Exhibit 10.1
 
Execution Copy

MASTER INNOVATION AND SUPPLY AGREEMENT
 

between
 

THE HERSHEY COMPANY
 
 
and
 
 
BARRY CALLEBAUT, AG
 
 
 
 

_____________________________
 
Dated this 13th day of July, 2007
_____________________________

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

 
TABLE OF CONTENTS

   
Page
     
1.
DEFINITIONS
1
     
2.
SUPPLY AGREEMENTS
2
     
3.
STEERING COMMITTEE
13
     
4.
STANDARDS FOR PERFORMANCE
13
     
5.
NON-COMPETE AGREEMENT
14
     
6.
NON-SOLICITATION
14
     
7.
CONFIDENTIALITY
14
     
8.
TERM
17
     
9.
TERMINATION
17
     
10.
INDEPENDENT CONTRACTORS
18
     
11.
REPRESENTATIONS AND WARRANTIES
18
     
12.
INDEMNIFICATION
19
     
13.
FORCE MAJEURE
20
     
14.
NOTICE
20
     
15.
NO WAIVER
21
     
16.
ASSIGNMENTS
21
     
17.
GOVERNING LAW
21
     
18.
REAL ESTATE AGREEMENTS
21
     
19.
ENTIRE AGREEMENT AND HEADINGS
21
     
20.
CONFLICTING TERMS
21
     
21.
PREPRINTED TERMS
22
     
22.
BINDING EFFECT
22

 

i

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

EXHIBITS
 
Exhibit A:          Hershey Specifications
 
Exhibit B:          Form of Open Book Costing Data
 
Exhibit C:          Insurance
 
Exhibit D:          Competitors
 
Exhibit E:          Product Guaranty and Indemnity

Exhibit F:          Global Volume Increment Examples

ii

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

MASTER INNOVATION AND SUPPLY AGREEMENT

MASTER INNOVATION AND SUPPLY AGREEMENT (this “Agreement”) is entered into this
13th day of July, 2007.
 
 
BETWEEN:
 
THE HERSHEY COMPANY, a corporation organized and existing under the laws of the
State of Delaware, with a principal place of business at 100 Crystal A Drive,
Hershey, Pennsylvania 17033 (hereinafter individually referred to as "Hershey"
or a “Party”),
 
and
 
BARRY CALLEBAUT, AG, a corporation organized and existing under the laws of
Switzerland, with a principal place of business at Westpark Pfingstweidstrasse
60, 8500 Zurich, Switzerland (hereinafter individually referred to as
“Callebaut” or a “Party”).
 
Hershey and Callebaut may collectively be referred to herein as the “Parties”.
 
 
BACKGROUND:
 
Hershey and Callebaut are manufacturers of chocolate and confectionery products
and have experience in the design, development, manufacture and marketing of
such products.  Simultaneous with the signing of this Agreement, Hershey and
Callebaut have entered into a Product Development and Innovation Agreement
(together with any exhibits thereto, the “Innovation Agreement”) under which
Hershey will utilize Callebaut’s product development, innovation and
manufacturing expertise and Hershey and Callebaut will collaborate on joint
development of new technologies and products. Hershey and Callebaut now wish to
enter into this Agreement and the related Supply Agreements, pursuant to which
Callebaut will manufacture certain products and ingredients for Hershey.
 
 
1.
DEFINITIONS

 
In addition to the terms defined elsewhere in this Agreement, whenever used in
this Agreement the following terms shall have the respective meanings set out
below:
 
“Affiliate” means a wholly owned subsidiary of a Party.
 
“Bulk Chocolate Product” means chocolate in solid and/or liquid form, including
chocolate chips and chocolate chunks in any form.
 
“Cocoa Ingredient” means cocoa liquor, cocoa butter and/or cocoa powder.
 
“Finished Consumer Chocolate Confectionery Product” means any product in any
form that does not require further processing prior to retail sale to a
consumer.
 
“Global Supply Agreement” means the Supply Agreement of even date herewith for
Products sourced between the Parties other than those Products sourced under the
Supply Agreement for Mexico, the Supply Agreement for Robinson or a Subsequent
Supply Agreement, together with any exhibits thereto.
 
“Hershey Specifications” means the product specifications, technical procedures
and quality requirements provided from time to time by Hershey.
 

1

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

“Losses” means damages, losses, liabilities, obligations and claims of any kind
(including, without limitations, reasonable attorney’s fees and expenses).
 
“North America” means the United States, Canada, Mexico, Puerto Rico and the
U.S. Virgin Islands.
 
“Products” means any and all products defined as such in a Supply Agreement.
 
 “Real Estate Agreements” means the Lease Agreement for the Monterrey, Mexico
land and the Lease Agreement for the Robinson, Illinois premises, together in
each instance with any exhibits thereto.
 
“Related Agreements” mean, collectively, each Supply Agreement, the Real Estate
Agreements and the Innovation Agreement.
 
“Subsequent Supply Agreement” means any separate supply agreement entered into
by the Parties or Affiliates thereof subsequent to the date of this Agreement
and designated as such therein.
 
“Supply Agreement” means any of the Supply Agreement for Mexico, the Supply
Agreement for Robinson, the Global Supply Agreement or any subsequent Supply
Agreement.
 
“Supply Agreement for Mexico” means the Supply Agreement for chocolate products
to be produced in Monterrey, Mexico, together with any exhibits thereto, of even
date herewith.
 
“Supply Agreement for Robinson” means the Supply Agreement for chocolate
products to be produced in Robinson, Illinois, together with any exhibits
thereto, of even date herewith.
 
 
2.
SUPPLY AGREEMENTS

 
Simultaneous with the signing of this Agreement the Parties will execute each of
the Supply Agreements.  The Supply Agreements provide that Callebaut will,
through the use of its own technical information and equipment, and through the
use of certain technical information provided by Hershey, manufacture, package
and deliver the Products defined therein to Hershey in exchange for the
consideration referenced in the respective Supply Agreement. The following terms
and conditions shall apply to each of the Supply Agreements:
 
 
A.         Production of Products
 
1.         Callebaut will produce, package and deliver Products for Hershey in
accordance with the Hershey Specifications.  The Hershey Specifications are
attached hereto as Exhibit A.  Callebaut agrees to abide by Hershey’s Supplier
Code of Conduct. Callebaut acknowledges that the Hershey Specifications may be
revised upon prior written notice by Hershey, in its sole discretion, at any
time during the term of this Agreement.  In the event that revisions to the
Hershey Specifications result in a change in cost to Callebaut, including a
change in cost due to any required capital addition or expenditure on the part
of Callebaut, following good-faith negotiations between the Parties, the amount
paid to Callebaut under the applicable Supply Agreement will be adjusted to
reflect the new cost.  If such revisions render unmarketable any of the Products
or inventories of ingredients or packaging materials, Hershey shall purchase, up
to the quantity authorized in accordance with the provisions of Section 2(B)(2),
all such items from Callebaut at Callebaut's cost or other agreed upon price.
 
2

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

 
2.         Callebaut agrees to pay for any and all capital required to
manufacture the Products unless specified otherwise in this Agreement or in a
Supply Agreement.
 
 
B.         Operations Planning
 
The Parties agree to plan the production under each Supply Agreement in
accordance with the following principles:
 
1.         On October 1 of each year during the term of each Supply Agreement,
Hershey will provide to Callebaut an estimate of the twelve (12) month demand
for the upcoming calendar year (January to December) by Product (the “Annual
Estimate”).
 
