Tax Indemnification Agreement

Exhibit 10.3
EXECUTION COPY


TAX INDEMNIFICATION AGREEMENT


This TAX INDEMNIFICATION AGREEMENT ("Agreement") is made and entered into as of the first day of December, 1997, by and between CPC INTERNATIONAL INC., a Delaware corporation ("CPC"), and CORN PRODUCTS INTERNATIONAL, INC., a Delaware corporation ("CORN").

WITNESSETH


WHEREAS, CPC is the common parent of an affiliated group of corporations within the meaning of Code Section 1504 which includes CORN (all capitalized terms not otherwise defined shall be as defined in Section 5.07 hereof); and


WHEREAS, CPC intends to transfer to CORN its corn refining business, including all stock owned by it in domestic and foreign corporations engaged in the corn refining business, in exchange for stock of CORN, and distribute to its shareholders stock constituting control of CORN, within the meaning of Code Section 368(c) (the "Spinoff"); and


WHEREAS, in connection therewith, it will be necessary for certain foreign corporations owned by CPC to engage in Foreign Spinoffs; and


WHEREAS, the IRS has issued the IRS Rulings which state the United States federal income tax treatment of the Spinoff and the Foreign Spinoffs, which tax treatment also shall be relied upon and reported by CPC for all applicable United States state and local Tax purposes


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(such United States federal income tax and state and local Tax treatment to be referred to hereinafter as the "Tax Treatment"); and


WHEREAS, the parties hereto are entering into this Agreement to indemnify CPC as hereinafter provided in the event the Spinoff or any of the Foreign Spinoffs shall fail to qualify for the Tax Treatment due to actions by CORN or its Affiliates.


NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the parties hereby agree as follows:


ARTICLE 1
REPRESENTATIONS AND COVENANTS


SECTION 1.01. Representations.


(a) CORN hereby makes the following representations to CPC: (i) CORN has reviewed the submissions to the IRS in connection with the IRS Rulings and, to the best of CORN's knowledge, all statements and representations therein concerning CORN, its business, operations, capital structure or organization, are complete and accurate in all material respects; (ii) CORN shall, and shall cause each of its Affiliates to, comply with each statement concerning CORN and its Affiliates that is designated as a "representation" in the submissions or the IRS Rulings; (iii) CORN concurs with all representations and statements made in the submissions.


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All of the above representations shall survive the Spinoff Date until the expiration of all statute of limitations (inclusive of extensions) in respect of taxable periods for which Taxes might be imposed or otherwise assessed in respect of the Spinoff and all of the Foreign Spinoffs.


(b) CORN hereby represents and warrants to CPC that neither CORN nor any Foreign Spinco nor any of their respective Affiliates has any present intention to cease to engage in its Active Business (as defined in Section 1.02(a)(i)), undertake, or permit to be undertaken, any action that would result in a violation of any of CORN's covenants in Section 1.02(a)(ii), or undertake, authorize, approve, recommend, permit, facilitate, enter into any contract with respect to, or consummate, any transaction described in Section 1.02(a)(iii).


SECTION 1.02. Covenants.


(a) CORN covenants and agrees with CPC that during the Restricted Period:


(i) CORN and each Foreign Spinco will continue to engage in the active conduct, within the meaning of section 1.355-3(b) of the Regulations, of the corn refining business, as described in the Ruling Request, which business, as actively conducted, shall be referred to hereinafter as such corporation's Active Business.


(ii) CORN and each Foreign Spinco will (A) continue to manage and to own directly assets which represent at least fifty percent (50%) of the Gross Assets which such corporation


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managed and owned directly immediately after the Spinoff or the applicable Foreign Spinoff, as the case may be; (B) continue to manage and own (directly and indirectly through one or more entities) assets which represent at least 50% of the Gross Assets which such corporation managed and owned (directly and indirectly through one or more entities) immediately after the Spinoff or the applicable Foreign Spinoff, as the case may be; and (C) not take any action (including the acquisition or entering into of businesses other than extensions of its Active Business) which would cause the fair market value of its Active Business to be less than five percent (5%) of its total Gross Assets.


