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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 3)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
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Republic Industries, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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REPUBLIC INDUSTRIES, INC. LOGO
------------------------
NOTICE OF
SPECIAL MEETING
AND
PROXY STATEMENT
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SPECIAL MEETING
OF STOCKHOLDERS
OF REPUBLIC INDUSTRIES, INC.
JANUARY 20, 1997
AUTONATION USA (TM) LOGO
<PAGE> 3
REPUBLIC INDUSTRIES, INC. LOGO
December 13, 1996
Dear Stockholder:
We invite you to attend a Special Meeting of Stockholders (the "Special
Meeting") of Republic Industries, Inc. ("Republic") to be held at 9:30 a.m. on
Monday, January 20, 1997, at The Broward Center for the Performing Arts, Amaturo
Theater, 201 S.W. Fifth Avenue, Fort Lauderdale, Florida 33312. The limited
purpose of the Special Meeting is to consider and vote upon a proposal providing
for a merger (the "Merger") involving Republic, AutoNation Incorporated
("AutoNation") and RI/ANI Merger Corp. ("Mergersub"), a wholly owned subsidiary
of Republic.
The terms of the Merger are set forth in a Merger Agreement (the "Merger
Agreement") by and among Republic, Mergersub, AutoNation, H. Wayne Huizenga,
Steven R. Berrard and JM Family Enterprises, Inc. Pursuant to the Merger
Agreement, upon consummation of the Merger, each of the outstanding shares of
common stock of AutoNation will be converted into 0.217796 of a share of common
stock of Republic, $.01 par value per share, and Mergersub will be merged with
and into AutoNation, with the result that AutoNation will become a wholly-owned
subsidiary of Republic.
A Special Committee comprised of the disinterested Directors of Republic
has carefully reviewed and considered the terms and conditions of the proposed
Merger. As a result of this review, including the receipt by the Special
Committee of an opinion from its financial advisor regarding the fairness of the
Merger from a financial point of view, the Special Committee has unanimously
approved the proposal and unanimously recommends that stockholders vote for
approval and adoption of the Merger Agreement and the transactions contemplated
thereby.
The accompanying Proxy Statement provides a detailed description of the
proposed Merger and the business of AutoNation, as well as risks associated with
the proposed Merger, which are set forth in the section entitled "Risk Factors."
Please give all of this information your careful attention.
Although this is a Special Meeting for a limited purpose, whether or not
you plan to attend in person, it is important that your shares be represented at
the Special Meeting. Please date and sign your proxy card and return it in the
enclosed envelope as soon as possible.
Very truly yours,
REPUBLIC INDUSTRIES, INC.
/s/ H. WAYNE HUIZENGA
H. Wayne Huizenga, Chairman of the
Board
and Co-Chief Executive Officer
Enclosures
<PAGE> 4
REPUBLIC INDUSTRIES, INC. LOGO
200 EAST LAS OLAS BLVD., SUITE 1400
FORT LAUDERDALE, FLORIDA 33301
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF REPUBLIC INDUSTRIES, INC.:
A Special Meeting of Stockholders (the "Special Meeting") of Republic
Industries, Inc. ("Republic") will be held at 9:30 a.m. on Monday, January 20,
1997, at The Broward Center for the Performing Arts, Amaturo Theater, 201 S.W.
Fifth Avenue, Fort Lauderdale, Florida 33312, for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the Merger
Agreement ("Merger Agreement"), dated as of May 8, 1996, as amended,
by and among Republic, RI/ANI Merger Corp., AutoNation Incorporated,
H. Wayne Huizenga, Steven R. Berrard and JM Family Enterprises,
Inc., and the transactions set forth therein, pursuant to which
RI/ANI Merger Corp. will be merged with and into AutoNation
Incorporated (the "Merger"). The Merger and the Merger Agreement are
more completely described in the accompanying Proxy Statement, and a
copy of the Merger Agreement is attached as Annex A thereto; and
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Stockholders of record at the close of business on November 29, 1996 are
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof.
You are cordially invited to attend the Special Meeting in person. Even if
you plan to attend in person, you are requested to date, sign and return the
enclosed proxy at your earliest convenience. You may revoke your proxy at any
time prior to its use.
By Order of the Board of Directors
(SIG) Richard L. Handley
Richard L. Handley, Senior Vice
President,
General Counsel and Secretary
Fort Lauderdale, Florida
December 13, 1996
YOU ARE URGED TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT IN THE ACCOMPANYING ENVELOPE AS SOON AS POSSIBLE.
THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
<PAGE> 5
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REPUBLIC INDUSTRIES, INC.
PROXY STATEMENT
REPUBLIC LOGO AUTONATION LOGO
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This Proxy Statement is being furnished to the stockholders of Republic
Industries, Inc., a Delaware corporation ("Republic"), in connection with the
solicitation of proxies by the Board of Directors of Republic, for use at the
Special Meeting of Stockholders (the "Special Meeting") of Republic to be held
at 9:30 a.m. on Monday, January 20, 1997, at The Broward Center for the
Performing Arts, Amaturo Theater, 201 S.W. Fifth Avenue, Fort Lauderdale,
Florida 33312, and any postponement or adjournment thereof. Proxies properly
executed and returned in a timely manner will be voted at the Special Meeting in
accordance with the directions noted thereon. If no direction is indicated, they
will be voted for the proposals set forth on the Notice of Special Meeting, and
in accordance with the judgment of the persons acting under the proxies on other
matters presented for a vote. Any stockholder giving a proxy has the power to
revoke it at any time before it is voted, either in person at the meeting, by
written notice to the Secretary of Republic or by delivery of a later-dated
proxy.
At the Special Meeting, Republic's stockholders will consider and vote upon
a proposal to approve and adopt a Merger Agreement, dated as of May 8, 1996, as
amended (the "Merger Agreement"), by and among Republic, RI/ANI Merger Corp., a
Florida corporation and wholly-owned subsidiary of Republic ("Mergersub"),
AutoNation Incorporated, a Florida corporation ("AutoNation"), H. Wayne
Huizenga, Steven R. Berrard, and JM Family Enterprises, Inc., a Delaware
corporation ("JMFE"). Pursuant to the Merger Agreement, Mergersub is to be
merged with and into AutoNation (the "Merger"), and AutoNation is to become a
wholly-owned subsidiary of Republic.
As of the date hereof, Republic's executive offices are located at 200 East
Las Olas Boulevard, Suite 1400, Fort Lauderdale, Florida 33301 (telephone
954-627-6000). As of December 16, 1996, Republic's executive offices will be
located at 450 East Las Olas Boulevard, Suite 1200, Fort Lauderdale, Florida
33301 (telephone (954) 627-6000). Proxy materials will be mailed to stockholders
on or about December 13, 1996.
Shares of common stock, $.01 par value per share, of Republic ("Republic
Common Stock") are traded on The Nasdaq Stock Market ("Nasdaq") under the symbol
"RWIN." On December 9, 1996, the last reported sales price for Republic Common
Stock as reported by Nasdaq was $33.00 per share. On May 10, 1996, Republic's
Board of Directors declared a two-for-one stock split in the form of 100% stock
dividend to stockholders of record on May 28, 1996, which was distributed on
June 8, 1996 (the "Stock Split"). All references in this Proxy Statement to
historical share and per share data have been retroactively adjusted to reflect
the Stock Split.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY THE STOCKHOLDERS OF REPUBLIC.
------------------------
The date of this Proxy Statement is December 13, 1996.
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TABLE OF CONTENTS
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Summary............................................................................... 3
Risk Factors.......................................................................... 11
The Special Meeting................................................................... 13
The Proposed Merger................................................................... 14
Background of the Merger............................................................ 14
Recommendation of the Special Committee and Reasons for the Merger.................. 19
Opinion of Merrill Lynch............................................................ 20
The Merger Agreement.................................................................. 23
General............................................................................. 24
Effective Time; Effect of Merger.................................................... 24
Conversion of Shares................................................................ 24
Stock Options....................................................................... 24
Representations and Warranties...................................................... 24
Certain Covenants................................................................... 25
Conditions Precedent to Closing..................................................... 26
Termination......................................................................... 27
Indemnification..................................................................... 28
Expenses............................................................................ 28
"Lock-Up" and Non-Compete Agreements................................................ 28
Management of Republic Before and After the Merger and the Pending Republic
Acquisitions........................................................................ 29
Conflicts of Interest................................................................. 33
Information Concerning AutoNation..................................................... 34
Management's Discussion and Analysis of Financial Condition and Results of Operations
of
AutoNation.......................................................................... 36
Market Prices and Dividend Policy..................................................... 39
Comparative Per Share Data............................................................ 40
Security Ownership of Certain Beneficial Owners and Management of Republic............ 41
Description of Republic's Capital Stock............................................... 43
Appraisal Rights...................................................................... 44
Other Matters......................................................................... 44
Stockholder Proposals................................................................. 44
Experts............................................................................... 45
Incorporation by Reference............................................................ 45
Annex A -- Merger Agreement
Annex B -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
Annex C -- Reports of Independent Certified Public Accountants
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained or incorporated by
reference in this Proxy Statement and the Annexes hereto. Stockholders of
Republic are urged to read this Proxy Statement and the Annexes hereto, and in
particular the section herein entitled "RISK FACTORS", in their entirety.
REPUBLIC
Republic is 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
Rent-A-Car, Inc. and certain affiliated companies ("Alamo"), which operates a
fleet of approximately 158,000 vehicles, owns and operates 205 car rental
locations in the United States and Canada and 61 car rental locations in Europe,
and licenses another 111 locations to third party operators in Europe. In August
1996, Republic completed the acquisition of CarChoice, Inc. ("CarChoice"), which
owns and operates two used vehicle megastores in Dallas, Texas and Detroit,
Michigan. Republic owns or operates 15 landfills and provides waste collection
services to over 1,300,000 residential, commercial and industrial customers, and
provides related environmental services. Republic provides electronic security
monitoring services to over 207,000 businesses and residences predominantly in
Florida, Colorado, Illinois and Maryland. Republic's strategy is to grow
aggressively as a diversified company through internal growth and by acquiring
and integrating additional automotive businesses, solid waste services
businesses, and electronic security services businesses, as well as by acquiring
and expanding businesses in other industries.
In addition to the Merger, Republic has two other significant pending
acquisitions of other companies: Addington Resources, Inc. ("Addington") and
Continental Waste Industries, Inc. ("Continental"), both of which are primarily
engaged in the solid waste services industry (collectively, the "Pending
Republic Acquisitions"). In connection with the Pending Republic Acquisitions,
which are expected to be consummated in December 1996, an aggregate of
approximately 27 million shares of Republic Common Stock will be issued (which
number includes shares of Republic Common Stock issuable upon future exercises
of warrants and options to be assumed by Republic in the Pending Republic
Acquisitions). The Addington transaction is subject to the approval of Addington
stockholders and the Continental transaction is subject to approval of
Continental stockholders. Each of the Pending Republic Acquisitions is subject
to other customary closing conditions, including receipt of regulatory
approvals. However, consummation of any of the AutoNation, Addington, and
Continental acquisitions is not contingent upon the approval or consummation of
any of such other acquisitions.
In November 1995, Republic changed its name to Republic Industries, Inc.
from Republic Waste Industries, Inc. As of the date hereof, Republic's principal
executive offices are located at 200 East Las Olas Boulevard, Suite 1400, Fort
Lauderdale, Florida 33301, and its telephone number is (954) 627-6000. As of
December 16, 1996, Republic's principal executive offices will be located at 450
East Las Olas Boulevard, Suite 1200, Fort Lauderdale, Florida 33301.
AUTONATION
AutoNation, which is owned in part by certain affiliates of Republic, has
started a national roll-out of a chain of megastores, under the AutoNation
USA(TM) brand name, for the sale of reconditioned-to-perform-like-new vehicles
in a customer friendly, "no haggle" environment. AutoNation commenced operations
of its first AutoNation megastore in October 1996 and operates 3 AutoNation
megastores as of December 3, 1996. Each AutoNation megastore stocks more than
1,000 late-model, low-mileage, previously-owned vehicles, each of which has
undergone extensive reconditioning and safety inspections by certified
technicians. The AutoNation megastores will also offer vehicle financing,
service centers and automobile accessory sales. Each AutoNation megastore is
located on an approximately 20-acre site with high-visibility and convenient
access. AutoNation also has smaller used vehicle retail stores which feature
older-model, higher mileage vehicles than those to be offered in AutoNation
megastores. AutoNation owns or leases 17 sites in Florida, Texas, Arizona,
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Nevada and Michigan which it operates or is developing as AutoNation USA(TM)
megastores (11 sites), vehicle reconditioning centers (three sites) and smaller
retail locations (three sites), eight of which are open and operating as of
December 3, 1996 and the other nine of which it expects will be opened and
operating by June 30, 1997. AutoNation is in various stages of evaluating,
contracting and closing on purchases or leases of approximately 70 additional
sites which it plans to develop into AutoNation retail stores and reconditioning
centers. Republic also anticipates that its existing CarChoice locations will be
permanently converted to AutoNation's format. AutoNation leases its corporate
offices in Fort Lauderdale, Florida.
AutoNation's principal executive offices are located at One Financial
Plaza, Suite 1700, Fort Lauderdale, Florida 33394, and its telephone number is
(954) 627-5100.
THE SPECIAL MEETING
Time and Location. The Special Meeting will be held at 9:30 a.m. on
Monday, January 20, 1997, at The Broward Center for the Performing Arts, Amaturo
Theater, 201 S.W. Fifth Avenue, Fort Lauderdale, Florida 33312.
Matters to be Considered. The purpose of the Special Meeting is to
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement,
and the transactions set forth therein and (ii) such other proposals as may be
properly brought before the Special Meeting.
Votes Required. In order to effect the Merger, the Merger Agreement must
be approved and adopted by the affirmative vote of a majority of the votes cast
by holders of outstanding shares of Republic Common Stock present at the Special
Meeting in person or proxy and entitled to vote thereon. Abstentions and broker
non-votes will be considered shares present at the meeting and entitled to vote
for purposes of determining a quorum; however, abstentions and broker non-votes
will not be considered votes cast with respect to the proposal on the Merger
Agreement and, therefore, will have no effect with respect to such proposal.
As of October 31, 1996, directors and executive officers of Republic may be
deemed beneficial owners of approximately 38.6% of the outstanding shares of
Republic Common Stock, and directors and executive officers of AutoNation
(excluding those persons who are also directors and officers of Republic) may be
deemed to beneficially own an additional amount of less than 1% of the
outstanding shares of Republic Common Stock. See "CONFLICTS OF INTEREST."
Record Date. The record date for the Special Meeting is November 29, 1996.
Accordingly, holders of record of Republic Common Stock as of such date will be
entitled to notice of, and to vote at, the Special Meeting.
THE PROPOSED MERGER
Form of the Merger. At the effective time of the Merger (the "Effective
Time"), Mergersub will be merged with and into AutoNation, with AutoNation
continuing as the surviving corporation and a wholly-owned subsidiary of
Republic.
Conversion of the AutoNation Common Stock. Pursuant to the Merger
Agreement, at the Effective Time, each outstanding share of common stock, $0.001
par value per share, of AutoNation ("AutoNation Common Stock") will be converted
into 0.217796 of a share of Republic Common Stock. No fractional shares of
Republic Common Stock will be issued in connection with the Merger and cash will
be paid in lieu thereof.
Ownership of Republic Common Stock After the Merger. Former shareholders
of AutoNation will own approximately 7.2% of the outstanding Republic Common
Stock immediately following consummation of the Merger, based upon the number of
shares of Republic Common Stock outstanding on November 30, 1996, excluding
shares of Republic Common Stock owned by such persons prior to consummation of
the Merger and assuming no additional issuances of Republic Common Stock prior
to consummation of the Merger. Pursuant to the Merger Agreement, all
shareholders of AutoNation will be subject to "lock-up" agreements which will
restrict their ability to sell any shares of Republic Common Stock received in
the Merger for periods ranging from six months to two years following the
Effective Time.
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Recommendation of the Special Committee of the Board of Directors. An
independent special committee comprised of non-employee members of the Board of
Directors of Republic (the "Special Committee") has, by unanimous vote (i)
determined that the Merger is consistent with, and in furtherance of, the
long-term business strategy of Republic and is fair to, and in the best
interests of, Republic and its stockholders, (ii) approved the Merger Agreement
and the other transactions contemplated thereby and (iii) recommended approval
and adoption of the Merger Agreement by the holders of Republic Common Stock.
Opinion of Financial Advisor. Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") has delivered its written opinion to the Special
Committee to the effect that, on May 7, 1996 and as of the date hereof, and
based upon the assumptions made, procedures followed, matters considered, and
limits of review as set forth in such opinion, the consideration to be paid by
Republic pursuant to the Merger Agreement is fair to Republic from a financial
point of view. For information on the assumptions made, procedures followed,
matters considered and limits of the review by Merrill Lynch, stockholders
should read in its entirety the opinion of Merrill Lynch, a copy of which is
attached hereto as Annex B.
Conditions to the Merger. The obligations of Republic and AutoNation to
consummate the Merger are subject to various conditions, including obtaining
approval of the Merger Agreement by Republic's stockholders.
Termination. The Merger Agreement may be terminated by Republic and/or
AutoNation under certain circumstances, including if the Merger has not been
consummated by December 31, 1996. See "THE MERGER AGREEMENT -- Termination".
Registration and Nasdaq Listing. Shares of Republic Common Stock to be
issued in connection with the Merger will not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), at the time of issuance.
Following the consummation of the Merger, Republic will file a registration
statement with the Securities and Exchange Commission (the "Commission") to
permit resales by the former shareholders of AutoNation of the shares of
Republic Common Stock issued in the Merger. In addition, Republic will file an
application to list the shares of Republic Common Stock issued in connection
with the Merger on Nasdaq. Shares of Republic Common Stock are traded on Nasdaq
under the symbol "RWIN".
Dividends. Since December 1989, Republic has not declared or paid any cash
dividends on Republic Common Stock. Republic currently intends to retain its
earnings for future growth and, therefore, does not anticipate paying cash
dividends in the foreseeable future.
Regulatory Approvals Required. The obligations of Republic and AutoNation
to consummate the Merger are subject to the expiration or early termination of
the waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") and the rules promulgated thereunder. Pre-merger
notification information will be filed with the Antitrust Division of the
Department of Justice and the Federal Trade Commission ("FTC") under the HSR
Act. The required waiting period under the HSR Act will expire at 11:59 p.m.
thirty days after such filing, unless extended by request from the FTC for
additional information or documentary material or unless early termination of
the waiting period is granted.
Appraisal Rights. Appraisal rights under applicable law are not available
to stockholders of Republic.
Accounting Treatment. The Merger will be accounted for by Republic under
the "purchase" method of accounting in accordance with generally accepted
accounting principles. Therefore, the aggregate consideration paid by Republic
in connection with the Merger will be allocated to AutoNation's assets and
liabilities based on their fair values, with any excess being treated as
goodwill. The assets and liabilities and results of operations of AutoNation
will be consolidated into the assets and liabilities and results of operations
of Republic subsequent to the Effective Time.
CERTAIN TRANSACTIONS BETWEEN REPUBLIC AND AUTONATION
In connection with the execution of the Merger Agreement, Republic and
AutoNation entered into a Loan Agreement, dated May 8, 1996, as amended (the
"Loan Agreement"), under which Republic is
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providing a line of credit to AutoNation to fund its cash flow requirements
during the period pending consummation of the Merger. As of September 30, 1996,
Republic has made advances to AutoNation pursuant to the Loan Agreement of
approximately $112,900,000.
RISK FACTORS
Stockholders of Republic should carefully evaluate the matters set forth
under "Risk Factors". Factors to be considered, among other things, include the
potential for fluctuation in the value of Republic Common Stock as well as the
potential for changes in the businesses and financial condition of Republic and
AutoNation prior to the Effective Time.
CONFLICTS OF INTEREST
Mr. Huizenga is Chairman of the Board of AutoNation, Mr. Berrard is Chief
Executive Officer of AutoNation and they and certain other members of Republic's
Board of Directors and senior management also have ownership interests in
AutoNation. See "CONFLICTS OF INTEREST."
EXECUTIVE OFFICERS AND DIRECTORS AFTER THE MERGER
All of Republic's existing Directors and executive officers as of the date
hereof will remain in their respective positions following the Merger. Lawrence
S. Rich, Chief Operating Officer of JMFE and a director of AutoNation, is
expected to be appointed to Republic's Board of Directors following consummation
of the Merger. See "MANAGEMENT OF REPUBLIC BEFORE AND AFTER THE MERGER AND THE
PENDING REPUBLIC ACQUISITIONS -- Management of Republic After the Closing of the
Pending Republic Acquisitions."
RECENT DEVELOPMENTS
Acquisition of Alamo. In November 1996, Republic acquired, in merger
transactions, all of the outstanding capital stock of Alamo in exchange for an
aggregate of 22,123,893 shares of Republic Common Stock. Such transaction has
been accounted for as a pooling of interests business combination.
Private Placement Transaction. In November 1996, Republic issued and sold
12,079,915 shares of Republic Common Stock in a private placement transaction
for $29.50 per share resulting in net proceeds to Republic of approximately
$353,000,000 after deducting fees and commissions.
Pending Acquisition of Addington. In June 1996, Republic entered into a
definitive merger agreement (the "Addington Merger Agreement") with Addington.
Addington is a solid waste services company. The Addington Merger Agreement
provides that each share of common stock of Addington will be exchanged in a
merger transaction (the "Addington Merger"), on a tax-free basis, for
nine-tenth's (0.9) of a share of Republic Common Stock. In connection with the
Addington Merger, it is contemplated that an aggregate of approximately
14,014,651 shares of Republic Common Stock will be issued (which number includes
shares of Republic Common Stock issuable in the future upon the exercise of
outstanding options of Addington). Consummation of the Addington Merger, which
will be accounted for as a pooling of interests business combination, is subject
to approval by Addington's stockholders and other customary closing conditions,
including receipt of regulatory approval. Certain stockholders of Addington,
representing approximately 45% of Addington's outstanding common stock, have
granted irrevocable proxies to Republic to vote, or execute written consents
with respect to, their shares in favor of the transaction, which is expected to
close in December 1996.
Pending Acquisition of Continental. In June 1996, Republic entered into a
definitive merger agreement (the "Continental Merger Agreement") with
Continental. Continental is a solid waste services company. The Continental
Merger Agreement provides that each share of common stock of Continental will be
exchanged in a merger transaction (the "Continental Merger"), on a tax-free
basis, for eight-tenth's (0.8) of a share of Republic Common Stock. In
connection with the Continental Merger, it is contemplated that an aggregate of
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approximately 12,949,151 shares of Republic Common Stock will be issued (which
number includes shares of Republic Common Stock issuable in the future upon the
exercise of outstanding options and warrants of Continental). Consummation of
the Continental Merger, which will be accounted for as a pooling of interests
business combination, is subject to approval by Continental's stockholders and
other customary closing conditions, including receipt of regulatory approval.
Certain stockholders of Continental, representing approximately 23% of
Continental's outstanding common stock, have granted irrevocable proxies to
Republic to vote, or execute written consents with respect to, their shares in
favor of the transaction, which is expected to close in December 1996.
Termination of Agreement to Acquire ADT Limited. In September 1996,
Republic announced that the Agreement and Plan of Amalgamation, dated as of July
1, 1996 and amended as of July 15, 1996 (the "ADT Agreement"), by and among
Republic, R.I./Triangle, Ltd. and ADT Limited, a Bermuda corporation ("ADT"),
which provided for the acquisition of ADT by Republic, had been terminated by
mutual agreement of the parties. In connection with the execution of the ADT
Agreement, ADT granted to Republic a warrant (the "ADT Warrant") to purchase
15,000,000 common shares of ADT at a purchase price of $20 per share (which
approximated fair market value) subject to certain antidilution adjustments. The
ADT Warrant became exercisable upon the termination of the ADT Agreement and
remains exercisable until March 1997. Pursuant to the terms of the ADT Warrant,
ADT has granted to Republic certain registration rights with respect to the
common shares of ADT issuable to Republic upon exercise of the warrant.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in this Summary and under the captions "RISK FACTORS,"
"SUMMARY -- Recent Developments," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF AUTONATION," "THE PROPOSED
MERGER -- Background of the Merger; -- Reasons for the Merger; -- Opinion of
Merrill Lynch," "INFORMATION CONCERNING AUTONATION," and elsewhere in this Proxy
Statement, constitute "forward-looking statements" within the meaning of the
Federal Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of Republic or
AutoNation to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, Republic's and AutoNation's limited
operating histories in vehicle retailing and related businesses and uncertainty
as to future profitability of such operations; the ability to meet construction
and development schedules and budgets for vehicle retailing megastores; the
ability to develop and implement operational and financial systems to manage
rapidly growing operations; the uncertainty as to the consumer demand for new
and used vehicles; competition in existing and potential future lines of
business; regulatory changes; loss or failure to obtain governmental permits;
the ongoing consolidation within the solid waste management industry; the
availability of acquisition and expansion opportunities on attractive terms; the
ability to integrate and successfully operate acquired businesses and the risks
associated with such businesses; the ability to obtain financing on acceptable
terms to finance Republic's growth strategy and for Republic to operate within
the limitations imposed by financing arrangements; and other factors referenced
in this Proxy Statement. See "RISK FACTORS."
MARKET PRICES AND DIVIDEND POLICY
See "MARKET PRICES AND DIVIDEND POLICY".
7
<PAGE> 12
REPUBLIC'S SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The historical financial statements of Republic include the financial
position and results of operations of CarChoice which Republic acquired in
August 1996 and Incendere, Inc. and certain affiliated waste companies
controlled by Dwight C. Schaubach ("Schaubach") and certain electronic security
companies known as Denver Burglar Alarm ("Denver Alarm"), both of which Republic
acquired in February 1996. These transactions have been accounted for under the
pooling of interests method of accounting and, accordingly, Republic's
historical financial statements have been restated as if the companies had
operated as one entity since inception. The following selected income statement
data for each of the three years in the period ended December 31, 1995 and the
balance sheet data at December 31, 1995 and 1994 are derived from consolidated
financial statements of Republic incorporated by reference herein, which have
been audited by Arthur Andersen LLP, independent certified public accountants.
The income statement data for the years ended December 31, 1992 and 1991 and the
balance sheet data at December 31, 1993, 1992 and 1991 have been derived from
audited consolidated financial statements of Republic not incorporated by
reference herein. The income statement data for the nine month periods ended
September 30, 1996 and 1995 and the selected balance sheet data at September 30,
1996 are derived from unaudited interim consolidated financial statements of
Republic incorporated by reference herein. The unaudited interim consolidated
financial statements include all material adjustments, consisting only of normal
recurring adjustments, which Republic considers necessary for a fair
presentation of its financial position and results of operations for these
periods. Operating results of Republic for the nine months ended September 30,
1996 are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1996. The data should be read in conjunction
with the consolidated financial statements of Republic, the unaudited interim
consolidated financial statements of Republic and management's discussion and
analysis of Republic incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue............................ $423,371 $210,679 $295,238 $218,173 $182,495 $162,504 $143,873
Income from continuing operations
before income taxes.............. $ 59,770 $ 19,740 $ 35,455 $ 22,147 $ 2,162 $ 12,339 $ 8,820
Income (loss) from continuing
operations....................... $ 37,954 $ 10,966 $ 19,921 $ 16,849 $ (331) $ 9,000 $ 6,932
Earnings per common and common
equivalent share from continuing
operations....................... $ .17 $ .09 $ .14 $ .17 $ -- $ .09 $ .09
Weighted average common and common
equivalent shares................ 218,668 119,527 141,279 96,920 97,102 94,788 80,576
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER 31,
30, ----------------------------------------------------
1996 1995 1994 1993 1992 1991
------------ -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............ $246,129 $144,329 $ (5,379) $ 5,651 $ 6,996 $ 18,502
Short-term debt, including current
maturities of long-term debt.......... $ 18,805 $ 11,996 $ 11,210 $ 11,464 $ 10,837 $ 9,191
Long-term debt, net of current
maturities............................ $ -- $ 3,791 $ 40,703 $ 42,930 $ 31,043 $ 28,582
Shareholders' equity.................... $791,904 $450,548 $115,218 $102,881 $121,071 $118,082
Total assets............................ $986,865 $582,466 $257,207 $217,388 $202,967 $192,472
</TABLE>
See Notes 2, 5, 9 and 10 to consolidated financial statements of Republic
which are incorporated by reference in this Proxy Statement for discussion of
business combinations, various equity transactions, the distribution of the
hazardous waste services segment and restructuring charges and their effect on
comparability of year-to-year data. See "MARKET PRICES AND DIVIDEND POLICY" for
a discussion of Republic's dividend policy.
8
<PAGE> 13
AUTONATION'S SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
The following selected consolidated statements of operations data, for the
period from inception (September 12, 1995) to December 31, 1995 and the
consolidated balance sheet data at December 31, 1995 are derived from the
consolidated financial statements of AutoNation Incorporated and Subsidiaries
incorporated by reference herein, which have been audited by Arthur Andersen
LLP, independent certified public accountants. The consolidated statements of
operations data for the nine month period ended September 29, 1996 and the
selected consolidated balance sheet data at September 29, 1996 are derived from
the unaudited interim consolidated financial statements incorporated by
reference herein. The unaudited interim consolidated financial statements
include all material adjustments, consisting only of normal recurring
adjustments, which AutoNation considers necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the nine months ended September 29, 1996 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1996. The data should be read in conjunction with the consolidated
financial statements and the unaudited interim consolidated financial statements
incorporated by reference in this Proxy Statement and management's discussion
and analysis included elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED PERIOD FROM INCEPTION PERIOD FROM INCEPTION
SEPTEMBER 29, (SEPTEMBER 12, 1995) TO (SEPTEMBER 12, 1995) TO
1996 SEPTEMBER 29, 1996 DECEMBER 31, 1995
------------- ----------------------- -----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenue..................... $ 9,190 $ 9,190 $ --
Net loss.................... $ (18,332) $ (21,396) $ (3,064)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 29, DECEMBER 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................... $(103,639) $ 10,701
Loan payable to related party.............................. $ 112,900 $ --
Vehicle financing with related party....................... $ 29,218 $ --
Long-term debt, net of current maturities.................. $ -- $ --
Shareholders' equity....................................... $ 30,734 $ 12,541
Total assets............................................... $ 190,174 $ 13,327
</TABLE>
See Notes 1, 4, 7, 8 and 10 of Notes to Consolidated Financial Statements
of AutoNation which have been incorporated by reference in this Proxy Statement
for discussion of AutoNation's development stage activities, capitalization,
income taxes, related party financing and certain events occurring subsequent to
December 31, 1995 and their effect on comparability of 1995 and 1996 data.