2.         Thirty (30) days before each calendar quarter during the term of each
Supply Agreement Hershey will provide Callebaut with a scheduling agreement
which will be used to track product shipments and subsequent invoices (the
“Scheduling Agreement”).  This Scheduling Agreement will provide a more current
estimate of Product demand for the upcoming quarter at the Product level and
will identify Product cost in accordance with the terms of the applicable Supply
Agreement.  It is understood by the Parties that when production is terminated,
and possibly during the term of this Agreement, some materials will either
become obsolete due to changes in the Hershey's Specifications or there will be
extra material due to incorrect forecasting.  While Hershey will be financially
responsible for these obsolete and/or extra materials:
 
 
a)
Callebaut shall use all prudent means to minimize the financial impact to
Hershey of these material losses, and

 
 
b)
under no circumstances will Hershey be responsible under the provisions of this
section for ingredients and packaging materials which, when ordered by
Callebaut, represented more than a three (3) month supply (based on the then
current production plan) of the item in question (except with regard to
production of promotion or “one time” products which will be mutually agreed
to), and

 
 
c)
notwithstanding (b) above, Callebaut may enter into supply contracts for a
period of longer than three (3) months with the prior written approval from
Hershey.

 
3.         Each week during the term of this Agreement Hershey will provide
Callebaut a shipment plan by facility for the Products showing estimated
required shipments of Products on a twelve (12) week rolling basis (the
“Shipment Plan”).  Additionally, for Monterrey and Robinson Hershey  will
further identify the first two weeks of the Shipment Plan into daily shipments,
inclusive of Saturdays, Sundays and non-business days if Hershey requires
shipments on such days.
 
4.         Except as set forth in the volume and pricing provisions of Section
2(B)(7)  and any obligation that exists under Section 2(B)(2) above  with
respect to the Supply Agreement for Mexico and the Supply Agreement for Robinson
Hershey shall be obligated to purchase from Callebaut only the three day
production reflected in the relevant Shipment Plan for the day after such
Shipment Plan was received and the next two days, and with respect to the Global
Supply Agreement Hershey shall be obligated to purchase from Callebaut only the
first two-weeks’ production reflected in the then-current Shipment Plan.

3

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

5.         Designated representatives within the plants will plan the shipments
outlined in an applicable Shipment Plan on a daily and/or shift basis.
 
6.         Callebaut will supply all of Hershey’s actual demands. In the event
Hershey’s daily production demand exceeds Callebaut’s daily capacity, Callebaut
will make the Product that exceeded its capacity on the next available
production run. Callebaut will undertake commercially reasonable efforts to
ensure that commitments to third party customers do not limit or interfere with
any production for Hershey, provided, however, that nothing contained in this
Agreement or any Supply Agreement shall be interpreted as requiring Callebaut to
cancel service commitments to third-party customers as a result of any error or
omission in a Scheduling Agreement or Shipment Plan.  For planning purposes in
the Monterrey facility, Callebaut will provide Hershey with information
pertaining to the facility’s estimated daily production capacity no later than
May 1, 2008.
 
7.         In the event that Hershey’s actual order volume of Products in any
given calendar year under the applicable Supply Agreement is less than the
amounts set forth on Exhibit F from Callebaut’s Monterrey facility and
Callebaut’s Robinson facility, respectively, and provided the shortfall is not
due to Callebaut’s action or inaction,  the consequences shall be limited to:
 
 
a)
The continued application of the cost tiers in the Conversion Cost Grids of the
respective Supply Agreements as may be adjusted in accordance with the Global
Volume Increment set forth below; and

 
 
b)
With respect to Callebaut’s Monterrey facility, Callebaut may exercise the Put
Option set forth in the Supply Agreement for Mexico.

 
 
8.
Global Volume Increment

 
 
a)
To potentially reduce or eliminate the incremental absorption charge resulting
from the application of the cost tiers where the respective annual purchase
volumes are below the Base Tiers, volume shortfalls in products sourced from
Callebaut’s Monterrey facility and from Callebaut’s Robinson facility may be
offset by other volume sourced by Hershey from Callebaut as set forth in this
Section.

 
 
b)
Reference is made to the Base Tier volume ranges set forth in the Conversion
Cost Grids of the Supply Agreements:

 
 
i.
The Base Tier volume range for the Supply Agreement for Mexico is the amount set
forth in Exhibit F.

 
 
ii.
The Base Tier volume range for the Supply Agreement for Robinson is the amount
set forth in Exhibit F.

 
 
iii.
The Global Supply Agreement does not include a Base Tier Volume range.  Solely
for the purposes of this Section, the Base Tier volume range for the Global
Supply Agreement shall be the amount set forth in Exhibit F.

 
 
iv.
As per Section (2)(B)(1), Hershey’s shall deliver to Callebaut the Annual
Estimate for the following calendar year detailing production requirements for
each of Callebaut’s Monterrey facility

 

4

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

 
 
and Callebaut’s Robinson facility, production requirements under the Global
Supply Agreement and production requirements for any Subsequent Supply
Agreement.  The sum of these Annual Estimates shall be collectively referred to
as the Global Volume Estimate.  For purposes of clarity, volumes to be included
in the Global Volume Estimate shall include all volumes sourced by Hershey from
any Callebaut facility, including all chocolate bulk products, all chocolate
fillings to be used in a Callebaut, Hershey facility or co-manufacturer
facility, all chocolate chips and chocolate eggs production, and all new
products sourced from Callebaut by Hershey, but shall not include Cocoa
Ingredients.

 
 
c)
The Global Volume Increment shall be calculated as:

 
66% x [the sum of the amount by which the Annual Estimates exceed the Base
Tiers, plus the Estimated Subsequent Supply Agreement Volume]
 
 
i.
Where the resulting Global Volume Increment is a number greater than zero, it
shall be first added to the Annual Estimate for Callebaut’s Monterrey facility
in an amount necessary to reach the amount set forth in Exhibit F (which is the
lowest volume of the Base Tier range) to determine the cost tier to be used for
the January – December conversion cost to be determined in accordance with
Section (2)(D).  After deducting any amount applied to determine the cost tier
for product sourced from Callebaut’s Monterrey facility, any remaining Global
Volume Increment may be similarly applied to determine the cost tier for
Callebaut’s Robinson facility.  In no instance shall the Global Volume Increment
result in conversion costs lower than that reflected in the Base Tier of the
Conversion Cost Grids.

 
 
ii.
With respect to the application of the Global Volume Increment, each calendar
year must be viewed on a stand-alone basis.  Volume from one calendar year may
not be applied to any preceding or succeeding calendar year.

 
 
iii.
The calculation of the Global Volume Increment shall commence with the calendar
year starting on January 1, 2009.

 
 
iv.
Annually at each November Steering Committee Meeting, the Parties will review
actual annual purchase volumes as compared to the Annual Estimate used to
calculate the Global Volume Increment and to establish the cost tiers used in
the January – December conversion costs.  If such actual annual purchase volumes
indicates that a different cost tier should have been used for the then current
calendar year, the Parties shall calculate and agree upon any necessary year-end
adjustment to be applied to all volume for the full calendar year and apply such
year-end adjustment as per Section (2)(D)(2)(b).

 

5

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

 
v.
Examples of the calculation of the global increment methodology are attached as
part of Exhibit F.

