Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 1 of 26
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA NORTHERN DIVISION
DAVID JACKOWITZ, ) Plaintiff, v . CIVIL ACTION%k.4^w 3771% REPUBLIC INDUSTRIES, INC., ) _ H. WAYNE HUIZENGA, STEVEN R. ) CLASS ACTION COMpiaMISTRA77 BERRARD, HARRIS W. HUDSON, )'^ J.P. BRYAN, RICK L. BURDICK, } JURY TRIAL DEMANbED ~ ~ ap^^ MICHAEL G. DEGROOTE, JOHN J. ) MELK, GEORGE D. JOHNSON, JR., ) DONALD E. KOOGLER, J. RONALD ) =T CASTELL, ROBERT A. GUERIN, ) c ^^ , RICHARD L. HANDLEY, THOMAS W. ) J,,: c_ HAWKINS, ROBERT J. HENNINGER, ) JR., MICHAEL S. KARSNER, ) T MICHAEL R. CARPENTER, and ) ,'= —^ LAWRENCE S. RICH ) -c7 Defendants. ) r`:' C-0
Plaintiff David Jackowitz ("Plaintiff") comes by his counsel and sues Defendants alleging as follows:
SUMMARY OF ACTION
1. This is an action brought under Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14a-9 promulgated thereunder as well as the common law. This action arises out of a proposed transaction in which certain of the Individual Defendants who are Directors and/or Officers of Republic Industries, Inc. ("Republic" or the "Company") plan to sell to the Company all of the common stock of AutoNation, a privately held, development stage company whose stock is owned principally by them. Under the proposed transaction, which the public shareholders of Republic approved by vote at a special meeting held on January 16, Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 2 of 26
1997, AutoNation, started by Defendant Huizenga_ and others in
September 1995, will be merged into Republic (the "Merger"). The shareholders of AutoNation, including ten of the individual Defendants in this action, will receive shares of Republic stock at
the rate of .0217796 shares for each AutoNation share previously owned by them. The deal was originally negotiated in April 1996. On May 8, 1996, a so-called special committee of the Board of
Directors of Republic, composed of the three Republic Directors who do not own stock in AutoNation, agreed to the transaction based on
a so-called "fairness opinion" issued by Merrill Lynch. Merrill Lynch opined that the transaction was fair to the Company and its public shareholders at a time when the approximately 17.4 million shares of Republic common stock to be issued to purchase AutoNation
had a market value of approximately $250 million. The market value of the Republic stock is now more than double what it was at the
time the transaction was originally announced. Nevertheless, the Company and the individual Defendants, most of whom will reap a substantial windfall if the transaction is consummated, urged that
the transaction proceed on its original terms purportedly relying on the recommendation of the Special Committee, despite the fact that the May 7 "fairness opinion" issued by Merrill Lynch expressly does not apply to the current circumstances. The Company's Proxy
statement, dated December 16, 1996 ("December 16 Proxy") which was mailed out so as to reach shareholders during the Christmas holidays, is materially false and misleading in stating that the Special Committee has determined and believes that the transaction
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is fair to the company and its public shareholders and is based on the May 7 Merrill Lynch fairness opinion. The proposed transaction represents a breach of fiduciary duty by the individual Defendants and is motivated by self-interest. If consummated, the Merger will result in the Directors and Officers of Republic increasing their
ownership of the Company's stock from 38.6% to 45.80.
JURISDICTION AND PARTIES 2. This Court has jurisdiction of this action pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa. The claims asserted arise under Section 14(a) of the Exchange Act, 15 U.S.C.
§ 78n giving rise to federal question jurisdiction.
3. Venue is proper in this district pursuant to Section 27 of the Exchange Act. Many of the acts alleged herein, including the solicitation of proxies and many of the activities of the individual Defendants leading up to the solicitation of proxies occurred, in substantial part, in this district. At all relevant times, Republic maintained its principal place of business in this
District, and it is currently located at 450 East Las Olas
Boulevard, Fort Lauderdale, Florida 33301. In addition, many of the individual Defendants named herein, including Defendants Huizenga, Berrard, Hudson, Johnson and Koogler reside in this
District. 4. In connection with the acts alleged in this Complaint, the Defendants directly or indirectly used various means and instrumentalities of interstate commerce, including, but not
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limited to, the mails, interstate telephonic communications and the facilities of the national securities markets.
