Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket...

Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket 01/22/1997 of 26

IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF FLORIDA

NORTHERN DIVISION

DAVID JACKOWITZ, )

Plaintiff,CIVIL ACTION%k.4^w 37 71%v .

REPUBLIC INDUSTRIES, INC., ) _H. WAYNE HUIZENGA, STEVEN R. ) CLASS ACTION COMpiaMISTRA77BERRARD, 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 ) =TCASTELL, ROBERT A. GUERIN, ) c ^^ ,RICHARD L. HANDLEY, THOMAS W. ) J,,: c_HAWKINS, ROBERT J. HENNINGER, )JR., MICHAEL S. KARSNER, ) TMICHAEL 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,


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


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


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

17


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 datehereof, based on the Transaction presented andthe facts and circumstances existing as of thedate hereof. Subsequent events anddevelopments including, but not limited to, achange in the applicable law, facts,circumstances, (including, but not limited tochanges effecting our assumptions set forthabove) may affect the conclusions set forth inthis opinion and, in such event, this opinionshould not be relied on in the future. Weassume no obligation to update, revise,

19


reaffirm or withdraw as a result of any suchsubsequent events or developments, theinvalidity 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 ofRepublicCommon Stock Value of Value of

Shares of to be Issued Republic Shares Republic SharesAutoNation in Exchange to be to beCommonStock Therefor Upon Received as of Received as of

Name and Beneficially Consummation close of business close of businessCurrent Position Owned of The Merqer May 7, 1996 January 16, 1997

H. Wayne Huizenga 29,375,000 6,397,757 $111,960,748 $235,917,289Chairman and Co-ChiefExecutive Officer

Steven R. Berrard 14,500,000 3,158,042 $ 55,265,735 $116,452,799Co-Chief ExecutiveOfficer, President,and Director

Harris W. Hudson 100,000 21,779 $ 381,133 $ 803,101Vice Chairman ofthe Board

George D. Johnson, Jr. 2,500,000 544,490 $ 9,528,575 $ 20,078,069Director

John J. Melk 825,000 179,681 $ 3,144,418 $ 6,625,737Director

Lawrence S. Rich 750,000 163,347 $ 2,858,573 $ 6,023,421Proposed Director

Robert A. Guerin 125,000 27,224 $ 476,420 $ 1,003,885Senior Vice President

iJ. Ronald Castell 125,000 27,224 $ 476,420 $ 1,003,885Senior Vice President

Thomas W. Hawkins 450,000 98,008 $ 1,715,140 $ 3,614,045Senior 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


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


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.

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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, IIIFlorida Bar No. 0005215222 Lakeview AvenueSuite 300West Palm Beach, FL(561) 835-9400

republic\complint.rdl

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CERTIFICATION OF NAMED PLAINTIFFPT `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, 1996200 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


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

Case 0:97-cv-06037-DTKH Document 1 Entered on FLSD Docket...

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