 
 
 
C.
Contingency and Business Interruption

 
If during the term of a Supply Agreement, through no fault of Hershey, Callebaut
is delayed or unable to deliver Products in accordance with the terms of this
Agreement or any Supply Agreement, other than as a result of a force majeure
event, then in addition to any other remedies available to Hershey, Callebaut
will, at Hershey’s option, either reimburse Hershey for incremental costs it
incurs in obtaining alternate supplies of Products or Callebaut will supply
Products from its facilities at the same delivered cost as specified in the
current applicable Scheduling Agreement.  Products can only be sourced in a form
and/or from a country which allows Hershey’s country of origin labeling to
remain correct, and which does not subject the finished goods Hershey makes with
the Products to additional duties or taxes upon export, unless Callebaut
reimburses Hershey for any such additional duties or taxes.
 
 
D.         Product Costing and Procurement
 
1.         Hershey shall reimburse Callebaut for the ingredients and packaging
materials used to produce Products, at costs to be established in accordance
with the provisions of Section 2(D)(2), shall pay Callebaut a conversion cost
specified in the Pricing Grid of the applicable Supply Agreement (which
conversion cost shall include Callebaut's cost of labor, overhead and profit
and, where applicable, the incremental absorption charge), and shall pay
Callebaut’s agreed upon working capital financing costs.  Product costs will be
developed and communicated with full detail to include at minimum ingredient
component costs and yields, packaging component costs and yields and conversion
costs.  Product costs will be established no later than December 31 for the
following full calendar year (January to December), subject to the provisions of
Section 2(D)(4).
 
2.         Hershey and Callebaut agree to establish Product costs as follows:
 
 
a)
As part of the August Steering Committee meeting, Hershey and Callebaut will
review the estimated volumes of ingredients and components which will be
required to produce Hershey’s estimated demand of Products for the upcoming
calendar year. The Parties will discuss the method by which ingredients and
packaging components will be purchased.  The Parties agree that at Hershey’s
option one of the following methods will be used to procure each component:

 
 
i)
Hershey sells the ingredient or component directly to Callebaut;

 
 
ii)
Callebaut places orders or releases for ingredients or components with Hershey’s
suppliers under Hershey’s contracts; provided however, that any supplier must be
approved by Callebaut, such approval not to be unreasonably withheld; or

 
 
iii)
Callebaut purchases directly from its suppliers (which are approved by Hershey).

 
 
Any ingredients or components sourced pursuant to clause (i) or (ii) shall be
referred to herein as “Hershey Raw Materials”, and any ingredients or

 

6

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

 
components sourced pursuant to clause (iii) shall be referred to herein as
“Callebaut Raw Materials”.  With regard to any ingredients or components sourced
pursuant to clause (i), Hershey shall be liable to Callebaut for the quality and
suitability of use of such ingredients or components, unless quality or
suitability fails due to the action or inaction of Callebaut.   At any time
during production Hershey may require Callebaut to change one or more of the
methods of procurement that have been selected, subject to fulfillment of any
pre-existing commitments Callebaut may have made to suppliers, provided,
however, that such commitments, other than with respect to any ingredients or
components sourced pursuant to clause (i), do not exceed the amount authorized
to be purchased under Section 2(B)(2).

 
 
b)
During the November Steering Committee meeting, Hershey will provide Callebaut
with the costs for Hershey Raw Materials and Callebaut will present Hershey with
the proposed costs for the Callebaut Raw Materials, inclusive of any carry or
forward cover costs necessary to establish yearlong pricing, for each Product.
Callebaut will also provide substantiation and documentation showing current
costs and the methodology Callebaut used to calculate the proposed annual cost
for each Callebaut Raw Material and the then current estimate of any year-end
adjustments, as provided for under the Supply Agreements, including adjustments
resulting from the application of the fineness grid and from tiered pricing
based on actual calendar year volume.  In the event the Parties cannot agree on
a cost for a Callebaut Raw Material, Hershey shall have the right to purchase
this component itself and sell it to Callebaut or to require that Callebaut
purchase it under one of Hershey’s established contracts with a supplier. If the
Parties reach an agreement on the annual cost for Callebaut Raw Materials,
Callebaut will use that cost in its calculation of Product costing to Hershey
for the next calendar year period.  In addition, nothing in this Agreement or
any Related Agreement shall be construed as allowing Hershey access to
Callebaut’s financial records, including, but not limited to, operating costs
and suppliers’ invoices.  Callebaut will provide open-book costing data for the
Products in form substantially similar to that shown on Exhibit B.

 
3.         During November of each year hereunder Callebaut will have entered
all agreed upon input costs and variables into the product pricing model and
will provide Hershey with costs for each Product by appropriate unit of measure
(case, pound, other).
 
4.         Product costs will be calculated in accordance with this Agreement
for a period of one year (January – December).  These costs will be used in the
Scheduling Agreements and will be subject to change only at the start of each
calendar year, except in the case of an event of Force Majeure or for
exceptional inflationary events in areas such as energy costs or currency
rates.  The Parties agree to jointly work towards minimizing the impact of any
such fluctuations.
 
5.         Should Product(s) be added throughout the year, Hershey and Callebaut
will create Product costs by unit of measure following the above methodology (to
include all
 

7

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

            ingredients, packaging, conversion costs and
yields/waste/overweight) 30 days before the first production.
 
6.         In the event that a change in Hershey Specifications results in an
increase or decrease in actual conversion costs, Hershey and Callebaut will
review documented changes and negotiate a new conversion cost that reflects such
change which will take effect from the date of the change.
 
7.         All Callebaut orders under Hershey supply contracts will be reported
to Hershey in a manner established by Hershey and Callebaut.
 
8.         Product costs will include a financing fee on the Callebaut Raw
Materials, the conversion fee charged by Callebaut and the incremental
absorption charge where applicable.  For purposes of the financing fee, cocoa
based products involving forward contracts shall be considered Callebaut Raw
Materials.  The agreed to financing fee for the subsequent calendar year will be
fixed at each November Steering Committee Meeting and will reflect Callebaut’s
estimated cost of  borrowing.
 
9.         Hershey and Callebaut will each designate one contact for all pricing
questions and other operating issues arising under this agreement or any Supply
Agreement.
 
 
E.         Product Yields
 
1.         Each Supply Agreement will set forth a waste, loss, and/or overweight
allowance for each ingredient and packaging component used to produce a Product
(the “Established Yields”). Callebaut shall be responsible for all additional
ingredients and packaging components required as a result of Callebaut’s failure
to comply with Established Yields.
 
2.         Hershey and Callebaut will review any issues with Established Yields
where applicable.  Should Hershey and Callebaut agree to adjust the Established
Yield, the new Established Yield will apply for the following year’s production
(January-December).  Any adjustment will not be retroactive, except as otherwise
mutually agreed to by the Parties.
 
 
F.         Currency
 
1.         Unless otherwise agreed by the Parties, Hershey will pay for Products
produced under the Monterrey and Robinson Supply Agreements in United States
Dollars.  Any reference to “Dollars” or “$” in this Agreement or any Related
Agreement shall be a reference to United States Dollars.
 
2.         For all other production Hershey and Callebaut will agree to the
payment currency and exchange rates at minimum thirty (30) days before such
production under the Global Supply Agreement or a Subsequent Agreement begins.
 
3.         Any and all currency and exchange rate agreements will be reviewed
annually by the Parties.
 
4.         Callebaut and Hershey will agree on currency exchange rates for use
in calendar year pricing for those Callebaut Raw Materials that involve
currencies other than the currency used to invoice Hershey for
Products.  Callebaut shall be responsible for any variances in such currency
exchange rates as part of the calendar year pricing, except for cases of
 
8

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

 
exceptional inflationary events that may affect calendar year pricing.  The
Parties agree to jointly work towards minimizing the impact of any such
exceptional inflationary events.
 
