Certain CST Unaudited Prospective Financial
Information
In connection with the merger, CSTs management prepared financial projections of Adjusted EBITDA,
reconciled from Net Income, and Capital Expenditures for fiscal years 2016 through 2020 (which we refer to as the CST Projections). The CST Projections were prepared for internal use and provided to CSTs board of directors for the
purposes of considering, analyzing and evaluating CSTs strategic and financial alternatives, including the merger. The CST Projections were provided to BofA Merrill Lynch in connection with rendering its fairness opinion to the CST board of
directors and in performing the related analyses. CST does not as a matter of course make public projections as to future performance due to, among other reasons, the inherent difficulty of accurately predicting financial performance for future
periods and the uncertainty of underlying assumptions and estimates. However, CST is including in this document a summary of certain unaudited financial projections for CST on a stand-alone basis, without giving effect to the merger, to give CST
stockholders access to certain nonpublic information provided to CSTs board of directors and CSTs financial advisor for purposes of considering and evaluating the merger. The inclusion of the CST Projections should not be regarded as an
indication that CST, its board of directors or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results or an accurate prediction of future results, and it should not be relied
on as such.
The CST Projections and the underlying assumptions upon which the CST Projections were based are subjective in
many respects, and subject to multiple interpretations and frequent revisions based on actual experience and business developments. The CST Projections reflect numerous assumptions with respect to company performance, industry performance, general
business, economic, regulatory, market and financial conditions and other matters, many of which are difficult to predict, subject to significant economic and competitive uncertainties and beyond CSTs control. Multiple factors, including those
described in the section entitled
Cautionary Statement Concerning Forward-Looking Statements
, could cause the CST Projections or the underlying assumptions to be inaccurate. As a result, there can be no assurance that the CST
Projections will be realized or that actual results will not be significantly higher or lower than projected. The CST Projections cover multiple years, and projections by their nature become less reliable with each successive year. In addition, the
CST Projections have not been updated or revised to reflect information or results after the date the CST Projections were prepared or as of date of this document, and except as required by applicable securities laws, CST does not intend to update
or otherwise revise the CST Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be
in error. Economic and business environments can and do change quickly, which adds a significant level of uncertainty as to whether the results portrayed in the CST Projections will be achieved. As a result, the inclusion of the CST Projections in
this document does not constitute an admission or representation by CST or any other person that the information is material. The CST Projections do
CST BRANDS, INC.
Proxy
Statement
29
THE MERGER (PROPOSAL 1)
not take into account the possible effects on CST of the merger and do not attempt to predict or suggest future results of the combined company. The CST Projections do not give effect to the merger,
including the impact of negotiating or executing the merger agreement, the expenses that may be incurred in connection with consummating the merger, the potential synergies that may be achieved by the combined company as a result of the merger, the
effect on CST of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken
if the merger agreement had not been executed, but that were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the CST Projections do not take into account the effect on CST of any possible failure of the
merger to occur. The summary of the CST Projections is not provided to influence CST stockholders decisions regarding whether to vote for the merger proposal or any other proposal.
The CST Projections were not prepared with a view toward public disclosure or toward compliance with United States generally accepted
accounting principles (which we refer to as GAAP), published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial
information. Neither KPMG LLP, CSTs independent registered public accounting firm, nor any other accounting firm, has examined, compiled or performed any procedures with respect to the CST Projections, and accordingly, KPMG LLP does not
express an opinion or any other form of assurance with respect thereto. The KPMG LLP report incorporated by reference in this document relates to CSTs historical financial information. It does not extend to the prospective financial
information contained herein and should not be read to do so.
The following is a summary of the CST Projections:
Summary of the CST Projections
(U.S. dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Fiscal Year
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
Net Income
|
|
$
|
342
|
|
|
$
|
161
|
|
|
$
|
195
|
|
|
$
|
246
|
|
|
$
|
291
|
|
Interest Expense
|
|
|
42
|
|
|
|
35
|
|
|
|
36
|
|
|
|
39
|
|
|
|
40
|
|
Income Tax Expense
|
|
|
188
|
|
|
|
90
|
|
|
|
111
|
|
|
|
141
|
|
|
|
166
|
|
Depreciation, Amortization and Accretion Expense
|
|
|
175
|
|
|
|
175
|
|
|
|
190
|
|
|
|
206
|
|
|
|
224
|
|
EBITDA
|
|
$
|
747
|
|
|
$
|
461
|
|
|
$
|
532
|
|
|
$
|
632
|
|
|
$
|
721
|
|
Gains on the Sale of Assets
|
|
|
(350
|
)
|
|
|
(35
|
)
|
|
|
(22
|
)
|
|
|
(26
|
)
|
|
|
(28
|
)
|
Equity in Earnings from CAPL
|
|
|
2
|
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(11
|
)
|
IDRs from CAPL
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
(6
|
)
|
|
|
(8
|
)
|
|
|
(12
|
)
|
Adjusted EBITDA
|
|
$
|
396
|
|
|
$
|
418
|
|
|
$
|
499
|
|
|
$
|
591
|
|
|
$
|
670
|
|
Capital Expenditures
|
|
$
|
(462
|
)
|
|
$
|
(496
|
)
|
|
$
|
(557
|
)
|
|
$
|
(588
|
)
|
|
$
|
(628
|
)
|
(1)
|
Earnings before interest, income taxes and depreciation and amortization (which we refer to as EBITDA) is a non-GAAP measure consisting
of net income plus interest expense, provision for income taxes and depreciation and amortization. Projected Adjusted EBITDA for fiscal years 2016 through 2020 adjusts projected EBITDA to exclude equity in earnings from CAPL, incentive distribution
rights (which we refer to as IDRs) income from CAPL and gains on the sale of assets.
|
For the
foregoing reasons, and considering that the special meeting will be held several months after the CST Projections were prepared, as well as the uncertainties inherent in any forecasting information, readers of this document are cautioned not to
place unwarranted reliance on the CST Projections set forth above. No one has made or makes any representation to any stockholder regarding the information included in the CST Projections. CST urges all CST stockholders to review its most recent SEC
filings for a description of its reported financial results. See the section entitled
Where You Can Find Additional Information
.
30
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
Opinion of CSTs Financial Advisor
CST
retained BofA Merrill Lynch to act as CSTs financial advisor in connection with the merger. BofA Merrill Lynch is an internationally recognized investment banking firm that is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. CST selected BofA Merrill Lynch to
act as CSTs financial advisor in connection with the merger on the basis of BofA Merrill Lynchs experience in transactions similar to the merger, its reputation in the investment community and its familiarity with CST and its business.
On August 21, 2016, at a meeting of the CST board of directors held to evaluate the merger, BofA Merrill Lynch delivered to
the CST board of directors an oral opinion, which was confirmed by delivery of a written opinion dated August 21, 2016, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in
its opinion, the merger consideration to be received in the merger by holders of CST common stock was fair, from a financial point of view, to such holders.
The full text of BofA Merrill Lynchs written opinion to the CST board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and
limitations on the review undertaken, is attached as Annex C to this document and is incorporated by reference herein in its entirety. The following summary of BofA Merrill Lynchs opinion is qualified in its entirety by reference to the
full text of the opinion. BofA Merrill Lynch delivered its opinion to the CST board of directors for the benefit and use of the CST board of directors (in its capacity as such) in connection with and for purposes of its evaluation of the merger
consideration from a financial point of view. BofA Merrill Lynchs opinion does not address any other aspect of the merger, and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or
transactions that might be available to CST or in which CST might engage or as to the underlying business decision of CST to proceed with or effect the merger. BofA Merrill Lynchs opinion does not address any other aspect of the merger
and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.
In connection with rendering its opinion, BofA Merrill Lynch has, among other things:
|
|
|
reviewed certain publicly available business and financial information relating to CST;
|
|
|
|
reviewed certain internal financial and operating information with respect to the business, operations and prospects of CST furnished to or
discussed with BofA Merrill Lynch by the management of CST, including certain financial forecasts relating to CST prepared by the management of CST (we refer to such forecasts as CST management forecasts);
|
|
|
|
discussed the past and current business, operations, financial condition and prospects of CST with members of senior management of CST;
|
|
|
|
reviewed the trading history for CST common stock and a comparison of that trading history with the trading histories of other companies BofA
Merrill Lynch deemed relevant;
|
|
|
|
compared certain financial and stock market information of CST with similar information of other companies BofA Merrill Lynch deemed relevant;
|
|
|
|
compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions BofA Merrill Lynch deemed
relevant;
|
|
|
|
considered the fact that CST publicly announced that it would explore its strategic alternatives and the results of BofA Merrill Lynchs
efforts on behalf of CST to solicit, at the direction of CST, indications of interest from third parties with respect to a possible acquisition of CST;
|
|
|
|
reviewed the merger agreement; and
|
|
|
|
performed such other analyses and studies and considered such other information and factors as BofA Merrill Lynch deemed appropriate.
|
In arriving at its opinion, BofA Merrill Lynch assumed and relied upon, without independent verification,
the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the management of CST that it was not aware of any facts
or
CST BRANDS, INC.
Proxy
Statement
31
THE MERGER (PROPOSAL 1)
circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to CST management forecasts, BofA Merrill Lynch was advised by CST, and assumed,
that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of CST as to the future financial performance of CST. BofA Merrill Lynch did not make and was not provided
with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of CST or any other entity, nor did BofA Merrill Lynch make any physical inspection of the properties or assets of CST or any other entity, nor did
BofA Merrill Lynch evaluate the solvency or fair value of CST, Circle K or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Merrill Lynch assumed, at the direction of CST, that
the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals,
consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on CST or any other entity or
the merger (including the contemplated benefits thereof) in any respect material to BofA Merrill Lynchs analyses or opinion.
BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects or implications of the merger (other than the merger consideration to the extent expressly specified in its opinion),
including, without limitation, the form or structure of the merger or any terms, aspects or implications of any other agreement, arrangement or understanding entered into in connection with or related to the merger or otherwise. BofA Merrill
Lynchs opinion was limited to the fairness, from a financial point of view, of the merger consideration to be received by holders of CST common stock, and no opinion or view was expressed with respect to any consideration received in
connection with the merger by the holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or
any other aspect of any compensation to any officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration or otherwise. In addition, BofA Merrill Lynch did not express any view or
opinion with respect to, and relied, with the consent of CST, upon the assessments of CST and its representatives regarding, legal, regulatory, accounting, tax and similar matters relating to CST or any other entity and the merger (including the
contemplated benefits thereof), as to which BofA Merrill Lynch understood that CST obtained such advice as it deemed necessary from qualified professionals. BofA Merrill Lynch further expressed no opinion or recommendation as to how any
stockholder should vote or act in connection with the merger or any other matter. Except as described above, CST imposed no other limitations on the investigations made or procedures followed by BofA Merrill Lynch in rendering its opinion.
BofA Merrill Lynchs opinion was necessarily based on financial, economic, monetary, market and other conditions and
circumstances as in effect on, and the information made available to BofA Merrill Lynch as of, the date of its opinion. The credit, financial and stock markets have been experiencing unusual volatility and BofA Merrill Lynch expressed no
opinion or view as to any potential effects of such volatility on CST, Circle K or the merger. It should be understood that subsequent developments may affect its opinion, and BofA Merrill Lynch does not have any obligation to update, revise or
reaffirm its opinion. The issuance of BofA Merrill Lynchs opinion was approved by a fairness opinion review committee of BofA Merrill Lynch.
The following represents a brief summary of the material financial analyses presented by BofA Merrill Lynch to the CST board of directors in connection with its opinion.
The financial analyses
summarized below include information presented in tabular format.
In order to fully understand the financial analyses performed by BofA Merrill Lynch, the tables must be read together with the text of each
summary.
The tables alone do not constitute a complete description of the financial analyses performed by BofA Merrill Lynch.
Considering the data set forth in the tables below without considering the full
narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Merrill Lynch.
Company Financial Analyses
Selected Publicly Traded Companies Analysis.
BofA Merrill Lynch reviewed publicly available financial and stock market information for CST and the following three selected publicly traded
companies that BofA Merrill Lynch in its professional judgment considered generally relevant for comparative purposes in the retail convenience store industry (which we refer to, collectively, as the selected publicly traded companies).
|
|
|
Alimentation Couche-Tard Inc.
|
32
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
|
|
|
Caseys General Stores, Inc.
|
BofA Merrill Lynch reviewed, among other things, enterprise values of the selected publicly traded companies, calculated as equity values based on closing stock prices on August 19, 2016 (or in the case
of Couche-Tard, August 15, 2016, which was the last trading day prior to the
Wall Street Journal
article announcing that Couche-Tard was near a deal to buy CST) plus debt less cash and cash equivalents, as a multiple of calendar year 2016
estimated earnings before interest, taxes, depreciations and amortization (which we refer to as EBITDA). The observed low to high fiscal year 2016 estimated EBITDA multiples for the selected publicly traded companies were 7.7x to
11.7x. BofA Merrill Lynch observed that CSTs fiscal year 2016 estimated EBITDA multiple, based on publicly available research analysts estimates, as of (i) December 8, 2015, the last trading day prior to Engine Capital, L.P.s
public letter to the CST board of directors, was 8.6x, and (ii) as of August 15, 2016, was 10.4x (which multiples excluded estimated CAPL EBITDA, debt, cash and cash equivalents attributable to the approximate 80.4% interest in CAPL not owned by
CST). BofA Merrill Lynch then applied a selected range of fiscal year 2016 multiples of 8.0x to 10.5x derived from the selected publicly traded companies to CSTs fiscal year 2016 retail pro forma adjusted EBITDA, based on CST management
forecasts, which measure excludes equity income from CSTs investment in limited partner units of CAPL, income from CSTs ownership of the general partner and related incentive distribution rights of CAPL, EBITDA related to CSTs
divested California and Wyoming sites, gains on certain foreign exchange transactions and certain one-time non-recurring items, and includes EBITDA from CSTs acquisition of Flash Foods on an annualized basis (which we refer to as Retail
Pro Forma Adjusted EBITDA).
BofA Merrill Lynch reviewed publicly available financial information for the following nine
selected publicly traded general partnerships that BofA Merrill Lynch in its professional judgment considered generally relevant for comparative purposes to CAPL (which we refer to, collectively, as the selected publicly traded general
partnerships):
|
|
|
Energy Transfer Equity, L.P.
|
|
|
|
Western Gas Equity Partners, LP
|
|
|
|
Plains GP Holdings, L.P.
|
|
|
|
Tallgrass Energy GP, LP
|
|
|
|
NuStar GP Holdings, LLC
|
|
|
|
Alliance Holdings GP, L.P.
|
Based upon its professional judgment and experience, BofA Merrill Lynch then applied a selected general partner distribution yield range of 9.0% to 7.0% to CSTs estimated calendar year 2016 income
from the incentive distribution rights of CAPL, based on CST management forecasts.
BofA Merrill Lynch calculated an equity
value of CSTs investment in limited partner units of CAPL based on CAPLs closing stock price of $24.34 on August 15, 2016, which was the last trading day prior to the
Wall Street Journal
article announcing that Couche-Tard was
near a deal to buy CST.
Estimated financial data of the selected publicly traded companies and selected publicly traded
general partnerships were based on publicly available research analysts estimates, and estimated financial data of CST were based on CST management forecasts and other publicly available information. For purposes of this analysis, BofA
Merrill Lynch aggregated the implied equity value reference ranges for each of CSTs retail business, CSTs ownership interest in the general partner of CAPL and CSTs investment in limited partner units of CAPL. This analysis
indicated the following approximate implied per share equity value reference range for CST (rounded to the nearest $0.25 per share), as compared to the merger consideration:
|
|
|
Implied Per Share Equity Value Reference Range
|
|
Merger Consideration
|
$33.50 $46.25
|
|
$48.53
|
CST BRANDS, INC.
Proxy
Statement
33
THE MERGER (PROPOSAL 1)
No company used in this analysis is identical or directly comparable to CST or CAPL, as applicable. Accordingly, an evaluation of the results of this analysis is not entirely
mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which
CST was compared.
Selected Precedent Transactions Analysis
. BofA Merrill Lynch reviewed, to the extent publicly
available, financial information relating to the following eleven selected transactions involving companies in the retail convenience store industry (which we refer to, collectively, as the selected precedent transactions):
|
|
|
|
|
Announcement Date
|
|
Acquiror
|
|
Target
|
August 25, 2003
|
|
The Pantry, Inc.
|
|
Golden Gallon Holding LLC
|
October 6, 2003
|
|
Alimentation Couche-Tard Inc.
|
|
The Circle K Corporation
|
January 27, 2004
|
|
Green Valley Acquisition Co., LLC
|
|
Uni-Marts, LLC
|
October 21, 2005
|
|
Seven-Eleven Japan Co., Ltd.
|
|
7-Eleven, Inc.
|
December 21, 2005
|
|
Wellspring Capital Management LLC
|
|
Susser Holdings Corporation
|
September 21, 2007
|
|
Susser Holdings Corporation
|
|
TCFS Holdings, Inc. (Town & Country Food Stores, Inc.)
|
April 18, 2012
|
|
Alimentation Couche-Tard Inc.
|
|
Statoil Fuel & Retail ASA
|
April 28, 2014
|
|
Energy Transfer Partners, L.P.
|
|
Susser Holdings Corporation
|
May 22, 2014
|
|
Marathon Petroleum Corporation
|
|
Hess Retail Holdings LLC
|
September 25, 2014
|
|
Energy Transfer Partners, L.P.
|
|
Aloha Petroleum, Ltd.
|
December 18, 2014
|
|
Alimentation Couche-Tard Inc.
|
|
The Pantry, Inc.
|
BofA Merrill Lynch reviewed, among other things, transaction values of the selected precedent
transactions, calculated as the purchase prices paid for the target companies plus debt and minority interests and less cash and cash equivalents, as a multiple of such target companies latest 12 months EBITDA, which in the case of the
acquisition of Susser Holdings Corporation reflects the multiple for Sussers retail business only. The overall low to high latest 12 months EBITDA multiples observed for the selected transactions were 5.1x to 13.7x. BofA Merrill
Lynch then applied a range of selected retail multiples of 8.0x to 12.0x derived from the selected transactions to each of (i) CSTs latest 12 months Retail Pro Forma Adjusted EBITDA from June 30, 2016 and (ii) CSTs fiscal year 2016
estimated Retail Pro Forma Adjusted EBITDA.
BofA Merrill Lynch reviewed, to the extent publicly available, financial
information relating to the following three selected transactions involving general partnerships that BofA Merrill Lynch in its professional judgment considered generally relevant for comparative purposes to CAPL (collectively, the selected
precedent general partnership transactions).
|
|
|
|
|
Announcement Date
|
|
Acquiror
|
|
Target
|
June 16, 2014
|
|
Williams Companies, Inc.
|
|
Access Midstream Partners GP, L.L.C.
|
August 6, 2014
|
|
CST Brands, Inc.
|
|
Lehigh Gas GP, LLC
|
January 8, 2016
|
|
ArcLight Capital Partners
|
|
TransMontaigne GP LLC
|
BofA Merrill Lynch reviewed, among other things, the implied value of the general partnership acquired in
the selected precedent general partnership transactions, calculated based on the purchase prices paid for the target companies less the market value of any limited partnership interests purchased in connection with the transaction, as a multiple of
such target companies distributable cash flows derived assuming, based on BofA Merrill Lynchs professional judgment and expertise, a 1.0x distribution coverage ratio for the following fiscal year of each company. The range of such
multiples observed for the selected precedent general partnership transactions were 14.4x to 20.8x.
Based upon its
professional judgment and experience BofA Merrill Lynch then applied a selected general partner distributable cash flow multiple range of 15.0x to 20.0x to CSTs estimate for CAPLs fiscal year 2017 distributable cash flow of $11
34
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
million, based on CST management forecasts, derived assuming, based on BofA Merrill Lynchs professional judgment and expertise, a 1.0x distribution coverage ratio for CAPL for purposes of
determining the value of the ownership interest in the general partner of CAPL owned by CST.
BofA Merrill Lynch calculated an
equity value of CSTs investment in limited partner units of CAPL based on CAPLs closing stock price of $24.34 on August 15, 2016, which was the last trading day prior to the
Wall Street Journal
article announcing that Couche-Tard
was near a deal to buy CST.
Estimated financial data of the selected precedent transactions and selected precedent general
partnership transactions were based on publicly available research analysts estimates, and estimated financial data of CST were based on CST management forecasts and other publicly available information. For purposes of this analysis,
BofA Merrill Lynch aggregated the implied equity value reference ranges for each of CSTs retail business, CSTs ownership interest in the general partner of CAPL and CSTs investment in limited partner units of CAPL. This
analysis indicated the following approximate implied per share equity value reference ranges for CST (rounded to the nearest $0.25 per share), as compared to the merger consideration:
|
|
|
|
|
|
|
Implied Per Share Equity Value Reference Ranges
|
|
Merger Consideration
|
|
Based on latest 12 months Retail Pro Forma
Adjusted EBITDA from June 30, 2016
|
|
Based on 2016 estimated Retail Pro
Forma Adjusted EBITDA
|
|
$39.00 $61.50
|
|
$35.00 $55.75
|
|
$
|
48.53
|
|
No company, business or transaction used in this analysis is identical or directly comparable to CST or
the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and
other factors that could affect the acquisition or other values of the companies, business segments or transactions to which CST and the merger were compared.
Discounted Cash Flow and Discounted Distributions Analysis.
BofA Merrill Lynch performed a discounted cash flow analysis of CST, calculating the estimated present value of the
standalone unlevered, after-tax free cash flows of CSTs retail business, the estimated present value of the distributions with respect to CSTs limited partnership interests in CAPL and the estimated present value of the distributions
with respect to CSTs ownership interest in the general partner of CAPL, in each case forecasted during the fiscal year 2016 after June 30, 2016 through the full fiscal year ending December 31, 2020 based on CST management
forecasts. BofA Merrill Lynch calculated terminal values for CST by applying a range of selected retail terminal value EBITDA multiples of 8.0x to 10.0x. The cash flows and terminal values were then discounted to present value as of June
30, 2016 using discount rates ranging from 7.25% to 8.75%, which were based on the estimate of CSTs weighted average cost of capital. This analysis indicated the following approximate implied per share equity value reference ranges for
CST (rounded to the nearest $0.25 per share):
|
|
|
Implied Per
Share Equity Value Reference Range CST Retail
|
Low
|
|
High
|
$41.50
|
|
$57.25
|
BofA Merrill Lynch then performed a discounted distribution analysis to calculate the estimated present
value of the estimated limited partner distributions to CST from its ownership interest in limited partner units of CAPL during fiscal year 2016 after June 30, 2016 through the full fiscal year ending December 31, 2020, based on CST management
forecasts. BofA Merrill Lynch calculated terminal values of such limited partner distributions by applying a range of terminal yields of 9.0% to 12.0% to fiscal year 2020 estimated limited partner distributions to CST. The limited partner
distributions and terminal values were then discounted to present value as of June 30, 2016 using cost of equity discount rates ranging from 7.25% to 8.75%, which were based on an estimate of CAPLs weighted average cost of
capital. This analysis indicated the following approximate implied per share equity value reference range for limited partner distributions to CST (rounded to the nearest $0.25 per share):
|
|
|
Implied Per Share Equity Value Reference Range CAPL LP
Interest
|
Low
|
|
High
|
$2.50
|
|
$3.25
|
BofA Merrill Lynch then performed a discounted distribution analysis to calculate the estimated present
value of the estimated incentive distribution rights income to CST from its ownership interest in the general partner of CAPL during fiscal year 2016
CST BRANDS, INC.
Proxy
Statement
35
THE MERGER (PROPOSAL 1)
after June 30, 2016 through the full fiscal year ending December 31, 2020, based on CST management forecasts. BofA Merrill Lynch calculated terminal values of such general partner distributions by
applying a range of terminal yields of 7.0% to 9.0% to fiscal year 2020 estimated incentive distribution rights distributions to CST. The incentive distribution rights and terminal values were then discounted to present value as of June 30,
2016 using cost of equity discount rates ranging from 9.00% to 11.25%, which were based on an estimate of the general partner of CAPLs weighted average cost of capital. This analysis indicated the following approximate implied per share
equity value reference range for general partner distributions to CST (rounded to the nearest $0.25 per share):
|
|
|
Implied Per Share Equity Value Reference Range CAPL GP
Interest
|
Low
|
|
High
|
$1.50
|
|
$1.75
|
BofA Merrill Lynch then added the implied per share equity value reference ranges resulting from the
above three analyses, indicating the following approximate implied per share equity value reference range for CST (rounded to the nearest $0.25 per share), as compared to the merger consideration:
|
|
|
Implied Per Share
Equity Value
Reference Range Aggregate
|
|
Merger Consideration
|
$45.50 $62.25
|
|
$48.53
|
Other Factors
In rendering its opinion, BofA Merrill Lynch also reviewed and considered for information purposes only other factors, including:
|
|
|
the historical trading performance of CST common stock during the 52-week period ended March 3, 2016, the day prior to CSTs public
announcement of the exploration of strategic alternatives, which reflected low to high closing prices for CST common stock during such period of approximately $32.00 to $44.75 per share;
|
|
|
|
publicly available one-year forward Wall Street research analysts stock price targets for CST as of March 3, 2016 and as of August 19, 2016,
discounted to present value using a discount rate based on CSTs cost of equity of 9.5%, which indicated a target stock price range for CST common stock of approximately $29.25 to $41.00 per share and $32.00 $50.25 per share,
respectively; and
|
|
|
|
the results of the selected premiums paid analysis described immediately below.
|
BofA Merrill Lynch identified, to the extent publicly available, selected all-cash transactions involving U.S. publicly traded companies
announced between January 1, 2005 and June 30, 2016 with transaction values in excess of $500 million. BofA Merrill Lynch calculated the (i) average and median premiums to the target companies closing stock prices on the last trading day
prior to public announcement of the relevant transaction, public disclosure of a potential transaction or the review of strategic alternatives, public speculation of a transaction or other market rumors or speculation (which we refer to as the
unaffected share price) of approximately 36% and 31%, respectively, and (ii) average and median premiums to the target companies high closing stock prices during the 52-week period prior to public announcement of the relevant
transaction of approximately 12% and 12%, respectively.
BofA Merrill Lynch then applied a range of calculated premiums from
(i) 20% 45% to the price per share of $34.21 of CST common stock as of March 3, 2016, the day prior to CSTs public announcement of the exploration of strategic alternatives, and (ii) 0.0% 22.5% to the price per share of $44.75 of
CST common stock, representing the high closing stock price of CST common stock during the 52-week period ended March 3, 2016, the day prior to CSTs public announcement of the exploration of strategic alternatives. This analysis indicated
an approximate per share equity value reference range, rounded to the nearest $0.25, for CST of $41.00 $54.75.
No
company or transaction used in this analysis is identical or directly comparable to CST or the merger, respectively. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex
considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which CST was compared.
36
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
Miscellaneous
As noted above, the discussion set forth above is a summary
of the material financial analyses presented by BofA Merrill Lynch to the CST board of directors in connection with its opinion and is not a comprehensive description of all analyses undertaken by BofA Merrill Lynch in connection with its
opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular
circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Merrill Lynch believes that its analyses summarized above must be considered as a whole. BofA Merrill Lynch
further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying BofA Merrill Lynchs analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given
greater weight than any other analysis referred to in the summary.
In performing its analyses, BofA Merrill Lynch considered
industry performance, general business and economic conditions and other matters, many of which are beyond the control of CST and Circle K. The estimates of the future performance of CST in or underlying BofA Merrill Lynchs analyses are
not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Merrill Lynchs analyses. These analyses were prepared solely as part
of BofA Merrill Lynchs analysis of the fairness, from a financial point of view, of the merger consideration and were provided to the CST board of directors in connection with the delivery of BofA Merrill Lynchs opinion. The
analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the
ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Merrill Lynchs view of the actual values of CST.
The type and amount of consideration payable in the merger was determined through negotiations between CST and Circle K, rather than by
any financial advisor, and was approved by the CST board of directors. The decision to enter into the merger agreement was solely that of the CST board of directors. As described above, BofA Merrill Lynchs opinion and analyses were
only one of many factors considered by the CST board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the CST board of directors or management with respect to the merger or the merger
consideration.
CST has agreed to pay BofA Merrill Lynch for its services in connection with the merger an aggregate fee of
$30 million, $2 million of which was payable upon delivery of its opinion and the remainder of which is contingent upon consummation of the merger. CST also has agreed to reimburse BofA Merrill Lynch for its expenses incurred in connection with
BofA Merrill Lynchs engagement and to indemnify BofA Merrill Lynch, any controlling person of BofA Merrill Lynch and each of their respective directors, officers, employees, agents and affiliates against specified liabilities, including
liabilities under the federal securities laws.
BofA Merrill Lynch and its affiliates comprise a full service securities firm
and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management,
financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Merrill Lynch and its affiliates may invest on a
principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including
derivatives, bank loans or other obligations) of CST, Circle K and certain of their respective affiliates.
BofA Merrill Lynch
and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to CST and certain of its affiliates and have received or in the future may
receive compensation for the rendering of these services, including (i) having acted as financial advisor to CST in connection with an acquisition transaction, (ii) having acted or acting as a book-running manager and underwriter for certain
equity offerings of certain affiliates of CST, (iii) having acted or acting as a lender under certain term loans, letters of credit, credit facilities and other credit arrangements of CST and/or certain of its affiliates, (iv) having provided or
providing certain managed investments services and products to CST and/or certain of its affiliates, (v) having acted or acting as an agent for CST and certain of its subsidiaries in connection with certain purchases of equity interests of an
affiliate of CST, and (vi)
CST BRANDS, INC.
Proxy
Statement
37
THE MERGER (PROPOSAL 1)
having provided or providing certain treasury management products and services to CST and/or certain of its affiliates. In addition, BofA Merrill Lynch and/or certain of its affiliates have
maintained, currently are maintaining, and in the future may maintain, commercial (including vendor and/or customer) relationships with CST and/or certain of its affiliates. From August 1, 2014 through July 31, 2016, BofA Merrill Lynch and its
affiliates derived aggregate revenues from CST and its affiliates of approximately $8 million for investment and corporate banking services.
In addition, BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to
Circle K and certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including (i) having acted as a financial advisor to The Pantry, Inc. (which we refer to as Pantry),
a current affiliate of Circle K, in the acquisition of Pantry by an affiliate of Circle K, (ii) having acted or acting as a lender under certain term loans, letters of credit, credit and leasing facilities and other credit arrangements of Circle K
and/or certain of its affiliates, (iii) having provided or providing certain managed investments services and products to Circle K and/or certain of its affiliates, and (iv) having provided or providing certain treasury management products and
services to Circle K and/or certain of its affiliates. In addition, BofA Merrill Lynch and/or certain of its affiliates have maintained, currently are maintaining, and in the future may maintain, commercial (including vendor and/or customer)
relationships with Circle K and/or certain of its affiliates. From August 1, 2014 through July 31, 2016, BofA Merrill Lynch and its affiliates derived aggregate revenues from Circle K and its affiliates of approximately $22 million for
investment and corporate banking services.
Financing
The merger is not conditioned upon receipt of financing by Circle K. We understand that Couche-Tard plans to finance the transaction
using available cash, existing credit facilities and a new term loan
.
Interests of CSTs
Directors and Executive Officers in the Merger
In considering the recommendation of the CST board of directors that CST
stockholders vote in favor of the adoption of the merger agreement, CST stockholders should be aware that the directors and executive officers of CST have potential interests in the proposed merger that may be different from or in addition to the
interests of CST stockholders generally. The CST board of directors was aware of these interests and considered them, among other matters, in making its recommendation that CSTs stockholders vote in favor of the adoption of the merger
agreement.
Treatment of CST Equity Awards
Stock Options
. At the effective time, each option to purchase CST common stock (which we refer to as a stock option) that is outstanding immediately prior to the effective time,
whether vested or unvested, will become fully vested and be converted into the right to receive a cash payment equal to the product of (1) the number of shares of CST common stock subject to such option as of the effective time and (2) the excess of
the merger consideration over the exercise price.
Restricted Shares
. At the effective time, each share of CST
common stock granted subject to any vesting or other lapse restrictions pursuant to a CST benefit plan (which we refer to as a restricted share) that is outstanding immediately prior to the effective time, whether vested or unvested,
will become fully vested and will be converted into the right to receive a cash payment equal to the merger consideration.
Restricted Stock Units
. At the effective time, each award of CST restricted stock units (which we refer to as
RSUs) that is outstanding immediately prior to the effective time, whether vested or unvested, will, if granted prior to the date of the merger agreement, become fully vested and be converted into the right to receive a cash payment
equal to the product of (1) the number of shares of CST common stock subject to such award as of the effective time and (2) the merger consideration. For purposes of unvested CST market share units (which we refer to as MSUs), which
are RSUs that vest based on performance goals related to the price of CST common stock, in accordance with the award agreements, performance goals will be deemed satisfied under this transaction based on the merger consideration.
At the effective time, each award of RSUs that is granted after the date of the merger agreement, if any, that is outstanding as of
immediately prior to the effective time will be converted into the right to receive a cash payment equal to the product of (1) the number of shares of CST common stock subject to such award as of the effective time and (2) the merger consideration,
but such award will remain subject to the vesting terms that applied to such award prior to the effective time.
38
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
For an estimate of the amounts that would become payable to each of CSTs named executive officers in settlement of their unvested equity awards, see
Quantification of Potential
Payments to CSTs Named Executive Officers in Connection with the Merger
. If the effective time of the merger were September 1, 2016, based on a price per share of CST common stock of $48.53, CST estimates the aggregate amount
that would become payable to CSTs three executive officers other than its named executive officers in settlement of their unvested equity awards to be $2,324,394 and the aggregate amount that would become payable to CSTs non-employee
directors in settlement of their unvested equity awards to be $2,555,963.
