SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Section 240.14a-11(c) or
Section 240.14a-12
PRIVATE BUSINESS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRIVATE BUSINESS, INC.
9020 OVERLOOK BOULEVARD
BRENTWOOD, TENNESSEE 37027
Dear Shareholder:
You are cordially invited to attend the 2002 Annual Meeting of
Shareholders of Private Business, Inc. (the "Company"), to be held at our
corporate offices, 9020 Overlook Boulevard, Brentwood, Tennessee, on May 21,
2002, at 9:00 a.m. (Central Daylight time).
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. Following the formal business
portion of the Annual Meeting, there will be a report on the operations of the
Company and shareholders will be given the opportunity to ask questions. At your
earliest convenience, please mark, sign and return the accompanying proxy card
in the enclosed postage pre-paid envelope. We hope you will be able to attend
the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and mail the enclosed proxy card promptly. If you attend the Annual
Meeting, you may revoke such proxy and vote in person if you wish, even if you
have previously returned your proxy card. If you do not attend the Annual
Meeting, you may still revoke such proxy at any time prior to the Annual Meeting
by providing written notice of such revocation to Michael Berman, Vice President
- - General Counsel of the Company. YOUR PROMPT COOPERATION WILL BE GREATLY
APPRECIATED.
Sincerely,
/s/ Thomas L. Black
Thomas L. Black
Chief Executive Officer
Nashville, Tennessee
April 19, 2002
PRIVATE BUSINESS, INC.
9020 OVERLOOK BOULEVARD
BRENTWOOD, TENNESSEE 37027
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Private Business, Inc.:
The Annual Meeting of Stockholders of Private Business, Inc., a Tennessee
corporation (the "Company"), will be held at our corporate offices, 9020
Overlook Boulevard, Brentwood, Tennessee, at 9:00 a.m. Central Daylight Time, on
Tuesday, May 21, 2002 for the following purposes:
(1) To elect three (3) Class 3 directors, to hold office for a
three (3) year term and until their successors have been duly elected and
qualified; and
(2) To transact such other business as may properly come before
the meeting, or any adjournment or postponement thereof.
The proxy statement and form of proxy accompanying this notice are
being mailed to stockholders on or about April 19, 2002. Only stockholders of
record at the close of business on April 5, 2002 are entitled to notice of and
to vote at the meeting and any adjournment thereof.
Your attention is directed to the proxy statement accompanying this
notice for a more complete statement regarding the matters to be acted upon at
the meeting.
We hope very much that you will be able to be with us. The Company's
Board of Directors urges all Stockholders of record to exercise their right to
vote at the Annual Meeting of Stockholders personally or by proxy. Accordingly,
we are sending you the accompanying proxy statement and the enclosed proxy card.
YOUR REPRESENTATION AT THE ANNUAL MEETING OF STOCKHOLDERS IS IMPORTANT.
TO ENSURE YOUR REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD. SHOULD
YOU DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS VOTED IN
THE MANNER PROVIDED IN THE ACCOMPANYING PROXY STATEMENT.
By Order of the Board of Directors
/s/ Thomas L. Black
Thomas L. Black
Chief Executive Officer
Brentwood, Tennessee
April 19, 2002
PRIVATE BUSINESS, INC.
9020 OVERLOOK BLVD.
BRENTWOOD, TENNESSEE 37027
PROXY STATEMENT
This Proxy Statement and enclosed Proxy are being furnished to
stockholders of Private Business, Inc., a Tennessee corporation (together with
its subsidiaries "Private Business" or the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders (the "Annual Meeting") of the Company to be held
at 9:00 a.m. Central Daylight Time on Tuesday, May 21, 2002, at our corporate
offices, 9020 Overlook Boulevard, Brentwood, Tennessee and at any adjournments
or postponements thereof. The cost of soliciting proxies in the accompanying
form will be borne by the Company. The persons named as proxies were selected by
the Board of Directors of the Company and are executive officers of the Company.
