exh102.htm


     

    Exhibit
      10.2

     

     

    Execution 
Copy

    


     

    SUPPLY
      AGREEMENT

     

    FOR
      MONTERREY, MEXICO

     

    


     

    THIS
      AGREEMENT is entered into on 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 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”).

     

    Callebaut
      and Hershey may collectively be referred to herein as the
“Parties”.

     

    


     

    BACKGROUND

     

    This
      Supply Agreement for Monterrey, Mexico (hereinafter this “Agreement”) is subject
      to the terms and conditions found in the Master Innovation and Supply Agreement
      between Hershey and Callebaut of even date herewith (the “Master
      Agreement”).  This Agreement further specifies the terms pursuant to
      which Callebaut will manufacture the products specified in Exhibit I-M at its
      Monterrey, Mexico facility (the “Products”) for Hershey.  Callebaut
      has indicated its ability and intent to manufacture the Products for Hershey
      in
      accordance with the terms and conditions specified herein. Defined terms used
      herein and not otherwise defined herein shall have the meaning set forth in
      the
      Master Agreement.

     

    NOW
      THEREFORE, with the intent to be legally bound and in consideration of
      the mutual promises herein set forth and other good and valuable consideration,
      the Parties hereby agree as follows:

     

    
      	
              1)  

            	
              Production
                of the Product

            


    

     

    
      	
              A)  

            	
              Callebaut
                shall manufacture the Products specified in Exhibit I-M at its facility
                to
                be located in Monterrey, Mexico as further described
                herein.  Products may be added to or removed from this list by
                Hershey at any time throughout the term of this Agreement.  If a
                new Product is added, Exhibit I-M will be revised to add
                the

            


    

     


    
      
        1

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
                

            	
              new
                Product.  Other exhibits will be added or revised as required to
                reflect the production of the new
                Product(s).

            


    

     

    
      	
              B)  

            	
              Provisions
                regarding the volume of Products to be sourced under this Agreement
                are
                set forth in the Master Agreement.  In the event that Hershey’s
                actual order volume of Products in any given calendar year during
                the Term
                of this Agreement is less than the volume set forth in Exhibit VIII-M
                (“Minimum Threshold Volume”) from Callebaut’s Monterrey facility, and
                provided the shortfall is not due to Callebaut’s action or inaction,
                Callebaut has the right to exercise a “put option” for the Monterrey
                facility (excluding equipment) (the “Put Option”). If Callebaut exercises
                its Put Option:

            


    

     

    
      	
              1)  

            	
              Hershey
                will purchase the Callebaut Monterrey facility building and base
                utility
                infrastructure at fair market value (to be determined in accordance
                with a
                methodology agreed upon by the parties);
                and

            


    

     

    
      	
              2)  

            	
              Hershey
                will have the right, but not the obligation, to purchase the equipment
                located at Callebaut’s Monterrey facility at its fair market value (to be
                determined in accordance with a methodology agreed upon by the parties).
                Any equipment Hershey elects not to purchase will be removed from
                the
                facility by Callebaut at its cost.

            


    

     

    Callebaut
      must exercise the Put Option
      within two years from the date Hershey’s annual orders from Monterrey fall below
      the Minimum Threshold Volume threshold (the “Put Period”).  The
      purchase of the facility must be completed within one year of the exercise
      of
      the Put Option. During the Put Period operations will continue pursuant to
      the
      terms of this Agreement.

     

    With
      Hershey’s consent, Callebaut may
      sell its capacity between the volume set forth in Exhibit VIII-M (“Target
      Volume”) pounds and Hershey’s forecasted volume.  Hershey’s overhead
      burden will be reduced proportionately by the incremental sales attained by
      Callebaut.  Callebaut will also use commercially reasonable efforts to
      reduce its costs in order to reduce the overhead burden assigned to
      Hershey.

     

    
      	
              2)  

            	
              Investment
                by Callebaut

            


    

     

    
      	
              A)  

            	
              Except
                as otherwise agreed by the Parties, Callebaut will invest the necessary
                capital, including the acquisition of certain machinery purchased
                or
                ordered by Hershey, for the construction of a liquid chocolate production
                facility in Monterrey, Mexico on land owned by Hershey, adjacent
                to the
                proposed Hershey facility, and leased to Callebaut as described in
                Section
                5 below.  All references to facilities or production hereunder
                shall be deemed to refer to Hershey’s Monterrey facility or Callebaut’s
                Monterrey facility, as appropriate.  New Products added to
                Exhibit I-M and any proposed changes to existing Products must be
                within
                the then existing technical capability of the Monterrey facility
                being
                constructed by Callebaut.  Callebaut agrees to provide Hershey
                with information describing its then-existing technical capabilities.
                Should Callebaut be required to purchase additional or
                new

            


    

     


    
      
        2

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
                

            	
              capital
                to manufacture the new or modified Products, the Parties must agree
                prior
                to any production hereunder on the relevant conversion cost to be
                invoiced
                to Hershey by Callebaut, including the applicable allocation of
                incremental capital, if any.