 
G.         Payments for Products
 
1.         Callebaut shall issue its invoice for Products produced in accordance
with this Agreement at the time such Products are shipped or delivered to
Hershey in accordance with the delivery terms.  Hershey shall pay any amount due
under this Agreement following receipt of Callebaut's invoice on terms of net
twenty-three (23) days from date of receipt of invoice plus a seven day grace
period to enable weekly grouping of payments, except in the case of a good faith
dispute.
 
2.         To ensure prompt payment of all invoices, Callebaut shall include on
each invoice the information requested by Hershey in a form agreed in advance.
 
3.         Invoices shall be electronically submitted. The date of receipt of
electronic invoices will be the date following the date upon which it is
transmitted.
 
4.         All payments shall be electronically transferred to the designated
bank account of the Party to which such payments are due.
 
5.         A Party may only set off amounts it is owed by the other Party if
permitted by applicable law and against amounts it owes the other Party in the
event the Party seeking to offset payments has a credible concern about the
other Party’s creditworthiness.
 
 
H.         Productivity
 
1.         Hershey and Callebaut recognize the need to provide the highest
quality product at the lowest possible cost.  To accomplish this objective,
Hershey and Callebaut agree to cooperate in a continuing effort to improve the
productivity of all operations.
 
2.         These productivity efforts should target but are not limited to, (i)
improved yields for packaging and ingredient utilization; (ii) optimization of
output in all phases of the production process; (iii) obtaining the lowest
possible cost per unit on packaging and ingredients; (iv) labor reductions
through effective utilization; (v) reduction of overweights; and (vi)
minimization of sampling/testing of the Products.
 
3.         It is recognized that Callebaut’s ability to share conversion cost
productivity for its Robinson and Monterrey facilities will be dependent on
Callebaut’s ability to fill available capacity with third party volume. Hershey
and Callebaut agree to share in all productivity improvements related to
production output, labor reductions, etc.  Notwithstanding the above, Hershey
shall receive 100% of all cost improvements resulting from reductions in unit
costs for ingredients and packaging, minimization of all sampling/testing, as
well as savings from Hershey funded capital investments of the Products, except
where such Hershey funded capital investments improve the overall efficiency of
the Callebaut facility whereby Callebaut third-party volume may also benefit
from such investments.  Hershey's share of the resulting productivity efforts
shall be in the form of conversion cost reductions or Established Yield
improvements.
 
 
I.         Supply of Ingredients and Packaging
 

9

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

                            1.        For Callebaut Raw Materials, Callebaut
will issue its purchase orders directly with suppliers, and will honor all
payment terms of the suppliers on a timely basis, except in the case of a good
faith dispute. Callebaut will use only suppliers that have been previously
approved in writing by Hershey for the Products.  Hershey shall in no way be a
party to or responsible for Callebaut’s contracts for Callebaut Raw Materials.
 
2.         For Hershey Raw Materials, Hershey shall, at its option, either
invoice Callebaut or direct the supplier to invoice Callebaut directly, and
Callebaut shall pay any amount due Hershey hereunder following receipt of
Hershey’s invoice on terms of net twenty-three (23) days from date of receipt of
invoice plus a seven day grace period to enable weekly groupings of payments or
shall pay within the supplier’s stated terms, except, in each instance, in the
case of a good faith dispute.
 
3.         With Hershey’s prior approval, such approval not to be unreasonably
withheld, Callebaut may source ingredients and packaging from other Callebaut
divisions at prevailing market rates.  The Parties recognize that Hershey has
existing contractual obligations for the procurement of Cocoa Ingredients at the
date of this Agreement.  Upon the expiration of these contractual commitments,
Hershey will source Cocoa Ingredients from Callebaut for the Robinson Facility
as long as Callebaut meets Hershey’s product specifications, quality
requirements, time requirements, commercial cost assumptions, capacity and
volume requirements, and geographic need.  Hershey will source Cocoa Ingredients
from Callebaut for the Monterrey facility from the start of production as long
as Callebaut meets Hershey’s product specifications, quality requirements, time
requirements, commercial cost assumptions, capacity and volume requirements, and
geographic need.
 
4.         Where commercially reasonable, the Hershey Raw Materials volumes
shall only be used in the Products and Callebaut agrees not to use Hershey Raw
Materials volumes in any other product it may produce.  Should it not be
commercially reasonable to ensure that Hershey Raw Materials are used solely in
the Products (e.g. due to common silos, manufacturing processes, etc.), Hershey
shall nonetheless receive the benefit of use of raw materials of equal quality
and specification in the manufacture of the Products and in pricing on invoices
received from Callebaut.
 
5.         Callebaut shall inspect and sample all Hershey Raw Materials and
Callebaut Raw Materials for conformance with Hershey's Specifications and shall
reject and withhold from use in the manufacture of the Products any Hershey Raw
Materials or Callebaut Raw Materials determined by Callebaut not to be in
conformity with such Hershey Specifications.  Callebaut will maintain available
line capacity and inventories of ingredients and packaging materials in
sufficient amounts to support the production requirements of the Products set
forth on the Shipment Plan issued by Hershey to Callebaut. Callebaut
acknowledges that certain ingredients used in the products have a limited shelf
life.  Callebaut agrees to utilize the ingredients in such a manner as to
utilize first those ingredients which have been in inventory the longest.
 
 
J.         Quality Assurance
 
1.         Without limiting its warranties herein, Callebaut shall manufacture
the Products and perform the sampling and testing procedures for the Products in
accordance with the Hershey Specifications.
 
10

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

 
2.         All Products delivered by Callebaut to Hershey under the terms of
this Agreement shall conform to the Hershey Specifications, applicable laws and
regulations of the United States Food and Drug Administration, the United States
Public Health Service, Mexico’s Ministry of Health, Canadian Regulatory Agency
Requirements, and any and all other applicable United States, Canadian and
Mexican federal, state and local laws and regulations.  All water used in
connection with the Products, whether it be for processing or cleaning, shall
meet the United States Environmental Protection Agency and applicable Canadian
and Mexican safe drinking water standards.  All required testing will be done at
Callebaut's expense, which expense shall be included as part of the conversion
fee charged by Callebaut, however, Hershey shall reimburse Callebaut separate
and apart from the conversion cost for all third-party testing expense, if any,
incurred by Callebaut between the date of this Agreement and December 31, 2007
while the Parties work towards the certification of the Callebaut-owned
labs.  Should such certification be delayed beyond December 31, 2007 due to the
action or inaction of Hershey, the final reimbursement date will be extended
until such date as the Callebaut-owned labs are so certified.  Should, however,
such certification be delayed because of Callebaut failing to provide Hershey
with necessary information or Callebaut’s failure to implement remedial actions,
if any, validly identified by Hershey, Callebaut will be responsible for any
third-party testing expense incurred after December 31, 2007.  Should Hershey
change the Hershey Specifications at any time during the term of this Agreement,
the Parties will negotiate in good faith any required adjustment to conversion
costs.
 
3.         Callebaut warrants that (i) it will perform under this Agreement in
accordance with all the terms hereof, (ii) that its processing of the Products
hereunder shall be in accordance with the highest standards prescribed by the
Good Manufacturing Practices regulations promulgated by the United States Food
and Drug Administration, all applicable United States, Canadian and Mexican laws
and regulations and Hershey's Specifications, and (iii) that all Products, when
delivered to Hershey, will comply with Hershey’s Specifications, shall not be
adulterated or misbranded within the meaning of the United States Federal Food,
Drug and Cosmetic Act (the “Act”), applicable Canadian and Mexican law, and
regulations promulgated thereunder, and shall not be articles which may not,
under the provisions of Section 404 or 505 of the Act, be introduced into
interstate commerce.
 