9
<PAGE> 14
SELECTED UNAUDITED PRO FORMA
FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma financial data for the nine months ended
or at September 30, 1996 and the year ended December 31, 1995 gives effect to
certain closed Republic acquisitions and certain 1995 equity transactions
(collectively, the "Closed Republic Transactions") and the Merger as if such
acquisitions and transactions occurred at the beginning of the periods presented
for results of operations data and as of the balance sheet date for balance
sheet data. The following unaudited pro forma Combined Company financial data
for the nine months ended September 30, 1996 and for the years ended December
31, 1995, 1994 and 1993 gives effect to consummation of the Merger, the closed
Republic Transactions, certain closed Continental acquisitions and the pending
Republic Acquisitions as if such events occurred for balance sheet purposes at
the balance sheet date and for statement of operations purposes at the beginning
of the periods presented. The selected unaudited pro forma financial data was
derived from, and should be read in conjunction with, the unaudited condensed
consolidated pro forma financial statements and the notes thereto incorporated
by reference in this Proxy Statement. See "INCORPORATION BY REFERENCE." The
unaudited pro forma data is not necessarily indicative of the combined results
of operations or financial position that would have occurred if the Merger,
Closed Republic Transactions and the Pending Republic Acquisitions had occurred
at the beginning of the period nor are they necessarily indicative of future
operating results. There can be no assurance that any of the Pending Republic
Acquisitions will be completed.
PRO FORMA REPUBLIC AND AUTONATION DATA:
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Revenue...................................................................... $ 1,610,527 $ 1,751,581
Income from continuing operations before income taxes........................ $ 51,227 $ 4,708
Income from continuing operations............................................ $ 26,406 $ 12
Earnings per common and common equivalent share from continuing operations... $ .10 $ --
Weighted average common and common equivalent shares......................... 258,694 $ 230,028
SEPTEMBER 30,
1996
-------------
PRO FORMA BALANCE SHEET DATA:
Working capital.............................................................. $ 187,629
Short-term debt, including current maturities of long-term debt.............. $ 2,321,179
Long-term debt, net of current maturities.................................... $ 215,153
Shareholders' equity......................................................... $ 1,024,303
Total assets................................................................. $ 4,100,664
Book value per common share.................................................. $ 4.44
</TABLE>
PRO FORMA COMBINED COMPANY DATA:
<TABLE>
<CAPTION>
NINE
MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------
1996 1995 1994 1993
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Revenue.................................................... $ 1,716,338 $1,874,476 $1,595,880 $1,370,497
Income from continuing operations before income taxes...... $ 52,379 $ 22,348 $ 49,999 $ 28,423
Income from continuing operations.......................... $ 24,580 $ 10,614 $ 29,595 $ 14,406
Earnings per common and common equivalent share from
continuing operations.................................... $ .09 $ .04 $ .21 $ .11
Weighted average common and common equivalent shares....... 285,078 260,223 139,410 137,024
SEPTEMBER 30,
1996
-------------
PRO FORMA BALANCE SHEET DATA:
Working capital............................................ $ 184,945
Short-term debt, including current maturities of long-term
debt..................................................... $ 2,329,088
Long-term debt, net of current maturities.................. $ 277,323
Shareholders' equity....................................... $ 1,197,844
Total assets............................................... $ 4,405,930
Book value per common share................................ $ 4.67
</TABLE>
10
<PAGE> 15
RISK FACTORS
In addition to the other information contained in this Proxy Statement, the
following risk factors should be considered carefully by the stockholders of
Republic before voting for the proposal to approve and adopt the Merger
Agreement.
Fixed Exchange Ratio. The Exchange Ratio is fixed and will not be adjusted
in the event of any increase or decrease in the stock price of the Republic
Common Stock. The price of the Republic Common Stock at the Effective Time may
vary from the price as of the date the Merger Agreement was approved by the
Special Committee of the Board of Directors of Republic, the date the opinion of
Merrill Lynch was rendered, the date of the Special Meeting or the date the
Merger is consummated, due to changes in the business, operations and prospects
of Republic, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, general market and economic conditions, and
other factors. See "MARKET PRICES AND DIVIDEND POLICY."
Uncertainties in Integrating Operations and Achieving Cost Savings. The
success of any business combination, including the Merger, is in part dependent
on the ability following the transaction to consolidate operations, integrate
departments, systems and procedures and thereby obtain business efficiencies,
economies of scale and related cost savings. The consolidation of operations,
the integration of departments, systems and procedures and the relocation of
staff present significant management challenges. The challenges posed may be
particularly significant because they must be addressed contemporaneously with
integrating the Pending Republic Acquisitions. There can be no assurance that
future consolidated results will improve as a result of the Merger (or the
Pending Republic Acquisitions), or as to the timing or extent to which cost
savings and efficiencies will be achieved.
Consummation of Pending Republic Acquisitions; Dilution. While management
of Republic remains committed to consummating each of the Pending Republic
Acquisitions, there can be no assurance that the consents and approvals required
for each of such acquisitions will be obtained, that the other conditions
necessary for the consummation of such acquisitions will be satisfied or that
such acquisitions will otherwise be consummated. The issuance of additional
shares of Republic Common Stock upon closing of the Pending Republic
Acquisitions, upon exercise of warrants or options, or upon completion of other
acquisitions or business combinations, may have a dilutive effect on earnings
per share and will have a dilutive effect on the voting rights of the holders of
Republic Common Stock. Assuming the consummation of each of the Merger and the
Pending Republic Acquisitions, the current stockholders of each of the following
companies will own approximately the following percentages of the outstanding
shares of Republic Common Stock based on the number of shares of Republic Common
Stock outstanding as of November 30, 1996: Republic 83.8%; AutoNation 6.5%;
Continental 4.7%; and Addington 5.1%. Assuming the consummation of only the
Merger, the stockholders of Republic immediately prior to the Effective Time
will own approximately 92.8% of the outstanding shares of Republic Common Stock
and the former shareholders of AutoNation (excluding shares of Republic Common
Stock owned by such persons prior to consummation of the Merger) will own
approximately 7.2% of the outstanding shares of Republic Common Stock based on
the number of shares of Republic Common Stock outstanding as of November 30,
1996.
Possible Depressing Effect of Future Sales of Republic Common
Stock. Future sales of the shares of Republic Common Stock to be issued in the
Merger, or the perception that such sales could occur, could adversely affect
the market price of Republic Common Stock. There can be no assurance as to when,
and how many of, the shares of Republic Common Stock to be issued in the Merger
will be sold and the effect such sales may have on the market price of Republic
Common Stock. Such securities are subject to resale restrictions in accordance
with the Securities Act and the regulations promulgated thereunder. As such
restrictions lapse or if such securities are registered for sale to the public,
such securities may be sold to the public.
Limited Operations in Vehicle Retailing Business. Republic has a limited
history of operations in vehicle retailing and related businesses. Prior to its
acquisition of CarChoice in August 1996, Republic had no history of operations
in the vehicle retailing industry. Republic currently anticipates that it will,
through acquisitions, including the acquisition of AutoNation, rapidly expand
its operations in new and used vehicle
11
<PAGE> 16
retailing and related businesses. Operations of CarChoice and AutoNation did not
generate revenue until 1996. Neither CarChoice nor AutoNation has operated
profitably since inception. AutoNation has started up and is developing a chain
of vehicle retailing megastores and opened its first AutoNation USA(TM)
megastore in October 1996. The success of Republic's aggressive development
plans in the vehicle retailing business is dependent on a number of factors
including, but not limited, to economic conditions, competitive environment,
adequate capital, accurate site selection, construction schedules, supply of new
and used vehicles, consumer acceptance of the megastore concept in vehicle
retailing, vehicle manufacturers' approval and control over new vehicle dealer
franchises, and the building of brand recognition. There can be no assurance
that Republic will be successful in the vehicle retailing industry or in any
related automotive industries which it enters.
Valuation of AutoNation. There are a number of methods of determining the
valuation of any company, which methods often involve consideration of
intangible factors which are not readily capable of being quantified with
precision. Accordingly, determination of a precise valuation of AutoNation is
difficult, due in part to such factors as its limited history of operations in
vehicle retailing and related businesses. Consequently, the Special Committee of
the Board of Directors of Republic engaged Merrill Lynch to evaluate the
fairness of the consideration proposed to be paid by Republic to the
shareholders of AutoNation in connection with the Merger. The Special Committee
and Merrill Lynch relied on forecasts and projections regarding AutoNation's
future operating performance, as well as numerous other factors, including
AutoNation's audited financial statements, and Merrill Lynch issued its opinion
that the consideration to be issued by Republic in the Merger is fair to
Republic from a financial point of view. Neither Republic nor Merrill Lynch,
nor, to Republic's knowledge, any other party, has conducted independent
appraisals or valuations of the assets or liabilities of AutoNation.
Need for Substantial Additional Capital. Republic's strategy is to
aggressively grow as a diversified company by acquiring and integrating
additional companies in its existing lines of business, and companies in other
lines of business, as well as through internal growth of such businesses. As of
November 30, 1996, Republic had approximately $1.9 billion in long term debt
outstanding ($1.6 billion of which was secured by revenue earning rental
vehicles) and had approximately $93 million in cash available for general
corporate purposes. Republic believes that additional capital may be necessary
to continue its rapid expansion, to service its outstanding debt and to fully
capitalize on acquisition and expansion opportunities that may become available
to Republic. There can be no assurance that additional financing will be
available on a timely basis, if at all, or that it will be available on terms
acceptable to Republic. In the event that adequate financing is not available or
is not available in the amounts or on terms acceptable to Republic, the
implementation of Republic's acquisition and expansion strategy could be impeded
and Republic's ability to react to changes in the industries in which it does
business could be limited, which could have a material adverse effect on
Republic's business, financial condition and future prospects.
Seasonality. Vehicle retailing operations could be adversely affected by
protracted periods of inclement weather. There can be no assurance that
protracted periods of inclement weather will not have a material adverse effect
on AutoNation's business, financial condition and future prospects.
Competitive Environment. The vehicle retailing industry is changing as a
result of rapid consolidation and highly competitive environments. The future
success of AutoNation will be affected by such changes, the nature of which
cannot be forecast with certainty. The vehicle retailing industry in the United
States is highly fragmented and competitive, and is in the early stages of
consolidation. Republic believes that there is no used vehicle retailer
currently operating a national chain of megastores. In addition to AutoNation,
several other companies have announced plans to roll out national chains of used
vehicle megastores over the next few years. In addition, several franchised new
vehicle dealers, which have significant used vehicle operations, have recently
conducted initial public offerings of their securities, with proceeds targeted
to be used for acquisitions of other dealers. Some of these competitors in the
new and used vehicle retailing industry have significantly greater financial and
operational resources than Republic and more established market positions than
AutoNation. There can be no assurance that Republic will be able to compete
effectively in the new or used vehicle retailing industry or related automotive
businesses.
12
<PAGE> 17
THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon (i) a
proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby; and (ii) such other proposals as may be properly brought
before the Special Meeting.
The Special Committee of the Board of Directors of Republic has unanimously
approved the Merger Agreement and recommends a vote FOR approval and adoption of
the Merger Agreement and the transactions contemplated thereunder.
VOTES REQUIRED
The presence, in person or represented by proxy, of the holders of a
majority of the shares of Republic Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum at the Special Meeting. The
affirmative vote of a majority of the votes cast by holders of outstanding
shares of Republic Common Stock present at the Special Meeting in person or by
proxy and entitled to vote thereon is required to approve and adopt the Merger
Agreement. Only stockholders of record at the close of business on the Record
Date are entitled to notice of and to vote at the Special Meeting or any and all
adjournments and postponements thereof. As of the Record Date, 232,466,603
shares of Republic Common Stock were issued and outstanding and entitled to vote
at the Special Meeting. Each share of Republic Common Stock issued and
outstanding on the Record Date will entitle the holder thereof to one vote on
each proposal presented at the Special Meeting. Shares of Republic Common Stock
represented at the Special Meeting by a properly executed, dated and returned
proxy will be treated as present at the Special Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining.
Proxies relating to "street name" shares that are properly executed and
returned by brokers will be counted as shares present for purposes of
determining the presence of a quorum, but will not be treated as shares having
voted at the Special Meeting as to the Merger Agreement if authority to vote is
withheld from the broker (a "broker non-vote"). Abstentions will be recorded as
such by the Inspectors of Election for the Special Meeting. Abstentions and
broker non-votes (as well as any other failure to vote) will not be considered
as votes cast with respect to the proposal on the Merger Agreement and,
therefore, will have no effect on the outcome of the vote to approve and adopt
the Merger Agreement.
At October 31, 1996, directors and executive officers of Republic may be
deemed to be beneficial owners of 86,452,630 shares (including shares underlying
certain options and warrants) of Republic Common Stock, or approximately 38.6%
of the then outstanding shares of Republic Common Stock. See "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF REPUBLIC."
VOTING OF PROXIES
Proxies properly executed and returned in a timely manner will be voted at
the Special Meeting in accordance with the directions noted thereon. Proxies
which are properly executed, but for which no voting direction is indicated,
will be voted in favor of approval and adoption of the Merger Agreement, and in
accordance with the judgment of the persons acting under the proxies on other
matters presented for a vote.
REVOCABILITY OF PROXIES
Any stockholder giving a proxy has the power to revoke it at any time
before it is voted, either by voting in person at the meeting, by written notice
to the Secretary of Republic or by delivery of a later-dated proxy.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only stockholders of record of Republic Common Stock at the close of
business on November 29, 1996 (the "Record Date") are entitled to receive notice
of, and to vote at, the Special Meeting. The only voting stock of Republic
outstanding is Republic Common Stock, of which 232,466,603 shares were
13
<PAGE> 18
outstanding of record as of the close of business on the Record Date. A majority
of the outstanding shares of Republic Common Stock on the Record Date must be
represented in person or by proxy at the Special Meeting in order for a quorum
to be present.
APPRAISAL RIGHTS
Stockholders of Republic will have no appraisal rights under Delaware law
in connection with the Merger.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the Directors, officers and employees
of Republic may solicit proxies from Republic's stockholders by personal
interview, telephone, or otherwise. Republic will bear the costs of the
solicitation of proxies from its stockholders. Arrangements will be made with
brokerage firms and other custodians, nominees and fiduciaries who hold Republic
Common Stock for the forwarding of solicitation materials to the beneficial
holders thereof. Republic may reimburse such brokers, custodians, nominees and
fiduciaries for the reasonable out-of-pocket expenses incurred by them in
connection therewith. In addition, Harris Trust and Savings Bank and Corporate
Investor Communications, Inc. have been retained by Republic to assist in the
tabulation and solicitation, respectively, of proxies for which they will be
paid a fee of approximately $10,000 in the aggregate plus reimbursement of
out-of-pocket expenses.
REQUIREMENT FOR STOCKHOLDER APPROVAL OF THE MERGER AGREEMENT
Nasdaq requires stockholder approval in connection with a National Market
issuer's acquisition of the stock of another company if any director, officer or
substantial stockholder of the issuer has a 5% or greater interest (or such
persons collectively have a 10% or greater interest) in the company to be
acquired, and the potential issuance of common stock could result in a 5% or
greater increase in outstanding common shares. As Mr. Huizenga and other
directors and officers of Republic collectively have a greater than 10% interest
in AutoNation, and Republic plans to issue 17,467,248 shares of Republic Common
Stock in the proposed Merger, approval by Republic's stockholders is required.
For Nasdaq purposes, the affirmative vote of a majority of the votes cast by
holders of outstanding shares of Republic Common Stock present at the Special
Meeting in person or by proxy will constitute stockholder approval.
THE PROPOSED MERGER
BACKGROUND OF THE MERGER
In May 1995, Republic negotiated and executed certain Stock Purchase
Agreements with H. Wayne Huizenga and Harris W. Hudson, pursuant to which, among
other matters, Messrs. Huizenga and Hudson, and certain of their assigns,
invested an aggregate of approximately $31 million in Republic in exchange for
an aggregate of 13.7 million shares of Republic Common Stock and warrants to
purchase 27.4 million shares of Republic Common Stock. In addition, at the same
time, Republic entered into certain Merger Agreements to acquire Hudson
Management Corporation and Envirocycle, Inc. (collectively, "HMC") from Mr.
Hudson in exchange for 16 million shares of Republic Common Stock. All of these
transactions and related transactions (the "Combination Transactions") closed
following receipt of approval by holders of a majority of the outstanding
Republic Common Stock at a special meeting held on August 3, 1995. As a result
of and upon consummation of the Combination Transactions, Messrs. Huizenga and
Hudson became two of the largest stockholders of Republic, Mr. Huizenga became
the Chairman and Chief Executive Officer of Republic, and Mr. Hudson became the
President and a Director of Republic. See "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF REPUBLIC."
During the negotiations with respect to the Combination Transactions in May
1995, Mr. Huizenga informed Michael G. DeGroote, then Republic's Chairman,
President and Chief Executive Officer, as well as the largest beneficial owner
of shares of Republic Common Stock, that Mr. Huizenga along with other investors
was making a major investment in the used car industry and planned to develop
and open a retail
14
<PAGE> 19
chain of used car "megastores" across the country. Mr. Huizenga and Mr. DeGroote
discussed the idea of including this venture in the Combination Transactions, as
part of the substantial investment which Mr. Huizenga wished to make in
Republic.
For several reasons, in May 1995, Republic did not pursue the acquisition
of Mr. Huizenga's used car venture as part of the Combination Transactions.
First, the used car venture was at that time still in the conceptual and
research phase of development. Second, the anticipated start-up losses of the
venture would more than offset Republic's projected earnings for all of 1995 and
possibly beyond. Mr. DeGroote and Mr. Huizenga believed that the perceived
inability of the combined company to generate earnings could continue to keep
the market price for Republic Common Stock at the low trading levels which
Republic Common Stock had traded at for several years, which in turn would
impede Republic's ability to engage in the aggressive acquisition strategy that
Mr. Huizenga proposed (and which Republic has since August 1995 implemented).
Moreover, Republic lacked sufficient capital with which to fund the substantial
development costs which Mr. Huizenga had stated would be necessary for the used
car venture. Finally, given the low market price of Republic Common Stock at
that time, a proposed acquisition of AutoNation would have involved the issuance
of a substantial amount of shares of Republic Common Stock, which Mr. DeGroote
and Mr. Huizenga believed would have been overly dilutive to existing
stockholders of Republic. As a result, at that time, Mr. DeGroote and Mr.
Huizenga determined that it would not be in the best interests of Republic and
its stockholders to acquire and attempt to develop the used car megastore
concept.
Over the following months until March 1996, the used car industry was the
subject of encouraging media coverage in magazines, press and reports of
financial analysts, including several articles about or referencing the
AutoNation concept which Mr. Huizenga was developing with Steven R. Berrard,
Chief Executive Officer of AutoNation, Jim Moran, Chairman and Founder of JMFE,
and other investors, including three of Republic's Directors, Mr. Hudson, George
D. Johnson, Jr., and John J. Melk. In mid-March, 1996, Mr. Huizenga and Mr.
DeGroote, Republic's Vice Chairman (and still the largest beneficial owner of
Republic Common Stock), discussed re-exploring the possibility of the
acquisition of AutoNation by Republic. The reasons discussed for this were that
the AutoNation concept had progressed rapidly and its business plan had been
substantially developed and refined, over $52 million already had been invested
in AutoNation by its shareholders, AutoNation had assembled an experienced and
talented senior management team, a substantial portion of the period during
which AutoNation projected to be incurring operating losses had elapsed, and
Republic had substantially increased its equity base and market capitalization
such that a transaction would have a far less dilutive effect on existing
stockholders. In addition, Mr. Huizenga advised Mr. DeGroote that he had engaged
in discussions with certain Wall Street investment bankers, including Merrill
Lynch, with respect to underwriting an initial public offering of shares of
AutoNation, and that the preliminary valuations of AutoNation verbally presented
by such investment bankers for purposes of evaluating an initial public offering
were approximately $1 billion. No specific date or time period for an initial
public offering of AutoNation was anticipated by AutoNation or Republic
management or discussed with Merrill Lynch. On or about March 15, 1996, Mr.
Huizenga sent Mr. DeGroote the business plan, financial statements and
projections of AutoNation, as well as more detailed information regarding
AutoNation's management team, real estate holdings and other matters. The other
members of Republic's Board of Directors promptly were advised of such
discussions and were sent the AutoNation business plan and other materials.
During the week of March 18, 1996, Mr. Huizenga and Mr. DeGroote discussed
by telephone the viable alternatives that appeared to be available to
AutoNation, which were for AutoNation to "go public," to continue to raise
private capital from Mr. Huizenga and the other investors in AutoNation, or to
merge AutoNation with a well-capitalized public company.
On Friday, March 22, 1996, Mr. Huizenga met Mr. DeGroote in Bermuda to
discuss those alternatives in further detail. At that meeting, Messrs. Huizenga
and DeGroote reviewed the public offering projections verbally presented to Mr.
Huizenga by the Wall Street investment bankers, reviewed the estimated size and
potential growth of the used car industry, reviewed potential acquisition
candidates that could be targeted for accelerated growth in the used car
industry and related businesses, and reviewed Republic's financial position and
access to capital markets. They discussed various alternatives, including having
Republic not proceed any further with respect to AutoNation, to have Republic
make an investment in AutoNation or to have Republic acquire all of AutoNation.
Mr. DeGroote and Mr. Huizenga separately reviewed the substance of these
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discussions with the other members of the Board of Directors by telephone during
the week following the March 22nd meeting. After thorough review, Mr. DeGroote
believed that it would be in the best interests of Republic and its stockholders
to seek to acquire all of AutoNation for up to 20 million shares of Republic
Common Stock.
On Wednesday, March 27, 1996, Mr. Huizenga, as Chairman of AutoNation, met
with two of the three other members of AutoNation's board, Mr. Berrard and
Lawrence S. Rich, Chief Operating Officer and a director of JMFE. Jim Moran,
Chairman of JMFE, and Pat Moran, President and a director of JMFE, also attended
this meeting; JMFE was the second largest owner of shares of AutoNation Common
Stock. Mr. Huizenga reviewed with such persons the discussions which Mr.
Huizenga had with Mr. DeGroote concerning the possibility of having Republic
acquire or make an investment in AutoNation as possible alternatives to taking
AutoNation public as a separate company. They collectively determined to pursue
a transaction in which AutoNation would be acquired by Republic in exchange for
approximately 17 to 20 million shares of Republic Common Stock, which then had a
market value of approximately $250 to $300 million based on the closing price
per share on Nasdaq of $14.3125 on March 26, 1996 for Republic Common Stock.
Their reasons for pursuing such a transaction were that keeping AutoNation as a
privately-held company was feasible but would require them to invest
substantially more capital than that which they already had invested, as well as
to obtain substantial lines of credit to finance continued development and
growth. The alternative of going public was viewed positively as a means of
having ready access to sufficient capital to develop operations but it was
determined that AutoNation will incur losses for several quarters and as a
consequence, could have limited access to additional capital in the future if
needed. Merging with Republic not only provided access to substantial amounts of
capital to continue development of the AutoNation megastores, but also did so in
a public entity that could be reporting earnings during the development stage of
operations. As a result, they decided to pursue a possible acquisition by
Republic, to be structured as a tax-free transaction.
On Friday, March 29, 1996, the Board of Directors of Republic held a
special meeting in Fort Lauderdale, Florida, from approximately 8:30 a.m. until
3:30 p.m. to consider a possible transaction with AutoNation. At that meeting,
Mr. Huizenga summarized for the Board a possible initial public offering of
AutoNation, as well as the financial projections verbally presented to Mr.
Huizenga by certain Wall Street investment bankers relating to such initial
public offering, his discussions with Mr. DeGroote, his discussions with Messrs.
Moran, Rich and Berrard about AutoNation's alternatives, and 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 to $300
million based on the March 26, 1996 closing price. The Board generally discussed
these matters for over two hours. Mr. Berrard then was introduced by Mr.
Huizenga to the Board, and Mr. Berrard and several members of AutoNation's
senior management team made a two hour presentation to the Board of Directors
about AutoNation's concept, marketing and advertising plans, financial
projections, megastore design, real estate site analysis, real estate sites
owned and sites subject to purchase contracts, sources of vehicle supply and
financing, and operational matters. Mr. Berrard and AutoNation's management team
answered numerous questions posed by the Board during and immediately following
the presentation. Following the conclusion of the presentation and answering of
questions by AutoNation's management team, the Board continued to meet for two
more hours, and reviewed the material and information which had been presented
to it. The Board was favorably impressed with the AutoNation concept and
prospects, and discussed how Republic could pursue an acquisition of AutoNation
at the $250 million valuation proposed by AutoNation given the ownership
interests in AutoNation held by Messrs. Huizenga, Hudson, Johnson and Melk. Upon
advice of Richard L. Handley, Senior Vice President and General Counsel to
Republic, the Board appointed a Special Committee composed of disinterested
outside directors, namely, Mr. DeGroote, Rick L. Burdick and J.P. Bryan. By
unanimous resolution of the full Board of Directors, the Special Committee was
delegated the exclusive power and authority to (i) negotiate, review and
evaluate the terms and conditions of the proposed transaction in which all of
the outstanding shares of common stock of AutoNation would be acquired in a
tax-free transaction in exchange for 17,467,248 shares of Republic Common Stock,
which as of March 26, 1996 had a market value of $250 million, and, if the
Special Committee deemed appropriate, approve the execution and delivery of
documents setting forth the proposed transaction on behalf of Republic, (ii)
determine whether the proposed transaction was fair to, and in the best
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<PAGE> 21
interests of, Republic and all of its stockholders, and (iii) if deemed
advisable and in the best interests of Republic and in the interests of all of
its stockholders, approve the proposed transactions, and if stockholder approval
was determined to be required, recommend the proposed transactions to Republic's
stockholders for approval. The full Board further resolved that no such
transaction would be approved or recommended to Republic's stockholders without
the prior favorable recommendation of the Special Committee, and authorized the
Special Committee to retain its own special legal counsel and financial advisor
in connection with its assigned duties. Mr. DeGroote was appointed the Chairman
of the Special Committee by the members thereof.
On March 29, 1996, Republic issued a press release announcing the
developments to that date with respect to AutoNation, including the appointment
of the Special Committee.
The Special Committee retained Potter, Anderson & Corroon as separate
special counsel, and requested proposals from four major Wall Street investment
banking firms for financial advice and the issuance of a fairness opinion with
respect to a possible acquisition of AutoNation. After reviewing three proposals
which were submitted to the Special Committee during the week of April 1, 1996,
the Special Committee retained Merrill Lynch to render a fairness opinion with
respect to the proposed transaction with AutoNation.
On Wednesday, April 10, 1996, at the request of Mr. Burdick on behalf of
the Special Committee, Republic's senior management and Akerman, Senterfitt &
Eidson, P.A., Republic's regular outside counsel, prepared and delivered to the
Special Committee a summary of the principal terms and conditions of the
significant acquisitions made by Republic since August 1995. The Special
Committee and its special counsel, and Merrill Lynch, continued to review the
materials provided to Republic by AutoNation, and the Special Committee
considered the terms and conditions it would request of AutoNation and its
shareholders in light of that review and in light of the recent material
acquisitions consummated by Republic.
On April 11, 1996, the Special Committee (with Mr. Bryan participating by
telephone) met with its special counsel, Robert K. Payson and Donald J. Wolfe,
Jr. of Potter, Anderson & Corroon, and Charles A. Lewis, Daniel M. Dickinson,
and Brad J. Jaros of Merrill Lynch, in Toronto, Canada, for approximately six
hours. At this meeting, the history and status of the discussions regarding the
proposed transaction with AutoNation was reviewed, Merrill Lynch made a
presentation and answered questions regarding its written report addressing
valuation issues relevant to the proposed transaction, special counsel to the
Special Committee reviewed the fiduciary responsibilities of the Special
Committee under Delaware law, and various alternatives for structuring and
negotiating the transaction were explored. Such alternatives included
discussions regarding the number of shares of Republic Common Stock to be issued
in the proposed merger; whether the shares of Republic Common Stock to be
received by directors and/or officers of AutoNation should be restricted from
sale, and if so, for what time period; non-competition agreements; types of
representations and warranties and how long after the proposed transaction they
should survive; whether the number of shares of Republic Common Stock to be
exchanged in the proposed transaction should be subject to adjustment depending
on the market price of the Republic Common Stock; the effect of Hart-Scott-
Rodino; and piggy-back registration rights. At the conclusion of this meeting,
the Special Committee unanimously resolved to prepare and submit proposed terms
and conditions to AutoNation and authorized Messrs. DeGroote and Burdick to
engage in further discussions with AutoNation representatives on that basis.
On Monday, April 15, 1996, Messrs. DeGroote and Burdick of the Special
Committee, together with Gregory K. Fairbanks, then Executive Vice President and
Chief Financial Officer of Republic, Mr. Handley, and Jonathan L. Awner of
Akerman, Senterfitt & Eidson, P.A., outside counsel for Republic, met for
approximately three hours with Messrs. Berrard and Rich of AutoNation, to
negotiate additional terms and conditions of the proposed merger transaction.
Mr. Huizenga attended part of this meeting, as did Mr. Lewis of Merrill Lynch.
Among the principal terms and conditions negotiated at the April 15th
meeting, the Special Committee requested that the shareholders of AutoNation be
subject to "lock-up" agreements pursuant to which they would be contractually
restricted from selling any of the shares of Republic Common Stock to be
received in the merger transaction for up to two years following the date of the
merger. Messrs. Huizenga and Berrard agreed to such a two year lock-up
agreement, and Mr. Rich confirmed that JMFE would agree to a two-year
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<PAGE> 22
lock-up agreement and that Mr. Moran would agree to a one year lock-up
agreement. They also agreed that all of the other AutoNation shareholders would
be bound by six month lock-up agreements. The Special Committee believed such
lock-up agreements to be important as they would preclude the investors in
AutoNation, including Mr. Huizenga, from being able to realize any financial
gain from the shares of Republic Common Stock received in the Merger until a
point in time when the financial performance of AutoNation as a division of
Republic would be contributing to the earnings and growth of Republic.
Alternatively, if AutoNation were to fail to meet expectations, the shareholders
of AutoNation, including Mr. Huizenga, would not be able to profit from the
merger transaction before the results of AutoNation were established and
presumably reflected in the market price of Republic Common Stock. Additional
terms and conditions were negotiated concerning indemnification by the
controlling shareholders of AutoNation, including Mr. Huizenga, for breaches of
representations to be made in a definitive merger agreement, providing for
non-competition covenants, and addressing other matters.
Republic and its outside counsel prepared a draft of a merger agreement
based on the April 15th negotiations and circulated it to the Special Committee
and its special counsel on April 17, 1996. On April 19, 1996, a revised draft of
the proposed merger agreement was sent to Mr. Berrard and other representatives
of AutoNation and their counsel, Atlas, Pearlman, Trop & Borkson, P.A.
Representatives of Republic performed due diligence reviews of AutoNation during
the weeks of April 15th and April 22nd.
From April 29, 1996 until May 3, 1996, senior management of Republic,
including Messrs. Fairbanks and Handley, together with outside counsel to
Republic, met daily with AutoNation representatives, including Messrs. Berrard
and Rich, together with their counsel, for extensive negotiations and review of
the terms and conditions of the drafts of the merger agreement and related
documents. Messrs. Fairbanks, Handley, and/or Republic's outside counsel,
regularly reported on the status of the negotiations and presented issues
directly to Messrs. DeGroote or Burdick of the Special Committee, or to special
counsel to the Special Committee, during this period and received instructions
from the Special Committee with respect to the issues and matters being
negotiated.
