MERITZ & MUENZ LLP
COUNSELORS AT LAW
2021 O Street, NW
Washington, DC 20036
___________
Telephone: (202) 787-1964
Facsimile: (202) 787-3909
E-mail: Lmuenz@comcast.net
December 3, 2004
Mr. Reginald Norris
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Accessity Corp. Preliminary Proxy Response to SEC Comments
Dear Mr. Norris:
In response to our discussion via telephone, on behalf of Accessity Corp.
("Accessity"), I hereby provide you with the following response:
Proposal 3 Approval of Subsidiary Transfer
------------------------------------------
1. SEC Comment: "In the front and the body of the Proxy, state the business
reasons for the subsidiary transfer."
Response: Added language to state the business purpose was to have Mr.
Siegel relinquish cash payments that otherwise would be due him under his
respective employment agreements with Accessity as a result of the
consummation of the Share Exchange. The applicable revisions appear on
pages 7, 95 and 140 as attached.
2. SEC Comment: "State any additional compensation that will be paid to Mr.
Siegel and/or Mr. Kart related to this transfer."
Response: Added language to state that the Subsidiary Transfer, in addition
to other stated compensation was in ". . . in full consideration for the
agreement of each of Messrs. Siegel and Kart to relinquish cash payments
that otherwise would be due to each of them under their respective
employment agreements with Accessity as a result of the consummation of the
Share Exchange." The applicable revisions appear on pages 2, 7 and 140 as
attached.
3. SEC Comment: "Clarify that the Board of Directors approved this proposal
Mr. Reginald Norris
Securities and Exchange Commission
December 3, 2004
Page 2
without Mr. Siegel's influence and the support of disinterested directors."
Response: Added language to state that: ". . .the board of directors,
without any influence from Barry Siegel, by unanimous vote of a majority of
the disinterested directors, has determined that the Subsidiary Transfer
and the Subsidiary Sale are in the best interests of the holders of
Accessity's common stock." The applicable revisions appear on pages 3, 140
and 143 as attached.
4. SEC Comment: "Summarize the BearingPoint opinion."
Response: Please see pages 140 through 142 as attached.
Proposal 4 Approval of Subsidiary Sale
--------------------------------------
1. SEC Comment: "In the front of the Proxy, specify the sale price of $5,000."
Response: Added the purchase price of $5,000. The applicable revisions
appear on pages 1, 2 and 8 as attached.
2. SEC Comment: "Explain the business reasons for the sale to Mr. Siegel for
the price of $5,000."
Response: Added language to state: "Rather than discontinuing the
operations of Sentaur upon the consummation of the Share Exchange, the
disinterested members of Accessity's board of directors unanimously decided
to entertain offers from interested parties willing to pay Accessity a
nominal purchase price for Sentaur." The applicable revision appears on
page 143 as attached.
I hope that you find our response to your comments acceptable. It is my
understanding that you will contact me to advise me via telephone when we can
file the Definitive Proxy.
Please be advised that we will be inserting financial statements for the nine
months ended September 30, 2004 in place of the financial statements for the six
months ended June 30, 2004.
Mr. Reginald Norris
Thank you in advance for your prompt reply to this letter.
Respectfully yours,
Lawrence A. Muenz
Attachment
PAGE 1
ACCESSITY CORP.
12514 WEST ATLANTIC BOULEVARD
CORAL SPRINGS, FLORIDA 33071
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 28, 2004
--------------------
NOTICE IS HEREBY GIVEN that the 2004 annual meeting of the shareholders of
Accessity Corp. ("Accessity") is to be held on December 28, 2004, at the Coral
Springs Marriott Hotel, Golf Club and Convention Center, 11775 Heron Bay
Boulevard, Coral Springs, Florida 33076 at 10:00 a.m., local time, for the
following purposes:
1. To elect Bruce S. Udell as a Class III director of Accessity.
2. To consider and approve the issuance of shares of common stock of
Accessity to the shareholders of Pacific Ethanol, Inc., a California
corporation ("PEI") and the limited liability company members of
Kinergy Marketing, LLC ("Kinergy") and ReEnergy, LLC ("ReEnergy"),
in exchange for their ownership interests in such companies, and the
issuance of warrants to acquire shares of common stock of Accessity
to holders of issued and outstanding options and warrants to acquire
shares of common stock of PEI, pursuant to the Share Exchange
Agreement dated as of May 14, 2004, as amended on July 30, 2004 and
as of October 1, 2004 (as amended, the "Share Exchange Agreement"),
and the consummation of the transactions contemplated thereby
(collectively the "Share Exchange"). Upon consummation of the Share
Exchange, each of PEI, Kinergy and ReEnergy will become a
wholly-owned subsidiary of Accessity. A copy of the Share Exchange
Agreement is attached as APPENDIX A to the proxy statement
accompanying this notice.