            


    

     

    
      	
              B)  

            	
              Upon
                execution of this Agreement Callebaut will assume, and Hershey will
                assign
                to Callebaut, all of Hershey’s rights and obligations under the purchase
                orders for equipment listed on Exhibit II-M hereto (the “Transferred
                Purchase Orders”). Within ten business days of execution of this
                Agreement, Callebaut will reimburse Hershey in Dollars for all payments
                Hershey has made under the Transferred Purchase Orders.  The
                payments and reimbursement amounts for these purchase orders are
                outlined
                on Exhibit II-M.

            


    

     

    
      	
              3)  

            	
              Callebaut’s
                Structure

            


    

     

    Callebaut
      will maintain a structure that enables Callebaut to pass on duty free and value
      added tax (VAT) free equipment, ingredient and material costs to Hershey as
      allowable under current applicable laws and regulations.

     

    If
      for
      any reason Callebaut is required to pay duties or value added tax on any
      equipment, ingredients or components of the Products, other than as a result
      of
      a change in any applicable law or regulations, Callebaut agrees not to pass
      those costs on to Hershey.

     

    In
      the
      event a change in any such law or regulation pertaining to the duty and value
      added tax (VAT) free structure should occur that results in an economic impact
      necessitating Hershey’s cessation of its chocolate activities in its Monterrey
      facility, Hershey may terminate its obligations under this Agreement.
 Callebaut may exercise the Put Option set forth in Section 2(B) within
      three months of the termination.  Should Callebaut choose not to exercise
      its Put Option, Callebaut may purchase the land leased to it by Hershey at
      fair
      market value.  In addition, upon such cessation of Hershey’s chocolate
      activities in its Monterrey facility, the Parties agree to jointly evaluate
      the
      Parties’ ongoing strategic relationship for the source of supply of those
      Products previously sourced from the Monterrey facilities, including sourcing
      from and investment in alternative locations.

     

    
      	
              A)  

            	
              The
                Products must qualify as products of Mexico under the North American
                Free
                Trade Agreement (NAFTA), and Callebaut must provide Hershey with
                accurate
                NAFTA Certificates of Origin throughout the Term of this
                Agreement.   Any exceptions to the foregoing must be
                approved in writing by Hershey.

            


    

     

    
      	
              4)  

            	
              Capacity
                of Operation

            


    

     

    
      	
              A)  

            	
              The
                Callebaut Monterrey, Mexico facility will have the capacity to produce
                and
                deliver the Target Volume pounds per year of Products to
                Hershey.  Callebaut will install two manufacturing lines, each
                capable of producing liquid milk, dark and compound
                chocolate.

            


    

     

    
      	
              B)  

            	
              Should
                Hershey’s planned demand increase above the Target Volume pounds per
                calendar year, Callebaut will, unless otherwise agreed by the Parties,
                invest the

            


    

     


    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               

            	
              necessary
                capital in the facility to meet Hershey’s demand.  The related
                conversion costs for production in excess of the Target Volume pounds
                will
                be mutually agreed by the Parties, using the guidelines shown on
                Exhibit
                VIII-M.

            


    

     

    
      	
              C)   

            	
              Hershey
                shall provide Callebaut with twelve (12) months notice for planned
                demand
                increases over the Target Volume pounds to allow Callebaut to expand
                capacity if a new line is required.  Should Callebaut’s cost
                base be increased as a result of such capital investment, the Parties
                shall negotiate in good faith to agree on the conversion cost to
                be
                invoiced to Hershey by Callebaut, including the applicable allocation
                of
                capital costs.  Should Callebaut’s cost base be reduced due to
                increased volume from Hershey, such cost savings shall be shared
                with
                Hershey on a reasonable basis to be agreed to by the
                Parties.