4.         Callebaut shall reimburse Hershey for any costs or losses incurred by
Hershey as a result of any Product rejected by Hershey for failure to conform to
the requirements of this Agreement.  Callebaut's obligation under the prior
sentence shall include reimbursing Hershey for all reasonable cleaning,
transportation, retrieval, storage and destruction costs caused by the defective
Product.  The above remedies are not exclusive and, subject to the provisions of
Section 10(F), Hershey shall be entitled to all remedies hereunder and allowed
by law.  Callebaut shall not be required to remedy any defects or discrepancies
caused substantially by inherent defects in Hershey's Specifications.  All major
incidents shall be reported to the Steering Committee at the quarterly meeting
following the incident.
 
11

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

 
5.         Callebaut shall remove any Product rejected by Hershey or not
otherwise meeting the requirements of this Agreement in accordance with
Hershey's reasonable instructions.  Rejected Product sourced under any Supply
Agreement that has already been packaged by Hershey into finished product shall
be disposed of in accordance with Hershey’s reasonable instructions.  The method
of disposition of rejected Products sourced under either the Mexico Supply
Agreement or the Robinson Supply Agreement that has not already been packaged by
Hershey into finished product shall be at Callebaut’s discretion.  With
Hershey’s prior approval, and provided that Callebaut can meet Hershey
Specifications and in compliance with applicable laws and regulations, rejected
Products may be blended into future Products sold to Hershey.  Callebaut may
also blend any such rejected Product into any other products for third-party
volume at a rate of 5%, or such greater rate as may be approved by
Hershey.   Callebaut will be responsible for the cost of normal disposal of
Product rejected for failure to satisfy the requirements of this Agreement.
 
6.         Upon reasonable notice, and during Callebaut's normal operations,
Callebaut shall permit Hershey or its designees access to Callebaut's facilities
utilized in the receiving, handling, packaging and storage of packaging,
ingredients and Products for the purpose of ascertaining Callebaut's compliance
with Good Manufacturing Practices and Hershey Specifications and quality
assurance requirements, provided however, that unless permitted under another
agreement between the Parties, Hershey shall not have access to any part of
Callebaut's facilities which are not used directly in the manufacture of
Products or the receiving, storage, handling or packaging of any Products or
ingredients or which are subject to limited access by agreement of the
Parties.  Notwithstanding the foregoing, Callebaut shall have the final
responsibility for complying with all requirements of this Agreement, the
Hershey Specifications, Good Manufacturing Practices and other legal
requirements.  Callebaut shall promptly notify Hershey of any material
discrepancies noted during any inspection of Callebaut's production facilities
by the United States Food and Drug Administration, the United States Public
Health Service, Canadian Regulatory Authority, Mexico’s Ministry of Health, any
state or any other legally authorized federal, state or local regulatory agency
and shall also provide Hershey a list of any discrepancies noted by any
authorities relating to the manufacture, packaging and storage by Callebaut of
the Products, the ingredients and the packaging materials.
 
7.         Callebaut shall keep complete, true and accurate records with respect
to compliance with the requirements of the Hershey Specifications set forth on
Exhibit A.  Callebaut shall allow Hershey or its designees reasonable access to
these records insofar as they relate to the Products, potential product recalls,
potential product claims and government inquiries.  These records will be
maintained for a period of not less than 6 years.
 
8.         Callebaut represents that it has registered its facilities as
required under the United States Food and Drug Administration Bioterrorism
Act.  Callebaut will remain in compliance with such Act through the term of this
Agreement.  Callebaut agrees to contact Hershey promptly (but in no event later
than one hour after Callebaut knows or should have known of the incident) if any
of the Callebaut facilities used for the production of any Product are affected
by security violation, theft or other incident that is reasonably likely to
impair Product integrity.
 
12

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

 
9.         The Parties incorporate the Product Guaranty and Indemnity Agreement
attached as Exhibit E into this Agreement.
 
 
K.         Delivery, Title Transfer, Risk of Loss and Insurance
 
1.         Delivery terms, transfer of title to and risk of loss of the Products
are addressed in each of the Supply Agreements.
 
2.         Callebaut shall carry and maintain Insurance coverage as defined in
Exhibit C.  The limits specified in Exhibit C are based upon factors existing at
the commencement of this Agreement.  The Parties agree that these limits may be
increased or decreased, by mutual agreement, throughout the term of this
Agreement.  Should an increase in insurance coverage be required, the Parties
agree to negotiate in good faith any required adjustments to the calendar year
pricing for the Products, effective for the January to December period following
the increase in coverage.  Hershey shall be named as additional named insured on
each of the foregoing policies.  Callebaut shall pay all premiums when due and
within such period of time as is necessary to keep such insurance in full force
and effect.  Current certificates of insurance shall be provided to Hershey to
evidence the coverage required by this Section 2(K)(2).  Such certificates shall
provide for thirty (30) days advance written notice to Hershey of any
cancellation of the relevant policy and Callebaut shall provide thirty (30) days
advance written notice of any material change to the relevant policy.
 
 
3.
STEERING COMMITTEE

 
A Steering Committee shall be established to assess performance and address
issues arising under this Agreement and the Related Agreements.  Each Party
shall assign representatives from their management teams to guide the
relationship between the Parties, ensure compliance with this Agreement and the
Related Agreements, resolve issues and disputes, measure and assess performance,
and evaluate proposals from either side.  At least one senior executive or
officer of each Party shall participate on the Steering Committee.  The
respective individuals from each Party responsible for production, quality,
logistics and pricing are expected to attend Steering Committee meetings.  The
Steering Committee will meet quarterly. A Party wishing to modify or amend any
provision of any agreement between the Parties may submit the proposed change to
the Steering Committee for its consideration along with the basis for the
proposal, any adjustment in costs or schedules of delivery of Products resulting
from the change, and any other impact of the change, to the other Party.  No
change will be accepted until agreed upon by both Parties in writing and signed
by each Party.
 
 
4.
STANDARDS FOR PERFORMANCE

 
A.         Both Parties agree to develop two-way performance metrics by which
performance under this Agreement will be evaluated.  A scorecard with key
performance indicators and metrics will be jointly developed by September 30,
2007 (the “Performance Scorecard”).  Performance bands will be set forth as
follows on the Performance Scorecard for the determination of aggregate average
quarterly scores: (i) Acceptable; (ii) Immediate action; and (iii)
Unacceptable.   For purposes of clarity, the Parties both acknowledge that an
“Unacceptable” rating will result in the event of a significant disruption in
the supply of Products arising from Callebaut’s action or inaction under this
Agreement.
 
13

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

 
B.         Prior to each Steering Committee meeting, each Party will complete
their respective Performance Scorecard for both their and the other Party’s
performance over the past three, six and twelve months.  Performance Scorecard
reports will be reviewed at the quarterly Steering Committee meeting.  If the
Steering Committee identifies issues that need improvement, the responsible
Party will provide corrective action plans and results within a reasonable
amount of time commensurate with the severity of the issue.  The Performance
Scorecard shall be developed in sufficient form and content to clearly define
those key performance indicators which, if not achieved, would constitute a
breach under the terms of this Agreement or the Supply Agreements.
 