5. Plaintiff is a citizen of the State of Florida. As of December 16, 1996 the date the Proxy was filed with the SEC, he was the holder of 400 shares of Republic common stock.
6. Defendant Republic is a Delaware corporation. Although originally a waste collection and disposal company, Republic which changed its name in November 1995 from Republic Waste Industries, has recently diversified itself to include electronic security monitoring services and within the last several months has acquired
or agreed to acquire certain car rental companies including Alamo and National Car Rental Systems and car dealerships including
Maroone Automotive Group. As of the close of business on November 29, 1996, the record date for shareholder voting on the Merger, Republic had 232,466,608 shares outstanding held by thousands of individual shareholders. The Company's common stock is listed for
trading on the Nasdaq national over-the-counter market under the
symbol 'IRWIN." 7. Defendant H. Wayne Huizenga has served as the Chairman of the Board and Chief Executive Officer of Republic since August 1995 (Co-Chief Executive Officer since October, 1996). Mr. Huizenga
served as the Vice Chairman of Viacom Inc. ("Viacom") from September 1994 until October 1995. Mr. Huizenga also served as the Chairman of the Board of Blockbuster Entertainment Group, a division of Viacom, from September 1994, at which time Viacom acquired Blockbuster Entertainment Corporation ("Blockbuster")
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through a merger, until October 1995. From April 1987 through September 1994, Defendant Huizenga served as the Chairman of the
Board and Chief Executive Officer of Blockbuster. Mr. Huizenga also co-founded Waste Management, Inc., now know as WMX
Technologies, Inc. ("Waste Management"), the world's largest integrated environmental services company, in 1971, and served in various capacities, including the President, the Chief Operating Officer and a Director from its inception until 1984. Mr. Huizenga also owns or controls the Miami Dolphins, Florida Marlins and Florida Panthers professional sports franchises, as well as Pro
Player Stadium, in South Florida, and has served as the Chairman of the Board of Florida Panthers Holdings, Inc. ("PUCK") since September 1996. In addition, Mr. Huizenga has served as the
Chairman of the Board of Extended Stay America, Inc. ("STAY"), an
economy extended-stay lodging chain, since August 1995. In addition, Defendant Huizenga is Chairman of the Board of AutoNation
and beneficially owns 29,375,000 shares of its common stock which will be exchanged for 6,397,757 shares of Republic common stock
upon the consummation of the Merger. 8. Defendant Steven R. Berrard has served as Co-Chief
Executive Officer, President and a Director of Republic since
October 1996. He has also served as Chief Executive Officer of AutoNation since March 1996. From September 1994 through March 1996, Mr. Berrard served as President and Chief Executive Officer of Blockbuster Entertainment Group. He became Vice Chairman of the Board of Blockbuster in November 1989 and served as Blockbuster's
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President and Chief Operating Officer from January 1993 until September 1994. In addition, Mr. Berrard served as President and
Chief Executive Officer and a director of Spelling Entertainment Group Inc., a television and filmed entertainment producer and distributor, from March 1993 through March 1996, and served as a director of Viacom from September 1994 until March 1996. Mr. Berrard also serves as a Director of PUCK. Defendant Berrard
beneficially owns 14,500,000 shares of AutoNation stock which will be exchanged for 3,158,042 shares of Republic common stock upon the
consummation of the Merger. 9. Defendant Harris W. Hudson, Defendant Huizenga I s brother-
in-law, has served as the Vice Chairman of the Board of Republic since October 1996, and as a Director of Republic since August 1995. Mr. Hudson also serves as the Chairman of Republic's Solid Waste Services Division. Mr. Hudson had served as the President of Republic from August 1995 until October 1996. From May 1995 until August 1995, Mr. Hudson had served as a consultant to Republic. Mr. Hudson founded and since inception in 1983 has served as
Chairman of the Board, Chief Executive Officer and President of Hudson Management Corporation, which was acquired by Republic in
August 1995. From 1964 to 1982, Mr. Hudson served as Vice President of Waste Management of Florida, Inc., a subsidiary of Waste Management, and its predecessor. Mr. Hudson has been a
Director of PUCK since September 1996. Defendant Hudson beneficially owns 100,000 shares of AutoNation common stock which
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will be exchanged for 21,779 shares of Republic common stock upon consummation of the Merger.