(iii) Neither CORN, nor any Foreign Spinco, nor any of their respective directors, officers or other representatives, will undertake, authorize, approve, recommend, permit, facilitate, enter into any contract with respect to, or consummate, any of the following transactions:


(A) the issuance of Common Stock (whether or not subject to restrictions), or the issuance of any options, warrants, rights or securities exercisable for, or convertible into, Common Stock (collectively, the "New Stock"), whether in a single transaction or in a series of related or unrelated transactions or otherwise, which in the aggregate if issued (and in the case of options, warrants, rights or securities, exercised or converted) immediately prior to the Spinoff or the applicable Foreign Spinoff, as the case may be, would exceed twenty percent (20%) of the outstanding shares of Common Stock (including the New Stock) immediately following the Spinoff or the applicable Foreign Spinoff, as the case may be;


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(B) the issuance of any class or series of capital stock or any other instrument (other than Common Stock (whether or not subject to restrictions) or options, warrants, rights or securities exercisable for, or convertible into, Common Stock) that would constitute equity of CORN or any Foreign Spinco for United States federal income tax purposes (such classes or series of capital stock and other instruments being referred to herein as "Disqualified Stock") other than pursuant to the CORN Rights Plan;


(C) the issuance of any options, rights, warrants, securities or similar arrangements exercisable for, or convertible into, Disqualified Stock other than pursuant to the CORN Rights Plan;


(D) any redemptions, purchases or other acquisitions from shareholders of greater than 20% of the outstanding capital stock or other equity interests in CORN or any Foreign Spinco in a single transaction or a series of related or unrelated transactions, except redemptions, purchases or other acquisitions by CORN, any Foreign Spinco or any of their respective Affiliates, of the capital stock or other equity interests of CORN or any Foreign Spinco that satisfy all of the following requirements: (1) there is a "sufficient business purpose" (within the meaning of section 4.05(1)(b) of Revenue Procedure 96-30) for the transaction, (2) the stock to be redeemed, purchased or otherwise acquired is widely held, (3) the stock redemptions, purchases or other acquisitions will be made on the open market, and (4) the amount of stock redemptions, purchases or other acquisitions in a single transaction or in a series of related or unrelated


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transactions will not exceed an amount of stock representing twenty percent (20%) of the outstanding stock of CORN or the applicable Foreign Spinco immediately following the Spinoff;


(E) the dissolution, merger, or complete or partial liquidation of CORN or any Foreign Spinco or any announcement of such action; or


(F) the waiver, amendment, termination or modification of any provision of the CORN Rights Plan, or redemption of Preferred Stock Purchase Rights, in connection with, or in order to permit or facilitate, any acquisition or proposed acquisition of Beneficial Ownership of capital stock or other equity interest in CORN.


(b) In addition to the other representations, warranties, covenants and agreements set forth in this Agreement, CORN and its Affiliates will take, or refrain from taking, as the case may be, such actions as CPC may reasonably request during the Ruling Period as necessary to ensure that the Spinoff and the Foreign Spinoffs qualify for the Tax Treatment, including, without limitation, such actions as CPC determines may be necessary to obtain and preserve the IRS Rulings or any subsequent IRS ruling relating to the tax treatment of the Spinoff or any of the Foreign Spinoffs on which the parties can rely. For purposes hereof, the "Ruling Period" shall mean the period commencing on the Spinoff Date and ending on the first anniversary of the date on which there shall have expired all statutes of limitations (inclusive of extensions) in respect of taxable periods for which Taxes might be imposed or otherwise assessed in respect of the Spinoff and all of the Foreign Spinoffs, but in no event ending sooner than the third