On Monday, May 6, 1996, the Special Committee, Merrill Lynch, and their
respective counsel, received the revised and negotiated drafts of the merger
agreement and related documents. In addition, Republic and its counsel and
auditors completed a due diligence report with respect to AutoNation which was
provided to the Special Committee and its counsel, and to Merrill Lynch, on May
6, 1996.
Late in the afternoon on May 7, 1996, the Special Committee (without Mr.
Bryan present), having reviewed the negotiated drafts of the merger agreements
and other documents and reports provided to them, convened a meeting by
telephone conference call, in which its special counsel and representatives of
Merrill Lynch participated. Mr. Handley and outside counsel to Republic also
participated at certain times. Such meeting was adjourned, then reconvened by
telephone conference call on the morning of May 8, 1996 (with Mr. Bryan
present). During these conference calls, the Special Committee thoroughly
reviewed the terms and conditions of the most recent version of the proposed
merger agreement and related documents as well as a previously submitted draft
of Merrill Lynch's opinion. Merrill Lynch presented and answered questions
regarding its opinion as to the fairness of the proposed transaction, and its
formal written opinion was issued to the Special Committee on May 7, 1996. On
May 8, 1996, the Special Committee thereupon determined that the terms and
conditions of the merger agreement and related documents were fair to and in the
best interests of Republic and its stockholders, adopted them, and authorized
their execution by Mr. Handley on behalf of Republic in substantially the form
reviewed and adopted by the Special Committee.
On Wednesday, May 8, 1996, the Board of Directors and shareholders of
AutoNation adopted the Merger Agreement, authorized the transactions
contemplated thereby, and authorized their execution and delivery, by unanimous
written consents in lieu of meetings.
On May 8, 1996, the Merger Agreement and related documents were executed
and delivered by all parties thereto, and Republic issued a press release
announcing the execution of the Merger Agreement.
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RECOMMENDATION OF THE SPECIAL COMMITTEE AND REASONS FOR THE MERGER
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF REPUBLIC HAS ADOPTED THE
MERGER AGREEMENT, DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS OF
REPUBLIC AND ITS STOCKHOLDERS, AND RECOMMENDS THAT THE STOCKHOLDERS OF REPUBLIC
VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
In making its determinations, the Special Committee considered the
following material factors:
(1) the financial and other terms and conditions of the Merger
Agreement;
(2) the Special Committee's belief, after consultation with management
and Merrill Lynch, that acquiring AutoNation for approximately 17,467,248
shares of Republic Common Stock represents a substantial discount to the
cost of acquiring AutoNation if it were valued at its potential separate
initial public offering valuation;
(3) presentations of Merrill Lynch at the April 11th, April 15th and
May 7th meetings, and the written opinion of Merrill Lynch dated May 7,
1996, to the effect that, as of May 7, 1996 and based upon the assumptions
made, procedures followed, matters considered, and limits of review as set
forth in such opinion, the consideration to be paid by Republic pursuant to
the Merger Agreement is fair to Republic from a financial point of view
(for a summary of Merrill Lynch's opinion, including the assumptions made,
procedures followed, matters considered, and limits of review, see
"-- Opinion of Merrill Lynch" below);
(4) the Special Committee's belief, after consultation with Messrs.
Huizenga, Berrard and Rich, that AutoNation's likely alternative to a
merger transaction with Republic would be to complete its own separate
initial public offering of shares of its common stock, and the Special
Committee's belief that the market might perceive that Mr. Huizenga's
commitment and attention to Republic might be adversely impacted if
AutoNation were a separate public company chaired and substantially owned
by Mr. Huizenga;
(5) the Special Committee's desire to acquire the expertise and
talents of AutoNation's senior management team, including, but not limited
to, the addition of Mr. Berrard as the President and Chief Operating
Officer and a Director of Republic;
(6) the terms of the lock-up agreements which were agreed to by
Messrs. Huizenga, Berrard and Moran, by JMFE, and by the other shareholders
of AutoNation, which effectively provide that the AutoNation shareholders
will not be able to realize any financial gain from the Merger until
sufficient time has passed to allow the financial performance of AutoNation
to be contributing to the consolidated earnings and growth of Republic,
thereby providing the AutoNation shareholders, particularly Messrs.
Huizenga and Berrard and JMFE, a tremendous financial incentive to assure
the successful financial performance of AutoNation and Republic following
the Merger;
(7) the belief of the Special Committee that the acquisition of
AutoNation would provide Republic with a means of internally generating
substantial growth in revenue and ultimately in earnings, which growth
otherwise is available to Republic in its present lines of business
principally through acquisitions; and
(8) the opportunity for stockholders of Republic to maintain an equity
interest in a broader, more diversified base of businesses in which
Republic would operate if it were combined with AutoNation.
The Special Committee did not assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
Special Committee viewed its position and recommendations as being based on the
totality of the information presented to and considered by it. Individual
members of the Special Committee may have given different weights to different
factors.
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OPINION OF MERRILL LYNCH
At the May 7, 1996 meeting of the Special Committee, Merrill Lynch
delivered its written opinion dated May 7, 1996 to the Special Committee, that
as of May 7, 1996, and based upon the assumptions made, procedures followed,
matters considered, and limits of review as set forth in such opinion, the
consideration to be paid by Republic pursuant to the Merger Agreement is fair to
Republic from a financial point of view. Merrill Lynch also has delivered to the
Special Committee a substantially identical opinion, dated the date of this
Proxy Statement, hereinafter referred to as the "Merrill Lynch Opinion".
THE FULL TEXT OF THE MERRILL LYNCH OPINION DATED AS OF THE DATE OF THIS
PROXY STATEMENT, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT AND
IS INCORPORATED HEREIN BY REFERENCE. REPUBLIC'S STOCKHOLDERS ARE URGED TO READ
SUCH OPINION CAREFULLY AND IN ITS ENTIRETY IN CONJUNCTION WITH THIS PROXY
STATEMENT. THE MERRILL LYNCH OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE
CONSIDERATION TO BE PAID BY REPUBLIC PURSUANT TO THE MERGER AGREEMENT FROM A
FINANCIAL POINT OF VIEW AND DOES NOT CONTAIN A RECOMMENDATION TO ANY STOCKHOLDER
OF REPUBLIC AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER.
THE CONSIDERATION TO BE PAID BY REPUBLIC IN THE MERGER INCLUDING THE EXCHANGE
RATIO (AS DEFINED BELOW) WAS NOT DETERMINED BY MERRILL LYNCH. THE SUMMARY OF THE
MERRILL LYNCH OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERRILL LYNCH OPINION ATTACHED AS
ANNEX B TO THIS PROXY STATEMENT.
In connection with rendering the Merrill Lynch Opinion, Merrill Lynch: (1)
reviewed the Merger Agreement and this Proxy Statement; (2) reviewed certain
information, including financial forecasts, relating to the business, earnings,
cash flow, assets and prospects of AutoNation and Republic's car rental business
furnished to Merrill Lynch by senior management of AutoNation and Republic,
respectively; (3) held discussions with members of senior management of
AutoNation concerning its financial condition, businesses, cash flow, assets,
liabilities, operations, financial forecasts, contingencies and prospects; (4)
compared the historical and projected results of operations of AutoNation with
that of certain companies, organizations and businesses which Merrill Lynch
deemed to be reasonably similar to AutoNation; (5) considered the trading range
of Republic Common Stock and the pro forma effect of the Merger on Republic's
projected earnings, capitalization ratios and cash flows; (6) considered a
discounted cash flow analysis based on future cash flows that management of
AutoNation expects to generate; (7) considered the equity valuations of certain
companies, organizations and businesses, which Merrill Lynch deemed to be
reasonably similar to AutoNation, that recently completed initial public
offerings of equity securities; (8) considered the business background of the
members of the AutoNation senior management team and the financial performance
of the businesses with which they have been associated; and (9) reviewed such
other financial studies and analyses and performed such other investigations and
took into account such other matters (as more fully described below) as Merrill
Lynch deemed necessary, including its assessment of general economic, market and
monetary conditions.
In rendering the Merrill Lynch Opinion, Merrill Lynch assumed and relied
upon the accuracy and completeness of all information supplied or otherwise made
available to it by AutoNation and Republic, and Merrill Lynch did not
independently verify such information or undertake an independent appraisal of
the assets and liabilities contingent or otherwise of AutoNation or Republic.
With respect to the financial forecasts furnished by AutoNation and Republic,
Merrill Lynch has assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of AutoNation's and
Republic's senior management, respectively. The Merrill Lynch Opinion states
that it speaks only as of the date of such opinion, based on the proposed Merger
as presented and the facts and circumstances existing as of such date and that
subsequent events and developments including, but not limited to, a change in
applicable law, facts, circumstances (including, but not limited to, changes
affecting its assumptions set forth therein) may affect the conclusions set
forth in the Merrill Lynch Opinion and, in such event, the Merrill Lynch Opinion
should not be relied on in the future. Merrill Lynch has assumed no obligation
to update, revise, reaffirm or withdraw its opinion as a result of any such
subsequent events or developments, the invalidity of the assumptions set forth
therein, or otherwise.
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The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
the Merrill Lynch Opinion. The matters considered by Merrill Lynch in arriving
at the Merrill Lynch Opinion are based on numerous macroeconomic, operating and
financial assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond Republic's or
AutoNation's control. Merrill Lynch did not express any opinion as to what the
value of the shares of Republic Common Stock actually would be when issued to
AutoNation shareholders pursuant to the Merger or the prices which shares of
Republic Common Stock would trade subsequent to the Merger. No limitations were
imposed by the Special Committee upon Merrill Lynch with respect to the
investigations made or the procedures followed by it in rendering its opinion.
The Merrill Lynch Opinion does not present a discussion of the relative
merits of the Merger as compared to any other business plan or opportunity that
might be presented to Republic, or the effect of any other arrangement in which
Republic might engage. Merrill Lynch did not identify any mergers or
acquisitions that it deemed to be relevant for purposes of its analysis and,
accordingly, did not undertake any analysis comparing the financial terms of the
Merger with other mergers or acquisitions.
The following is a summary of all of the material financial analyses
considered by Merrill Lynch in arriving at the Merrill Lynch Opinion.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis of AutoNation. Under the discounted cash flow analysis, Merrill
Lynch analyzed projections of AutoNation's future performance under two
scenarios prepared by the management of AutoNation, an aggressive case
("Aggressive Case") and a base case ("Base Case"). In addition, Merrill Lynch
developed and analyzed a third set of projections (the "Conservative Case") that
reflected slower future financial growth assumptions than either the Aggressive
Case or the Base Case with respect to, among other things, the number of store
openings per year, timing of store openings and annual units sold per store.
Merrill Lynch did not establish which set of projections (e.g., Aggressive Case,
Base Case or Conservative Case) were more likely to be realized. Utilizing these
projections and using discount rates ranging from 18% to 22%, Merrill Lynch
calculated a range of present values for AutoNation based upon the discounted
net present value of the sum of (i) the projected stream of cash flows for
fiscal years 1997 through 2001 and (ii) the projected terminal value of
AutoNation in January 2002. The terminal value (the value of AutoNation in the
final year of its projections) was determined by applying the following two
methodologies: (i) applying multiples ranging from 5.0X to 7.0X to AutoNation's
estimated earnings before interest, taxes, depreciation and amortization
("EBITDA") for the year 2001 and (ii) applying cash flow perpetuity growth rates
of 6.0% to 10.0% to AutoNation's EBITDA for the year 2001. This analysis implied
aggregate net present values of the equity of AutoNation to be in a range of
$2.0 billion to $2.6 billion for the Aggressive Case, $1.2 billion to $2.0
billion for the Base Case, and $600 million to $1.0 billion for the Conservative
Case.
Pro Forma Merger Analysis. Using the financial information and projections
provided to Merrill Lynch by AutoNation, and utilizing EPS estimates for
Republic derived from (i) an equity analyst research report prepared by a
nationally recognized investment banking firm (the "Report") and (ii) estimates
for Republic's car rental business provided by Republic's senior management,
Merrill Lynch reviewed the accretion of or dilution to Republic's 1997, 1998 and
1999 projected earnings per share resulting from the Merger (after giving effect
to Republic's acquisition of Alamo). Merrill Lynch utilized the Report in
determining Republic's estimated earnings based on its view that current analyst
estimates for Republic already give effect to the acquisition of AutoNation. The
Report provided earnings estimates for each of Republic's divisions (other than
Republic's car rental business) and Merrill Lynch derived earnings estimates for
Republic without giving effect to the acquisition of AutoNation utilizing the
Report and estimates for Republic's car rental business provided by Republic's
senior management. This analysis revealed that the Merger would be (i) dilutive
to 1997 earnings per share in amounts ranging from 2.4% to 15.2%, (ii) dilutive
to 1998 earnings per share by 6.2% (utilizing the Conservative Case projections)
and accretive to 1998 earnings per share in amounts ranging from 9.3% to 25.2%
(utilizing the Base Case and Aggressive Case projections) and (iii) accretive to
1999 earnings per share in amounts ranging from 5.6% to 56.2%.
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Analysis of Selected Comparable Publicly Traded Companies; Potential Public
Market Valuation. Merrill Lynch reviewed certain financial information and
public market multiples for the following eleven publicly traded companies which
Merrill Lynch considered to be reasonably comparable, in concept, to AutoNation
for the purpose of its analyses: Autozone, Inc., Baby Superstore, Inc., Barnes &
Noble, Inc., Bed Bath & Beyond, Inc., Best Buy Co. Inc., Circuit City Stores,
Inc., Comp USA Inc., Home Depot, Inc., Pep Boys-Manny Moe & Jack, Petsmart Inc.
and Republic (the "High Growth Retail Comparables"). In selecting the High
Growth Retail Comparables, Merrill Lynch considered whether the company is a
national high growth retail company which generally focuses on a specific
industry segment. Merrill Lynch also reviewed certain financial information and
public market multiples for Cross Continent Auto Retailers and United Auto
Group, the first two megadealers of new cars to enter the public market (the
"Automotive MegaDealers" together with the High Growth Retail Comparables, the
"Comparable Companies"). In its analyses, Merrill Lynch utilized estimated
earnings per share information for the Comparable Companies for the years 1997,
1998 and 1999. The 1997 and 1998 EPS estimates were obtained from First Call, an
on-line data service available to subscribers which compiles such estimates
developed by research analysts, as of December 3, 1996 and were adjusted by
Merrill Lynch in certain cases to reflect a calendar year end. The First Call
estimates were not prepared in connection with the Merger or at Merrill Lynch's
request. The 1999 EPS estimates were based on 1998 EPS information multiplied by
a growth rate ranging from 16.0% to 50.0%. Utilizing the closing public market
price for each of the Comparable Companies as of December 3, 1996, Merrill Lynch
calculated the public market price as a multiple of (i) 1997 EPS to range
between 14x and 62.3x (with a mean of 27.5x and a median of 21.1x), (ii) 1998
EPS to range between 10.8x and 42.3x (with a mean of 21x and a median of 17.1x),
and (iii) 1999 EPS (with respect to the High Growth Comparable Companies only)
to range between 11.9x and 28.7x (with a mean of 16.9x and a median of 13.5x).
Merrill Lynch also reviewed equity analyst research reports prepared by Merrill
Lynch relating to the projected public trading price per share of, and projected
1998 earnings estimates for, the CarMax subsidiary of Circuit City Stores, Inc.
("CarMax"). Circuit City has publicly announced its intention to create a
separate class of stock for its CarMax subsidiary and to offer a portion of that
stock to the public and Merrill Lynch considered CarMax to be the most
comparable entrant in the used car megastore industry to AutoNation in strategy,
size and growth potential. Merrill Lynch determined the projected market price
per share of CarMax capital stock as a multiple of the projected 1998 earnings
for CarMax on a standalone basis (based on Merrill Lynch research and adjusted
to reflect a calendar year end) to range between 40x and 45x. Moreover, Merrill
Lynch reviewed equity analyst research reports prepared by Merrill Lynch and
another nationally recognized investment banking firm with respect to the
automotive retailing industry generally and/or with respect to Republic which
attribute 1998 earnings per share multiples ranging from 30x to 40x to
AutoNation.
Merrill Lynch applied a range of multiples of 20x to 25x to AutoNation's
estimated 1998 net income using the Aggressive Case and the Base Case and
derived an implied aggregate public trading market value for AutoNation to range
from $700 million to $1.5 billion. In determining the range of multiples to be
applied in its implied public trading market value analysis, Merrill Lynch
considered the following factors: the information analyzed by Merrill Lynch with
respect to the Comparable Companies and CarMax, management's track record with
other companies in creating shareholder value, AutoNation's business plan, the
positive publicity that the used-car megastore retailing concept has received
and the overall receptivity of the new issues market.
Contribution Analysis. Merrill Lynch analyzed and compared the respective
projected contribution of total revenues, earnings before interest and taxes
("EBIT") and net income for Republic (after giving effect to Republic's
acquisition of Alamo) and AutoNation in 1997 and 1998. Utilizing the Aggressive
Case projections provided by AutoNation and earnings estimates for Republic
derived by Merrill Lynch from the Report and estimates for Republic's car rental
business provided by Republic's senior management, the analysis indicated that,
after giving effect to the consummation of the Merger, AutoNation shareholders
would receive approximately 5.7% of the outstanding shares of Republic on a
fully diluted basis, and that AutoNation would contribute 34.8% and 53.7%, in
1997 and 1998, respectively, to combined revenues, 7.2% and 24.5%, in 1997 and
1998, respectively, to combined EBIT, and 2.9% and 24.0%, in 1997 and 1998,
respectively to combined net income.
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<PAGE> 27
In arriving at the Merrill Lynch Opinion, Merrill Lynch performed a variety
of financial analyses, all of the material portions of which are summarized
above. The preparation of a fairness opinion is a complex 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, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, Merrill Lynch made qualitative
judgments as to the significance and relevance of each analysis and factor
considered by it. Accordingly, while all of the material financial analyses
considered by Merrill Lynch in arriving at the Merrill Lynch Opinion are
described above, Merrill Lynch believes that its analyses must be considered as
a whole and that selecting portions of its analyses and the factors considered
by it, without considering all factors and analyses, could create a misleading
or incomplete view of the process underlying the analysis set forth in the
Merrill Lynch Opinion and of the Merrill Lynch Opinion. Merrill Lynch did not
assign relative weights to any of its analyses in preparing the Merrill Lynch
Opinion. Any estimates incorporated in the analyses performed by Merrill Lynch
and the ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual past or future values or results, which may be
significantly more or less favorable than any such estimates or those suggested
by such analysis. Estimated values do not purport to be appraisals and do not
necessarily reflect the prices at which businesses or companies may be sold in
the future, and such estimates are inherently subject to uncertainty. No public
company utilized as a comparison is identical to Republic, AutoNation or the
business segment for which a comparison is being made. Accordingly, an analysis
of publicly traded comparable companies is not mathematical; rather it involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the comparable companies and other factors that
could affect the public trading value of the comparable companies or company to
which they are being compared.
The Special Committee selected Merrill Lynch to render a fairness opinion
because Merrill Lynch is an internationally recognized banking firm with
substantial expertise in transactions similar to the Merger. As part of its
investment banking business, Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions. Merrill Lynch has provided, from time to time, various investment
banking, financial advisory and financial services to companies that had as
directors, officers or shareholders certain individuals who are currently
affiliated with Republic or AutoNation, for which it has received customary
compensation.
No limitations were imposed on Merrill Lynch by the Special Committee or
management of Republic with respect to the investigations made or procedures
followed by Merrill Lynch in preparing and rendering its opinion, and Republic
and its management cooperated fully with Merrill Lynch in connection therewith.
Republic agreed to pay, and has paid, Merrill Lynch $250,000 as
compensation for Merrill Lynch's services in rendering the Merrill Lynch
Opinion. In addition, Republic also has agreed to reimburse Merrill Lynch for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
its legal counsel) and to indemnify Merrill Lynch and certain related persons
against certain liabilities, including liabilities under the federal securities
laws, arising out of its engagement.
In the ordinary course of Merrill Lynch's business, Merrill Lynch may
actively trade the securities of Republic and its affiliates for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.
THE MERGER AGREEMENT
The following is a brief summary of certain terms of the Merger Agreement,
a copy of which is attached as Annex A to this Proxy Statement and is
incorporated herein by reference. This summary is qualified in its entirety by
reference to the full text of the Merger Agreement.
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GENERAL
The Board of Directors of AutoNation and the Special Committee of the Board
of Directors of Republic, meeting separately, each authorized the execution and
performance of the Merger Agreement. In addition, all of the shareholders of
AutoNation have approved and adopted the Merger Agreement.
EFFECTIVE TIME; EFFECT OF MERGER
If the Merger Agreement is approved and adopted by the requisite vote of
the stockholders of Republic, and all other conditions to the obligations of the
parties to consummate the Merger are satisfied or waived, the Merger will become
effective at the Effective Time upon the filing of articles of merger with the
Secretary of State of the State of Florida. As of the Effective Time, Mergersub
will be merged with and into AutoNation, with AutoNation continuing as the
surviving corporation and a wholly-owned subsidiary of Republic.
CONVERSION OF SHARES
As of the Effective Time, Republic will issue to the holders of AutoNation
Common Stock an aggregate of 17,467,248 shares of Republic Common Stock. As of
the Effective Time, each share of AutoNation Common Stock will be converted into
0.217796 of a share of Republic Common Stock (the "Exchange Ratio").
No fractional shares of Republic Common Stock will be issued upon
consummation of the Merger. In lieu thereof, each holder of AutoNation Common
Stock as of the Effective Time will receive a cash payment without interest
equal to the fair market value of the fractional share of Republic Common Stock
to which such holder otherwise would be entitled, calculated by multiplying such
fraction by the average of the daily closing prices of a share of Republic
Common Stock on Nasdaq for the five consecutive trading days ending on the
second trading day prior to the Effective Time.
STOCK OPTIONS
At the Effective Time, Republic shall assume all of AutoNation's rights and
obligations under the AutoNation 1995 Employee Stock Option Plan (the
"AutoNation Plan") with respect to each outstanding option to acquire shares of
AutoNation Common Stock (the "AutoNation Stock Options"), and the AutoNation
Plan shall continue with the same force and effect as existed immediately prior
to the Effective Time, except (a) that each AutoNation Stock Option granted
under the AutoNation Plan shall be converted into an option to acquire 0.217796
of a share of Republic Common Stock for each share of AutoNation Common Stock
subject to such AutoNation Stock Option, rounded to the nearest whole share of
Republic Common Stock for all options held by each such option holder, and (b)
that the exercise price per share of Republic Common Stock for all such
converted options shall be equal to the product of the exercise price of each
AutoNation Stock Option as of the date of grant thereof multiplied by 4.59145.
As of the date hereof, there are (i) an aggregate of 1,340,000 AutoNation
Stock Options outstanding which are (subject to the terms and conditions of the
AutoNation Plan) exercisable at $1.00 per share of AutoNation Common Stock,
which will be converted into options to purchase 291,847 shares of Republic
Common Stock at an exercise price of $4.59 per share, and (ii) an aggregate of
265,566 AutoNation Stock Options outstanding which are (subject to the terms and
conditions of the AutoNation Plan) exercisable at $3.00 per share of AutoNation
Common Stock, which will be converted into options to purchase 57,840 shares of
Republic Common Stock at an exercise price of $13.77 per share. At the Effective
Time, Republic will issue to each holder of an outstanding AutoNation Stock
Option a document evidencing the assumption by Republic of AutoNation's
obligations with respect thereto.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties. The
representations and warranties of Republic and Mergersub, with certain
exceptions, relate to, among other things: (a) their organization and good
standing; (b) their corporate power and authority to enter into the Merger
Agreement;
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<PAGE> 29
(c) the enforceability of the Merger Agreement against them; (d) the valid
issuance of Republic Common Stock; (e) the absence of finder's fees; (f) the
capitalization of Republic; (f) the absence of restrictions and conflicts with
the Merger Agreement; (g) Republic's reports filed with the Commission and
financial statements; (h) the absence of certain changes since December 31,
1995; and (i) certain tax matters.
The representations and warranties of, Messrs. Huizenga and Berrard and
JMFE, with certain exceptions, relate to, among other things: (a) AutoNation's
organization and good standing; (b) AutoNation's and each such shareholder's
power and authority to enter into the Merger Agreement; (c) the enforceability
of the Merger Agreement against them; (d) AutoNation's capitalization; (e) the
share holdings of the shareholders of AutoNation; (f) the absence of
restrictions and conflicts with the Merger Agreement; (g) AutoNation's
subsidiaries; (h) AutoNation's financial statements; (i) the absence of certain
changes since December 31, 1995; (j) certain litigation matters; (k) certain
environmental matters; (l) certain real property matters; (m) compliance with
laws; (n) certain labor and employment matters; (o) certain employee benefit
plan matters; (p) certain tax matters; (q) certain insurance matters; (r)
certain license and permit matters; (s) certain intellectual property matters;
(t) certain related party transactions; (u) title to assets; (v) certain
securities law matters; (w) business locations and bank accounts; and (x) names
under which AutoNation does business. These representations and warranties will
survive the consummation of the Merger until July 15, 1997.
CERTAIN COVENANTS
Republic agreed to, as soon as practicable following execution of the
Merger Agreement, establish a record date, duly call, give notice of, convene
and hold a special meeting of its stockholders for the purpose of approving the
Merger Agreement and the transactions contemplated thereby. In connection
therewith, Republic agreed to prepare and file a proxy statement relating to
such special meeting and a registration statement for issuance of shares of
Republic Common Stock in the Merger. AutoNation, Messrs. Huizenga and Berrard
and JMFE have agreed to cooperate with Republic in connection with such proxy
statement and registration statement.
Republic, AutoNation, Messrs. Huizenga and Berrard and JMFE have each
agreed to (i) promptly make all filings under the HSR Act, and request early
termination of the waiting period thereunder, (ii) use its reasonable best
efforts to take all actions necessary under applicable law to consummate the
Merger, (iii) afford each other party reasonable access to financial, operating
and other information, (iv) give prompt notice of the occurrence or
non-occurrence of any event which would likely cause any covenant or condition
in the Merger Agreement not to be complied with or satisfied, (v) use its best
efforts to cause the Merger to qualify as a tax-free reorganization under
Section 368 of the Code, and (vi) make no public announcement related to the
Merger without the prior consent of the other parties.
AutoNation, Messrs. Huizenga and Berrard and JMFE have agreed not to
initiate or solicit discussions or negotiations with third parties relating to
the merger, sale or other disposition of any substantial part of the assets or
business of AutoNation or enter into any agreement with respect thereto. Messrs.
Huizenga and Berrard and JMFE have agreed not to sell, transfer or otherwise
dispose of any of their shares of AutoNation Common Stock.
Republic has agreed to cause its executive officers and directors to
execute and deliver certain confidentiality and non-disclosure agreements
relating to certain confidential information of AutoNation.
AutoNation has agreed that prior to consummation the Merger it shall
conduct its business only in the ordinary course of business consistent with its
business plan, as provided to Republic (the "Business Plan"), including (i)
preserving intact its business organization and goodwill, (ii) keeping available
the services of its current officers, employees and consultants, (iii)
preserving its present relationships with customers, suppliers and other persons
with which it has significant business relations, and (iv) operating its
business in compliance with all applicable laws in all material respects. In
addition, AutoNation has agreed not to (A) amend or otherwise change its
articles of incorporation or bylaws or equivalent organizational documents; (B)
issue, sell, pledge, dispose of, encumber, or, authorize the issuance, sale,
pledge, disposition, grant or encumbrance of any shares of its capital stock of
any class, or any options, warrants, convertible securities or other rights of
any
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kind to acquire any shares of such capital stock, except for a limited number of
stock options to new employees; (C) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock; (D) reclassify, combine, split, subdivide
or redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock; (E) acquire (including, without limitation, for cash or shares of
stock), by merger, consolidation, or acquisition of securities, any interest in
any person, or make any investment in any person either by purchase of
securities, contributions of capital or property transfer, or make any loans or
advances to any person except advances to employees not in excess of $5,000; (F)
except in the ordinary course of business, and consistent with the Business
Plan, purchase any property or assets of any other person for a purchase price
of $100,000 or more; (G) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or otherwise as an accommodation become
responsible for, the obligations of any person, except for "floor plan"
financings of vehicle inventories on commercially reasonable terms and
conditions; (H) enter into any material contract other than in the ordinary
course of business consistent with the Business Plan; (I) mortgage, pledge, or
otherwise subject to any lien any asset, tangible or intangible, or real
property, except for certain permitted liens; or (J) increase the compensation
payable or to become payable to its existing officers or employees, or, except
as presently bound to do, grant any severance or termination pay in excess of
$5,000 per individual to, or enter into any employment or severance agreement
with, any of its directors, officers or other employees, or establish, adopt,
enter into or amend or take any action to accelerate any rights or benefits
which any collective bargaining, bonus, profit sharing, trust, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any directors, officers or employees, except
in the ordinary course of business consistent with the Business Plan.
In connection with the execution of the Merger Agreement, Republic and
AutoNation entered into the Loan Agreement, pursuant to which Republic is
providing AutoNation a line of credit primarily during the period pending the
Closing. Borrowings under the Loan Agreement will be used by AutoNation for
operational expenses, capital expenditures and certain other expenses incurred
in accordance with the Business Plan, up to the amounts specified in a cash flow
needs projection provided to Republic, as well as for financing vehicle
inventories. The Loan Agreement is secured by certain assets of AutoNation. The
Special Committee reviewed, evaluated, negotiated and approved, in consultation
with its special counsel and financial advisor, the Loan Agreement in
conjunction with its analysis and approval of the Merger.
CONDITIONS PRECEDENT TO CLOSING
Conditions to Obligations of AutoNation, Messrs. Huizenga and Berrard, JMFE
and Republic. The obligations of AutoNation, Messrs. Huizenga and Berrard, JMFE
and Republic to effect the Merger are subject to the fulfillment at or prior to
the Effective Time of several conditions, including among others:
(i) The Merger Agreement shall have been approved and adopted by the
vote of the holders of a majority of the voting power of the shares of
Republic Common Stock entitled to vote in accordance with the Certificate
of Incorporation and Bylaws of Republic and applicable Delaware law.
(ii) Any applicable HSR Act waiting period, including any extension
thereof, shall have expired or been terminated.
Conditions to Obligations of Republic. The obligations of Republic to
effect the Merger are subject to the fulfillment at or prior to the Effective
Time of several conditions, any or all of which may be waived in whole or in
part by Republic, including among others:
(i) The representations and warranties of Messrs. Huizenga and Berrard
and JMFE contained in the Merger Agreement shall be true and correct in all
material respects at and as of the Effective Time and AutoNation and
Messrs. Huizenga and Berrard and JMFE shall have performed and complied in
all material respects with all of their respective obligations required by
the Merger Agreement to be performed or complied with at or prior to the
Effective Time.
(ii) There shall have been no material adverse change in AutoNation.
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(iii) Each of the shareholders of AutoNation who is an Affiliate of
AutoNation and/or Republic shall have delivered to Republic a letter
agreement relating to Rule 145 under the Securities Act, in form and
substance satisfactory to Republic.