            


    

     

    
      	
              5)  

            	
              Lease
                of Land to Callebaut

            


    

     

    On
      or
      before August 31, 2007 the Parties anticipate executing a lease agreement (the
      “Lease Agreement”), whereby Hershey will lease to Callebaut (or its Mexican
      subsidiary) land to be identified in the lease (the “Leased Premises”) upon
      which Callebaut will construct its Monterrey facility.  The Parties
      agree to negotiate in good faith the terms of the Lease Agreement and use
      commercially reasonable efforts to execute the Lease Agreement on or before
      August 31, 2007.  In the event a Lease Agreement is not executed on or
      before August 31, 2007, either Party may terminate this Agreement, and if so
      terminated neither Party shall have any further obligation to the other
      hereunder.

     

    
      	
              6)  

            	
              Utilities
                and Services

            


    

     

    Exhibit
      IV-M lists the Hershey infrastructure which Hershey has agreed to make available
      to Callebaut, in exchange for the payment described on the Exhibit IV-M, to
      enable Callebaut’s access to certain utilities and services for its Monterrey
      facility. The Parties agree that the Lease Agreement will reflect which part
      of
      Hershey’s utility infrastructure Callebaut wishes to utilize (at the costs
      specified on Exhibit IV-M hereto), and any ongoing maintenance or usage costs
      associated therewith.  Payment for any one-time costs will be made by
      Callebaut to Hershey within 30 days after signing of the Monterrey Lease
      Agreement.

     

    
      	
              7)  

            	
              Key
                Timelines for Facility
                Readiness

            


    

     

    
      	
              A)  

            	
              Callebaut
                will be able to deliver Products from its Monterrey facility to Hershey’s
                Monterrey facility in accordance with the terms and timelines set
                forth on
                Exhibit VIII-M.

            


    

     

    
      	
              B)  

            	
              The
                facility will be able to deliver Products to Hershey’s Monterrey facility
                in accordance with the terms and timelines set forth on Exhibit
                VIII-M.

            


    

     

    
      	
              8)  

            	
              Contingency

            


    

     

    Callebaut
      will have the process and equipment capabilities set forth on Exhibit
      VIII-M.

     


    
      
        4

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
               
                9)

            	
              Access
                to Facility

            


    

     

    Upon
      reasonable notice, and during either Party's normal hours of operation, either
      Party shall be granted access to the other Party's facilities utilized in the
      receiving, manufacturing, handling, packaging and storage of packaging,
      ingredients and Products for the purpose of ascertaining either Party's
      compliance with the provisions of this Agreement and the Master Agreement,
      as
      pertains to compliance with Good Manufacturing Practices, Quality Assurance
      and
      Hershey’s Specifications; provided, however, that unless permitted either Party
      shall not have access to any part of either Party'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,
      Hershey acknowledges the requirement for the Callebaut facility to remain
      allergen free and Hershey will take necessary precautions when accessing the
      Callebaut facility.

     

    
      	
              10)  

            	
              Operations
                Planning

            


    

     

    
      	
              A)  

            	
              Callebaut
                shall deliver Products meeting all Hershey Quality Specifications
                to
                Hershey’s designated plant and receiving
                station.

            


    

     

    
      	
              B)  

            	
              The
                procedure for determining annual, quarterly, weekly and daily demands
                for
                the Products manufactured by Callebaut at its Monterrey facility
                is
                described in the Master Agreement.

            


    

     

    
      	
              C)  

            	
              An
                estimate for the first eighteen (18) months of Product demand is
                attached
                hereto as Exhibit V-M.

            


    

     

    
      	
              D)  

            	
              The
                Parties agree that there are maximum quantities of Products that
                Callebaut
                can deliver in a given period of time.  Such quantities are
                described in Exhibit VI-M.  The minimum quantity of Product that
                will be delivered to Hershey by Callebaut will be one (1) full
                5,000-gallon (approximately 48,000 lbs or 21,800 Kg) tanker load
                unless
                pre-approved.

            


    

     

    
      	
              E)  

            	
              The
                Parties will develop procedures to enable visibility to each other’s
                demand and inventory information.

            


    

     

    
      	
              F)  

            	
              Callebaut
                will provide a fleet of trucks and tankers capable of delivering
                the
                Products.  Unless otherwise specified herein, Callebaut shall be
                responsible for all costs associated with delivery of the
                Products.

            


    

     

    
      	
              G)  

            	
              Callebaut’s
                fleet of tankers will be capable of unloading at least 60 gallons
                per
                minute of Product.  Hershey will be responsible for providing
                sufficient pumps, hoses and connections to empty the tankers at this
                rate.  Callebaut will at its cost retrofit any tankers in its
                fleet with the appropriate fittings and discharge devices to match
                Hershey’s receiving equipment at Callebaut’s
                cost.