 
5.
NON-COMPETE AGREEMENT

 
A.         The parties agree to the Non-Compete provisions set forth in Exhibit
F.
 
 
6.
NON-SOLICITATION

 
Except as expressly permitted in any related agreement the Parties agree not to
solicit the other Party’s employees for employment. The Parties further agree
that public advertisements or postings of job openings in the ordinary course of
a Party’s business are not considered solicitation hereunder.
 
 
7.
CONFIDENTIALITY

 
A.         “Confidential Information” shall mean Proprietary Information and
Trade Secret Information.  With respect to information disclosed by Hershey to
Callebaut, Confidential Information shall mean non-public information,
including, without limitation, all information Callebaut may receive, or has
received since September 1, 2006, from Hershey concerning the processing of,
production of, marketing of, distribution of, selling of, strategic plans of,
recipes for and quantities of the Products Hershey requests Callebaut to process
and package and any recipes, ingredients, suppliers, product specifications,
production output, sales volume, consumer insights, costing/financial
information, productivity, research/developmental activities, location of
manufacturing or Hershey manufacturing processes used in the production of the
Products.  With respect to information disclosed by Callebaut to Hershey,
Confidential Information shall mean non-public information, including, without
limitation,  all information Hershey may receive, or has received since
September 1, 2006, from Callebaut concerning Callebaut’s facilities, financial
and production capabilities, processing of, production of, marketing of,
distribution of selling of and strategic plans of Callebaut products and any
recipes, ingredients, suppliers, product specifications, production output,
sales volume, costing/financial information, productivity and
research/developmental activities.
 
B.         “Proprietary Information” shall mean that Confidential Information of
a Party that is not included in Trade Secret Information.
 
C.         “Trade Secret Information” shall mean that information of a Party
which that Party considers to be confidential and proprietary in nature which
relates to the product and ingredient formulas and production processes which
are critical to the ongoing and future business of such Party, the unauthorized
disclosure or use of which could result in materially adverse technical and/or
commercial results to that Party whether disclosed in writing, orally or by
observation (including without limitation by e-mail or other electronic
communication).
 

14

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

D.         Any Confidential Information disclosed or otherwise disseminated from
one Party (hereafter, the “Disclosing Party”) to the other Party (hereafter, the
“Receiving Party”) whether such information is conveyed orally or in written
form (including without limitation by e-mail or other electronic communication)
or by observation or in any other manner, shall be treated and regarded as
confidential and proprietary information, which is the exclusive and sole
property of the Disclosing Party in accordance with the following provisions:
 
1.           Each Party’s obligations with respect to the Confidential
Information of the other Party shall apply with respect to any Confidential
Information covered by and disclosed in accordance with the terms of this
Agreement, the Innovation Agreement and the Mutual Non-Disclosure Agreements
between the Parties dated April 10, 2007, March 16, 2006 and December 21, 2005,
which Mutual Non-Disclosure Agreements are hereby superseded.
 
2.           All Trade Secret Information disclosed or otherwise provided to a
Receiving Party hereunder after the date of this Agreement shall either (i) be
disclosed in writing (including electronic documents) bearing a legend or other
statement that the disclosed information is classified as “Confidential” by the
Disclosing Party; or (ii) with respect to information provided orally or by
providing access to restricted areas for observation purposes, subsequently
identified as “Confidential” by the Disclosing Party in a written document and
provided to the Receiving Party within thirty (30) days of disclosure.  All
product and ingredient formulas and production processes of one Party received
by the other Party relating to the Products shall be deemed Trade Secrets unless
otherwise explicitly specified by the Disclosing Party at the time of the
disclosure.  The Parties agree to work through the Research Committee with
respect to disclosure of Trade Secrets pertaining to the Innovation Agreement in
accordance with the terms of the Innovation Agreement.  If the Receiving Party
disagrees with the identification of a Trade Secret set forth in any Disclosing
Party documentation, it shall raise such issue with the Research Committee as
defined in the Innovation Agreement and the Research Committee shall revise the
identification as may be necessary to satisfy both the Disclosing Party and the
Receiving Party consistent with the collaborative spirit of the Innovation
Agreement.  Proprietary Information may also bear a legend or other statement
classifying the information as “CONFIDENTIAL” but such designation will not
cause such Proprietary Information to be treated as Trade Secret Information.
 
3.           In addition to the foregoing obligations with respect to treatment
of Confidential Information, the Parties shall also comply with any protocols,
conditions and other restrictions imposed by the Research Committee with respect
to handling, retention and dissemination of Confidential Information of a Party,
including any procedures intended to facilitate return of such Confidential
Information to the Disclosing Party.
 
4.           A Receiving Party shall keep all Confidential Information received
from a Disclosing Party strictly confidential and secret and shall not divulge,
communicate or transmit such Confidential Information to any other Persons.  A
Receiving Party shall permit disclosure of such Confidential Information only to
such of its directors, officers, employees, contractors (other than competitors
of the Disclosing Party), and advisors who need such information for the purpose
of implementing this Agreement and the agreements which are exhibits hereto,
provided that such Persons are subject to confidentiality and use restrictions
equivalent to those contained herein.  If a Receiving Party desires to share
Confidential Information with a Person outside of the scope of this Agreement,
it shall first obtain the consent of the Disclosing Party.  A Receiving Party
shall use at least such efforts to maintain the confidentiality of such
Confidential
 

15

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

Information as it uses to protect the confidentiality of its own Confidential
Information, but in no event shall a Receiving Party use less than commercially
reasonable efforts to maintain such confidentiality.  Callebaut agrees that
Hershey’s proprietary flavors and essences disclosed pursuant to the April 10,
2007 Mutual Non-Disclosure Agreement shall be considered to be Trade Secret
Information and it will not chemically analyze, reverse engineer and disassemble
such flavors and essences.  Callebaut acknowledges that the formulas and
non-public processes disclosed in connection with Callebaut’s production of
semi-sweet chocolate chips for sale to Hershey are Hershey Trade Secrets.
 
5.           A Receiving Party shall not utilize Trade Secret Information it has
received from a Disclosing Party in any manner, except for the limited purposes
authorized in this Agreement or the agreements which are Exhibits hereto,
provided that Confidential Information that is an Innovation shall be treated in
accordance with the provisions of the Innovation Agreement.  Otherwise,
Proprietary Information, which is not an Innovation, may be freely used but not
disclosed except as otherwise permitted hereunder by the Parties.
 
6.           These obligations of confidentiality and restrictions on use of
Confidential Information shall survive the termination or expiration of this
Agreement for a period of five (5) years, except for Trade Secret Information
which shall remain subject to obligations of confidentiality and restrictions on
use indefinitely.  Upon the later of (i) the termination or expiration of this
Agreement and (ii) the termination or expiration of a Receiving Party’s
authorization to use specific Confidential Information, the Receiving Party
shall return all documents and other materials containing Confidential
Information that were disclosed by the Disclosing Party to the Disclosing Party
together with all copies and other embodiments thereof or otherwise dispose of
such documents and materials (including without limitation deletion or
destruction of electronic data) in accordance with the Disclosing Party’s
written direction.  In the event of inadvertent disclosure of Trade Secret
Information, the Disclosing Party shall have the right and obligation to
promptly request return of such Trade Secret Information and the Receiving Party
shall use reasonable efforts to promptly collect and return all such Trade
Secret Information.
 