3. To consider and approve the transfer of DriverShield CRM Corp., a
wholly-owned subsidiary of Accessity, to Barry Siegel, the current
Chairman of the Board, President and Chief Executive Officer of
Accessity, if the Share Exchange is approved by the shareholders.
4. To consider and approve the sale of Sentaur Corp., a wholly-owned
subsidiary of Accessity, to Barry Siegel, FOR THE SUM OF $5,000, if
the Share Exchange is approved by the shareholders.
5. To approve a new 2004 Stock Option Plan of Accessity, if the Share
Exchange is approved by the shareholders.
6. To consider and approve the reincorporation of Accessity in the
State of Delaware under the name "Pacific Ethanol, Inc." to occur
immediately prior to the consummation of the Share Exchange, if the
Share Exchange is approved by the shareholders.
7. To consider and approve an amendment to the articles of
incorporation of Accessity to change the name of Accessity to
"Pacific Ethanol, Inc." effective immediately prior to the
consummation of the Share Exchange, if the Share Exchange is
approved by the shareholder and the reincorporation of Accessity in
the State of Delaware does not occur.
8. To transact such other business as may properly come before this
annual meeting or any adjournment or postponement thereof.
The foregoing proposals are more fully described in the accompanying proxy
statement.
PAGE 2
an aggregate of 1,188,487 shares of Accessity common stock at exercise
prices ranging from $0.0001 per share to $2.00 per share in exchange for
cancellation of outstanding options and warrants.
The Board of Directors of Accessity has also approved, subject to the
approval of the Share Exchange by Accessity shareholders:
o the transfer of DriverShield CRM Corp. ("DriverShield"), a
wholly-owned subsidiary of Accessity, to Barry Siegel, the current
Chairman of the Board, President and Chief Executive Officer of
Accessity, the issuance of up to 400,000 shares of Accessity common
stock to Barry Siegel and 200,000 shares of Accessity common stock
to Philip Kart, Accessity's current Chief Financial Officer AND the
execution of a consulting and noncompetition agreement between
Accessity and each of Barry Siegel and Philip Kart (COLLECTIVELY,
THE "SUBSIDIARY TRANSFER"), IN FULL CONSIDERATION FOR the agreement
of each of Messrs. Siegel and Kart to relinquish cash payments that
otherwise would be due to each of them under their respective
employment agreements with Accessity as a result of the consummation
of the Share Exchange;
o the sale of Sentaur Corp. ("Sentaur"), a wholly-owned subsidiary of
Accessity, to Barry Siegel FOR THE SUM OF $5,000 (the "Subsidiary
Sale");
o the 2004 Stock Option Plan of Accessity (the "2004 Plan");
o the reincorporation of Accessity in the State of Delaware under the
name "Pacific Ethanol, Inc." to occur immediately prior to the
consummation of the Share Exchange (the "Delaware Reincorporation");
and
o an amendment to the articles of incorporation of Accessity to change
the name of Accessity to "Pacific Ethanol, Inc." effective
immediately prior to the consummation of the Share Exchange, if the
Share Exchange is approved by the shareholders and the Delaware
Reincorporation does not occur (the "Corporate Name Change").