Separation Agreements
CST is party to separation agreements with each of its executive officers, which provide severance benefits upon a qualifying termination
of employment. If the employment of an executive officer of CST were terminated by CST without cause or by the executive officer for good reason within two years following a change in control of CST (such as the merger), the executive officer
would be entitled to the following:
|
|
|
Severance Payment
. A cash severance payment equal to the product of (a) 2.5 (for Ms. Lubel) or 2.0 (for all other executive
officers), multiplied by (b) the sum of the executive officers annual base salary plus target annual short-term incentive opportunity, which severance payment is payable in a lump sum;
|
|
|
|
Prorated Target Annual Short-Term Incentive
. A cash payment equal to the executive officers target annual short-term incentive
opportunity for the year of termination, prorated for the portion of the year elapsed as of the last day of the month of termination, which payment is payable in a lump sum;
|
|
|
|
Long-Term Incentive Award Vesting
. Full vesting of any unvested long-term incentive awards immediately upon termination; and
|
|
|
|
Ancillary Benefits
. Continued medical, dental and other insurance benefits for a period of three years from the date of termination on
the same basis as immediately prior to the date of termination, or if such continued coverage is not permitted by applicable plans or law, a lump sum payment equal to the value of CSTs contribution for such coverage, and reimbursement of costs
incurred in connection with a move back to the executive officers original work location prior to the change in control and of reasonable outplacement expenses in seeking comparable employment during the first year following the date of
termination.
|
As a condition of receiving the severance benefits under the separation agreements, each of
the executive officers must execute a release of claims and comply, for one year following the date of termination, with restrictive covenants concerning noncompetition and nonsolicitation of employees, as well as perpetual confidentiality and
nondisparagement covenants.
In connection with the termination of employment of CSTs Executive Vice President and Chief
Strategy Officer Stephan F. Motz effective February 29, 2016, Mr. Motz and CST entered into a separation agreement pursuant to which he received the severance payable under his separation agreement upon a termination of employment not in connection
with a change in control. Pursuant to Mr. Motzs separation agreement, if there is a change in control of CST within 18 months following his termination of employment, he will receive (a) a cash payment equal to the excess of the
severance payment that would have been payable to him if his employment had been terminated by CST without cause or by him for good reason within two years following a change in control over the cash severance actually paid to him upon his
termination of employment and (b) 12 months of life insurance coverage (in addition to the 12 months he received in connection with his termination of employment), or if such continued coverage is not permitted by applicable plans or law, a lump sum
payment equal to the value of CSTs contribution for such coverage.
For an estimate of the amounts that would become
payable to each of CSTs named executive officers under their separation agreements if a severance-qualifying termination of employment were to occur immediately following consummation of the merger, see
Quantification of
Potential Payments to CSTs Named Executive Officers in Connection with the Merger
. CST estimates that the aggregate value of the severance payment, prorated target annual short-term incentive opportunity, insurance continuation
and outplacement benefits that would become payable to CSTs three other executive officers under their separation agreements if the effective time of the merger were September 1, 2016, and each incurred a severance-qualifying termination of
employment on that date, to be $3,530,207.
CST BRANDS, INC.
Proxy
Statement
39
THE MERGER (PROPOSAL 1)
CAPL Executive Income Continuity Plan
CAPL and its general partner,
CrossAmerica GP, LLC maintain the Executive Income Continuity Plan (which we refer to as the EICP) for their executive officers and other key employees who directly or indirectly provide services to or on behalf of CAPL, which provides
severance benefits upon a qualifying termination of employment. Certain of CSTs executive officers participate in the EICP. If a participants employment were terminated without cause or by the participant for good reason in
connection with a change in control of CAPL (such as the merger), the participant would be entitled to the following:
|
|
|
Severance Payment
. A cash severance payment equal to the product of (a) a severance multiple of 2.99 and (b) the sum of the
participants annual base salary plus target annual short-term incentive opportunity; however, for participants (other than Mr. Killinger) who would also be entitled to change-in-control severance benefits under a separation agreement with CST,
the aggregate severance payments and benefits may not exceed the greater of the payments and benefits provided under the CST separation agreement and those under the EICP (and in the case of Mr. Killinger, the aggregate severance payments under his
separation agreement with CST and the EICP may not exceed twice his severance payment under his separation agreement with CST);
|
|
|
|
Long-Term Incentive Award Vesting
. Full vesting of any unvested long-term incentive awards granted under CAPLs 2012 Incentive
Award Plan immediately upon termination; however, none of the executive officers of CST who participate in the EICP hold such awards; and
|
|
|
|
Ancillary Benefits
. Continued medical, dental and other insurance benefits for a period of three years (in the case of a participant
designated as an executive officer of CAPL) or one year (in the case of other participants) from the date of termination on the same basis as the participants coverage as of immediately prior to the date of termination, and reimbursement of
relocation expenses incurred in connection with a move back to the participants original work location and of reasonable outplacement expenses in seeking comparable employment for a period of one year (in the case of a participant designated
as an executive officer of CAPL) or six months (in the case of other participants) from the date of termination.
|
As a condition of receiving the severance benefits under the EICP, each participant must execute a release of claims and nondisparagement agreement.
For an estimate of the amounts that would become payable under the EICP to the one CST named executive officer who participates in the
EICP were a severance-qualifying termination of employment to occur immediately following consummation of the merger, see
Quantification of Potential Payments to CSTs Named Executive Officers in Connection with the
Merger
. If the effective time of the merger were September 1, 2016, CST estimates that the two other CST executive officers who participate in the EICP (one of whom is designated as an executive officer of CAPL) would be entitled to
severance payments under the EICP with an aggregate value of $1,253,357 upon a severance-qualifying termination of employment.
Prorated
Annual Short-Term Incentive for the Year of Closing
Pursuant to the merger agreement, if the merger is completed prior to
December 31, 2016, on or prior to completion, CST may pay annual short-term incentive awards to eligible employees (including the executive officers) in an amount determined based on actual performance through the completion of the merger and
prorated based on the portion of the year elapsed as of that time.
For an estimate of the amounts of the prorated annual
short-term incentive awards that would become payable to each of CSTs named executive officers, see
Quantification of Potential Payments to CSTs Named Executive Officers in Connection with the Merger
. CST
estimates that the aggregate value of the prorated annual short-term incentive payment that would become payable to CSTs three other executive officers if the effective time of the merger were September 1, 2016 to be $443,277.
Indemnification; Directors and Officers Insurance
Pursuant to the merger agreement, from and after the effective time, Circle K will indemnify certain persons, including CSTs directors and executive officers. In addition, for a period of not
less than six years from the effective time, Circle K will maintain an insurance and indemnification policy for the benefit of certain persons, including CSTs directors and executive officers. For additional information, see
The
Merger Agreement Indemnification and Insurance
.
40
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
For a general summary of the compensation provided to CSTs non-employee directors, see the section of CSTs annual proxy statement on Schedule 14A, filed with the SEC on April 29, 2016,
entitled Director Compensation. In addition, with respect to his service on the Strategic Review Committee in connection with CSTs process to evaluate potentially available strategic alternatives that culminated in CSTs
entry into the merger agreement, each member of that committee is entitled to a cash fee of $20,000 per month of service, except that the Chairman of the committee is entitled to a cash fee of $30,000 per month of service.
Quantification of Potential Payments to CSTs Named Executive Officers in Connection with the Merger
The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of
information about certain compensation for each of CSTs named executive officers that is based on or otherwise relates to the merger and assumes, among other things, that CSTs named executive officers will incur a severance-qualifying
termination of employment immediately following the effective time of the merger. For additional details regarding the terms of the payments described below, see the discussion under the caption
Interests of CSTs Directors
and Executive Officers in the Merger
.
The amounts indicated below are estimates based on multiple assumptions that
may or may not actually occur or be accurate on the relevant date, including assumptions described below, and do not reflect certain compensation actions that may occur before the effective time of the merger, including the grant of any additional
equity awards as permitted by the merger agreement if the effective time has not occurred by February 15, 2017. For purposes of calculating such amounts, we have assumed:
|
|
|
September 1, 2016 as the closing date of the merger; and
|
|
|
|
a severance-qualifying termination of each named executive officers employment immediately following the effective time of the merger.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
($)
(1)
|
|
|
Equity
($)
(2)
|
|
|
Perquisites/
Benefits
($)
(3)
|
|
|
Total
($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kimberly S. Lubel
|
|
|
6,424,625
|
|
|
|
6,672,423
|
|
|
|
71,468
|
|
|
|
13,168,516
|
|
Clayton E. Killinger
|
|
|
4,964,781
|
|
|
|
811,049
|
|
|
|
87,398
|
|
|
|
5,863,228
|
|
Anthony P. Bartys
|
|
|
1,766,869
|
|
|
|
419,170
|
|
|
|
38,906
|
|
|
|
2,224,945
|
|
Stephan F. Motz
|
|
|
771,313
|
|
|
|
|
|
|
|
2,075
|
|
|
|
773,388
|
|
Charles H. (Hal) Adams
|
|
|
1,893,750
|
|
|
|
561,564
|
|
|
|
74,050
|
|
|
|
2,529,364
|
|
(1)
|
The cash amount payable to the named executive officers (other than Mr. Motz) consists of the following components:
|
|
(a)
|
A severance payment to each named executive officer under the officers separation agreement with CST equal to the product of (a) 2.5 (for
Ms. Lubel) or 2.0 (for all other executive officers), multiplied by (b) the sum of the executive officers annual base salary plus target annual short-term incentive opportunity, which severance payment would be paid in a lump sum;
|
|
(b)
|
A payment to each named executive officer under the officers separation agreement with CST equal to the executive officers target annual
short-term incentive opportunity for the year of termination, prorated for the portion of the year elapsed as of the last day of the month of termination, which payment would be paid in a lump sum; and
|
|
(c)
|
For Mr. Killinger, a severance payment under the EICP, which due to the cap on payments applicable to him that is described above, is equal to the
cash severance payment under his separation agreement with CST.
|
All components of such cash
amount are double-trigger (
i.e.
, they are contingent upon a qualifying termination of employment). As a condition of receiving the severance payment and target annual short-term incentive opportunity under the CST severance
agreements, the named executive officers must execute a release of claims and comply with restrictive covenants concerning noncompetition and nonsolicitation of employees for one year following the date of termination and perpetual confidentiality
and nondisparagement covenants. As a condition of receiving the severance benefits under the EICP, each participant must execute a release of claims and nondisparagement agreement. The estimated amount of each component of the cash payment
is set forth in the table below.
CST BRANDS, INC.
Proxy
Statement
41
THE MERGER (PROPOSAL 1)
The cash amount payable to Mr. Motz consists of a payment equal to the excess of the severance payment that would have
been payable to him if his employment had been terminated by CST without cause or by him for good reason within two years following a change in control over the cash severance actually paid to him in connection with his termination of employment on
February 29, 2016. Because Mr. Motzs employment has already terminated, such payment would be single-trigger (
i.e.
, automatically as a result of the consummation of the merger). In connection with his termination
of employment, he executed a release of claims and agreed to comply with restrictive covenants concerning noncompetition and nonsolicitation of employees for one year following the date of termination and perpetual confidentiality and
nondisparagement covenants.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
CST Severance
Payment
($)
|
|
|
Prorated Target
Annual Short-
Term
Incentive
($)
|
|
|
CAPL EICP
Severance Payment
($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
Kimberly S. Lubel
|
|
|
5,536,250
|
|
|
|
888,375
|
|
|
|
|
|
Clayton E. Killinger
|
|
|
2,297,750
|
|
|
|
369,281
|
|
|
|
2,297,750
|
|
Anthony P. Bartys
|
|
|
1,539,450
|
|
|
|
227,419
|
|
|
|
|
|
Stephan F. Motz
|
|
|
771,313
|
|
|
|
|
|
|
|
|
|
Charles H. (Hal) Adams
|
|
|
1,650,000
|
|
|
|
243,750
|
|
|
|
|
|
If the effective time occurred in 2016, on or prior to the closing of the merger,
the named executive officers (other than Mr. Motz) would be entitled to a prorated annual short-term incentive award, determined based on actual performance as of the effective time. Such amount would be payable single-trigger
(
i.e.
, automatically as a result of the consummation of the merger).
(2)
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As described in more detail in
The Merger Agreement Treatment of CST Equity Awards; Employee Stock Purchase Plan
, any CST
stock options, restricted stock awards, restricted stock units and market share units (including those held by the directors and executive officers) that were outstanding at the time the merger agreement was entered into and that remain outstanding
as of the effective time of the merger will vest upon the effective time of the merger and be settled for the merger consideration (less, in the case of stock options, the applicable exercise price). For purposes of any market share unit award
with an incomplete performance period as of completion of the merger, satisfaction of performance goals will be deemed satisfied based on the value of the merger consideration, in accordance with the applicable award agreement.
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The amounts above and in the table below assume a price per share of CST common stock of
$48.53 and satisfaction of the performance goals underlying market share unit awards based on the value of the merger consideration. Set forth below are the values of each type of unvested CST equity award held by the named executive officers
that would become vested upon the consummation of the merger (excluding awards for which Messrs. Killinger, Adams and Bartys are retirement-eligible under the terms of the applicable award agreements). The amounts disclosed in respect of the
market share unit awards include the value of dividend equivalents that would become payable upon vesting. The foregoing amounts would become vested and payable single-trigger (
i.e.
, automatically as a result of the
consummation of the merger).
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|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Options
($)
|
|
|
RSUs
($)
|
|
|
MSUs
($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
Kimberly S. Lubel
|
|
|
2,243,913
|
|
|
|
2,780,090
|
|
|
|
1,648,421
|
|
Clayton E. Killinger
|
|
|
|
|
|
|
|
|
|
|
811,049
|
|
Anthony P. Bartys
|
|
|
|
|
|
|
|
|
|
|
919,170
|
|
Stephan F. Motz
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles H. (Hal) Adams
|
|
|
|
|
|
|
|
|
|
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561,565
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(3)
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The separation agreements with the named executive officers (other than Mr. Motz) provide for (a) continued medical, dental and other insurance
benefits for a period of three years from the date of termination on the same basis as in effect immediately prior to the date of termination, or if such continued coverage is not permitted by applicable plans or law, a lump sum payment equal to the
value of CSTs contribution for such coverage and (b) reimbursement of reasonable expenses in seeking comparable employment during the first year following the date of termination. The estimated amount of each such benefit is set
forth in the table below. In addition, the separation agreements provide for relocation benefits in certain circumstances, which are not determinable. All such amounts are double-trigger (
i.e.
, they are contingent upon a
qualifying termination of employment). As a condition of receiving the foregoing benefits, the named executive officers must execute a release of claims and comply with restrictive covenants concerning noncompetition and nonsolicitation of
employees for one year following the date of termination and perpetual confidentiality and nondisparagement covenants.
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42
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
In connection with his termination of employment on February 29, 2016, Mr. Motz entered into a separation agreement with
CST pursuant to which he is entitled to continued life insurance benefits for one year from his date of termination, or if such continued coverage is not permitted by applicable plans or law, a lump sum payment equal to the value of CSTs
contribution for such coverage. In the event of a change in control on September 1, 2016, Mr. Motzs separation agreement provides that he will receive an additional year of life insurance coverage, or if such continued coverage is not
permitted by applicable plans or law, a lump sum payment equal to the value of CSTs contribution for such coverage. Because Mr. Motzs employment has already terminated, such benefit would be provided single-trigger
(
i.e.
, automatically as a result of the consummation of the merger). In connection with his termination of employment, he executed a release of claims and agreed to comply with restrictive covenants concerning noncompetition and
nonsolicitation of employees for one year following the date of termination and perpetual confidentiality and nondisparagement covenants.
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|
|
|
|
|
|
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Name
|
|
Insurance
Continuation
($)
|
|
|
Outplacement
($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
Kimberly S. Lubel
|
|
|
46,468
|
|
|
|
25,000
|
|
Clayton E. Killinger
|
|
|
62,398
|
|
|
|
25,000
|
|
Anthony P. Bartys
|
|
|
13,906
|
|
|
|
25,000
|
|
Stephan F. Motz
|
|
|
2,075
|
|
|
|
|
|
Charles H. (Hal) Adams
|
|
|
49,050
|
|
|
|
25,000
|
|
Material U.S. Federal Income Tax Consequences of the Merger
The following is a general discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined
below) of CST common stock whose shares are exchanged for cash pursuant to the merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. This discussion is based on the
provisions of the U.S. Internal Revenue Code of 1986, as amended (which we refer to as the Code), applicable U.S. Treasury Regulations, judicial opinions and administrative rulings and published positions of the Internal Revenue
Service (which we refer to as the IRS), each as in effect as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could
affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is for general information purposes only and does not purport to be a complete analysis of all potential tax consequences. This discussion
does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax considerations under state, local or foreign laws or
U.S. federal laws other than those pertaining to the U.S. federal income tax. This discussion is not binding on the IRS or the courts and, therefore, could be subject to challenge, which could be sustained. No ruling is intended to be
sought from the IRS with respect to the merger.
For purposes of this discussion, the term U.S. holder means a
beneficial owner of CST common stock that is for U.S. federal income tax purposes:
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|
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a citizen or individual resident of the United States;
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a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the
United States, any state thereof, or the District of Columbia;
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a trust if (1) a court within the United States is able to exercise primary supervision over the trusts administration, and one or more U.S.
persons are authorized to control all substantial decisions of the trust or (2) such trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or
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an estate the income of which is subject to U.S. federal income tax regardless of its source.
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This discussion applies only to U.S. holders of shares of CST common stock who hold such shares as a capital asset within the meaning of
Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular
circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or foreign currencies, traders in securities who elect
the
CST BRANDS, INC.
Proxy
Statement
43
THE MERGER (PROPOSAL 1)
mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, tax-qualified
retirement plans, banks and other financial institutions, mutual funds, certain expatriates, partnerships (or other entities or arrangements treated as partnerships for U.S. federal income tax purposes), S corporations, or other pass-through
entities, or investors in such partnerships, S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, U.S. holders who hold shares of CST common stock as part of a hedge, straddle, constructive
sale, conversion or other integrated transaction, U.S. holders who will hold (actually or constructively) an equity interest in the surviving corporation immediately after the merger, and U.S. holders who acquired their shares of CST common stock
through the exercise of employee stock options or other compensation arrangements). This discussion also does not address the U.S. federal income tax consequences to holders of shares of CST common stock who exercise appraisal rights in
connection with the merger under the DGCL.
If a partnership (including for this purpose any entity or arrangement treated as
a partnership for U.S. federal income tax purposes) holds shares of CST common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partners and the activities of the partnership. If you are, for
U.S. federal income tax purposes, a partner in a partnership holding shares of CST common stock, you should consult your tax advisor.
This summary of material U.S. federal income tax consequences is for general information purposes only and is not tax advice. Holders of CST common stock are urged to consult their own tax
advisors to determine the particular tax consequences to them of the merger, including the applicability and effect of the alternative minimum tax, the unearned income Medicare contribution tax and any other U.S. federal, or state, local, foreign or
other tax laws.
The receipt of cash by U.S. holders in exchange for shares of CST common stock pursuant to the merger
will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of CST common stock pursuant to the merger will recognize capital gain
or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) the U.S. holders adjusted tax basis in such shares.
Any such gain or loss will be long-term capital gain or loss if a U.S. holders holding period in the shares of CST common stock surrendered in the merger is greater than one year as of the date of
the merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a
U.S. holder acquired different blocks of CST common stock at different times and different prices, such U.S. holder must determine its adjusted tax basis, gain or loss and holding period separately with respect to each block of CST common stock.
Information Reporting and Backup Withholding
Payments made in exchange for shares of CST common stock pursuant to the merger may be subject, under certain circumstances, to information reporting and backup withholding (currently at a rate of
28%). To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return to the applicable withholding agent a properly completed and executed IRS Form W-9, certifying that such U.S. holder is a
U.S. person, that the taxpayer identification number provided is correct, and that such U.S. holder is not subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holders U.S. federal income tax liability, if any,
provided that such holder furnishes the required information to the IRS in a timely manner.
Regulatory
Approvals
HSR Clearance
. Under the HSR Act and the rules promulgated thereunder, certain transactions,
including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division and the FTC and all statutory waiting period requirements have been satisfied. Completion of the merger is
subject to the expiration or termination of the applicable waiting period under the HSR Act.
Under the HSR Act, the merger
may not be completed until the expiration of a 30 calendar day waiting period, which begins when Couche-Tard and CST file Premerger Notification and Report Forms under the HSR Act with the FTC and the Antitrust
44
CST BRANDS,
INC.
Proxy Statement
THE MERGER (PROPOSAL 1)
Division, unless such waiting period is earlier terminated by the FTC and the Antitrust Division. Couche-Tard and CST filed their Premerger Notification and Report Forms on September 16, 2016 in
connection with the merger, and the waiting period will therefore expire at 11:59 p.m., Eastern Time, on October 17, 2016. If prior to the expiration or termination of the waiting period either the FTC or the Antitrust Division issues a request
for additional information or documentary material from Couche-Tard and CST, the waiting period with respect to the merger would be extended until the 30th calendar day following the date of Couche-Tards and CSTs substantial compliance
with that request. After that time, absent Couche-Tards and CSTs agreement, the acquisition can be blocked only by court order. The FTC and the Antitrust Division may terminate the applicable waiting period at any time before its
expiration.
At any time before or after the expiration or termination of the statutory waiting periods under the HSR Act, or
before or after the effective time, the Antitrust Division or the FTC may take action under the antitrust laws, including seeking to enjoin the completion of the merger, to rescind the merger or to conditionally permit completion of the merger
subject to regulatory conditions or other remedies. In addition, U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the
completion of the merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. Although neither CST nor Couche-Tard believes that the merger
will violate the antitrust laws, there can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.
Canadian Competition Act Clearance
. Part IX of the Competition Act, including the regulations promulgated thereunder,
requires that the parties to certain transactions that exceed the thresholds set out in sections 109 and 110 of the Competition Act (which we refer to as notifiable transactions) provide the Commissioner of Competition (which we refer to
as the commissioner) with pre-closing notification of the transaction consisting of prescribed information.
Subject to certain limited exemptions, the parties to a notifiable transaction cannot complete the transaction until an applicable
waiting period under section 123 of the Competition Act has expired or been terminated or an appropriate waiver has been provided by the commissioner. The waiting period ends 30 days after the day on which the parties to the notifiable transaction
have submitted their respective notifications. The parties are entitled to complete their notifiable transaction at the end of the 30-day period, unless the commissioner notifies the parties, pursuant to subsection 114(2) of the Competition Act,
that the commissioner requires specified additional information that is relevant to the commissioners assessment of the notifiable transaction (which we refer to as a supplementary information request). In the event that the
commissioner issues a supplementary information request, the notifiable transaction cannot be completed until 30 days after compliance with such supplementary information request, provided that there is no order issued by the Competition Tribunal in
effect prohibiting completion at the relevant time. The commissioners substantive assessment of a notifiable transaction may extend beyond the statutory waiting period, and the commissioner may seek an order from the Competition Tribunal
before or after expiry of the statutory waiting period, and for up to one year following completion, to enjoin and/or prohibit all or part of a transaction.
In addition or as an alternative to filing notifications containing the prescribed information, a party to a notifiable transaction may comply with Part IX of the Competition Act by applying to the
commissioner for: (i) an Advance Ruling Certificate issued by the commissioner pursuant to section 102 of the Competition Act, which exempts parties from the notification requirements under Part IX of the Competition Act and bars the commissioner
from bringing an application under section 92 of the Competition Act to challenge the transaction, or (ii) a no-action letter from the commissioner advising that he does not, at the time, intend to initiate proceedings before the Competition
Tribunal under section 92 of the Competition Act to challenge the transaction (which we refer to as a no-action letter) and an exemption from the pre-merger notification obligation under paragraph 113(c) of the Competition Act.
The merger is a notifiable transaction, and as such, the parties must comply with the merger notification provisions of Part
IX of the Competition Act. Completion of the merger is also subject to the receipt of Canadian Competition Act Clearance, which is defined as one of the following having occurred: (i) the issuance of an Advance Ruling Certificate by the
commissioner, (ii) the expiration or termination of the applicable waiting period under Section 123 of the Competition Act following CST and Couche-Tard having given the requisite notice of the merger under Section 114 of the Competition Act or
(iii) waiver of the requisite notice under Paragraph 113(c) of the Competition Act.
CST BRANDS, INC.
Proxy
Statement
45
THE MERGER (PROPOSAL 1)
On August 30, 2016, Circle K filed with the commissioner a request for an Advance Ruling Certificate or no-action letter. Circle K and CST filed their notifications with the commissioner on or before
September 7, 2016, commencing the applicable waiting period from that date. On October 7, 2016, the commissioner issued supplementary information requests to each of Circle K and CST, thereby extending the waiting period until 30 days after both
Circle K and CST comply with the supplementary information requests.
Although neither CST nor Circle K believes that the
merger violates the Competition Act, there can be no assurance that a challenge to the merger will not be made or, if such a challenge is made, that it would not be successful.
Stockholder Litigation Relating to the Merger
Three separate complaints have been filed by purported stockholders of the Company commencing putative class action lawsuits challenging
the proposed transaction in the San Antonio Division of the United States District Court in the Western District of Texas. The first complaint, captioned
Richard Malone
v.
CST Brands, Inc. et. al.
(No. 5:16-cv-0955), was filed on
September 26, 2016 and names as defendants the Company and the directors of the Company. That complaint alleges, among other things, that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the
Exchange Act by filing or permitting to be filed a proxy statement that was allegedly materially incomplete and misleading. The second complaint, captioned
Harry Savage
v.
CST Brands, Inc. et. al.
(No. 5:16-cv-0968), was filed on
September 29, 2016 and names as defendants the Company, the directors of the Company, Circle K and Merger Sub. That complaint alleges, among other things, that the Companys directors breached their fiduciary duties by agreeing to an
allegedly unfair price in an allegedly unfair process and that they violated Sections 14(a) and 20(a) of the Exchange Act by filing or permitting to be filed a proxy statement that was allegedly materially incomplete and misleading, and that Circle
K and Merger Sub allegedly aided and abetted their breaches of fiduciary duty. The third complaint, captioned
Jacob Kempler Family Trust v. CST Brands, Inc.
(No. 5:16-cv-00982), was filed on October 4, 2016 and names as defendants the
Company and the directors of the Company. That complaint alleges, among other things, that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act by filing or permitting to be filed a
proxy statement that was allegedly materially incomplete and misleading. In each suit, the plaintiff seeks, among other things, injunctive relief enjoining completion of the merger, monetary damages and costs and attorneys fees. The
parties believe these claims are without merit.
Delisting and Deregistration of CST Common Stock
If the merger is completed, CST common stock will be delisted from the NYSE and deregistered under the Exchange Act.
46
CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger agreement, a copy of which is attached to this document as
Annex A
and which is incorporated by reference into this document. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We
encourage you to read carefully the merger agreement in its entirety, as the rights and obligations of the parties thereto are governed by the express terms of the merger agreement and not by this summary or any other information contained in this
document.
Explanatory Note Regarding the Merger Agreement
The following summary of the merger agreement, and the copy of the merger agreement attached as
Annex
A
to this
document, are intended to provide information regarding the terms of the merger agreement and are not intended to provide any factual information about CST or modify or supplement any factual disclosures about CST in its public reports filed with
the SEC. In particular, the merger agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to CST. The merger agreement contains representations
and warranties by and covenants of CST, Circle K and Merger Sub that were made only for purposes of that agreement and as of specified dates. The representations, warranties and covenants in the merger agreement were made solely for the benefit
of the parties to the merger agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures and being made for the purposes of allocating contractual risk between the parties to
the merger agreement instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties that generally differ from those applicable to
investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in CSTs
public disclosures. The representations, warranties and covenants in the merger agreement and any descriptions thereof should be read in conjunction with the disclosures in CSTs periodic and current reports, proxy statements and other
documents filed with the SEC. See the section entitled
Where You Can Find Additional Information
. Moreover, the description of the merger agreement below does not purport to describe all of the terms of such agreement
and is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached hereto as
Annex
A
and is incorporated herein by reference.
Additional information about CST may be found elsewhere in this document and CSTs other public filings. See the section
entitled
Where You Can Find Additional Information
.
Structure of the Merger; Certificate of Incorporation; Bylaws;
Directors and Officers; Headquarters
At the effective time, Merger Sub will merge with and into CST, and the separate
corporate existence of Merger Sub will cease. CST will be the surviving corporation in the merger and will continue its corporate existence as a Delaware corporation and an indirect wholly owned subsidiary of Circle K.
At the effective time, the certificate of incorporation of CST will be amended as set forth in Annex I to the merger agreement, and the
bylaws of Merger Sub that are in effect immediately before the effective time will become the bylaws of the surviving corporation.
At the effective time, the individuals holding positions as directors of Merger Sub immediately before the effective time will become the initial directors of the surviving corporation, and the
individuals holding positions as officers of CST immediately before the effective time will continue as the initial officers of the surviving corporation.
Upon the effective time, Circle K will cause a new Circle K division and shared service center to be based in San Antonio, Texas.
When the Merger Becomes Effective
The closing of the merger will take
place at 10:00 a.m. local time at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, 10019 on the second business day following satisfaction or waiver of the last of the conditions set forth in the merger
agreement to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of such conditions), or at such other place, date and time as CST and
Circle K may agree in writing.
CST BRANDS, INC.
Proxy
Statement
47
THE MERGER AGREEMENT
At the closing, CST will cause a certificate of merger to be filed with the Secretary of State of the State of Delaware. The merger will become effective at the time when the certificate of merger is
filed or at such later date or time as may be agreed by CST and Merger Sub and specified in the certificate of merger.
As of
the date of the filing of this document, the parties expect to complete the merger in early calendar year 2017. However, completion of the merger is subject to the satisfaction or waiver of the conditions to the completion of the merger, and
factors outside the control of CST or Circle K may delay the completion of the merger, or prevent it from being completed at all. There can be no assurances as to whether or when the merger will be completed.
Effect of the Merger on the Common Stock
At the effective time, each share of CST common stock outstanding immediately prior to the effective time (other than shares owned by CST in treasury and shares owned by Circle K or Merger Sub or any
subsidiaries of CST, Circle K or Merger Sub and other than dissenting shares for which appraisal rights have been properly exercised in accordance with Delaware law and not lost or withdrawn) will be converted into the right to receive the merger
consideration. The merger consideration will be $48.53 per share in cash, without interest, and subject to any applicable withholding taxes.
At the effective time, each share of CST common stock outstanding immediately prior to the effective time that is owned by CST in treasury or owned by Circle K or Merger Sub or any subsidiaries of CST,
Circle K or Merger Sub will be cancelled, and no consideration will be delivered in exchange for such cancellation.
At the
effective time, each share of common stock of Merger Sub outstanding immediately prior to the effective time will be converted into and become one validly issued, fully paid and nonassessable share of common stock of the surviving corporation, and
such shares will constitute the only outstanding shares of capital stock of the surviving corporation.
Treatment of CST Equity Awards;
Employee Stock Purchase Plan
Stock Options
. At the effective time, each stock option that is outstanding
immediately prior to the effective time, whether vested or unvested, will become fully vested and be converted into the right to receive a cash payment equal to the product of (1) the number of shares of CST common stock subject to such option as of
the effective time and (2) the excess of the merger consideration over the exercise price.
Restricted Shares
. At
the effective time, each restricted share that is outstanding immediately prior to the effective time, whether vested or unvested, will become fully vested and will be converted into the right to receive a cash payment equal to the merger
consideration.
RSUs
. At the effective time, each award of RSUs that is outstanding immediately prior to the
effective time, whether vested or unvested, will, if granted prior to the date of the merger agreement, become fully vested and be converted into the right to receive a cash payment equal to the product of (1) the number of shares of CST common
stock subject to such award as of the effective time and (2) the merger consideration. For purposes of unvested CST MSUs, which are RSUs that vest based on performance goals related to the price of CST common stock, in accordance with the award
agreements, performance goals will be deemed satisfied based on the merger consideration.
At the effective time, each award
of RSUs that is granted after the date of the merger agreement that is outstanding as of immediately prior to the effective time will be converted into the right to receive a cash payment equal to the product of (1) the number of shares of CST
common stock subject to such award as of the effective time and (2) the merger consideration, but such award will remain subject to the vesting terms that applied to such award prior to the effective time.
Employee Stock Purchase Plan
. CST has agreed that, as of no later than the business day immediately prior to the effective
time, CST will terminate the ESPP. CST also has agreed that it will take all necessary action to ensure that no new offering periods under the ESPP will commence during the period from August 21, 2016 through the effective time. The
accumulated contributions of the participants in the current offering period will be used to purchase shares of CST common stock as of no later than 10 business days prior to the effective time, and the participants purchase rights under such
offerings will terminate immediately after such purchase.
48
CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
Payment for Common Stock in the Merger
At or prior to the effective time,
Circle K will deposit, or cause to be deposited, with a U.S. bank or trust company appointed by Circle K and reasonably acceptable to CST (which we refer to as the paying agent), in trust for the benefit of the holders of CST common
stock, cash in U.S. dollars sufficient to pay the aggregate merger consideration. As soon as reasonably practicable after the effective time (and no later than the second business day following the closing date), Circle K will instruct the
paying agent to mail to each holder of record of shares of CST common stock whose shares were converted into the right to receive the merger consideration (1) a letter of transmittal and (2) instructions for effecting the surrender of certificates
or book-entry shares formerly representing shares of CST common stock in exchange for the merger consideration. Upon surrender of certificates (or effective affidavits of loss in lieu of certificates) or book-entry shares, as applicable, to the
paying agent together with the letter of transmittal, duly completed and validly executed in accordance with the instructions to the letter of transmittal, and such other documents as may customarily be required by the paying agent, the holder of
such certificates (or effective affidavits of loss in lieu of certificates) or book-entry shares will be entitled to receive the merger consideration for all such shares.