7.           The obligations herein concerning Confidential information of the
Parties under this Agreement shall not pertain to information which: (i) is
generally known to the public at the time of its disclosure or becomes generally
available to the public at any time thereafter, (ii) is disclosed to the
Receiving Party by a third party who has the right to disclose such information,
(iii) was known to the Receiving Party prior to its disclosure under this
Agreement, or (iv) is independently developed by the Receiving Party without use
of the Disclosing Party's Confidential Information.
 
8.           In the event of a breach or threatened breach of the provisions of
this Section 7, the non-breaching Party shall be entitled to an injunction
restraining the breaching Party from disclosing, in whole or in part, any of the
above-referenced information or from rendering any service to any person, firm,
corporation, association, or other entity to whom such information has been
disclosed or is threatened to be disclosed.  Except as otherwise stated in
Section 7(D)(9), nothing herein shall be construed as prohibiting the
non-breaching Party from pursuing any other remedies available at law or in
equity for such breach or threatened breach, including the recovery of damages.
 
16

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

 
9.           Notwithstanding anything else herein, the Parties acknowledge that
certain Residual Information disclosed as part of the Parties’ collaborative
efforts under the Innovation Agreement may be retained within their respective
companies, including, without limitation the minds of employees and data
systems, and subsequently used by a Receiving Party even though the Receiving
Party has used its commercially reasonable efforts to refrain from using and to
destroy or return such Residual Information to the Disclosing Party and complied
with any protocols, conditions and other restrictions imposed by the Research
Committee with respect to handling, retention and dissemination of Confidential
Information.   The Parties agree that they will not bring any legal actions or
proceedings against one another arising from such use of Residual Information
exchanged under the operation of the Innovation Agreement.  “Residual
Information” shall mean such Confidential Information provided from a Disclosing
Party which in documentary form (including, without limitation, written, graphic
or electronic form), is retained in the files of a Party after it has used
reasonable efforts to locate any and all copies and disseminations thereof and
which do not on their face indicate that they are the Confidential Information
of the Disclosing Party, and such Confidential Information retained in the
minds/memories of employees and other permissible Persons which Confidential
Information has not been specifically and intentionally committed to memory.
 
 
8.
TERM

 
A.         The term of this Agreement shall commence on the date noted on the
first page of this Agreement and shall expire, unless earlier terminated, on
December 31, 2022.  The term of this Agreement may be extended or renewed at any
time as agreed in writing by the Parties.
 
B.         Terms for each of the Related Agreements are defined therein and may
vary from the term of this Agreement.
 
 
9.
TERMINATION

 
A.         Either Party shall be entitled to terminate this Agreement at any
time within 60 days of the occurrence of any of the following: (i) if the other
Party files a voluntary petition in bankruptcy, is declared bankrupt, makes an
assignment for the benefit of creditors or suffers the appointment of a receiver
or a trustee of its assets, (ii) if the other Party breaches the conditions of
Section 7 in a material manner which results in Losses for the non-breaching
Party or (iii) as set forth in Section 16.
 
B.         In addition, Hershey shall be entitled to terminate this Agreement at
any time within 60 days of the occurrence of any of the following:
 
1.         a material breach by Callebaut of the conditions of Section 5A;
 
2.         Callebaut’s failure to address a significant disruption in the supply
or quality of Products;
 
3.         the disposition by Callebaut, in whole or in part, of its business
(other than to its one or more of Affiliates) and such disposal materially
affects the ability of Callebaut to duly perform under this Agreement or any
Related Agreement; or
 
4.         a direct or indirect change of control in the legal or beneficial
ownership of Callebaut and such change of control is in favor of:
 
 
17

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

 
(a)
one of Hershey’s direct competitors as set forth on Exhibit D, or those
successors or assigns to those competitive businesses;

 
 
(b)
a person or entity that might reasonably bring Hershey into disrepute; or

 
 
(c)
a person or entity whose financial standing and/or past and/or present business
practices presents Hershey, based on Hershey's reasonable determination, with
significant risk in connection with this Agreement.

 
C.         Upon any termination of this Agreement, each Related Agreement shall
also terminate, unless the Parties otherwise agree in writing.
 
 
10.
INDEPENDENT CONTRACTORS

 
Nothing in this Agreement or any Related Agreement is intended or shall be
deemed to constitute a partnership, agency, employer/employee or joint venture
relationship between the Parties.  Neither Party shall be deemed to be or to
have been acting on the behalf of the other Party by reason of any action
hereunder or under any Related Agreement.  All activities by the Parties
hereunder or under any Related Agreement shall be preformed by them as
independent contractors.  Neither Party shall incur any debt or make any
commitment for or on behalf of the other Party, except to the extent
specifically required hereby or by the provisions of a Related Agreement.
 
 
11.
REPRESENTATIONS AND WARRANTIES

 
A.         Callebaut's Representations.  Callebaut hereby represents and
warrants to Hershey that the following are true and correct as of the effective
date of this Agreement.
 
1.         Callebaut has full power to execute and perform its obligations under
this Agreement, to perform the covenants and transactions contemplated hereby,
and, without limitation, to grant Hershey the rights defined in the Product
Development and Innovation Agreement of even date herewith;
 
2.         Callebaut is not a party to, nor will it become a party to during the
Term, any agreement which restricts or otherwise is in conflict with the terms
of this Agreement;
 
3.         all corporate action on the part of Callebaut, its officers and
directors necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of Callebaut hereunder have
been taken; and
 
4.         this Agreement constitutes a valid and legally binding obligation of
Callebaut enforceable in accordance with its terms.
 
 
B.         Hershey's Representations.  Hershey hereby represents and warrants to
Callebaut that the following are true and correct as of the effective date of
this Agreement:
 
1.         Hershey has full power to execute and perform its obligations under
this Agreement and to perform the covenants and transactions contemplated
hereby;
 
2.         Hershey is not a party to, nor will it become a party to during the
Term, any agreement which restricts or otherwise is in conflict with the terms
of this Agreement;
 
 
18

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

3.         all corporate action on the part of Hershey, its officers and
directors, necessary for the authorization, execution and delivery of this
Agreement and the performance of all obligations of Hershey hereunder have been
taken; and
 
4.         this Agreement constitutes a valid and legally binding obligation of
Hershey enforceable in accordance with its terms.
 
 
12.
INDEMNIFICATION

 
A.         Callebaut shall defend and indemnify Hershey and its Affiliates, and
their respective officers, directors, employees, agents, successors and
permitted assigns (each a “Hershey Indemnitee”; it being understood that Hershey
constitutes a Hershey Indemnitee), against all Losses arising out of, caused by,
happening in connection with or otherwise related to this Agreement or any
Related Agreement and the work performed by Callebaut or any of its Affiliates
hereunder or thereunder, including, but not limited to, Callebaut's manufacture,
loading, transportation, unloading, storage, handling, packaging or use of the
Hershey Raw Materials, the Callebaut Raw Materials and/or any Products except,
however, when caused:
 
1.         by the action or inaction of any Hershey Indemnitee;
 
2.         by Callebaut's reliance on and adherence to the Hershey
Specifications or written directions provided by Hershey; or
 
3.         by the use of Hershey Raw Materials which were defective at the time
of delivery to Callebaut.
 
B.           Callebaut further acknowledges and agrees, to the maximum extent
permitted by applicable law, to indemnify and defend each Hershey Indemnitee
against losses in the form of fines, penalties and assessments resulting from
Callebaut’s breach of the terms of this Agreement or any Related Agreement, or
the violation of any law, regulation and/or ordinance directly or indirectly
relating to Callebaut's performance of this Agreement or any Related Agreement.
 