The Delaware Reincorporation will be effected through a merger of
Accessity with and into a wholly-owned Delaware subsidiary of Accessity named
Pacific Ethanol, Inc., to be formed for the purpose of effecting the
reincorporation (the "Delaware Reincorporation Subsidiary"). In lieu of
receiving common stock of the Delaware Reincorporation Subsidiary, Accessity
shareholders will have dissenters' rights. Accessity shareholders who properly
demand these rights will receive cash for the fair value of the Accessity common
stock that they held prior to the merger. The fair value would be determined by
a court or by agreement between Accessity and its shareholders who exercise
their dissenters' rights. If the proposal to reincorporate Accessity in the
State of Delaware is approved by the Accessity shareholders, but Accessity
receives demands for exercise of dissenters' rights that exceed 1% of the
outstanding shares of Accessity common stock, Accessity's board of directors may
elect not to proceed with the reincorporation. If the board of directors elects
not to proceed with the reincorporation or if the proposal is not approved by
Accessity's shareholders, Accessity will remain a New York corporation, provided
the Corporate Name Change is approved by the shareholders, Accessity and will
change its name to Pacific Ethanol, Inc. If, however, the Delaware
Reincorporation is approved, the Delaware Reincorporation Subsidiary will
succeed to the rights, properties and assets and assume the liabilities of
Accessity, and its financial statements will be substantially identical to
Accessity, the only difference being those appropriate to reflect Accessity's
new corporate identity, the Share Exchange and the Subsidiary Transfer. This new
company (i.e., Accessity Corp., a New York corporation, renamed Pacific Ethanol,
Inc. or the Delaware Reincorporation Subsidiary named Pacific Ethanol, Inc.),
which combines the operations of the Acquired Companies, is referred to in this
proxy statement as the "Combined Company." Accessity shareholders will vote on
the matters described in this
PAGE 3
Accessity shareholders will vote on the matters described in this proxy
statement at the annual meeting of shareholders on the date set forth above. At
the annual meeting, you will be asked:
o to elect Bruce S. Udell as a Class III director of Accessity
(Proposal 1);
o to approve the issuance of shares of Accessity common stock and
options and warrants in the Share Exchange pursuant to the Share
Exchange Agreement and the consummation of the transactions
contemplated thereby (Proposal 2);
o to approve the Subsidiary Transfer (Proposal 3), if the Share
Exchange is approved by the shareholders;
o to approve the Subsidiary Sale (Proposal 4), if the Share Exchange
is approved by the shareholders;
o to approve the 2004 Plan (Proposal 5), if the Share Exchange is
approved by the shareholders;
o to approve the Delaware Reincorporation (Proposal 6), if the Share
Exchange is approved by the shareholders; and
o to approve the Corporate Name Change (Proposal 7), if the Share
Exchange is approved by the shareholders and the Delaware
Reincorporation does not occur.
Neither the Share Exchange nor the other matters described in this proxy
statement (other than the election of a Class III director) can be completed
unless the shareholders of Accessity approve the Share Exchange and the other
matters described in this proxy statement (other than the election of a Class
III director).
RECOMMENDATION OF ACCESSITY'S BOARD OF DIRECTORS
The board of directors of Accessity, by unanimous vote, has determined
that the Share Exchange is in the best interests of the holders of Accessity's
common stock. In addition, the board of directors, WITHOUT ANY INFLUENCE FROM
BARRY SIEGEL, by unanimous vote of the disinterested directors, has determined
that the Subsidiary Transfer and the Subsidiary Sale are in the best interests
of the holders of Accessity's common stock. The decisions of the board of
directors of Accessity to enter into the Subsidiary Transfer are based upon its
evaluation of a number of factors, including, among others, the written opinion
dated October 9, 2004, and confirmed in writing as of the date of this proxy
statement, of BearingPoint, Inc. ("BearingPoint") that, based upon and subject
to the matters set forth in the written opinion, as of such dates, the
Subsidiary Transfer is fair from a financial point of view to Accessity and the
shareholders of Accessity. See "Proposal 3--Approval of the Subsidiary
Transfer--Fairness Opinion." In addition, the board of directors of Accessity,
by unanimous vote, has determined that the approval of 1995 Plan amendment, the
2004 Plan, and the Delaware Reincorporation is in the best interests of the
shareholders of Accessity.
HOW TO VOTE
Shares held directly in your name as the "Shareholder of Record" may be
voted in person at the annual meeting. If you choose to do so, please bring the
enclosed proxy card or proof of identification. Even if you currently plan to
attend the annual meeting, we recommend that you also submit your proxy card as
described below so that your vote will be counted if you later decide not to
attend the annual meeting. Shares held through a broker or other nominee may be
voted in person by you only if you obtain a signed legal proxy from the record
holder giving you the right to vote the shares.