Representations and Warranties; Material Adverse Effect
The merger
agreement contains representations and warranties of CST, subject to certain exceptions in the merger agreement, in the disclosure schedules delivered in connection with the merger agreement and in CSTs public filings, as to, among other
things:
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organization, good standing and qualification to do business;
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corporate authority and governmental and third party consents and approvals relating to the execution, delivery and performance of the merger
agreement;
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the SEC filings of CST and CAPL and the financial statements of CST;
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the establishment and maintenance of certain disclosure controls and procedures and internal control over financial reporting;
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the absence of undisclosed liabilities;
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compliance with applicable laws and permits;
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employee benefit plans and other agreements, plans and policies with or concerning employees;
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employee relations, labor matters and compliance with workplace safety and workers compensation laws;
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the absence of certain material events in the business of CST, including that there has not been a material adverse effect with respect to CST;
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investigations and litigation;
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the accuracy and completeness of the information supplied for the purposes of this document;
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the receipt by the CST board of directors of a fairness opinion from BofA Merrill Lynch;
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the required vote of CST stockholders to adopt the merger agreement;
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affiliate party transactions;
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brokers and finders fees; and
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CST BRANDS, INC.
Proxy
Statement
49
THE MERGER AGREEMENT
The merger agreement also contains representations and warranties of Circle K and Merger Sub, subject to certain exceptions in the merger agreement and the disclosure schedules delivered in connection
with the merger agreement, as to, among other things:
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organization, good standing and qualification to do business;
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corporate authority and governmental and third party consents and approvals relating to the execution, delivery and performance of the merger
agreement;
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investigations and litigation;
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the accuracy and completeness of the information supplied for the purposes of this document;
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the availability on the closing date of sufficient funds for Circle Ks payment of the merger consideration;
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capitalization of Merger Sub;
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the ownership by Circle K, Merger Sub and their affiliates of CST common stock; and
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acknowledgments with respect to the representations and warranties of CST in the merger agreement.
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Some of the representations and warranties in the merger agreement are qualified by materiality qualifications or a material
adverse effect qualification with respect to either CST or Circle K, as discussed below.
For purposes of the merger
agreement, a material adverse effect with respect to CST means any event, development, change, state of facts or effect that, individually or in the aggregate (a) prevents or materially impairs or delays the ability of CST to consummate
the merger or (b) has a material adverse effect on the business, financial condition or results of operations of CST and its subsidiaries, taken as a whole, but will not include any event, development, change, state of facts or effect relating to or
resulting from the following:
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conditions in or affecting the United States or Canadian economies or the global economy generally;
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political or economic conditions in any country or region in the world or acts of war, sabotage or terrorism (including any escalation or general
worsening of any such acts of war, sabotage or terrorism) in any country or region of the world occurring after the date of the merger agreement;
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changes in the financial, credit, banking or securities markets in any country or region in the world;
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changes in GAAP or other accounting standards (or interpretations or the enforcement thereof);
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changes in any laws or other binding directives issued by any governmental entity (or interpretations or the enforcement thereof);
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changes that are generally applicable to the industries in which CST and its subsidiaries operate;
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any change in the market price or trading volume of CST common stock;
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the execution and delivery and performance of the merger agreement or the public announcement or pendency or consummation of the merger, including
the impact thereof on the relationships, contractual or otherwise, of CST or any of its subsidiaries with employees, customers or suppliers;
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the identity of Circle K or any of its affiliates as the acquiror of CST;
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the taking of any action required or expressly contemplated by the merger agreement or with the prior written consent or at the direction of Circle
K;
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the occurrence of natural disasters;
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any failure to meet internal or published projections, forecasts or revenue or earning predictions for any period; or
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any change in the credit rating of CST or its securities;
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except that (i) the first, second, third and sixth bullet points above may be taken into account to the extent the impact of such event,
development, change, state of facts or effect on the business, financial condition or results of operations of CST and its
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CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
subsidiaries, taken as a whole, is disproportionately adverse in relation to others in the industries in which CST and its subsidiaries operate, in which case only the incremental disproportionate effect
shall be taken into account, and (ii) the underlying cause of any change or failure referred to in the seventh, twelfth and thirteenth bullet points above may be taken into account.
For the purpose of the merger agreement, a material adverse effect with respect to Circle K means any event, development,
change, state of facts or effect that prevents or materially impairs or delays the ability of Circle K or Merger Sub to perform its obligations under the merger agreement, to satisfy the conditions precedent to the merger or to consummate the
merger.
Conduct of Business Pending the Merger
The merger agreement provides that, during the period from August 21, 2016 until the earlier of the termination of the merger agreement in accordance with its terms and the effective time, except as
required by applicable law, as may be agreed in writing by Circle K (which consent may not be unreasonably withheld, delayed or conditioned), as may be expressly required or expressly permitted by the merger agreement or as set forth in the
disclosure schedules delivered by CST concurrently with the merger agreement, CST and its subsidiaries will conduct their businesses in the ordinary course of business consistent with past practice, and CST will use all commercially reasonable
efforts to preserve intact its current business organization, keep available the services of the key employees of CST and its subsidiaries, subject to the restrictions summarized below, and maintain satisfactory relationships with the material
customers, lenders, suppliers and others having material business relationships with CST or any of its subsidiaries.
The
merger agreement further provides that, during the period from August 21, 2016 until the earlier of the termination of the merger agreement in accordance with its terms and the effective time, except as required by applicable law, with the prior
written consent of Circle K, as may be expressly required or expressly permitted by the merger agreement or as set forth in the disclosure schedules delivered by CST concurrently with the merger agreement, CST:
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will not, and will not permit its subsidiaries that are not wholly owned to pay any dividend or make any distribution, except dividends and
distributions (A) paid by subsidiaries of CST to CST or to any of its wholly owned subsidiaries, (B) by CAPL and (C) by CAPLs wholly owned subsidiaries to CAPL or CAPLs wholly owned subsidiaries;
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will not, and will not permit its subsidiaries to, split, combine or reclassify any of its capital stock or issue any securities in respect of its
capital stock;
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except as required by existing written agreements or CST benefit plans, will not, and will not permit its subsidiaries (other than CAPL and its
subsidiaries) to (A) increase directors or employees compensation or other benefits other than in the ordinary course of business consistent with past practice, (B) enter into any employment, change of control, severance or
retention agreement (other than offer letters with new hires in the ordinary course of business so long as such letters do not provide material severance or change-in-control benefits) or (C) enter into or amend any plan, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except as would not result in a material increase in cost to CST or any of its subsidiaries or a material acceleration or increase
in payments or benefits;
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will not, and will not permit its subsidiaries to, enter into or make any loans, advances or capital contributions to, or investments in, any other
person (other than loans or advances to directors, employees, agents or consultants in the ordinary course of business consistent with past practice) or make any change in its existing borrowing, lending or investment arrangements;
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will not, and will not permit its subsidiaries to, change material financial accounting policies or its methods of reporting income, deductions or
other items for financial accounting purposes, except as required by GAAP or SEC rule or policy;
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will not, and will not permit its subsidiaries to, amend its organizational documents;
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will not, and will not permit its subsidiaries to, issue, sell, pledge, dispose of or encumber any shares of its capital stock or any securities
convertible into or exchangeable for any such shares or any rights to acquire such shares, other than (A) issuances of CST common stock in respect of any exercise or settlement of CST equity awards outstanding as of August 21, 2016 or granted as
permitted by the terms of the merger agreement or (B) liens securing obligations under CSTs existing credit facilities;
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51
THE MERGER AGREEMENT
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will not, and will not permit its subsidiaries to, purchase or redeem any shares of its capital stock or any rights to acquire any such shares,
other than from the holder of a CST equity award in payment of the exercise price thereof (if applicable) or to satisfy withholding obligations upon the vesting of such award;
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will not, and will not permit its subsidiaries to, incur, assume, guarantee or prepay any indebtedness for borrowed money, except for (A) any
indebtedness for borrowed money among CST and/or its wholly owned subsidiaries, (B) indebtedness for borrowed money incurred to replace or refinance existing indebtedness for borrowed money in the ordinary course of business and in a manner
consistent with past practice, (C) guarantees by CST of indebtedness for borrowed money of its subsidiaries that is incurred in compliance with this bullet point, (D) indebtedness for borrowed money incurred pursuant to debt agreements in effect as
of August 21, 2016 for the purpose of financing capital expenditures permitted by the bullet point below, (E) other indebtedness for borrowed money incurred pursuant to agreements in effect as of August 21, 2016 or the issuance of new commercial
paper by CST, not to exceed $15 million outstanding in the aggregate, and (F) with respect to any indebtedness not in accordance with clauses (A) through (E), for any indebtedness not to exceed $15 million in aggregate principal amount outstanding
at the time incurred, except that none of the foregoing restrictions will apply to CAPL and its subsidiaries so long as, immediately after incurring the applicable indebtedness, CAPL is in compliance with certain agreed-upon financial ratios;
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will not, and will not permit any of its subsidiaries to, make any capital expenditure in excess of $15 million individually or in the
aggregate, other than as contemplated by the capital expenditures budget of CST made available to Circle K;
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will not, and will not permit its subsidiaries to, sell, assign, lease, license, transfer, exchange or swap, mortgage or otherwise encumber
(including any sale-leasebacks or securitizations), or subject to any lien (other than certain permitted liens), any properties or assets having a value in excess of $10 million, individually or in the aggregate, subject to certain exceptions;
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will not, and will not permit its subsidiaries to, enter into, materially and adversely modify or terminate any material contract, subject to
certain exceptions;
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will not, and will not permit its subsidiaries to, (A) acquire any entity or assets that constitutes a business or division of any person, or all or
a substantial portion of the assets of any person (or business or division thereof) located in the U.S. for consideration in excess of $10 million (and none of the foregoing will be permitted with respect to any entity, business or assets located in
Canada); or (B) enter into any joint venture, partnership or other similar arrangements with respect to any assets, businesses or divisions of CST or its subsidiaries located in the U.S. with a fair market value in excess of $10 million (and
none of the foregoing will be permitted with respect to any assets, businesses or divisions located in Canada), except that none of the foregoing restrictions in this bullet point will apply to CAPL and its subsidiaries so long as, immediately after
the applicable transaction, CAPL is in compliance with certain agreed-upon financial ratios;
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will not, and will not permit its subsidiaries to, adopt or enter into a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;
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will not, and will not permit its subsidiaries to, enter into any new line of business;
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will not, and will not permit its subsidiaries to, settle, or offer or propose to settle, (A) any material litigation, investigation, arbitration or
other claim not relating to tax matters, (B) any stockholder litigation or dispute against CST or its officers or directors or (C) any litigation or dispute that relates to the transactions contemplated by the merger agreement, in each case,
subject to certain exceptions;
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will not, and will not permit its subsidiaries to, make or change any material tax election, change any material annual tax accounting period, adopt
or change any material method of tax accounting, file any material amended tax returns or claims for material tax refunds, enter into any closing agreement with respect to a material amount of taxes, settle any material tax claim, audit or
assessment, surrender any right to claim a material tax refund, offset or other reduction in tax liability or consent to any extension or waiver of the limitations period that could reasonably be expected to produce a material tax claim or
assessment, in each case, except in the ordinary course of business consistent with past practice; and
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will not, and will not permit its subsidiaries to, agree, in writing or otherwise, to take any of the foregoing actions.
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CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
Circle K and Merger Sub have also agreed that, during the period from August 21, 2016 until the earlier of the termination of the merger agreement in accordance with its terms and the effective time,
Circle K and Merger Sub will not, and will not permit any of their subsidiaries or affiliates to, take or agree to any action (including entering into agreements with respect to acquisitions, mergers, consolidations or business combinations or
entering into any new lines of businesses) that would reasonably be expected to prevent or materially delay, impede or interfere with its performance of, or consummation of the transactions contemplated by, the merger agreement.
Access
Subject to
certain exceptions and limitations, during the period from August 21, 2016 until the earlier of the termination of the merger agreement in accordance with its terms and the effective time, CST must afford to Circle K and its representatives
reasonable access during normal business hours, on reasonable prior notice, to CSTs and its subsidiaries officers, properties, contracts, books and records.
Alternative Proposals; No Solicitation
Except as permitted by the merger
agreement, during the period from August 21, 2016 until the earlier of the termination of the merger agreement in accordance with its terms and the effective time, CST will not and will cause its subsidiaries and their respective affiliates and
representatives not to, directly or indirectly:
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solicit, initiate, knowingly facilitate or knowingly encourage the submission of any alternative proposal (as defined below);
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participate in any discussions or negotiations regarding an alternative proposal, or furnish any nonpublic information regarding any alternative
proposal to any person that has made or to CSTs knowledge is seeking to make an alternative proposal;
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enter into any letter of intent, agreement in principle or contract regarding an alternative proposal (except for confidentiality agreements); or
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publicly propose to do any of the foregoing.
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Pursuant to the merger agreement, an alternative proposal means any
bona fide
inquiry, proposal or offer made by any person for (1) a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction involving CST, (2) the direct or indirect acquisition by any person of 15% or more of the assets of CST and its subsidiaries on a consolidated
basis or (3) the direct or indirect acquisition by any person of 15% or more of the voting power of the outstanding common stock of CST, including any tender offer or exchange offer for 15% or more of the voting power of the outstanding CST common
stock, in each case other than the transactions contemplated by the merger agreement.
Receipt of Alternative Proposals
Notwithstanding the provisions of the merger agreement described above, if at any time after August 21, 2016 and prior to the time
the requisite CST stockholder vote is obtained, CST receives an unsolicited, written alternative proposal without any material violation of the applicable non-solicitation provisions of the merger agreement, that the CST board of directors
determines in good faith, after consultation with its financial advisors and outside legal counsel, is or is reasonably likely to result in, a superior proposal (as defined below), then CST may:
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furnish information to the person making such alternative proposal, subject to entering into a confidentiality agreement and providing the same
information to Circle K; and
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engage in discussions or negotiations with the person making such alternative proposal, subject to providing to Circle K a copy of any written
alternative proposal and the identity of the person making such alternative proposal.
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Pursuant to the
merger agreement, a superior proposal means an unsolicited, written,
bona fide
inquiry, proposal or offer made by any person for (1) a merger, reorganization, share exchange, consolidation, business combination, recapitalization,
dissolution, liquidation or similar transaction involving CST, (2) the direct or indirect acquisition by any person of 50% or
CST BRANDS, INC.
Proxy
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53
THE MERGER AGREEMENT
more of the assets of CST and its subsidiaries on a consolidated basis or (3) the direct or indirect acquisition by any person of 50% or more of the voting power of the outstanding common stock of
CST, including any tender offer or exchange offer for 50% or more of the voting power of the outstanding CST common stock, in each case other than the transactions contemplated by the merger agreement, without any violation of the applicable
non-solicitation provisions of the merger agreement, on its most recently amended or modified terms, that the CST board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel and taking into
account all financial, legal, regulatory and other aspects, (A) would be, if consummated, more favorable to CSTs stockholders from a financial point of view than the merger agreement and the merger (after taking into account any modifications
or changes committed to in writing by Circle K pursuant to its match rights summarized below) and (B) is reasonably likely to be consummated if accepted (including that any necessary financing is reasonably likely to be obtained on a timely basis).
Change in Board Recommendation
The CST board of directors has unanimously recommended that CST stockholders vote
FOR
the proposal to adopt the merger agreement. We refer in this document to the recommendation of
the CST board of directors that stockholders adopt this merger agreement as the company recommendation.
The
merger agreement permits the CST board of directors to make a change of recommendation with respect to the company recommendation only in certain limited circumstances, as described below. A change of recommendation
means any of the following actions taken by the CST board of directors or a committee of the CST board of directors:
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qualifying, modifying, withholding or withdrawing, or publicly proposing to qualify, modify, withhold or withdraw, in a manner adverse to Circle K,
the company recommendation;
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subject to limited exceptions, taking any formal action or making any public statement in connection with a tender offer or exchange offer other
than a recommendation against such offer or a reaffirmation of the company recommendation;
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approving or recommending, or publicly proposing to approve or recommend, an alternative proposal; or
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failing to include the company recommendation in this document.
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However, notwithstanding the above, at any time after August 21, 2016 and prior to the time the requisite CST stockholder vote is
obtained, the CST board of directors may:
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make a change of recommendation under the first or fourth bullet of the definition of change of recommendation above in response to a
material development (as defined below) if the CST board of directors determines in good faith, after consultation with outside counsel, that the failure to take such action would be inconsistent with the CST board of directors fiduciary
duties to the stockholders of CST under applicable law, provided that CST (A) has given Circle K at least four business days prior written notice specifying in reasonable detail the reasons for such proposed change of recommendation, (B) has
given Circle K during such four business day period the opportunity to meet or negotiate with CST in good faith and (C) at the end of such four business day period, after taking into account any amendments to the merger agreement committed to in
writing by Circle K, the CST board of directors determines in good faith, after consultation with outside counsel, that the failure of the CST board of directors to make such change of recommendation would continue to be inconsistent with its
fiduciary duties to the stockholders of CST under applicable law; or
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make a change of recommendation or terminate the merger agreement to enter into a definitive agreement with respect to a superior proposal if, prior
to taking such action, (A) the CST board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, that such alternative proposal is a superior proposal, (B) CST has given Circle K at least four
business days prior written notice and a copy of such superior proposal (or, for each material modification to the material terms of any such alternative proposal, two business days prior written notice), (C) CST has given Circle K
during such four or two business day period the opportunity to meet or negotiate with CST in good faith and (D) at the end of such four or two business day period, the CST board of directors, after consultation with CSTs financial advisors and
outside legal counsel, has determined that the alternative proposal remains a superior proposal (taking into account any amendments to the merger agreement committed to in writing by Circle K).
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CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
A material development is defined to mean a material development or material change in circumstances (other than relating to or in connection with an alternative proposal) that occurs or
arises after August 21, 2016 that was not known and not reasonably foreseeable (or if known, the consequences of which were not known or reasonably foreseeable) by the CST board of directors as of August 21, 2016.
CST Stockholders Meeting
Subject to the relevant provisions of the merger agreement, including CSTs right to terminate the merger agreement to enter into a definitive agreement with respect to a superior proposal, as
described in the section entitled
Alternative Proposals; No Solicitation Change in Board Recommendation
, (1) CST will take all action necessary in accordance with the DGCL and CSTs certificate of
incorporation and bylaws to duly call, give notice of and convene a meeting of CST stockholders as promptly as reasonably practicable following the mailing of this document for the purpose of obtaining the requisite vote of CST stockholders in
adopting the merger agreement and (2) subject to the CST board of directors right to make a change of recommendation, as described in the section entitled
Alternative Proposals; No Solicitation Change in Board
Recommendation
, CST will use all reasonable efforts to solicit from its stockholders proxies in favor of the adoption of the merger agreement.
Financing and Financing Cooperation
Circle K agreed to use its
commercially reasonable efforts to take all actions necessary to obtain debt financing necessary to pay in cash the aggregate merger consideration and to perform its obligations under the merger agreement and agreed to keep CST reasonably informed
of the status of its efforts to obtain any such debt financing.
CST agreed that, upon the request of Circle K, CST will use
its commercially reasonable efforts to provide such assistance with respect to the debt financing as is reasonably requested by Circle K, subject to certain limitations. Circle K will promptly reimburse CST for all reasonable and documented out
of pocket costs (including reasonable attorneys fees) incurred by CST or its subsidiaries or representatives in connection with the debt financing and will indemnify and hold harmless from any losses suffered by them in connection with the
debt financing.
Circle Ks and Merger Subs obligations under the merger agreement, including their obligation to
complete the merger, are not conditioned on their receipt of any debt financing.
Employee Matters
The merger agreement provides that Circle K will provide, or cause its subsidiaries to provide, to each CST employee who continues to be
employed by the surviving corporation or one of its subsidiaries after the effective time (which we refer to as CST employee) compensation and benefits on the following terms:
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From the effective time until April 29, 2018, (a) base compensation that is no less favorable than was provided to the CST employee immediately
before the effective time and (b) equity-based incentive opportunities that are no less favorable than those provided to employees of Circle K and its subsidiaries who are similarly situated to (including with respect to work location) the
applicable CST employee;
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From the effective time until April 30, 2017, an annual bonus opportunity with bonus targets and related performance metrics that are no less
favorable than those provided to the CST employee immediately before the effective time, and from May 1, 2017 until April 29, 2018, an annual bonus opportunity with bonus targets and related performance metrics that are no less favorable than those
applicable to employees of Circle K and its subsidiaries who are similarly situated to (including with respect to work location) the applicable CST employee;
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From the effective time until April 30, 2017, all other compensation and benefits that, in the aggregate, are no less favorable than those provided
to the CST employee immediately before the effective time, and from May 1, 2017 until April 29, 2018, all other compensation and benefits (other than equity-based incentive benefits) that, in the aggregate, are no less favorable than those provided
to employees of Circle K and its subsidiaries who are similarly situated to (including with respect to work location) the applicable CST employee; and
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From the effective time until April 29, 2018, Circle K will provide or cause the surviving corporation to provide to each CST employee who is
eligible under the CST severance plan as of the effective time, severance benefits equal
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55
THE MERGER AGREEMENT
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to the greater of (a) the severance benefits to which such CST employee is then entitled under the CST severance plan, taking into account all service whether
before or after the effective time, and (b) the severance benefits provided to employees of Circle K and its subsidiaries who are similarly situated to (including with respect to work location) the applicable CST employee under the severance
arrangements of Circle K and its subsidiaries, in each case without duplication of benefits under any other contract or arrangement applicable to such CST employee and without taking into account any reduction after the effective time in base
compensation paid to such CST employee.
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Under the merger agreement, for all purposes (including purposes of
vesting (other than equity awards), eligibility to participate and level of benefits) under the employee benefit plans of Circle K and its subsidiaries providing benefits to any CST employees after the effective time, each CST employee will be
credited with his or her years of service with CST and its subsidiaries before the effective time, to the same extent as such CST employee was entitled, before the effective time, to credit for such service under any similar CST benefit plan in
which such CST employee participated or was eligible to participate immediately prior to the effective time. However, the foregoing will not apply (a) with respect to participation in or benefit accrual under any defined benefit pension or
retiree medical plan or (b) to the extent that its application would result in a duplication of benefits.
In addition,
each CST employee will be immediately eligible to participate in any and all benefit plans of Circle K and its subsidiaries to the extent such plan supersedes a comparable CST benefit plan in which such CST employee participated immediately before
the effective time. For purposes of each benefit plan of Circle K and its subsidiaries providing medical, dental, pharmaceutical and/or vision benefits to any CST employee, Circle K will cause all pre-existing condition exclusions and
actively-at-work requirements of such new plan to be waived for such employee and his or her covered dependents, unless such conditions would not have been waived under the comparable plans of CST and its subsidiaries in which such employee
participated immediately prior to the effective time. The amount of eligible expenses incurred by each such CST employee and his or her covered dependents that were credited to deductible and maximum out-of-pocket co-insurance requirements
under the prior CST benefit plans will be credited for purposes of satisfying the deductible, and maximum out-of-pocket co-insurance requirements under the new Circle K benefit plans.
Efforts to Complete the Merger
Each of CST and Circle K agreed in the
merger agreement to use its commercially reasonable efforts to promptly take and to promptly do, and to assist and cooperate with one another in doing, all things reasonably necessary, proper or advisable under applicable laws to consummate the
merger and the other transactions contemplated by the merger agreement as promptly as practicable and in any event prior to the end date, including (1) obtaining of all necessary waivers, consents, clearances, approvals, actions or nonactions
and expirations or termination of waiting periods from governmental entities and the making of all necessary registrations and filings in connection therewith, (2) using its commercially reasonable efforts to obtain all necessary consents, approvals
or waivers from third parties and (3) defending laws or other legal proceedings challenging the merger agreement or the consummation of the merger, except that none of CST, Circle K or Merger Sub will be required to pay any fee, penalty or other
consideration to a third party for any contractual consent or approval.
In addition, Circle K agreed to take all such further
action as may be necessary to avoid or eliminate each and every impediment under any antitrust law so as to enable the closing to occur as promptly as practicable (and in any event no later than the end date). If necessary to obtain the
requisite antitrust clearances, Circle K will, including by proposing, negotiating, committing and effecting, by consent decree, hold separate order, or otherwise, (i) sell, divest, dispose of or otherwise hold separate (including by establishing a
trust or otherwise), any of the businesses, assets or properties of Circle K, CST, the surviving corporation or any of their respective affiliates and (ii) otherwise take or commit to take actions that after the closing would limit Circle
Ks freedom of action with respect to, or its ability to operate and/or retain any of the businesses, assets or properties of Circle K, CST, the surviving corporation or any of their respective affiliates. However, CST and its subsidiaries
are not required to agree to any such actions with respect to the assets, businesses or operations of CST or any of its affiliates unless the effectiveness of such agreement is conditioned on the closing of the merger.
Circle K has the right, subject to its obligations to cooperate and consult with CST as described below, to determine, direct and have
control over the strategy and process by which the parties will seek the required approvals under antitrust laws and to control the defense or prosecution of any claims or actions relating thereto. Notwithstanding the foregoing, Circle K and
CST will cooperate and consult with each other in connection with the making of all regulatory filings, notifications,
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THE MERGER AGREEMENT
communications and submissions. Additionally, Circle K and CST will keep each other apprised on a current basis of the status of matters relating to the completion of the transactions contemplated by
the merger agreement, including promptly furnishing the other with copies of notices or other communications received by them from any third party and/or governmental entity with respect to such transactions. Circle K and CST will also permit
the other partys counsel a reasonable opportunity to review in advance, and consider in good faith the views of the other party in connection with, any material proposed notifications or filings and any material written communications or
submissions to a governmental entity. Neither party will participate in any substantive meeting or discussion with any governmental entity in connection with the proposed transactions unless it consults with the other party in advance and gives
the other party a reasonable opportunity to attend and participate.
Indemnification and Insurance
Circle K and Merger Sub agreed that, at the effective time, the surviving corporation will assume the obligations with respect to all
rights to indemnification and exculpation from liabilities, including advancement of expenses, for acts or omissions occurring at or prior to the effective time in favor of the current or former directors or officers of CST or its subsidiaries as
provided in their respective certificates of incorporation, bylaws or any indemnification contract (in each case, as in effect on August 21, 2016).
For six years after the effective time, the surviving corporation will maintain in effect the exculpation, indemnification and advancement of expenses provisions of CSTs and its subsidiaries
organizational documents or in any indemnification agreements as in effect immediately prior to the effective time.
In
addition, for six years after the effective time, the surviving corporation will, to the fullest extent permitted under applicable law, indemnify and hold harmless (and advance funds in respect of each of the foregoing) each current and former
director or officer of CST and its subsidiaries and each person who served at the request of CST as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan
or enterprise (which we refer to, individually, as an indemnified party) against any costs or expenses (including advancing reasonable attorneys fees and expenses), judgments, fines, losses, claims, damages, liabilities and amounts
paid in settlement in connection with any actual or threatened claim arising out of, relating to or in connection with any act or omission occurring or alleged to have occurred, whether before or after the effective time, in connection with such
indemnified partys service as a director or officer of CST or its subsidiaries or service as an officer, director, member, trustee or other fiduciary of any other enterprise if such service was at the request of CST, subject to specified
limitations.
Circle K also agreed to use all commercially reasonable efforts to cause the surviving corporation as of the
effective time to purchase a six-year prepaid tail policy, with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under CSTs and its subsidiaries existing policies of
directors and officers liability insurance and fiduciary liability insurance, with respect to matters arising on or before the effective time (including in connection with the merger agreement and the merger), and Circle K will cause
such policy to be maintained in full force and effect, for its full term. If Circle K fails to obtain such tail insurance policy, it will, for six years after the effective time, cause the surviving corporation to maintain in effect
the current policies of directors and officers liability insurance and fiduciary liability insurance maintained by CST and its subsidiaries, except that Circle K will not be required to pay annual premiums in excess of 300% of the last
annual premium paid by CST prior to August 21, 2016 but will purchase as much coverage as reasonably practicable for such amount.
None of the provisions of the merger agreement summarized above in this section entitled
Indemnification and Insurance
will apply to CAPL or its general partner or subsidiaries
except for the second paragraph of this section.
Coordination on Litigation
CST and Circle K agreed to keep the other reasonably informed of, and cooperate in connection with, any stockholder litigation or claim
against such party and/or its directors or officers relating to the merger or the other transactions contemplated by the merger agreement, including that CST will give Circle K a reasonable opportunity to participate in the defense or settlement of
any such litigation or claim, and CST will not compromise or settle such litigation or claim without Circle Ks prior written consent (which consent may not be unreasonably withheld, conditioned or delayed).
CST BRANDS, INC.
Proxy
Statement
57
THE MERGER AGREEMENT
Other Covenants and Agreements
The merger agreement also contains
additional covenants, including, among others, covenants relating to the filing of this document, public announcements relating to the merger, elimination or any applicable takeover statutes, exemptions of dispositions of CST securities in
connection with the merger under Rule 16b-3 of the Exchange Act and the delisting and deregistration of CST common stock.
Conditions to
Completion of the Merger
Each partys obligation to complete the transactions contemplated by the merger agreement
is subject to the satisfaction or waiver (to the extent permitted by applicable law) of the following conditions:
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the adoption of the merger agreement by at least a majority of the outstanding shares of CST common stock;
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the absence of any injunction or similar order by any court of competent jurisdiction that prohibits the consummation of the merger that has been
entered and continues to be in effect and the absence of any law that has been enacted, entered, promulgated or enforced or deemed applicable by any governmental entity that prohibits or makes illegal the consummation of the merger;
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the expiration or termination of any waiting period under the HSR Act applicable to the merger; and
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one of the following having occurred (which we refer to as the Canadian Competition Act Clearance): (i) the issuance of an Advance
Ruling Certificate, (ii) the expiration or termination of the applicable waiting period under Section 123 of the Competition Act following CST and Circle K having given the requisite notice of the merger under Section 114 of the Competition Act
or (iii) waiver of the requisite notice under Paragraph 113(c) of the Competition Act.
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The obligation
of Circle K and Merger Sub to complete the transactions contemplated by the merger agreement is subject to the satisfaction or waiver (to the extent permitted by applicable law) of the following additional conditions:
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the accuracy of the representations and warranties of CST both at and as of August 21, 2016 and at and as of the closing date (except for any such
representations and warranties expressly made as of an earlier date, which representations and warranties must be true and correct only as of that earlier date), subject to a material adverse effect standard or such other standard
provided in the merger agreement;
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CST having performed in all material respects all obligations and complied with all covenants required by the merger agreement to be performed or
complied with it prior to the effective time;
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CSTs delivery to Circle K of a certificate, dated as of the closing date and signed by CSTs CEO or another senior officer, certifying
that the conditions set forth in the two bullet points above have been satisfied; and
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there having not occurred any material adverse effect with respect to CST since August 21, 2016.
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The obligation of CST to complete the transactions contemplated by the merger agreement is subject to the satisfaction or waiver (to the
extent permitted by applicable law) of the following additional conditions:
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the accuracy of the representations and warranties of Circle K and Merger Sub both at and as of August 21, 2016 and at and as of the closing date
(except for any such representations and warranties expressly made as of an earlier date, which representations and warranties must be true and correct only as of that earlier date), subject to a material adverse effect standard or such
other standard provided in the merger agreement;
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Circle K and Merger Sub having performed in all material respects all obligations and complied with all covenants required by the merger agreement
to be performed or complied with them prior to the effective time; and
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Circle Ks delivery to CST of a certificate, dated as of the closing date and signed by Circle Ks CEO or another senior officer,
certifying that the conditions set forth in the two bullet points above have been satisfied.
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Termination
The merger agreement may be terminated at any time prior to the effective time by the mutual written consent of CST and Circle K.
58
CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
The merger agreement may also be terminated at any time prior to the effective time by either CST or Circle K:
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if the effective time has not occurred on or before May 22, 2017, except that if as of such date all closing conditions have been satisfied or
waived (other than those conditions that are to be satisfied by action taken at the closing) other than the expiration or termination of the applicable waiting period under the HSR Act and the receipt of Canadian Competition Act Clearance, then such
date will automatically be extended to August 22, 2017 (we refer to such date, as it may be so extended, as the end date), provided that the right to terminate the merger agreement pursuant to such termination right will not be available
to any party that has breached its obligations under the merger agreement in any material respect that has contributed to the failure to consummate the merger on or before such date;
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if a governmental entity has issued an order, decree or ruling permanently enjoining, restraining or otherwise prohibiting or making illegal the
transactions contemplated by the merger agreement, and such order, decree or ruling has become final and nonappealable, provided that the party seeking to terminate the merger agreement pursuant to such termination right has complied with its
obligations under the regulatory efforts covenant of the merger agreement described in the section entitled
Efforts to Complete the Merger
;
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if the vote of a majority of the outstanding shares of CST common stock to adopt the merger agreement has not been obtained at the special meeting;
or
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if the other party has breached or failed to perform in any material respect any of its representations, warranties or covenants contained in the
merger agreement, which breach or failure to perform (1) would result in a failure of a condition to the obligations of such party to effect the merger and (2) is either not curable by the end date or is not cured within 30 business days
of written notice of such breach or failure to perform, provided that the party seeking to terminate pursuant to such termination right is not then in material breach of any representation, warranty or covenant in the merger agreement.
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In addition, the merger agreement may be terminated by Circle K at any time prior to the time the CST
stockholder vote is obtained:
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if the CST board of directors or a committee of the CST board of directors has made a change of recommendation;
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if CST has breached or failed to perform in any material respect its obligations under the non-solicitation provision in the merger agreement,
described in the section entitled
Alternative Proposals; No Solicitation
; or
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if the CST board of directors fails to reaffirm (publicly, if so requested by Circle K in writing) the company recommendation within 10 business
days after the date that any alternative proposal (or material modification to an alternative proposal) is first publicly disclosed by CST or the person making such alternative proposal or any material development is first publicly disclosed by CST.
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In addition, the merger agreement may be terminated by CST at any time prior to the time the CST
stockholder vote is obtained to enter into a definitive agreement with respect to a superior proposal (see
Alternative Proposals; No Solicitation Change in Board Recommendation
), provided that the termination fee is
paid concurrently with such termination.
Termination Fee
CST will pay Circle K a termination fee in an amount equal to $133 million if the merger agreement is terminated in the following circumstances:
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if the merger agreement is terminated by CST to enter into a definitive agreement with respect to a superior proposal;
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if the merger agreement is terminated by Circle K for a change of recommendation, CSTs material breach of its non-solicitation covenant or the
CST board of directors failure to reaffirm the company recommendation, each as described under
Termination
; or
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(1) after August 21, 2016, a qualifying transaction (as defined below) or intention to make a qualifying transaction is publicly proposed or
publicly disclosed prior to, and not withdrawn at least two business days prior to, the special
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CST BRANDS, INC.