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anniversary of the close of the taxable year of CPC in which the Spinoff occurs. Without limiting the generality of the foregoing, CORN and its Affiliates shall cooperate with CPC if CPC determines to obtain additional IRS rulings pertaining to whether any actual or proposed change in facts and circumstances affects the United States federal income tax status of the Spinoff or any of the Foreign Spinoffs. This Section 1.02(b) shall not apply after the termination of the Restricted Period with respect to any of the actions described in Section 1.02(a), unless (i) at the termination of the Restricted Period, the federal income tax year of CPC that includes the Spinoff is under examination by the Internal Revenue Service or any successor federal income tax authority or, at or prior to the termination of the Restricted Period, CPC has received notice that such an examination is to commence and (ii) CPC delivers to CORN concurrent with any request after the termination of the Restricted Period pertaining to an action described in Section 1.02(a), an opinion of independent tax counsel of recognized national standing who is experienced in the issues to be addressed and otherwise is reasonably acceptable to CORN, that such request is reasonable; provided that this Section 1.02(b) will not apply if the possible adverse effect on CORN and its business from the actions requested by CPC pursuant to this Section 1.02(b) is greater than the possible adverse effect on CPC and its business from not taking such actions.


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ARTICLE 2


CORN INDEMNITY OBLIGATIONS


SECTION 2.01. Tax Indemnities.


(a) Except as otherwise provided in Section 2.01(b), if CORN, any Foreign Spinco, or any of their respective Affiliates (collectively the "Indemnifying Party"), whether through any of their respective directors, officers, other representatives or otherwise, shall violate, or cause or permit to be violated, any representation or covenant contained in Article 1, and as a result thereof (singly or in combination with other actions of the Indemnifying Party), the Spinoff or any of the Foreign Spinoffs shall fail to qualify for the Tax Treatment, the Indemnifying Party shall (jointly and severally) indemnify and hold harmless CPC and each member of the CPC Group (collectively the "Indemnified Party") against any and all Indemnified Liabilities (as defined in Section 3.01(a) arising therefrom.


(b) If, following the six-month anniversary of the Spinoff Date, CORN, any Foreign Spinco or any of their respective Affiliates takes any action or engages in conduct prohibited by, or resulting in the violation of any covenant in, Section 1.02(a) (other than any action or conduct that results in an event described in Section 2.01(c)), and prior to such action or conduct, CORN delivers to CPC (i) a ruling from the IRS in form and substance reasonably satisfactory to CPC, and upon which CPC can rely, to the effect that the proposed action or conduct will not cause the Spinoff or any of the Foreign Spinoffs to fail to qualify for the tax treatment stated in the IRS


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Ruling or otherwise to be taxable for federal income tax purposes, or (ii) an Opinion of Counsel, Section 2.01(a) will not apply with respect to such action or conduct.


(c) Notwithstanding anything to the contrary set forth in this Agreement, if, during the Restricted Period, any Person or Group acquires Beneficial Ownership of fifty percent (50%) or more of the Common Stock (or any other class of capital stock or other equity interest) of CORN or any Foreign Spinco or commences a tender or other purchase offer for the capital stock or other equity interest of CORN or any Foreign Spinco, upon consummation of which such Person or Group would acquire Beneficial Ownership of fifty percent (50%) or more of the Common Stock (or any other class of stock or other equity interest) of CORN or any Foreign Spinco, and, as a result thereof, the Spinoff or any of the Foreign Spinoffs shall fail to qualify for the Tax Treatment, the Indemnifying Party shall indemnify and hold harmless the Indemnified Party against any and all Indemnified Liabilities (as defined in Section 3.01(a)) arising therefrom. The Indemnified Party shall be so indemnified and held harmless under this Section 2.01(c) without regard to whether the Indemnified Party has received or delivered to CPC a supplemental ruling from the IRS or an Opinion of Counsel, and without regard to whether an acquisition of Beneficial Ownership results from a transaction which is not prohibited under Article 1.


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ARTICLE 3


INDEMNIFIED LIABILITIES


SECTION 3.01. Definition and Calculation of Indemnified Liabilities. For purposes of this Agreement, "Indemnified Liabilities" sha ...