Re: Does this sound Honest/legal to you?
You've run into something very standard and common. The sales rep gets to someone near the top, works a deal as a preferred vendor. Incentives are provided at that level and above. Managers then have to use these preferred vendors, often at a detriment to their P&L, assigned goals and or budgets, without the advantage of the incentives.
Usually, it eventually backfires on the sales rep. The lower level managers make their displeasure known, they point out every single problem and flaw, sometimes they even work to sabotage the relationship.
Make enough noise and it will eventually go away.