            


    

     

    
      	
              H)  

            	
              Callebaut
                shall inspect all tankers shipping the Products and shall reject
                any
                carrier not meeting the Hershey Specifications.  Callebaut shall
                be responsible for cleaning

            


    

     


    
      
        5

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	
                

            	
              and
                sanitizing tankers on an agreed upon
                frequency.

            


    

     

    
      	
              I)  

            	
              Callebaut
                will maintain adequate and accurate shipping records in order that
                Product
                lots on all shipments may be
                traced.

            


    

     

    
      	
              J)  

            	
              All
                shipments of Product shall meet the standard of identity for the
                planned
                Product.

            


    

     

    
      	
              11)  

            	
              Product
                Cost

            


    

     

    
      	
              A)  

            	
              The
                procedures for determining the cost of the Products are described
                in the
                Master Agreement.

            


    

     

    
      	
              B)  

            	
              The
                conversion costs for the Products are set forth on Exhibit
                VI-M.  By October 1 of each year, Hershey shall advise Callebaut
                of the Annual Estimate of Products. Callebaut will utilize the conversion
                cost applicable to the volumes in the Annual Estimate and conversion
                cost
                tier in its cost to Hershey for the following calendar year after
                taking
                into consideration the available Global Volume Increment, if
                any.

            


    

     

    At
      the
      conclusion of each of the calendar years during the Term, should actual volume
      differ from the Annual Estimate and fall into a conversion cost tier other
      than
      the one charged, Hershey will be debited or credited the difference in total
      annual conversion costs with cash settlement in accordance with the terms of
      the
      Master Agreement, or the Parties can mutually agree to roll over the variance
      for inclusion in the cost base to be invoiced to Hershey by Callebaut for
      Products purchased in the next calendar year.

     

    
      	
              C)  

            	
              The
                initial Annual Estimate provided at the date of this Agreement indicates
                that the total weighted average Product fineness for Monterrey is
                as shown
                on Exhibit VII-M.  Should the actual average fineness for any
                given calendar year fall outside the Base Range set forth in Exhibit
                VII-M, the change in fineness charge shown on Exhibit VII-M will
                apply as
                appropriate to the total volume of Product purchases for such calendar
                year.  Hershey will be debited or credited the difference in
                fineness on an annual basis with cash settlement in accordance with
                the
                terms of the Master Agreement, or the Parties can mutually agree
                to roll
                over the difference in fineness for inclusion in the cost base to
                be
                invoiced to Hershey by Callebaut for Products purchased in the next
                calendar year.

            


    

     

    
      	
              12)  

            	
              Coordination
                of Product Receiving and
                Invoicing

            


    

     

    
      	
              A)  

            	
              Callebaut
                and Hershey will coordinate the delivery details for each
                tanker.

            


    

     

    
      	
              B)  

            	
              Upon
                entering the Hershey operation, Hershey will weigh Callebaut’s tanker
                truck, and Product at Hershey’s weigh station.  The driver shall
                exit truck before weight is
                recorded.

            


    

     

    
      
        6

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              C)  

            	
              Hershey
                will unload each tanker to the fullest extent possible and take ownership
                once chocolate leaves the relevant
                tanker.

            


    

     

    
      	
              D)  

            	
              Hershey’s
                operator will be responsible for all connections of Hershey’s hoses to
                Callebaut’s tankers and any resulting
                incidents.

            


    

     

    
      	
              E)  

            	
              Once
                a tanker is emptied and appropriate documentation is approved, Callebaut’s
                tanker will proceed to Hershey’s weigh station to weigh truck, tanker and
                any left-over chocolate.  Again, the driver shall exit the truck
                before its weight is recorded.  Callebaut will electronically
                submit the invoice for the difference between the “full weight” and “empty
                weight” to Hershey immediately upon the tanker leaving Hershey’s
                operation.

            


    

     

    
      	
              13)  

            	
              Quality
                Assurance

            


    

     

    
      	
              A)  

            	
              All
                Products delivered by Callebaut to Hershey shall meet the terms agreed
                to
                under the Master Agreement.

            


    

     

    
      	
              B)  

            	
              Callebaut
                will not be required to utilize rework generated by
                Hershey.  Any use of such rework shall be negotiated on a
                case-by-case basis.