PAGES 7 AND 8
SUMMARY OF THE SHARE EXCHANGE
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FOUND IN GREATER DETAIL
ELSEWHERE IN THIS PROXY STATEMENT. THIS SUMMARY DOES NOT CONTAIN ALL OF THE
INFORMATION THAT IS IMPORTANT TO YOU. ACCESSITY URGES YOU TO READ THE ENTIRE
PROXY STATEMENT (INCLUDING THE APPENDICES) BEFORE YOU DECIDE HOW TO VOTE. THE
SHARE EXCHANGE AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT.
SHAREHOLDERS ARE ENCOURAGED TO READ THE SHARE EXCHANGE AGREEMENT, WHICH IS THE
LEGAL DOCUMENT GOVERNING THE SHARE EXCHANGE, THE SUBSIDIARY TRANSFER AND THE
SUBSIDIARY SALE.
OVERVIEW OF THE TRANSACTION
THE SHARE EXCHANGE
o Pursuant to the Share Exchange Agreement, the current security
holders of each of PEI, Kinergy and ReEnergy will exchange their
securities in such companies for newly issued shares of Accessity
common stock.
o It is anticipated that an aggregate of approximately 17,550,000
shares of Accessity common stock will be issued to shareholders of
PEI on a fully diluted basis (including up to 2,750,000 shares to be
issued in connection with a $7 million equity financing to be used
for corporate growth and which is currently in process), an
aggregate of 3,875,000 shares of Accessity common stock will be
issued to Neil Koehler, the sole limited liability company member of
Kinergy, and an aggregate of 125,000 shares of Accessity common
stock will be issued to the limited liability company members of
ReEnergy. For more information, see "Proposal 2--Approval of the
Share Exchange and Related Transactions," "Capitalization" and
"Unaudited Pro Forma Combined Condensed Financial Statements."
RESULTS OF THE SHARE EXCHANGE
o It is anticipated that current security holders of PEI, Kinergy and
ReEnergy will collectively own, on a fully-diluted basis,
approximately 86% of Accessity common stock outstanding immediately
following the exchange, and that current Accessity shareholders will
collectively own, on a fully-diluted basis, the remaining
approximately 14% of Accessity common stock outstanding immediately
following the exchange.
o Upon consummation of the Share Exchange, all current directors of
Accessity will resign except for Kenneth J. Friedman, and Neil
Koehler, Ryan Turner, William Lyles, Frank Greinke and John Pimentel
will be appointed to the board of directors of the Combined Company.
As a result, former directors of PEI will control the board of
directors of the Combined Company. Prior to the consummation of the
Share Exchange, PEI and Kinergy were not under common control.
o Following the exchange, each of PEI, Kinergy and ReEnergy will be a
wholly-owned subsidiary of Accessity. For more information, see
"Proposal 2--Approval of the Share Exchange and Related
Transactions."
TRANSFER AND SALE OF CURRENT ACCESSITY SUBSIDIARIES
o Concurrent with the Share Exchange, it is anticipated that Accessity
will transfer DriverShield to Barry Siegel, Accessity's current
Chairman of the Board, President and Chief Executive Officer, ISSUE
UP TO 400,000 SHARES OF ACCESSITY COMMON STOCK TO BARRY SIEGEL AND
200,000 SHARES OF ACCESSITY COMMON STOCK TO PHILIP KART, ACCESSITY'S
CURRENT CHIEF FINANCIAL OFFICER, AND ENTER INTO A CONSULTING AND
NONCOMPETITION AGREEMENT WITH EACH OF BARRY SIEGEL AND PHILIP KART,
ALL IN FULL CONSIDERATION FOR THE AGREEMENT OF EACH OF MESSRS.
SIEGEL AND KART TO RELINQUISH CASH
o PAYMENTS THAT OTHERWISE WOULD BE DUE TO EACH OF THEM UNDER THEIR
RESPECTIVE EMPLOYMENT AGREEMENTS WITH ACCESSITY AS A RESULT OF THE
CONSUMMATION OF THE SHARE EXCHANGE. IN ADDITION, ACCESSITY WILL sell
Sentaur to Barry Siegel FOR THE SUM OF $5,000. As a result,
Accessity will no longer engage in its current businesses but will
thereafter conduct the businesses of PEI, Kinergy and ReEnergy. For
more information, see "Proposal 2--Approval of the Share Exchange
and Related Transactions--Transfer of DriverShield and Sale of
Sentaur," "Proposal 3--Approval of Subsidiary Transfer" and
"Proposal 4--Approval of Subsidiary Sale."