10. Defendant J.P. Bryan has served as a Director of Republic since May 1991 and also was a Director of Republic from August 1990
until March 1991. Since January 1995, Mr. Bryan has served as President and Chief Executive Officer of Gulf Canada Resources Ltd.
("Gulf Canada"), which is engaged in oil and gas exploration and production. Since 1981, Mr. Bryan has served as the Chairman of the Board and Chief Executive Officer of Torch Energy Advisors Inc., a subsidiary of Torchmark Corporation, engaged in the management of
institutional holdings in energy-related fields and has, since
March 1990, held the same positions with Nuevo Energy Company, a company involved in the oil and gas industry. Mr. Bryan also currently serves on the Board of Directors of Bellweather Exploration Company, an oil and gas exploration company.
11. Defendant Rick L. Burdick has been a Director of Republic since May 1991. Since June 1995, Mr. Burdick has served as a Director of J. Ray McDermott, S.A. Mr. Burdick is the sole
shareholder of a professional corporation which is a partner in the
law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., a limited liability partnership including professional corporations.
12. Defendant Michael G. DeGroote has been a Director of Republic since 1991 and had served as the Vice Chairman of the Board of Directors of Republic from August 1995 until October 1996.
Mr. DeGroote had served as the Chairman of the Board and President of Republic from August 1991 until August 1995, and as the Chief
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Executive Officer of Republic from May 1991 until August 1995. Since April 1995, Mr. DeGroote has served as Chairman of the Board, President and Chief Executive Officer of Republic Environmental Systems, Inc., now known as International Alliance Services, Inc. ("RESI"). Mr. DeGroote owned a controlling interest in Laidlaw
Inc. ("Laidlaw"), a Canadian company, from 1959 until he sold his interest in 1988. During his tenure, Laidlaw became the third largest waste service company in North America and the Largest
operator of school buses with over 28,000 vehicles. Mr. DeGroote served as the Chairman of the Board and Chief Executive Officer of
Laidlaw from 1959 until June 1990, when he resigned from those positions to pursue personal business matters. Mr. DeGroote has served as a Director of Gulf Canada since May 1995, and a Director of RESI since April 1995. Defendant DeGroote sold 500,000 shares of Republic common stock to Defendant Melk on November 15, 1996. He sold an additional 1.5 million shares publicly in November for
prices ranging between $29.50 and $32.00 per share. 13. Defendant John J. Melk, a long-term crony and business associate of Huizenga, has served as a Director of Republic since August 1995. Mr. Melk has been Chairman and Chief Executive Officer of H2O Plus Inc., a bath and skin care product manufacturer and retail distributor, since 1988. Mr. Melk as been a private investor in various businesses since March 1984 and prior to March 1984, he held various positions with Waste Management and Management International, plc., a subsidiary of Waste Management. Mr. Melk also served as a Director of Psychemedics Corporation and
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of STAY. From February 1987 until March 1989 and from May 1993 until September 1994, Mr. Melk served as a Director of Blockbuster.
He also served as the Vice Chairman of Blockbuster from February 1987 until March 1989. Defendant Melk beneficially owns 825,000 shares of AutoNation common stock which will be exchanged for 179,681 shares of Republic common stock upon consummation of the
Merger.
14. Defendant George D. Johnson, Jr. has served as a Director of Republic since November 1995. Mr. Johnson presently is
President, Chief Executive Officer and a Director of STAY. From 1993 until 1995, Mr. Johnson served in various executive positions with Blockbuster Entertainment Group and, prior to its merger with
Viacom, with Blockbuster, including as President of the Consumer
Products Division, and also as a Director of Blockbuster. From 1987 until 1993, Mr. Johnson was the managing general partner of WJB Video L.P., becoming the largest Blockbuster franchisee with over 200 video stores prior to a merger with Blockbuster in 19932. He is also a Director of Duke Power Company, Viacom and PUCK.