This Proxy Statement and enclosed Proxy were initially mailed or
delivered to stockholders on or about April 19, 2002. The Company's Annual
Report, which includes the Company's Annual Report on Form 10-K filed with the
Securities Exchange Commission for the fiscal year ended December 31, 2001, is
being concurrently mailed or delivered with this Proxy Statement to stockholders
entitled to vote at the Annual Meeting. The Annual Report is not to be regarded
as proxy soliciting material.
The Company has fixed the close of business on April 5, 2002 as the
record date for determining the holders of its common stock, no par value (the
"Common Stock") who will be entitled to notice of and to vote at the meeting. On
that date, the Company had issued and outstanding 13,966,098 shares of Common
Stock and 40,031 Shares of Series B Preferred Stock. Holders of the Company's
Common Stock and Series B Preferred Stock are entitled to one vote for each
share owned of record. A majority of shares entitled to vote constitutes a
quorum. A share, once represented for any purpose at the meeting, is deemed
present for purposes of determining a quorum for the meeting (unless the meeting
is adjourned and a new record date is set for the adjourned meeting), even if
the holder of the share abstains from voting with respect to any matter brought
before the meeting.
The director nominees will be elected by a plurality of the votes cast
of the shares of Common Stock and Series B Preferred Stock present or
represented by proxy and entitled to vote at the Annual Meeting. There are no
cumulative voting rights. There is no appraisal or similar right of dissenters
respecting the matters to be voted upon. Any other matters that may be properly
submitted to the stockholders will be approved by the affirmative vote of a
majority of votes cast of the shares of Common Stock and Preferred Stock present
or represented by proxy and entitled to vote at the Annual Meeting.
If properly executed and returned in time for the Annual Meeting, the
enclosed Proxy will be voted in accordance with the choices specified thereon.
Where a signed Proxy is returned, but no choice is specified, the shares will be
voted "for" the election of each Class 3 director nominee and in the discretion
of the proxies on such other matters as may properly come before the Annual
Meeting. Any stockholder who executes and returns a Proxy may revoke it in
writing at any time before it is voted at the Annual Meeting by executing and
delivering a later-dated proxy, or by appearing at the meeting and voting in
person. If a stockholder returns a proxy and abstains from voting on any matter,
the shares represented by such proxy will be considered present for purposes of
determining the presence of a quorum at the Annual Meeting and as un-voted,
although present and entitled to vote, for purposes of determining the approval
of each matter as to which the stockholder has abstained or withheld authority.
If a broker submits a proxy that indicates that the broker does not have
discretionary authority as to certain shares to vote on one or more matters,
those shares will be counted as shares that are present for purposes of
determining the presence of a quorum but will not be considered as present and
entitled to vote with respect to such matters.
1
PROPOSAL 1.
ELECTION OF DIRECTORS
All directors generally hold office for three-year terms and then until
their successors have been duly elected and qualified. The Board of Directors of
the Company is divided into three classes. The term of the Class 1 directors
will expire at the 2003 Annual Meeting of Stockholders, the term of the Class 2
directors will expire at the 2004 Annual Meeting of Stockholders; and the term
of the Class 3 directors will expire at this Annual Meeting of Stockholders (and
in all cases when their respective successors are duly elected and qualified).
At each annual meeting, successors to the class of directors whose term expires
at such meeting will be elected to serve for a three-year term and until their
successors are duly elected and qualified.
The Board of Directors proposes that the three nominees indicated below
be elected as Class 3 directors to serve for a three-year term and until their
successors are duly elected and qualified. Mr. Evans, Mr. Brown and Mr. Ingram
are currently Class 3 directors. If any of the nominees should become unable to
accept election or declines to serve, neither of which the Board anticipates, it
is intended, in the absence of contrary direction, that the proxies will be
voted for the balance of those named below and for substitute nominee(s) as the
Board may designate, unless the Board has taken prior action to reduce its
membership. The proxies will in no event be voted for a greater number of
nominees than three.
