Contract Manufacturing and Packaging Agreement ... Leone Industries



 Exhibit 10.18 
 Confidential information redacted and filed separately with the Commission. 

Omitted portions indicated by [***] 
  

					
	



	 		  	
	 		  	LEONE INDUSTRIES
	 		  	 443 South East Avenue

Bridgeton, NJ 08302-0310
 856-455-2000
— fax 455-3491

	 		  	  
 January 12, 2007


 Mr. John Foraker 
 Chief Executive Officer 
 Homegrown Naturals, Inc. 

Vice President Production 
 564 Gateway Drive

 Napa, California 94558 
 Dear John:

 Please let this letter serve as our purchase agreement between Leone Industries (“Leone”) and Homegrown Naturals, Inc.
(“Homegrown”) for a period of approximately eighteen months beginning January 12, 2007 through June 30, 2008 and one year from July 1, 2008 until June 30, 2009 (the “Term”). 

This agreement is based upon several factors among which are: 
  

	 	•	 	 that Homegrown Naturals, Inc., their successors or assigns will purchase[***] 



[***]     as well as those items as stated below of these approximate styles and sizes from Leone Industries.

  

	 	•	 	 that these items are packed in one or half dozen RSCs as noted below with one color printing. All items are packed with fibre partitions for safety
reasons. 


  

	 	•	 	 that pricing is based upon Homegrown Naturals purchasing[***] 



[***] 
  

	 	•	 	 Homegrown Naturals may mix any shipment with any or all items as they do today. 



Currently, all glass is made domestically so there should be no issues or delays with ship sailings, customs, the Long Shoreman’s union, port
closings, strikes in other countries, currency fluctuations, available ships due to increases in shipping traffic to other regions of the world or the changes in the Department of Homeland Security’s levels of their advisory system or their
newly increased inspections of incoming containers and the associated delay and cost. 
 All orders will be direct with the manufacturing
facility without a middleman and their calling a 1-800 call center. You will maintain the same representative who has worked hard coordinating both coasts and the Potwins. 
 Our facility is inspected periodically by AIB and recently received the highest level awarded of Superior for Food Safety and Hygiene. All of our glass containers exceed California’s and
Oregon’s recycled content requirements of a minimum of 35% post-consumer waste with a recycled percentage closer to 50%. We currently also have two of the cleanest glass furnaces in the world and produce little or no NOX. 

  

			
	Confidential Information Redacted	  	Confidential Treatment Requested



  










			
	Mr. John Foraker	  	January 12, 2007

  

 Item Specifications- 

 

	 	•	 	 Eight ounce Leone designed Annie’s Naturals container- Packed necks down in a half dozen 175 lb. test or its ECT equivalent RSC with a fiber
partition, printed one color Annie’s Naturals and palletized at a minimum of 490 cases per pallet with open flaps down. 


  

	 	•	 	 Eight ounce Leone designed fluted banjo dressing- Packed necks down in an one dozen kraft 175 lb. test or its ECT equivalent RSC with a fiber
partition, printed one color contents and palletized at a minimum of 250 cases per pallet with open flaps down. 


  

	 	•	 	 Sixteen ounce Leone designed fluted banjo dressing- Packed necks down in a half dozen kraft 175 1b. test or its ECT equivalent RSC with a fiber
partition, printed one color Annie’s Naturals and palletized at a minimum of 297 cases per pallet with open flaps down. 


  

	 	•	 	 Twelve ounce marinade- Packed necks down in half dozen kraft 175 lb. test or its ECT equivalent RSC with a fiber partition, printed one color and
palletized at a minimum of 405 cases per pallet with open flaps down. 


  

	 	•	 	 Twelve ounce Leone designed BBQ- Packed necks down in one dozen kraft 175 lb. test or its ECT equivalent RSC with a fiber partition, printed one color
content and palletized at a minimum of 231 cases per pallet with open flaps down. 


  

	 	•	 	 Six and a half ounce fluted Leone design Sauce- Packed necks down in an one dozen kraft 175 lb. test or its ECT equivalent RSC with a fiber partition,
printed one color content and palletized at a minimum of 330 cases per pallet with open flaps down. 


 Production
Scheduling; Minimum Production Quantities 
 When Homegrown Naturals requires Leone to manufacture items to satisfy those of its packaging
requirements described above, Homegrown Naturals shall provide written notice to Leone, signed by an officer of Homegrown Naturals or his designee, (the “Notice”), specifying (i) the item to be manufactured, (ii) the quantity of
that item to be manufactured, (iii) a forecast of the quantity Homegrown Naturals estimates it will purchase by calendar month. In any case, Homegrown Naturals will purchase the entire quantity produced as specified not later than the maximum
Storage and Carrying Charges Term for that item or January 31, 2010 whichever is earlier. The Notice shall provide Leone a reasonable time in which to manufacture the items. 

 

			
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	Mr. John Foraker	  	January 12, 2007

  

 Prices: 
 Based upon Homegrown Naturals purchasing [***]
                                         from
Leone Industries, Homegrown will receive the following pricing: 
 Price Increases 

These FOB prices quoted below are firm for eighteen months and expire on June 30, 2008. 
 Eight Ounce 359 Leone designed Annie’s Natural’s dressing 
 FOB Price.
Delivered price estimated at today’s freight cost to your destinations as outlined below. 
  