Defendant Johnson beneficially owns 2,500,000 shares of AutoNation common stock which will be exchanged for 544, 000 shares of Republic
common stock upon consummation of the Merger.
15. Defendant Donald E. Koogler has served as an Executive Vice President of Republic since May 1991. From May 1991 until August 1995, Mr. Koogler also served as a Director of Republic and from May 1991 until 1996 as Chief Operating Officer. In September 1990, Mr. Koogler founded K&K Investment and Consulting Services
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and served as its President until May 1991. Mr. Koogler joined
Laidlaw as a Vice President in 1985 and became an Executive Vice
President in October 1987. Mr. Koogler also served as Vice President of Waste Management from 1980 until 1985. Mr. Koogler has been employed in the solid waste industry for over 25 years, in
various executive positions.
16. Defendant J. Ronald Castell joined Republic as a Vice President in August 1995, and was promoted to Senior Vice President in October 1995. From September 1994 until joining Republic, he served as a consultant to Viacom. Prior to that, Mr. Castell was
Senior Vice President of Programming and Communications for
Blockbuster from August 1991 until September 1994 and was Senior
Vice President of Programming and Merchandising from February 1989
until August 1991. From October 1985 to February 1989, he was Vice
President of Marketing and Merchandising at Erol I s, then a chain of two hundred video stores headquartered in the Washington, D.C.
area.
17. Defendant Robert A. Guerin has served as Senior Vice President of Republic since August 1995, and has served as
President of Republic's Security Services Division since June 1996. From September 1994 until joining Republic, he served as a consultant to Viacom. Prior to that, Mr. Guerin was Senior Vice
President of Domestic Franchising for Blockbuster from January 1992 until September 1994, was Senior Vice President of Administration and Development for Blockbuster from October 1989 until December 1991, and was a Vice President of Blockbuster from March 1988 until
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October 1989. From March 1986 to March 1988, Mr. Guerin served as Vice President and Region Manger of Waste Management of North
America, Inc., a subsidiary of Waste Management. From June 1982 to March 1986, he served as President of Wells Fargo Armored Service
Corp. Defendant Guerin beneficially owns 125,000 shares of AutoNation common stock which will be exchanged for 27,224 shares
of Republic common stock upon consummation of the Merger.
18. Defendant Richard L. Handley joined Republic in October 1995 as Senior Vice President and the General Counsel. In May 1996, Mr. Handley was also appointed Secretary of Republic. From
June 1993 until joining Republic, he was a principal of Randolph Management Group, Inc., a management consulting firm specializing in the environmental industry. Prior to that, Mr. Handley was Vice President, Secretary and General Counsel of The Brand Companies, Inc., an environmental services company, from July 1990 until May 1993, Associate General Counsel of Waste Management of North
America, Inc. from January 1987 to June 1990, and legal counsel to
waste Management Energy Systems, Inc., a waste-to-energy company, from September 1985 to January 1987, all of which companies were affiliates or subsidiaries of Waste Management. Prior to September 1985, Mr. Handley was a lawyer in private practice in Chicago,
Illinois.
19. Defendant Thomas W. Hawkins joined Republic in June 1996 as Senior Vice President. From September 1994 until June 1996, Mr. Hawkins served as Executive Vice President -- Administration of Blockbuster Entertainment Group. Prior to that, he was Senior Vice
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President, General Counsel and Secretary of Blockbuster from February 1994. He joined Blockbuster as Senior Corporate Counsel
in November 1989, became Associate General Counsel and Secretary in
August 1991 and Vice President, General Counsel and Secretary in February 1993. Prior to November 1989, Mr. Hawkins was a lawyer in private practice in Chicago, Illinois. Defendant Hawkins beneficially owns 450,000 shares of AutoNation common stock which will be exchanged for 98,000 shares of Republic common stock upon
consummation of the Merger.
