as many
------------
counterparts as may be deemed necessary or convenient, and by the
different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed an original, but all of which such
counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the day and year first above written.
XXXXX RIVER PAPER COMPANY, INC.
By: [SIGNATURE APPEARS HERE]
--------------------------------
Name:
Title:
WINCUP HOLDINGS, L.P.
By: WinCup Holdings, Inc., its general partner
By: [SIGNATURE APPEARS HERE]
---------------------------
Name:
Title:
Sales Agent Extension Agreement - 3
EXHIBIT E
WIRING INSTRUCTIONS OF WINCUP HOLDINGS, L.P.
Account Name: WinCup Holdings, L.P.
Account Number: 3750081282
Bank: Nations Bank
Dallas, Texas
ABA#: 11100012