ADOPTION OF BENEFITS PLAN
o In connection with the transactions contemplated by the Share
Exchange Agreement, it is anticipated that Accessity will adopt the
2004 Plan, a stock option plan to be administered by a committee of
Accessity's board of directors under which incentive stock options
may be granted to employees (including officer and director
employees), and non-statutory stock options may be granted to
employees, directors, officers, independent contractors and
consultants. For more information, see "Proposal 5--Approval of the
2004 Plan."
REINCORPORATION
o Immediately prior to the consummation of the Share Exchange, it is
anticipated that Accessity will change its name to Pacific Ethanol,
Inc. and reincorporate in Delaware. Current Accessity shareholders
will have dissenters' appraisal rights under New York law in
connection with the reincorporation. If the proposed reincorporation
is not approved by the shareholders of Accessity or if the proposal
is approved, but Accessity receives demands for exercise of
dissenters' rights that exceed 1% of the outstanding shares of
Accessity common stock, the board may elect not to proceed with the
reincorporation in which case Accessity will remain a New York
corporation and, provided the Corporate Name Change Proposal is
approved, change its name to Pacific Ethanol, Inc. For more
information, see "Proposal 6--Approval of Delaware Reincorporation"
and "Proposal 7--Approval of Corporate Name Change."
CORPORATE NAME CHANGE
o If the Share Exchange is approved by the shareholders and the
proposal to reincorporate Accessity in the State of Delaware does
not occur, it is anticipated that immediately prior to the
consummation of the Share Exchange, Accessity will change its name
to Pacific Ethanol, Inc. For more information, see "Proposal 7 --
Approval of Corporate Name Change."
THE COMPANIES TO THE SHARE EXCHANGE
ACCESSITY CORP.
Accessity is a provider of medical billing recovery services through its
wholly-owned subsidiary, Sentaur, and, until January 2003, also was a provider
of management and processing services for new automobile claims and repairs
through its wholly-owned subsidiary, DriverShield. Effective January 2, 2003,
Accessity transferred to ClaimsNet, Inc. all responsibility for such management
and processing services pursuant to a Strategic Partnership Agreement by and
among Accessity, DriverShield and ClaimsNet, Inc. Although Accessity continues
to provide medical billing recovery services through Sentaur, if the Share
Exchange is consummated, Accessity will transfer DriverShield to Barry Siegel
and sell Sentaur to Barry Siegel. As a result, Accessity will no longer engage
in either business but will thereafter conduct the businesses of PEI, Kinergy
and ReEnergy.
Accessity was incorporated in New York on June 28, 1985 under the name First
Priority Group, Inc. and was originally engaged in the automotive fleet
management business and administration of
PAGE 95
employment agreement with Accessity, which will be allocated between
compensation for consulting services and compensation for a covenant not to
compete, each in amounts as shall be mutually acceptable to the Acquired
Companies, Accessity and Mr. Siegel. In consideration of his waiver of the
change in control provisions in his current employment agreement with Accessity,
Mr. Siegel is entitled to receive a number of shares of Accessity common stock,
not to exceed 400,000 shares, with the exact number of shares equal to such
number as shall be equal to a fraction, the numerator of which is the excess of
the value of the waived severance payment he would otherwise be entitled to
receive pursuant to the change in control provisions in his current employment
agreement with Accessity over the fair market value of DriverShield, and the
denominator of which is the closing price per share of Accessity common stock on
the business day before the closing of the Share Exchange.
CONSULTING AND NONCOMPETITION AGREEMENT WITH PHILIP KART. Pursuant to the
consulting and noncompetition agreement with Mr. Kart, the form and substance of
which must be mutually acceptable to the Acquired Companies, Accessity and Mr.
Kart, and in consideration of his waiver of the change in control provisions in
his current employment agreement with Accessity, Mr. Kart will be entitled to
receive payment of compensation in the form of 200,000 shares of Accessity
common stock, which shall be allocated between compensation for consulting
services and compensation for a covenant not to compete, each in amounts as
shall be mutually acceptable to the Acquired Companies, Accessity and Mr. Kart.