20. Defendant Robert J. Henninger, Jr. has served as a Senior Vice President of Republic since October 1995. From September 1994 until joining Republic, he served as a consultant to Viacom, and from July 1994 until September 1994, he served as Senior Vice President and Chief Administrative Officer of Blockbuster. Prior to July 1994, Mr. Henninger was employed by Arthur Andersen LLP, an
international public accounting firm, for 23 years, and had been Managing Partner of the firm's Fort Lauderdale, Florida office since 1984. Defendant Henninger beneficially owns 500,000 shares
of AutoNation common stock which will be exchanged for 108,898 shares of Republic common stock upon consummation of the Merger.
21. Defendant Michael S. Karsner has served as Senior Vice President and Chief Financial Officer of Republic since October 1996. Prior to joining Republic, Mr. Karsner served as Senior Vice President and Chief Financial Officer at Dole Food Company, Inc., a multinational packaged food company ( "Dole") , from May 1996 until September 1996, as Vice President, Chief Financial Officer and
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Treasurer of Dole from February 1995 until May 1996, and as Vice President and Treasurer of Dole from January 1994 until February 1995. From January 1990 through December 1993, Mr. Karsner served as Vice President and Treasurer of the Black & Decker Corporation, a multinational consumer products company.
22. Defendant Michael R. Carpenter has served as Vice President and Corporate Controller of Republic since August 1995.
From September 1994 until August 1995, Mr. Carpenter served as Vice President and Corporate Controller of Blockbuster Entertainment
Group. Prior to that, he was Vice President and Assistant Corporate Controller of Blockbuster from May 1992. He joined Blockbuster as Director of Financial Reporting in April 1988. Mr.
Carpenter is a certified public accountant.
23. Defendant Lawrence S. Rich is Chief Operating Officer and Director of JMFE, a diversified automotive corporation founded in 1968. Mr. Rich was an Executive Vice President of JMFE from 1986 to 1994, when he was elected Chief Operating Officer. He has also
served as a Director of AutoNation since September 1995. Defendant Rich beneficially owns 750,000 shares of AutoNation common stock
which will be exchanged for 163,347 shares of Republic common stock
upon consummation of the Merger. CLASS ACTION ALLEGATIONS
24. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 23(a) and (b)(2) and (3) on behalf of all shareholders of record of Republic as of December 16,
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1996, the date Republic filed its Proxy Statement with the Securities and Exchange Commission.
25. The members of the Class are so numerous and geographi- cally dispersed that the joinder of all members is impracticable.
While the exact number of Class Members is not known at this time,
as of the close of business on November 29, 1996, there were 232,466,608 shares of the Company's common stock outstanding and thousands of stockholders of record.
26. Plaintiff's claims are typical of the claims of the members of the Class because Plaintiff and the Class Members have been harmed in the same manner as a result of the violations of the
federal securities laws alleged herein.
27. Plaintiff will adequately protect the interests of the Class. Plaintiff is the holder of shares of common stock of the Company. In addition, Plaintiff has retained counsel who are competent and experienced in class action and securities litiga- tion. Plaintiff has no interests which are in conflict or
antagonistic with those of the members of the Class.
28. A class action is superior to other available methods for the fair and efficient adjudication of this controversy. No difficulty will be encountered in the management of this action as
a class action.
29. Questions of law and fact are common to the members of the Class and such questions predominate over any questions which may affect individual members only. Among the common questions of
law and fact are:
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a. whether Section 14(a) of the Exchange Act has been violated by the conduct alleged in this Complaint; b. whether the Individual Defendants have breached their fiduciary duties to the Company, to Plaintiff and the members
of the Class; and C. the extent of damages sustained by reason of the claims asserted herein.
BACKGROUND
30. In May 1995, Defendants Huizenga and Hudson invested $31 million in Republic in exchange for 13.7 million shares of its
common stock and warrants to purchase 22.4 million additional shares. As a result Huizenga and Hudson became two of the largest shareholders of Republic; Huizenga became Chairman and Chief Executive Officer and Hudson became President and a Director.
31. In November 1995 Republic changed its name from Republic Waste Industries, Inc. to Republic Industries, Inc. Republic is currently a holding company with major business segments in vehicle rental, vehicle retailing, integrated solid waste services, and electronic security services. In November 1996 Republic completed the acquisition of Alamo Rental Car, and affiliated companies. In August 1996 it completed the acquisition of CarChoice, Inc. which operates two used vehicle so-called mega stores in Dallas, Texas
and Detroit, Michigan.