(iv) All of the shareholders of AutoNation shall have delivered to
Republic a letter agreement relating to restrictions on the sale, transfer
or other disposition of the shares of Republic Common Stock to be received
by each of such shareholders in the Merger for periods ranging from six
months to two years.
(v) The consummation of the Merger shall not be precluded, enjoined,
prohibited or materially restricted by any order or injunction of a court
of competent jurisdiction.
Conditions to Obligations of AutoNation, Messrs. Huizenga and Berrard and
JMFE. The obligations of AutoNation and Messrs. Huizenga and Berrard and JMFE
to effect the Merger are subject to the fulfillment at or prior to the Effective
Time of several conditions, any or all of which may be waived in whole or in
part by them, including, among others:
(i) The representations and warranties of each of Republic and
Mergersub shall be true and correct in all material respects at and as of
the Effective Time and Republic and Mergersub shall have performed and
complied in all material respects with all of their obligations required by
the Merger Agreement to be performed or complied with at or prior to the
Effective Time.
(ii) There shall have been no material adverse change in Republic.
(iii) Republic shall have issued all of the shares of Republic Common
Stock required to be issued pursuant to the Merger and such shares shall
have been duly listed for trading on The Nasdaq Stock Market, subject to
official notice of issuance. In addition, Republic shall have paid the
required cash in lieu of fractional shares of Republic Common Stock.
(iv) The Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(v) The consummation of the Merger shall not be precluded, enjoined,
prohibited or materially restricted by any order or injunction of a court
of competent jurisdiction.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time:
(i) by mutual written consent of AutoNation and Republic at any time
prior to the Closing;
(ii) by Republic, upon a breach of any material representation,
warranty, covenant or agreement on the part of AutoNation, Messrs. Huizenga
and Berrard and JMFE set forth in the Merger Agreement, which cannot be, or
has not been, cured by the earlier of 10 days after written notice thereof
is given to the party committing such breach or December 31, 1996;
(iii) by AutoNation, upon a breach of any material representation,
warranty, covenant or agreement on the part of Republic set forth in the
Merger Agreement, which cannot be, or has not been, cured by the earlier of
10 days after written notice thereof is given to the party committing such
breach or December 31, 1996;
(iv) by either Republic or AutoNation if the Closing shall not have
been consummated before December 31, 1996;
(v) by Republic, if the Merger Agreement and the transactions
contemplated thereby fail to receive the requisite vote for approval and
adoption by the stockholders of Republic;
(vi) by AutoNation, if Republic shall not have received the waiver or
consent of its lenders under that certain Credit Facilities and
Reimbursement Agreement dated December 19, 1995 (the "Credit
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<PAGE> 32
Agreement"), which consent shall remain effective until September 30, 1996,
or otherwise shall not have modified such Credit Agreement to permit the
consummation of the Merger as a permitted acquisition thereunder; or
(vii) by Republic, if the Special Committee determines, whether before
or after Republic's stockholders vote at the Meeting, in good faith based
upon the advice of counsel and in consultation with its financial advisors,
that proceeding with the Merger would result in a breach of its fiduciary
duties under applicable law.
INDEMNIFICATION
Messrs. Huizenga and Berrard and JMFE have agreed to indemnify Republic
against any expenses, liabilities and damages incurred or suffered by Republic
(collectively, "Indemnifiable Damages") resulting from or arising out of any
breach of a representation or warranty made by AutoNation or Messrs. Huizenga
and Berrard and JMFE in or pursuant to the Merger Agreement. However, Messrs.
Huizenga and Berrard and JMFE shall not be liable to Republic with respect to
any claims for Indemnifiable Damages unless all Indemnifiable Damages incurred
by Republic exceed an aggregate of $2,500,000 (the "Indemnification
Deductible"), in which case they shall be liable only for the amount of such
Indemnifiable Damages in excess of such Indemnification Deductible and provided
that their maximum liability for Indemnifiable Damages shall not exceed
$50,000,000 in the aggregate.
EXPENSES
In connection with the consummation of the Merger, Republic has agreed to
pay all fees for filings under the HSR Act by any of the parties to the Merger
Agreement, all fees of Merrill Lynch in connection with their rendering a
fairness opinion to the Special Committee and all Commission and Nasdaq fees in
connection with the issuance, registration and listing of the shares of Republic
Common Stock to be issued pursuant to the Merger.
"LOCK-UP" AND NON-COMPETE AGREEMENTS
Each of Messrs. Huizenga and Berrard, and JMFE, have executed and delivered
letter agreements with Republic pursuant to which they have agreed, with certain
limited exceptions, (i) not to sell, transfer or otherwise dispose of the shares
of Republic Common Stock to be received by each of them in the Merger for a
period of two years following the Effective Time, (ii) not to publicly disclose
confidential information concerning the business of AutoNation, and (iii) not to
compete in the retail used car business for a period of 18 months following the
Effective Time (and in the case of Mr. Huizenga and Mr. Berrard, for such longer
period as they may be employed by Republic and 18 months thereafter). Jim Moran
has executed and delivered a similar letter agreement, except that the
restriction on his ability to sell, transfer or otherwise dispose of the shares
of Republic Common Stock to be received by him in the Merger is for a period of
one year following the Effective Time. All of the other shareholders of
AutoNation, at or prior to closing, will execute and deliver similar letter
agreements with Republic covering a period of six months following the Effective
Time.
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MANAGEMENT OF REPUBLIC BEFORE AND AFTER THE MERGER AND
THE PENDING REPUBLIC ACQUISITIONS
CURRENT REPUBLIC MANAGEMENT
The following table sets forth below certain information with respect to
those individuals who serve as members of the Board of Directors and executive
officers of Republic as of the date hereof.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION
- - ----------------------------------- --- ----------------------------------------------------
<S> <C> <C>
H. Wayne Huizenga.................. 58 Chairman of the Board and Co-Chief Executive Officer
Steven R. Berrard.................. 41 Co-Chief Executive Officer, President and a Director
Harris W. Hudson................... 53 Vice Chairman of the Board
J.P. Bryan......................... 56 Director
Rick L. Burdick.................... 45 Director
Michael G. DeGroote................ 63 Director
John J. Melk....................... 60 Director
George D. Johnson, Jr.............. 54 Director
Donald E. Koogler.................. 47 Executive Vice President
J. Ronald Castell.................. 58 Senior Vice President
Robert A. Guerin................... 53 Senior Vice President
Richard L. Handley................. 49 Senior Vice President, General Counsel and Secretary
Thomas W. Hawkins.................. 35 Senior Vice President
Robert J. Henninger, Jr. .......... 47 Senior Vice President
Michael S. Karsner................. 38 Senior Vice President and Chief Financial Officer
Michael R. Carpenter............... 38 Vice President and Corporate Controller
</TABLE>
The Board of Directors of Republic currently consists of eight members.
Directors are elected to serve until the next annual meeting of Republic's
stockholders, or until their earlier death, resignation, or removal from office.
Successors to those directors whose terms have expired are required to be
elected by stockholder vote while vacancies in unexpired terms and any
additional positions created by board action are filled by action of the
existing Board of Directors of Republic. The executive officers named above were
elected or appointed to serve in such capacities until the next annual meeting
of the Board of Directors of Republic, or until their respective successors have
been duly elected and have been qualified, or until their earlier death,
resignation, disqualification or removal from office.
Mr. Hudson is married to Mr. Huizenga's sister. Otherwise, there is no
family relationship between any of the directors and executive officers of
Republic.
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"), a diversified entertainment and communications company, from
September 1994 until October 1995. Mr. Huizenga also served as the Chairman of
the Board of the Blockbuster Entertainment Group, a division of Viacom, from
September 1994, at which time Viacom acquired Blockbuster Entertainment
Corporation ("Blockbuster") through a merger, until October 1995. From April
1987 through September 1994, Mr. Huizenga served as the Chairman of the Board
and Chief Executive Officer of Blockbuster, during which time he helped build
Blockbuster into the world's largest video and music retailer. Mr. Huizenga also
served as the President of Blockbuster from April 1987 to June 1988. Mr.
Huizenga also co-founded Waste Management, Inc., now known 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
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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.
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. Mr. Berrard joined Blockbuster in June 1987 as Senior Vice
President, Treasurer and Chief Financial Officer and became a Director of
Blockbuster in May 1989. He became Vice Chairman of the Board of Blockbuster in
November 1989 and served as Blockbuster's 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.
Harris W. Hudson 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.
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.
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.
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
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.
John J. Melk has served as a Director of Republic since August 1995. Mr.
Melk has been Chairman and Chief Executive Officer of H(')O Plus Inc., a bath
and skin care product manufacturer and retail distributor, since 1988. Mr. Melk
has been a private investor in various businesses since March 1984 and prior to
March 1984, he held various positions with Waste Management and its
subsidiaries, including President of Waste
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Management International, plc., a subsidiary of Waste Management. Mr. Melk also
serves as a Director of Psychemedics Corporation and 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.
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 1993. He is
also a Director of Duke Power Company, Viacom and PUCK.
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 June 1996 as Chief Operating
Officer. In September 1990, Mr. Koogler founded K&K Investment and Consulting
Services 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.
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's, then a chain of two hundred video stores headquartered
in the Washington, D.C. area.
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 October 1989. From March 1986 to March 1988, Mr. Guerin served
as Vice President and Region Manager of Waste Management of North America, Inc.,
a subsidiary of Waste Management, where he was responsible for operations with
over 6,000 employees. From June 1982 to March 1986, he served as President of
Wells Fargo Armored Service Corp., a transporter of currency and valuables with
over 7,000 employees.
Richard L. Handley joined Republic in October 1995 as a 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.
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 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.
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<PAGE> 36
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.
Michael S. Karsner has served as a 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 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.
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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Republic has established three committees, the
Executive Committee, the Audit Committee and the Compensation Committee. The
Executive Committee consists of Messrs. Huizenga, Hudson and DeGroote. The
Executive Committee has full authority to exercise all the powers of the Board
of Directors of Republic between meetings of the Board of Directors of Republic,
except as reserved by the Board of Directors of Republic. The Executive
Committee does not have the power to elect or remove executive officers, approve
a merger of Republic, recommend a sale of substantially all of Republic's
assets, recommend a dissolution of Republic, amend Republic's By-laws or
Certificate of Incorporation, declare dividends on Republic's outstanding
securities, or, except as expressly authorized by the Board of Directors of
Republic, issue any Republic Common Stock or preferred stock. By action of the
Board of Directors of Republic, the Executive Committee has certain limited
authority to approve the issuance of Republic Common Stock in connection with
certain types of mergers and acquisitions by Republic.
The Audit Committee consists of Messrs. Bryan, Burdick and Melk. The Audit
Committee has the power to oversee the retention, performance and compensation
of the independent public accountants for Republic, and the establishment and
oversight of such systems of internal accounting and auditing control as it
deems appropriate.
The Compensation Committee consists of Messrs. Melk, Johnson and Bryan. The
Compensation Committee reviews Republic's compensation philosophy and programs,
exercises authority with respect to the payment of salaries and incentive
compensation to directors and officers, and administers Republic's 1991 Stock
Option Plan and 1995 Employee Stock Option Plan.
MANAGEMENT OF REPUBLIC AFTER THE CLOSING OF THE MERGER AND THE PENDING REPUBLIC
ACQUISITIONS
All of Republic's existing Directors and executive officers as of the date
hereof will remain in their respective positions following the closing of the
Merger and the Pending Republic Acquisitions. Lawrence S. Rich, a director of
AutoNation, is expected to be appointed to Republic's Board of Directors
following consummation of the AutoNation Merger.
Lawrence S. Rich, age 53, is Chief Operating Officer and a director of
JMFE, a highly diversified automotive corporation founded in 1968. JMFE is
ranked by Forbes magazine as the 27th largest (by revenue) privately-held
company in America. The flagship of JMFE, Southeast Toyota Distributors, Inc.,
is the world's largest independent distributor of Toyota vehicles. Mr. Rich was
an Executive Vice President of
32
<PAGE> 37
JMFE from 1986 to 1994, when he was elected Chief Operating Officer. He also has
served as a director of AutoNation since September 1995.
CONFLICTS OF INTEREST
The following table sets forth information with respect to the number of
shares of AutoNation Common Stock beneficially owned by those Directors and
executive officers of Republic, and those persons expected to be named as
Directors and executive officers of Republic immediately following consummation
of the Merger, who are also shareholders of AutoNation:
<TABLE>
<CAPTION>
SHARES OF SHARES OF REPUBLIC COMMON STOCK
AUTONATION TO BE ISSUED IN EXCHANGE
COMMON STOCK THEREFOR UPON CONSUMMATION OF
NAME AND CURRENT POSITION BENEFICIALLY OWNED THE MERGER
- - ------------------------------------- ------------------ --------------------------------
<S> <C> <C>
H. Wayne Huizenga(1)................. 29,375,000 6,397,757
Chairman and Co-Chief Executive
Officer
Steven R. Berrard.................... 14,500,000 3,158,042
Co-Chief Executive Officer,
President, and Director
Harris W. Hudson..................... 100,000 21,779
Vice Chairman of the Board
George D. Johnson, Jr................ 2,500,000 544,490
Director
John J. Melk......................... 825,000 179,681
Director
Lawrence S. Rich(2).................. 750,000 163,347
Proposed Director
Robert A. Guerin..................... 125,000 27,224
Senior Vice President
J. Ronald Castell.................... 125,000 27,224
Senior Vice President
Thomas W. Hawkins.................... 450,000 98,008
Senior Vice President
Robert J. Henninger(3)............... 500,000 108,898
Senior Vice President
</TABLE>
- - ---------------
(1) The number of shares set forth includes (a) 200,000 shares of AutoNation
Common Stock held, and 43,559 shares of Republic Common Stock to be
received upon consummation of the Merger, by Mr. Huizenga's wife, as to
which he disclaims beneficial ownership and (b) 29,075,000 shares of
AutoNation Common Stock held, and 6,332,418 shares of Republic Common Stock
to be received upon consummation of the Merger, by a family partnership in
which Mr. Huizenga is a limited partner, as to which he disclaims
beneficial ownership. Mr. Huizenga has voting power (but not dispositive
power) over the 29,275,000 shares of AutoNation Common Stock held by the
family partnership and by his wife, and Mr. Huizenga will not have voting
or dispositive power over, or other beneficial ownership of, any of the
6,375,977 shares of Republic Common Stock to be issued in exchange for such
shares of AutoNation Common Stock. The number of shares set forth does not
include 12,075,000 shares of AutoNation Common Stock as to which Mr.
Huizenga has voting power (but not dispositive power) pursuant to certain
voting proxies executed by certain other AutoNation shareholders, or the
2,629,886 shares of Republic Common Stock to be received by such
shareholders in the Merger (as to which Mr. Huizenga will not have any
voting power or other beneficial ownership).
(2) All of the 750,000 shares of AutoNation Common Stock are, and all of the
163,347 shares of Republic Common Stock to be received upon consummation of
the Merger will be, held by Rich Kids, Ltd., a partnership controlled by
Mr. Rich and his wife.
(3) Mr. Henninger also has an option to purchase 50,000 shares of AutoNation
Common Stock, which will convert into an option to purchase 10,880 shares
of Republic Common Stock at an exercise price of $4.59 per share.
33
<PAGE> 38
INFORMATION CONCERNING AUTONATION
BUSINESS
AutoNation has started a national roll out of a chain of megastores, under
the AutoNation USA(TM) brand name, that will sell
reconditioned-to-perform-like-new vehicles in a customer friendly, "no haggle"
environment. Each AutoNation USA(TM) megastore stocks more than 1,000
late-model, low-mileage, previously-owned vehicles, each of which has undergone
extensive reconditioning and safety inspections by certified technicians. The
AutoNation USA(TM) megastores also offer vehicle financing, service centers and
automobile accessory sales. Each AutoNation USA(TM) megastore is located on an
approximately 20-acre site with high-visibility and convenient access.
AutoNation opened and commenced operations of its first AutoNation USA(TM)
megastore in October 1996. AutoNation also has smaller used vehicle retail
stores which operate under the names CarStopTM and ValuStopTM("ValuStop stores")
and which feature older-model, higher mileage vehicles than those to be offered
in AutoNation USA(TM) megastores.
As each AutoNation USA(TM) megastore site is being developed, AutoNation
hires a general manager for that retail site approximately 60 days prior to the
store's anticipated opening date. All other employees for the store are hired by
the general manager no later than 30 days prior to the store's anticipated
opening date. All retail staff receive extensive training in the period prior to
the store opening. Such training is conducted by professional instructors
employed by AutoNation. Training focuses on AutoNation's "no haggle" one-price
policy for vehicles, high quality customer service, state-of-the-art computer
systems, warranty and financing plans, and other systems and procedures. A
sufficient inventory of used vehicles is purchased, reconditioned, and delivered
to the store within two weeks prior to its opening date in order to stock the
store with a broad selection of high quality used vehicles.
AutoNation has several sources of supply for used vehicles. To date,
AutoNation has acquired most of its inventory of used vehicles by purchasing
them from auctions, vehicle dealerships and corporate accounts. AutoNation
employs used vehicle wholesale buyers who regularly attend auctions. At the
auctions, used vehicles are offered for sale through competitive bidding on
behalf of new car dealers (consisting, primarily, of trade-in and off-lease
vehicles), banks and finance companies (consisting of off-lease and repossessed
vehicles), and car rental companies, government agencies, corporations and other
entities which own vehicle fleets. AutoNation's corporate accounts include
banks, and car rental and other companies with leased and fleet vehicles, from
which AutoNation directly purchases. As AutoNation opens and operates more
retail locations, it also anticipates obtaining significant quantities of used
vehicles from trade-ins by its customers.
Once purchased, all used vehicles acquired by AutoNation for retail resale
are transported to a reconditioning center. AutoNation owns and operates its own
reconditioning centers, and also subcontracts reconditioning centers from
vehicle auctions and other third parties. At the reconditioning centers, the
mechanical, safety and cosmetic condition of each vehicle is thoroughly
inspected by certified technicians, and the vehicles are repaired, serviced,
painted, cleaned and processed, as necessary, prior to being delivered to
AutoNation's stores.
AutoNation has a total of approximately 1,100 employees as of December 3,
1996, none of which are covered by collective bargaining agreements.
AutoNation's principal executive offices are located at One Financial
Plaza, Suite 1700, Fort Lauderdale, Florida 33394, and its telephone number is
(954) 627-5100.
PROPERTIES
As of December 3, 1996, AutoNation owns 14 sites and leases three sites. Of
these 17 sites, a total of 11 are for AutoNation USA(TM) megastores, a total of
three are for ValuStop(TM) stores, and a total of three are for reconditioning
centers. In addition, AutoNation is in various stages of evaluating, contracting
and closing on purchases or leases of approximately 70 sites for additional
AutoNation USA(TM) megastores, ValuStop(TM)
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<PAGE> 39
stores or reconditioning centers. The eight sites that have opened and are
operating as of December 3, 1996 are as follows:
<TABLE>
<CAPTION>
TYPE MARKET DATE OPENED
---------------------------------- -------------------- ------------------
<S> <C> <C>
ValuStop store.................... Orlando, FL 1st Quarter, 1996
ValuStop store.................... Arlington, TX 2nd Quarter, 1996
Reconditioning center............. Ft. Lauderdale, FL 3rd Quarter, 1996
ValuStop store.................... Ft. Lauderdale, FL 3rd Quarter, 1996
AutoNation USA(TM) megastore...... Ft. Lauderdale, FL 4th Quarter, 1996
Reconditioning center............. Houston, TX 4th Quarter, 1996
AutoNation USA(TM) megastore...... Houston, TX 4th Quarter, 1996
AutoNation USA(TM) megastore...... Houston, TX 4th Quarter, 1996
</TABLE>
As of December 3, 1996, the projected rollout of the next nine sites is as
follows:
<TABLE>
<CAPTION>
TYPE MARKET OPENING DATE
---------------------------------- -------------------- ------------------
<S> <C> <C>
AutoNation USA(TM) megastore...... Dallas, TX 4th Quarter, 1996
AutoNation USA(TM) megastore...... Phoenix, AZ 4th Quarter, 1996
AutoNation USA(TM) megastore...... Houston, TX 1st Quarter, 1997
AutoNation USA(TM) megastore...... Miami, FL 1st Quarter, 1997
Reconditioning center............. Dallas, TX 2nd Quarter, 1997
AutoNation USA(TM) megastore...... Houston, TX 2nd Quarter, 1997
AutoNation USA(TM) megastore...... Dallas, TX 2nd Quarter, 1997
AutoNation USA(TM) megastore...... Detroit, MI 2nd Quarter, 1997
AutoNation USA(TM) megastore...... Las Vegas, NV 2nd Quarter, 1997
</TABLE>
AutoNation also leases its corporate office in Fort Lauderdale, Florida.
MARKET PRICE AND DIVIDEND POLICY RELATING TO AUTONATION COMMON STOCK
AutoNation is a privately-owned corporation; therefore there is no public
market price available with respect to AutoNation Common Stock. Since its
inception, AutoNation has not paid any dividends with respect to AutoNation
Common Stock. The Merger Agreement provides that AutoNation may not, without the
prior written consent of Republic, declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to AutoNation Common Stock. It is not anticipated that AutoNation will
declare or pay any dividends.
35
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF AUTONATION
The following discussion should be read in conjunction with AutoNation's
Selected Consolidated Financial Data and AutoNation's Consolidated Financial
Statements and the Notes thereto incorporated by reference in this Proxy
Statement. See "AVAILABLE INFORMATION".
ORGANIZATION AND DEVELOPMENT STAGE ACTIVITIES
AutoNation is a development stage enterprise as defined in SFAS No. 7,
"Accounting and Reporting by Development Stage Enterprises". AutoNation
currently plans to develop, establish and operate a nationwide chain of retail
stores to purchase, recondition, sell, finance and service new and used
vehicles. Since September 12, 1995 ("Inception"), AutoNation has been
principally engaged in organizational and business activities associated with
the opening of several retail outlets in the future, the first of which opened
in October 1996.
While AutoNation has generated insignificant revenue to date, planned
principal operations have not yet commenced. To date, AutoNation's efforts have
been directed towards developing a corporate infrastructure to support
operations, designing and implementing management information systems, procuring
and developing land sites, establishing operations and financial planning and
control. In connection with these development stage activities, AutoNation has
purchased certain land sites and incurred associated development costs for these
sites which will serve as locations for future retail stores and reconditioning
centers.
MERGER AGREEMENT WITH REPUBLIC
In May 1996, AutoNation and certain of its shareholders entered into a
Merger Agreement with Republic and Mergersub. Consummation of the transaction is
subject to the approval of Republic's stockholders at a Special Meeting, and
other customary conditions, including regulatory approvals. Pursuant to the
Merger Agreement, an aggregate of 17,467,248 shares of Republic Common Stock
will be issued in exchange for all of the issued and outstanding shares of
AutoNation Common Stock. Based on 80,200,000 shares of the AutoNation Common
Stock issued and outstanding as of the Closing, each share of the AutoNation
Common Stock will be converted into a 0.217796 fractional share of Republic
Common Stock.
In connection with the Plan of Merger, AutoNation entered into a Loan
Agreement with Republic to provide advances to AutoNation up to the amounts
specified in a cash flow needs projection delivered by AutoNation to Republic.
Such advances carry an interest rate of LIBOR plus 2%. The advances are
collateralized by the common stock of AutoNation USA Corporation, a wholly-owned
subsidiary of AutoNation which owns all of AutoNation's real estate holdings,
all trademarks and other intellectual property of AutoNation and AutoNation's
subscription commitments discussed in Notes 4 and 5 to the consolidated
financial statements. If the merger transaction is consummated, the subscription
commitments will no longer be required. The advances pursuant to the Loan
Agreement mature on June 30, 1997. At September 29, 1996, AutoNation had
outstanding $112,900,000 pursuant to the Loan Agreement and has incurred
$1,295,546 of interest expense since inception of the Loan Agreement.
RESULTS OF OPERATIONS
Since Inception, AutoNation has been engaged in development stage
activities. Management believes the most relevant trend for providing an
assessment of the financial condition and results of operations of AutoNation is
to compare the nine months ended September 29, 1996 to the period from Inception
to December 31, 1995.
Nine months ended September 29, 1996 compared to the period from Inception
(September 12, 1995) to December 31, 1995
Revenue. For the nine months ended September 29, 1996, AutoNation
generated insignificant revenues of $9,190,184 from three locations, which have
opened from March 1996 through September 1996.
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<PAGE> 41
AutoNation's planned principal operations are expected to commence in the fourth
quarter of 1996 at which time AutoNation expects a significant increase in
revenue. In this regard, AutoNation opened its first megastore retail outlet in
October 1996.
Costs and expenses. Costs and expenses increased to $27,522,178 from
$3,063,732 for the nine months ended September 29, 1996 compared to the period
from Inception to December 31, 1995. This increase is primarily attributable to
AutoNation operating for a nine month period in 1996 compared to the shorter
period represented by the period from Inception to December 31, 1995. The
overall trend of increasing costs and expenses is due to AutoNation's increased
cost of operations, resulting from costs incurred to operate its first three
locations, including costs associated with the procurement, reconditioning and
transportation of vehicles. General and administrative expenses increased due to
activities associated with the growth of AutoNation's infrastructure and
employee base, as well as continued marketing, research and store design
activities.
AutoNation continues to design, develop and implement a comprehensive
management information system for use when planned principal operations
commence. Such costs were expensed during the three months ended March 31, 1996
and have subsequently been capitalized since that date.
Income taxes. AutoNation has recorded a valuation allowance for the
deferred tax benefits generated by the net operating loss for the nine month
period ended September 29, 1996 and for the period from Inception to December
31, 1995 due to the present development stage of AutoNation.
LIQUIDITY AND CAPITAL RESOURCES
Since AutoNation's inception on September 12, 1995, AutoNation has financed
its development stage activities with cash contributions from its shareholders,
aggregating $52,130,000 and advances from Republic of $112,900,000. Such capital
contributions amounted to $36,525,500 for the nine months ended September 29,
1996 and $15,604,500 for the period from Inception to December 31, 1995,
respectively. Pursuant to the Shareholders' Agreement, the Board of Directors of
AutoNation determines the amount of capital required by AutoNation to commence
operations and determines what portion of such capital contributions shall be
classified as equity or debt. To date, all capital contributions have been
classified as equity by the Board of Directors. The Shareholders are obligated
to make capital contributions, up to a total of $80,200,000, consistent with
budgets previously prepared and agreed upon by the Shareholders, however, in the
event the Merger is consummated the Shareholders would not be required to make
any further cash contributions. See Notes 4 and 5 to the AutoNation Consolidated
Financial Statements incorporated by reference in this Proxy Statement.
The cumulative capital contributions of $52,130,000 have been primarily
used to fund AutoNation's purchases of land sites and associated development
costs and various development stage activities. Beginning in May 1996, Republic
advanced monies to AutoNation to provide additional funding for land sites and
associated development costs to execute AutoNation's development strategy. These
two financing sources have primarily funded $127,968,962 of land site and
associated development costs and $48,697,826 of net cash used in operating
activities.
At September 29, 1996, AutoNation has a net deficit in working capital of
$103,638,913. This net working capital deficit is the result of financing site
costs with short-term borrowings under the loan agreement with Republic. Upon
consummation of the proposed merger, it is anticipated that such short-term
borrowings will be refinanced with long-term borrowings pursuant to Republic's
$250 million credit facility.
To date, AutoNation has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk.
Management believes that it can adequately finance operations based on its
access to additional capital from its Shareholders and subscribers combined with
the Loan Agreement. The Loan Agreement will provide AutoNation with financing to
fund its cash flow needs through December 29, 1996 and during the period that
planned principal operations commence.
37
<PAGE> 42
AutoNation is also exploring various financing alternatives in connection
with the commencement of planned principal operations. However, there can be no
assurance that any additional financing will be available, or, in the event that
it is available, in the amounts and on the terms that are acceptable to
AutoNation.
Cash Flows From Operating Activities
AutoNation's net cash used in operating activities increased to $48,697,826
in the nine months ended September 29, 1996 compared to $2,277,748 for the
period from Inception to December 31, 1995. This increase is primarily
attributable to the higher net loss resulting from increased spending to support
AutoNation's development stage activities and working capital investments in
inventories and other items associated with the opening of AutoNation's first
three locations.
Cash Flow From Investing Activities
AutoNation made capital expenditures of $132,833,888 and $1,839,887 for the
nine months ended September 29, 1996 and for the period from Inception to
December 31, 1995, respectively. The increase is primarily the result of
AutoNation continuing to execute its development strategy during the first nine
months of 1996. The capital expenditures represent the purchase of land sites
and associated development expenses associated with the construction of new
retail outlets as well as purchases of office furniture and fixtures. Management
anticipates continuing to make capital expenditures in connection with the
purchase of land sites and the future development and construction thereof.
Cash Flows From Financing Activities
AutoNation's Shareholders and Subscribers have made cash contributions of
$36,525,500 and $15,604,500 in the nine month period ended September 29, 1996
and the period from Inception to December 31, 1995, respectively. Beginning in
May 1996, Republic advanced $112,900,000 to AutoNation pursuant to the Loan
Agreement discussed above. These two financing sources have funded AutoNation's
development stage activities and capital expenditures described above.
Additionally, AutoNation's vehicle inventories have been financed with proceeds
from loans from a related party.
New Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-based
Compensation", which requires adoption in 1996. SFAS No. 123 requires that
AutoNation's financial statements include certain disclosures about stock-based
employee compensation and permits the adoption of a change in accounting for
such arrangements. Changes in accounting for stock-based compensation are
optional and AutoNation plans to adopt only the disclosure requirements in 1996.
38
<PAGE> 43
MARKET PRICES AND DIVIDEND POLICY
Republic Common Stock has been traded on Nasdaq under the symbol "RWIN"
since September 4, 1990. The following table sets forth, for the periods
indicated, the high and low closing sales prices (after giving effect to the
Stock Split) for Republic Common Stock as quoted on Nasdaq.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
- - ----------------------------------------------------------------------------- ---- ---
<S> <C> <C>
1994:
March 31................................................................... $ 1 25/32 $ 1 3/8
June 30.................................................................... 1 3/4 1 11/32
September 30............................................................... 1 25/32 1 1/2
December 31................................................................ 2 1 5/8
1995:
March 31................................................................... 2 1/32 1 9/16
June 30.................................................................... 6 13/16 1 19/32
September 30............................................................... 13 1/32 6 1/2
December 31................................................................ 18 1/16 10
1996:
March 31................................................................... 17 15/16 13 3/16
June 30.................................................................... 34 1/8 15
September 30............................................................... 31 19 1/4
December 31 (Through December 3, 1996)..................................... 34 5/8 27 3/8
</TABLE>
On December 3, 1996, the closing price of Republic Common Stock as reported
by Nasdaq was $33.00 per share. The number of record holders of Republic Common
Stock as of November 29, 1996, was approximately 3,515.
Since December 1989, Republic has not declared or paid any cash dividends
on Republic Common Stock. Republic currently intends to retain its earnings for
future growth and, therefore, does not anticipate paying cash dividends in the
foreseeable future.