            


    

     

    
      	
              14)  

            	
              Title
                Transfer and Risk of
                Loss

            


    

     

    
      	
              A)  

            	
              Title
                to the Products shall be and remain with Hershey from the date and
                time:

            


    

     

    
      	
              i)  

            	
              the
                Product leaves Callebaut’s tanker;
                or

            


    

     

    
      	
              ii)  

            	
              the
                Product leaves Callebaut’s trailer and is delivered to Hershey’s receiving
                dock for dry Products.

            


    

     

    
      	
              B)  

            	
              Callebaut
                shall bear the risk of loss to the Products (either while in storage
                or in
                process at Callebaut’s plant or any non-Hershey storage facility utilized
                by Callebaut with Hershey’s consent) until the Products leave the tanker
                for delivery into Hershey’s Monterrey
                facility.

            


    

     

    
      	
              15)  

            	
              Term

            


    

     

    
      	
              A)  

            	
              The
                initial term of this Agreement shall commence on the date noted on
                the
                first page of this Agreement and shall expire, unless earlier terminated
                in accordance with the terms hereof, on December 31, 2022 (the “Initial
                Term”).

            


    

     

    
      	
              B)  

            	
              This
                Agreement may be renewed thereafter for one or more five (5) year
                terms
                (the “Renewal Term(s)”) upon written agreement of the Parties executed no
                later than eighteen (18) months prior to the expiration of the then
                current term.

            


    

     

    
      	
              C)  

            	
              The
                Initial Term and any Renewal Term shall be referred to herein as
                the
                “Term”.

            


    

     

    
      
        7

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              16)  

            	
              Termination

            


    

     

    Termination
      rights are set forth in the
      Master Agreement.

     

    
      	
              17)  

            	
              Consequences
                of Sale, Termination, Expiration, or Change in
                Control

            


    

     

    In
      the
      event of termination or expiration of this Agreement, or of a change in control
      of Callebaut described in the Master Agreement to which Hershey does not
      consent,  Hershey  shall have a right to acquire Callebaut’s
      Monterrey facility and the equipment required to manufacture Products for
      Hershey   at fair market value to be determined by a mutually
      agreed upon valuation process. Should Hershey exercise such purchase, (i) an
      eighteen (18) month period (either before the end of the Term or at the time
      of
      notice) will be given to Callebaut to allow time to build a new facility to
      maintain business continuity and (ii) the Parties will agree on any future
      employment of Callebaut’s employees working at the Monterrey facility at the end
      of the eighteen month notice period.  If notice is given at the time
      of termination, the Parties shall continue to operate under the terms and
      conditions of the Master Agreement and this Agreement for the duration of such
      notification period.  Ownership of any equipment not acquired by
      Hershey will be retained by Callebaut and such equipment will be removed at
      Callebaut’s cost in accordance with an agreed upon schedule.  In the
      event Hershey chooses to sell its Monterrey facility to a third party (and
      not
      as part of an acquisition or joint venture) or Hershey chooses not to exercise
      its right to acquire Callebaut’s Monterrey facility, Callebaut shall have a
      right to acquire the Leased Premises at fair market value to be determined
      by a
      mutually agreed upon valuation process, subject to Hershey’s continued ownership
      of the water rights attributable to the Leased Premises; provided that Hershey
      or the purchaser of its facility, as a condition of the sale agreement with
      Hershey, continues to make water available to the Callebaut facility on
      substantially the same terms and to the same extent as Hershey was providing
      any
      water prior to such transfer. In the event Hershey does not exercise its right
      to purchase the Callebaut facility and Callebaut does not exercise its right
      to
      purchase the land, the Lease Agreement will be extended for an agreed upon
      term
      on terms no less favourable than those contained in the Lease
      Agreement.

     

    
      	
              18)  

            	
              Taxes
                and Charges

            


    

     

    Except
      as
      otherwise provided in Section 3(A), Callebaut shall pay all federal, state
      and
      local taxes, charges, duties, fees and assessments which may be levied in
      connection with Callebaut's performance of this Agreement except for charges
      or
      assessments resulting from Callebaut's violations of any laws or regulations
      which were the result of Callebaut's adherence to the Hershey Specifications
      or
      directions or caused by Callebaut's use of Hershey supplied ingredients. In
      the
      event of a charge or assessment resulting from adherence to Hershey’s
      Specifications, directions, or Hershey supplied ingredients, Hershey will be
      responsible for resolving the assessment or charge in accordance with applicable
      laws at its cost.

     


    
      
        8

      

      
        
        

        
          

        

      

      
        
        

      

    


    WITNESS
      WHEREOF, each of the Parties 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

               

            


    

    


     


    
      
        9