32. AutoNation is a privately owned corporation. According to the December 16 Proxy, it was started by Defendant Huizenga and
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others in September 1995. AutoNation is currently a "development stage enterprise" which, according to the December 16 Proxy has started a "national roll out" of a chain of mega stores which will each sell reconditioned automobiles with each mega store stocking more than 1,000 late model, used automobiles. AutoNation opened and commenced operation of its first megastore in October 1996.
33. The largest single shareholder of AutoNation is Defendant Huizenga who is Chairman of the Board, followed by Defendant
Berrard, as Chief Executive Officer. Defendant Rich has also
served as a Director of AutoNation since September 1995.
34. Since its inception on September 12, 1995 AutoNation has been engaged solely in development stage activities. It has a net loss of Twenty-One Million Three Hundred Ninety-Six dollars ($21,396,000) since inception on revenues of $9,190,000. The Company is admittedly a "development stage" enterprise for accounting purposes. According to the December 16 Proxy AutoNation generated insignificant revenues of $9,190,184 from its three locations which opened from March 1996 through September 1996. According to the December 16 Proxy, its planned, principal operations were expected to commence in the fourth quarter of 1996
at which time the Company expects a significant increase in
revenues. 35. According to the December 16 Proxy, since its inception on September 12, 1995, AutoNation has financed its development stage activities with cash contributions from shareholders totalling $52,130,000 plus advances from Republic totalling
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$112,900,000. The contributions have been used principally to fund the purchase of land sites and other development activities. While the shareholders of AutoNation are obligated to make capital contributions up to a total of $80,200,000, in the event the transaction is consummated with Republic the AutoNation shareholders would not be required to make any further cash
contributions.
36. AutoNation's financial condition, a summary of which is disclosed in the December 16, 1996 Proxy, portrays a company that hardly meets a $250 million purchase price, much less the $643
million purchase price ultimately paid for AutoNation. AutoNation has never generated any earnings. Since its inception, AutoNation
has lost $21,396,000 on revenues of $9,190,000. It had a working capital deficiency of $103,639,000 as of September 29, 1996. As of that same date, AutoNation's shareholders' equity, or net worth, was $30,734,000. By the time the acquisition was approved on January 16, 1996, the net worth was presumably less than $30
million due to continuing losses.
37. According to the December 16 Proxy the Board of Directors of Republic held a special meeting on March 29, 1996 to consider a possible transaction with AutoNation. At that meeting, according to the December 16 Proxy, Defendant Huizenga summarized for the Board a possible initial public offering of stock by AutoNation and discussed alternatives including AutoNation's interest in being acquired by Republic for approximately 17 to 20 million shares of Republic common stock having a market value of approximately $250
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to $300 million based on the then current market price for Republic
stock.
38. According to the December 16, Proxy, the Republic board was "favorably impressed" with the concept of acquiring AutoNation at the $250 million valuation proposed by AutoNation. The board
appointed a so-called Special Committee composed of Defendants DeGroote, Burdick, and Bryan who did not themselves own shares of
AutoNation common stock.
39. According to the December 16 Proxy, after several meetings with their counsel and Merrill Lynch who was hired as a
financial advisor, the Special Committee determined on May 8 that the terms of the Merger Agreement were . . . "fair to and in the best interests of Republic and its shareholders"; adopted them on behalf of the Company; and authorized their execution on behalf of Republic. In doing so the Special Committee supposedly relied on
an opinion from Merrill Lynch dated May 7 that the transaction was
fair to the Company and its public shareholders.
40. Under the terms agreed to, AutoNation will be merged into and become a subsidiary of Republic upon consummation of the transaction. At that time, each outstanding share of common stock of AutoNation will be converted into 0.217796 of a share of Republic common stock. The Merger Agreement provided for no
modification of the conversion formula in the event that the Republic common stock were to increase in value after the agreement was entered into and before the consummation of the Merger.