During fiscal 2001, the Board of Directors held six meetings and acted
by four written consent actions. Each director attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors and (ii)
the total number of meetings held by all committees on which the individual
director served. There are two committees of the Board of Directors which assist
the Board in discharging its responsibilities. These committees, their members
and functions are discussed below.
INFORMATION ABOUT NOMINEES FOR CLASS 3 DIRECTORS
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION
- ---------------- --- --------------------
Bruce R. Evans 43 Mr. Evans has served as a director since
August 1998. Since January 2001, he has been
a managing partner of Summit Partners, a
venture capital firm in Boston,
Massachusetts where he has been employed
since 1986. Mr. Evans also serves as a
director of Opnet Technologies, Inc. and
several privately-held companies.
Frank W. Brown 48 Mr. Brown was a director of Towne from March
1998 until the merger, at which time he
became a director of the Company. Mr. Brown
is currently Managing Director of The
Bankers Bank. Previously, he was a principal
with Brown, Burke Capital Partners, Inc., a
provider of financial advisory services to
community-oriented financial institutions
and middle market corporations in connection
with mergers and acquisitions and financing
and a Managing Member of Capital
Appreciation Management Company, L.L.C., an
Atlanta-based merchant banking fund. Mr.
Brown has also worked in various corporate
finance and investment banking positions
with Bankers Trust Company, The First Boston
Corporation and The Robinson-Humphrey
Company.
David B. Ingram 39 Mr. Ingram became a director of the Company
in October 2001. Mr. Ingram is currently the
Chairman and President of Ingram
Entertainment Inc., a distributor of videos,
DVDs and video games, a position he has held
since April 1996. He joined Ingram
Entertainment Inc. in July 1991, where he
held a variety of positions before being
named President in August 1994. He is also a
member of the Montgomery Bell Academy Board
of Trustees (Nashville), the Private
Business Board of Directors, and the
Balentine & Company Advisory Board. He is
also Chairman of the Investment Committee
for the Tennessee Golf Foundation, Chairman
of the Vanderbilt Owen School Capital
Campaign Steering Committee, and is a member
of the AmSouth Bank Community Advisory
Board. Mr. Ingram is a former board member
of Buy.com, Ingram Micro, and the Video
Software Dealers Association.
2
INFORMATION ABOUT CONTINUING DIRECTORS - CLASS 1 (TERM ENDING 2003)
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION
- ---------------- --- --------------------
Thomas L. Black 50 Mr. Black co-founded Private Business in
1991 and has served as a director since that
time and has served as President and Chief
Executive Officer since February 2001. Prior
to joining Private Business, Inc., Mr. Black
served as Chief Executive Officer of Imagic
Corporation, a Nashville-based check imaging
software company, and Tecniflex, Inc., a
check processing equipment maintenance and
servicing company. He had previously served
as Chief Executive Officer of Private
Business, Inc. from 1991 until 1995, prior
to the company's initial public offering.
Glenn W. Sturm 48 Mr. Sturm was a director of Towne from 1996
until the merger, at which time he became a
director or the Company. Mr. Sturm has been
a partner in the law firm of Nelson Mullins
Riley & Scarborough, L.L.P. since 1992, and
he presently serves as a member of its
executive committee. Mr. Sturm served as
chief executive officer of Netzee, Inc., a
provider of a suite of Internet-based
products and services to financial
institutions from its inception in 1999
until October 2000. Mr. Sturm also serves as
a director of The InterCept Group, Inc., a
provider of technology products and services
to financial institutions.
Gregory S. Daily 42 Mr. Daily became a director in August 2001.
Mr. Daily is the former President of PMT
Services, Inc., a company he co-founded in
1984 that markets electronic credit card
authorization and payment systems. After PMT
merged with NOVA Corporation in 1998, he
served as a Vice Chairman of NOVA from 1998
until 2001. His current business
involvements include iPayment Technologies,
Inc., Century II, and Cumberland Swan. He
currently serves on the boards of Paylinx,
Retriever Payment Systems, and Technology
Funding Alliance.