39
<PAGE> 44
COMPARATIVE PER SHARE DATA
Set forth below are historical earnings (loss) from continuing operations
and book value per common share data of Republic and AutoNation, individually,
and unaudited pro forma per common share data for Republic and AutoNation
combined which gives effect to the consummation of the Merger, certain closed
Republic acquisitions and certain 1995 equity transactions as if such events
occurred for balance sheet purposes at the balance sheet date and for statement
of operations purposes at the beginning of the periods presented. Also presented
is Combined Company unaudited pro forma data which gives effect to the
transactions discussed above, as well as certain completed acquisitions by
Continental and the Pending Republic Acquisitions as if such events occurred for
balance sheet purposes at the balance sheet date and for statement of operations
purposes at the beginning of the periods presented. The unaudited pro forma data
was derived from, and should be read in conjunction with, the unaudited
condensed consolidated pro forma financial statements and notes thereto
incorporated by reference in this Proxy Statement. See "INCORPORATION BY
REFERENCE." Historical amounts for Republic and the pro forma information
derived therefrom are adjusted to reflect the Stock Split of Republic Common
Stock. The loss per common and common equivalent share for
AutoNation -- Historical for 1995 is for the period from inception (September
12, 1995) through December 31, 1995. No cash dividends were declared on the
common stock of Republic for the periods presented. The information set forth
below should be read in conjunction with the respective audited and unaudited
consolidated financial statements of Republic and AutoNation, including the
notes thereto, and the Unaudited Pro Forma Condensed Consolidated Financial
Statements incorporated by reference in this Proxy Statement. See "AVAILABLE
INFORMATION."
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
NINE MONTHS ENDED ON OR AT
ON OR AT DECEMBER 31,
SEPTEMBER 30, ------------------------------
1996 1995 1994 1993
----------------- -------- -------- --------
<S> <C> <C> <C> <C>
REPUBLIC -- HISTORICAL
Earnings per common and common equivalent share
from continuing operations................... $ .17 $ .14 $ .17 $ --
Book value per common share.................... $ 4.15 $ 2.78 $ 1.19 $ 1.06
AUTONATION -- HISTORICAL
Loss per common and common equivalent share
from continuing operations................... $ (.23) $ (.04) N/A N/A
Book value per common share.................... $ .38 $ .16 N/A N/A
REPUBLIC AND AUTONATION COMBINED -- PRO FORMA
Earnings per common and common equivalent share
from continuing operations................... $ .10 $ -- N/A N/A
Book value per common share.................... $ 4.44 N/A N/A N/A
AUTONATION -- PRO FORMA EQUIVALENT PER SHARE
INFORMATION FOR REPUBLIC AND AUTONATION
COMBINED
Earnings per common and common equivalent
share........................................ $ .02 $ -- N/A N/A
Book value per common share.................... $ .96 N/A N/A N/A
COMBINED COMPANY -- PRO FORMA
Earnings per common and common equivalent share
from continuing operations................... $ .09 $ .04 $ .21 $ .11
Book value per common share.................... $ 4.67 N/A N/A N/A
AUTONATION -- PRO FORMA EQUIVALENT PER SHARE
INFORMATION FOR COMBINED COMPANY
Earnings per common and common equivalent share
from continuing operations................... $ .02 $ .01 $ .05 $ .02
Book value per common share.................... $ 1.02 N/A N/A N/A
</TABLE>
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<PAGE> 45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF REPUBLIC
The following table sets forth certain information regarding beneficial
ownership of Republic Common Stock as of October 31, 1996, by (i) each person
who is known by Republic to own beneficially 5% or more of Republic Common
Stock, (ii) each director of Republic, (iii) each executive officer of Republic
named in the Summary Compensation Table and (iv) all directors and executive
officers of Republic as a group. Share amounts and percentages shown for each
entity, individual or group in the table are adjusted to give effect to shares
of Republic Common Stock that are not outstanding but may be acquired by a
person upon exercise of all options and warrants exercisable by such entity,
individual or group within 60 days of October 31, 1996. However, such shares of
Republic Common Stock are not deemed to be outstanding for the purpose of
computing the percentage of outstanding shares beneficially owned by any other
person.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER(1) PERCENT
- - ------------------------------------------------------------------------- ----------- -------
<S> <C> <C>
H. Wayne Huizenga(2)..................................................... 29,462,557 13.9%
200 South Andrews Avenue
Fort Lauderdale, Florida 33301
MGD Holdings Ltd.(3)..................................................... 21,800,000 11.6
Victoria Hall
11 Victoria Street
P.O. Box HM 1065
Hamilton, HMEX Bermuda
Westbury (Bermuda) Ltd.(4)............................................... 8,100,000 4.1
Victoria Hall
11 Victoria Street
P.O. Box HM 1065
Hamilton, HMEX Bermuda
Michael G. DeGroote(5)................................................... 30,020,000 15.1
Victoria Hall
11 Victoria Street
P.O. Box HM 1065
Hamilton, HMEX Bermuda
Harris W. Hudson(6)...................................................... 19,825,505 10.1
200 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
Steven R. Berrard(7)..................................................... 400,000 *
200 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
Donald E. Koogler(8)..................................................... 267,321 *
200 East Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
J.P. Bryan(9)............................................................ 150,000 *
401 9th Avenue, S.W.
Calgary, Alberta, Canada T2P2H7
Rick L. Burdick(10)...................................................... 120,000 *
1900 Pennzoil Place
711 Louisiana Street
Houston, Texas 77002
</TABLE>
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<PAGE> 46
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER(1) PERCENT
- - ------------------------------------------------------------------------- ----------- -------
<S> <C> <C>
John J. Melk(11)......................................................... 3,940,000 2.0
676 North Michigan Ave., Suite 4000
Chicago, Illinois 60611
George D. Johnson, Jr.(12)............................................... 848,361 *
500 East Broward Boulevard, Suite 950
Fort Lauderdale, Florida 33394
All directors and executive officers as a group (16 persons)............. 86,452,630 38.6
</TABLE>
- - ---------------
* Less than 1 percent
(1) The number of shares of Republic Common Stock beneficially owned and the
exercise prices of options/warrants to purchase Republic Common Stock have
been adjusted to reflect the Stock Split.
(2) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Huizenga consists of (a) 8,997,440 shares owned directly by him, (b)
1,000,000 shares held by his wife, (c) presently exercisable warrants to
purchase 8,000,000, 4,000,000 and 4,000,000 shares of Republic Common Stock
at exercise prices of $2.25, $2.75 and $3.50 per share, respectively, and
(d) vested options to purchase 2,000,000, 1,000,000 and 465,117 shares of
Republic Common Stock at exercise prices of $12.375, $10.125 and $16.125
per share, respectively. Mr. Huizenga disclaims beneficial ownership of the
shares held by his wife.
(3) The aggregate amount of Republic Common Stock beneficially owned by MGD
Holdings, a Bermuda corporation controlled by Mr. DeGroote, consists of
20,200,000 shares directly owned by MGD Holdings. MGD Holdings also owns
presently exercisable Management Warrants (as defined below) to purchase up
to 1,600,000 shares of Republic Common Stock at an exercise price of $4.50
per share.
(4) The aggregate amount of Republic Common Stock beneficially owned by
Westbury (Bermuda) Ltd., a Bermuda corporation controlled by Mr. DeGroote
("Westbury"), consists of 2,700,000 shares owned directly by it and
presently exercisable warrants to purchase 2,700,000, 1,350,000 and
1,350,000 shares of Republic Common Stock at exercise prices of $2.25,
$2.75 and $3.50 per share, respectively.
(5) The aggregate amount of Republic Common Stock beneficially owned by Mr.
DeGroote consists of the shares beneficially owned by MGD Holdings and
Westbury, and vested options to purchase 100,000 and 20,000 shares of
Republic Common Stock at exercise prices of $12.375 and $18.0625 per share,
respectively. Mr. DeGroote is the sole stockholder, the President and a
director of MGD Holdings and Westbury.
(6) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Hudson consists of 17,200,000 shares owned directly by him and presently
exercisable warrants to purchase 1,200,000, 600,000 and 600,000 shares of
Republic Common Stock at exercise prices of $2.25, $2.75 and $3.50 per
share, respectively and options exercisable within 60 days of October 31,
1996 to purchase 100,000 and 125,505 shares of Republic Common Stock at
exercise prices of $1.9375 and $12.375 per share, respectively.
(7) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Berrard consists of presently exercisable warrants to purchase 200,000,
100,000 and 100,000 shares of Republic Common Stock at exercise prices of
$2.25, $2.75 and $3.50 per share, respectively.
(8) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Koogler consists of 267,321 shares owned by his wife. Mr. Koogler disclaims
beneficial ownership of the shares owned by his wife.
(9) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Bryan consists of presently exercisable warrants to purchase 80,000 shares
of Republic Common Stock at an exercise price of $1.345 per share and
vested options to purchase 20,000 and 50,000 shares of Republic Common
Stock at exercise prices of $18.0625 and $5.125 per share, respectively.
(10) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Burdick consists of presently exercisable warrants to purchase 100,000
shares of Republic Common Stock at an exercise
42
<PAGE> 47
price of $1.345 per share, and vested options to purchase 20,000 shares of
Republic Common Stock at an exercise price of $18.0625 per share.
(11) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Melk consists of (a) 1,600,002 shares owned by JJM Republic Limited
Partnership, of which Mr. Melk is the general partner and his three adult
children are limited partners, (b) 1,599,998 shares owned by JLM Republic
Limited Partnership, of which Mr. Melk's wife is the general partner and
his three adult children are limited partners, (c) vested warrants to
purchase 200,000, 100,000 and 100,000 shares of Republic Common Stock at
exercise prices of $2.25, $2.75 and $3.50 per share, respectively, (d)
vested options to purchase 100,000 and 20,000 shares of Republic Common
Stock at exercise prices of $12.375 and $18.0625 per share, respectively,
and (e) 220,000 shares owned by his wife. Mr. Melk disclaims beneficial
ownership of the 1,599,998 owned by JLM Republic Limited Partnership and of
the 220,000 shares owned by his wife.
(12) The aggregate amount of Republic Common Stock beneficially owned by Mr.
Johnson consists of (a) 328,361 shares of Republic Common Stock owned
directly by him, (b) presently exercisable warrants to purchase 200,000,
100,000 and 100,000 shares of Republic Common Stock at exercise prices of
$2.25, $2.75 and $3.50 per share, respectively, and (c) vested options to
purchase 100,000 and 20,000 shares of Republic Common Stock at exercise
prices of $12.25 and $18.0625 per share, respectively.
DESCRIPTION OF REPUBLIC'S CAPITAL STOCK
The Second Amended and Restated Certificate of Incorporation of Republic
(the "Certificate of Incorporation"), authorizes capital stock consisting of
500,000,000 shares of Republic Common Stock and 5,000,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock"). There were 232,466,603
shares of Republic Common Stock, and no shares of Preferred Stock, issued and
outstanding as of November 30, 1996. The following summary description of the
capital stock of Republic is qualified in its entirety by reference to the
Certificate of Incorporation and Bylaws of Republic, copies of which have been
filed with the Commission and are incorporated herein by reference. See
"INCORPORATION BY REFERENCE."
Common Stock. The holders of shares of Republic Common Stock have equal
pro rata rights to dividends if, as and when declared by Republic's Board of
Directors; do not have any preemptive subscription or conversion rights; and
have one vote per share on all matters upon which the stockholders of Republic
may vote at all meetings of stockholders. There are no redemption or sinking
fund provisions applicable to Republic Common Stock. The holders of Republic
Common Stock do not have cumulative voting rights. As a result, the holders of a
majority of the shares voting for the election of directors can elect all the
members of the Board of Directors.
Preferred Stock. No shares of Preferred Stock are currently outstanding.
The Board of Directors is authorized to divide the Preferred Stock into series
and, with respect to each series, to determine the dividend rights, dividend
rate, conversion rights, voting rights, redemption rights and terms, liquidation
preferences, the number of shares constituting the series, the designation of
such series and such other rights, qualifications, limitations or restrictions
as the Board of Directors may determine. The Board of Directors could, without
shareholder approval, issue Preferred Stock with voting rights and other rights
that could adversely affect the voting power of holders of Republic Common Stock
and such stock could be used to prevent a hostile takeover of Republic. Republic
has no present plans to issue any shares of Preferred Stock.
Certificate of Incorporation and Bylaws. The Certificate of Incorporation
was amended on November 28, 1995 to (i) change Republic's name to Republic
Industries, Inc., and (ii) to eliminate all provisions relating to
classification of the members of the Board of Directors. The directors of
Republic are elected each year at the annual meeting of the stockholders for
terms of one year and until their successors are elected and qualified; existing
directors may nominate and elect qualified persons to fill vacancies on the
Board of Directors. The Certificate of Incorporation was amended on May 15, 1996
to increase the number of authorized shares of Republic Common Stock to
500,000,000 from 350,000,000. Republic's Bylaws provide that directors may be
removed for cause by vote of two-thirds of the other directors or by vote of a
majority of stockholders, and may be removed without cause by the vote of a
majority of stockholders at a meeting called for such purpose.
43
<PAGE> 48
Transfer Agent and Registrar. The Transfer Agent and Registrar for
Republic Common Stock is Harris Trust and Savings Bank.
APPRAISAL RIGHTS
Stockholders of Republic will have no appraisal rights under Delaware law
in connection with the Merger.
OTHER MATTERS
FEDERAL SECURITIES LAWS CONSEQUENCES
The shares of Republic Common Stock which may be received by AutoNation
shareholders pursuant to the Merger will be restricted securities as defined in
Rule 144 under the Securities Act. It is contemplated that a registration
statement will be filed with the Commission promptly following the Merger to
permit resales by the former AutoNation shareholders of the shares of Republic
Common Stock to be issued in the Merger.
REGULATORY APPROVAL
Certain acquisition transactions such as the Merger are reviewed by the
Antitrust Division of the Department of Justice (the "Antitrust Division") or
the FTC to determine whether such transactions comply with applicable antitrust
laws. Under the provisions of the HSR Act, the Merger cannot be consummated
until certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements of the HSR Act have been satisfied.
Information will be filed with the Antitrust Division and the FTC under the HSR
Act by Republic and AutoNation. The required waiting period under the HSR Act
will expire at 11:59 p.m. thirty days after such filing, unless extended by
request from the FTC for additional information or documentary material or
unless early termination of the waiting period is granted. At any time before or
after consummation of the Merger, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the consummation of the Merger or
seeking the divestiture of substantial assets of Republic or AutoNation. There
can be no assurance that additional information or documentary material will not
be requested. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take such action under the antitrust laws as it deems necessary or desirable.
Such action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of businesses of Republic or AutoNation by Republic. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.
CERTAIN LITIGATION
On April 11, 1996, a purported class and derivative action complaint,
Harbor Finance Partners v. H. Wayne Huizenga, et al., CA No. 14933, was filed
against Republic and all of Republic's Directors in the Court of Chancery of the
State of Delaware in and for New Castle County (the "Complaint"). The Complaint
alleges, among other things, breach of fiduciary duty by the Directors due to
allegedly engaging in self-dealing and violating duties of loyalty to Republic,
and waste of corporate assets, with respect to the proposed Merger. The
Complaint generally seeks, among other things, certification as a class action,
preliminary and permanent injunctions enjoining the consummation of the Merger,
and an award for compensatory damages. The parties have agreed to an extension
of time for which a responsive pleading has to be filed by the defendants.
Republic believes that this lawsuit is without merit.
STOCKHOLDER PROPOSALS
Any proposals of stockholders intended to be presented at Republic's 1997
Annual Meeting must be received by Republic for inclusion in the proxy statement
and form of proxy relating to the meeting not later than December 11, 1996. It
is suggested that proponents submit their proposals by certified mail, return
44
<PAGE> 49
receipt requested. Detailed information for submitting resolutions will be
provided upon written request to the Secretary of Republic (Republic Industries,
Inc., 200 East Las Olas Blvd., Suite 1400, Fort Lauderdale, Florida 33301).
EXPERTS
The consolidated financial statements and schedule for Republic as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995, the consolidated financial statements of AutoNation as of
December 31, 1995 and for the period from inception (September 12, 1995) to
December 31, 1995, the consolidated financial statements of Addington and
Continental as of December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995, the combined financial statements of HMC as
of September 30, 1994 and 1993 and for each of the three years in the period
ended September 30, 1994 and incorporated by reference in this Proxy Statement
have been audited by Arthur Andersen LLP, independent certified public
accountants, to the extent and for the periods as indicated in their reports
with respect thereto. The combined financial statements of Acquired Solid Waste
Companies as of and for the year ended December 31, 1995 incorporated by
reference in this Proxy Statement have been audited by Munson, Cronick &
Associates, independent certified public accountants, to the extent and for the
periods as indicated in their report with respect thereto. The combined
financial statements of Alamo Rent-A-Car, Inc. and Affiliates ("Alamo") as of
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, the consolidated financial statements of Guy Salmon USA, Ltd.
and Subsidiaries as of December 31, 1995 and 1994, and for each of the three
years in the period ended December 31, 1995, and the financial statements of
DKBERT Assoc. as of December 31, 1995 and 1994, and for each of the three years
in the period ended December 31, 1995, have been included (incorporated by
reference) herein, in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, to the extent and for the periods as
indicated in their reports with respect thereto. The financial statements and
schedule referred to above have been incorporated by reference herein in
reliance upon authority of said firms as experts in accounting and auditing in
giving said reports.
Representatives of Arthur Andersen LLP are expected to be present at the
Special Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
INCORPORATION BY REFERENCE
Republic incorporates by reference herein the following documents filed
pursuant to the Exchange Act under Republic's Exchange Act File No. 0-9787:
1. Republic's Annual Report on Form 10-K for the year ended December 31,
1995;
2. Republic's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996;
3. Republic's Current Reports on Form 8-K dated September 7, 1995,
September 26, 1995, February 14, 1996, February 27, 1996 (as amended
by Form 8-K/A), March 29, 1996, May 8, 1996, May 9, 1996 (as amended
by Form 8-K/A), May 15, 1996, May 20, 1996, June 12, 1996, June 25,
1996, June 27, 1996, July 1, 1996 (as amended by Form 8-K/A), July
15, 1996, September 30, 1996, November 7, 1996, November 8, 1996 and
November 25, 1996 (as amended by Form 8-K/A dated November 25, 1996);
4. The description of Republic's capital stock which is contained in
Republic's registration statement on Form 8-A, dated June 19, 1981,
as amended; and
5. Republic's Proxy Statement relating to its 1996 Annual Meeting of
Stockholders.
All documents and reports filed by Republic pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement
and prior to the date of the Special Meeting shall be deemed to be incorporated
by reference in this Proxy Statement and to be a part hereof from the dates of
filing
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<PAGE> 50
of such documents or reports. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROXY STATEMENT IS DELIVERED, ON WRITTEN OR ORAL REQUEST TO REPUBLIC
INDUSTRIES, INC., 450 EAST LAS OLAS BLVD., SUITE 1200, FORT LAUDERDALE, FL 33301
(TELEPHONE NUMBER (954) 627-6000), ATTENTION: RICHARD L. HANDLEY. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS
SHOULD BE MADE BY DECEMBER 31, 1996.
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<PAGE> 51
ANNEX A
MERGER AGREEMENT
DATED AS OF MAY 8, 1996 BY AND AMONG
REPUBLIC INDUSTRIES, INC., RI/ANI MERGER CORP.,
AUTONATION INCORPORATED, H. WAYNE HUIZENGA,
STEVEN R. BERRARD AND JM FAMILY ENTERPRISES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
THE MERGER
1.1 Plan of Merger................................................................. A-1
1.2 The Closing.................................................................... A-1
1.3 Merger Consideration........................................................... A-1
1.4 Filing of Articles of Merger................................................... A-2
1.5 Issuance of Republic Shares.................................................... A-2
1.6 Delivery of Certificates....................................................... A-2
1.7 Accounting and Tax Treatment................................................... A-2
1.8 Stock Options.................................................................. A-2
1.9 Adjustments to Exchange Ratio.................................................. A-2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE REPUBLIC COMPANIES
2.1 Corporate Status............................................................... A-3
2.2 Corporate Power and Authority.................................................. A-3
2.3 Enforceability................................................................. A-3
2.4 Republic Common Stock.......................................................... A-3
2.5 No Commissions................................................................. A-4
2.6 Capitalization................................................................. A-4
2.7 No Violation................................................................... A-4
2.8 Reports and Financial Statements............................................... A-4
2.9 Absence of Certain Changes or Events........................................... A-5
2.10 Tax Matters.................................................................... A-5
2.11 Governing Documents............................................................ A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CONTROL SHAREHOLDERS
3.1 Corporate Status............................................................... A-5
3.2 Power and Authority............................................................ A-5
3.3 Enforceability................................................................. A-6
3.4 Capitalization................................................................. A-6
3.5 Shareholders of The Company.................................................... A-6
3.6 No Violation................................................................... A-6
3.7 No Commissions................................................................. A-7
3.8 Subsidiaries................................................................... A-7
3.9 Financial Statements........................................................... A-7
3.10 Changes Since the Current Balance Sheet Date................................... A-7
3.11 Litigation..................................................................... A-7
3.12 Environmental Matters.......................................................... A-8
3.13 Real Property.................................................................. A-8
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
3.14 Compliance..................................................................... A-8
3.15 Labor and Employments Matters.................................................. A-8
3.16 Employee Benefit Plans......................................................... A-8
3.17 Tax Matters.................................................................... A-9
3.18 Insurance...................................................................... A-9
3.19 Permits........................................................................ A-9
3.20 Intellectual Property.......................................................... A-9
3.21 Transactions With Insiders..................................................... A-10
3.22 Good Title to Assets........................................................... A-10
3.23 Securities Law Matters......................................................... A-10
3.24 Business Locations; Bank Accounts.............................................. A-10
3.25 Names.......................................................................... A-10
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by AutoNation Pending the Merger........................... A-10
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Further Assurances............................................................. A-11
5.2 Stockholder's Meeting; Proxies................................................. A-12
5.3 Proxy Statement................................................................ A-12
5.4 HSR Act and Other Actions...................................................... A-13
5.5 Access to Information.......................................................... A-13
5.6 Notification of Certain Matters................................................ A-13
5.7 Tax Treatment.................................................................. A-13
5.8 Confidentiality; Publicity..................................................... A-13
5.9 No Other Discussions........................................................... A-13
5.10 Sale of AutoNation Common Stock................................................ A-14
5.11 Credit Facility................................................................ A-14
5.12 Non-Disclosure Letter Agreements............................................... A-14
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of AutoNation, the Control Shareholders and the
Republic Companies........................................................... A-14
6.2 Conditions to Obligations of the Republic Companies............................ A-14
6.3 Conditions to Obligations of AutoNation and the Control Shareholders........... A-15
ARTICLE VII
INDEMNIFICATION
7.1 Agreement by the Control Shareholders to Indemnify............................. A-16
7.2 Survival of Representations and Warranties..................................... A-16
7.3 Indemnification Deductible; Cap on Indemnifiable Damages....................... A-16
7.4 Notice of Claim for Indemnifiable Damages...................................... A-17
7.5 Notice of Third Party Claim.................................................... A-17
ARTICLE VIII
DEFINITIONS
8.1 Defined Terms.................................................................. A-17
8.2 Other Definitional Provisions.................................................. A-18
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination.................................................................... A-19
9.2 Effect of Termination.......................................................... A-19
ARTICLE X
GENERAL PROVISIONS
10.1 Notices........................................................................ A-20
10.2 Entire Agreement............................................................... A-21
10.3 Expenses....................................................................... A-21
10.4 Amendment; Waiver.............................................................. A-21
10.5 Binding Effect; Assignment..................................................... A-21
10.6 Counterparts................................................................... A-21
10.7 Remedies....................................................................... A-21
10.8 Interpretation................................................................. A-21
10.9 Governing Law.................................................................. A-22
10.10 Arm's Length Negotiations...................................................... A-22
EXHIBIT A PLAN OF MERGER AND REORGANIZATION............................................ A-23
EXHIBIT B FORM OF LOCKUP AND NONCOMPETE LETTER......................................... A-25
</TABLE>
iii
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ANNEX A
MERGER AGREEMENT
This MERGER AGREEMENT (this "Agreement") is entered into as of May 8, 1996
by and among REPUBLIC INDUSTRIES, INC., a Delaware corporation ("Republic");
RI/ANI MERGER CORP., a Florida corporation and wholly-owned subsidiary of
Republic ("Republic Mergersub," and together with Republic, the "Republic
Companies"); AUTONATION INCORPORATED., a Florida corporation ("AutoNation"); and
H. Wayne Huizenga ("Huizenga"), and Steven R. Berrard ("Berrard"), each a
resident of the State of Florida, and JM Family Enterprises, Inc. ("JMFE"), a
Delaware corporation (Huizenga, Berrard and JMFE hereinafter collectively
referred to as the "Control Shareholders"). Certain other capitalized terms used
herein are defined in Article VIII and throughout this Agreement.
RECITALS
The parties have determined that it is in their respective best interests,
and that of the respective stockholders of Republic and of AutoNation, for
Republic to acquire AutoNation upon the terms and subject to the conditions set
forth in this Agreement. In order to effectuate the transaction, Republic has
organized Republic Mergersub as a wholly-owned subsidiary, and the parties have
agreed, subject to the terms and conditions set forth in this Agreement, to
merge Republic Mergersub with and into AutoNation, so that AutoNation continues
as the surviving corporation (the "Surviving Corporation") and as a wholly-owned
subsidiary of Republic, and each of the Shareholders of AutoNation will be
issued common stock of Republic, in exchange for their shares of the capital
stock of AutoNation.
TERMS OF AGREEMENT
In consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Plan of Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined below) Republic Mergersub shall be merged with
and into AutoNation (the "Merger") on the terms and conditions set forth in the
Plan of Merger and Reorganization annexed hereto as Exhibit A (the "Plan of
Merger"). The terms and conditions of the Plan of Merger are incorporated herein
by reference as if fully set forth herein. As a result of the Merger, the
separate corporate existence of Republic Mergersub shall cease and AutoNation
shall continue as the Surviving Corporation under the provisions of the Florida
Business Corporation Act ("FBCA").
1.2 The Closing. Subject to the satisfaction or waiver of all the
conditions in Article VI, the consummation of the Merger (the "Closing") shall
take place as promptly as practicable (and in any event within three (3)
business days) after satisfaction of the conditions set forth in Section 6.1, at
the offices of AutoNation's counsel, Atlas, Pearlman, Trop & Borkson, P.A., 200
East Las Olas Boulevard, Fort Lauderdale, Florida, or such other time and place
as the parties may otherwise agree.
1.3 Merger Consideration. Pursuant to the Plan of Merger, an aggregate of
8,733,624 shares of common stock, $0.01 par value per share, of Republic
("Republic Common Stock") will be issued in the Merger in exchange for all of
the issued and outstanding shares of common stock of AutoNation (the "AutoNation
Common Stock"). Based on 80,200,000 shares of AutoNation Common Stock issued and
outstanding as of the Closing (which is the amount issued and outstanding as of
the date hereof), each share of AutoNation Common Stock will be converted into a
0.108898 fractional share of Republic Common Stock (the "Exchange Ratio"). In
lieu of issuance of fractional shares of Republic Common Stock in the Merger,
each holder of AutoNation Common Stock as of the Effective Time shall receive a
cash payment without interest equal to the fair market value of the fractional
share of Republic Common Stock to which such holder otherwise would be entitled
(collectively, the "Fractional Payments"). For purposes of calculating the
Fractional Payments, the fair market value of a fraction of a share of Republic
Common Stock shall be such
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fraction multiplied by the average of the daily closing prices of a share of
Republic Common Stock on The Nasdaq Stock Market -- National Market as reported
in the Wall Street Journal for the five consecutive trading days that end on the
second trading day prior to the Effective Date.
1.4 Filing of Articles of Merger. At the time of the Closing, the parties
shall cause the Merger to be consummated by filing duly executed Articles of
Merger (with the completed Plan of Merger annexed thereto) with the Department
of State of the State of Florida, in such form as Republic and AutoNation
determine is required by and is in accordance with the relevant provisions of
the FBCA (the date and time of such filing is referred to herein as the
"Effective Date" or "Effective Time").
1.5 Issuance of Republic Shares. At the Effective Time, by virtue of the
Merger and without any further action on the part of the parties hereto,
Republic shall issue to each Shareholder duly executed certificates, in valid
form registered in such Shareholder's name, evidencing that number of shares of
Republic Common Stock determined pursuant to the Exchange Ratio as set forth in
the Plan of Merger based on the number of shares of capital stock of AutoNation
owned by each Shareholder on the Effective Date.
1.6 Delivery of Certificates. At the Closing, all certificates
representing all the issued and outstanding shares of AutoNation Common Stock
shall be cancelled, and Republic shall deliver one or more certificates
representing the shares of Republic Common Stock issued pursuant to Section 1.5
to each Shareholder. The shares of Republic Common Stock issuable by Republic in
exchange for the AutoNation Common Stock in the Merger are sometimes referred to
herein as the "Republic Shares."
1.7 Accounting and Tax Treatment. The parties hereto acknowledge and agree
that the transactions contemplated hereby shall be treated as a purchase by
Republic for accounting purposes, and as a tax-free reorganization under Section
368 of the Code.
1.8 Stock Options. At the Effective Time, Republic shall assume all of
AutoNation's rights and obligations under the AutoNation 1995 Employee Stock
Option Plan (the "AutoNation Plan") with respect to each outstanding option to
acquire shares of AutoNation Common Stock (the "AutoNation Stock Options"), and
the AutoNation Plan shall continue with the same force and effect as existed
immediately prior to the Effective Time, except (a) that each AutoNation Stock
Option granted under the AutoNation Plan shall be converted into an option to
acquire a 0.108898 fractional share of Republic Common Stock for each share of
AutoNation Common Stock subject to such AutoNation Stock Option, rounded to the
nearest whole share of Republic Common Stock for all options held by each such
optionholder, and (b) that the exercise price per share of Republic Common Stock
for all such converted options shall be equal to the product of the exercise
price of each AutoNation Stock Option as of the date of grant thereof multiplied
by 9.1829. As of the date hereof, there are an aggregate of 1,340,000 AutoNation
Stock Options outstanding which are (subject to the terms and conditions of the
AutoNation Plan) exercisable at $1.00 per share of AutoNation Common Stock,
which will be converted into options to purchase an aggregate of 145,927 shares
of Republic Common Stock at an exercise price of $9.1829 per share, and there
are an aggregate of 265,566 AutoNation Stock Options outstanding which are
(subject to the terms and conditions of the AutoNation Plan) exercisable at
$3.00 per share of AutoNation Common Stock, which will be converted into options
to purchase an aggregate of 28,920 shares of Republic Common Stock at an
exercise price of $27.5487 per share. Republic (i) has reserved for issuance an
aggregate of 240,186 shares of Republic Common Stock that will become issuable
upon the exercise of such AutoNation Stock Options, as adjusted pursuant to this
Section 1.8 subject to consummation of the Merger, and (ii) at the Effective
Time will issue to each holder of an outstanding AutoNation Stock Option a
document evidencing the assumption by Republic of AutoNation's obligations with
respect thereto under this Section 1.8. Nothing in this Section 1.8 shall affect
the schedule of vesting with respect to the AutoNation Stock Options.
