Item 1.01. Entry Into a Material Definitive Agreement
On August 21, 2016, CST Brands, Inc., a Delaware corporation (the Company), entered into an Agreement and Plan of Merger (the
Merger Agreement) with 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). Under the terms of
the Merger Agreement, Merger Sub will be merged with and into the Company (the Merger), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Parent is a wholly owned subsidiary of Alimentation Couche-Tard Inc.
(ACT).
Pursuant to the Merger Agreement, at the effective time of the Merger, each outstanding share of common stock of the
Company (other than shares owned by the Company as treasury stock and shares owned by Parent or Merger Sub, or by any subsidiary of the Company, Parent or Merger Sub, and any shares for which dissenters rights have been properly exercised and
not withdrawn or lost under Delaware law) will be converted into the right to receive $48.53 in cash, without interest (the Merger Consideration). In addition, in connection with the Merger, (i) all shares of Company restricted
stock and restricted stock units (other than any restricted stock units granted after August 21, 2016 and before completion of the Merger) and market share units will vest and be converted into the right to receive cash equal to the product of
(a) the total number of shares of restricted stock or shares underlying such restricted stock unit and (b) the Merger Consideration; and (ii) all options to acquire shares of Company common stock will vest and be converted into the
right to receive an amount in cash equal to the excess, if any, of the Merger Consideration over the exercise price per share of Company common stock subject to the option for each share subject to the option. For purposes of any market share unit
award with an incomplete performance period as of the effective time of the Merger, satisfaction of performance goals will be determined in accordance with the applicable award agreement. Any restricted stock units that are granted after
August 21, 2016 and before completion of the Merger will be converted into the right to receive an amount in cash in the same manner as other restricted stock units, but such right will remain subject to the vesting terms that applied to such
award prior to the consummation of the Merger.
The Board of Directors of the Company unanimously approved the Merger Agreement and has
resolved to submit the Merger Agreement to a vote of the Company stockholders and to recommend that the stockholders adopt the Merger Agreement.
The closing of the Merger is subject to certain conditions, including, among others, the adoption of the Merger Agreement by Company
stockholders and the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and receipt of clearance under the Canadian Competition Act. Consummation of the Merger is not subject to a
financing condition. Concurrently with the execution of the Merger Agreement, the Company and ACT entered into an Unconditional Guaranty (the Guaranty), pursuant to which ACT agreed to unconditionally guarantee the payment and other
obligations of Parent under the Merger Agreement.
The Company has made customary representations and warranties in the Merger Agreement
and agreed to customary covenants, including covenants regarding operation of the business of the Company and its subsidiaries prior to the closing. These covenants prohibit, among other things, the Company from declaring and paying quarterly cash
dividends between August 21, 2016 and completion of the Merger. The Merger Agreement also includes customary covenants prohibiting the Company from soliciting, providing information or participating in discussions concerning, proposals relating
to an alternative acquisition, except in limited circumstances relating to unsolicited proposals that constitute, or are reasonably likely to result in, a superior proposal, as defined in the Merger Agreement. The Company is entitled to change its
recommendation or terminate the Merger Agreement only in limited circumstances; specifically, it may change its recommendation in response to a material development, as defined in the Merger Agreement, or may change its recommendation or terminate
the Merger Agreement to enter into a superior proposal, subject to specified limitations.
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The Merger Agreement contains certain termination rights, including that, prior to the adoption
of the Merger Agreement by the Companys stockholders, (i) Parent may terminate the Merger Agreement if (a) the Companys Board of Directors changes its recommendation, (b) the Companys Board of Directors fails to
reaffirm its recommendation in favor of the Merger (publicly, if so requested by Parent in writing) within ten business days after public disclosure of any alternative acquisition proposal or material modification thereto or any material development
or (c) the Company materially breaches its non-solicitation obligations under the Merger Agreement; and (ii) the Company may terminate the Merger Agreement in certain circumstances to enter into a superior proposal. The Merger Agreement
provides that, upon the termination of the Merger Agreement under specified circumstances, including those described above, the Company will be required to pay a termination fee of $133 million to Parent. The Merger Agreement may also be terminated
by either party if the Merger is not completed by May 22, 2017 or, if all conditions are satisfied as of such date other than with respect to the receipt of the requisite antitrust clearances, August 22, 2017.
The foregoing summary of the Merger Agreement and the Guaranty and the transactions contemplated thereby do not purport to be complete and are
subject to, and qualified in their entirety by, the full text of the Merger Agreement attached as Exhibit 2.1 and the full text of the Guaranty attached as Exhibit 10.1, each of which is incorporated herein by reference.
The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to
provide any other factual information about the Company, Parent, or their respective subsidiaries and affiliates. The Merger Agreement contains representations and warranties by the Company, on the one hand, and by Parent and Merger Sub, on the
other hand, made solely for the benefit of the other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with signing the
Merger Agreement. The disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger
Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to shareholders, or may have been used for the purpose of allocating risk between the Company, on the
one hand, and Parent and Merger Sub, on the other hand. Accordingly, the representations and warranties in the Merger Agreement should not be relied on by any persons as characterizations of the actual state of facts about the Company, Parent or
Merger Sub at the time they were made or otherwise.