TRANSFER OF DRIVERSHIELD AND SALE OF SENTAUR
As a condition to the consummation of the Share Exchange by Accessity, the
parties have agreed that Accessity shall transfer DriverShield and sell Sentaur
to Barry Siegel pursuant to written agreements, the form and substance of which
must be reasonably satisfactory to the Acquired Companies. THE TRANSFER OF
DRIVERSHIELD TO BARRY SIEGEL IS IN PARTIAL CONSIDERATION FOR BARRY SIEGEL TO
RELINQUISH CASH PAYMENTS THAT OTHERWISE WOULD BE DUE TO HIM UNDER HIS EMPLOYMENT
AGREEMENT WITH ACCESSITY AS A RESULT OF THE CONSUMMATION OF THE SHARE EXCHANGE.
Accessity has obtained a fairness opinion from BearingPoint with respect to the
Subsidiary Transfer. See "Proposal 3--Approval of Subsidiary Transfer--Fairness
Opinion" and "Proposal 4--Approval of Subsidiary Sale."
The landlord of the Coral Spring, Florida premises currently has the
property listed for sale and Accessity has agreed to terminate the lease upon
sale of the building. As part of the disposition of DriverShield to Mr. Siegel,
until the landlord of the present Accessity headquarters in Coral Springs,
Florida sells the building, Mr. Siegel or an entity owned or controlled by Mr.
Siegel (which may include Sentaur) with the consent of the lessor under the
existing lease agreement for such facilities, on terms and conditions reasonably
satisfactory to the Acquired Companies, will contribute the sum of $3,500 toward
the monthly rent obligation. However, once the Acquired Companies have made
lease payments of $50,000 under the lease, Mr. Siegel will make all lease
payment until the building is sold. In addition, the personal property at the
facilities of Accessity located in Coral Springs, Florida will be transferred to
Mr. Siegel or an entity owned or controlled by Mr. Siegel (which may include
Sentaur) and Accessity will pay Barry Siegel or Sentaur $20,000 for moving
expenses. Upon consummation of the Share Exchange, the principal executive and
business offices of Accessity will become the principal executive and business
offices of PEI located at 5711 N. West Avenue, Fresno, California 93711.
EMPLOYMENT AGREEMENTS
Upon consummation of the Share Exchange, Neil Koehler, currently the Chief
Executive Officer of PEI, will become the Chief Executive Officer of Accessity,
Tom Koehler, currently a Vice President of PEI, will become a Vice President of
Accessity, and Ryan Turner, the current Chief Operations Officer of PEI, will
become the Chief Operations Officer of Accessity. Each of Messrs. Koehler,
Koehler and Turner has executed an employment agreement with PEI, which
agreement will be assigned to and
PAGES 140-142
PROPOSAL 3
APPROVAL OF SUBSIDIARY TRANSFER
GENERAL
THE disinterested directors of Accessity, WITHOUT ANY INFLUENCE FROM BARRY
SIEGEL, HAVE unanimously approved the Subsidiary Transfer, subject to the
approval by the shareholders of Accessity of the Share Exchange, and recommends
that the shareholders approve and adopt the Subsidiary Transfer proposal, if the
Share Exchange is approved. In determining whether to approve the Subsidiary
Transfer, Accessity obtained a fairness opinion from BearingPoint.
See "--Fairness Opinion."
The affirmative vote of the holders of a majority of the outstanding
shares of Accessity common stock as of the record date will be required to
approve the Subsidiary Transfer proposal. For purposes of this vote, abstentions
and broker non-votes will be counted as votes "AGAINST" the Subsidiary Transfer
proposal.
As a condition to the consummation of the Share Exchange by Accessity, the
parties have agreed that Accessity shall effect the Subsidiary Transfer.
Elements of the Subsidiary Transfer include: (i) the transfer of DriverShield to
Barry Siegel pursuant to a written agreement, the form and substance of which
must be reasonably satisfactory to the Acquired Companies, (ii) the issuance of
an aggregate of 600,000 shares of Accessity common stock to Barry Siegel and
Philip Kart, AND (iii) the execution of mutually acceptable consulting and
noncompetition agreements between Accessity and each of Messrs. Siegel and Kart.