1.9 Adjustments to Exchange Ratio. If between the date of this Agreement
and the Effective Time the outstanding shares of Republic Common Stock shall
have been changed into a different number of shares or a different class, by
reason of any stock dividend, split, reclassification, recapitalization,
combination or exchange of shares, (i) the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, split,
reclassification, recapitalization, combination or exchange of shares, and (ii)
corresponding adjustments will be made to the provisions of Section 1.8 to
effect an equitable conversion of AutoNation Stock Options
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into options to acquire Republic Common Stock. Nothing stated in this Section
1.9 shall be construed as providing the Shareholders any preemptive or
anti-dilutive rights, and there shall be no adjustment to the Exchange Ratio in
the event that Republic issues or agrees to issue any shares of Republic Common
Stock between the date hereof and the Effective Time, whether for cash, through
option grants, option or warrant exercises, in acquisitions, or in other
transactions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE REPUBLIC COMPANIES
As a material inducement to the Control Shareholders and AutoNation to
enter into this Agreement and to consummate the transactions contemplated
hereby, each of the Republic Companies jointly and severally make the following
representations and warranties to the Control Shareholders and AutoNation:
2.1 Corporate Status. Republic is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite power and authority to own or lease its properties and to carry on
its business as now being conducted. Republic Mergersub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Republic Mergersub is a wholly-owned subsidiary of Republic.
2.2 Corporate Power and Authority. Each of the Republic Companies has the
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. Republic Mergersub has taken all action necessary to
authorize its execution and delivery of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated
hereby. Republic's Board of Directors has appointed, and delegated its full
power to, a special committee of disinterested non-employee directors for the
purpose of considering the transactions contemplated hereby (the "Special
Committee"), and the Special Committee has, pursuant to such delegated power and
authority, approved the execution and delivery of this Agreement by Republic,
the performance of its obligations hereunder and, subject to the approval of a
majority of the outstanding shares of Republic Common Stock, the consummation of
the transactions contemplated hereby, and the Special Committee as of the date
hereof intends to recommend the transactions contemplated hereby to the
stockholders of Republic. The Special Committee has received an opinion of
Merrill Lynch, Pierce, Fenner & Smith Incorporated to the effect that the
aggregate consideration to be paid by Republic to the AutoNation Shareholders in
connection with the transactions contemplated hereby is fair to Republic and to
Republic's stockholders from a financial point of view as of the date hereof.
2.3 Enforceability. This Agreement has been duly executed and delivered by
each of the Republic Companies and constitutes a legal, valid and binding
obligation of each of the Republic Companies, enforceable against each of the
Republic Companies in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
2.4 Republic Common Stock. Upon consummation of the Merger and the
issuance and delivery of certificates representing the Republic Shares to the
Shareholders, the Republic Shares will be (i) duly authorized and validly
issued, fully paid and non-assessable shares of Republic Common Stock, (ii) free
and clear of any Liens, other than Liens on any particular Shareholder's
Republic Shares that may be created or permitted to exist by such Shareholder's
actions, and (iii) approved for trading on The Nasdaq Stock Market. After
consummation of the Merger, the shares of Republic Common Stock to be issued
upon exercise of the converted AutoNation Stock Options, will, when such
converted stock options are duly exercised and paid for in accordance with the
terms thereof, be duly authorized and validly issued, fully paid and
non-assessable shares of Republic Common Stock.
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2.5 No Commissions. Neither of the Republic Companies has incurred any
obligation for any finder's or broker's or agent's fees or commissions or
similar compensation in connection with the transactions contemplated hereby.
2.6 Capitalization. The authorized capital stock of Republic consists of
350,000,000 shares of Republic Common Stock and 5,000,000 shares of preferred
stock. As of April 5, 1996, (i) 83,224,706 shares of Republic Common Stock were
validly issued and outstanding, fully paid and nonassessable and not issued in
violation of any preemptive or similar right of any stockholder of Republic, and
(ii) no shares of preferred stock were issued and outstanding. The Republic
Shares to be issued in the Merger will be "voting stock" within the meaning of
the Code and will not be subject to any preemptive or any similar right of any
stockholder of Republic. All issued and outstanding shares of capital stock of
the Republic Mergersub are owned beneficially and of record by Republic. No
other shares of capital stock of the Republic Mergersub or any rights, options,
warrants, convertible securities, subscription rights or other agreements or
commitments of any kind obligating the Republic Mergersub to issue or sell any
other such shares are outstanding or have been authorized. The Republic
Mergersub was formed solely for the purpose of engaging in the Merger with
AutoNation and has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
2.7 No Violation. Except as set forth on Schedule 2.7, the execution and
delivery of this Agreement by the Republic Companies, the performance by the
Republic Companies of their respective obligations hereunder and the
consummation by the Republic Companies of the transactions contemplated by this
Agreement will not, except as would not have a Material Adverse Effect on
Republic, (i) contravene any provision of the articles of incorporation or
bylaws of Republic, (ii) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment, ruling or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against Republic, (iii) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under, or
give rise to a right to terminate, amend, modify, abandon or accelerate, any
material Contract which is applicable to, binding upon or enforceable against
Republic, (iv) result in or require the creation or imposition of any Lien upon
or with respect to any of the property or assets of Republic, or (v) require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person,
except (i) pursuant to the Exchange Act and the Securities Act and applicable
NASD inclusion requirements, (ii) filings required under the securities or blue
sky laws of the various states, (iii) filings required under the HSR Act, or any
filings required to be made by AutoNation or the Control Shareholders. Republic
has taken all actions necessary to ensure its continued inclusion in, and the
continued eligibility of the Republic Common Stock for trading on, the Nasdaq
Stock Market under all currently effective inclusion requirements.
2.8 Reports and Financial Statements. Within the last three years, except
where failure to have done so did not and would not have a Material Adverse
Effect on Republic, Republic has filed all reports, registrations and
statements, together with any required amendments thereto, that it was required
to file with the SEC, including, but not limited to Forms 10-K, Forms 10-Q,
Forms 8-K and proxy statements (collectively, the "Republic Reports"). Republic
has previously furnished to AutoNation and made available to the Control
Shareholders copies of all Republic Reports filed with the SEC since January 1,
1996, and with respect to Republic Reports filed after the date of this
Agreement until the Effective Date, will promptly furnish to AutoNation and to
the Control Shareholders, copies of each of the Republic Reports filed with the
SEC during such period. As of their respective dates (but taking into account
any amendments filed prior to the date of this Agreement), the Republic Reports
complied, or, with respect to Republic Reports filed after the date of this
Agreement, will comply, in all material respects with all the rules and
regulations promulgated by the SEC and did not contain, or, with respect to
Republic Reports filed after the date of this Agreement, will not contain, any
untrue statement of a material fact or omit to state a 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. The financial
statements of Republic included, or to be included, in the Republic Reports
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been, or will be, prepared in accordance with
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GAAP consistently applied during the periods presented (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) and, or will,
fairly present (subject, in the case of the unaudited statements, to normal
audit adjustments) the financial position of Republic and its consolidated
subsidiaries as of the date thereof and the results of their operations and
their cash flows for the periods then ended. Except as set forth in the Republic
Reports and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, Republic has no material
liabilities or obligations of any nature required by GAAP to be set forth on a
consolidated balance sheet of Republic and its consolidated subsidiaries or in
the notes thereto which individually or in the aggregate would have a Material
Adverse Effect on Republic.
2.9 Absence of Certain Changes or Events. Except as disclosed in Republic
Reports filed by Republic with the SEC prior to the date of this Agreement,
since December 31, 1995 to the date of this Agreement, there has not been any
change in the financial condition, results of operations or business of Republic
that either individually or in the aggregate would have a Material Adverse
Effect on Republic.
2.10 Tax Matters. Republic warrants that it has no present intention of
disposing of any of the capital stock of AutoNation to be received by Republic
in the Merger.
2.11 Governing Documents. Republic has delivered to the Control
Shareholders true, accurate and complete copies of the Certificate of
Incorporation and Bylaws of Republic in effect as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE CONTROL SHAREHOLDERS
As a material inducement to Republic to enter into this Agreement and to
consummate the transactions contemplated hereby, the Control Shareholders
jointly and severally make the following representations and warranties to
Republic, provided, that JMFE makes no representation or warranty as to any
matter described in Sections 3.4, 3.8 through 3.20, 3.22, 3.24, and 3.25, and
further provided that any representation or warranty which relates to a
particular Control Shareholder is made severally only by such Control
Shareholder:
3.1 Corporate Status. AutoNation and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and has the requisite power and authority to own or
lease its properties and to carry on its business as now being conducted. JMFE
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware. Except as set forth on Schedule 3.1, AutoNation
and each of its subsidiaries is not qualified to transact business as a foreign
corporation in any other jurisdiction and the present conduct of their business
does not require any such qualification. There is no pending proceeding for the
dissolution, liquidation, insolvency or rehabilitation of AutoNation or any of
its subsidiaries or JMFE.
3.2 Power and Authority. AutoNation and JMFE each has the corporate power
and authority to execute and deliver this Agreement, to perform its respective
obligations hereunder and to consummate the transactions contemplated hereby.
Each of Huizenga and Berrard is an individual residing in the State of Florida
with the requisite competence and authority to execute and deliver this
Agreement, to perform his respective obligations hereunder and to consummate the
transactions contemplated hereby. AutoNation and JMFE each has taken all action
necessary to authorize the execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the consummation of the
transactions contemplated hereby, including, with respect to AutoNation, having
obtained the approval of this Agreement and the Merger and other transactions
contemplated hereby by all of the shareholders of AutoNation Common Stock by
action taken by written consent in lieu of a meeting. As of the date hereof,
Huizenga, JMFE and the board of directors of AutoNation hold irrevocable proxies
from all of the Shareholders of AutoNation, other than the Control Shareholders.
From the date hereof until the Effective Date, Huizenga, JMFE and the board of
directors of AutoNation will not revoke or terminate any of the voting proxies
which they hold with respect to the outstanding shares of AutoNation Common
Stock, and will not exercise their rights to vote such proxies other than in
favor of the Merger and the transactions contemplated hereby.
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3.3 Enforceability. This Agreement has been duly executed and delivered by
AutoNation and the Control Shareholders, and constitutes the legal, valid and
binding obligation of AutoNation and the Control Shareholders, enforceable
against AutoNation and the Control Shareholders in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.4 Capitalization. Schedule 3.4 sets forth, with respect to AutoNation
and each of its subsidiaries, (a) the number of authorized shares of each class
of its capital stock, and (b) the number of issued and outstanding shares of
each class of its capital stock. Except as set forth on Schedule 3.4, all of the
issued and outstanding shares of capital stock of AutoNation and each of its
subsidiaries (i) have been duly authorized and validly issued and are fully paid
and non-assessable, (ii) were issued in compliance with all applicable state and
federal securities laws, and (iii) were not issued in violation of any
preemptive rights or rights of first refusal, and no preemptive rights or rights
of first refusal exist, and no such rights arise by virtue of or in connection
with the transactions contemplated hereby. Except as set forth on Schedule 3.4,
which sets forth a true and correct copy of the AutoNation Plan and a list of
all options granted thereunder as of the date hereof, there are no outstanding
or authorized rights, options, warrants, convertible securities, subscription
rights, conversion rights, exchange rights or other agreements or commitments of
any kind that would require AutoNation or any of its subsidiaries to issue or
sell any shares of its capital stock (or securities convertible into or
exchangeable for shares of its capital stock). Except as set forth on Schedule
3.4, there are no outstanding stock appreciation, phantom stock, profit
participation or other similar rights with respect to the capital stock of
AutoNation or any of its subsidiaries or with respect to voting or transfer of
such capital stock. Neither AutoNation nor any of its subsidiaries is obligated
to redeem or otherwise acquire any of its outstanding shares of capital stock.
3.5 Shareholders of The Company. AutoNation has previously provided to
Republic a true, correct and complete list which sets forth, with respect to
AutoNation and each of its subsidiaries, (a) the name, address and social
security (or federal employer identification) number of, and the number of
outstanding shares of each class of its capital stock owned by each Shareholder
of record as of the close of business on the date of this Agreement; and (b) the
name, address and social security (or federal employer identification) number
of, and number of shares of each class of its capital stock beneficially owned
by each beneficial owner of outstanding shares of capital stock (to the extent
that beneficial ownership of any such shares is different than record
ownership). At the Effective Time, each of the Control Shareholders will own its
respective shares of AutoNation Common Stock, and AutoNation will own the shares
of capital stock of its subsidiaries, free and clear of all Liens.
3.6 No Violation. Except as set forth on Schedule 3.6, the execution and
delivery of this Agreement by AutoNation and the Control Shareholders, the
performance by AutoNation and the Control Shareholders of their respective
obligations hereunder and the consummation by AutoNation and the Control
Shareholders of the transactions contemplated by this Agreement will not, except
as would not have a Material Adverse Effect on AutoNation, (i) contravene any
provision of the articles of incorporation or bylaws of AutoNation or any of its
subsidiaries, (ii) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment, ruling or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon or enforceable against AutoNation or any of its subsidiaries or
the Control Shareholders, (iii) conflict with, result in any breach of, or
constitute a default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to a right
to terminate, amend, modify, abandon or accelerate, any material Contract which
is applicable to, binding upon or enforceable against AutoNation, any of its
subsidiaries or the Control Shareholders, (iv) result in or require the creation
or imposition of any Lien upon or with respect to any of the property or assets
of AutoNation, any of its subsidiaries or the Control Shareholders, or (v)
require the consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, any court or tribunal or any other
Person, except any applicable filings required under the HSR Act and any filings
required to be made by the Republic Companies.
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3.7 No Commissions. Neither AutoNation nor any Control Shareholder has
incurred any obligation for any finder's or broker's or agent's fees or
commissions or similar compensation in connection with the transactions
contemplated hereby.
3.8 Subsidiaries. Except as set forth on Schedule 3.8, AutoNation does not
own, directly or indirectly, any outstanding voting securities of or other
interests in, or control, any corporation, partnership, joint venture or other
business entity.
3.9 Financial Statements. AutoNation has delivered to Republic the
financial statements of AutoNation, consisting of a Consolidated Balance Sheet
as of December 31, 1995 with accompanying notes thereto, audited by Arthur
Andersen LLP, and of an unaudited balance sheet and statements of operations and
cash flows as of and for the period ended March 31, 1996 (collectively, the
"Financial Statements"), a copy of which is attached to Schedule 3.9 hereto. The
balance sheet dated as of December 31, 1995 of AutoNation included in the
Financial Statements is referred to herein as the "Current Balance Sheet". The
Financial Statements fairly present the consolidated financial position of
AutoNation at each of the balance sheet dates and the results of operations for
the periods covered thereby, and, other than the interim unaudited financial
statements, have been prepared in accordance with GAAP consistently applied
throughout the periods indicated. The books and records of AutoNation fully and
fairly reflect all material transactions, properties, assets and liabilities of
AutoNation. The balance sheets included in the Financial Statements do not
reflect any material writeup or revaluation increasing the book value of any
assets, except as specifically disclosed in the notes thereto. The Financial
Statements reflect all material adjustments necessary for a fair presentation of
the financial information contained therein, other than the interim financial
statements which are subject to normal year end audit adjustments. Except as set
forth on Schedule 3.9, AutoNation does not have any material liabilities or
obligations of any nature required by GAAP to be set forth on a consolidated
balance sheet of AutoNation and its consolidated subsidiaries or in the notes
thereto which individually or in the aggregate would have a Material Adverse
Effect on AutoNation, and except (a) to the extent reflected or taken into
account in the Current Balance Sheet and not heretofore paid or discharged, (b)
to the extent specifically set forth in or incorporated by express reference in
any of the Schedules attached hereto, (c) liabilities incurred in the ordinary
course of business consistent with the Business Plan (as defined below), none of
which relates to breach of contract, breach of warranty, tort, infringement or
violation of law, or which arose out of any action, suit, claim, governmental
investigation or arbitration proceeding, (d) normal accruals, reclassifications,
and audit adjustments which would be reflected on an audited financial statement
and which would not be material in the aggregate, and (e) liabilities incurred
in the ordinary course of business prior to the date of the Current Balance
Sheet which, in accordance with GAAP consistently applied, were not recorded
thereon.
3.10 Changes Since the Current Balance Sheet Date. Since the date of the
Current Balance Sheet, there has been no Material Adverse Change to AutoNation
and its subsidiaries taken as a whole. Since the date of the Current Balance
Sheet, there has not been any redemption, purchase or other acquisition by
AutoNation of any shares of its capital stock, or any declaration, setting aside
or payment of any dividend or other distribution by AutoNation, or any of its
subsidiaries, in respect of its capital stock. Except as set forth on Schedule
3.10, as of the date hereof, there are no material Contracts entered into by or
binding upon AutoNation or any of its subsidiaries to acquire any assets or
securities of, or to merge, acquire or consolidate with, any other Person, other
than Contracts for the purchase or lease of real property, entered into in the
ordinary course of business consistent with the Business Plan as set forth on
Schedule 3.13.
3.11 Litigation. Except as set forth on Schedule 3.11, as of the date
hereof, there is no action, suit, or legal, administrative or other proceeding
or governmental investigation pending, or to the best of the Control
Shareholders' knowledge, threatened by or against AutoNation or any of the
properties or assets of AutoNation, which, in any single case or in the
aggregate, (i) challenge or question the validity of, or would seek to enjoin
the consummation of, the transactions contemplated by this Agreement, or (ii)
would result in a Material Adverse Effect on AutoNation.
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3.12 Environmental Matters. Except as set forth on Schedule 3.12,
(a) AutoNation has at all times been in compliance in all material
respects with all Environmental Laws (as defined herein) governing its
business, operations, properties and assets, including, without limitation,
Environmental Laws with respect to discharges into the ground water,
surface water and soil, emissions into the ambient air, and generation,
accumulation, storage, treatment, transportation, labeling or disposal of
solid and hazardous waste materials and substances or process by-products,
in each case, for which failure to comply would have a Material Adverse
Effect on AutoNation. AutoNation is in compliance in all material respects
with all notice, record keeping and reporting requirements of all
Environmental Laws, and has complied with all material informational
requests or demands arising under the Environmental Laws, where failure to
comply would have a Material Adverse Effect on AutoNation.
(b) AutoNation has not received any notice and otherwise has no
knowledge of any material enforcement order or notice of violation issued
or given by any federal, state or local judicial or administrative
authority or private party in which order or notice AutoNation has been
named as a potentially responsible party pursuant to which AutoNation may
be (contingently or otherwise) liable, which would have a Material Adverse
Effect on AutoNation.
(c) As used in this Agreement, "Environmental Laws" means all federal,
state or local laws, rules, regulations, orders or ordinances or judicial
or administrative interpretations thereof, any of which govern (or purport
to govern) or relate to air emissions, water discharges, hazardous or toxic
substances, solid or hazardous waste and occupational health and safety, as
any of these terms are or may be defined in such laws, rules, regulations,
orders, or ordinances, or judicial or administrative interpretations
thereof, including, without limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, by the Superfund Amendments and Reauthorization
Act, the Hazardous Materials Transportation Act, the Toxic Substances
Control Act, the Clean Air Act, the Clean Water Act and the Occupational
Safety and Health Act.
(d) For purposes of this Section 3.12, the term "AutoNation" means
AutoNation and each of its subsidiaries.
3.13 Real Property. Schedule 3.13 sets forth a list which is true and
correct as of the date hereof of (i) all leases of real property which
AutoNation or each of its subsidiaries is a party to, (ii) all real property
owned by AutoNation or each of its subsidiaries, and (iii) all pending
contracts, including letters of intent, by AutoNation or any of its subsidiaries
to purchase any interest in any real property (collectively, the "Real
Property"). Except as set forth on Schedule 3.13, as of the date hereof,
AutoNation's and each of its subsidiaries' actual use of the Real Property which
it currently owns or leases is in compliance with all applicable zoning
ordinances and building codes and environmental, land use, health and safety and
other laws, permits, rules, regulations and orders, except where failure to
comply would not have a Material Adverse Effect on AutoNation.
3.14 Compliance. AutoNation and each of its subsidiaries has complied in
all material respects with all requirements of law relating to the business
conducted by it or relating to the properties and assets owned or used by it now
or in the past.
3.15 Labor and Employment Matters. Except as set forth on Schedule 3.15,
neither AutoNation nor any of its subsidiaries (a) is a party to any collective
bargaining agreement or discussions or negotiations with any individual or group
looking toward any such agreement, or (b) has experienced any actual, or to the
knowledge of the Control Shareholders, threatened strike, grievance or unfair
labor practice claim, suit or administrative proceeding. Schedule 3.15 lists
each material contract, agreement or plan of the following nature, whether
formal or informal, and whether or not in writing, to which AutoNation is a
party or under which AutoNation or any of its subsidiaries has an obligation as
of the date hereof (true and correct copies of which have been furnished to
Republic): (i) employment agreements, (ii) noncompetition agreements and (iii)
consulting agreements.
3.16 Employee Benefit Plans. Schedule 3.16 lists each employee benefit
plan or arrangement, including, but not limited to, pension and profit-sharing
plans, bonus plans, stock purchase plans, hospitalization,
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disability and other insurance plans, severance or termination pay plans and
policies, whether or not described in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), in which employees of
AutoNation or any of its subsidiaries participate, true and correct copies of
which have been provided to Republic ("Employee Benefit Plans"). To AutoNation's
knowledge, with respect to each Employee Benefit Plan: (i) each has been
administered in all material respects in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Code; and (ii) no
actions, suits, claims or disputes are pending or threatened.
3.17 Tax Matters. (a) Tax Returns and Tax Payment. (i) Except as set forth
on Schedule 3.17, all Tax Returns required to be filed by AutoNation and each of
its subsidiaries for any period ending on or before the Effective Date, taking
into account any extension or waiver of time to file granted or obtained by
AutoNation or any of its subsidiaries, have been or will be timely filed, except
where the failure to file would not have a Material Adverse Effect on
AutoNation, (ii) all Taxes shown as due on those Tax Returns as well as all
Taxes due to federal, state, local or foreign taxing authorities, with respect
to periods ending on or before the Effective Date, have been or will be paid or
adequate provision has been made or will be made therefor, and (iii) the filed
Tax Returns are complete and correct in all material respects and neither
AutoNation nor any of its subsidiaries is required to pay, for the periods
represented by such Tax Returns, any Taxes other than those shown in those Tax
Returns or otherwise disclosed in the Schedules.
(b) Audits. The Tax Returns of AutoNation and each of its subsidiaries
have never been audited by the Internal Revenue Service, (ii) there are no
pending unresolved issues with respect to any Taxes payable to any federal,
state or local taxing authority, and (iii) AutoNation and each of its
subsidiaries have not been notified by any taxing authority that it is to be the
subject of an impending tax audit.
(c) Tax Liens. There are no material liens for Taxes imposed by any
federal, state or local taxing authorities outstanding against any assets of
AutoNation or any of its subsidiaries.
3.18 Insurance. AutoNation and each of its subsidiaries is covered by
valid policies of insurance covering its properties, assets and business.
AutoNation and its subsidiaries are in compliance in all material respects with
the material requirements of their respective insurance policies. To the
knowledge of the Control Shareholders, neither AutoNation nor any of its
subsidiaries has been denied coverage by any insurer for material claims
submitted by AutoNation or its subsidiaries.
3.19 Permits. AutoNation and each of its subsidiaries has, or has applied
for, all material permits, licenses, registrations, filings, authorizations,
consents, approvals or other indicia of authority ("Permits") necessary for the
conduct of its business and the operation of its facilities as presently
conducted and operate, all Permits which have been issued are in full force and
effect and there is no condition, nor has any event occurred which constitutes,
or with the giving of notice or the passage of time (or both) would constitute,
a violation of the terms of any Permit, and, to the knowledge of AutoNation, no
pending application for any Permit has been denied, except to the extent that
any of the foregoing would not have a Material Adverse Effect on AutoNation. All
applications for renewal of the Permits have been timely filed (except to the
extent that the failure to file would not have a Material Adverse Effect on
AutoNation).
3.20 Intellectual Property. AutoNation and each of its subsidiaries has
full legal right, title and interest in and to all trademarks, servicemarks,
tradenames, copyrights, know-how, trade secrets and other material intellectual
property used in the conduct of its business (the "Intellectual Property"), and
Schedule 3.20 sets forth a list of all such Intellectual Property. To the
knowledge of the Control Shareholders, the unrestricted use and exploitation and
intended use of the Intellectual Property does not and will not infringe or
misappropriate any material rights held or asserted by any Person, except to the
extent that such would not have a Material Adverse Effect on AutoNation. No
payments (other than governmental fees) are required for the continued use of
the Intellectual Property. Except as set forth in Schedule 3.20, none of the
Intellectual Property has ever been declared invalid or unenforceable, or is the
subject of any pending or, to AutoNation's knowledge, threatened action for
opposition, cancellation, declaration or invalidity, unenforceability or
misappropriation or like claim, action or proceeding.
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3.21 Transactions With Insiders. Except as set forth on Schedule 3.21,
none of the officers, directors or shareholders (owning of record or
beneficially more than 5%) of AutoNation (or any of their spouses or children)
has been a party to any transaction, or series of similar transactions, with
AutoNation or any of its subsidiaries, in which the amount involved exceeds
$60,000 and in which any such persons had or will have a direct or indirect
material interest.
3.22 Good Title to Assets. AutoNation and each of its subsidiaries has
good and marketable title to all of its Assets (as hereinafter defined), free
and clear of any Liens or restrictions on use other than Permitted Liens, except
to the extent that such would not have a Material Adverse Effect on AutoNation.
For purposes of this Agreement, the term "Assets" means all of the material
properties and assets owned by AutoNation and each of its subsidiaries, whether
personal or mixed, tangible or intangible, wherever located.
3.23 Securities Law Matters. Each Control Shareholder is acquiring the
Republic Shares hereunder for his own account for investment and not with a view
to, or for the sale in connection with, any distribution of any of the Republic
Shares, except in compliance with applicable state and federal securities laws.
Each Control Shareholder has had the opportunity to discuss the transactions
contemplated hereby with Republic and has had the opportunity to obtain such
information pertaining to the Republic Companies as has been requested,
including but not limited to filings made by Republic with the SEC under the
Exchange Act. Each Control Shareholder has such knowledge and experience in
business or financial matters that he or it is capable of evaluating the merits
and risks of an investment in the Republic Shares.
3.24 Business Locations; Bank Accounts. AutoNation has no office or place
of business other than as identified on Schedule 3.24 and AutoNation's principal
place of business and chief executive office (as such terms are used in
subsection 9-401 of the Uniform Commercial Code as enacted in the State of
Florida as of the date hereof) are indicated on Schedule 3.24. Schedule 3.24
also lists each account of AutoNation with any bank, broker or other depository
institution, and the names of all persons authorized to withdraw funds from each
such account.
3.25 Names. All names under which AutoNation does business as of the date
hereof or has previously conducted business are specified on Schedule 3.25.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by AutoNation Pending the Merger. AutoNation
covenants and agrees that, between the date of this Agreement and the Effective
Time, except as otherwise required under applicable law or as otherwise
consented to in writing by Republic (such consent not to be unreasonably
withheld) the business of AutoNation and each of its subsidiaries shall be
conducted only in, and AutoNation and each of its subsidiaries shall not take
any action except in, the ordinary course of business consistent with
AutoNation's 1996 Business Plan, a copy of which has been provided to Republic
(the "Business Plan"). AutoNation and each of its subsidiaries shall use its
reasonable best efforts to preserve intact its business organization and
goodwill, to keep available the services of its current officers, employees and
consultants, to preserve its present relationships with customers, suppliers and
other persons with which it has significant business relations, and to operate
its business in compliance with all applicable laws in all material respects. By
way of amplification and not limitation, except as contemplated by this
Agreement or as otherwise required under applicable law, AutoNation and each of
its subsidiaries shall not, between the date of this Agreement and the Effective
Time, directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of Republic (such consent not to be
unreasonably withheld):
(a) amend or otherwise change its articles of incorporation or bylaws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber, or, authorize the
issuance, sale, pledge, disposition, grant or encumbrance of any shares of
its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such
capital stock, except that AutoNation
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may grant options to purchase up to an aggregate of 600,000 shares of
AutoNation Common Stock pursuant to the AutoNation Plan to employees hired
by AutoNation after the date of this Agreement, provided that (i) no
individual employee shall be granted options to purchase more than 50,000
shares of AutoNation Common Stock; (ii) the exercise price per share of
AutoNation Common Stock is not less than the quotient of (x) the closing
bid price per share of Republic Common Stock as quoted on the Nasdaq Stock
Market on the last trading date before the date such employee is hired by
AutoNation, divided by (y) 9.1812; and (iii) such options are subject to a
four year vesting schedule pursuant to which 25% of the aggregate amount of
options granted to each such new employee shall vest and first become
exercisable on the first four succeeding anniversaries of such employee's
date of hire;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) acquire (including, without limitation, for cash or shares of
stock), by merger, consolidation, or acquisition of securities, any
interest in any Person, or make any investment in any Person either by
purchase of securities, contributions of capital or property transfer, or
make any loans or advances to any Person except advances to employees not
in excess of $5,000;
(f) except in the ordinary course of business, and consistent with the
Business Plan, purchase any property or assets of any other Person for a
purchase price of $100,000 or more;
(g) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or otherwise as an accommodation become
responsible for, the obligations of any Person, except for "floor plan"
financings of vehicle inventories on commercially reasonable terms and
conditions;
(h) enter into any material Contract other than in the ordinary course
of business consistent with the Business Plan;
(i) mortgage, pledge, or otherwise subject to any Lien any asset,
tangible or intangible, or real property, except for Permitted Liens;
(j) increase the compensation payable or to become payable to its
existing officers or employees, or, except as presently bound to do, grant
any severance or termination pay in excess of $5,000 per individual to, or
enter into any employment or severance agreement with, any of its
directors, officers or other employees, or establish, adopt, enter into or
amend or take any action to accelerate any rights or benefits which any
collective bargaining, bonus, profit sharing, trust, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or
employees, except in the ordinary course of business consistent with the
Business Plan.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Further Assurances. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be reasonably necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions contemplated
hereby. AutoNation and Republic each agree to cooperate with the other in the
preparation and filing of all forms, notifications, reports and information, if
any, required or reasonably deemed advisable pursuant to any requirement of law
or the rules of any exchange on which the Republic Common Stock is traded or The
Nasdaq Stock Market in connection with the transactions contemplated by this
Agreement. Except as may be specifically required hereunder, neither of the
parties hereto or their respective Affiliates shall be required to agree to take
any action that in the reasonable opinion of such party would result in or
produce a Material Adverse Effect on such party.
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5.2 Stockholder's Meeting; Proxies. As soon as practicable after the date
of this Agreement, Republic shall establish a record date, duly call, give
notice of, convene and hold a special meeting of its stockholders for the
purpose of voting upon the approval of this Agreement and the transactions
contemplated hereby including the issuance of the Republic Shares in the Merger.