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41. Under the terms of the Merger Agreement, Defendants Huizenga and Berrard agreed not to sell any of the shares of Republic common stock to be received by them in the Merger
transaction for up to two years following the date of the Merger; Defendant Rich agreed to a similar two year "lockup agreement"; Defendant Guerin agreed to a one year lockup agreement; and all other AutoNation shareholders agreed to a six month lockup agreement except for Jim Moran who agreed to a one year lockup. They are free to vote, and otherwise enjoy the benefits of said
ownership hereunder.
42. While Merrill Lynch issued an opinion on May 7 opining that the transaction was fair to Republic and its public shareholders as of that date, that opinion contained certain important limitations. In the first place, it was expressly
limited to the circumstances as of the date it was issued and was
by its own terms not applicable to changed circumstances. In its opinion, Merrill Lynch expressly disclaimed any obligation to update, revise, reaffirm or withdraw its opinion as a result of any subsequent developments or events. In that regard the opinion
states as follows: This opinion speaks only as of the date hereof, based on the Transaction presented and the facts and circumstances existing as of the date hereof. Subsequent events and developments including, but not limited to, a change in the applicable law, facts, circumstances, (including, but not limited to changes effecting our assumptions set forth above) may affect the conclusions set forth in this opinion and, in such event, this opinion should not be relied on in the future. We assume no obligation to update, revise, 19 Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 20 of 26
reaffirm or withdraw as a result of any such subsequent events or developments, the invalidity of the assumptions set forth above, or otherwise." 43. Since the date of the May 7 fairness opinion, the market price of Republic common stock has increased substantially. The stock, which ended the trading day on May 7 at $17.50 is now trading for more than twice as much per share, ending the trading
day on January 16 at $36.875. As a result, each of the AutoNation shareholders, including Defendants Huizenga, Berrard, Hudson, Melk, Rich, Guerin, Castell, Hawkins, Henninger and Rich will reap substantial windfall profits. The magnitude of that windfall is
illustrated by the following chart:
Shares of Republic Common Stock Value of Value of Shares of to be Issued Republic Shares Republic Shares AutoNation in Exchange to be to be CommonStock Therefor Upon Received as of Received as of Name and Beneficially Consummation close of business close of business Current Position Owned of The Merqer May 7, 1996 January 16, 1997
H. Wayne Huizenga 29,375,000 6,397,757 $111,960,748 $235,917,289 Chairman and Co-Chief Executive Officer Steven R. Berrard 14,500,000 3,158,042 $ 55,265,735 $116,452,799 Co-Chief Executive Officer, President, and Director Harris W. Hudson 100,000 21,779 $ 381,133 $ 803,101 Vice Chairman of the Board George D. Johnson, Jr. 2,500,000 544,490 $ 9,528,575 $ 20,078,069 Director John J. Melk 825,000 179,681 $ 3,144,418 $ 6,625,737 Director Lawrence S. Rich 750,000 163,347 $ 2,858,573 $ 6,023,421 Proposed Director Robert A. Guerin 125,000 27,224 $ 476,420 $ 1,003,885 Senior Vice President i J. Ronald Castell 125,000 27,224 $ 476,420 $ 1,003,885 Senior Vice President Thomas W. Hawkins 450,000 98,008 $ 1,715,140 $ 3,614,045 Senior Vice President Robert J. Henninger 500,000 108,898 $ 1,905,715 $ 4,015,614 Senior vice President
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COUNT I 44. Plaintiff incorporates paragraph 1 through 44 as fully as if set out verbatim.
45. The December 16, 1996 Proxy states that a special committee comprised of the disinterested directors of Republic has carefully reviewed and considered the terms and conditions of the proposed Merger and as a result of this review, including the receipt by the committee of an opinion from its financial advisor regarding the fairness of the Merger from a financial point of view, has unanimously approved the proposal after determining that the Merger is fair to and in the best interests of Republic and its
shareholders, and recommends that the Republic shareholders vote for approval and adoption of the Merger Agreement.