INFORMATION ABOUT CONTINUING DIRECTORS - CLASS 2 (TERM ENDING 2004)
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION
- ---------------- --- --------------------
Brian J. Conway 43 Mr. Conway has served as a director since
August 1998. He has been a managing director
or partner of TA Associates, Inc., a private
equity investment firm in Boston,
Massachusetts, or its predecessor since
1988, and was an associate at the firm from
1984 through 1988. He is a director of
several privately-held companies.
William B. King 57 Mr. King co-founded Private Business in 1991
and has served as Chairman of the Board
since that time. In 1970, he co-founded
Madison Financial Corporation, a provider of
marketing products and services to community
banks. Mr. King sold Madison Financial
Corporation in 1986 and served as Chairman
of the Board of its successor, FISI*Madison
Financial Corporation, from 1986 to 1995.
Mr. King is a private investor, and he has
served as a major shareholder, director,
and/or chairman of a number of
privately-held companies during the past
five years. He currently serves on the
boards of Tecniflex, Inc., Board Member,
Inc., StrategyCorps LLC, Journal
Communications, InfoAdvantage, Inc. and
Ingram Entertainment Corporation.
Richardson M. Roberts 44 Mr. Roberts was a director of Towne from May
1999 until the merger, at which time he
became a director of the Company. From
September 1998 until June 1999, he was vice
chairman of the board of directors of Nova
Corporation, a publicly-traded provider of
transaction processing services, related
software application products and
value-added services primarily to
small-to-medium sized merchants. Mr. Roberts
served with PMT Services, a publicly-traded
marketer of electronic credit card
authorization and payment systems, from 1984
to December 1998, most recently as its chief
executive officer. Mr. Roberts is also a
principal investor in Cheyenne
Environmental, Capital Cash, and Magic
Springs Theme Park. He currently serves on
the board of the Tennessee State Museum.
3
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors currently has two committees: the audit
committee and the compensation committee. The compensation committee makes
recommendations concerning salaries and incentive compensation for executives of
the Company. The compensation committee consists of Messrs. King , Evans, Ingram
and Roberts. The compensation committee met two times during fiscal 2001. The
audit committee reviews the Company's quarterly reports and reviews and approves
the annual report of the Company's independent auditors. Messrs. Conway, Daily,
Sturm and Brown currently serve on the audit committee. Mr. Gary W. Cage and Mr.
Fred Goad served on the audit committee until they resigned from the board in
April 2001 and August 2001 respectively. The audit committee met four times
during fiscal 2001.
DIRECTOR COMPENSATION
Non-employee directors receive $1,000 cash compensation for each board
meeting they attend. Directors are reimbursed for expenses incurred in
connection with attendance at board and committee meetings. No non-employee
directors received stock option grants during the 2001 fiscal year. Beginning in
fiscal year 2002, all non-employee directors will receive options to purchase
8,000 shares of common stock at the fair market value of the stock on the date
of the grant. Also, any new director joining the Company's board in 2002 or
thereafter will receive options to purchase 10,000 shares of common stock at the
fair market value of the stock on the date of the grant. Mr. Black, Private
Business's only employee director, received his stock option grants for his
service as an employee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE PROPOSED NOMINEES TO THE CLASS 3 DIRECTORS. THE AFFIRMATIVE VOTE OF A
PLURALITY OF THE VOTES CAST ON PROPOSAL 1, IN PERSON OR BY PROXY, IS NECESSARY
FOR THE ELECTION OF THE NOMINEES NAMED HEREIN TO BE DIRECTORS OF THE COMPANY.