THE TRANSFER OF DRIVERSHIELD TO BARRY SIEGEL, THE ISSUANCE OF SHARES OF
ACCESSITY COMMON STOCK TO EACH OF MESSRS. SIEGEL AND KART AND THE EXECUTION OF
THE CONSULTING AND NONCOMPETITION AGREEMENTS WITH EACH OF MESSRS. SIEGEL AND
KART ARE IN FULL CONSIDERATION FOR the agreement of each of Messrs. Siegel and
Kart to relinquish cash payments that otherwise would be due to each of them
under their respective employment agreements with Accessity as a result of the
consummation of the Share Exchange.
The landlord of the Coral Springs, Florida premises currently has the
property listed for sale, and Accessity has agreed to terminate the lease upon
sale of the building. As part of the disposition of DriverShield to Mr. Siegel,
until the landlord of the present Accessity headquarters located in Coral
Springs, Florida sells the building, Mr. Siegel or an entity owned or controlled
by Mr. Siegel (which may include Sentaur) with the consent of the lessor under
the existing lease agreement for such facilities, on terms and conditions
reasonably satisfactory to the Acquired Companies, will contribute the sum of
$3,500 toward the monthly rent obligation. However, once the Acquired Companies
have made lease payments of $50,000 under the lease, Mr. Siegel will make all
lease payments until the building is sold. In addition, the personal property at
the facilities of Accessity located in Coral Springs, Florida will be
transferred to Mr. Siegel or an entity owned or controlled by Mr. Siegel (which
may include Sentaur), and Accessity will pay Barry Siegel or Sentaur $20,000 for
moving expenses. Upon consummation of the Share Exchange, the principal
executive and business offices of Accessity will be the principal executive and
business offices of PEI located at 5711 N. West Avenue, Fresno, California
93711.
FAIRNESS OPINION
The following SUMMARY of BearingPoint's fairness opinion is qualified in
its entirety by reference to the full text of the opinion as set forth in
APPENDIX H. The preparation of a fairness opinion involves various
determinations as to the most relevant quantitative methods of financial
analysis and the application of those methods to particular circumstances.
In performing its analysis, BearingPoint: (I) made numerous assumptions
with respect to industry performance, business and other matters, many of which
are beyond the control of Accessity or DriverShield; AND (II) relied, without
assuming responsibility for verification, upon discussions with the management
of Accessity and ClaimsNet, the operator of DriverShield, AND UPON THE ACCURACY
AND COMPLETENESS OF ALL OF THE FINANCIAL AND OTHER INFORMATION AND PROJECTIONS
REVIEWED BY BEARINGPOINT FOR PURPOSES OF ITS OPINION. The analyses performed by
BearingPoint are not necessarily indicative of actual values or FUTURE RESULTS,
AND do not purport to be appraisals.
In conducting its analysis and arriving at its opinion THAT THE SUBSIDIARY
TRANSFER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO ACCESSITY AND ITS
SHAREHOLDERS, BearingPoint: (I) held discussions with the management of each of
Accessity and ClaimsNet concerning the business, financial statements,
operations and prospects of DriverShield; (II) reviewed the terms of the
Subsidiary Transfer; III) reviewed budgets, HISTORICAL financial statements and
performance, projections, material contracts, internal analyses and all other
relevant documentation provided by Accessity concerning DRIVERSHIELD; (iv)
reviewed publicly available information about ACCESSITY; (v) reviewed INTERNAL
ANALYSES ABOUT DRIVERSHIELD; AND (VI) REVIEWED the proposed acquisition terms
and the Share Exchange Agreement. BEARINGPOINT used such valuation methods as it
deemed appropriate, INCLUDING a discounted cash flow valuation. This methodology
seeks to determine the value of a business today, based on the amount it may
generate in cash over future periods. Typically, cash flows are projected over a
defined period, often five years, and a remaining or residual amount is
estimated for the values beyond the defined initial years of projections. These
future amounts are then individually discounted to the present by a discount
rate, and their amounts are summed to determine the total present value. The
discount rate is determined based on the inherent risk associated with the
stream of projected cash flows.
ACCESSITY SELECTED BEARINGPOINT BECAUSE BearingPoint is engaged in THE
consulting business and regularly engages in the valuation of businesses in
connection with mergers and acquisitions and other activities. Accessity
selected BearingPoint to serve as its financial advisor based on BearingPoint's
qualifications and expertise. The terms of BearingPoint's engagement to
Accessity are set forth in an engagement letter dated July 26, 2004.