Republic shall comply with all requirements of law applicable to such meeting.
Republic shall use its reasonable best efforts to solicit from its stockholders
proxies in favor of approval of this Agreement and the transactions contemplated
hereby including the issuance of the Republic Shares, and shall take all other
action necessary or advisable to obtain the vote or consent of its stockholders
required by Delaware law to obtain such approvals; provided, however, that
nothing contained in this Section will require the board of directors of
Republic to take any action or refrain from taking any action which the board of
directors of Republic (or the Special Committee thereof) determines in good
faith based upon advice of counsel and financial advisors would result in a
breach of its fiduciary duties under applicable law. In connection with the
foregoing, AutoNation shall cooperate and consult with Republic.
5.3 Proxy Statement. As promptly as practicable after the execution of
this Agreement, Republic shall prepare and file with the SEC, in compliance with
applicable law and regulations, (i) a proxy statement relating to the special
meeting of Republic's stockholders to be held in connection with approving the
transactions contemplated hereby (the "Proxy Statement") and (ii) a registration
statement on form S-4 in connection with the issuance of Republic Common Stock
in the Merger (the "Form S-4") in which the Proxy Statement will be included as
a prospectus. Republic shall use its reasonable best efforts to have the Proxy
Statement and the Form S-4 and/or any amendments or supplements thereto declared
effective by the SEC. Each of AutoNation and the Control Shareholders shall
furnish all information concerning itself and its affiliates to Republic as
necessary in connection with such actions and the preparation of the Proxy
Statement and Form S-4. As promptly as practicable after the Form S-4 is
declared effective by the SEC, Republic shall mail the Proxy Statement to its
stockholders and to the Shareholders of AutoNation. The Proxy Statement shall
include the recommendation of the board of directors of Republic (or of the
Special Committee) to the stockholders of Republic in favor of approving this
Agreement and the transactions contemplated hereby including the issuance of the
Republic shares; provided, however, that nothing contained in this Section will
require the board of directors of Republic to take any action or refrain from
taking any action which the board of directors of Republic (or the Special
Committee thereof) determines in good faith based upon advice of counsel and
financial advisors would result in a breach of its fiduciary duties under
applicable law. If the Merger is consummated, Republic agrees to file a
post-effective amendment to the Form S-4 to allow Affiliates of AutoNation
and/or Republic to resell and offer for resale from time to time on a continuous
basis (so long as they remain Affiliates) the Republic Shares they receive in
the Merger. Republic agrees that the Form S-4, the Proxy Statement, and any
other documents to be filed with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby (excluding in each case any
information supplied in writing by AutoNation or the Control Shareholders
specifically for use therein) will not, at the respective times such documents
are filed, and, in the case of the Form S-4, when it becomes effective, and,
with respect to the Proxy Statement, when first mailed to the stockholders of
Republic, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading, or, in the case of the Proxy Statement or any amendment thereof or
supplement thereto, at the time of the Republic stockholders' meeting, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein in light of the circumstances
under which they were made not misleading. None of the information that has been
or will be supplied by AutoNation or the Control Shareholders in writing
specifically for use in the Form S-4, the Proxy Statement, or any other
documents to be filed with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby will, at the respective
times such documents are filed, and, in the case of the Form S-4, when it
becomes effective, and, with respect to the Proxy Statement, when first mailed
to the stockholders of Republic, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading, or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Republic
stockholders' meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading.
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5.4 HSR Act and Other Actions. Each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act, with respect to the transactions contemplated
hereby, and will request early termination of the waiting period thereunder and
(ii) use its reasonable best efforts to take, or cause to be taken, all
appropriate actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated herein, and to overcome any objections
of any Governmental Authority to the consummation of the transactions
contemplated hereby. The parties also agree to use reasonable best efforts to
defend all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby and to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby. The parties
also shall use their reasonable best efforts to obtain the consent of any third
party, including lenders, whose consent is required under any contract to avoid
a termination or other adverse consequences under such contract.
5.5 Access to Information. From the date hereof to the Effective Time,
AutoNation and Republic shall (and each shall cause its subsidiaries and its and
their directors, officers, employees, auditors, counsel and agents) to afford
the other party and its employees, counsel and agents reasonable access at all
reasonable times to its properties, offices, and other facilities, to its
officers, and to all books and records, and shall furnish such persons with all
financial, operating and other data and information as may be reasonably
requested.
5.6 Notification of Certain Matters. Republic shall give prompt notice to
AutoNation, and AutoNation shall give prompt notice to Republic, of the
occurrence or non-occurrence of any event which would likely cause any covenant
or condition contained herein not to be complied with or satisfied. Each party
hereto shall give prompt notice to every other party hereto if any such party is
served with, or is threatened (in writing) with, any lawsuit seeking to enjoin,
or recover damages allegedly arising out of, the transactions contemplated
hereby, or otherwise becomes aware that any such lawsuit has been filed in any
court.
5.7 Tax Treatment. Republic, Republic Mergersub, AutoNation and the
Control Shareholders will use their respective best efforts to cause the Merger
to qualify as a "reorganization" under the provisions of Section 368 of the Code
and shall not take any action prior to or after the Merger is effected to cause
the Merger to lose its tax-free status. From and after the Effective Date,
Republic shall cause the Surviving Corporation to continue AutoNation's historic
business to use a significant portion of AutoNation's historic business assets
in a business within the meaning of Treasury Regulation Section 1.368-1(d).
Republic agrees to file the Plan of Merger with their respective federal income
tax returns of Republic and the Surviving Corporation for the year in which the
Merger is effective, and to comply with the reporting requirements of Treasury
Regulation 1.368-3. The parties agree to use their respective best efforts to
challenge any objections of any Governmental Authority seeking to disqualify the
Merger as a "reorganization" under Section 368 of the Code or to appeal any
order to that effect.
5.8 Confidentiality; Publicity. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no press release or other
public announcement related to this Agreement or the transactions contemplated
hereby shall be issued by any party hereto without the prior approval of the
other parties, except that Republic may make such public disclosure which it
believes in good faith to be required by law or by the regulations of the Nasdaq
Stock Market or the terms of any listing agreement with a securities exchange
(in which case Republic will consult with AutoNation prior to making such
disclosure).
5.9 No Other Discussions. AutoNation, the Control Shareholders, and their
respective Affiliates, employees, agents and representatives will not (i)
initiate, solicit, encourage the initiation by others of discussions or
negotiations with third parties or, in the case of AutoNation, the Control
Shareholders and their respective Affiliates, respond to solicitations by third
persons relating to any merger, sale or other disposition of any substantial
part of the assets, business or properties of AutoNation or any of its
subsidiaries (whether by merger, consolidation, sale of stock or otherwise), or
(ii) enter into any agreement or commitment (whether or not binding) with
respect to any of the foregoing transactions. AutoNation will immediately notify
Republic if any third party attempts to initiate any solicitation, discussion or
negotiation with respect to any of the foregoing transactions.
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5.10 Sale of AutoNation Common Stock. Except as otherwise expressly
consented to by Republic, from the date of this Agreement until the Effective
Time, none of the Control Shareholders (nor any Affiliates thereof) will
directly or indirectly sell, transfer or otherwise dispose of any shares of
AutoNation Common Stock or permit the sale, transfer or other disposition of any
shares of AutoNation Common Stock by any of the other Shareholders of
AutoNation.
5.11 Credit Facility. From the date hereof until October 31, 1996,
Republic agrees to (or to cause a third party to) loan to AutoNation cash in
amounts necessary to meet AutoNation's projected requirements for capital
expenditures and corporate overhead in furtherance of and consistent with its
Business Plan as set forth in the budget provided by AutoNation to Republic, on
such terms and conditions as is set forth in that certain Loan Agreement and
Note executed and delivered by AutoNation as of the date hereof, and repayment
of which is secured by that certain Stock Pledge and Assignment Agreement
executed and delivered by AutoNation and Republic as of the date hereof.
Republic agrees and acknowledges that no additional contributions to AutoNation
by the Shareholders will be required as a condition to such loans or otherwise
under this Agreement, provided that in the event the Merger is not consummated
on or before September 30, 1996, the making of such contributions by the
Shareholders may thereafter be required by Republic as security for repayment of
such loans in accordance with the Stock Pledge and Assignment Agreement.
5.12 Non-Disclosure Letter Agreements. On or before May 10, 1996, each of
the directors and executive officers of Republic shall have entered into an
agreement with Republic containing certain confidentiality and non-disclosure
covenants with respect to AutoNation, reasonably acceptable to AutoNation.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of AutoNation, the Control Shareholders and
the Republic Companies. The obligations of AutoNation, the Control Shareholders
and the Republic Companies to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) Shareholder Approval. This agreement shall have been approved and
adopted by the vote of the holders of a majority of the voting power of the
shares of Republic Common Stock entitled to vote in accordance with the
Certificate of Incorporation and Bylaws of Republic and applicable Delaware
law.
(b) HSR Act Waiting Period. Any applicable HSR Act waiting period,
including any extension thereof, shall have expired or been terminated.
6.2 Conditions to Obligations of the Republic Companies. The obligations
of the Republic Companies to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
or all of which may be waived in whole or in part by the Republic Companies:
(a) Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of the Control
Shareholders contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time with the same force and
effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii)
that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in
any event for such failures to be true and correct which would not,
individually or in the aggregate, have a Material Adverse Effect on
AutoNation. Each of AutoNation and the Control Shareholders shall have
performed and complied in all material respects with all of their
respective obligations required by this Agreement to be performed or
complied with at or prior to the Effective Time. Each of AutoNation and the
Control Shareholders shall have delivered to the Republic Companies a
certificate, dated as of the Effective Time, duly signed by an executive
officer of AutoNation, certifying that such representations and warranties
are true and correct and that all such obligations have been performed and
complied with in all material respects.
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(b) No Material Adverse Change. Between the date hereof and the
Effective Date, there shall have been no Material Adverse Change of
AutoNation, and each of AutoNation and the Control Shareholders shall have
delivered to the Republic Companies a certificate to that effect, dated the
Effective Time and signed by an executive officer of AutoNation.
(c) Corporate Certificate. AutoNation shall have delivered to the
Republic Companies (i) copies of the articles of incorporation and bylaws
of AutoNation as in effect immediately prior to the Effective Time, (ii)
copies of resolutions or consents adopted by the Board of Directors of
AutoNation authorizing the transactions contemplated by this Agreement,
(iii) copies of the written consents of the Shareholders approving the
Merger and the other transactions contemplated hereby, and (iv) a
certificate of good standing of AutoNation and its subsidiaries issued by
the Department of State of the State of Florida as of a date not more than
ten days prior to the Effective Time, certified in each case as of the
Effective Time by the Secretary of AutoNation as being true, correct and
complete.
(d) Rule 145 Undertakings. At or prior to the Closing, each of the
Shareholders who is an Affiliate of AutoNation and/or Republic as listed on
Schedule 6.2(d) hereto (and any of the Shareholders who becomes an
Affiliate of AutoNation and/or Republic between the date hereof and the
Effective Date) shall have delivered to Republic a letter agreement
relating to Rule 145 under the Securities Act, in form and substance
satisfactory to Republic.
(e) Shareholder Letter Agreements. At or prior to the Closing, each
of the Control Shareholders shall have delivered to Republic a letter
agreement relating to a two-year restriction on the sale, transfer or other
disposition of the shares of Republic Common Stock to be received by each
such Shareholders hereunder, and each of the other Shareholders shall have
delivered to Republic a letter agreement relating to a six month
restriction (except for James M. Moran, who shall be subject to a one-year
restriction) on the sale, transfer or other disposition of the shares of
Republic Common Stock to be received by each such Shareholder hereunder, in
the form of Exhibit B hereto. Such letter agreements will also contain
confidentiality provisions and covenants not to compete reasonably
acceptable to Republic, provided that no such provisions or covenants will
be more favorable to Republic than the existing similar provisions and
covenants running in favor of AutoNation.
(f) No Injunction. The consummation of the Merger shall not be
precluded, enjoined, prohibited or materially restricted by any order or
injunction of a court of competent jurisdiction (each party agreeing to use
its best efforts to have any such order reversed or vacated or to have any
such injunction lifted).
6.3 Conditions to Obligations of AutoNation and the Control
Shareholders. The obligations of AutoNation and the Control Shareholders to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions, any or all of which may be waived in
whole or in part by AutoNation and the Control Shareholders:
(a) Accuracy of Representations and Warranties and Compliance with
Obligations. The representations and warranties of each of the Republic
Companies contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time with the same force and
effect as though made at and as of that time except (i) for changes
specifically permitted by or disclosed pursuant to this Agreement, and (ii)
that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date, except in
any event for such failures to be true and correct which would not,
individually or in the aggregate, have a Material Adverse Effect on
Republic. Each of the Republic Companies shall have performed and complied
in all material respects with all of its obligations required by this
Agreement to be performed or complied with at or prior to the Effective
Time. Each of the Republic Companies shall have delivered to AutoNation a
certificate, dated as of the Effective Time, and signed by an executive
officer thereof, certifying that such representations and warranties are
true and correct, and that all such obligations have been performed and
complied with, in all material respects.
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(b) No Material Adverse Change. Between the date hereof and the
Effective Date, there shall have been no Material Adverse Change of
Republic and there shall have been delivered to AutoNation a certificate to
that effect, dated the Effective Time and signed by or on behalf of
Republic.
(c) Corporate Certificate. Republic shall have delivered to
AutoNation (i) copies of the articles of incorporation and bylaws of
Republic as in effect immediately prior to the Effective Time, (ii) copies
of resolutions or consents adopted by the Board of Directors of Republic
authorizing the transactions contemplated by this Agreement, (iii) copies
of the certificate of the inspector of elections of the Special Meeting of
the Shareholders indicating the vote approving the Merger and the other
transactions contemplated hereby, and (iv) a certificate of good standing
of Republic and Republic Mergersub issued by the Secretary of State of the
State of Delaware as of a date not more than ten days prior to the
Effective Time, certified in each case as of the Effective Time by the
Secretary of Republic as being true, correct and complete.
(d) Republic Shares. At the Closing, Republic shall have issued all
of the Republic Shares and shall have delivered to the Shareholders
certificates representing the Republic Shares required to be issued to them
hereunder, and the Republic Shares shall have been duly listed for trading
on The Nasdaq Stock Market, subject to official notice of issuance. In
addition, Republic shall have paid the Fractional Payments by checks
payable to the Shareholders.
(e) Registration Statement. The Form S-4 shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(f) No Injunction. The consummation of the Merger shall not be
precluded, enjoined, prohibited or materially restricted by any order or
injunction of a court of competent jurisdiction (each party agreeing to use
its best efforts to have any such order reversed or vacated or to have any
such injunction lifted).
ARTICLE VII
INDEMNIFICATION
7.1 Agreement by the Control Shareholders to Indemnify. The Control
Shareholders jointly and severally agree to indemnify and hold Republic harmless
from and against the aggregate of all expenses, losses, costs, deficiencies,
liabilities and damages (including, without limitation, related counsel and
paralegal fees and expenses) incurred or suffered by Republic (collectively,
"Indemnifiable Damages") resulting from or arising out of (i) any breach of a
representation or warranty made by AutoNation or the Control Shareholders in or
pursuant to this Agreement, or (ii) any inaccuracy in any certificate delivered
by AutoNation or the Control Shareholders pursuant to this Agreement. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, Republic shall have the right to be put in the same
after-tax consolidated financial position as it would have been in had each of
the representations and warranties of the Control Shareholders been true and
correct.
7.2 Survival of Representations and Warranties. Each of the
representations and warranties made by the Control Shareholders in this
Agreement or pursuant hereto shall survive until July 15, 1997. No claim for the
recovery of Indemnifiable Damages may be asserted by Republic against the
Control Shareholders after such representations and warranties shall thus
expire, provided, however, that claims for Indemnifiable Damages first asserted
within the applicable period shall not thereafter be barred. Notwithstanding any
knowledge of facts determined or determinable by any party by investigation,
each party shall have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties contained in this
Agreement or in any other documents or papers delivered in connection herewith.
Each representation, warranty, covenant and agreement of the parties contained
in this Agreement is independent of each other representation, warranty,
covenant and agreement.
7.3 Indemnification Deductible; Cap on Indemnifiable
Damages. Notwithstanding anything to the contrary in this Article VII, the
Control Shareholders shall not be liable to Republic with respect to any
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claims for Indemnifiable Damages unless all Indemnifiable Damages incurred by
Republic exceed an aggregate of $2,500,000 (the "Indemnification Deductible"),
in which case the Control Shareholders shall be liable only for the amount of
such Indemnifiable Damages in excess of such Indemnification Deductible,
provided, however, that the maximum liability of the Control Shareholders for
Indemnifiable Damages shall not exceed $50,000,000 in the aggregate. Republic
agrees to use its reasonable best efforts to attempt to mitigate any claim for
Indemnifiable Damages hereunder, including seeking recovery under applicable
insurance policies or from third parties.
7.4 Notice of Claim for Indemnifiable Damages. In the event that Republic
believes that it is entitled to a claim for any Indemnifiable Damages hereunder,
Republic shall promptly give written notice to the Control Shareholders of such
claim, the amount or the estimated amount of such claim, and the basis for such
claim. The Control Shareholders shall pay the amount of the claim for
Indemnifiable Damages to Republic within fifteen (15) days. If, prior to the
expiration of such 15 day period, the Control Shareholders notify Republic in
writing of an intention to dispute the claim and if such dispute is not resolved
within 30 days thereafter, then such dispute shall be resolved by a committee of
three arbitrators (one appointed by the Control Shareholders, one appointed by
the Special Committee and one appointed by the two arbitrators so appointed),
which shall be appointed within 60 days thereafter. The arbitrators shall abide
by the rules of the American Arbitration Association and their decision shall be
made within 45 days of being appointed and shall be final and binding on all
parties, provided that the arbitrators shall have no authority to award punitive
damages.
7.5 Notice of Third Party Claim. Promptly after receipt by Republic of
notice of the commencement of any action by a third party, which is likely to
give rise to Indemnifiable Damages, Republic shall promptly notify the Control
Shareholders of the commencement thereof; but the omission to so notify the
Control Shareholders will not relieve them from any liability which they may
have hereunder unless the Control Shareholders have been materially prejudiced
thereby nor will such failure to so notify the Control Shareholders relieve them
from any liability which they may have to Republic otherwise than hereunder. In
case such action is brought against Republic and it notifies the Control
Shareholders of the commencement thereof, the Control Shareholders shall have
the right to participate in, and, to the extent that they may wish, to assume
the defense thereof, with counsel reasonably satisfactory to Republic; provided,
however, if the defendants in any action include both Republic and any of the
Control Shareholders and there is a conflict of interest which would prevent
counsel for the Control Shareholders from also representing Republic, Republic
shall have the right to select a separate counsel to participate in the defense
of such action on behalf of Republic. After notice from the Control Shareholders
to Republic of their election to so assume the defense thereof, the Control
Shareholders will not be liable to Republic for any legal or other expense
subsequently incurred by Republic in connection with the defense thereof other
than reasonable costs of investigation, unless (i) Republic shall have employed
counsel in accordance with the provisions of the preceding sentence, (ii) the
Control Shareholders shall not have employed counsel satisfactory to Republic to
represent Republic within a reasonable time after the notice of the commencement
of the action, or (iii) the Control Shareholders have authorized the employment
of counsel for Republic at the expense of the Control Shareholders.
Notwithstanding anything to the contrary set forth in this Agreement, the
Control Shareholders shall not in the defense of any such claim, except with the
prior written consent of Republic, consent to the entry of any judgment or enter
into any settlement which (i) does not include as an unconditional term the
release by the claimant or plaintiff of Republic from all further liability in
respect of such claim, (ii) will not, in the reasonable judgment of Republic,
result in or have a Material Adverse Effect on Republic, and (iii) provides for
injunctive or other non-monetary relief.
ARTICLE VIII
DEFINITIONS
8.1 Defined Terms. As used herein, the following terms shall have the
following meanings:
"Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any indenture, lease, sublease, license, loan
agreement, mortgage, note, indenture, restriction, will, trust, commitment,
obligation or other contract, agreement or instrument, whether written or
oral.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Governmental Authority" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, but not limited to, any conditional
sale or other title retention agreement, any lease in the nature thereof,
and the filing of or agreement to give any financing statement under the
Uniform Commercial Code or comparable law or any jurisdiction in connection
with such mortgage, pledge, security interest, encumbrance, lien or
charge).
"Material Adverse Change (or Effect)" means a change (or effect), in
the financial condition, results of operations or business of a Person, and
with respect to any Person that is a corporation, means the financial
condition or results of operation of such corporation and its subsidiaries
on a consolidated basis and the business of the corporation and its
subsidiaries taken as a whole, which change (or effect) individually or in
the aggregate, is materially adverse to such financial condition, results
of operations or business.
"Permitted Liens" means statutory liens for taxes or municipal
impositions not yet due and payable, and statutory liens of landlords,
construction, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due and payable.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, estate, trust, unincorporated association,
joint venture, Governmental Authority or other entity, of whatever nature.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholders" means all of the shareholders of AutoNation, including
the Control Shareholders.
"Tax Return" means any tax return, filing or information statement
required to be filed in connection with or with respect to any Taxes; and
"Taxes" means all taxes, fees or other assessments, including, but not
limited to, income, excise, property, sales, franchise, intangible,
withholding, social security and unemployment taxes imposed by any federal,
state, local or foreign governmental agency, and any interest or penalties
related thereto.
8.2 Other Definitional Provisions. (a) All terms defined in this Agreement
shall have the defined meanings when used in any certificates, reports or other
documents made or delivered pursuant hereto or thereto, unless the context
otherwise requires.
(b) Terms defined in the singular shall have a comparable meaning when used
in the plural, and vice versa.
(c) All matters of an accounting nature in connection with this Agreement
and the transactions contemplated hereby shall be determined in accordance with
GAAP applied on a basis consistent with prior periods, where applicable.
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(d) As used herein, the neuter gender shall also denote the masculine and
feminine, and the masculine gender shall also denote the neuter and feminine,
where the context so permits.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of AutoNation and Republic at any time
prior to the Closing;
(b) by Republic, upon a breach of any material representation,
warranty, covenant or agreement on the part of AutoNation or the Control
Shareholders set forth in this Agreement, which cannot be, or has not been,
cured within 10 days after written notice thereof is given to the party
committing such breach, provided that the right to effect such cure shall
not extend beyond the date set forth in subparagraph (d) below;
(c) by AutoNation, upon a breach of any material representation,
warranty, covenant or agreement on the part of the Republic Companies set
forth in this Agreement, which cannot be, or has not been, cured within 10
days after written notice thereof is given to the party committing such
breach, provided that the right to effect such cure shall not extend beyond
the date set forth in subparagraph (d) below;
(d) by either Republic or AutoNation if the Closing shall not have
been consummated before September 30, 1996;
(e) by Republic, if this Agreement and the transactions contemplated
hereby fail to receive the requisite vote for approval and adoption by the
stockholders of Republic;
(f) by AutoNation, if Republic shall not have received the waiver or
consent of its lenders under that certain Credit Facilities and
Reimbursement Agreement dated December 19, 1995 to the transactions
contemplated by this Agreement by May 31, 1996, which shall remain
effective until September 30, 1996, or otherwise modified such Credit
Facilities and Reimbursement Agreement to allow Republic to consummate the
Merger as a Permitted Acquisition thereunder and comply with its
obligations under this Agreement; or
(g) by Republic, if the Special Committee determines, whether before
or after Republic's stockholders vote at the special meeting to be called
to approve the Merger and transactions contemplated hereby, in good faith
based upon the advice of counsel and in consultation with its financial
advisors, that proceeding with the Merger and the other transactions
contemplated hereby would result in a breach of its fiduciary duties under
applicable law.
9.2 Effect of Termination. Except for the provisions of Section 10.3 which
will survive the termination of this Agreement, the event of termination of this
Agreement pursuant to Section 9.1, this Agreement and the Plan of Merger shall
forthwith become void; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
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ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and telecopy numbers
(or to such other addresses or telecopy numbers which such party shall designate
in writing to the other party):
(a) IF TO ANY OF THE REPUBLIC COMPANIES TO:
Republic Industries, Inc.
200 East Las Olas Blvd., Suite 1400
Ft. Lauderdale, FL 33301
Attn: Richard L. Handley, Vice President and General Counsel
Telecopy: (954) 779-3884
WITH A COPY TO:
Akerman, Senterfitt & Eidson, P.A.
One Southeast Third Avenue, Suite 2700
Miami, Florida 33131
Attention: Philip B. Schwartz, Esq.
Telecopy: (305) 374-5095
(b) IF TO AUTONATION OR THE CONTROL SHAREHOLDERS TO:
AutoNation Incorporated
One Financial Plaza, 17th Floor
Fort Lauderdale, FL 33301
Attn: Steven R. Berrard, President
Telecopy: (954) 764-0645
WITH COPIES TO:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, FL 33301
Attn: Elliot P. Borkson, Esq.
Telecopy: (954) 766-7800
Eckert Seamans Cherin & Mellot
600 Grant Street, 42nd Floor
Pittsburgh, PA 15219
Attn: Bryan D. Rosenberger, Esq.
Telecopy: (412) 566-6099
JM Family Enterprises, Inc.
100 N.W. 12th Avenue
P.O. Box 1160
Deerfield Beach, FL 33443
Attn: Lawrence S. Rich
Telecopy: (954) 429-2549
and
Attn: Colin Brown, Esq.
Telecopy: (954) 429-2601
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10.2 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto) and other documents delivered at the Closing pursuant
hereto, contains the entire understanding of the parties in respect of its
subject matter and supersedes all prior agreements and understandings (oral or
written) between or among the parties with respect to such subject matter. The
Exhibits and Schedules constitute a part hereof as though set forth in full
above.
10.3 Expenses. Except as otherwise provided herein, the parties shall pay
their own fees and expenses, including their own counsel fees, incurred in
connection with this Agreement or any transaction contemplated hereby, provided
that Republic agrees to pay all HSR fees for filings by any party hereto with
respect to the Merger, all fees of Merrill Lynch Pierce Fenner & Smith in
connection with their rendering a fairness opinion to the Special Committee of
the Board of Directors of Republic and all SEC and NASD fees in connection with
the issuance, registration and listing of the Republic shares to be issued
pursuant to the Merger.
10.4 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
all parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
the exercise of any other right, power or privilege. No waiver of any breach of
any provision shall be deemed to be a waiver of any preceding or succeeding
breach of the same or any other provision, nor shall any waiver be implied from
any course of dealing between the parties. No extension of time for performance
of any obligations or other acts hereunder or under any other agreement shall be
deemed to be an extension of the time for performance of any other obligations
or any other acts. The rights and remedies of the parties under this Agreement
are in addition to all other rights and remedies, at law or equity, that they
may have against each other.
10.5 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by AutoNation or the Shareholders without the
prior written consent of Republic.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
10.7 Remedies. (a) Each party acknowledges that the other parties would
not have an adequate remedy at law for money damages in the event that any of
the covenants or agreements of such party in this Agreement was not performed in
accordance with its terms, and it is therefore agreed that each party in
addition to and without limiting any other remedy or right such party may have,
shall have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach and enforcing specifically the
terms and provisions hereof, and each party hereby waives any and all defenses
such party may have on the ground of lack of jurisdiction or competence of the
court to grant such an injunction or other equitable relief.
(b) All rights, powers and remedies under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not
alternative, and the exercise or beginning of the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
10.8 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement. Any information
disclosed by a party in any schedule hereto shall be deemed to be disclosed in
all of the Schedules of such party.
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10.9 Governing Law. This Agreement shall be construed in accordance with
and governed for all purposes by the laws of the State of Florida applicable to
contracts executed and to be wholly performed within such State.
10.10 Arm's Length Negotiations. Each party herein expressly represents
and warrants to all other parties hereto that (a) before executing this
Agreement, said party has fully informed itself of the terms, contents,
conditions and effects of this Agreement; (b) said party has relied solely and
completely upon its own judgment in executing this Agreement; (c) said party has
had the opportunity to seek and has obtained the advice of counsel before
executing this Agreement; (d) said party has acted voluntarily and of its own
free will in executing this Agreement; (e) said party is not acting under
duress, whether economic or physical, in executing this Agreement; and (f) this
Agreement is the result of arm's length negotiations conducted by and among the
parties and their respective counsel.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
REPUBLIC INDUSTRIES, INC.,
a Delaware corporation
By: /s/ RICHARD L. HANDLEY
------------------------------------
Name: Richard L. Handley
Title: Senior Vice President
RI/ANI MERGER CORP., a Florida
corporation
By: /s/ RICHARD L. HANDLEY
------------------------------------
Name: Richard L. Handley
Title: Vice President
AUTONATION INCORPORATED,
A Florida corporation
By: /s/ STEVEN R. BERRARD
------------------------------------
Name: Steven R. Berrard
Title: President
By: /s/ H. WAYNE HUIZENGA
------------------------------------
H. Wayne Huizenga, individually
By: /s/ STEVEN R. BERRARD
------------------------------------
Steven R. Berrard, individually
JM FAMILY ENTERPRISES, INC.,
a Delaware corporation
By: /s/ LAWRENCE S. RICH
------------------------------------
Name: Lawrence S. Rich
Title: Chief Operating Officer
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EXHIBIT A
PLAN OF MERGER AND REORGANIZATION
This Plan of Merger (this "Plan") is entered into as of , 1996
among RI/ANI Merger Corp., a Florida corporation ("Merger Corp."), and
AutoNation Incorporated, a Florida corporation ("AutoNation").
RECITALS
The boards of directors and shareholders of Merger Corp. and AutoNation
have determined that it is advisable and in the best interests of each such
corporation and its respective shareholders that Merger Corp. be merged (the
"Merger") with and into AutoNation on the terms and subject to the conditions
set forth herein.
ARTICLE I
THE MERGER
At the Effective Time (as defined in Article V hereof), Merger Corp. shall
be merged with and into AutoNation in accordance with the Florida Business
Corporation Act (the "FBCA"), and the separate existence of Merger Corp. shall
cease and AutoNation shall thereafter continue as the surviving corporation (the
"Surviving Corporation") under the laws of the State of Florida.
ARTICLE II
THE SURVIVING CORPORATION
A. At the Effective Time, the Articles of Incorporation of AutoNation, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation.
B. At the Effective Time, the Bylaws of AutoNation, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation, until thereafter altered, amended or repealed in accordance with
the FBCA and the Articles of Incorporation and Bylaws of the Surviving
Corporation.
C. At the Effective Time, the officers and directors of AutoNation shall be
the officers and directors of the Surviving Corporation until their successors
are elected and have qualified.