C.           Hershey shall have the right, but not the duty, to participate, at
its own cost, in the defense of any relevant claim or litigation with attorneys
of Hershey's selection.
 
D.           Hershey shall defend and indemnify Callebaut and its Affiliates,
and their respective officers, directors, employees, agents, successors and
permitted assigns (each a “Callebaut Indemnitee”; it being understood that
Callebaut constitutes a Callebaut Indemnitee), against all Losses arising out
of, caused by, happening in connection with or otherwise related to:
 
1.         the action or inaction of any Hershey Indemnitee;
 
2.         Callebaut's reliance on and adherence to the Hershey Specifications
or written directions provided by any Hershey Indemnitee;
 
3.         the use of Hershey Raw Materials ingredients which were defective
when made available to Callebaut; or
 
4.         any breach by Hershey or any Affiliate of Hershey of this Agreement
or any Related Agreement.
 
E.           Callebaut shall have the right, but not the duty, to participate,
at its own cost, in the defense of any claim or litigation with attorneys of
Callebaut's selection.
 
19

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

 
F.           Anything contained in this Agreement or any Related Agreement to
the contrary notwithstanding, neither Party hereto shall have any liability
under any provision of this Agreement or any Related Agreement (whether pursuant
to this Section 12 or pursuant to any cause of action or complaint initiated by
or on behalf of any Party) for any punitive or special damages, loss of business
reputation, or 50% of lost future profit,  regardless of whether the relevant
claim is based on warranty, contract, tort (including negligence or strict
liability) or otherwise.  Each Party hereto agrees to take all reasonable action
to mitigate any Losses it may suffer or incur upon and after becoming aware of
any event which could reasonably be expected to give rise to any Losses.
 
G.           Callebaut’s and Hershey’s indemnification obligations shall survive
the termination or expiration of this Agreement and any Related Agreement.
 
 
13.
FORCE MAJEURE

 
In the event that either Party shall be totally or partially unable to fulfill
one or more of its obligations hereunder or under any Related Agreement as a
result of acts or occurrences beyond the control of the Party affected, such as,
but not limited to, actions, omissions or impositions by local, state,
provincial, federal or national government authorities, fire, flood, earthquake,
or other natural disaster, acts of God, act of terrorism or revolution or labor
unrest, the Party so affected shall be totally or partially relieved from
fulfilling its contract obligations during the period of such force majeure.  In
connection with any such force majeure event, the affected Party shall notify
the other Party of the circumstances thereof as soon as reasonably possible and
shall propose alternatives to the Steering Committee.  In addition, if such
force majeure event shall continue for a period of 90 days or longer, then the
other Party shall be entitled to terminate this Agreement or the relevant
Related Agreement, as applicable, at any time thereafter during which such event
is continuing.
 
 
14.
NOTICE

 
Any notice or other writing required or permitted to be given under this
Agreement or any Related Agreement, except for the separate notice provisions
set forth in the Innovation Agreement, (referred to in this Section 14 as a
“notice”) shall be deemed duly given if delivered personally (including by
recognized delivery device), or sent by prepaid, registered mail, or transmitted
by fax or other form of recorded communication tested prior to transmission to
the address of the applicable Party set out above, if to Hershey to the
attention of Senior Director, Global Manufacturing Alliances, fax no.
717-534-8232 with a copy to Legal Counsel, fax no. 717-534-7549, and if to
Callebaut to the attention of the President, North America, fax no.
312-329-7643, with a copy to the Chief Financial Officer, North America, fax no.
312-329-7643.  Either Party may change the address for notice by notifying the
other Party in the manner provided in this Section 14.  Any notice which is
personally delivered shall be deemed to have been given and received on the day
it is so delivered, unless such day is not a business day, in which case it will
be deemed delivered on the next business day.  Any notice which is mailed in the
manner provided for in this Section 14 shall be deemed to have been given and
received on the 5th business day following the date of its mailing.  Any notice
transmitted by fax or other form of recorded communications shall be deemed
given and received on the 1st business day after its transmission.
 

20

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

15.
 NO WAIVER

 
The failure of either Party to assert a right hereunder or any Related Agreement
or to insist upon compliance with any terms or conditions of this Agreement or
any Related Agreement shall not constitute a waiver of that right or excuse the
subsequent performance or nonperformance of any term or condition by the other
Party.
 
 
16.
ASSIGNMENTS

 
A.           This Agreement will be assignable to a successor in interest of
substantially all of a Party’s assets, subject to Hershey’s termination rights
set forth in Section 9.  All other assignments will be subject to the prior
written consent of the non-assigning Party hereto.
 
B.           Callebaut shall not subcontract the performance of its obligations
hereunder or under any Related Agreement, or permit any other arrangement having
similar effect, in any event other than to an Affiliate of Callebaut, without
obtaining the prior written consent of Hershey.
 
 
17.
GOVERNING LAW

 
This Agreement shall be governed and construed in accordance with the laws
(excluding the conflict of laws rules thereof) of the State of New York.  Each
Party hereto agrees to submit to the exclusive jurisdiction of the Courts of the
Southern District of New York with respect to this Agreement.
 
 
18.
REAL ESTATE AGREEMENTS

 
The Parties agree to negotiate in good faith with respect to the Real Estate
Agreements, such negotiation to begin as soon as practical following execution
of this Agreement.  In the event the Parties fail to execute the Real Estate
Agreements before August 31, 2007 either Party may terminate this Agreement
(which will also result in the termination of all previously executed Related
Agreements) and upon any such termination neither Party shall have any further
liability to the other with respect to this Agreement or any Related Agreement.
 
 
19.
ENTIRE AGREEMENT AND HEADINGS

 
This Agreement and the Related Agreements constitute the entire agreement
between the Parties with respect to the subject matter hereof and thereof, and
any prior or contemporaneous agreements or understandings related thereto
(including the Product Purchase and Supply Agreement between the Parties dated
December 4, 2006 and any letters of intent or confidentiality agreements) are
deemed superseded hereby.  Neither this Agreement nor any Related Agreement may
be amended except by an instrument in writing duly executed on behalf of the
Party against which such amendment is sought to be enforced.  All headings
utilized herein are inserted for reference only and shall have no effect on the
meaning or construction of any terms of this Agreement.
 
 
20.
CONFLICTING TERMS

 
The terms of this Agreement shall supersede and take precedence over any
conflicting terms found in any Related Agreement or any purchase order or
invoice issued by either Party.

 
21

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

21.           
 PREPRINTED TERMS

 
In no event shall any preprinted terms or conditions found on either Party’s
purchase orders, invoices or other preprinted forms be considered an amendment
or modification of this Agreement or any Related Agreement. Such preprinted
terms or conditions, to the extent in conflict with this Agreement or any
Related Agreement, shall be considered null and of no effect.
 
 
22.
BINDING EFFECT

 
The rights created by this Agreement shall inure to the benefit of, and the
obligations created hereby shall be binding upon, the Parties and their
respective successors and permitted assigns.
 
IN WITNESS WHEREOF, each of the Parties hereto has executed this Agreement by
its duly authorized representatives as of the date and year first above written.
 

 

 
BARRY CALLEBAUT, AG
     
By /s/ Patrick De Maeseneire
 
Name: Patrick De Maeseneire
 
Title:  Chief Executive Officer
     
THE HERSHEY COMPANY
     
By  /s/ Burton H. Snyder   
                                                       
Name: Burton H. Snyder
 
Title:  Senior Vice President,
          General Counsel & Secretary

 

 

 

 

 

 

 

 

 

22

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