46. The foregoing statements were false and misleading when made on December 16, 1996. As of that date the opinion of the special committee as to the fairness of the acquisition price was neither honestly held nor reasonable. Although ostensibly based upon the May 7 fairness opinion issued by Merrill Lynch, that opinion was issued at a time when the value of the total consideration to be paid for the acquisition was $250 million. The
value of the consideration to be paid to AutoNation shareholders (not including the value of being released from their obligation to make $80,000,000 of capital contributions to AutoNation) has now increased to more than $643 million without any fairness opinion being issued with respect to it, resulting in a windfall of at least $359 million to the shareholders of AutoNation including
21 Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 22 of 26
Defendant Huizenga and the other individual Defendants specified above. 47. The false and misleading statements in the proxy
statement were motivated in part by the desire of certain of the
individual defendants to obtain the windfall benefits described above.
48. Plaintiff and the members of the Class have been damaged by reason of the violations of Section 14(a) alleged herein. COUNT II
49. Plaintiff incorporates paragraphs 1 through 49 of this Complaint as fully as if set out verbatim. 50. The individual Defendants, by reason of their positions as Directors and/or Officers of the Company owe a fiduciary duty to the Company and to Plaintiff and the members of the Class. Such
duty includes the obligation to avoid self-dealing and the
obligation not to benefit unfairly at the expense of the
corporation or its shareholders.
51. By reason of their positions as Directors or Officers of the Company the individual Defendants are also subject to a fiduciary duty to act in the best interest of the Company at all
times. In entering into a transaction whereby the Company and its
shareholders had no protection from paying more than twice the price originally negotiated to acquire AutoNation, a development stage enterprise with no history of established earnings, the individual Defendants breached that duty to the corporation and its shareholders. No pre-suit demand on the Board of Directors is
22 Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 23 of 26
required because a majority of the Board is tainted by self- interest.
52. Plaintiff and members of the Class, and the Company have been damaged by reason of the breaches of fiduciary duty by the individual Defendants alleged herein. WHEREFORE, Plaintiff on behalf of himself and all members of the Class respectfully prays that the Court:
a. Certify this action as a class action on behalf of
the Class alleged;
b. Enter judgment in favor of Plaintiff and the Class declaring the December 16 Proxy Statement false and misleading and in violation of Section 14(a) of the Exchange Act and Rule
14 (a) (9) ; C. Declare the vote of the Republic shareholders taken after dissemination of the December 16 proxy to be void and a
nullity; d. Enter judgement in favor of Plaintiff and the Class and the Company against the individual Defendants for breach of
their fiduciary duties;
e. Award Plaintiff the cost incurred in bringing this action including but not limited to expert fees, counsel fees and
costs; and f. Award such other relief as the Court deems just and
proper.
23 Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 24 of 26
DEMAND FOR JURY TRIAL Plaintiff hereby demands a trial by jury on all issues so triable.
Dated: January 17, 1997 Respectfully submitted, BURT & PUCILLO
By. '/'-0J'-" C. Oliver Burt, III Florida Bar No. 0005215 222 Lakeview Avenue Suite 300 West Palm Beach, FL (561) 835-9400
republic\complint.rdl
24 Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 25 of 26
CERTIFICATION OF NAMED PLAINTIFF PT `RSUANTSn FEDERALSECLU2iTIES LAW'S
David Jackowitz. IRA (,"Plaintiff") declares, as to the claims asserted under the federal
securities laws, that:
1. Plaintiff has reviewed the complaint and authorized its filing,
2. Plaintiff did not purchase the security that is the subject of this action at the
direction of plaintiff's counsel or in order to participate in this private action.
3. Plaintiff is willing to serve as a representative party on behalf of the Class,
including providing testimony at deposition and trial, if necessary.
4. Plaintiff's transactions in the security that is the subject of this action during the
Class period is/are as follows:
Security Transaction Date
Republic Industries, Inc. 200 shares (Bought) June 13, 1996 200 shares (Bought) July 2, 1996
5. During the three years prior to the date of this Certificate, Plaintiff has not sought
to serve or served as a representative party for a class in any action filed under the federal
securities laws.
6. The Plaintiff will not accept any payment for serving as a representative party on
behalf of the Class beyond the Plaintiff's pro rata share of any recovery, except such reasonable
costs and expenses (including lost wages) directly relating to the representation of the Class as
ordered or approved by the Court.
9999/47-14001 Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 Page 26 of 26 I declare under p^ Aty of perjury that the foregoing is tr. and correct. Executed this
1 day of January, 1997.
David Jackowitz
9999/97-14001 2