ARTICLE III
MANNER AND BASIS OF CONVERTING SHARES
A. At the Effective Time, each share of common stock of AutoNation, $0.001
par value per share (the "AutoNation Common Stock"), which shall be issued and
outstanding (other than shares of AutoNation Common Stock held in treasury)
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive a 0.108998 fractional share of
common stock, $0.01 par value per share, of Republic Industries, Inc., a
Delaware corporation and the parent corporation of Merger Corp. ("Republic
Common Stock"); provided, however, that in lieu of the issuance of any
fractional share of Republic Common Stock, each holder of AutoNation Common
Stock as of the Effective Time shall receive a cash payment without interest
equal to the fair market value of the fractional share of Republic Common Stock
to which such holder otherwise would be entitled, with the fair market value of
a fraction of a share of Republic Common Stock determined by multiplying such
fraction by the average of the daily closing prices of a share of Republic
Common Stock on The Nasdaq Stock Market -National Market as reported in the Wall
Street Journal for the five consecutive trading days that end on the second
trading day prior to the Effective Time.
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B. At the Effective Time, each share of AutoNation Common Stock held in
treasury shall be canceled and extinguished without any conversion thereof.
C. At the Effective Time, each right to acquire shares of AutoNation Common
Stock, to the extent that any such rights exist, which shall be issued and
outstanding shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the right to acquire a 0.108998 fractional
share of Republic Common Stock.
D. At the Effective Time, each share of common stock of Merger Corp., $1.00
par value per share, issued and outstanding immediately prior to the Effective
Time, shall be automatically converted into one share of AutoNation Common
Stock, which shall be the only outstanding common stock of the Surviving
Corporation immediately following the Effective Time.
ARTICLE IV
EFFECT OF MERGER
At the Effective Time, all property, rights, privileges, powers and
franchises of AutoNation and Merger Corp. shall vest in the Surviving
Corporation, and all liabilities and obligations of AutoNation and Merger Corp.
shall become liabilities and obligations of the Surviving Corporation.
ARTICLE V
EFFECTIVE TIME
As used in this Agreement, the term "Effective Time" shall mean the date
and time of filing of Articles of Merger with the Department of State of the
State of Florida.
IN WITNESS WHEREOF, each of the parties has caused this Plan to be executed
on its behalf as of the date first written above.
RI/ANI MERGER CORP.,
A FLORIDA CORPORATION
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
AUTONATION INCORPORATED,
A FLORIDA CORPORATION
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
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EXHIBIT B
, 1996
Republic Industries, Inc.
200 East Las Olas Blvd., Suite 1400
Ft. Lauderdale, FL 33301
Re: Section 6.2(e) of Merger Agreement with AutoNation Incorporated
Gentlemen:
Reference is made to that certain Merger Agreement, dated as of May 8, 1996
(the "Agreement"), by and among Republic Industries, Inc., a Delaware
corporation ("Republic"); RI/ANI Merger Corp., a Florida corporation (the
"Republic Mergersub"); AutoNation Incorporated, a Florida corporation
("AutoNation"); and H. Wayne Huizenga, Steven R. Berrard and JM Family
Enterprises, Inc., a Delaware corporation ("JMFE"). Pursuant to the Agreement,
Republic Mergersub shall be merged with and into AutoNation (the "Merger"), and
as a result of such Merger, each shareholder of AutoNation, including the
undersigned, shall receive shares of common stock of Republic ("Republic Common
Stock") in exchange for the issued and outstanding shares of common stock of
AutoNation. Further reference is made to Section 6.2(e) of the Agreement which
provides that the consummation of the Merger and other transactions contemplated
by the Agreement are conditioned, in part, upon the execution of and compliance
with the terms of this Letter by the undersigned. Capitalized terms used herein
and not defined have the meanings assigned to them in the Agreement.
1. Restrictions on Transfer. The undersigned hereby agrees not to offer,
sell, contract to sell, grant an option relating to, pledge or margin,
hypothecate or otherwise dispose of, directly or indirectly (except as provided
below), any shares of Republic Common Stock received by the undersigned pursuant
to the Merger, without the prior written consent of Republic, for a period of
[180 days/one year/two years] from the date that the Merger becomes effective.
The undersigned further acknowledges that Republic may cause its transfer agent
to place stop transfer instructions with respect to the shares of Republic
Common Stock received by the undersigned in the Merger on Republic's stock
transfer ledger in accordance with the foregoing agreement.
Notwithstanding the foregoing restrictions, Republic hereby agrees that the
undersigned may pledge or margin some or all of the shares of Republic Common
Stock received by the undersigned in the Merger pursuant to a bona fide loan
transaction with a third party lender who is not an officer, director or other
affiliate of Republic. Furthermore, Republic hereby consents to the transfer,
sale or other disposal of such securities to or by such third party lender
pursuant to a margin call or foreclosure of such pledged shares in accordance
with the terms of such bona fide loan after a default by the undersigned
thereunder.
Notwithstanding the foregoing restrictions, Republic also hereby agrees
that the undersigned may, with the prior written consent of Republic, which
consent shall not be unreasonably withheld, transfer some or all of the shares
of Republic Common Stock received by the undersigned in the Merger to (i) a
corporation, trust or other entity which is controlled by the undersigned or
(ii) a member of the undersigned's immediate family, provided that (a) any such
transfer shall be made in compliance with all applicable federal and state
securities laws and (b) the transferee of such shares must agree to be bound by
the terms of this letter agreement.
To the extent that the undersigned is employed by AutoNation immediately
prior to the consummation of the Merger, Republic agrees that the foregoing
restrictions shall not be applicable to any shares of Republic Common Stock
received by the undersigned in the Merger if the undersigned's employment is
terminated by AutoNation after the consummation of the Merger without "cause."
For the purposes of this letter agreement, termination for "cause" shall mean
termination because of (a) the undersigned's breach of his covenants and
agreements contained herein, (b) gross misconduct by the undersigned in the
performance of his duties, (c) the commission by the undersigned of an act
constituting common law fraud or a felony, or (d) the commission by the
undersigned of an act resulting in material damage to Republic. Any resignation
or other voluntary termination of employment with AutoNation by the undersigned
shall be deemed a termination for
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"cause"; provided that the undersigned's termination of employment solely as a
result of a demotion or other material adverse change by Republic in the duties
or obligations incident to his employment with AutoNation shall be deemed a
termination by Republic without "cause."
2. Non-Disclosure. The undersigned covenants and agrees that, except as
expressly permitted by this letter agreement, it shall not at any time use for
its own benefit, or for the benefit of any other person, or to the detriment of
Republic, or disclose to any person, firm or corporation, any secret, private or
confidential information or other proprietary knowledge of and concerning the
business or affairs of AutoNation which it may have acquired in the course of,
or as incident to, ownership of shares of capital stock of AutoNation. The
provisions of this paragraph shall not be applicable with respect to information
concerning the business and affairs of AutoNation which is otherwise publicly
available or which may be required to be disclosed by law, provided that prior
notice of any disclosure required by law, and an opportunity to object to any
such required disclosure, shall be given by the undersigned to Republic.
3. Non-Competition. The undersigned recognizes and acknowledges that, as a
former shareholder of AutoNation, it is, and continues to be, privy to
confidential information of AutoNation, which is valuable and material to the
business and competitive position of Republic and that the covenants herein
contained are a material consideration and inducement to Republic to enter into
the Agreement. Accordingly, the undersigned agrees that for the period of 18
months immediately following the consummation of the Merger (unless the
undersigned also is an employee of AutoNation immediately prior to consummation
of the Merger, in which case during the period in which he or she continues to
be employed by AutoNation and for a period of 18 months following the date of
termination of such employment for any reason), unless the business of
AutoNation is discontinued or terminated, the undersigned will not (and will not
permit any affiliate over which it has control to) without the prior written
consent of Republic, own or control any voting equity interest, directly or
indirectly, in any company, the business of which consists of selling
previously-owned motor vehicles directly to consumers in the continental United
States (a "Retail Used Car Business"); provided, that this prohibition will not
apply to:
(a) ownership of 5% or less of the shares of any public company that
is primarily engaged in the Retail Used Car Business; or
(b) the acquisition of any company, if the gross profits of the
portion of its business engaged in the Retail Used Car Business is 10% or
less of its total gross profits, so long as such portion of its business is
disposed of within 12 months after the acquisition of such company.
For purposes of this letter agreement, an "affiliate" shall mean any person
or entity directly or indirectly controlling, controlled by, or under common
control with, the undersigned.
4. Remedies; Independent Covenants; Severability. The undersigned agrees
that upon a breach of the provisions of paragraphs 2 and 3 of this letter
agreement, Republic shall be entitled to an accounting and payment by the
undersigned of all damages caused as a result of any violation; and, in
addition, as a matter of right, Republic shall be entitled to injunctive relief
in any court of competent jurisdiction, all of which remedies Republic shall be
entitled to pursue simultaneously and cumulatively. The agreements contained in
paragraphs 2 and 3 of this letter agreement are to be construed as being
independent of any other agreements in this letter agreement; and the existence
of any cause of action in favor of the undersigned against Republic, whether
predicated on this agreement or otherwise, shall not constitute a defense to the
enforcement by Republic of the provisions of this letter agreement. The
activities, territories, times, customers, persons and institutions to which the
restrictions set forth in paragraphs 3 of this letter agreement are applicable
are separate and divisible covenants and agreements. If any restriction is held
by any court of competent jurisdiction to be unenforceable as to any one
activity, territory, time, customer, person or institution above listed or a
variation thereof, such restriction shall nonetheless be operative as to all
other activities, territories, times, customers, persons and institutions.
A-26
<PAGE> 80
5. Governing Law. This letter agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Florida.
Very truly yours,
ACCEPTED AND AGREED:
REPUBLIC INDUSTRIES, INC.
By:
- - ----------------------------------------------------
Name:
Title:
A-27
<PAGE> 81
FIRST AMENDMENT TO MERGER AGREEMENT
This FIRST AMENDMENT TO MERGER AGREEMENT (this "Amendment") is entered into
as of September 30, 1996 by and among REPUBLIC INDUSTRIES, INC., a Delaware
corporation, RI/ANI MERGER CORP., a Florida corporation, AUTONATION
INCORPORATED, a Florida corporation, H. WAYNE HUIZENGA, STEVEN R. BERRARD, and
JM FAMILY ENTERPRISES, INC., a Delaware corporation.
The parties to this Amendment entered into that certain Merger Agreement as
of May 8, 1996 (the "Merger Agreement"), and have determined to amend certain
provisions thereof relating to certain rights to terminate the Merger Agreement.
Accordingly, the term "September 30, 1996" set forth in Section 9.1(d) of the
Merger Agreement is hereby changed to "December 31, 1996" effective immediately.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
REPUBLIC INDUSTRIES, INC.
By: /s/ Richard L. Handley
-------------------------------------
Richard L. Handley, Senior Vice
President and General Counsel
RI/ANI MERGER CORP.
By: /s/ Richard L. Handley
-------------------------------------
Richard L. Handley, Vice President
AUTONATION INCORPORATED
By: /s/ Steven R. Berrard
-------------------------------------
Steven R. Berrard, President
/s/ H. Wayne Huizenga
----------------------------------------
H. WAYNE HUIZENGA, individually
/s/ Steven R. Berrard
----------------------------------------
STEVEN R. BERRARD, individually
JM FAMILY ENTERPRISES, INC.
By: /s/ Colin W. Brown
-------------------------------------
Colin W. Brown, Executive Vice
President and General Counsel
A-28
<PAGE> 82
SECOND AMENDMENT TO MERGER AGREEMENT
AND
FIRST AMENDMENT TO LOAN AGREEMENT
AND RELATED LOAN DOCUMENTS
THIS SECOND AMENDMENT TO MERGER AGREEMENT AND FIRST AMENDMENT TO LOAN
AGREEMENT AND RELATED LOAN DOCUMENTS (this "Amendment"), is entered into as of
October 31, 1996, by and among REPUBLIC INDUSTRIES, INC., a Delaware corporation
("Republic"), RI/ANI MERGER CORP., a Florida corporation, AUTONATION
INCORPORATED, a Florida corporation ("AutoNation" or "Borrower"), H. WAYNE
HUIZENGA, STEVEN R. BERRARD, JM FAMILY ENTERPRISES, INC., a Delaware
corporation, AUTONATION USA CORPORATION, a Florida corporation (the "Company"),
and REPUBLIC RESOURCES COMPANY, a Delaware corporation (the "Lender").
WHEREAS, the parties to this Amendment (other than the Company and the
Lender) entered into that certain Merger Agreement dated as of May 8, 1996, as
amended by that certain First Amendment to Merger Agreement dated as of
September 30, 1996 (the "Merger Agreement");
WHEREAS, Republic and AutoNation entered into that certain Loan Agreement
dated as of May 8, 1996 (the "Loan Agreement"), which Republic assigned to the
Lender pursuant to an Assignment dated as of May 8, 1996, and various parties
hereto entered into certain related loan documents (defined in the Loan
Agreement and herein as "Loan Documents"); and
WHEREAS, the parties hereto desire to amend the Merger Agreement and the
Loan Documents;
NOW THEREFORE, the parties agree that the following amendments shall be
effective immediately:
1. Amendments to Merger Agreement. The following amendments are
hereby made to the Merger Agreement:
(a) The term "October 31, 1996" as set forth in Section 5.11 is
hereby changed to "January 31, 1997" and the term "September 30, 1996"
as set forth in Section 5.11 is hereby changed to "December 31, 1996."
(b) The following sentence is inserted after the first sentence of
Section 5.11:
In addition, Republic agrees to make additional loans of cash to
AutoNation, in an aggregate principal amount not to exceed $150
million, in lieu of or to refinance borrowings by AutoNation from
other lenders under "floor plan" financings, for purchase of vehicle
inventories, such additional loans to be on the same terms and
conditions as loans made to AutoNation pursuant to the preceding
sentence.
(c) The following sentence is added to the end of Section 5.11:
The Loan Agreement will provide that AutoNation may enter into a
credit facility with a bank or institutional lender, not in excess of
$250 million in the aggregate principal amount, for the purpose of
funding AutoNation's acquisition of real estate, and Republic agrees
to provide its corporate guaranty of AutoNation's obligations
thereunder.
2. Amendments to Loan Agreement. The following amendments are hereby
made to the Loan Agreement:
(a) The definition of the defined terms "Loan" or "Loan Amount" as
set forth in Section 1.2(v) of the Loan Agreement is hereby amended to
mean the principal obligation of up to the amount specified in the Cash
Flow Needs Projection, to be used for the purposes set forth in Section
4.1(a), plus the principal obligation of up to $150,000,000.00, to be
used for the purposes set forth in Section 4.1(b), all of the foregoing
obligations to be evidenced by the Note.
(b) The definition of the defined term "Maturity Date" as set forth
in Section 1.2(y) of the Loan Agreement is hereby amended to mean "June
30, 1997."
A-29
<PAGE> 83
(c) Section 1.2 is amended to add a new paragraph (ff) as follows:
(ff) "Floor Plan Advances" means all disbursements of the Loan
pursuant to this Agreement which are advanced for the purpose set
forth in Section 4.1(b), and which are not advanced for the purpose
set forth in Section 4.1(a).
(d) Section 2.1 is amended to read as follows:
Subject to all the terms, representations, warranties, covenants and
conditions in this Agreement, Lender agrees to lend to Borrower and
Borrower agrees to borrow from and repay to Lender an aggregate
principal amount not to exceed the amount set forth on the Cash Flow
Needs Projection (for the purposes set forth in Section 4.1(a)
hereof) plus an aggregate principal amount not to exceed
$150,000,000.00 (for the purposes set forth in Section 4.1(b)
hereof).
(e) Section 4.1 is amended to read as follows:
(a) Borrower shall use all Advances, except Floor Plan Advances,
up to the amount set forth on the Cash Flow Needs Projection
exclusively for payments of the items set forth on the Cash Flow
Needs Projection or for similar items arising in the ordinary course
of business consistent with the Business Plan.
(b) Borrower shall use all Advances which consist of Floor Plan
Advances up to the aggregate principal amount of $150,000,000.00
exclusively for funding the purchase of vehicle inventories or to
refinance Borrower's vehicle floor plan financings.
(f) Section 5.2 is amended to add another clause to the first
sentence as follows:
, or (iv) a credit facility with a bank or institutional lender, not
in excess of $250 million in the aggregate principal amount, for the
purpose of funding Borrower's acquisition of real estate, and Lender
agrees to provide its corporate guaranty of Borrower's obligations
thereunder if requested by Borrower.
(g) The definition of the defined term "Advance Cutoff Date" as set
forth in Section 6.1 of the Loan Agreement is hereby amended by changing
"October 31, 1996" to "January 31, 1996" in clause (i) of such Section
6.1.
(h) Section 6.4 is amended by adding the following sentence:
Borrower shall also advise Lender upon making each Request for
Advance whether the requested Advance is for items set forth on the
Cash Flow Needs Projection or is a Floor Plan Advance for funding the
purchase or refinancing of vehicle inventories.
3. Amendment of Note. AutoNation agrees to promptly execute and
deliver an instrument making and confirming the following amendments to
that certain Promissory Note entered into by AutoNation as of May 12, 1996
pursuant to the Loan Agreement (the "Note"):
(i) In Section 2 (Payment), the definition of the defined term,
"Maturity Date," will be amended to mean June 30, 1997.
(ii) In Section 13 (Interest Rate Upon Default), the references to
"March 31, 1997" will be changed to "June 30, 1997."
Republic and Lender hereby agree that the instrument confirming the
foregoing amendments, which is being made in order to conform the
Note to the amended Loan Agreement, will be effective as of the date
hereof.
4. Amendment of Stock Pledge and Assignment Agreement. The term
"December 15, 1996" is hereby changed to "March 15, 1997" as used in
Sections 12 and 13 of that certain Stock Pledge and Assignment Agreement
entered into as of May 8, 1996 by and among AutoNation, the Company, and
Republic.
A-30
<PAGE> 84
5. Confirmation of Advances to Date. The Borrower confirms that as of
the date of this Amendment, of the total amounts borrowed by Borrower from
the Lender pursuant to the Loan Agreement, approximately $41 million
relates to Floor Plan Advances as defined in the Loan Agreement (as amended
hereby), and the balance relates to items set forth on the Cash Flow Needs
Projection.
A-31
<PAGE> 85
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
REPUBLIC INDUSTRIES, INC.
By: /s/ RICHARD L. HANDLEY
------------------------------------
Richard L. Handley
Senior Vice President
RI/ANI MERGER CORP.
By: /s/ RICHARD L. HANDLEY
------------------------------------
Richard L. Handley
Vice President
AUTONATION INCORPORATED
By: /s/ STEVEN R. BERRARD
------------------------------------
Steven R. Berrard
President
/s/ H. WAYNE HUIZENGA
--------------------------------------
H. Wayne Huizenga
/s/ STEVEN R. BERRARD
--------------------------------------
Steven R. Berrard
JM FAMILY ENTERPRISES, INC.
By: /s/ COLIN W. BROWN
------------------------------------
Colin W. Brown
Executive Vice President
AUTONATION USA INCORPORATED
By: /s/ STEVEN R. BERRARD
------------------------------------
Steven R. Berrard
President
REPUBLIC RESOURCES COMPANY
By: /s/ RICHARD L. HANDLEY
------------------------------------
Richard L. Handley
Vice President
A-32
<PAGE> 86
ANNEX B
<TABLE>
<S> <C>
YZa December 13, 1996
</TABLE>
Special Committee of the Board of Directors
Republic Industries, Inc.
200 East Las Olas Boulevard, Suite 1400
Ft. Lauderdale, Florida 33301
Gentlemen:
Republic Industries, Inc. (the "Company") has entered into a merger
agreement, dated as of May 8, 1996, as amended (the "Agreement") with AutoNation
Incorporated ("AutoNation") pursuant to which the Company will acquire all of
the shares of AutoNation common stock in exchange for 17,467,248 (adjusted for
two-for-one stock split on June 8, 1996) shares of the Company's common stock
(the "Transaction").
You have asked us whether, in our opinion, the consideration to be paid by
the Company pursuant to the Agreement is fair to the Company from a financial
point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) reviewed the Agreement and the Proxy Statement;
(2) reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects
of AutoNation and the Company's rental car business furnished to us
by senior management of AutoNation and the Company, respectively;
(3) held discussions with members of senior management of AutoNation
concerning its financial condition, businesses, cash flow, assets,
liabilities, operations, financial forecasts, contingencies and
prospects;
(4) compared the historical and projected results of operations of
AutoNation with that of certain companies, organizations and
businesses which we deemed to be reasonably similar to AutoNation;
(5) considered the trading range of the Company's common stock and the
pro forma effect of the Transaction on the Company's projected
earnings capitalization ratios and cash flows;
(6) considered a discounted cash flow analysis based on future cash
flows that management of AutoNation expects to generate;
(7) considered the equity valuations of certain companies, organizations
and businesses, which we deemed to be reasonably similar to
AutoNation, that recently completed initial public offerings of
equity securities;
(8) considered the business background of the members of the AutoNation
senior management team and the financial performance of the
businesses with which they have been associated; and
(9) reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters
as we deemed necessary, including our assessment of general
economic, market, monetary and other conditions.
B-1
<PAGE> 87
In preparing our opinion, with your consent we have relied on the accuracy
and completeness of all information supplied or otherwise made available to us
by AutoNation and the Company, and we have not independently verified such
information or undertaken an independent appraisal of the assets and liabilities
contingent or otherwise of AutoNation or the Company. With respect to the
financial forecasts furnished by AutoNation and the Company, we have assumed
that they have been reasonably prepared and reflect the best currently available
estimates and judgment of AutoNation's and the Company's senior management,
respectively.
We have been retained by the Special Committee of the Board of Directors of
the Company to act as financial advisor to such special committee and, in such
capacity, Merrill Lynch will act as an independent contractor and will receive a
fee for our services. In the ordinary course of our securities business, we may
actively trade debt and/or equity securities of the Company and its affiliates
for our own account and the accounts of our customers, and we therefore may from
time to time hold a long or short position in such securities. In addition, in
the past in connection with other transactions we provided investment banking
services (including mergers and acquisitions advisory services) to companies
that had as directors, officers or shareholders certain individuals who are
currently affiliated with the Company or AutoNation.
Our opinion is directed to the Special Committee of the Board of Directors
of the Company and does not constitute a recommendation to any stockholder of
the Company as to how such stockholder should vote at any stockholder meeting of
the Company held in connection with the Transaction.
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 affecting 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, reaffirm or
withdraw our opinion as a result of any such subsequent events or developments,
the invalidity of the assumptions set forth above, or otherwise.
On the basis of, and subject to the foregoing, we are of the opinion that
the consideration to be paid by the Company pursuant to the Agreement is fair to
the Company from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Charles A. Lewis
-----------------------------------
Vice Chairman, Investment Banking
Group
B-2
<PAGE> 88
ANNEX C
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Republic
Industries, Inc. (a Delaware corporation, formerly Republic Waste Industries,
Inc.) and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Republic
Industries, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, all in conformity with generally accepted
accounting principles.
We have also made similar audits of the accompanying supplemental
consolidated balance sheets of Republic Industries, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the related supplemental consolidated statements
of operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1995. The supplemental consolidated
statements give retroactive effect to the merger with Alamo Rent-A-Car, Inc. and
Affiliates on November 25, 1996, which has been accounted for as a pooling of
interests as described in Note 1. These supplemental financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these supplemental financial statements based on our audits.
We did not audit the financial statements of DKBERT and GUSA Ltd. companies
included in the combined financial statements of Alamo Rent-A-Car, Inc. and
Affiliates, which statements reflect total assets and revenues constituting 13.7
percent and 7.8 percent, respectively, in 1995, 11.9 percent and 4.9 percent,
respectively in 1994, and 4.3 percent of total revenue in 1993, of the related
supplemental consolidated totals. These statements were audited by other
auditors whose reports thereon have been furnished to us and our opinion
expressed herein, insofar as it relates to the amounts included for DKBERT and
GUSA Ltd., is based solely upon the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of the other
auditors, the supplemental consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Republic
Industries, Inc. and its subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, after giving retroactive effect to
the merger with Alamo Rent-A-Car, Inc. and Affiliates as described in Note 1,
all in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
December 5, 1996.
C-1
<PAGE> 89
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of Republic Industries, Inc. (a Delaware corporation, formerly Republic Waste
Industries, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the
related supplemental consolidated statements of operations, shareholders' equity
and cash flows for each of the years in the three-year period ended December 31,
1995. The supplemental consolidated statements give retroactive effect to the
acquisition of the assets of CarChoice, Inc. on August 1, 1996, which has been
accounted for as a pooling of interests as described in Note 1. These
supplemental financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these supplemental
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Republic Industries, Inc. and its subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995, after giving retroactive
effect to the acquisition of the assets of CarChoice, Inc. as described in Note
1, all in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
September 30, 1996.
C-2
<PAGE> 90
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CarChoice, Inc.:
We have audited the accompanying consolidated balance sheet of CARCHOICE,
INC. AND SUBSIDIARY (Delaware corporations) as of December 31, 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the period from inception (January 26, 1995) to December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CarChoice, Inc. and
Subsidiary as of December 31, 1995 and the results of their operations and their
cash flows for the period from inception to December 31, 1995 in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Detroit, Michigan,
June 12, 1996.
C-3
<PAGE> 91
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Republic
Industries, Inc. (a Delaware corporation, formerly Republic Waste Industries,
Inc.) and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity and cash flows
(restated) for each of the three years in the period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Industries, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 15, 1996.
C-4
<PAGE> 92
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Republic
Industries, Inc. (a Delaware corporation, formerly Republic Waste Industries,
Inc.) and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Industries, Inc.
and the subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 26, 1996.
C-5
<PAGE> 93
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Republic Industries, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of Republic Industries, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1994 and 1993 and the related supplemental consolidated statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1994. These supplemental consolidated
statements give retroactive effect to the mergers with the Pooled Entities
described in Note 1 to the supplemental consolidated financial statements. These
transactions have been accounted for under the pooling of interests method of
accounting. These supplemental financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
supplemental financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Republic Industries, Inc. and subsidiaries as of December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994, after giving retroactive effect to the
mergers with Denver Alarm Companies and Schaubach Companies as described in Note
1 to the supplemental consolidated financial statements, all in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 15, 1996.
C-6
<PAGE> 94
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of
The Denver Fire Reporter & Protective Co.
and Guardian Security Services, Inc.:
We have audited the accompanying combined balance sheet of The Denver Fire
Reporter & Protective Co. and Guardian Security Services, Inc. (together, the
"Denver Alarm Companies"; both Colorado corporations affiliated through common
ownership) as of December 31, 1995, and the related combined statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Denver Alarm Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Denver Alarm
Companies as of December 31, 1995, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 5, 1996.
C-7
<PAGE> 95
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Addington Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Addington
Resources, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Addington Resources, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Louisville, Kentucky,
February 29, 1996.
C-8
<PAGE> 96
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Continental Waste Industries, Inc.:
We have audited the accompanying consolidated balance sheets of CONTINENTAL
WASTE INDUSTRIES, INC. (a Delaware corporation) and SUBSIDIARIES as of December
31, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Continental
Waste Industries, Inc. and Subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois,
February 20, 1996.
C-9
<PAGE> 97
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Area Container Services, Inc., Incendere, Inc. and
Smithton Sanitation Service, Inc.:
We have audited the accompanying combined balance sheet of Area Container
Services, Inc., Incendere, Inc. and Smithton Sanitation Service, Inc.
(collectively, the "Schaubach Companies") as of December 31, 1995, and the
related combined statements of operations, stockholders' equity (deficit) and
cash flows for the year then ended. These financial statements are the
responsibility of the Schaubach Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Schaubach Companies as
of December 31, 1995, and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 9, 1996
(Except with respect to the matter
discussed in Note 11, as to which
the date is February 29, 1996).
C-10
<PAGE> 98
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
AutoNation Incorporated:
We have audited the accompanying consolidated balance sheet of AutoNation
Incorporated and subsidiaries (a Florida corporation in the development stage)
as of December 31, 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for the period from inception (September 12,
1995) to December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AutoNation Incorporated and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for the period from inception (September 12, 1995) to December
31, 1995 in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 26, 1996 (except with respect to the matters
discussed in Note 10, as to which the date is November 4, 1996).
C-11
<PAGE> 99
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Boards of Directors of
Hudson Management Corporation
and Envirocycle, Inc.:
We have audited the accompanying combined balance sheets of Hudson
Management Corporation and subsidiaries and Envirocycle, Inc. (a Florida
corporation and a Florida S-corporation, respectively, affiliated through common
ownership) as of September 30, 1994 and 1993, and the related combined
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1994. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hudson Management
Corporation and subsidiaries and Envirocycle, Inc. as of September 30, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1994, in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
June 1, 1995 (except with respect to the
matter discussed in Note 10,
as to which the date is
August 3, 1995).
C-12
<PAGE> 100
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Alamo Rent-A-Car, Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Alamo
Rent-A-Car, Inc. and Affiliates (as defined in note 1 to the combined financial
statements) as of December 31, 1995 and 1994, and the related combined
statements of operations, equity and cash flows for each of the years in the
three-year period ended December 31, 1995. These companies are under common
ownership and common management. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Alamo Rent-A-Car,
Inc. and Affiliates as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 8, 1996, except as to the
second paragraph of Note 13, which
is as of April 19, 1996 and the
second paragraph of Note 18,
which is as of November 26, 1996
C-13
<PAGE> 101
INDEPENDENT AUDITOR'S REPORT
Republic Industries, Inc.
Ft. Lauderdale, Florida
We have audited the accompanying combined balance sheet of Acquired Solid
Waste Companies as of December 31, 1995, and the related combined statements of
operations, equity, and cash flows for the year then ended. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Acquired Solid Waste
Companies as of December 31, 1995, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
The combined balance sheets and related statements of operations, equity,
and cash flows for the three months ended March 31, 1995 and 1996, are
unaudited. We did not audit or review those financial statements, and,
accordingly, we express no opinion or other form of assurance on them.
/s/ MUNSON, CRONICK & ASSOCIATES
MUNSON, CRONICK & ASSOCIATES
Fullerton, California,
July 18, 1996.
C-14
<PAGE> 102
APPENDIX
P R O X Y
REPUBLIC INDUSTRIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Richard L. Handley and Christopher S. Morter, each with power of
substitution, are hereby authorized to vote all stock which the undersigned
would be entitled to vote if personally present at the Special Meeting of
Stockholders of Republic Industries, Inc. to be held on January 20, 1996 (the
"Special Meeting"), or any postponements or adjournments thereof, as indicated
on the reverse side.
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR THE PROPOSALS SET FORTH ON THE OTHER SIDE. As to any other matter, said
Proxies shall vote in accordance with their best judgment.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Stockholders and the Proxy Statement furnished herewith.
(Continued and to be signed on reverse side)
1. Approval and adoption of the Merger Agreement and the transactions
contemplated thereunder as set forth in the Proxy Statement, dated December
13, 1996, relating to the Special Meeting.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
A vote FOR is recommended by the Board of Directors.
2. In their discretion, on such other matters as may properly come before the
meeting.
Change of Address and/or
Comments Mark Here [ ]
Please sign exactly as name
appears hereon. When shares
are held by joint tenants,
both should sign. If acting as
an attorney, executor, trustee
or in any other representative
capacity, sign name and title.
DATED__________________,1996
____________________________
SIGNATURE
____________________________
SIGNATURE IF HELD JOINTLY
VOTES MUST BE INDICATED BY AN
[X] MARKED IN BLACK OR BLUE
INK.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