Proxy
Statement
59
THE MERGER AGREEMENT
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meeting or, if there has been no special meeting, prior to termination of the merger agreement, (2) thereafter the merger agreement is terminated pursuant to the
termination trigger with respect to CSTs material breach or due to failure to obtain the CST stockholder vote or failure to complete the merger on or by the end date, and (3) concurrently with or within 12 months after such termination, CST
enters into a definitive agreement providing for a qualifying transaction or completes a qualifying transaction.
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Pursuant to the merger agreement, a qualifying transaction means any
bona fide
inquiry, proposal or offer made by any person for (1) a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction involving CST, (2) the direct or indirect acquisition by any person of 50% or more of the assets of CST and its subsidiaries on a consolidated
basis or (3) the direct or indirect acquisition by any person of 50% or more of the voting power of the outstanding common stock of CST, including any tender offer or exchange offer for 50% or more of the voting power of the outstanding CST common
stock, in each case other than the transactions contemplated by the merger agreement.
Limitation on Remedies
If the merger agreement is terminated pursuant to the provisions described in the section entitled
Termination
,
the transactions contemplated by the merger agreement will be abandoned, the merger agreement will become null and void, and there will be no liability or obligation on the part of CST, Circle K or Merger Sub or their respective subsidiaries or
affiliates, except that the confidentiality agreement, certain provisions of the merger agreement relating to financing cooperation reimbursement and indemnification, confidentiality of information shared by CST with Circle K and termination of the
merger agreement will survive termination. Additionally, termination will not relieve any party from liabilities or damages arising out of fraud by any party or, except in the case of CSTs liability following payment of the termination
fee, any willful breach of any covenant or agreement in the merger agreement.
If the termination fee is paid, except in the
case of fraud, the termination fee will be the sole and exclusive remedy of Circle K and Merger Sub against CST and its subsidiaries and their respective former, current or future officers, directors, partners, stockholders, managers, members,
affiliates and representatives.
Expenses
In general, all costs and expenses incurred in connection with the merger and the merger agreement will be paid by the party incurring or required to incur such expense, except that all expenses incurred
in connection with the printing, filing and mailing of this document will be borne by CST, and all fees paid in respect of filings under the HSR Act and the Competition Act will be borne by Circle K.
Amendment and Modification
At any time prior to the effective time, any provision of the merger agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by
CST, Circle K and Merger Sub, or in the case of a waiver, by the party against whom the waiver is to be effective. Notwithstanding the foregoing, after receipt of the vote of CST stockholders to adopt the merger agreement, if any such amendment
or waiver would require further approval of CST stockholders or the sole stockholder of Merger Sub under applicable law or the rules and regulations of the NYSE, then the effectiveness of such amendment or waiver will be subject to the approval of
CST stockholders or the sole stockholder of Merger Sub, as applicable.
Governing Law
The merger agreement will be governed by and construed in accordance with the laws of the State of Delaware.
Jurisdiction
Pursuant
to the merger agreement, the parties irrevocably agreed that any legal action or proceeding with respect to the merger agreement and the rights and obligations arising under the merger agreement, or for recognition and enforcement of any
60
CST BRANDS,
INC.
Proxy Statement
THE MERGER AGREEMENT
judgment in respect of the merger agreement and the rights and obligations arising under the merger agreement brought by a party or its successors or assigns, will be brought and determined exclusively in
the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of
Delaware).
Waiver of Jury Trial
Each of the parties to the merger agreement irrevocably waived any and all right to a trial by jury in any action arising out of or relating to the merger agreement or the transactions contemplated by the
merger agreement.
Specific Enforcement
The parties agreed that irreparable damage would occur if any of the provisions of the merger agreement are not performed or are breached. Accordingly, the parties agreed that, in addition to any
other remedy available, including monetary damages, each of the parties will be entitled to an injunction restraining breaches or threatened breaches of the merger agreement and a decree or order of specific performance to enforce specifically the
observance and performance of the covenants and obligations of the merger agreement.
CST BRANDS, INC.
Proxy
Statement
61
THE UNCONDITIONAL GUARANTY
THE UNCONDITIONAL GUARANTY
The following is a summary of the material provisions of the guaranty, a copy of which is attached to this document as
Annex
B
and which is incorporated by reference into this document. This summary does not purport to be complete and may not contain all of the information about the guaranty that is important to you. We encourage you to read carefully
the guaranty in its entirety, as the rights and obligations of the parties thereto are governed by the express terms of the guaranty and not by this summary or any other information contained in this document.
Explanatory Note Regarding the Guaranty
The following summary of the guaranty, and the copy of the guaranty attached as
Annex B
to this document, are intended to provide information regarding the terms of the guaranty and are not
intended to provide any factual information about CST or modify or supplement any factual disclosures about CST in its public reports filed with the SEC. In particular, the guaranty and the related summary are not intended to be, and should not
be relied upon as, disclosures regarding any facts and circumstances relating to CST. The guaranty contains representations and warranties by and covenants of CST and Couche-Tard that were made only for purposes of that agreement and as of
specified dates. The representations, warranties and covenants in the guaranty were made solely for the benefit of the parties to the guaranty, may be subject to limitations agreed upon by the contracting parties, including being made for the
purposes of allocating contractual risk between the parties to the guaranty instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties
that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the guaranty, which subsequent information may or may
not be fully reflected in CSTs public disclosures. The representations, warranties and covenants in the guaranty and any descriptions thereof should be read in conjunction with the disclosures in CSTs periodic and current reports,
proxy statements and other documents filed with the SEC. See the section entitled
Where You Can Find Additional Information
. Moreover, the description of the guaranty below does not purport to describe all of the terms
of such agreement and is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached hereto as
Annex B
and is incorporated herein by reference.
Additional information about CST may be found elsewhere in this document and CSTs other public filings. See the section
entitled
Where You Can Find Additional Information
.
Guaranteed Obligations
Couche-Tard, which indirectly owns all of the outstanding equity of Circle K, is the guarantor under the guaranty. Pursuant to the
guaranty, Couche-Tard, as primary obligor and not merely as surety, absolutely, irrevocably and unconditionally agreed to guarantee the full and timely performance and payment when due of each and every obligation of Circle K under the merger
agreement (which we refer to as the guaranteed obligations).
The guaranty is an unconditional guaranty of
performance and not of collection. In any right of action that may accrue to CST under the merger agreement, CST may proceed against Couche-Tard directly without having commenced any action against or having obtained any judgment against Circle
K or may proceed against Couche-Tard and Circle K jointly and severally.
Waiver of Defenses
Pursuant to the guaranty, Couche-Tard waived and agreed not to assert or to take advantage of (a) any defense that may arise by
reason of the incapacity, lack of authority, bankruptcy, insolvency or disability of Circle K or any other person or entity; (b) any defense based upon the failure of the Circle K or any other person or entity to take any action or refrain from
any action; (c) any duty on the part of CST to disclose to Couche-Tard any facts it may now or hereafter know; (d) promptness, diligence, acceptance or notice of acceptance of the guaranty; (e) the invalidity or unenforceability of the merger
agreement; (f) any defense based upon a failure to notify Couche-Tard of any modification to the merger agreement; (g) presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of any guaranteed obligations
incurred and any defenses that may be available by virtue of any valuation, stay or moratorium law or similar law now or hereafter in effect; (h) all suretyship defenses; and (i) any other defense that Couche-Tard may or might have relating to its
undertakings, liabilities, and obligations under the guaranty.
62
CST BRANDS,
INC.
Proxy Statement
THE UNCONDITIONAL GUARANTY
Term of Guaranty
The guaranty will continue in effect until each and
every guaranteed obligation is satisfied.
Amendment and Modification
The guaranty may not be amended or modified, or any of its provisions waived, except by a written instrument signed by CST and
Couche-Tard.
Governing Law
The guaranty will be governed and construed in accordance with the laws of the State of Delaware.
CST BRANDS, INC.
Proxy
Statement
63
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT
IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. NO PERSONS HAVE BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR ANY OTHER
PERSON. THIS PROXY STATEMENT IS DATED OCTOBER 11, 2016. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS
DOES NOT AND WILL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
CST BRANDS, INC.
Proxy
Statement
75
Annex A
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
by
and among
CIRCLE K STORES INC.,
ULTRA ACQUISITION CORP.
and
CST BRANDS, INC.
Dated as of
August 21, 2016
Table of Contents
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Page
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ARTICLE 1
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THE MERGER
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Section 1.1
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The Merger
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A-1
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Section 1.2
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Closing
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A-1
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Section 1.3
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Effective Time
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A-2
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Section 1.4
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Effects of the Merger
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A-2
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Section 1.5
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Organizational Documents of the Surviving Corporation
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A-2
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Section 1.6
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Directors of the Surviving Corporation
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A-2
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Section 1.7
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Officers of the Surviving Corporation
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A-2
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Section 1.8
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Headquarters
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A-2
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ARTICLE 2
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CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
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Section 2.1
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Effect on Capital Stock
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A-2
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Section 2.2
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Exchange of Certificates
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A-3
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Section 2.3
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Treatment of Company Equity Awards
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A-5
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Section 2.4
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Employee Stock Purchase Plan
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A-5
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ARTICLE 3
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REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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Section 3.1
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Qualification; Organization; Subsidiaries
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A-6
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Section 3.2
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Capitalization
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A-6
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Section 3.3
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Corporate Authority Relative to This Agreement; No Violation
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A-7
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Section 3.4
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Reports and Financial Statements
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A-8
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Section 3.5
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Internal Controls and Procedures
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A-9
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Section 3.6
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No Undisclosed Liabilities
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A-9
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Section 3.7
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Compliance with Law; Permits
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A-10
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Section 3.8
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Environmental Laws and Regulations
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A-10
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Section 3.9
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Employee Benefit Plans
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A-11
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Section 3.10
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Labor Matters
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A-13
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Section 3.11
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Absence of Certain Changes or Events
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A-13
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Section 3.12
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Investigations; Litigation
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A-13
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Section 3.13
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Proxy Statement; Other Information
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A-13
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Section 3.14
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Tax Matters
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A-14
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Section 3.15
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Intellectual Property
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A-15
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Section 3.16
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Real Property
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A-15
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Section 3.17
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Opinions of Financial Advisors
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A-16
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Section 3.18
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Required Vote of the Company Stockholders
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A-16
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Section 3.19
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Material Contracts
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A-16
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Section 3.20
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Insurance Policies
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A-17
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Section 3.21
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Affiliate Party Transactions
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A-17
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Section 3.22
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Finders or Brokers; Fees
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A-17
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Section 3.23
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Takeover Laws
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A-18
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A-i
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ARTICLE 4
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REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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Section 4.1
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Qualification, Organization, Subsidiaries
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A-18
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Section 4.2
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Corporate Authority Relative to This Agreement; No Violation
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A-18
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Section 4.3
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Investigations; Litigation
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A-19
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Section 4.4
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Proxy Statement; Other Information
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A-19
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Section 4.5
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Financing
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A-19
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Section 4.6
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Capitalization of Merger Sub
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A-19
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Section 4.7
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Ownership of Common Stock
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A-19
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Section 4.8
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No Additional Representations
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A-20
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ARTICLE 5
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COVENANTS AND AGREEMENTS
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Section 5.1
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Conduct of Business by the Company
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A-20
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Section 5.2
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Control of Operations
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A-23
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Section 5.3
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Parent Obligations
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A-23
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Section 5.4
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Access
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A-23
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Section 5.5
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No Solicitation
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A-24
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Section 5.6
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Proxy; Company Meeting
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A-26
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Section 5.7
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Takeover Statutes; Stockholder Litigation
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A-27
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Section 5.8
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Stock Exchange De-listing; 1934 Act Deregistration
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A-27
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Section 5.9
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Employee Matters
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A-27
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Section 5.10
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Efforts
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A-29
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Section 5.11
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Indemnification and Insurance
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A-30
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Section 5.12
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Financing
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A-32
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Section 5.13
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Public Announcements
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Section 5.14
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Rule 16b-3
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Section 5.15
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Further Assurances
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ARTICLE 6
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CONDITIONS TO THE MERGER
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Section 6.1
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Conditions to Obligation of Each Party to Effect the Merger
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Section 6.2
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Conditions to Obligation of the Company to Effect the Merger
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Section 6.3
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Conditions to Obligations of Parent and Merger Sub to Effect the Merger
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Section 6.4
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Frustration of Closing Conditions
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ARTICLE 7
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TERMINATION
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Section 7.1
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Termination or Abandonment
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Section 7.2
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Effect of Termination
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Section 7.3
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Termination Fee
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ARTICLE 8
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MISCELLANEOUS
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Section 8.1
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No Survival of Representations and Warranties
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Section 8.2
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Expenses
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Section 8.3
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Counterparts; Effectiveness
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Section 8.4
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Governing Law; Jurisdiction
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Section 8.5
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Specific Enforcement
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Section 8.6
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WAIVER OF JURY TRIAL
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Section 8.7
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Notices
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Section 8.8
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Assignment; Binding Effect
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Section 8.9
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Severability
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Section 8.10
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Entire Agreement; No Third-Party Beneficiaries
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Section 8.11
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Amendments; Waivers
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Section 8.12
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Headings
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A-40
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Section 8.13
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Interpretation
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A-40
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Section 8.14
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Obligations of Merger Sub
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A-40
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Section 8.15
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Definitions
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A-40
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A-iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 21, 2016 (this
Agreement
), among Circle K Stores Inc., a Texas
corporation (
Parent
), Ultra Acquisition Corp., a Delaware corporation and an indirect, wholly owned subsidiary of Parent (
Merger Sub
), and CST Brands, Inc., a Delaware corporation (the
Company
).
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, Parent desires to acquire the Company on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition of the Company by Parent, and on the terms and subject to the conditions set forth in this
Agreement and in accordance with the General Corporation Law of the State of Delaware (the
DGCL
), Merger Sub shall be merged with and into the Company (the
Merger
), with the Company surviving the Merger as a
wholly owned subsidiary of Parent;
WHEREAS, concurrently herewith, the Company and Alimentation Couche-Tard Inc., which beneficially owns
all of the outstanding shares of Parent (
Guarantor
), are entering into an Unconditional Guaranty (the
Guaranty
), pursuant to which Guarantor is guaranteeing the full and timely performance and payment of
Parents obligations pursuant to the Merger Agreement;
WHEREAS, the Board of Directors of the Company (the
Board of
Directors
) unanimously has (a) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (b) approved the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, including the Merger, and (c) resolved to recommend adoption of this Agreement by the stockholders of the Company;
WHEREAS, the boards of directors of Parent and Merger Sub have approved the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger, and declared it advisable for Parent and Merger Sub, respectively, to enter into this Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements specified herein in
connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and
agreements contained herein, and intending to be legally bound hereby, Parent, Merger Sub and the Company agree as follows:
ARTICLE 1
THE
MERGER
Section 1.1
The Merger
. On the terms and subject to the conditions set forth in this Agreement, and in accordance
with the DGCL, at the Effective Time, Merger Sub shall merge with and into the Company, the separate corporate existence of Merger Sub shall cease and the Company shall continue its corporate existence under Delaware law as the surviving corporation
in the Merger (the
Surviving Corporation
).
Section 1.2
Closing
. The closing of the Merger (the
Closing
) shall take place (a) at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019, at 10:00 a.m., local time, on the second Business Day after the satisfaction or waiver
(to the extent permitted by applicable Law) of the conditions set forth in Article 6 (other than those conditions that by their nature are to be satisfied at the Closing,
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but subject to the satisfaction or waiver of such conditions) or (b) at such other place, time and date as the Company and Parent may agree in writing. The date on which the Closing actually
occurs is referred to as the
Closing Date
.
Section 1.3
Effective Time
. Subject to the provisions of this
Agreement, at the Closing, the Company shall cause a certificate of merger (the
Certificate of Merger
) to be executed, acknowledged and filed with the Secretary of State of the State of Delaware in accordance with Section 251
of the DGCL. The Merger shall become effective at such time as the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or at such later date or time as may be agreed by the Company and Merger Sub and
specified in the Certificate of Merger in accordance with the DGCL (the effective time of the Merger being hereinafter referred to as the
Effective Time
).
Section 1.4
Effects of the Merger
. The Merger shall have the effects set forth in this Agreement and the applicable provisions of
the DGCL.
Section 1.5
Organizational Documents of the Surviving Corporation
. At the Effective Time, subject to
Section 5.11: (a) the certificate of incorporation of the Company as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the
DGCL and such certificate of incorporation;
provided
that at the Effective Time, such certificate of incorporation shall be amended as set forth in Annex I to this Agreement; and (b) the bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the DGCL and such bylaws.
Section 1.6
Directors of the Surviving Corporation
. Subject to applicable Law, the directors of Merger Sub as of immediately prior
to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, incapacitation, retirement, resignation or removal.
Section 1.7
Officers of the Surviving Corporation
. The officers of the Company as of immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, incapacitation, retirement, resignation or removal.
Section 1.8
Headquarters
. Upon the Effective Time, Parent shall cause a new Circle K division and shared service center to be
based in San Antonio, Texas.
ARTICLE 2
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.1
Effect on Capital Stock
. At the Effective Time, by virtue of the Merger and without any action on the part of the
Company, Merger Sub or the holders of any securities of the Company or Merger Sub:
(a)
Conversion of Company Common Stock
. Each
share of common stock, par value $0.01 per share, of the Company (such shares, collectively, the
Common Stock
, and each, a
Share
) outstanding immediately prior to the Effective Time, but excluding Cancelled
Shares and Dissenting Shares, shall be converted automatically into the right to receive $48.53 per Share in cash (the
Merger Consideration
), without interest. All Shares that have been converted into the right to receive the
Merger Consideration as provided in this Section 2.1(a) shall be automatically cancelled upon the conversion thereof and shall cease to exist, and the holders of certificates that immediately prior to the Effective Time represented such Shares
shall cease to have any rights with respect to such Shares other than the right to receive the Merger Consideration, without interest.
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(b)
Cancellation of Shares
. Each Share that is owned by the Company as treasury stock or
otherwise, or by Parent or Merger Sub, or by any Subsidiary of the Company, Parent or Merger Sub, immediately prior to the Effective Time (the
Cancelled Shares
) shall be cancelled and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(c)
Conversion of Merger Sub Common Stock
. Each share of common stock, par value $0.01 per
share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the Effective Time, all certificates representing the common stock of Merger Sub
shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.
(d)
Dissenters Rights
. Any provision of this Agreement to the contrary notwithstanding, if required by the DGCL (but only to the
extent required thereby), Shares that are issued and outstanding immediately prior to the Effective Time (other than the Cancelled Shares) and that are held by holders of such Shares who have not voted in favor of the adoption of this Agreement or
consented thereto in writing and who have properly exercised appraisal rights with respect thereto in accordance with, and who have complied with, Section 262 of the DGCL with respect to any such Shares held by any such holder (the
Dissenting Shares
) shall not be converted into the right to receive the Merger Consideration, and holders of such Dissenting Shares shall be entitled to receive payment of the fair value of such Dissenting Shares in accordance
with the provisions of such Section 262 unless and until any such holder fails to perfect or effectively withdraws or loses its rights to appraisal and payment under the DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such rights, such Dissenting Shares will thereupon be treated as if they had been converted into, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon, and the Surviving
Corporation shall remain liable for payment of the Merger Consideration for such Shares. At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights provided in Section 262 of
the DGCL and as provided in the previous sentence. The Company shall give Parent (i) prompt notice of any demands received by the Company for appraisals of Shares and (ii) the opportunity to participate in all negotiations and proceedings
with respect to such notices and demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisal or settle any such demands.
(e)
Adjustments
. If, between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of
the Company shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or any stock dividend thereon with a record date during such period (but excluding the effect of
any exercise of Company Options that are outstanding as of the date of this Agreement), the Merger Consideration and any other amounts payable pursuant to this Agreement shall be equitably adjusted, without duplication, to proportionally reflect
such change.
Section 2.2
Exchange of Certificates
.
(a)
Paying Agent
. At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with a U.S. bank or trust
company that shall be appointed by Parent (and reasonably satisfactory to the Company) to act as a paying agent hereunder (the
Paying Agent
), in trust for the benefit of holders of the Shares, cash in U.S. dollars sufficient to
pay the aggregate Merger Consideration in exchange for all of the Shares outstanding immediately prior to the Effective Time (other than the Cancelled Shares), payable upon due surrender of the certificates that immediately prior to the Effective
Time represented Shares (
Certificates
) (or effective affidavits of loss in lieu thereof) or non-certificated Shares represented by book-entry (
Book-Entry Shares
) pursuant to the provisions of this Article 2
(such cash being hereinafter referred to as the
Exchange Fund
).
(b)
Payment Procedures
.
(i) As soon as reasonably practicable after the Effective Time and in any event not later than the second Business Day following the Closing
Date, Parent shall instruct the Paying Agent to mail to each holder of
A-3
record of Shares whose Shares were converted into the right to receive the Merger Consideration pursuant to Section 2.1, (A) a letter of transmittal, which shall specify that delivery
shall be effected, and risk of loss and title to Certificates shall pass, only upon delivery of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares to the Paying Agent and shall be in such form and have such other
provisions as is customary, and (B) instructions for use in effecting the surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares in exchange for the Merger Consideration.
(ii) Upon surrender of Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares to the Paying Agent, together with
such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may customarily be required by the Paying Agent, the holder of such Certificates (or effective affidavits of
loss in lieu thereof) or Book-Entry Shares shall be entitled to receive from the Exchange Fund in exchange therefor an amount in cash equal to the product of (x) the number of Shares represented by such holders properly surrendered
Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares and (y) the Merger Consideration (less any applicable withholding Taxes). No interest shall be paid or accrued on any amount payable upon due surrender of
Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry Shares. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment upon due surrender of the Certificate may
be paid to such a transferee if the Certificate formerly representing such Shares is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes
have been paid or are not applicable.
(iii) The Paying Agent, the Company, Parent, Merger Sub and their respective agents, as applicable,
shall be entitled to deduct and withhold from any amounts otherwise payable under this Agreement such amounts as are required to be withheld or deducted under the Internal Revenue Code of 1986, as amended (the
Code
), and the
regulations promulgated thereunder, or under any provision of state, local or foreign Tax Law with respect to the making of such payment. To the extent that amounts are so deducted or withheld, such deducted or withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the Person in respect of which such deduction or withholding was made.
(c)
Closing of Transfer Books
. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that
were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation or the Paying Agent for transfer or any other reason, the holder of any such
Certificates or Book-Entry Shares shall be given a copy of the letter of transmittal referred to in Section 2.2(b) and instructed to comply with the instructions in that letter of transmittal in order to receive the cash to which such holder is
entitled pursuant to this Article 2.
(d)
Termination of Exchange Fund
. Any portion of the Exchange Fund (including the
proceeds of any investments thereof) that remains undistributed to the former holders of Shares on the six month anniversary of the Effective Time shall thereafter be delivered to the Surviving Corporation upon demand, and any former holders of
Shares who have not surrendered their Shares in accordance with this Article 2 shall thereafter look only to the Surviving Corporation for payment of their claim for the Merger Consideration, without any interest thereon, upon due surrender of
their Shares.
(e)
No Liability
. Anything herein to the contrary notwithstanding, none of the Company, Parent, Merger Sub, the
Surviving Corporation, the Paying Agent or any other Person shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.
(f)
Investment of Exchange Fund
. The Paying Agent shall invest all cash included in the Exchange Fund as reasonably directed by Parent;
provided
,
however
, that any investment of such cash shall be limited to direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the U.S. government, or any U.S. registered open end
investment company holding itself out as a U.S. government money market fund. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation pursuant to Section 2.2(d).
A-4
(g)
Lost Certificates
. In the case of any Certificate that has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Paying Agent or Parent, the posting by such Person of a bond in customary amount as indemnity
against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate a check in the amount of the number of Shares represented by such lost, stolen or
destroyed Certificate multiplied by the Merger Consideration (less any applicable withholding Taxes), without any interest thereon.
Section 2.3
Treatment of Company Equity Awards
.
(a) Each option to purchase Shares that was granted pursuant to any Company Benefit Plan (each, a
Company Option
), whether
vested or unvested, that is outstanding immediately prior to the Effective Time shall, at the Effective Time, become fully vested and be converted into the right to receive an amount in cash equal to the product of (i) the excess, if any, of
the Merger Consideration over the exercise price per Share of such Company Option and (ii) the total number of Shares subject to such Company Option. Parent shall cause the Surviving Corporation or one of its Subsidiaries, as applicable, to pay
to the holders of Company Options the cash amounts described in the immediately preceding sentence, less such amounts as are required to be withheld or deducted under the Code or any provision of state, local or foreign Tax Law with respect to the
making of such payment, within five calendar days following the Effective Time. If the applicable exercise price per Share equals or exceeds the Merger Consideration, such Company Option shall be cancelled without payment of additional
consideration, and all rights with respect to such Company Option shall terminate as of the Effective Time.
(b) Each award of restricted
stock units granted pursuant to any Company Benefit Plan (each, an
RSU
), whether vested or unvested, that is outstanding immediately prior to the Effective Time, shall as of the Effective Time, become fully vested (in the case of
Company RSUs that are Market Share Unit Awards (
MSUs
), in respect of a number of Shares determined pursuant to the terms of the applicable award agreement with respect to performance determination in connection with a change
in control) and be cancelled and of no further force or effect as of the Effective Time and automatically converted into the right to receive an amount in cash equal to the product of (i) the total number of Shares subject to such RSU and
(ii) the Merger Consideration. Parent shall cause the Surviving Corporation or one of its Subsidiaries, as applicable, to pay to the holders of RSUs the cash amounts described in the immediately preceding sentence, less such amounts as are
required to be withheld or deducted under the Code or any provision of state, local or foreign Tax Law with respect to the making of such payment, within five calendar days following the Effective Time (or such later date as is required by
Section 409A of the Code).
(c) Each Share granted subject to any vesting or other lapse restrictions pursuant to any Company Benefit
Plan (each, a
Restricted Share
), whether vested or unvested, that is outstanding immediately prior to the Effective Time, shall, at the Effective Time, become fully vested (without regard to the satisfaction of any performance
condition, vesting or other lapse condition) and be converted into the right to receive an amount in cash equal to the Merger Consideration. Parent shall cause the Surviving Corporation or one of its Subsidiaries, as applicable, to pay to the
holders of Restricted Shares the cash amounts described in the immediately preceding sentence, less such amounts as are required to be withheld or deducted under the Code or any provision of state, local or foreign Tax Law with respect to the making
of such payment, within five calendar days following the Effective Time.
(d) Prior to the Effective Time, the Company, through its Board
of Directors or an appropriate committee thereof, will adopt such resolutions as may reasonably be required to effectuate the actions contemplated by this Section 2.3.
Section 2.4
Employee Stock Purchase Plan
. The Company shall take all necessary action to ensure that no new offering periods under
the Companys Employee Stock Purchase Plan (the
ESPP
) will commence during the period from the date of this Agreement through the Effective Time. The accumulated contributions of the participants in the current offering
period shall be used to purchase Shares as of no later than ten Business
A-5
Days prior to the Effective Time, and the participants purchase rights under such offerings shall terminate immediately after such purchase. As of no later than the Business Day immediately
prior to the Effective Time, the Company shall terminate the ESPP.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in (a) the Companys Annual Report on Form 10-K for the year ended December 31, 2015 or CAPLs Annual
Report on Form 10-K for the year ended December 31, 2015, or any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by the Company or CAPL since December 31, 2015, in each case as filed with the SEC (other than disclosures
contained therein under the captions Risk Factors or Forward-Looking Statements and any other disclosures contained therein relating to information, factors or risks that are predictive, cautionary or forward looking in
nature) or (b) in the disclosure letter delivered by the Company to Parent concurrently with the execution of this Agreement (the
Company Disclosure Letter
) (it being agreed that disclosure of any item in any section or
subsection of the Company Disclosure Letter shall be deemed disclosed with respect to any other section or subsection of the Company Disclosure Letter only to the extent the applicability of such disclosure is reasonably apparent on its face), the
Company represents and warrants to Parent and Merger Sub as follows:
Section 3.1
Qualification; Organization; Subsidiaries
.
(a) Each of the Company and its Subsidiaries is a legal entity duly organized, validly existing and in good standing under the Laws of its
respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except, in each case, as would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) The Company has made available to Parent true, complete and
correct copies of the certificate of incorporation and bylaws of the Company in effect as of the date of this Agreement. Section 3.1(b) of the Company Disclosure Letter sets forth a true and complete list of each Non-CAPL Subsidiary of the
Company, each such Non-CAPL Subsidiarys jurisdiction of incorporation and its authorized, issued and outstanding shares of capital stock, if any, that are not owned by the Company or its Subsidiaries, in each case, as of the date hereof. All
of the outstanding equity interests of each Subsidiary of the Company are duly authorized, validly issued, fully paid and nonassessable, and are owned by the Company or its Subsidiaries, free and clear of all Liens (other than Liens pursuant to the
credit facilities existing on the date hereof and any restrictions imposed by applicable securities Laws or the organizational documents of any such Subsidiary). No Subsidiary of the Company owns any equity interests of the Company or securities
convertible into or exchangeable for such equity interests.
Section 3.2
Capitalization
.
(a) The authorized share capital of the Company consists of 250,000,000 shares of Common Stock and 20,000,000 shares of preferred stock, par
value $0.01 per share (the
Preferred Stock
). As of August 18, 2016 (the
Capitalization Date
), there were: (i) 77,850,130 Shares of Common Stock issued (including Shares held by the Company in
treasury), 75,684,881 Shares of Common Stock outstanding (including 1,080 unvested Restricted Shares) and no shares of Preferred Stock issued and outstanding; (ii) Company Options to purchase an aggregate of 1,698,146 Shares issued and
outstanding; and (iii) 287,378 Shares of Common Stock underlying outstanding RSUs other than MSUs and (iv) 93,249 Shares of Common Stock underlying outstanding MSUs if performance conditions are satisfied at the target level or 186,498
Shares of Common Stock underlying outstanding MSUs if performance conditions are satisfied at the maximum level. All outstanding Shares are duly authorized, validly issued, fully paid and nonassessable, and are not subject to and were not issued in
violation of any preemptive or similar right, purchase option, call or right of first refusal or similar right.
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(b) Except as set forth in Section 3.2(a) or as permitted by Section 5.1, (i) the
Company does not have any shares of its capital stock issued or outstanding other than Shares of Common Stock that have become outstanding after the Capitalization Date that were reserved for issuance as of that date as set forth in
Section 3.2(a), and (ii) there are no outstanding subscriptions, options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities or other similar rights, agreements, arrangements,
undertakings or commitments of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to (A) issue, transfer or sell any shares of capital stock or
other equity interests of the Company or any Subsidiary of the Company or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscriptions, options, warrants, calls, rights,
profits interests, stock appreciation rights, phantom stock, convertible securities or other similar rights, agreements, arrangements, undertakings or commitments, (C) redeem, repurchase or otherwise acquire any such shares of capital stock or
other equity interests, or (D) provide a material amount of funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary. Except for the issuance of shares as set forth in clause
(i) of this subsection (b) above, since the Capitalization Date to the date hereof, the Company has not declared or paid any dividend or distribution in respect of the Common Stock, and has not issued, sold, repurchased, redeemed or
otherwise acquired any Common Stock, and its Board of Directors has not authorized any of the foregoing or otherwise taken any action or agreed to take any action that would have been prohibited by Section 5.1(b)(vii).
(c) Except for Equity Awards, neither the Company nor any of its Subsidiaries has outstanding bonds, debentures, notes or other obligations,
the holders of which have the right to vote or which are convertible into, or exercisable for or exchangeable for securities having the right to vote with the stockholders of the Company on any matter.
(d) Except for the Voting Agreement entered into on October 1, 2014 with Joseph V. Topper, Jr. and certain of his affiliates, there
are no voting agreements, voting trusts, stockholders agreements, proxies or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock or other equity interest of
the Company or any of its Subsidiaries.
(e) Section 3.2(e) of the Company Disclosure Letter includes a complete list, as of the close
of business on the Capitalization Date, of (i) (A) each outstanding Company Option, (B) each outstanding Restricted Share, and (C) each outstanding RSU (each, an
Equity Award
), (ii) the number of Shares of
Common Stock underlying each Equity Award and (A) the target and maximum number of Shares of Common Stock underlying each such Equity Award with respect to which the performance or vesting period has not ended as of the Capitalization Date and
(B) the actual number of Shares of Common Stock underlying each such Equity Award with respect to which the performance or vesting period has ended as of the Capitalization Date, (iii) the Company Benefit Plan under which each Equity Award
was granted, and (iv) the exercise price, in the case of each Company Option.
Section 3.3
Corporate Authority Relative to
This Agreement; No Violation
.
(a) The Company has the requisite corporate power and authority to enter into and deliver this Agreement
and, subject to receipt of the Company Stockholder Approval, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The Board of Directors of the Company at a duly held meeting unanimously has
(i) determined that it is in the best interests of the Company and its stockholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, including the Merger and (iii) resolved to recommend that the stockholders of the Company adopt this Agreement (the
Recommendation
) and directed that such matter be submitted for
consideration of the stockholders of the Company at the Company Meeting. Except for the Company Stockholder Approval and the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, no other corporate proceedings on
the part of the Company are necessary to authorize the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes the valid and binding agreement of Parent
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and Merger Sub, constitutes the valid and binding agreement of the Company, enforceable against the Company in accordance with its terms.
(b) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other
transactions contemplated hereby do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to any Governmental Entity, other than (i) the filing of the Certificate of Merger,
(ii) the filing of the pre-merger notification reports under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
HSR Act
), and the Canadian Competition Act, as amended (the
Competition
Act
), (iii) compliance with the applicable requirements of the Exchange Act, including the filing of the Proxy Statement with the SEC, (iv) compliance with the rules and regulations of the NYSE, (v) compliance with any
applicable foreign or state securities or blue sky laws and (vi) the other consents and/or notices set forth on Section 3.3(b) of the Company Disclosure Letter (collectively, clauses (i) through (vi), the
Specified
Approvals
), and other than any consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not reasonably be expected to, individually or in the aggregate, have a Company Material
Adverse Effect.