4
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Private Business is authorized to issue 33,333,333 shares of common
stock and 20,000,000 shares of preferred stock. As of March 31, 2002, there were
13,965,909 shares of common stock and 40,031 shares of Series B Preferred Stock
issued and outstanding. The following table sets forth as of March 31, 2002
information with respect to the beneficial ownership of our outstanding common
stock by (i) each director of Private Business, (ii) each executive officer
named in the Summary Compensation Table herein, (iii) all directors and
executive officers as a group, and (iv) each stockholder known by Private
Business to be the beneficial owner of more than 5% of its outstanding common
stock. Except as otherwise indicated, the persons or entities listed below have
sole voting and investment power with respect to all shares of common stock
owned by them, except to the extent such power may be shared with a spouse.
Shares
Beneficially Owned(1)
-----------------------
Name Number Percent
- ---- --------- -------
Summit Partners (2)(3) 1,475,763 10.6
TA Associates Group (2)(4) 1,475,763 10.6
Gregory A. Thurman (5) 987,837 7.1
William B. King 455,242 3.3
Thomas L. Black (6) 1,270,194 8.9
Henry M. Baroco (7) 452,750 3.2
Gerard M. Hayden, Jr. (8) 12,499 *
Joseph P. Mooney (9) 36,656 *
Peter S. Scully (10) 31,783 *
Kevin M. McNamara (11) 263,276 1.9
Fred P. Read (12) 31,754 *
Frank W. Brown (13) 28,969 *
Brian J. Conway (4) 1,475,763 10.6
Gregory S. Daily 254,212 1.8
Bruce R. Evans (3) 1,475,763 10.6
David B. Ingram (14) 27,333 *
Richardson M. Roberts (15) 16,459 *
Glenn W. Sturm (16) 70,510 *
All directors and executive officers as a group (13
persons) (17) 5,608,133 38.3
- ----------------
* Less than 1%
(1) The percentages shown are based on 13,956,909 shares of Common Stock
outstanding on March 31, 2002. Pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"), shares of Common
Stock which a person has the right to acquire pursuant to the exercise
of stock options and warrants held by such holder that are exercisable
within sixty (60) days of such date are deemed outstanding for the
purpose of computing the percentage ownership of such person, but are
not deemed outstanding for computing the percentage ownership of any
other person.
(2) The address for Summit Partners is care of Summit Ventures V, L.P. at
600 Atlantic Avenue, Suite 2800, Boston, MA 02210. The address for TA
Associates Group is 125 High Street Tower, Suite 2500, Boston, MA
02110.
(3) Includes 1,143,107 shares held by Summit Ventures V, L.P., 191,144
shares held by Summit V Companion Fund, L.P., 76,457 shares held by
Summit V Advisors Fund (QP), L.P., 23,364 shares held by Summit V
Advisors Fund, L.P., and 41,691 shares held by Summit Investors III,
L.P. Mr. Evans is a general partner of Summit Investors III, L.P. and
is a member of Summit Partners, LLC, which is the general partner of
Summit Ventures V, L.P., Summit V Companion Fund, L.P., Summit V
Advisors Fund (QP), L.P., and Summit V Advisors Fund, L.P. Mr. Evans
may be deemed to share voting and investment power with respect to all
shares held by the partnerships. Mr. Evans disclaims beneficial
ownership of these shares, except to the extent of his pecuniary
interest therein.
5
(4) Includes 1,122,362 shares owned by TA/Advent VIII, L.P.; 308,805 shares
owned by Advent Atlantic & Pacific III L.P.; 22,168 shares owned by TA
Executives Fund LLC; 22,428 shares owned by TA Investors LLC. TA/Advent
VIII, Advent Atlantic & Pacific III L.P., TA Executives Fund LLC and TA
Investors LLC are part of an affiliated group of investment
partnerships referred to, collectively, as the TA Associates Group. The
general partner of TA/Advent VIII, L.P. is TA Associates VIII LLC. The
general partner of Advent Atlantic & Pacific III L.P. is TA Associates
AAP III Partners. TA Associates, Inc. is the general partner of TA
Associates AAP III Partners, L.P. and the manager of each of TA
Associates VIII, LLC, TA Executives Fund, LLC, and TA Investors, LLC is
TA Associates, Inc. In such capacity, TA Associates, Inc. exercises
sole voting and investment power with respect to all of the shares held
of record by the named investment partnerships. Individually no
shareholder, director, or officer of TA Associates, Inc. is deemed to
have or share voting and investment power. Principals and employees of
TA Associates, Inc. (including Mr. Conway, a Director of Private
Business) comprise the members of TA Investors LLC. Mr. Conway has a
pecuniary interest in 3,632 shares held by TA Investors, LLC.