													
	 Leone
 Item#
	  	 Description
	  	Case Pack	  	2006
Price/Gross	 	 	2007 
FOB
Price/gross	 
	 359
	  	Annie’s Naturals Leone designed 8oz.FOB Bridgeton, NJ	  		  				 	$	[***	] 
					
	 359
	  	Annie’s Naturals Leone designed 8oz. est. del. to VT	  	Half-dozen	  	$	[***	] 	 	$	[***	] 
					
	 359
	  	Annie’s Naturals Leone designed 8oz. est. del. to OR	  		  	$	[***	] 	 	$	[***	] 

 Annual purchases for this item will be or exceed: [***]         cases annually.

 Eight Ounce 402 Leone designed fluted banjo dressing 
 FOB Price. Delivered price estimated at today’s freight cost to your destinations as outlined below. 
  

													
	 Leone
 Item#
	  	 Description
	  	Case Pack	  	2006
Price/Gross	 	 	2007 FOB
Price/gross	 
	 402
	  	Leone fluted 8oz. banjo    FOB Bridgeton, NJ	  		  				 	$	[***	] 
					
	 402
	  	Leone fluted 8oz. banjo est. del. to Norwich, VT	  	One-dozen	  	$	[***	] 	 	$	[***	] 
					
	 402
	  	Leone fluted 8oz. banjo est. del. to Forest Grove,	  		  	$	[***	] 	 	$	[***	] 

 Annual purchases for this item will be or exceed [***]         cases annually.

 Twelve Ounce BBQ 

FOB Price. Delivered price estimated at today’s freight cost to your destinations as outlined below. 

 

													
	 Leone
 Item#
	  	 Description
	  	Case Pack	  	2006
Price/Gross	 	 	2007 FOB
Price/gross	 
	 285
	  	Leone 10oz    FOB Bridgeton, NJ	  		  				 	$	[***	] 
					
	 285
	  	Leone 10oz est. del. to Norwich, VT	  	One-dozen	  	$	[***	] 	 	$	[***	] 
					
	 285
	  	Leone 10oz est. del. to Forest Grove, OR	  		  	$	[***	] 	 	$	[***	] 

 Annual purchases for this item will be or exceed [***]         cases annually.

  

			
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	Mr. John Foraker	  	January 12, 2007

  

 Six and a half Ounce Leone designed Sauce* 

FOB Price. Delivered price estimated at today’s freight cost to your destinations as outlined below. 

 

															
	 Leone
Item#
	  	 Description
	  	Case Pack	 	  	2006
Price/Gross	 	 	2007 FOB
Price/gross	 
	 301
	  	 Leone 6.5oz fluted sauce     FOB Bridgeton, NJ
	  				  				 	$	[***	] 
					
	 301
	  	 Leone 6.5oz fluted sauce est. del. to Norwich, VT
	  	 	One-dozen	  	  	$	[***	] 	 	$	[***	] 
					
	 301
	  	 Leone 6.5 oz fluted sauce est. del. to Forest Grove,
	  				  	$	[***	] 	 	$	[***	] 

 Annual purchases for this item will be or exceed [***]     cases annually. *Should the volume of all
Leone customer purchases fall below an economical production level, Leone will work with Annie’s to find a suitable replacement. 

Sixteen Ounce Leone design dressing 
 FOB Price. Delivered price estimated at today’s freight cost to your destinations as outlined below. 
  

													
	 Leone
Item#
	  	 Description
	  	Case Pack	  	2006
Price/Gross	 	 	2007 FOB
Price/gross	 
	 409
	  	 Leone 16oz. design dressing         FOB Bridgeton, NJ
	  		  				 	$	[***	] 
					
	 409
	  	 Leone 16oz. design dressing est. del. to Norwich, VT
	  	 1/2 Doz.	  	$	[***	] 	 	$	[***	] 
					
	 409
	  	 Leone 16oz. design dressing est. del. to Forest Grove, OR
	  		  	$	[***	] 	 	$	[***	] 

 Annual purchases for this item will be or exceed [***]     cases annually. 

Delivery Costs and Storage 
 Prices are
quoted FOB. Delivered price mentioned is estimated at today’s freight cost to your destinations as outlined below to Blanchard and Blanchard and to Jim Lieb in Oregon in full truckloads (a minimum of [***] pallets per truckload to Vermont and a
minimum of [***] pallets to Jim Lieb. 
 [***]     Percent Rebate of Total Purchases from January 12, 2007
until June 30, 2008 
 At the end of eighteen months, or June 30, 2008, we will calculate the entire dollar purchases of Homegrown
Naturals from Leone over the course of the Term. If all terms and conditions of the agreement dated January 12, 2007 have been followed then within thirty days of that date, we will issue a credit to Homegrown for [***] percent of the total
invoiced and paid invoices. 
 Fixed Twelve Month Lowered Price for 100% Oregon Packaging 7/1/08 until 7/31/09 

If at that time, June 30, 2008, all Annie’s Naturals products are packed on the West Coast and Leone Industries is unable to
provide Homegrown a delivered per gross price for the period of July 1, 2008 until June 30, 2009 at the same price as we supplied in 2006 to Vermont of $ [***]     per gross or $[***]     per case
delivered to Portland, Oregon, then as of June 30th
2008 this agreement will end. If Leone does provide the above pricing then the agreement continues in force until June 30, 2009 If Leone must provide emergency production from our current east coast production facility after July 1, 2008,
pricing will be adjusted accordingly. 
  