(c) Assuming compliance with the matters referenced in Section 3.3(b), receipt of the Specified Approvals and the
receipt of the Company Stockholder Approval, the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby do not and will not
(i) contravene or conflict with, or violate or breach any provision of, the organizational or governing documents of the Company or any of its Subsidiaries, (ii) contravene or conflict with, or violate or breach any provision of, any Law
binding upon or applicable to the Company or any of its Subsidiaries or any of their respective properties or assets or (iii) result in any violation of, or default (with or without notice, lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to the loss of a benefit under any legally binding loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement or contract (collectively,
Contracts
) or Permit binding upon the Company or any of its Subsidiaries or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of the Company or any of its Subsidiaries, other
than, in the case of clauses (ii) and (iii), any such violation, conflict, default, termination, cancellation, acceleration, right, loss or Lien that would not reasonably be expected to, individually or in the aggregate, have a Company Material
Adverse Effect.
Section 3.4
Reports and Financial Statements
.
(a) The Company has filed or furnished all forms, documents and reports required to be filed or furnished prior to the date hereof by it with
the SEC on a timely basis since December 31, 2013 (together with any documents so filed or furnished during such period on a voluntary basis, in each case as may have been amended since their filing, the
Company SEC
Documents
). CAPL has filed or furnished all forms, documents and reports required to be filed or furnished prior to the date hereof by it with the SEC on a timely basis since December 31, 2013 (together with any documents so filed or
furnished during such period on a voluntary basis, in each case as may have been amended since their filing, the
CAPL SEC Documents
). Each of the Company SEC Documents and CAPL SEC Documents, including all forms, documents and
reports filed by the Company or CAPL with the SEC after the date hereof, as of its date, or, if amended, as finally amended prior to the date of this Agreement, complied as to form in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated thereunder. As of the date filed with the SEC, none of the Company SEC Documents or CAPL SEC Documents, including
all forms, documents and reports filed by the Company or CAPL with the SEC after the date hereof, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading. Each Company SEC Document or CAPL SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the
Securities Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements
therein not misleading. As of
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the date hereof, there are no material outstanding or unresolved comments received from the SEC with respect to any of the Company SEC Documents or CAPL SEC Documents.
(b) The consolidated financial statements (including all related notes and schedules) of (i) the Company included in the Company SEC
Documents (if amended, as of the date of the last such amendment), and (ii) CAPL included in the CAPL SEC Documents (if amended, as of the date of the last such amendment), in each case fairly presented in all material respects the consolidated
financial position of the Company or CAPL, as applicable and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended
(subject, in the case of the unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein, including the notes thereto) in conformity with GAAP (except, in the case of the unaudited statements, as
permitted by the SEC) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto). Except for CAPL, none of the Subsidiaries of the Company is required to file periodic reports with the SEC.
(c) No securitization transactions or other off-balance sheet arrangements (as defined in Item 303 of Regulation S-K under the
Securities Act) existed or were effected by the Company, CAPL or any other Subsidiaries since December 31, 2013 and prior to the date hereof.
Section 3.5
Internal Controls and Procedures
.
(a) The Company has established and maintains disclosure controls and procedures and internal controls over financial
reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. The Companys disclosure controls and procedures are reasonably
designed to ensure that all material information required to be disclosed by the Company in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the SEC, and that all such material information is accumulated and communicated to the Companys management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to
Sections 302 and 906 of the Sarbanes-Oxley Act. The principal executive officer and principal financial officer of the Company have made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act and Rule 13a-15 under the Exchange
Act. The Companys management has completed an assessment of the effectiveness of the Companys internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended
December 31, 2015, and such assessment concluded that such controls were effective. To the Knowledge of the Company, from December 31, 2013 to the date hereof, the Company has not failed to disclose to the Companys auditors and the
audit committee of the Board of Directors (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect
the Companys ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal
controls over financial reporting.
(b) Since December 31, 2013 through the date of this Agreement, except as would not reasonably be
expected to, individually or in the aggregate, have a Company Material Adverse Effect, none of the Company, any of its Subsidiaries or, to the Knowledge of the Company, any director or officer of the Company or any of its Subsidiaries has received
any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices.
Section 3.6
No Undisclosed Liabilities
. Except (a) as disclosed, reflected or reserved against in the audited consolidated
balance sheet of the Company and its Subsidiaries as of December 31, 2015 (or the notes thereto), (b) as incurred in connection with this Agreement, (c) for liabilities and obligations that have been
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incurred in the ordinary course of business consistent with past practice since December 31, 2015 and (d) for liabilities or obligations that have been discharged or paid in full,
neither the Company nor any Subsidiary of the Company has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that have had or would reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 3.7
Compliance with Law; Permits
.
(a) The Company and each of the Companys Subsidiaries are, and since December 31, 2013 have been, in compliance with, and are not,
and since December 31, 2013 have not been, in default under or in violation of, any applicable federal, state, local, municipal, international or foreign law, statute, treaty, ordinance, rule, regulation, judgment, order, injunction, mandatory
policy, binding directive, decree or agency requirement of any Governmental Entity (collectively,
Laws
and each, a
Law
) or with the applicable listing and corporate governance rules of the NYSE, except where
such noncompliance, default or violation would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. The Company and each of the Companys Subsidiaries are not, and since December 31, 2013
have not been, under investigation with respect to and, to the Knowledge of the Company, have not been threatened in writing to be charged with or given written notice of any violation of, any applicable Law or with the applicable listing and
corporate governance rules of the NYSE, in each case, except as would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.
(b) The Company and each of its Subsidiaries are in possession of all franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, registrations, approvals and orders of any Governmental Entity (
Permits
) necessary for the Company and the Companys Subsidiaries to own, lease and operate their properties and
assets and to carry on their businesses as they are now being conducted (such Permits, the
Company Permits
), except where the failure to have any of the Company Permits would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect. All Company Permits are in full force and effect, no default (with or without notice, lapse of time, or both) has occurred under any such Company Permit, and none of the Company or its Subsidiaries
has received any written notice from any Governmental Entity threatening to suspend, revoke, withdraw or materially and adversely modify any such Company Permit, in each case, except as would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries, nor to the Knowledge of the
Company, any of their respective directors, officers, agents, employees or any other Persons acting on their behalf has, at any time since January 1, 2013 in the case of the Company and its Non-CAPL Subsidiaries, and since October 1, 2014
in the case of the Companys CAPL Subsidiaries, in connection with the operation of their respective businesses, (i) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials, candidates or members of political parties or organizations, or established or maintained any unlawful or unrecorded funds in violation of Section 104 of the Foreign Corrupt
Practices Act or any other similar applicable foreign, federal or state law, (ii) paid, accepted or received any unlawful contributions, payments, expenditures or gifts or (iii) violated any applicable U.S. Export and Import Laws, or made
a voluntary disclosure with respect to any violation thereof, in each case other than immaterial violations of applicable Laws that are not Known to the Company.
(d) The foregoing notwithstanding, the representations and warranties in this Section 3.7 shall not be deemed to be made with respect to
the Companys compliance with, or Company Permits with respect to: (i) Environmental Laws, Hazardous Substances and any other environmental matter or (ii) Tax matters.
Section 3.8
Environmental Laws and Regulations
.
(a) Except as would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect, since
January 1, 2013 in the case of the Company and its Non-CAPL Subsidiaries, and since October 1, 2014 in the case of the Companys CAPL Subsidiaries: (i) each of the Company and its
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Subsidiaries is and has been in compliance with all applicable Environmental Laws, which compliance includes obtaining, maintaining and complying with all Company Permits required under
Environmental Laws (
Environmental Permits
) and all such Environmental Permits are in full force and effect; (ii) there has been no disposal or release of any Hazardous Substance by the Company or any of its Subsidiaries, or
to the Knowledge of the Company, any other Person in any manner that would reasonably be expected to give rise to the Company or any of its Subsidiaries incurring any remedial obligation, corrective action requirement or other liability or
obligation under applicable Environmental Laws or Environmental Permits; (iii) there are no investigations, actions, suits, proceedings, reviews, or inquiries pending or, to the Knowledge of the Company, threatened in writing against the
Company or any of its Subsidiaries involving any real property currently or formerly owned, operated or leased by or for the Company or any of its Subsidiaries alleging noncompliance with or liability under any Environmental Law or Environmental
Permit; and (iv) as of the date hereof, the Companys and its Subsidiaries underground storage tank systems (
UST Systems
) comply with all applicable requirements relating to the registration, reporting, licensing,
use and maintenance of UST Systems such that its UST Systems (and the Company or its Subsidiary as the owner and/or operator thereof) qualify for inclusion in all applicable government funds for the reimbursement of corrective action costs relating
to UST Systems (
UST Funds
) and for all applicable reimbursement pursuant to such UST Funds.
(b) As used herein,
Environmental Law
means any Law relating to (i) the protection, preservation or restoration of the indoor or outdoor environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource), or (ii) any pollutant, contaminant, waste, or toxic or otherwise hazardous substance, including the exposure thereto, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or threatened release or disposal thereof.
(c) As used herein,
Hazardous Substance
means any substance presently listed, defined, designated, classified or otherwise regulated as hazardous, toxic, radioactive or dangerous or for which liability may arise under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any Governmental Entity or any Environmental Law and includes any toxic waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or petroleum or any derivative or byproduct thereof, radon, radioactive material, asbestos, or asbestos-containing material, urea formaldehyde, foam insulation or polychlorinated biphenyls.
Section 3.9
Employee Benefit Plans
.
(a) Section 3.9(a) of the Company Disclosure Letter lists all material Company Benefit Plans.
Company Benefit Plans
means all employee or director compensation and/or benefit plans, programs, policies, agreements or other arrangements, including any employee welfare plan within the meaning of Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended (
ERISA
), any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA), and any bonus, incentive, deferred compensation, vacation, stock
purchase, stock option, severance, employment, change of control or fringe benefit plan, program or agreement (other than any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (a
Multiemployer
Plan
)), in each case that are sponsored, maintained or contributed to by the Company or any of its Subsidiaries for the benefit of current or former employees, directors or consultants of the Company or its Subsidiaries.
(b) The Company has heretofore made available to Parent true and complete copies of each of the material Company Benefit Plans and with respect
to each such plan: (i) each writing constituting a part of such Company Benefit Plan, including all amendments thereto; (ii) the most recent Annual Report (Form 5500 Series) and accompanying schedules, if any; and (iii) the most
recent determination letter from the Internal Revenue Service (if applicable) for such Company Benefit Plan.
(c) (i) Each Company Benefit
Plan has been maintained and administered in all material respects in compliance with its terms and with applicable Law, including ERISA and the Code to the extent applicable thereto; (ii) each of the Company Benefit Plans intended to be
qualified within the meaning of Section 401(a)
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of the Code has received a favorable determination letter from the Internal Revenue Service or is entitled to rely upon a favorable opinion issued by the Internal Revenue Service, and, to the
Knowledge of the Company, there are no existing circumstances or any events that have occurred that could reasonably be expected to adversely affect the qualified status of any such plan; (iii) no Company Benefit Plan is subject to Title IV of
ERISA, and no employee benefit plan sponsored, maintained or contributed to by the Company or any of its Subsidiaries since May 1, 2013 has been subject to Title IV of ERISA; (iv) no Company Benefit Plan provides medical or other welfare
benefits with respect to current or former employees or directors of the Company or its Subsidiaries beyond their retirement or other termination of service, other than (A) coverage mandated by applicable Law or (B) benefits under any
employee pension plan (as such term is defined in Section 3(2) of ERISA) or benefits not in excess of three years under severance arrangements; (v) no material liability under Title IV of ERISA has been incurred by the Company,
its Subsidiaries or any ERISA Affiliate of the Company that has not been satisfied in full (other than with respect to amounts not yet due), and no condition exists that presents a risk to the Company, its Subsidiaries or any ERISA Affiliate of the
Company of incurring a liability thereunder; (vi) all material contributions or other amounts payable by the Company or its Subsidiaries as of the date hereof with respect to each Company Benefit Plan in respect of current or prior plan years
have been paid or accrued in accordance with GAAP (other than with respect to amounts not yet due); (vii) no employee benefit plan of the Company or its Subsidiaries is a Multiemployer Plan or a plan that has two or more contributing sponsors,
at least two of whom are not under common control, within the meaning of Section 4063 of ERISA; and (viii) there are no material pending, threatened or, to the Knowledge of the Company, anticipated claims (other than claims for benefits in
accordance with the terms of the Company Benefit Plans) by, on behalf of or against any of the Company Benefit Plans or any trusts related thereto that could reasonably be expected to result in any material liability of the Company or any of its
Subsidiaries.
ERISA Affiliate
means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same controlled group as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
(d) The Company is not in default in performing any of its material contractual obligations under any Company Benefit Plan or any related trust
agreement or insurance contract. All material contributions and other material payments required to be made by the Company and its Subsidiaries to any Company Benefit Plan have been made, or reserves adequate for such contributions or other payments
have been set aside therefor. The Company has paid all material liabilities for insurance premiums for benefits provided under the insured Company Benefit Plans and has paid all material amounts due. There are no material outstanding liabilities
under any Company Benefit Plan other than liabilities for benefits to be paid in the ordinary course of business to participants in such Plans and their beneficiaries.
(e) Except as set forth in Section 3.9(a) or Section 3.9(e) of the Company Disclosure Letter, there are no written employment
Contracts for a specified duration, or Contracts providing for severance or other benefits in the event of termination, between the Company or its Subsidiaries and any of their current management employees. The Company has made available to Parent
complete copies of the Companys severance plans and policies applicable to its employees.
(f) The consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with another event: (i) entitle any current or former employee, consultant or officer of the Company or any of its Subsidiaries to severance pay or any other payment or
benefits, except as provided in this Agreement or as required by applicable Law; or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due to any such employee, consultant or officer, except as provided in
this Agreement (including Section 2.3 hereof).
(g) There is no contract, plan or arrangement (written or otherwise) that,
individually or collectively, would reasonably be expected to (i) entitle any current or former employee or other service provider to any Tax gross-up from the Company or any of its Subsidiaries in respect of Taxes under Section 409A of
the Code or Section 4999 of the Code or (ii) give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code.
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Section 3.10
Labor Matters
.
(a) Neither the Company nor any of its Subsidiaries is party to any collective bargaining, labor or similar agreement (a
Collective
Bargaining Agreement
).
(b) Except as would not reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect, there are (i) no strikes or lockouts with respect to any employees of the Company or any of its Subsidiaries, (ii) to the Knowledge of the Company, no union organizing effort pending or threatened against the
Company or any of its Subsidiaries (for the avoidance of doubt, other than any matters set forth in any Collective Bargaining Agreement), (iii) no unfair labor practice, labor dispute (other than routine individual grievances) or labor
arbitration proceeding pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, and (iv) no slowdown, or work stoppage in effect or, to the Knowledge of the Company, threatened with respect to
employees of the Company or any of its Subsidiaries.
(c) The Company and its Subsidiaries are not delinquent in in any material respect in
the payments to any employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by them or amounts required to be reimbursed to such employees.
(d) The Company and its Subsidiaries are in compliance in all material respects with all applicable Laws respecting (i) employment and
employment practices, (ii) terms and conditions of employment and wages and hours, and (iii) unfair labor practices.
Section 3.11
Absence of Certain Changes or Events
. Since December 31, 2015, there has not been any event or effect that,
individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect. From December 31, 2015 through the date of this Agreement, (a) the Company and its Subsidiaries have conducted their
respective businesses, in all material respects, in the ordinary course of business consistent with past practice; and (b) except as disclosed in Section 3.11 of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries has taken any actions, or has agreed to take any actions, that would have been prohibited by Section 5.1(b)(i), (ii), (v), (vi)(A), (x), (xii), (xiv), (xv), (xvi) or (xvii) if such actions were taken on or after the date
of this Agreement.
Section 3.12
Investigations; Litigation
. There is no investigation or review pending (or, to the Knowledge
of the Company, threatened in writing) by any Governmental Entity with respect to the Company, any of the Companys Subsidiaries (or any of the Companys and its Subsidiaries respective properties) or, to the Knowledge of the
Company, any present officer, director or employee of the Company or any of its Subsidiaries, in each case, that is material to the business of the Company and its Subsidiaries, taken as a whole, and there are no actions, suits, inquiries,
investigations or proceedings pending (or, to the Knowledge of the Company, threatened in writing) against or affecting the Company, any of the Companys Subsidiaries (or any of the Companys and its Subsidiaries respective
properties) or, to the Knowledge of the Company, any present officer, director or employee of the Company or any of its Subsidiaries, and there are no orders, judgments or decrees of, or before, any Governmental Entity or arbitrator, in each case,
that that are material to the business of the Company and its Subsidiaries, taken as a whole.
Section 3.13
Proxy Statement; Other
Information
. The proxy statement to be filed by the Company with the SEC in connection with seeking the Company Stockholder Approval (including the letter to stockholders, notice of meeting and form of proxy, as each may be amended or
supplemented, the
Proxy Statement
) will not, at the time it is filed with the SEC, or at the time it is first mailed to the stockholders of the Company and at the time of the Company Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Company will cause the Proxy Statement
to comply as to form in all material respects with the requirements of the Exchange Act applicable thereto. No representation is made by the Company with respect to statements made in the Proxy Statement based on information supplied in writing, or
required to be supplied (but that was not supplied), by or on behalf of Parent, Merger Sub or any of their Affiliates for inclusion or incorporation by reference therein.
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Section 3.14
Tax Matters
.
(a) As used in this Agreement, (i)
Taxes
means any and all federal, state, local or foreign taxes, governmental fees or
other like assessments or charges of any kind (including withholding on amounts paid to or by any Person), and any and all interest, penalties, additions to tax and additional amounts relating thereto, imposed by any Governmental Entity, including
income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers compensation, net worth, excise, withholding, ad valorem and value added taxes, and
any liability for any of the foregoing as transferee and (ii)
Tax Return
means any return, report, document, election, declaration or similar filing (including the attached schedules) required to be filed with respect to
Taxes, including any information return, claim for refund, amended return or declaration of estimated Taxes.
(b) Except as would not,
individually or in the aggregate, have a Company Material Adverse Effect, the Company represents and warrants to Parent and Merger Sub as follows:
(i) the Company and each of its Subsidiaries have prepared and timely filed (taking into account any extension of time within
which to file) all Tax Returns required to be filed by any of them and all such filed Tax Returns are complete and accurate;
(ii) the Company and each of its Subsidiaries have paid all Taxes that are due and payable;
(iii) the Company and its Subsidiaries have established in accordance with GAAP an adequate accrual for all Taxes on the most
recent financial statements included in the Company SEC Documents;
(iv) the federal income Tax Returns of the Company and
its Subsidiaries through the Tax year ended December 31, 2007 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has
expired;
(v) as of the date of this Agreement, there are not pending or threatened in writing any audits, examinations,
suits, investigations or other proceedings in respect of Taxes of the Company or any of its Subsidiaries;
(vi) there are
no liens for Taxes upon any property of the Company or any of its Subsidiaries, except for Permitted Liens;
(vii) neither
the Company nor any of its Subsidiaries has been a controlled corporation or a distributing corporation (within the meaning of Section 355(a)(1)(A) of the Code) in any distribution occurring during the two-year period
ending on the date hereof that was intended to be governed by Section 355 of the Code;
(viii) neither the Company nor
any of its Subsidiaries is a party to any understanding or arrangement described in Section 6662(d)(2)(C)(ii) of the Code, or has participated in any listed transaction within the meaning of Treasury Regulation
Section 1.6011-4;
(ix) neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated
group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) has any liability for the Taxes of any Person (other than the Company, or any subsidiary of the Company) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law);
(x) neither the Company nor
any of its Subsidiaries is a party to any Tax sharing or Tax allocation agreement, or has any liability for the Taxes of another Person pursuant to any agreement, in each case, other than any such agreement (1) solely between or among any of
the Company and any of its Subsidiaries or (2) not primarily relating to Taxes and entered into in the ordinary course of business (a
Tax Sharing Agreement
);
(xi) neither the Company nor any of its Subsidiaries is a party to any currently effective waiver or other agreement extending
the statute of limitation or period of assessment or collection of any material Taxes;
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(xii) each of the Company and its Subsidiaries, within the time and in the manner
prescribed by Law, has withheld and paid over to the proper Governmental Entity all material amounts required to be withheld and paid over under applicable Law (including Sections 1441, 1442, 3102 and 3402 of the Code or any other applicable
provision of state, local or foreign Law); and
(xiii) there has been no change in any method of accounting utilized by the
Company or its Subsidiaries that would require any material adjustment to taxable income pursuant to the Code (or any similar or corresponding provision of state, local or foreign Law).
Section 3.15
Intellectual Property
.
(a) For purposes of this Agreement, (i)
Intellectual Property
means any trademark, service mark, trade name, invention,
patent, trade secret, copyright, know how, Internet domain names, trade dress (together with goodwill), software and databases (including any registrations or applications for registration of any of the foregoing) or any other similar type of
proprietary intellectual property right, and (ii)
Company Intellectual Property
means all material Intellectual Property owned or licensed and used or held for use by the Company or any of its Subsidiaries.
(b) Section 3.15 of the Company Disclosure Letter sets forth a true, correct and complete list as of the date hereof of all patented or
registered Company Intellectual Property and any outstanding applications therefor, in each case issued by, filed with, or recorded by, any Governmental Entity and the owner of record, date of application, registration or issuance, and relevant
jurisdiction as to each.
(c) The Company and its Subsidiaries own, or are licensed or otherwise have the right to use, all Intellectual
Property used in the conduct of their businesses, except where the failure to own, license or possess the right to use such Intellectual Property would not, individually or in the aggregate, have or reasonably be expected to have a Company Material
Adverse Effect. To the Knowledge of the Company, no third party is infringing any material Company Intellectual Property and the Company and its Subsidiaries are not infringing, misappropriating or violating any material Intellectual Property right
of any third party, in each case, except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect.
Section 3.16
Real Property
.
(a) The Company and its Subsidiaries have good and valid fee simple title to all of the material real property owned by the Company and its
Subsidiaries (the
Owned Real Property
), free and clear of Liens except Permitted Liens, except as would not reasonably be expected to have a Company Material Adverse Effect.
(b) Except as would not reasonably be expected to have a Company Material Adverse Effect, (i) each lease, license, sublease and occupancy
agreement, together with any material amendments thereto (each, a
Lease
) with respect to all real property leased, licensed, subleased or otherwise used or occupied by the Company or its Subsidiaries as lessee or sublessee (the
Leased Real Property
and, collectively with the Owned Real Property, the
Real Property
) is in full force and effect and is a legal, valid, binding and enforceable obligation of the Company or its Subsidiary, as
the case may be, and, to the Knowledge of the Company, of the other party or parties thereto, (ii) neither the Company nor any of its Subsidiaries is in material breach or material default under any of the Leases and no event has occurred or
circumstance exists that, with the delivery of notice, passage of time or both, would constitute such a breach or default or permit the termination, modification or acceleration of rent under such Lease.
(c) To the Knowledge of the Company, all buildings, structures, fixtures, building systems and equipment, and all components that are part of
the Real Property are in material compliance with all applicable Laws and are structurally sound and in good operating condition in all material respects and in a state of good and working maintenance and repair in all material respects, and are
reasonably adequate and reasonably suitable for the operation of the Companys business except as would not reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Company, each Real Property is in compliance
in all material respects with all applicable zoning requirements and the current use of such Real Property is a permitted or
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legally established use under applicable zoning requirements, except as would not reasonably be expected to have a Company Material Adverse Effect. To the Knowledge of the Company, there is no
pending or written or oral threat of condemnation or similar action affecting any of the Real Property.
Section 3.17
Opinions of
Financial Advisors
. The Board of Directors has received the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated as of the date of this Agreement, substantially to the effect that, as of such date and subject to the
assumptions, limitations, qualifications and other matters stated therein, the Merger Consideration to be received by the holders of Common Stock in the Merger pursuant to this Agreement is fair, from a financial point of view, to such holders. A
copy of such opinion has been provided to Parent or, if a written opinion is not available as of the date of this Agreement, will be provided to Parent promptly after the date of this Agreement.
Section 3.18
Required Vote of the Company Stockholders
. The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is the only vote of holders of securities of the Company that is required to adopt this Agreement and approve the consummation of the Merger and the other transactions contemplated hereby (the
Company Stockholder
Approval
).
Section 3.19
Material Contracts
.
(a) Except for this Agreement, agreements filed as exhibits to the Company SEC Documents or the CAPL SEC Documents or as set forth in
Section 3.19 of the Company Disclosure Letter, as of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or expressly bound by any Contract (excluding any Company Benefit Plan) that:
(i) is a material contract (as such term is defined in Item 601(b)(10) of Regulation S-K of the Securities
Act);
(ii) is (A) a fuel supply agreement or other agreement (including any related incentive agreements) by which
any Person has the right or obligation to purchase or sell any brand of motor fuel at any of the Real Property or (B) a material dealer or branded retailer contract with respect to the operation of any of the Real Property;
(iii) is an agreement that by its terms provides for the purchase or sale of merchandise, supplies, services, equipment or
other assets providing for annual payments by the Company and its Subsidiaries or to the Company and its Subsidiaries, of $25 million or more, other than those that (A) can be terminated by the Company or its Subsidiaries on 6 months or
less notice without payment by the Company or its Subsidiaries of any material penalty or (B) have a remaining term left of 12 months or less;
(iv) is a material franchise agreement related to the operation by the Company and its Subsidiaries of food and beverage
franchises (including quick service restaurants) at any of the Real Property;
(v) creates or grants a Lien (including
Liens upon properties acquired under conditional sales, capital leases or other title retention or security devices) that is material to the Company and its Subsidiaries, taken as a whole, other than any Permitted Lien;
(vi) relates to any joint venture, partnership, limited liability or other similar Contract relating to the formation,
creation, operation, management or control of any joint venture or partnership that is material to the business of the Company and its Subsidiaries, taken as a whole;
(vii) is an indenture, credit agreement, loan agreement, security agreement, guarantee (other than any guarantee provided with
respect to a wholly owned Subsidiary of the Company), note, mortgage or other Contract providing for or securing indebtedness for borrowed money or deferred payment (in each case, whether incurred, assumed, guaranteed or secured by any asset) in
excess of $25 million;
(viii) is a settlement, conciliation or similar Contract (x) with any Governmental Entity or
(y) which would require the Company or any of its Subsidiaries to pay consideration of more than $25 million after the date of this Agreement;
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(ix) relates to the acquisition or disposition of any business (whether by
merger, sale of stock, sale of assets or otherwise) or any real property having an aggregate purchase price in excess of $25 million;
(x) pursuant to which the Company or any of its Subsidiaries is obligated, directly or indirectly, to make any loan, capital
contribution to, or other investment in, any Person; or
(xi) contains any covenant that materially limits the ability of
the Company or any of its Subsidiaries to engage in any line of business, or to compete with any Person or operate at any geographic location.
Each
Contract of the type described in this Section 3.19(a) (including those described in the introductory clause of this subsection (a)) is referred to herein as a
Company Material Contract
.
(b) Neither the Company nor any Subsidiary of the Company is in breach of or default under the terms of any Company Material Contract where
such breach or default would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. To the Knowledge of the Company, no other party to any Company Material Contract is in breach of or default under the
terms of any Company Material Contract where such breach or default would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as would not have, individually or in the aggregate, a Company
Material Adverse Effect, (i) each Company Material Contract is a valid and binding obligation of the Company or the Subsidiary of the Company that is party thereto and, to the Knowledge of the Company, of each other party thereto, and is in
full force and effect and (ii) neither the Company nor any of its Subsidiaries has received any written notice or claim of default under any Company Material Contract or any written notice, or, to the Knowledge of the Company, verbal indication
of an intention to terminate any Company Material Contract. As of the date of this Agreement, except as would not have a Company Material Adverse Effect, no Person is renegotiating with the Company any material amount paid by the Company under any
Company Material Contract or any other material term or provision of any Company Material Contract.
Section 3.20
Insurance
Policies
. Except as would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, (a) all insurance policies maintained by the Company and its Subsidiaries are in full force and effect and
all premiums due and payable thereon have been paid in accordance with the terms of such policies, (b) neither the Company nor any of its Subsidiaries is in breach or default of any of its insurance policies, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a breach or default or permit termination or material and adverse modification of any of such policies and
(c) other than in connection with ordinary course renewals, the Company has not received any written notice of termination, cancellation, or non-renewal with respect to any such policy.
Section 3.21
Affiliate Party Transactions
. Since December 31, 2013 through the date hereof, there have been no material
transactions, agreements, arrangements or understandings between the Company or any of its Subsidiaries on the one hand, and any director or executive officer of the Company or any of its Affiliates on the other hand, that would be required to be
disclosed under Item 404 under Regulation S-K under the Securities Act and that have not been so disclosed in the Company SEC Documents or CAPL SEC Documents, other than ordinary course of business employment agreements and similar employee
arrangements otherwise set forth on the Company Disclosure Letter.
Section 3.22
Finders or Brokers; Fees
.
(a) Except for Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, neither the Company nor any of its
Subsidiaries has employed any investment banker, broker or finder in connection with the transactions contemplated by this Agreement who might be entitled to any fee or any commission in connection with or upon consummation of the Merger.
(b) The aggregate fees payable to Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Chase & Co. (and any other
brokers) by the Company or its Subsidiaries in connection with the Merger and the
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other transactions contemplated by this Agreement will not exceed the amount set forth in Section 3.22 of the Company Disclosure Letter.
Section 3.23
Takeover Laws
. Assuming the representations and warranties of Parent and Merger Sub set forth in Section 4.7 are
true and correct, no fair price, moratorium, control share acquisition, business combination or other form of antitakeover statute or regulation or any anti-takeover provision in the certificate of
incorporation or bylaws of the Company is, and the Company has no rights plan, poison pill or similar agreement that is, or at the Effective Time will be, applicable to this Agreement, the Merger or the other transactions contemplated
hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the disclosure letter delivered by Parent to the Company concurrently with the execution of this Agreement (the
Parent Disclosure Letter
) (it being agreed that disclosure of any item in any section or subsection of the Parent Disclosure Letter shall be deemed disclosed only with respect to any other section or subsection of the Parent
Disclosure Letter to the extent the applicability of such disclosure is reasonably apparent on its face), Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:
Section 4.1
Qualification, Organization, Subsidiaries
. Each of Parent and Merger Sub is a corporation duly organized, validly
existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except, in each case,
as would not reasonably be expected to, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.2
Corporate Authority Relative to This Agreement; No Violation
.
(a) No vote of the holders of capital stock of Parent is necessary to
approve this Agreement or the consummation of the transactions contemplated hereby. Each of Parent and Merger Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger, have been duly and validly authorized by the boards of directors of Parent and Merger Sub and the sole
stockholder of Merger Sub, and, except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize the consummation
of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming this Agreement constitutes the valid and binding agreement of the Company, constitutes the valid and
binding agreement of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms.
(b) The
execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to any Governmental Entity, other than (i) the filing of the Certificate of Merger, (ii) the filing of pre-merger notification reports under the HSR Act and the Competition
Act, (iii) compliance with the applicable requirements of the Exchange Act, (iv) compliance with any applicable foreign or state securities or blue sky laws and (v) the other consents and/or notices set forth on Section 4.2(b) of
the Parent Disclosure Letter (collectively, clauses (i) through (v), the
Parent Approvals
), and other than any consent, approval,
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authorization, permit, action, filing or notification the failure of which to make or obtain would not reasonably be expected to, individually or in the aggregate, have a Parent Material Adverse
Effect.
(c) The execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby do not and will not (i) contravene or conflict with, or violate or breach any provision of, the organizational or governing documents of Parent or any of its Subsidiaries,
(ii) assuming compliance with the matters referenced in Section 4.2(b) and receipt of the Parent Approvals, contravene or conflict with, or violate or breach any provision of any Law binding upon or applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets or (iii) result in any violation of, or default (with or without notice, lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a benefit under any Contract or Permit binding upon Parent or any of its Subsidiaries or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of Parent or any of its
Subsidiaries, other than, in the case of clauses (ii) and (iii), any such violation, conflict, default, termination, cancellation, acceleration, right, loss or Lien that would not reasonably be expected to, individually or in the aggregate,
have a Parent Material Adverse Effect.
Section 4.3
Investigations; Litigation
. There is no investigation or review pending
(or, to the Knowledge of Parent, threatened) by any Governmental Entity with respect to Parent or any of its Subsidiaries that would have, individually or in the aggregate, a Parent Material Adverse Effect, and there are no Actions pending (or, to
the Knowledge of Parent, threatened) against or affecting Parent or any of Parents Subsidiaries, or any of their respective properties at law or in equity before, and there are no orders, judgments or decrees of, or before, any Governmental
Entity, in each case that would have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.4
Proxy
Statement; Other Information
. The information provided by Parent or its Subsidiaries or Affiliates for inclusion or incorporation by reference in the Proxy Statement will not, at the time it is filed with the SEC, or at the time it is first
mailed to the stockholders of the Company or at the time of the Company Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not misleading. No representation is made by Parent or Merger Sub with respect to statements made in the Proxy Statement based on information supplied by or on behalf of the Company or any of
its Affiliates that is contained in the Proxy Statement.
Section 4.5
Financing
. On the Closing Date, immediately prior to the
Effective Time, Parent will have (or will make available to Merger Sub) sufficient cash, available lines of credit or other sources of immediately available, unrestricted funds to enable Parent to pay in cash the aggregate Merger Consideration and
to perform its obligations under this Agreement with respect to the transactions contemplated by this Agreement, including the treatment of Equity Awards pursuant to Section 2.3 and all payments, fees and expenses payable by Parent related to
or arising out of the consummation of the transactions contemplated by this Agreement.