BearingPoint's role was limited to rendering an opinion that the principal terms
of the Subsidiary Transfer are fair, from a financial point of view, to
Accessity and the shareholders of Accessity. As compensation for its services,
BearingPoint will receive a fee of $69,000, plus reimbursement of its reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel.
Accessity has ALSO agreed to indemnify BearingPoint, its affiliates and related
partnerships and associations, partners, principals, employees, legal counsel,
agents and controlling persons (within the meaning of the federal securities
laws), to the full extent lawful, from and against any losses, claims, damages
or liabilities related to or arising out of BearingPoint's engagement or its
role in connection therewith (other than those that result primarily from such
person's bad faith or gross negligence) and shall reimburse any such indemnified
person for all expenses incurred in connection with investigating, defending or
preparing to defend any such action or claim.
A MAJORITY OF THE DISINTERESTED MEMBERS OF THE BOARD OF DIRECTORS OF
ACCESSITY UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
SUBSIDIARY TRANSFER PROPOSAL.
PAGE 143
PROPOSAL 4
APPROVAL OF SUBSIDIARY SALE
GENERAL
THE disinterested directors of Accessity, WITHOUT ANY INFLUENCE FROM BARRY
SIEGEL, HAVE unanimously approved the Subsidiary Sale, subject to the approval
by the shareholders of Accessity of the Share Exchange, and recommends that the
shareholders approve and adopt the Subsidiary Sale proposal, if the Share
Exchange is approved.
The affirmative vote of the holders of a majority of the outstanding
shares of Accessity common stock as of the record date will be required to
approve the Subsidiary Sale proposal. For purposes of this vote, abstentions and
broker non-votes will be counted as votes "AGAINST" the Subsidiary Sale
proposal.
TERMS OF SUBSIDIARY SALE
In late 2002, Accessity established a new business unit, Sentaur, to
diversify from the automobile repair industry. Sentaur provides hospitals the
opportunity to recoup discounts improperly taken by insurance companies and
other institutional payors of medical treatments. This business unit contracts
with hospitals and, upon analytic review of their internal records and
contracts, isolates those payors who have improperly discounted the fees they
have paid and seeks appropriate recovery. Sentaur's fee income from the
hospitals is earned upon the successful collection of the receivable by the
hospital. Sentaur currently has a number of hospitals under signed contracts.
For the nine month period ending September 30, 2004, Sentaur recorded total
revenues of approximately $480,000 and a net loss of approximately $46,000.
These results only reflect Sentaur's direct costs and exclude any costs of
overhead for rent, telephone, utilities, accounting and other administrative
services, officer salary and insurance. Inclusion of these additional expenses
would substantially increase the loss recorded for this period.
In light of the foregoing, Accessity's Board of Directors has determined
that the financial performance of Sentaur over a two-year period does not
warrant continuing Sentaur's operations after the closing of the Share Exchange.
Management of the Acquired Companies has concurred with Accessity and has
advised Accessity that they intend to terminate operations of Sentaur
immediately following consummation of the Share Exchange. RATHER THAN
DISCONTINUING THE OPERATIONS OF SENTAUR UPON THE CONSUMMATION OF THE SHARE
EXCHANGE, THE DISINTERESTED MEMBERS OF ACCESSITY'S BOARD OF DIRECTORS
UNANIMOUSLY DECIDED TO ENTERTAIN OFFERS FROM INTERESTED PARTIES WILLING TO PAY
ACCESSITY A NOMINAL PURCHASE PRICE FOR SENTAUR.
Therefore, Barry Siegel has offered to purchase Sentaur from Accessity for
the sum of $5,000 and will attempt to operate Sentaur for his own benefit. Mr.
Siegel will purchase all of the capital stock of Sentaur thereby acquiring all
of Sentaur's assets and liabilities. Mr. Siegel and Accessity have agreed to
execute a Stock Purchase Agreement that is mutually agreeable to both parties.
THE DISINTERESTED MEMBERS OF THE BOARD OF DIRECTORS OF ACCESSITY
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE SUBSIDIARY
SALE PROPOSAL.