			
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	Mr. John Foraker	  	January 12, 2007

  

 Releases & Freight: 
 The delivered estimated prices set forth above, as well as any prices proposed for production of less than the minimum production quantity of an item, depend on Leone receiving sufficient notice of
releases so that it can arrange delivery to Homegrown Naturals. We must ask for you to present your releases as soon as possible and at the very least[***] days before the delivery to Vermont would be scheduled or pickup for West Coast delivery. For
releases presented after these cutoffs, Leone will make every reasonable efforts to arrange delivery at the best price obtainable but may invoice for any charges (including detention charges, if any occur. Homegrown Naturals agrees to pay such
freight charges. 
 Wooden Pallets: 
 All items are shipped on standard GMA four way 40x48 wooden pallets which are billed at $[***] each (due within[***]days) and are non-returnable. Leone Industries reserves the right to review and/or
revise the pallet pricing if their cost of wooden pallets increases during the term of this agreement. 
 Energy Surcharge 

An energy surcharge will continue to be in effect during the period of this agreement. The energy surcharge will track the[***]
                                        
[***]                    . On the 15th day of each month the twelve month average or “1-Year” price will be used to calculate the energy
surcharge that will go into effect on the following 1st day of the next month. 
 Exclusive Requirements; Right of First Refusal

 During the Term of this Agreement Homegrown Naturals shall purchase exclusively from Leone its total requirements of glass containers,
including but not limited to those listed above, except that: 
  

	•	 	 If Homegrown Naturals has glass packaging requirements other than those items described above, then Homegrown Naturals shall afford Leone the right of
first refusal to provide such requirements and may fill those requirements from another source only if: (a) Homegrown Naturals has submitted exclusively to Leone a written request for a proposal, specifying all information reasonably necessary
to determining the pertinent glass packaging requirement, (b) Leone has declined to submit a proposal within[***]days from Leone’s receipt of a written request for proposal, and (c) Homegrown Naturals has thereafter received a written
proposal from another source which has been presented to Leone and an officer of Leone has declined to match the terms of the written proposal within[***]days from presentation to Leone. 



 

	•	 	 Within [***] days before the end of the Term Homegrown Naturals shall submit to Leone a written request for a proposal to fulfill Homegrown
Natural’s requirements of these containers for a term (the “Renewal Term”) of no less than one year from the date this Agreement expires. That proposal shall specify all information reasonably necessary to determining the pertinent
glass packaging requirement for the Renewal Term. Homegrown Naturals may fill its requirements for these containers during the Renewal Term from a source other than Leone only if (a) Leone has declined to submit a proposal within[***]days from
Leone’s receipt of a written request for proposal, or (b) Homegrown Naturals has thereafter received a written proposal from another source which has been presented to Leone and an officer of Leone has declined to match the terms of the
written proposal within[***]days from presentation to Leone. 


  

			
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	Mr. John Foraker	  	January 12, 2007

  

 Refrigerated Dressing 
 We have begun work with Annie on the design of the new refrigerated dressing line. If the time frame, Annie is telling us is correct then we need to move quickly. 

Mould Amortization 
 A set of mould
equipment costs, as you may know, between $[***]     and $[***]     . For this reason, we require that a customer for whom we build a new item purchase a minimum quantity of that item within the contract
period. If a customer purchases at least that minimum quantity within the specified period, then we consider the mould commitment fully satisfied and the customer incurs no expense other than the quoted price of the glass. If a customer’s
purchases do not meet the minimum, however, we require the customer to reimburse us for the unamortized mould cost at the rate of: 
  

							
		  				  	[***]
	[***]	  	 	X	  	  	
	  
	  				  	
	[***]	  				  	

 Terms 

Our terms of payment are net [***] days from the invoice date in U.S. dollars. Payments received within ten days of invoice date earn a one percent
discount on that portion of the invoice amount which represents glass, F.O.B. Bridgeton, New Jersey and not including pallet charges. We will charge interest at [***] percent per month on all amounts outstanding for more than
[***]     days, including the billed amount ($[***] each) for pallets. If a customer’s account discloses amounts of any sort outstanding for more than[***]         days we will not
release glass to that customer until payment is received for all amounts outstanding for[***]     or more days. 
  

			
	Sincerely,	 	
		
	/s/ David J. Leone	 	 /s/ John Foraker

	 David J. Leone
 Leone
Industries
	 	 Mr John Foraker
 Homegrown
Naturals, Inc.

		
	DJL/sj	 	

  

			
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