Section 4.6
Capitalization of Merger
Sub
. The authorized capital stock of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per share, of which 100 shares are validly issued and outstanding. All of the issued and outstanding capital stock of Merger Sub is,
and at the Effective Time will be, owned directly or indirectly by Parent. Merger Sub does not have outstanding any option, warrant, right or any other agreement pursuant to which any Person other than Parent or its wholly owned Subsidiaries may
acquire any equity security of Merger Sub. Merger Sub has not conducted any business prior to the date hereof and has, and prior to the Effective Time will have, no assets, liabilities or obligations of any nature other than those incident to its
formation and pursuant to this Agreement and the Merger and the other transactions contemplated by this Agreement.
Section 4.7
Ownership of Common Stock
. None of Parent, Merger Sub or any of their respective Subsidiaries or Affiliates beneficially owns, directly or indirectly (including pursuant to a derivatives contract),
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any Shares of Common Stock or other securities convertible into, exchangeable for or exercisable for Shares of Common Stock and none of Parent, its Subsidiaries or Affiliates has any rights to
acquire, directly or indirectly, any Shares of Common Stock except pursuant to this Agreement. None of Parent, Merger Sub or any of their affiliates or associates is, or at any time during the last three years has been, an
interested stockholder of the Company, in each case as defined in Section 203 of the DGCL.
Section 4.8
No
Additional Representations
.
(a) Each of Parent and Merger Sub acknowledges and agrees that it and its Representatives have received
access to such books and records, facilities, equipment, contracts and other assets of the Company that it and its Representatives have desired or requested to review and that it and its Representatives have had full opportunity to meet with the
management of the Company and to discuss the business and assets of the Company.
(b) Parent and Merger Sub agree and acknowledge that,
except for the representations and warranties contained in Article 3, neither the Company nor any other Person makes any other express or implied representation or warranty on behalf of the Company or any of its Affiliates. Parent and Merger Sub
agree and acknowledge that neither the Company nor any Person has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding the Company or its Subsidiaries furnished or made available to
Parent and its Representatives, except as expressly set forth in Article 3, and neither the Company or its Subsidiaries, its or their directors, officers, employees, agents or other Representatives, nor any other Person, shall be subject to any
liability to Parent or any other Person resulting from the Companys making available to Parent or Parents use of such information, or any information, documents or material made available to Parent in the due diligence materials provided
to Parent, including in the data room, other management presentations (formal or informal) or in any other form in connection with the transactions contemplated by this Agreement. Without limiting the foregoing, the Company makes no representation
or warranty to Parent or Merger Sub with respect to any business or financial projection, guidance or forecast relating to the Company or any of its Subsidiaries, whether or not included in the data room or any management presentation. Each of
Parent and Merger Sub, on its behalf and on behalf of its Affiliates, expressly waives any such claim relating to the foregoing matters.
ARTICLE 5
COVENANTS AND AGREEMENTS
Section 5.1
Conduct of Business by the Company
.
(a) From and after the date hereof and prior to the Effective Time and the date, if any, on which this Agreement is earlier terminated pursuant
to Section 7.1 (the
Termination Date
), and except (i) as may be required by applicable Law, (ii) as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned);
(iii) as may be expressly required or expressly permitted by this Agreement or (iv) as set forth in Section 5.1(a) of the Company Disclosure Letter, the Company covenants and agrees with Parent that the Company and its Subsidiaries
shall conduct their business in the ordinary course of business consistent with past practice and the Company shall use all commercially reasonable efforts to (A) preserve intact its current business organization, (B) keep available the
services of the key employees of the Company and its Subsidiaries, subject to the restrictions set forth in Section 5.1(b), and (C) maintain satisfactory relationships with the material customers, lenders, suppliers and others having
material business relationships with the Company or any of its Subsidiaries.
(b) Subject to the exceptions contained in clauses (i),
(iii) and (iv) of Section 5.1(a), the Company agrees with Parent, on behalf of itself and its Subsidiaries, that between the date hereof and the Effective Time and, if earlier, the Termination Date, without the prior written consent
of Parent, the Company:
(i) shall not, and shall not permit any of its Subsidiaries that is not wholly owned to, authorize
or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock
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(whether in cash, assets, stock or other securities of the Company or its Subsidiaries), except (A) dividends and distributions paid by Subsidiaries of the Company to the Company or to any
of its wholly owned Subsidiaries, (B) dividends or distributions by CAPL and (C) dividends or distributions by CAPLs wholly owned Subsidiaries to CAPL or CAPLs wholly owned Subsidiaries;
(ii) shall not, and shall not permit any of its Subsidiaries to, split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, except for any such transaction by a wholly owned Subsidiary of the Company that remains a wholly owned
Subsidiary after consummation of such transaction;
(iii) except as required by existing written agreements or Company
Benefit Plans, shall not, and shall not permit any of its Non-CAPL Subsidiaries to (A) increase the compensation or other benefits payable or provided to its directors and employees other than in the ordinary course of business consistent with
past practice (and, with respect to any Equity Awards, consistent with Section 5.1(b)(iii) of the Company Disclosure Schedule), (B) enter into any employment, change of control, severance or retention agreement with any employee or other
service provider of the Company or any of its Subsidiaries (it being understood that the Company and its Subsidiaries may enter into offer letters with new hires in the ordinary course of business so long as such letters do not provide material
severance or change-in-control benefits) or (C) establish, adopt, enter into or amend any plan, trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except
as would not result in a material increase in cost to the Company or any of its Subsidiaries or a material acceleration or increase in payments or benefits;
(iv) shall not, and shall not permit any of its Subsidiaries to, enter into or make any loans, advances or capital
contributions to, or investments in, any other Person (other than loans or advances to directors, employees, agents or consultants in the ordinary course of business consistent with past practice) or make any change in its existing borrowing,
lending or investment arrangements for or on behalf of any of such Persons, except as required by the terms of any Company Benefit Plan;
(v) shall not, and shall not permit any of its Subsidiaries to, change material financial accounting policies or procedures or
any of its methods of reporting income, deductions or other items for financial accounting purposes, except as required by GAAP or SEC rule or policy;
(vi) shall not (A) amend any provision of its certificate of incorporation or bylaws or similar applicable charter or
organizational documents or (B) permit any of its Subsidiaries to amend any provision of such Subsidiarys certificate of incorporation or bylaws or similar applicable charter or organizational documents;
(vii) except for transactions exclusively among the Company and its wholly owned Subsidiaries or among the Companys
wholly owned Subsidiaries, shall not, and shall not permit any of its Subsidiaries to, issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of its capital stock or other
ownership interests in the Company or any Subsidiaries of the Company or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire or with respect to any such shares of
capital stock, ownership interest or convertible or exchangeable securities, take any action to cause to be exercisable any otherwise unexercisable Company Option (except as otherwise provided by the terms of this Agreement or the express terms of
any unexercisable options or awards or other Equity Awards outstanding on the date hereof) or otherwise effect any stock split, reclassification or similar adjustment, combination, exchange or readjustment of shares with respect to the capital
structure of the Company or any of its Subsidiaries or amend the terms of any securities of the Company or any of its Subsidiaries, other than (a) issuances of Shares of Common Stock in respect of any exercise of Company Options or settlement
of Equity Awards, in each case, outstanding on the date hereof or as may be granted after the date hereof as permitted under this Section 5.1(b) and (b) liens securing obligations under the Companys existing credit facilities;
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(viii) except for transactions exclusively among the Company and its wholly owned
Subsidiaries or among the Companys wholly owned Subsidiaries, shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, purchase, redeem or otherwise acquire any shares of its capital stock or any rights, warrants or
options to acquire any such shares, other than the acquisition of Shares of Common Stock or rights to acquire Shares of Common Stock from a holder of a Company Option in satisfaction of withholding obligations or in payment of the exercise price or
from a holder of Equity Awards in satisfaction of withholding obligations upon the vesting of such Shares;
(ix) shall not,
and shall not permit any of its Subsidiaries to, incur, assume, guarantee, prepay or otherwise become liable for any indebtedness for borrowed money (directly, contingently or otherwise), except for (A) any indebtedness for borrowed money among
the Company and its wholly owned Subsidiaries or among the Companys wholly owned Subsidiaries, (B) indebtedness for borrowed money incurred to replace, renew, extend, refinance or refund any existing indebtedness for borrowed money in the
ordinary course of business and in a manner consistent with past practice, (C) guarantees by the Company of indebtedness for borrowed money of Subsidiaries of the Company, which indebtedness is incurred in compliance with this
Section 5.1(b)(ix), (D) indebtedness for borrowed money incurred pursuant to debt agreements in effect as of the date hereof for the purpose of financing capital expenditures permitted by Section 5.1(b)(xiii), (E) other
indebtedness for borrowed money incurred pursuant to agreements in effect as of the date hereof or the issuance of new commercial paper by the Company, not to exceed $15 million outstanding in the aggregate, and (F) with respect to any
indebtedness not in accordance with clauses (A) through (E), for any indebtedness not to exceed $15 million in aggregate principal amount outstanding at the time incurred by the Company or its Subsidiaries;
provided
, that the
restrictions set forth in this clause (ix) shall not apply to CAPL and its Subsidiaries so long as, immediately after incurring the applicable indebtedness, CAPL will be in compliance with the financial ratios set forth in
Section 5.1(b)(ix) of the Company Disclosure Letter (the
CAPL Financial Ratios
);
(x) except for
transactions exclusively among the Company and its wholly owned Subsidiaries or among the Companys wholly owned Subsidiaries, shall not, and shall not permit any of its Subsidiaries to, sell, assign, lease, license, transfer, exchange or swap,
mortgage or otherwise encumber (including any sale-leasebacks or securitizations), or subject to any Lien (other than Permitted Liens) or otherwise dispose of any portion of its tangible or intangible properties or assets having a value in excess of
$10 million, individually or in the aggregate, except (A) pursuant to existing agreements in effect prior to the execution of this Agreement and disclosed or made available to Parent prior to the date hereof or (B) for the sale of
inventory in the ordinary course of business consistent with past practice;
provided
, that the exceptions set forth in the foregoing clauses (A) and (B) shall not apply to any transactions between the Company and its Non-CAPL
Subsidiaries, on the one hand, and CAPL or any of its Subsidiaries, on the other hand;
(xi) shall not, and shall not
permit any of its Subsidiaries to, enter into, materially and adversely modify or amend, terminate or grant any waiver under any Company Material Contract, any Lease or any contract that would constitute a Company Material Contract or a Lease if
entered into prior to the date hereof (other than the expiration or renewal of any Company Material Contract or any Lease in accordance with its terms), except for any Contract that, as entered into, modified or amended, (A) can be terminated
by the Company or its Subsidiaries on 90 days or less notice without payment by the Company or its Subsidiaries of any material penalty or (B) has a remaining term left of 12 months or less;
provided
, that CAPL and its Subsidiaries
shall be permitted to do any of the foregoing in the ordinary course of business consistent with past practice;
(xii)
shall not, and shall not permit any of its Subsidiaries to, (A) acquire (by merger, consolidation, purchase of stock or assets or otherwise), or agree to so acquire, any entity, business or assets that constitute a business or division of any
Person, or all or a substantial portion of the assets of any Person (or business or division thereof) located in the U.S. for consideration in excess of $10 million (and none of the foregoing shall be permitted with respect to any entity, business
or assets located in Canada); or (B) enter into any joint venture, partnership, limited liability or other similar agreements or arrangements relating to the formation, creation, operation, management or control of any joint venture,
partnership or
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limited liability company with respect to any assets, businesses or divisions of the Company or its Subsidiaries located in the U.S. with a fair market value in excess of $10 million (and none of
the foregoing shall be permitted with respect to any assets, businesses or divisions located in Canada);
provided
, that the restrictions set forth in this clause (xii) shall not apply to CAPL and its Subsidiaries so long as, immediately
after the applicable transaction, CAPL will be in compliance with the CAPL Financial Ratios;
(xiii) shall not, and shall
not permit any of its Subsidiaries to, make or agree to make any capital expenditure in excess of $15 million individually or in the aggregate, other than as contemplated by the capital expenditures budget of the Company set forth in
Section 5.1(b)(xiii) of the Company Disclosure Letter;
(xiv) shall not, and shall not permit any of its Subsidiaries
to, adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries;
(xv) shall not, and shall not permit any of its Subsidiaries to, enter into any new line of business outside the businesses
being conducted by the Company and its Subsidiaries on the date hereof;
(xvi) shall not, and shall not permit any of its
Subsidiaries to, settle, or offer or propose to settle, (A) any material litigation, investigation, arbitration, proceeding or other claim involving or against the Company or any of its Subsidiaries (other than any of the foregoing that relates
to Tax matters), (B) any stockholder litigation or dispute against the Company or any of its officers or directors or (C) any litigation, arbitration, proceeding or dispute that relates to the transactions contemplated hereby, in each
case, other than settlements that involve the payment of monetary damages, in the aggregate, not in excess of the amount set forth in Section 5.1(b)(xvi) of the Company Disclosure Letter and without the imposition of equitable relief on, or the
admission of wrongdoing by, the Company, any of its Subsidiaries or any of its officers or directors;
(xvii) shall not,
and shall not permit any of its Subsidiaries to, make or change any material Tax election, change any material annual Tax accounting period, adopt or change any material method of Tax accounting, file any material amended Tax Returns or claims for
material Tax refunds, enter into any closing agreement with respect to a material amount of Taxes, settle any material Tax claim, audit or assessment, surrender any right to claim a material Tax refund, offset or other reduction in tax liability or
consent to any extension or waiver of the limitations period that could reasonably be expected to produce a material Tax claim or assessment, in each case, except in the ordinary course of business consistent with past practice; and
(xviii) shall not, and shall not permit any of its Subsidiaries to, agree, in writing or otherwise, to take any of the
foregoing actions.
Section 5.2
Control of Operations
. Nothing contained in this Agreement shall give Parent or Merger Sub,
directly or indirectly, the right to control or direct the Companys operations prior to the Effective Time. Prior to the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control
and supervision over its operations.
Section 5.3
Parent Obligations
. Between the date hereof and the earlier of the Effective
Time and the Termination Date, Parent and Merger Sub shall not, and shall not permit any of their Subsidiaries or Affiliates to, take or agree to take any action (including entering into agreements with respect to any acquisitions, mergers,
consolidations or business combinations or entering into any new lines of business) that would reasonably be expected to prevent or materially delay, impede or interfere with its performance of, or the consummation of the transactions contemplated
by, this Agreement.
Section 5.4
Access
.
(a) Subject to compliance with applicable Laws, the Company shall afford to Parent and to its Representatives reasonable access during normal
business hours, on reasonable prior notice, throughout the
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period prior to the earlier of the Effective Time and the Termination Date, to the Companys and its Subsidiaries officers, properties, contracts, books and records, other than any
such matters that relate to the negotiation and execution of this Agreement or (except as required under Section 5.5) to transactions potentially competing with or alternative to the transactions contemplated by this Agreement or proposals from
other parties relating to any competing or alternative transactions or with respect to the consideration or valuation of the Merger or any actual or potential strategic or financial alternatives thereto. The foregoing notwithstanding, the Company
shall not be required to afford such access if it would (i) breach any contract with any Person or violate any applicable Law or (ii) result in a loss or waiver of the attorney-client or other privilege held by the Company or any of its
Subsidiaries (it being agreed that the Company will give notice to Parent of the fact that it is withholding such access or information pursuant to clause (i) or (ii) above, and thereafter the Company and Parent shall reasonably cooperate
to cause such access or information to be provided in a manner that would not reasonably be expected to waive the applicable privilege or protection or violate the applicable restriction);
provided
,
further
, that any access or
investigation pursuant to this Section 5.4(a) shall be conducted in a manner so as to not interfere unreasonably with the business and operations of the Company and its Subsidiaries.
(b) Parent hereby agrees that all nonpublic information provided to it or any of its Representatives in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be deemed to be Confidential Information, as such term is used in, and shall be treated in accordance with, the confidentiality agreement, dated as of January 21, 2016, as amended,
between the Company and an Affiliate of Parent (the
Confidentiality Agreement
).
Section 5.5
No
Solicitation
.
(a) Subject to the provisions of this Section 5.5, from the date hereof until the Effective Time or, if earlier,
the termination of this Agreement in accordance with Article 7, the Company agrees that it shall not and shall cause each of its Subsidiaries and each of their respective Affiliates and Representatives not to, directly or indirectly,
(A) solicit, initiate, knowingly facilitate or knowingly encourage the submission of any Alternative Proposal, (B) participate in any discussions or negotiations regarding an Alternative Proposal with, or furnish any nonpublic information
regarding an Alternative Proposal to, any Person that has made or, to the Knowledge of the Company, is seeking to make, an Alternative Proposal, except to notify such Person as to the existence of the provisions of this Section 5.5,
(C) enter into any letter of intent, agreement, contract or agreement in principle regarding an Alternative Proposal (except for confidentiality agreements permitted under Section 5.5(e), an
Alternative Acquisition
Agreement
) or (D) publicly propose to do any of the foregoing (other than disclosure of the terms of this Agreement).
(b)
Except as expressly permitted by this Section 5.5, neither the Board of Directors nor any committee thereof shall (i) change, qualify, withhold, withdraw or modify, or publicly propose to change, qualify, withdraw or modify, in a manner
adverse to Parent, the Recommendation, (ii) subject to Section 5.5(f) (and excluding, for the avoidance of doubt, any stop, look and listen statement of the type contemplated by Rule 14d-9(f) under the Exchange Act), take any
formal action or make any public statement in connection with a tender offer or exchange offer other than a recommendation against such offer or a reaffirmation of the Recommendation, (iii) approve or recommend, or publicly propose to approve
or recommend to the stockholders of the Company, an Alternative Proposal, or (iv) fail to include the Recommendation in the Proxy Statement (any action described in clauses (i)-(iv) being referred to as a
Change of
Recommendation
).
(c) Notwithstanding anything to the contrary contained in this Agreement, if at any time prior to the receipt
of the Company Stockholder Approval, a material development or material change in circumstances (other than relating to or in connection with an Alternative Proposal) occurs or arises after the date of this Agreement that was not known and not
reasonably foreseeable (or if known, the consequences of which were not known or reasonably foreseeable) by the Board of Directors as of the date of this Agreement (any such development or change being a
Material Development
), the
Board of Directors may make a Change of Recommendation under clauses (i) or (iv) of Section 5.5(b) if the Board of Directors determines in good faith, after consultation with outside counsel, that the failure to take such action would
be inconsistent with the Board of Directors fiduciary duties to the stockholders of the Company under applicable Law;
provided
, that the
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Company (A) has given Parent at least four Business Days prior written notice advising Parent that it intends to take such action and specifying in reasonable detail the reasons for
such action, (B) has given Parent during such four-Business Day period the opportunity to meet or negotiate with the Board of Directors and its outside legal counsel to enable Parent and the Company to discuss or negotiate in good faith a
modification of the terms and conditions of this Agreement and (C) at the end of such four-Business Day period, after taking into account any amendments to this Agreement committed to in writing by Parent, the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that the failure of the Board of Directors to make such Change of Recommendation would continue to be inconsistent with its fiduciary duties to the stockholders of the Company under
applicable Law.
(d) The Company shall promptly (within 24 hours) notify Parent in the event that the Company, its Subsidiaries or
Representatives receives, after the date hereof, any request for discussions or negotiations with respect to an Alternative Proposal or proposal that is reasonably likely to lead to an Alternative Proposal, any request for access to the properties
or books and records of the Company or any of its Subsidiaries of which the Company or any of its Subsidiaries or any of their respective Representatives is or has become aware, or any request for nonpublic information relating to the Company or any
of its Subsidiaries, in each case, by any third party that is considering making, or has made, an Alternative Proposal. Such notice to Parent shall indicate the identity of the Person making such proposal or request and the material terms and
conditions of such proposal, if any, communicated by such Person to the Company.
(e) Anything in this Section 5.5 to the contrary
notwithstanding, at any time prior to receipt of the Company Stockholder Approval:
(i) if the Company receives an
unsolicited, written Alternative Proposal without any material violation of this Section 5.5 that the Board of Directors determines in good faith, after consultation with its financial advisors and outside legal counsel, is or is reasonably
likely to result in, a Superior Proposal, the Company may take the following actions: (A) furnish nonpublic information to the third party making such Alternative Proposal, if, prior to so furnishing such information, the Company receives from
the third party an executed confidentiality agreement having provisions as to confidential treatment of information that are substantially similar to the confidentiality provisions of the Confidentiality Agreement (an
Acceptable
Confidentiality Agreement
);
provided
, that any material nonpublic information concerning the Company or its Subsidiaries that is provided or made available by the Company to a third party given such access that was not previously
provided or made available to Parent or its Representatives shall be provided to Parent substantially concurrently, if such information is written, or otherwise promptly thereafter (and in any event within 24 hours); and (B) engage in
discussions or negotiations with the third party with respect to the Alternative Proposal;
provided
, that the Company shall provide to Parent a copy of any written Alternative Proposal made after the date hereof to the Company or any of its
Subsidiaries by such third party and the identity of such third party; and
(ii) the Board of Directors may make a Change
of Recommendation or terminate this Agreement to enter into a definitive agreement with respect to a Superior Proposal, but only if prior to taking any such action:
(1) the Board of Directors determines in good faith, after consultation with its financial advisors and outside legal counsel,
that such Alternative Proposal is a Superior Proposal (taking into account any adjustment or revisions committed to in writing by Parent in response to such Alternative Proposal (including pursuant to clause (3) below));
(2) the Company (A) at least four Business Days in advance of taking such action (the
Notice Period
),
has given Parent prior written notice of its intention to terminate this Agreement and has provided to Parent a copy of such Superior Proposal and (B) has given Parent during the Notice Period the opportunity to meet or negotiate with the Board
of Directors and its outside legal counsel to enable Parent and the Company to discuss or negotiate in good faith a modification of the terms and conditions of this Agreement; and
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(3) at the end of the Notice Period, the Board of Directors, after consultation
with the Companys financial advisors and outside legal counsel, shall have determined in good faith that the third partys Alternative Proposal remains a Superior Proposal (taking into account any amendments to this Agreement committed to
in writing by Parent);
provided
, that each time material modifications to the material terms of an Alternative Proposal determined to be a Superior Proposal are made, a new written notification from the Company consistent with that described
in clause (ii)(2) of this Section 5.5(e) shall be required and a new Notice Period under clause (ii)(2) of this Section 5.5(e) shall commence, during which notice period the Company shall be required to comply with the requirements of this
Section 5.5(e)(ii) anew, except that such new Notice Period shall be for two Business Days (as opposed to four Business Days).
(f)
Nothing contained in this Agreement shall prohibit the Company or its Board of Directors from (i) disclosing to its stockholders a position contemplated by Rules 14d-9 and 14e-2(a) under the Exchange Act, or from issuing a stop, look
and listen statement pending disclosure of its position thereunder; or (ii) making any disclosure to its stockholders if the Board of Directors determines in good faith, after consultation with the Companys outside legal counsel,
that the failure of the Board of Directors to make such disclosure would be inconsistent with the directors exercise of their fiduciary duties to the Companys stockholders under applicable Law.
(g)
Alternative Proposal
means any bona fide inquiry, proposal or offer made by any Person for (i) a merger,
reorganization, share exchange, consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction involving the Company, (ii) the direct or indirect acquisition by any Person of fifteen percent (15%) or
more of the assets of the Company and its Subsidiaries, on a consolidated basis or (iii) the direct or indirect acquisition by any Person of fifteen percent (15%) or more of the voting power of the outstanding Shares of Common Stock,
including any tender offer or exchange offer that if consummated would result in any Person beneficially owning Shares with fifteen percent (15%) or more of the voting power of the outstanding shares of Common Stock, in each case of clauses
(i)-(iii), other than the transactions contemplated by this Agreement.
(h)
Superior Proposal
means an unsolicited,
written Alternative Proposal, without any violation of this Section 5.5, substituting fifty percent (50%) for fifteen percent (15%), on its most recently amended or modified terms, that the Board of Directors determines
in good faith, after consultation with its financial advisors and outside legal counsel and taking into account all financial, legal, regulatory and other aspects of the Alternative Proposal, (i) would be, if consummated, more favorable to the
Companys stockholders from a financial point of view than this Agreement and the Merger (after taking into account any modifications or changes committed to in writing by Parent pursuant to clause (e)(ii) above) and (ii) is reasonably
likely to be consummated if accepted (including, without limitation, that any necessary financing is reasonably likely to be obtained on a timely basis).
Section 5.6
Proxy; Company Meeting
.
(a) As promptly as reasonably practicable after the execution of this Agreement (but no later than 20 Business Days after the date hereof),
subject to the receipt from Parent and Merger Sub of the information described in the second sentence of this subsection (a), the Company shall prepare (in consultation with Parent and giving due consideration to any comments made by Parent) and
file with the SEC the Proxy Statement, which shall, subject to Section 5.5, include the Recommendation, and shall use all reasonable best efforts to respond (in consultation with Parent and giving due consideration to any comments made by
Parent) as promptly as reasonably practicable to any comments by the SEC staff in respect of the Proxy Statement and to cause the definitive Proxy Statement to be mailed to the Companys stockholders as promptly as reasonably practicable after
the date of this Agreement. Parent and Merger Sub shall furnish all information concerning themselves and their Affiliates that is required to be included in the Proxy Statement, or that is customarily included in a proxy statement prepared in
connection with transactions of the type contemplated by this Agreement. The Company shall promptly notify Parent upon the receipt of any comments from the SEC or its staff or any request from the SEC or its staff for amendments or supplements to
the Proxy Statement and shall provide Parent with copies of
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all written correspondence between it and its Representatives, on the one hand, and the SEC and its staff, on the other hand, relating to the Proxy Statement (except the Company shall not be
required to provide any correspondence containing or reflecting information to which it is not required to provide access under Section 5.4(a)). If at any time prior to the Company Meeting any information relating to the Company, Parent or any
of their respective Affiliates, officers or directors is discovered by the Company or Parent which should be set forth in an amendment or supplement to the Proxy Statement, so that the Proxy Statement (or any other filings) shall not contain an
untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, the party that
discovers such information shall promptly notify the other party, and, to the extent required by applicable Law, an appropriate amendment or supplement describing such information shall be filed with the SEC and disseminated to the stockholders of
the Company.
(b) Subject to the other provisions of this Agreement, the Company shall (i) take all action necessary in accordance
with the DGCL and its certificate of incorporation and bylaws to duly call, give notice of, convene and hold a meeting of its stockholders as promptly as reasonably practicable following the mailing of the Proxy Statement for the purpose of
obtaining the Company Stockholder Approval (the
Company Meeting
), with the record date and meeting date of the Company Meeting to be selected after reasonable consultation with Parent, and (ii) subject to a Change of
Recommendation in accordance with Section 5.5, use all reasonable efforts to solicit from its stockholders proxies in favor of the approval of this Agreement and the transactions contemplated hereby. The Company shall keep Parent updated with
respect to proxy solicitation results as reasonably requested Parent from time to time.
(c) Unless terminated pursuant to
Section 7.1, the Company shall submit this Agreement and the Merger to the Companys stockholders at the Company Meeting whether or not a Change of Recommendation shall have occurred.
Section 5.7
Takeover Statutes; Stockholder Litigation
.
(a) If any fair price, moratorium, control share acquisition, business combination or other
form of antitakeover statute or regulation shall become applicable to the transactions contemplated hereby, each of the Company, Parent and Merger Sub and the members of their respective Boards of Directors shall grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such statute or regulation on
the transactions contemplated hereby.
(b) Each of the Company and Parent shall keep the other reasonably informed of, and cooperate with
such party in connection with, any stockholder litigation or claim against such party and/or its directors or officers relating to the Merger or the other transactions contemplated by this Agreement. Without limiting the foregoing, the Company shall
give Parent a reasonable opportunity to participate in the defense or settlement of any such litigation or claim and the Company shall not compromise, settle, come to an arrangement regarding or agree to compromise, settle or come to an arrangement
regarding any litigation or claim arising or resulting from the transactions contemplated by this Agreement or consent to the same without the prior written consent of Parent (which shall not be unreasonably withheld, conditioned or delayed).
Section 5.8
Stock Exchange De-listing; 1934 Act Deregistration
. Prior to the Effective Time, the Company shall cooperate with
Parent and use its commercially reasonable efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Laws and rules and policies of the NYSE and
SEC to enable the de-listing by the Surviving Corporation of the Common Stock from the NYSE and the deregistration of the Common Stock under the Exchange Act as promptly as practicable after the Effective Time.
Section 5.9
Employee Matters
.
(a) From the Effective Time until April 29, 2018, Parent shall provide, or shall cause its Subsidiaries to provide, to each Company
employee who continues to be employed by the Surviving Corporation or its
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Subsidiaries after the Effective Time (each, a
Company Employee
) (i) base compensation that is no less favorable than was provided to the Company Employee immediately
before the Effective Time and (ii) equity-based incentive opportunities that are no less favorable than those provided to employees of Parent and its Subsidiaries who are similarly situated to (including with respect to work location) the
applicable Company Employee. In addition, Parent shall provide, or shall cause its Subsidiaries to provide, to each Company Employee (A) from the Effective Time until April 30, 2017, an annual bonus opportunity with bonus targets and
related performance metrics that are no less favorable than those provided to the Company Employee immediately before the Effective Time, and (B) from May 1, 2017 until April 29, 2018, an annual bonus opportunity with bonus targets
and related performance metrics that are no less favorable than those applicable to employees of Parent and its Subsidiaries who are similarly situated to (including with respect to work location) the applicable Company Employee. Further, Parent
shall provide, or shall cause its Subsidiaries to provide, to each Company Employee (1) from the Effective Time until April 30, 2017, all other compensation and benefits that, in the aggregate, are no less favorable than those provided to
the Company Employee immediately before the Effective Time, and (2) from May 1, 2017 until April 29, 2018, all other compensation and benefits (other than equity-based incentive benefits) that, in the aggregate, are no less favorable
than those provided to employees of Parent and its Subsidiaries who are similarly situated to (including with respect to work location) the applicable Company Employee. Notwithstanding any other provision of this Agreement to the contrary and
subject to Section 5.9 of the Company Disclosure Letter, from the Effective Time until April 29, 2018, Parent shall or shall cause the Surviving Corporation to provide to each Company Employee who is eligible under the CST Brands, Inc.
Severance Plan effective as of February 25, 2016 (a copy of which is set forth in Section 5.9 of the Company Disclosure Letter, the
Severance Plan
) as of the Effective Time, severance benefits equal to the greater of
(I) the severance benefits to which such Company Employee is then entitled under the Severance Plan as described in Section 5.9 of the Company Disclosure Letter, taking into account all service whether before or after the Effective Time,
and (II) the severance benefits provided to employees of Parent and its Subsidiaries who are similarly situated to (including with respect to work location) the applicable Company Employee under the severance arrangements of Parent and its
Subsidiaries, in each case without duplication of benefits under any other Contract or arrangement applicable to such Company Employee and without taking into account any reduction after the Effective Time in base compensation paid to such Company
Employee.
(b) For all purposes (including purposes of vesting (other than equity awards), eligibility to participate and level of
benefits) under the employee benefit plans of Parent and its Subsidiaries providing benefits to any Company Employees after the Effective Time (the
New Plans
), each Company Employee shall be credited with his or her years of
service with the Company and its Subsidiaries and their respective predecessors before the Effective Time, to the same extent as such Company Employee was entitled, before the Effective Time, to credit for such service under any similar Company
Benefit Plan in which such Company Employee participated or was eligible to participate immediately prior to the Effective Time;
provided
that the foregoing shall not apply (i) with respect to participation in or benefit accrual under
any defined benefit pension or retiree medical plan or (ii) to the extent that its application would result in a duplication of benefits.
(c) In addition, (i) each Company Employee shall be immediately eligible to participate, without any waiting time, in any and all New
Plans to the extent coverage under such New Plan is comparable to a Company Benefit Plan in which such Company Employee participated immediately before the Effective Time (such plans, collectively, the
Old Plans
), and
further
provided
that the foregoing provision shall not preclude the Parent from confirming the eligibility of any such employee or his or her covered dependents after the Effective Time, and (ii) for purposes of each New Plan
providing medical, dental, pharmaceutical and/or vision benefits to any Company Employee, Parent shall cause (A) all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such employee and his or
her covered dependents, unless such conditions would not have been waived under the comparable plans of the Company or its Subsidiaries in which such employee participated immediately prior to the Effective Time, and (B) the amount of eligible
expenses incurred by such employee and his or her covered dependents which were credited to deductible and maximum out-of-pocket co-insurance requirements under the Old Plans to be credited for purposes of satisfying the deductible, and maximum
out-of-pocket co-insurance requirements under the New Plans.
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(d) Parent hereby acknowledges that a change of control (or similar phrase) within
the meaning of the Company Benefit Plans will occur at or prior to the Effective Time, as applicable.
(e) Without limiting the generality
of Section 8.10, the provisions of this Section 5.9 are solely for the benefit of the parties to this Agreement, and no current or former director, officer, employee, other service provider or independent contractor or any other person
shall be a third-party beneficiary of this Agreement, and nothing herein shall be construed as an amendment to any Company Benefit Plan or other compensation or benefit plan or arrangement for any purpose or to confer upon any Company Employee any
right to continued employment. Nothing in this Section 5.9 shall supersede or conflict with any Collective Bargaining Agreement.
Section 5.10
Efforts
.
(a) Each of the parties shall use its commercially reasonable efforts to promptly take, or cause to be taken, all actions, and to promptly do,
or cause to be done, and to assist and cooperate with the other parties in doing, all things reasonably necessary, proper or advisable under applicable Laws to consummate and make effective the Merger and the other transactions contemplated by this
Agreement as promptly as practicable and in any event prior to the End Date, including (i) the obtaining of all necessary actions or nonactions, waivers, consents, clearances, approvals, and expirations or terminations of waiting periods, from
Governmental Entities and the making of all necessary registrations and filings in connection therewith, (ii) using its commercially reasonable efforts to obtain all necessary consents, approvals or waivers from third parties, and
(iii) subject to Section 5.7(b), the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Merger;
provided
,
however
, that in no event
shall the Company, Parent or Merger Sub or their respective Subsidiaries be required to pay any fee, penalty or other consideration to any third party for any consent or approval required for the consummation of the transactions contemplated by this
Agreement under any contract or agreement.
(b) Parent and the Company shall promptly, but in no event later than 20 Business Days
after the date hereof, file (or cause to be filed) any and all required pre-merger notification and report forms under the HSR Act and the Competition Act with respect to the Merger. Parent and the Company shall request early termination of any
applicable waiting periods under such Antitrust Laws and shall respectively use their commercially reasonable efforts to cause the expiration or termination of such waiting periods, and shall supply to the Antitrust Division of the United States
Department of Justice (
Antitrust Division
) or the United States Federal Trade Commission (
FTC
) or to the Canadian Competition Bureau (the
Competition Bureau
) as promptly as reasonably
practicable any additional information or documents that may be requested pursuant to any Law or by any of them.
(c) In furtherance of the
covenants of the parties contained in this Section 5.10, but subject to the limitations set forth in Section 5.10(d), (i) if any administrative or judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging the Merger as violative of any Antitrust Law, each of the parties hereto shall use its commercially reasonable efforts to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction, or other order, whether temporary, preliminary or permanent, that results from such action or proceeding and that prohibits, prevents or restricts consummation of the Merger on or
before the End Date and (ii) Parent shall take all such further action as may be necessary to avoid or eliminate each and every impediment under any Antitrust Law so as to enable the Closing to occur as promptly as practicable (and in any event
no later than the End Date), and including, in the case of Parent, proposing, negotiating, committing and effecting, by consent decree, hold separate order, or otherwise, to (i) sell, divest, dispose of or otherwise hold separate (including by
establishing a trust or otherwise), any of the businesses, assets or properties of Parent, the Company, the Surviving Corporation or any of their respective Affiliates and (ii) otherwise take or commit to take actions that after the Closing
would limit Parents freedom of action with respect to, or its ability to operate and/or retain any of the businesses, assets or properties of Parent, the Company, the Surviving Corporation or any of their respective Affiliates (the actions
described in the foregoing clauses (i) and (ii) being
Divestiture Actions
);
provided
that neither the Company nor any of its Subsidiaries shall be required to become subject to, or consent or agree to or otherwise
take any action with respect to, any requirement, condition, understanding,
A-29
agreement or order to sell, divest, license, hold separate or otherwise dispose of, or to conduct, restrict, operate, invest or otherwise change the assets, operations or business of the Company
or any of its Affiliates, unless such requirement, condition, understanding, agreement or order is binding on or otherwise applicable to the Company only from and after the Effective Time in the event that the Closing occurs.
(d) Parent shall have the right (subject to compliance with Section 5.10(e) and its other obligations under this Section 5.10) to
determine, direct and have control over the strategy and process by which the parties will seek required approvals under the Antitrust Laws and to control the defense or prosecution of any claims, actions or proceedings relating thereto, including
all matters relating to any Divestiture Actions.
(e) Parent and the Company shall cooperate and consult with each other in connection with
the making of all filings, notifications, communications, submissions, and any other actions pursuant to this Section 5.10, and, subject to applicable legal limitations and the instructions of any Governmental Entity, Parent and the Company
shall keep each other apprised on a current basis of the status of matters relating to the completion of the transactions contemplated thereby, including promptly furnishing the other with copies of notices or other communications received by Parent
and the Company, as the case may be, or any of their respective Subsidiaries or Affiliates, from any third party and/or any Governmental Entity with respect to such transactions. Subject to applicable Law relating to the exchange of information,
Parent and the Company shall permit counsel for the other party reasonable opportunity to review in advance, and consider in good faith the views of the other party in connection with, any material proposed notifications or filings and any material
written communications or submissions to any Governmental Entity;
provided
,
however
, that materials may be redacted (i) to remove references concerning the valuation of the businesses of Parent, the Company or their respective
Subsidiaries, or proposals from third parties with respect thereto, (ii) as necessary to comply with contractual agreements, and (iii) as necessary to address reasonable privilege or confidentiality concerns. Parent and the Company agree
not to participate in any substantive meeting or discussion, either in person or by telephone, with any Governmental Entity in connection with the proposed transactions unless it consults with the other party in advance and, to the extent not
prohibited by such Governmental Entity, gives the other party a reasonable opportunity to attend and participate.
Section 5.11
Indemnification and Insurance
.
(a) The Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, assume the
obligations with respect to all rights to indemnification and exculpation from liabilities, including advancement of expenses, for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former directors
or officers of the Company or its Subsidiaries as provided in their respective certificates of incorporation, bylaws or any indemnification contract between such directors or officers and the Company (in each case, as in effect on the date hereof),
without further action, as of the Effective Time and all such obligations shall survive the Merger and shall continue in full force and effect in accordance with their terms.
(b) For a period of six years after the Effective Time, Parent and the Surviving Corporation shall maintain in effect the exculpation,
indemnification and advancement of expenses provisions of the Companys and any Company Subsidiarys certificates of incorporation and bylaws or similar organizational documents as in effect immediately prior to the Effective Time or in
any indemnification agreements of the Company or its Subsidiaries with any of their respective directors or officers as in effect immediately prior to the Effective Time, and shall not amend, repeal or otherwise modify any such provisions in any
manner that would adversely affect the rights thereunder of any individuals who at the Effective Time were current or former directors or officers of the Company or any of its Subsidiaries;
provided
,
however
, that all rights to
indemnification in respect of any action pending or asserted or any claim made within such period shall continue until the disposition of such action or resolution of such claim, even if beyond such six-year period. From and after the Effective
Time, Parent shall assume, guarantee and stand surety for, and shall cause the Surviving Corporation and its Subsidiaries to honor, in accordance with their respective terms, each of the covenants contained in this Section 5.11.
(c) For a period of six years after the Effective Time, each of Parent and the Surviving Corporation shall, to the fullest extent permitted
under applicable Law, indemnify and hold harmless (and advance funds in
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respect of each of the foregoing) each current and former director or officer of the Company or any of its Subsidiaries and each Person who served at the request of the Company as a director,
officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (each, together with such Persons heirs, executors or administrators, an
Indemnified
Party
) against any costs or expenses (including advancing reasonable attorneys fees and expenses in advance of the final disposition of any claim, suit, proceeding or investigation to each Indemnified Party to the fullest extent
permitted by Law), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement (collectively,
Losses
) in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative (an
Action
), arising out of, relating to or in connection with any act or omission occurring or alleged to have occurred, whether before or after the Effective Time, in connection
with such Indemnified Partys service as a director or officer of the Company or any of its Subsidiaries (including acts or omissions in connection with such Indemnified Partys service as an officer, director, member, trustee or other
fiduciary of any other enterprise if such service was at the request of the Company);
provided
, that (i) any Person to whom any funds are advanced pursuant to the foregoing must provide an undertaking to repay such advances if it is
ultimately determined that such Person is not entitled to indemnification, (ii) all rights to indemnification in respect of any Action pending or asserted within such period shall continue until the disposition of such Action and
(iii) Parent and the Surviving Corporation shall not be liable for any settlement effected without Parents or the Surviving Corporations prior written consent (which shall not be unreasonably withheld, conditioned or delayed). In
the event of any such Action, Parent and the Surviving Corporation shall cooperate with the Indemnified Party in the defense thereof.
(d)
Parent shall use all commercially reasonable efforts to cause the Surviving Corporation as of the Effective Time to purchase a six-year prepaid tail policy, with terms, conditions, retentions and limits of liability that are no less
favorable than the coverage provided under the Companys and its Subsidiaries existing policies of directors and officers liability insurance and fiduciary liability insurance, with respect to matters arising on or before the
Effective Time (including in connection with this Agreement and the transactions or actions contemplated by this Agreement), and Parent shall cause such policy to be maintained in full force and effect, for its full term, and cause all obligations
thereunder to be honored by the Surviving Corporation, and no other party shall have any further obligation to purchase or pay for insurance hereunder. If Parent for any reason fails to obtain such tail insurance policies as of the
Effective Time, Parent shall, for a period of six years after the Effective Time, cause the Surviving Corporation to maintain in effect the current policies of directors and officers liability insurance and fiduciary liability insurance
maintained by the Company and its Subsidiaries with respect to matters arising on or before the Effective Time;
provided
,
however
, that after the Effective Time, Parent shall not be required to pay annual premiums in excess of 300% of
the last annual premium paid by the Company prior to the date hereof in respect of the coverage required to be obtained pursuant hereto, but in such case shall purchase as much coverage as reasonably practicable for such amount.
(e) The rights of each Indemnified Party hereunder shall be in addition to, and not in limitation of, any other rights such Indemnified Party
may have under the certificates of incorporation or bylaws or other organizational documents of the Company or any of its Subsidiaries or the Surviving Corporation, any other indemnification arrangement, the DGCL or otherwise. The provisions of this
Section 5.11 shall survive the consummation of the Merger and expressly are intended to benefit, and are enforceable by, each of the Indemnified Parties. Parent and the Surviving Corporation shall promptly reimburse each Indemnified Party for
any costs or expenses (including attorneys fees) incurred by any such Indemnified Party in enforcing the indemnification or other obligations of Parent or the Surviving Corporation in this Section 5.11 (including Section 5.11(c))
unless it is ultimately determined that such Person is not entitled to the benefit of such indemnification or other obligation.
(f) In the
event that Parent, the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case
may be, shall assume the obligations set forth in this Section 5.11.
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(g) Notwithstanding the foregoing, none of the foregoing provisions of this Section 5.11,
except the first sentence of Section 5.11(b) and Section 5.11(f) (solely as such Section 5.11(f) relates to the first sentence of Section 5.11(b)), shall be applicable to CrossAmerica GP LLC, CAPL or any of the CAPL Subsidiaries.
Section 5.12
Financing
.
(a) Parent shall take, or use its commercially reasonable efforts to cause to be taken, all actions and to do, or use its commercially
reasonable efforts to cause to be done, all things necessary to obtain the debt financing necessary to pay in cash the aggregate Merger Consideration and to perform its obligations under this Agreement (the
Debt Financing
). Parent
shall keep the Company reasonably informed of the status of its efforts to obtain the Debt Financing or any alternative Debt Financing.
(b) Upon the request of Parent, the Company shall use its commercially reasonable efforts to provide such assistance with respect to the Debt
Financing as is reasonably requested by Parent, including: (a) making available at mutually agreed times to prospective lenders, on a customary and reasonable basis and upon reasonable notice, appropriate personnel of the Company and its
Subsidiaries, (b) providing, as promptly as reasonably practicable, customary information relating to the Company and its Subsidiaries to any financing institutions contemplated to arrange and/or provide all or any portion of the Debt Financing
(the
Financing Sources
) (including information to be used in the preparation of a customary information package regarding the business, operations and financial condition of Parent and its Subsidiaries customary for financings
similar to the Debt Financing) to the extent reasonably requested by Parent and/or the Financing Sources to assist in preparation of customary offering or information documents to be used for the completion of the Debt Financing, (c) assisting
in obtaining customary payoff letters and instruments of discharge to be delivered at Closing to the extent that Parent determines to arrange for the payoff of all or any part of the Companys existing credit facilities and releasing Liens and
the pledges of collateral securing such facilities, in each case to take effect at the Effective Time (it being understood that the Company shall have no obligation to pay or discharge any such indebtedness prior to the Effective Time or deliver any
notice of termination, prepayment or redemption prior to the Effective Time that is not conditioned on the occurrence of the Closing), and (d) assisting Parent in obtaining customary comfort letters and consents of the independent accountants
of the Company and its Subsidiaries. Anything in this Section 5.12 or this Agreement to the contrary notwithstanding, until the Effective Time occurs, neither the Company nor any of its Subsidiaries, nor any of their respective officers or
directors, as the case may be, shall be required to (i) waive or amend any terms of this Agreement or agree to pay any commitment or other similar fee or reimburse any expenses for which it has not received prior reimbursement, (ii) take
any action or provide any assistance that would reasonably be expected to interfere with the conduct of the business of the Company and its Subsidiaries, (iii) take any action or provide any information that will conflict with or violate its
organizational documents or any applicable Laws or would result in a breach of, or default under, any contractual arrangement to which the Company or any of its Subsidiaries is a party or would result in the waiver of legal privilege, (iv) give
any indemnities in connection with the Debt Financing, (v) pass resolutions or consents to approve or authorize the execution of the Debt Financing or any definitive agreements with respect thereto, (vi) enter into any definitive agreement
or have any liability or any obligation under any certificate, document, instrument, credit agreement or any related document or any other agreement or document related to the Debt Financing, or (vii) take any action in his/her capacity as a
director of the Company or any of its Subsidiaries, including the delivery of any certificate or opinion, with respect to any Debt Financing. Upon request by the Company prior to the Effective Time, Parent shall promptly reimburse the Company for
all reasonable and documented out of pocket costs (including reasonable attorneys fees) incurred by the Company or any of its Subsidiaries or their respective Representatives in connection with the Debt Financing, and shall indemnify and hold
harmless the Company, its Subsidiaries and their respective Representatives from and against any and all damages, losses, costs, liabilities or expenses suffered or incurred by any of them in connection with the arrangement of the Debt Financing,
any information used in connection therewith (other than information provided in writing by the Company or any of its Subsidiaries) and all other actions taken by the Company, its Subsidiaries and their respective Representatives in connection with
the Debt Financing. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
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(c) Parent and Merger Sub expressly acknowledge and agree that notwithstanding anything in this
Agreement to the contrary, their obligations hereunder, including their obligation to consummate the Merger and other transactions contemplated hereby, are not subject to, or conditioned on, the receipt of the Debt Financing.
Section 5.13
Public Announcements
. None of the Company, Parent, Merger Sub, or anyone acting on their behalf, shall issue any
press release or other public statement or comment relating to this Agreement or the transactions contemplated herein without the prior consent of the other party (which consent shall not be unreasonably withheld), except as may be required by
applicable Law or by obligations pursuant to any listing agreement with any securities exchange or as may be requested by a Governmental Entity (in which case, the party issuing the press release, public statement or comment shall use its
commercially reasonable efforts to give the other party the opportunity to review and comment upon such press release or other public statement or comment prior to issuance);
provided
that the restrictions in this Section 5.13 shall not
apply to any Company communication regarding an Alternative Proposal or a Change of Recommendation permitted by Section 5.5. Parent and the Company agree to issue a joint press release or separate press releases announcing this Agreement, in
either case in a form(s) to be mutually agreed upon by the parties.
Section 5.14
Rule 16b-3
. Prior to the Effective Time, the
Company shall be permitted to take such steps as may be reasonably necessary or advisable hereto to cause dispositions of Company equity securities (including derivative securities) pursuant to the transactions contemplated by this Agreement by each
individual who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 5.15
Further Assurances
. At and after the Effective Time, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company or Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company or Merger Sub, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
ARTICLE 6
CONDITIONS TO THE MERGER
Section 6.1
Conditions to Obligation of Each Party to Effect the Merger
. The respective obligations of each party to effect the
Merger and the other transactions contemplated hereby shall be subject to the satisfaction (or waiver by Parent and the Company to the extent permitted by applicable Law) at or prior to the Effective Time of the following conditions:
(a)
Stockholder Approval
. The Company Stockholder Approval shall have been obtained.
(b)
No Legal Restraints
. No injunction or similar order by any court of competent jurisdiction that prohibits the consummation of the
Merger shall have been entered and shall continue to be in effect, and no Law shall have been enacted, entered, promulgated or, enforced or deemed applicable by any Governmental Entity that, in any case, prohibits or makes illegal the consummation
of the Merger.
(c)
Regulatory Approvals
. (i) Any waiting period under the HSR Act applicable to the Merger shall have expired
or been terminated and (ii) Canadian Competition Act Clearance shall have been received.
Section 6.2
Conditions to
Obligation of the Company to Effect the Merger
. The obligation of the Company to effect the Merger and the other transactions contemplated hereby is further subject to the satisfaction (or waiver by the Company to the extent permitted by
applicable Law) at or prior to the Effective Time of the following conditions:
(a) (i) The representations and warranties of Parent and
Merger Sub set forth in Section 4.2(a) shall be true and correct in all material respects and the representations and warranties of Parent and Merger Sub set forth
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in Section 4.5 shall be true and correct in all respects, in each case both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date); and (ii) the other representations and warranties of Parent and Merger Sub set forth in Article 4 (disregarding all materiality and Parent Material Adverse Effect qualifications
contained therein) shall be true and correct both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except with respect to this
clause (ii) where the failure of such representations and warranties to be so true and correct would not have, individually or in the aggregate, a Parent Material Adverse Effect.
(b) Parent and Merger Sub shall have performed in all material respects all obligations and complied with all covenants required by this
Agreement to be performed or complied with by them prior to the Effective Time.
(c) Parent shall have delivered to the Company a
certificate, dated as of the Closing Date and signed by its Chief Executive Officer or another senior officer, certifying to the effect that the conditions set forth in Section 6.2(a) and Section 6.2(b) have been satisfied.
Section 6.3
Conditions to Obligations of Parent and Merger Sub to Effect the Merger
. The obligations of Parent and Merger Sub to
effect the Merger and the other transactions contemplated hereby are further subject to the satisfaction (or waiver by Parent and Merger Sub to the extent permitted by applicable Law) at or prior to the Effective Time of the following conditions:
(a) (i) The representations and warranties of the Company set forth in Sections 3.1(a), 3.2(b), 3.2(c), 3.2(d), 3.3(a), 3.22(a) and
3.23 shall be true and correct in all material respects, both when made and at and as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date); (ii) the
representations and warranties of the Company set forth in Section 3.2(a) shall be true and correct in all respects both when made and at and as of the Closing Date other than de minimis inaccuracies; and (iii) the other representations
and warranties of the Company set forth in Article 3 (disregarding all materiality and Company Material Adverse Effect qualifications contained therein, other than those in Section 3.11) shall be true and correct both when made and at and
as of the Closing Date, as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except with respect to this clause (iii) where the failure of such representations and
warranties to be so true and correct would not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) The Company
shall have performed in all material respects all obligations and complied with all covenants required by this Agreement to be performed or complied with by it prior to the Effective Time.
(c) The Company shall have delivered to Parent a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or another
senior officer, certifying to the effect that the conditions set forth in Section 6.3(a) and Section 6.3(b) have been satisfied.
(d) Since the date of this Agreement, there shall not have occurred any Company Material Adverse Effect.
Section 6.4
Frustration of Closing Conditions
. No party hereto may rely, either as a basis for not consummating the Merger or
terminating this Agreement and abandoning the Merger, on the failure of any condition set forth in Section 6.1, Section 6.2 or Section 6.3, as the case may be, to be satisfied if such failure was caused by such partys breach of
this Agreement.
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ARTICLE 7
TERMINATION
Section 7.1
Termination or Abandonment
. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may
be terminated and abandoned at any time prior to the Effective Time (except with respect to subsection (h) below, whether before or after receipt of the Company Stockholder Approval):
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent if the Effective Time shall not have occurred on or before May 22, 2017 (
provided
that if, as
of such date all conditions set forth in Section 6.1, Section 6.2 and Section 6.3 shall have been satisfied or waived (other than those conditions that are to be satisfied by action taken at the Closing) other than the conditions set
forth in Section 6.1(c), then such date shall automatically be extended to August 22, 2017 (as may be so extended, the
End Date
);
provided
that the right to terminate this Agreement pursuant to this
Section 7.1(b) shall not be available to any party that has breached its obligations under this Agreement in any material respect that has contributed to the failure to consummate the Merger on or before such date;
(c) by either the Company or Parent if any Governmental Entity shall have issued an order, decree or ruling permanently restraining, enjoining
or otherwise prohibiting or making illegal the transactions contemplated by this Agreement, and such order, decree or ruling shall have become final and nonappealable;
provided
that the party seeking to terminate this Agreement pursuant to
this Section 7.1(c) shall have complied with its obligations pursuant to Section 5.10;
(d) by either the Company or Parent if
the Company Meeting (including any adjournments or postponements thereof) shall have concluded and the Company Stockholder Approval contemplated by this Agreement shall not have been obtained;
(e) by the Company, if Parent or Merger Sub shall have breached or failed to perform in any material respect any of their representations,
warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) would result in a failure of a condition set forth in Section 6.1 or Section 6.2 and (ii) cannot be cured by the End
Date or, if curable, is not cured within 30 Business Days following the Companys delivery of written notice to Parent stating the Companys intention to terminate this Agreement pursuant to this Section 7.1(e) and the basis for such
termination;
provided
that the Company is not then in material breach of any representation, warranty, agreement or covenant contained in this Agreement;
(f) by Parent, if the Company shall have breached or failed to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or failure to perform (i) would result in a failure of a condition set forth in Section 6.1 or Section 6.3 and (ii) cannot be cured by the End Date or, if
curable, is not cured with 30 Business Days following Parents delivery of written notice to the Company stating Parents intention to terminate this Agreement pursuant to this Section 7.1(f) and the basis for such termination;
provided
that Parent or Merger Sub is not then in material breach of any representation, warranty, agreement or covenant contained in this Agreement;
(g) at any time prior to the date the Company Stockholder Approval is obtained, by Parent, if (i) there shall have been a Change of
Recommendation, (ii) the Company shall have breached in any material respect or failed to perform in any material respect any of the covenants and agreements set forth in Section 5.5, or (iii) the Board of Directors fails to reaffirm
(publicly, if so requested by Parent in writing) the Recommendation within ten Business Days after the date that (x) any Alternative Proposal (or material modification thereto) is first publicly disclosed by the Company or the Person making
such Alternative Proposal or (y) any Material Development is first publicly disclosed by the Company; or
(h) at any time prior to the
date the Company Stockholder Approval is obtained, by the Company, in accordance with Section 5.5(e)(ii);
provided
, that concurrently with such termination the Company shall tender payment to Parent of the Termination Fee pursuant to
Section 7.3.
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Section 7.2
Effect of Termination
. In the event of any termination of this Agreement
pursuant to Section 7.1, the terminating party shall forthwith give written notice thereof to the other party or parties and this Agreement shall terminate, and the transactions contemplated hereby shall be abandoned, without further action by
any of the parties hereto. In the event of termination of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become null and void and there shall be no liability or obligation on the part of the Company, Parent, Merger Sub
or their respective Subsidiaries or Affiliates, except that the Confidentiality Agreement shall survive termination in accordance with its terms, the penultimate sentence of Section 5.12(b) and the provisions of Section 5.4(b), this
Section 7.2, Section 7.3 and Article 8 shall survive such termination;
provided
,
however
, that neither Parent nor the Company shall be released from any liabilities or damages arising out of (a) any fraud by any
party or (b) except as set forth in Section 7.3(b), any willful breach of any covenant or agreement set forth in this Agreement.
Section 7.3
Termination Fee
. Any provision in this Agreement to the contrary notwithstanding:
(a) In the event that:
(i) after the date of this Agreement, (A) any Alternative Proposal (substituting fifty percent (50%) for the fifteen
percent (15%) threshold set forth in the definition of Alternative Proposal) (a
Qualifying Transaction
), or intention to make a Qualifying Transaction, is publicly proposed or publicly disclosed prior to, and not
withdrawn at least two Business Days prior to, the Company Meeting (or prior to termination of this Agreement if there has been no Company Meeting), (B) this Agreement is terminated by Parent pursuant to Section 7.1(f) or by Parent or the
Company pursuant to Section 7.1(b) or Section 7.1(d) and (C) concurrently with or within 12 months after such termination, the Company shall have entered into a definitive agreement providing for a Qualifying Transaction or shall have
completed a Qualifying Transaction (which, in each case set forth in this clause (C), need not be the same Qualifying Transaction that was made, disclosed or communicated prior to termination of this Agreement);
(ii) Parent shall have validly terminated this Agreement pursuant to Section 7.1(g); or
(iii) the Company shall have validly terminated this Agreement pursuant to Section 7.1(h),
then, in any such event, the Company shall pay to Parent (or, at Parents direction, an Affiliate of Parent) a fee of $133 million in cash (the
Termination Fee
), by wire transfer of same day funds to one or more accounts designated by Parent, such payment to be made, in the case of a termination referenced in clause (i) above, upon consummation of the Qualifying
Transaction, in the case of clause (ii) above, within three Business Days after such termination or, in the case of clause (iii) above, in advance of or concurrently with the termination by the Company pursuant to Section 7.1(h); it
being understood that in no event shall the Company be required to pay the Termination Fee on more than one occasion.
(b) Anything to the
contrary in this Agreement notwithstanding, except in the case of fraud, if the Company pays the Termination Fee pursuant to this Section 7.3, such payment shall be the sole and exclusive remedy of Parent and Merger Sub against the Company and
its Subsidiaries and their respective former, current or future officers, directors, partners, stockholders, managers, members, Affiliates and Representatives and none of the Company, any of its Subsidiaries or any of their respective former,
current or future officers, directors, partners, stockholders, managers, members, Affiliates or Representatives shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby. The
parties acknowledge that the agreements contained in this Section 7.3 are an integral part of the transactions contemplated hereby, that, without these agreements, the parties would not enter into this Agreement and that any amounts payable
pursuant to this Section 7.3 do not constitute a penalty. Accordingly, if the Company fails to promptly pay any amount due pursuant to this Section 7.3, the Company shall also pay any costs and expenses (including reasonable legal fees and
expenses) incurred by Parent or Merger Sub in connection with a legal action to enforce this Agreement that results in a judgment for such amount against the Company. Any amount not paid when due pursuant to this Section 7.3 shall bear interest
from the date such amount is due until the date paid at a rate equal to 2% plus the prime rate as published in
The Wall Street Journal
in effect on the date of such payment.
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ARTICLE 8
MISCELLANEOUS
Section 8.1
No Survival of Representations and Warranties
. None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger.
Section 8.2
Expenses
. Except as set forth in
Section 7.3, whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger, this Agreement and the transactions contemplated hereby shall be paid by the party incurring or required to incur such
expenses, except that (a) all expenses incurred in connection with the printing, filing and mailing of the Proxy Statement (including applicable SEC filing fees) shall be borne by the Company and (b) all fees paid in respect of any filings
under the HSR Act and the Competition Act shall be borne by Parent.
Section 8.3
Counterparts; Effectiveness
. This Agreement
may be executed in counterparts (including by facsimile, by electronic mail in portable document format (.pdf) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document), each
of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when one or more counterparts have been signed by each of the parties and delivered (by
telecopy, facsimile, electronic mail or otherwise as authorized by the prior sentence) to the other parties.
Section 8.4
Governing Law; Jurisdiction
. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. In addition, each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement
and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall
be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state
or federal court within the State of Delaware). Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction
of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the aforesaid courts. Each of the parties hereto hereby irrevocably
waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason
other than the failure to serve in accordance with this Section 8.4, (b) any claim that it or its property is exempt or immune from the jurisdiction of any such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by the applicable Law, any claim that (i) the suit, action or
proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
Section 8.5
Specific Enforcement
.
(a) The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Each party agrees that, in the event of any breach or threatened breach by any other party of any covenant or obligation contained in this Agreement, the non-breaching party shall be
entitled (in addition to any other remedy that may be available to it whether in law or equity, including monetary damages) to obtain (i) a decree or order of specific performance to enforce the observance and performance of such covenant or
obligation and (ii) an injunction restraining such breach or threatened breach.
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(b) Each party further agrees that (i) it will not oppose the granting of an injunction,
specific performance and other equitable relief as provided herein on the basis that the other party has an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity and (ii) no
other party or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 8.5, and each party irrevocably waives any
right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument.
Section 8.6
WAIVER OF
JURY TRIAL
. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
PARTY MAKES THIS WAIVER VOLUNTARILY AND SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS CONTAINED IN THIS SECTION 8.6.
Section 8.7
Notices
. Any notice required to be given hereunder shall be sufficient if in writing, and sent by email, facsimile
transmission, by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows:
To Parent or Merger Sub:
Circle K Stores Inc.
4080 W.
Jonathan Moore Pike
Columbus, Indiana 47201
Attention: Brian P. Hannasch
Facsimile: (450) 662-6633
Email:
bhannasch@circlek.com
with a copy to:
Faegre Baker Daniels LLP
600
East 96
th
Street, Suite 600
Indianapolis, Indiana 46240
Attention: J. Jeffrey Brown
Facsimile: (317) 569-4800
Email:
jeff.brown@faegrebd.com
To the Company:
CST Brands, Inc.
19500 Bulverde
Rd.
San Antonio, Texas 78259
Attention: Gérard Sonnier
Email: gerard.sonnier@cstbrands.com
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with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York,
New York 10019
Attention: Lawrence S. Makow
Gordon S. Moodie
Facsimile: (212) 403-2000
Email:
lsmakow@wlrk.com
gsmoodie@wlrk.com
or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered (a) when received
when sent by email or facsimile,
provided
that the recipient confirms in writing its receipt thereof, (b) upon proof of service when sent by reliable overnight delivery service, (c) upon personal delivery in the case of hand
delivery or (d) upon receipt of the return receipt when sent by certified or registered mail. Any party to this Agreement may notify any other party of any changes to the address or any of the other details specified in this paragraph;
provided
,
however
, that such notification shall only be effective on the date specified in such notice or two Business Days after the notice is given, whichever is later. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.
Section 8.8
Assignment; Binding Effect
. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties;
provided
, that Parent and Merger Sub may transfer or assign all or any part of their rights, in whole or
in part, under this Agreement or any related documents (a) to any lender as collateral security, (b) to one or more of their Affiliates at any time or (c) after the Effective Time, so long as the full amount of the Merger
Consideration has been delivered (in cash) to the Paying Agent and not returned to Parent or Merger Sub, to any Affiliate or successor of Parent;
provided
,
further
, that such transfer or assignment shall not relieve Parent or Merger
Sub of its obligations hereunder or enlarge, alter or change any obligation of any other party hereto or due to Parent or Merger Sub. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
Section 8.9
Severability
. Any term or provision of this Agreement
that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the sole extent of such invalidity or unenforceability without rendering invalid or unenforceable the remainder of such term or provision or the
remaining terms and provisions of this Agreement in any jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.
Section 8.10
Entire Agreement; No Third-Party Beneficiaries
. This Agreement (including the exhibits and schedules hereto), the
Guaranty and the Confidentiality Agreement constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof and
thereof and, except for (a) the right of the holders of the Common Stock and Equity Awards to receive the Merger Consideration in accordance with Article 2 and (b) Section 5.11 (which shall be for the benefit of the Indemnified
Parties), is not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder.
Section 8.11
Amendments; Waivers
. At any time prior to the Effective Time, whether before or after receipt of the Company
Stockholder Approval, any provision of this Agreement may be amended (by action taken or authorized by their respective boards of directors) or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Parent and Merger Sub, or in the case of a waiver, by the party against whom the waiver is to be effective;
provided
,
however
, that after receipt of the
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Company Stockholder Approval, if any such amendment or waiver shall by applicable Law or in accordance with the rules and regulations of the NYSE require further approval of the stockholders of
the Company or the sole stockholder of Merger Sub, as applicable, the effectiveness of such amendment or waiver shall be subject to the approval of the stockholders of the Company or the sole stockholder of Merger Sub, as applicable. The foregoing
notwithstanding, no failure or delay by any party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
Section 8.12
Headings
. Headings of the Articles and Sections of this Agreement are for convenience of the parties only and shall
be given no substantive or interpretive effect whatsoever. The table of contents to this Agreement is for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
Section 8.13
Interpretation
. When a reference is made in this Agreement to an Article or Section, such reference shall be to an
Article or Section of this Agreement unless otherwise indicated. Whenever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without
limitation. The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All
references herein to $ or dollars shall be to U.S. dollars. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless
otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Each of the parties has
participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties, and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.
Section 8.14
Obligations of Merger Sub
. Whenever this Agreement requires Merger Sub to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause such Merger Sub to take such action.
Section 8.15
Definitions
. References in this Agreement to specific laws or to specific provisions of laws shall include all rules
and regulations promulgated thereunder. Any statute defined or referred to herein or in any agreement or instrument referred to herein shall mean such statute as from time to time amended, modified or supplemented, including by succession of
comparable successor statutes. For purposes of this Agreement, the following terms (as capitalized below) will have the following meanings when used herein:
Acceptable Confidentiality Agreement
has the meaning set forth in Section 5.5(e).
Action
has the meaning set forth in Section 5.11(c).
Affiliates
means, with respect to any Person, any other Person that, directly or indirectly, controls, or is controlled by,
or is under common control with, such Person. As used in this definition, control (including, with its correlative meanings, controlled by and under common control with) shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.
Agreement
has the meaning set forth in the Preamble.
Alternative Acquisition Agreement
has the meaning set forth in Section 5.5(a).
Alternative Proposal
has the meaning set forth in Section 5.5(g).
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Antitrust Division
has the meaning set forth in Section 5.10(b).
Antitrust Laws
means the U.S. Sherman Act, as amended, the U.S. Clayton Act, as amended, the U.S. Federal Trade Commission
Act, as amended, the HSR Act, the Competition Act and all other applicable Laws issued by a Governmental Entity that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition through merger or acquisition.
Board of Directors
has the meaning set forth in the
Recitals.
Book-Entry Shares
has the meaning set forth in Section 2.2(a).
Business Day
means any day other than a Saturday, Sunday or a day on which the banks in Texas, New York or Quebec are
authorized by law or executive order to be closed.
Canadian Competition Act Clearance
means (a) an Advance Ruling
Certificate has been issued, (b) Parent and the Company have given the notice required under Section 114 of the Competition Act with respect to the Merger, and the applicable waiting period under Section 123 of the Competition Act has
expired or been terminated or (c) the obligation to give the requisite notice has been waived pursuant to Paragraph 113(c) of the Competition Act.
Cancelled Shares
has the meaning set forth in Section 2.1(b).
Capitalization Date
has the meaning set forth in Section 3.2(a).
CAPL
means CrossAmerica Partners LP.
CAPL Financial Ratios
has the meaning set forth in Section 5.1(b)(ix).
CAPL SEC Documents
has the meaning set forth in Section 3.4(a).
CAPL Subsidiaries
means CAPL and any Subsidiaries thereof.
Certificate of Merger
has the meaning set forth in Section 1.3.
Certificates
has the meaning set forth in Section 2.2(a).
Change of Recommendation
has the meaning set forth in Section 5.5(b).
Closing
has the meaning set forth in Section 1.2.
Closing Date
has the meaning set forth in Section 1.2.
Code
has the meaning set forth in Section 2.2(b)(iii).
Collective Bargaining Agreement
has the meaning set forth in Section 3.10(a).
Common Stock
has the meaning set forth in Section 2.1(a).
Company
has the meaning set forth in the Preamble.
Company Benefit Plans
has the meaning set forth in Section 3.9(a).
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Company Disclosure Letter
has the meaning set forth in Article 3.
Company Employees
has the meaning set forth in Section 5.9(a).
Company Intellectual Property
has the meaning set forth in Section 3.15(a).
Company Material Adverse Effect
means any event, development, change, state of facts or effect that, individually or in the
aggregate (a) has a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, but shall not include any event, development, change, state of facts or effect
relating to or resulting from: (i) conditions in or affecting the United States or Canadian economies or the global economy generally, (ii) political or economic conditions (or changes in such conditions) in the United States or Canada or
any other country or region in the world or acts of war, sabotage or terrorism (including any escalation or general worsening of any such acts of war, sabotage or terrorism) in the United States or Canada or any other country or region of the world
occurring after the date hereof, (iii) changes in the financial, credit, banking or securities markets in the United States or any other country or region in the world (including any disruption thereof and any decline in the price of any
security or any market index), (iv) changes in GAAP or other accounting standards (or interpretations or the enforcement thereof), (v) changes in any Laws or other binding directives issued by any Governmental Entity (or interpretations or
the enforcement thereof), (vi) changes that are generally applicable to the industries in which the Company and its Subsidiaries operate, (vii) any change in the market price or trading volume of the Common Stock, (viii) the execution
and delivery and performance of this Agreement or the public announcement or pendency or consummation of the Merger or other transactions contemplated hereby, including the impact thereof on the relationships, contractual or otherwise, of the
Company or any of its Subsidiaries with employees, customers or suppliers, (ix) the identity of Parent or any of its Affiliates as the acquiror of the Company, (x) the taking of any action required or expressly contemplated by this
Agreement or with the prior written consent or at the direction of Parent, (xi) the occurrence of natural disasters, (xii) any failure to meet internal or published projections, forecasts or revenue or earning predictions for any period or
(xiii) any change in the credit rating of the Company or its securities;
provided
, that (A) any event, development, change, state of facts or effect set forth in the foregoing clauses (i), (ii), (iii) and (vi) may be taken
into account in determining whether there has been or is a Company Material Adverse Effect to the extent (and only to the extent) the impact of such event, development, change, state of facts or effect on the business, financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole, is disproportionately adverse in relation to others in the industries in which the Company and its Subsidiaries operate, in which case only the incremental disproportionate effect
shall be taken into account and (B) the underlying cause of any change or failure referred to in the foregoing clauses (vii), (xii) and (xiii) may be taken into account in determining whether there has been or is a Company Material
Adverse Effect or (b) prevents or materially impairs or delays the ability of the Company to consummate the Merger.
Company
Material Contract
has the meaning set forth in Section 3.19(a).
Company Meeting
has the meaning set
forth in Section 5.6(b).
Company Option
has the meaning set forth in Section 2.3(a).
Company Permits
has the meaning set forth in Section 3.7(b).
Company SEC Documents
has the meaning set forth in Section 3.4(a).
Company Stockholder Approval
has the meaning set forth in Section 3.18.
Competition Act
has the meaning set forth in Section 3.3(b).
Competition Bureau
has the meaning set forth in Section 5.10(b).
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Confidentiality Agreement
has the meaning set forth in Section 5.4(b).
Contract
has the meaning set forth in Section 3.3(c).
Debt Financing
has the meaning set forth in Section 5.12(a).
DGCL
has the meaning set forth in the Recitals.
Dissenting Shares
has the meaning set forth in Section 2.1(d).
Divestiture Actions
has the meaning set forth in Section 5.10(c).
Effective Time
has the meaning set forth in Section 1.3.
End Date
has the meaning set forth in Section 7.1(b).
Environmental Law
has the meaning set forth in Section 3.8(b).
Environmental Permit
has the meaning set forth in Section 3.8(a).
Equity Award
has the meaning set forth in Section 3.2(e).
ERISA
has the meaning set forth in Section 3.9(a).
ERISA Affiliate
has the meaning set forth in Section 3.9(c).
ESPP
has the meaning set forth in Section 2.4.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Exchange Fund
has the meaning set forth in Section 2.2(a).
Financing Sources
has the meaning set forth in Section 5.12(b).
FTC
has the meaning set forth in Section 5.10(b).
GAAP
means United States generally accepted accounting principles.
Governmental Entity
means any federal, state, local, municipal or foreign government, any court, tribunal, administrative
agency or commission or other governmental or other regulatory authority or agency, whether federal, state, local, municipal, foreign or supranational, or the NYSE.
Guarantor
has the meaning set forth in the Recitals.
Guaranty
has the meaning set forth in the Recitals.
Hazardous Substance
has the meaning set forth in Section 3.8(c).
HSR Act
has the meaning set forth in Section 3.3(b).
Indemnified Party
has the meaning set forth in Section 5.11(c).
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Intellectual Property
has the meaning set forth in Section 3.15(a).
Knowledge
and
Known
means (a) with respect to Parent, the actual knowledge of the individuals
listed on Section 8.15(a) of the Parent Disclosure Letter and (b) with respect to the Company, the actual knowledge of the individuals listed on Section 8.15(b) of the Company Disclosure Letter.
Law
or
Laws
has the meaning set forth in Section 3.7(a).
Leased Real Property
has the meaning set forth in Section 3.16(b).
Lease
and
Leases
have the meaning set forth in Section 3.16(b).
Lien
means any mortgage, pledge, title defects, claims, changes, security interest, encumbrance or liens of any kind or
nature.
Merger
has the meaning set forth in the Recitals.
Merger Consideration
has the meaning set forth in Section 2.1(a).
Merger Sub
has the meaning set forth in the Preamble.
MSUs
has the meaning set forth in Section 2.3(b).
Multiemployer Plan
has the meaning set forth in Section 3.9(a).
New Plans
has the meaning set forth in Section 5.9(b).
Non-CAPL Subsidiaries
means Subsidiaries of the Company other than the CAPL Subsidiaries.
Notice Period
has the meaning set forth in Section 5.5(e)(ii)(2).
NYSE
means the New York Stock Exchange.
Old Plans
has the meaning set forth in Section 5.9(c).
Owned Real Property
has the meaning set forth in Section 3.16(a).
Parent
has the meaning set forth in the Preamble.
Parent Approvals
has the meaning set forth in Section 4.2(b).
Parent Disclosure Letter
has the meaning set forth in Article 4.
Parent Material Adverse Effect
means any event, development, change, state of facts or effect that prevents or materially
impairs or delays the ability of Parent or Merger Sub to perform its obligations under this Agreement, to satisfy the conditions precedent to the Merger or to consummate the Merger.
Paying Agent
has the meaning set forth in Section 2.2(a).
Permits
has the meaning set forth in Section 3.7(b).
Permitted Lien
means a Lien (a) for Taxes or governmental assessments, charges or claims of payment (i) not yet
due or (ii) being contested in good faith for which adequate accruals or reserves have been
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established in accordance with GAAP, (b) that is a carriers, warehousemens, mechanics, materialmens, repairmens or other similar lien arising in the ordinary
course of business, (c) that is a zoning, entitlement or other land use or environmental regulation by any Governmental Entity, (d) that is an easement, license, restrictive covenant or similar encumbrance against any property of the
Company or its Subsidiaries, including any minor defects of title, in each case that does not individually or in the aggregate materially adversely affect the value of such property or materially interfere with such propertys continued use in
the business of the Company and its Subsidiaries as currently conducted, (e) that is disclosed on the Companys audited consolidated balance sheet as of December 31, 2015, including the notes thereto (or securing liabilities reflected
on such balance sheet), (f) that was incurred after December 31, 2015 in the ordinary course of business consistent with past practice and that does not materially interfere with the use, operation or transfer of, or any of the benefits of
ownership of, the property of the Company and its Subsidiaries taken as a whole or (g) securing the Companys credit facilities, which facilities are existing on the date hereof.
Person
means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other
entity, group (as such term is used in Section 13 of the Exchange Act) or organization, including a Governmental Entity, and any permitted successors and assigns of such Person.
Preferred Stock
has the meaning set forth in Section 3.2(a).
Proxy Statement
has the meaning set forth in Section 3.13.
Qualifying Transaction
has the meaning set forth in Section 7.3(a).
Real Property
has the meaning set forth in Section 3.16(b).
Recommendation
has the meaning set forth in Section 3.3(a).
Representatives
means, with respect to any Person, such Persons officers, directors, employees, accountants,
consultants, legal counsel, investment bankers, financial advisors and agents and other representatives.
Restricted
Share
has the meaning set forth in Section 2.3(c).
RSU
has the meaning set forth in
Section 2.3(b).
Sarbanes-Oxley Act
means the Sarbanes-Oxley Act of 2002, as amended.
SEC
means the Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Severance Plan
has the meaning set forth in Section 5.9(a).
Share
has the meaning set forth in Section 2.1(a).
Specified Approvals
has the meaning set forth in Section 3.3(b).
Subsidiaries
means, with respect to any party, any corporation, partnership, association, trust or other form of legal
entity of which (a) more than 50% of the outstanding voting securities are on the date hereof directly or indirectly owned by such party or (b) such party or any Subsidiary of such party is a general partner (excluding partnerships in
which such party or any Subsidiary of such party does not have a majority of the voting interests in such partnership).
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Superior Proposal
has the meaning set forth in Section 5.5(h).
Surviving Corporation
has the meaning set forth in Section 1.1.
Tax Return
has the meaning set forth in Section 3.14(a).
Tax Sharing Agreement
has the meaning set forth in Section 3.14(b)(ix).
Taxes
has the meaning set forth in Section 3.14(a).
Termination Date
has the meaning set forth in Section 5.1(a).
Termination Fee
has the meaning set forth in Section 7.3(a).
U.S. Export and Import Laws
means the Arms Export Control Act (22 U.S.C. 2778), the International Traffic in Arms
Regulations (ITAR) (22 CFR Parts 120-130), the Export Administration Act of 1979 (50 U.S.C. 2401-2420), the Export Administration Regulations (EAR) (15 CFR 730-774), the Foreign Assets Control Regulations (31 CFR Parts 500-598), the Laws
administered by Customs and Border Protection (19 CFR Parts 0-199) and all other Laws of the United States and regulations regulating exports, imports or reexports to or from the United States, including the export or reexport of goods, services or
technical data from the United States, in each case as amended.
UST Funds
and
UST Systems
have the
meanings set forth in Section 3.8(a).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
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CIRCLE K STORES INC.
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By:
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/s/ Brian P. Hannasch
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Brian P. Hannasch
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President and Chief Executive Officer
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ULTRA ACQUISITION CORP.
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By:
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/s/ Brian P. Hannasch
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Brian P. Hannasch
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President
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CST BRANDS, INC.
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By:
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/s/ Kimberly S. Lubel
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Kimberly S. Lubel
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Chairman and Chief Executive Officer
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ANNEX I
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CST BRANDS, INC.
FIRST.
The name of the corporation is CST Brands, Inc. (the
Corporation
).
SECOND.
The address of the Corporations registered office in the State of Delaware is Corporation Service Company, 2711
Centerville Road, Suite 400 in the City of Wilmington, County of New Castle, Delaware 19808. The name of its registered agent at such address is The Corporation Service Company.
THIRD.
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH.
The total number of shares which the Corporation shall have authority to
issue is 1,000 shares of Common Stock, par value $0.01 per share.
FIFTH.
The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal By-Laws of the Corporation.
SIXTH.
Elections of directors need not be by written ballot
except and to the extent provided in the By-Laws of the Corporation.
SEVENTH.
A director of the Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of
Delaware as currently in effect or as the same may hereafter be amended. No amendment or repeal of this Article SEVENTH shall adversely affect any right or protection of a director that exists at the time of such amendment or repeal.
EIGHTH.
The Corporation shall indemnify, to the fullest extent permitted by law as currently in effect or as the same may hereafter be
amended, any person made or threatened to be made a party to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or such persons testator or intestate is or was a
director or officer of the Corporation or serves or served at the request of the Corporation any other enterprise as a director or officer. To the fullest extent permitted by law as currently in effect or as the same may hereafter be amended,
expenses incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be
determined that such person is not entitled to be indemnified by the Corporation. The Corporations obligations to indemnify or advance expenses to any person who is or was serving at its request as a director or officer of an other enterprise
shall be reduced by any amount such person may collect as indemnification or advancement from such other enterprise. The rights provided to any person by this Article EIGHTH shall be enforceable against the Corporation by such person, who shall be
presumed to have relied upon it in serving or continuing to serve as a director or officer as provided above. No amendment or repeal of this Article EIGHTH shall impair the rights of any person arising at any time with respect to events occurring
prior to such amendment or repeal. For purposes of this Article EIGHTH, the term Corporation shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the
Corporation in a consolidation or merger and the term other enterprise shall include any corporation, partnership, limited liability company or partnership, joint venture, trust or employee benefit plan.
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Annex B
EXECUTION VERSION
UNCONDITIONAL GUARANTY
THIS UNCONDITIONAL GUARANTY (this Guaranty) is made as of August 21, 2016, by Alimentation Couche-Tard Inc., a corporation
organized under the laws of the Province of Quebec, Canada (Guarantor), having a notice address of 4204 Boul. Industriel, Laval, Quebec H7L 0E3, to and for the benefit of CST Brands, Inc., a Texas corporation (Beneficiary),
having a notice address of One Valero Way, Building D, Suite 200, San Antonio, Texas 78249.
RECITALS
A. Concurrently herewith, Beneficiary, Circle K Stores Inc., a Texas corporation (CKS), and Ultra Acquisition Corp., a Delaware
corporation (Ultra and, together with CKS, Circle K) are entering into an Agreement and Plan of Merger, dated as of the date hereof (as amended from time to time, the Merger Agreement).
B. Beneficiarys willingness to enter into the Merger Agreement is expressly conditioned upon the execution and delivery of this Guaranty
by Guarantor. Guarantor, in consideration of its relationship to Circle K, has agreed to provide this Guaranty.
NOW, THEREFORE, in
consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:
1. Guarantor, as primary obligor and not merely as surety, hereby absolutely, irrevocably and unconditionally guarantees the full and timely
performance and payment when due of each and every obligation of Circle K under the Merger Agreement (the Guaranteed Obligations).
2. This is an unconditional guaranty of performance and not of collection. Guarantor expressly agrees that its liability under this Guaranty
shall be primary and that in any right of action which may accrue to Beneficiary under the Merger Agreement, Beneficiary may proceed against Guarantor directly without having commenced any action against or having obtained any judgment against
Circle K or any permitted assignee of the Merger Agreement or may proceed against Guarantor and Circle K and/or any permitted assignee of the Merger Agreement jointly and severally.
3. Guarantor waives and agrees not to assert or to take advantage of (a) any defense that may arise by reason of the incapacity, lack of
authority, bankruptcy, insolvency or disability of Circle K or any other person or entity; (b) any defense based upon the failure of the Circle K or any other person or entity to take any action or refrain from any action; (c) any duty on
the part of Beneficiary to disclose to Guarantor any facts it may now or hereafter know; (d) promptness, diligence, acceptance or notice of acceptance of this Guaranty; (e) the invalidity or unenforceability of the Merger Agreement;
(f) any defense based upon a failure to notify Guarantor of any modification to the Merger Agreement including, without limitation, notice of any extension of time for performance and/or payment; (g) presentment, demand for payment, notice
of non-performance, default, dishonor and protest, notice of any Guaranteed Obligations incurred and any defenses which may be available by virtue of any valuation, stay or moratorium law or similar law now or hereafter in effect; or (h) any
other defense that Guarantor may or might have relating to its undertakings, liabilities, and obligations hereunder. Guarantor agrees that the obligations of Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise
affected by (i) the failure or delay on the part of the Beneficiary to assert any claim or demand or to enforce any right or remedy against Circle K; (ii) any change in the corporate existence, structure or ownership of the Beneficiary,
Circle K, Guarantor or any other person or entity interested in the transactions contemplated by this Guaranty or the Merger Agreement; (iii) any change in the time, place or manner of payment of any of the Guaranteed Obligations or
(iv) the adequacy of any other means the Beneficiary may have of obtaining payment related to any of the Guaranteed Obligations. If at any time payment under this Guaranty or the Merger
B-1
Agreement is rescinded or must be otherwise restored or returned by the Beneficiary upon the insolvency, bankruptcy or reorganization of the Guarantor, Circle K or otherwise, the Guarantors
obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by the Beneficiary, all as though such payment had not been made.
4. Guarantor further agrees that the validity of this Guaranty shall in no way be terminated, affected, or impaired by reason of
Beneficiarys grant of any indulgences to Circle K under the Merger Agreement, whether directly or indirectly, or by reason of the assertion by Beneficiary of any rights or remedies against Circle K. Guarantor hereby waives all suretyship
defenses.
5. Guarantor represents that it has read and understands the Merger Agreement and, without limitation, the obligations of Circle
K to which this Guaranty applies under the Merger Agreement. Guarantor hereby agrees that this Guaranty shall remain in full force and effect as to any modification of the Merger Agreement or any agreement evidencing, securing or otherwise executed
in connection with any of the Guaranteed Obligations, whether or not Guarantor shall have received notice of or consented to such modification. In addition, no assignment of the Merger Agreement or any rights or obligations contained therein
contained by Circle K shall operate to extinguish or diminish the liability of Guarantor under this Guaranty.
6. Guarantor hereby
represents and warrants that the this Guaranty has been duly authorized, executed and delivered by Guarantor and the execution, delivery and performance of this Guaranty by Guarantor do not and will not (i) conflict with or result in a breach
of any of the terms of Guarantors certificate or articles of incorporation, bylaws or other constituent charter documents, (ii) result in any breach of, or constitute a default under, any contract or agreement to which Guarantor is bound,
(iii) violate any law or regulation applicable to Guarantor, or (iv) require Guarantor to obtain or make any consent, approval or authorization of, or registration, filing or declaration with, any governmental or regulatory authority or
other person. Guarantor acknowledges that it will receive substantial direct and indirect benefits from the transactions contemplated hereby and by the Merger Agreement.
7. This Guaranty shall continue in effect until each and every Guaranteed Obligation is satisfied.
8. This Guaranty may not be amended or modified, or any of its provisions waived, except by a written instrument signed by Beneficiary and
Guarantor.
9. Any notice hereunder shall be in writing and shall be deemed given on the next business day after the date of delivery, if
personally delivered, or on the fifth day after such notice is placed in the United States or Canadian mail, postage prepaid, sent by registered or certified mail, return receipt requested, and addressed to the applicable party hereto at the address
set forth in the introductory paragraph hereof, or to such other address as a party may designate for itself from time to time for the purpose of receiving notices hereunder by notice given in the manner aforesaid.
10. This Guaranty shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of
laws principles thereof. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable, all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by
law.
11. This Guaranty may be executed in the original or by telecopy or electronic transmission of a .pdf file containing an executed
signature page, in any number of counterparts, each of which will be deemed to be an original and all of which together will constitute one and the same instrument.
[Remainder of page intentionally left blank; signature page follows]
B-2
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered as of the date first set
forth above.
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ALIMENTATION COUCHE-TARD INC.
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By:
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/s/ Brian P. Hannasch
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Brian P. Hannasch
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President and Chief Executive Officer
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Accepted as of the date set forth above:
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CST BRANDS, INC.
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By:
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/s/ Kimberly S. Lubel
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Kimberly S. Lubel
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Chairman and Chief Executive Officer
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B-3
Annex C
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Merrill Lynch, Pierce, Fenner & Smith Incorporated
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GLOBAL CORPORATE &
INVESTMENT BANKING
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August 21, 2016
The Board
of Directors
CST Brands, Inc.
One Valero Way
Building D, Suite 200
San Antonio, Texas 78249
Members of the Board of Directors:
We understand that CST
Brands, Inc., a Delaware corporation (CST), proposes to enter into an Agreement and Plan of Merger, dated as of August 21, 2016 (the Agreement), among CST, Circle K Stores Inc., a Texas corporation (Parent),
and Ultra Acquisition Corp., a Delaware corporation and an indirect, wholly owned subsidiary of Parent (Merger Sub), pursuant to which, among other things, Merger Sub will merge with and into CST (the Merger) and each
outstanding share of the common stock, par value $0.01 per share, of CST (CST Common Stock) will be converted into the right to receive $48.53 in cash, without interest (the Consideration). The terms and conditions of the
Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point of view, to the holders of
CST Common Stock of the Consideration to be received by such holders in the Merger.
In connection with this opinion, we have, among other things:
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(i)
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reviewed certain publicly available business and financial information relating to CST;
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(ii)
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reviewed certain internal financial and operating information with respect to the business, operations and prospects of CST furnished to or discussed with us by the management of CST, including certain financial
forecasts relating to CST prepared by the management of CST (such forecasts, CST Forecasts);
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(iii)
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discussed the past and current business, operations, financial condition and prospects of CST with members of senior management of CST;
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(iv)
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reviewed the trading history for CST Common Stock and a comparison of that trading history with the trading histories of other companies we deemed relevant;
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(v)
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compared certain financial and stock market information of CST with similar information of other companies we deemed relevant;
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(vi)
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compared certain financial terms of the Merger to financial terms, to the extent publicly available, of other transactions we deemed relevant;
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(vii)
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considered the fact that CST publicly announced that it would explore its strategic alternatives and the results of our efforts on behalf of CST to solicit, at the direction of CST, indications of interest from third
parties with respect to a possible acquisition of CST;
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(viii)
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reviewed the Agreement; and
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Merrill Lynch, Pierce, Fenner &
Smith Incorporated member FINRA/SIPC, is a subsidiary of Bank of America Corporation
Merrill Lynch, Pierce, Fenner and Smith Incorporated
One Bryant Park, New York, NY 10036
C-1
The Board of Directors
CST Brands, Inc.
Page
2
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(ix)
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performed such other analyses and studies and considered such other information and factors as we deemed appropriate.
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In arriving at our opinion, we have assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other
information and data publicly available or provided to or otherwise reviewed by or discussed with us and have relied upon the assurances of the management of CST that it is not aware of any facts or circumstances that would make such information or
data inaccurate or misleading in any material respect. With respect to the CST Forecasts, we have been advised by CST, and we have assumed, that they have been reasonably prepared on bases reflecting the best currently available estimates and good
faith judgments of the management of CST as to the future financial performance of CST. We have not made or been provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of CST or any other entity,
nor have we made any physical inspection of the properties or assets of CST or any other entity. We also have not evaluated the solvency or fair value of CST, Parent or any other entity under any state, federal or other laws relating to bankruptcy,
insolvency or similar matters. We have assumed, at the direction of CST, that the Merger will be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course
of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, will be
imposed that would have an adverse effect on CST or any other entity or the Merger (including the contemplated benefits thereof) in any respect material to our analyses or opinion.
We express no view or opinion as to any terms or other aspects or implications of the Merger (other than the Consideration to the extent expressly specified
herein), including, without limitation, the form or structure of the Merger or any terms, aspects or implications of any other agreement, arrangement or understanding entered into in connection with or related to the Merger or otherwise. Our opinion
is limited to the fairness, from a financial point of view, of the Consideration to be received by holders of CST Common Stock and no opinion or view is expressed with respect to any consideration received in connection with the Merger by the
holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view is expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to
any officers, directors or employees of any party to the Merger, or class of such persons, relative to the Consideration or otherwise. Furthermore, no opinion or view is expressed as to the relative merits of the Merger in comparison to other
strategies or transactions that might be available to CST or in which CST might engage or as to the underlying business decision of CST to proceed with or effect the Merger. In addition, we are not expressing any view or opinion with respect to, and
we have relied, with the consent of CST, upon the assessments of CST and its representatives regarding, legal, regulatory, accounting, tax and similar matters relating to CST or any other entity and the Merger (including the contemplated benefits
thereof) as to which we understand that CST obtained such advice as it deemed necessary from qualified professionals. We further express no opinion or recommendation as to how any stockholder should vote or act in connection with the Merger or any
other matter.
We have acted as financial advisor to CST in connection with the Merger and will receive a fee for our services, a portion of which is
payable upon delivery of this opinion and the principal portion of which is contingent upon consummation of the Merger. In addition, CST has agreed to reimburse our expenses and indemnify us against certain liabilities arising out of our engagement.
Merrill Lynch, Pierce, Fenner & Smith Incorporated member FINRA/SIPC, is a
subsidiary of Bank of America Corporation
Merrill Lynch, Pierce, Fenner and Smith Incorporated
One Bryant Park, New York, NY 10036
C-2
The Board of Directors
CST Brands, Inc.
Page
3
We and our affiliates comprise a full service securities firm and commercial bank engaged in securities,
commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services
and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of our businesses, we and our affiliates may invest on a principal basis or on behalf of customers or manage funds that
invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of CST, Parent and
certain of their respective affiliates.
We and our affiliates in the past have provided, currently are providing, and in the future may provide,
investment banking, commercial banking and other financial services to CST and certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including (i) having acted as financial advisor
to CST in connection with an acquisition transaction, (ii) having acted or acting as a book-running manager and underwriter for certain equity offerings of certain affiliates of CST, (iii) having acted or acting as a lender under certain
term loans, letters of credit, credit facilities and other credit arrangements of CST and/or certain of its affiliates, (iv) having provided or providing certain managed investments services and products to CST and/or certain of its affiliates,
(v) having acted or acting as an agent for CST and certain of its subsidiaries in connection with certain purchases of equity interests of an affiliate of CST, and (vi) having provided or providing certain treasury management products and
services to CST and/or certain of its affiliates. In addition, we and/or certain of our affiliates have maintained, currently are maintaining, and in the future may maintain, commercial (including vendor and/or customer) relationships with CST
and/or certain of its affiliates.
In addition, we and our affiliates in the past have provided, currently are providing, and in the future may provide,
investment banking, commercial banking and other financial services to Parent and certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including (i) having acted as a
financial advisor to The Pantry, Inc. (Pantry), a current affiliate of Parent, in Parents acquisition of Pantry, (ii) having acted or acting as a lender under certain term loans, letters of credit, credit and leasing
facilities and other credit arrangements of Parent and/or certain of its affiliates, (iii) having provided or providing certain managed investments services and products to Parent and/or certain of its affiliates, and (iv) having provided
or providing certain treasury management products and services to Parent and/or certain of its affiliates. In addition, we and/or certain of our affiliates have maintained, currently are maintaining, and in the future may maintain, commercial
(including vendor and/or customer) relationships with Parent and/or certain of its affiliates.
It is understood that this letter is for the benefit and
use of the Board of Directors of CST (in its capacity as such) in connection with and for purposes of its evaluation of the Merger.
Our opinion is
necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to us as of, the date hereof. As you are aware, the credit, financial and stock markets have been
experiencing unusual volatility and we express no opinion or view as to any potential effects of such volatility on CST, Parent or the Merger. It should be understood that subsequent developments may affect this opinion, and we do not have any
obligation to update, revise, or reaffirm this opinion. The issuance of this opinion was approved by a fairness opinion review committee of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Merrill Lynch, Pierce, Fenner & Smith Incorporated member FINRA/SIPC, is a subsidiary
of Bank of America Corporation
Merrill Lynch, Pierce, Fenner and Smith Incorporated
One Bryant Park, New York, NY 10036
C-3
The Board of Directors
CST Brands, Inc.
Page
4
Based upon and subject to the foregoing, including the various assumptions and limitations set forth herein,
we are of the opinion on the date hereof that the Consideration to be received in the Merger by holders of CST Common Stock is fair, from a financial point of view, to such holders.
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Very truly yours,
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/s/ Merrill Lynch, Pierce, Fenner & Smith Incorporated
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MERRlLL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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Merrill Lynch, Pierce, Fenner & Smith Incorporated
member FINRA/SIPC, is a subsidiary of Bank of America Corporation
Merrill Lynch, Pierce, Fenner and Smith Incorporated
One Bryant Park, New York, NY 10036
C-4
Annex D
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
§ 262 Appraisal rights
(a)
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Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such
shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to
§ 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholders shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in
this section, the word stockholder means a holder of record of stock in a corporation; the words stock and share mean and include what is ordinarily meant by those words; and the words depository
receipt mean a receipt or other instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
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(b)
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Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant
to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of this title), § 252, § 254, § 255, § 256, § 257, § 258, § 263 or
§ 264 of this title:
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(1)
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Provided, however, that, except as expressly provided in § 363(b) of this title, no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national
securities exchange or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving corporation as provided in § 251(f) of this title.
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(2)
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Notwithstanding paragraph (b)(1) of this section, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263 and 264 of this title to accept for such stock anything except:
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a.
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Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
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b.
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Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
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c.
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Cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of this section; or
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d.
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Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a., b. and c. of this section.
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(3)
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In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 251(h), § 253 or § 267 of this title is not owned by the parent immediately prior to
the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
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(4)
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In the event of an amendment to a corporations certificate of incorporation contemplated by
§ 363(a) of this title, appraisal rights shall be available as contemplated by § 363(b) of this title, and the
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procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as practicable, with the word amendment substituted
for the words merger or consolidation, and the word corporation substituted for the words constituent corporation and/or surviving or resulting corporation.
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(c)
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Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision,
the provisions of this section, including those set forth in subsections (d), (e), and (g) of this section, shall apply as nearly as is practicable.
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(d)
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Appraisal rights shall be perfected as follows:
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(1)
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If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in accordance with § 255(c) of this title) with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) of this section that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section and, if 1 of the
constituent corporations is a nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholders shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10
days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has become effective; or
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(2)
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If the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or
§ 267 of this title, then either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series
of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a
merger approved pursuant to § 251(h) of this title, within the later of the consummation of the offer contemplated by § 251(h) of this title and 20 days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holders shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of
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the first notice or, in the case of a merger approved pursuant to § 251(h) of this title, later than the later of the consummation of the offer contemplated by § 251(h) of
this title and 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
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(e)
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Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) of this section hereof and who
is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time
within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholders demand for
appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholders written
request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this section hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such persons own name, file a petition or request
from the corporation the statement described in this subsection.
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(f)
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Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be
given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by
mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
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(g)
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At the hearing on such petition, the Court shall determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. If immediately before the merger or consolidation the shares
of the class
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or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange, the Court shall dismiss the proceedings as to all
holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for appraisal, (2) the value of the
consideration provided in the merger or consolidation for such total number of shares exceeds $1 million, or (3) the merger was approved pursuant to § 253 or § 267 of this title.
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(h)
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After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing
appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with interest, if any, to
be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, and except as provided in
this subsection, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from
time to time during the period between the effective date of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal
an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Court, and (2) interest
theretofore accrued, unless paid at that time. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the
appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has
submitted such stockholders certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this
section.
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(i)
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The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Courts decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
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(j)
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The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares
entitled to an appraisal.
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(k)
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From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal
rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in
the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not
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D-4
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affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholders demand for appraisal and to accept
the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
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(l)
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The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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D-5
Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be submitted via this method. FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill
in the circle next to each nominee you wish to withhold, as shown here: JOHN SmITH 1234 mAIN STREET APT. 203 NEW YORK, NY 10038 SPECIAL mEETING OF STOCKHOLDERS OF CST BRANDS, INC. November 16, 2016 INTERNET - Access www.voteproxy.com and
follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign
countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59 PM EST the day before the meeting. mAIL - Sign, date and mail your proxy card in the envelope provided
as soon as possible. IN PERSON - You may vote your shares in person by attending the Special Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible
documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. PROXY VOTING INSTRUCTIONS Please detach along perforated line and mail in the envelope provided IF you are not voting via
telephone or the Internet. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS RECOmmENDS YOU VOTE FOR PROPOSALS 1, 2, AND 3. PLEASE SIGN, DATE AND RETURN PROmPTLY IN THE ENCLOSED ENVELOPE. PLEASE mARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE x 00003003030000000000 5 111616 COmPANY NUmBER ACCOUNT NUmBER NOTICE OF INTERNET AVAILABILITY OF PROXY mATERIAL: The Notice of Special Meeting, proxy statement and proxy card are available at
http://www.astproxyportal.com/ast/CST/ The Board of Directors recommends you vote FOR proposals 1, 2 and 3: 1. A proposal to adopt the Agreement and Plan of Merger, dated as of August 21, 2016 (as it may be amended from time to time, the
merger agreement), by and among CST Brands, Inc., a Delaware corporation (CST), Circle K Stores Inc., a Texas corporation (Circle K), and Ultra Acquisition Corp., a Delaware corporation and an indirect wholly
owned subsidiary of Circle K (the merger). 2. A proposal to approve, on an advisory (non-binding) basis, certain compensation that may be paid or become payable to CSTs named executive officers in connection with the merger. 3. A
proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement
or in the absence of a quorum. NOTE: If any other matters are properly presented at the special meeting or any adjournment or postponement thereof for consideration, the holders of the proxies will have discretion to vote on these matters in
accordance with their best judgment. FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
CST BRANDS, INC.
Special Meeting of Stockholders of CST Brands, Inc.
to be held on November 16, 2016
for Holders
as of October 7, 2016
This Proxy is Being Solicited on behalf of the Board of Directors
The undersigned stockholder of CST Brands, Inc. (the "Company") hereby appoints Kimberly S. Lubel and Gérard J. Sonnier, and each of
them, proxies and attorneys-in-fact, with full power of substitution and resubstitution, and authorizes each of them, to vote all the shares of Common Stock of the Company which the undersigned is entitled to vote at the Special Meeting of
Stockholders of the Company and any adjournment or postponement thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment or postponement thereof, conferring authority upon such
true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting, including any adjournment or postponement thereof, in accordance with their best judgment. This proxy revokes any proxy heretofore
given with respect to the Special Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES
WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.
(Continued and to be signed on the reverse side.)