(5) Includes 75,007 shares held by The Joshua P. Thurman 1999 Trust and
75,008 shares held by the Whitney Thurman 1999 Trust.
(6) Includes options to purchase 227,082 shares of common stock.
(7) Includes options to purchase 351,847 shares of common stock.
(8) The amount shown consists of options to purchase shares of common
stock. This individual does not own any shares of common stock.
(9) Includes options to purchase 36,323 shares of common stock.
(10) Includes options to purchase 27,606 shares of common stock.
(11) Includes options to purchase 236,206 shares of common stock.
(12) Includes options to purchase 28,638 shares of common stock.
(13) Includes options to purchase 7,828 shares of common stock and 4,409
shares owned jointly with his spouse.
(14) Includes 333 shares owned by Ingram Capital Inc., an entity controlled
by Mr. Ingram.
(15) Includes options to purchase 9,190 shares of common stock.
(16) Includes options to purchase 6,010 shares of common stock.
(17) Includes options to purchase 678,385 shares of common stock.
6
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company as of March 31, 2002.
NAME AGE POSITIONS
- -------------------------------- --- -------------------------------------------------
Thomas L. Black................. 50 Chief Executive Officer
Henry M. Baroco................. 58 Chief Operating Officer
Gerard M. Hayden, Jr. .......... 47 Chief Financial Officer
Joseph P. Mooney................ 33 Chief Sales Officer
Peter S. Scully ................ 45 President of Private Business Insurance Inc. and
President and Chief Executive Officer of RMSA
Thomas L. Black currently serves as Chief Executive Officer of Private
Business, a position he assumed on February 1, 2001. Mr. Black co-founded
Private Business in 1991 and has served as a Director since that time. Mr. Black
served as Chief Executive Officer of Private Business from 1991 until 1995. Mr.
Black has served as Chief Executive Officer of Imagic Corporation, Nashville,
Tennessee, a check imaging software company, since 1997, and as Chief Executive
Officer of Tecniflex Inc. in Republic, Missouri, a check processing equipment
maintenance and servicing company, since 1999.
Henry M. Baroco became Chief Operating Officer of Private Business in
2001 after its merger with Towne Services, where he served as President and
Chief Operating Officer. Prior to joining Towne, Mr. Baroco was Senior Vice
President and General Manager of the vendor finance division of CIT Industrial
Finance, and had also served as Senior Vice President of Sales and Marketing for
Norwest Equipment Finance. Mr. Baroco also has more than 19 years of experience
with GE Capital, where he last served as National Sales Manager of its Vendor
Finance business.
Gerard M. Hayden, Jr. joined Private Business in November 2001 as Chief
Financial Officer. Prior to joining Private Business, Mr. Hayden served as
Executive Vice President and Chief Financial Officer of Covation from 1998 until
2001. Covation is a managed care application service provider financed by Bank
of America and Andersen Consulting. Previously, Mr. Hayden has held Chief
Financial Officer positions with Meridian Occupational Healthcare Associates,
Inc., ENVOY (now part of WebMD, NASDAQ: HLTH), Allied Clinical Laboratories,
Inc., and Lincoln National/Peak Health Plan.
Joseph P. Mooney joined Private Business in 1998 and currently serves
as Chief Sales Officer. Mr. Mooney was Vice President/Regional Manager -
Business Development until becoming Chief Sales Officer in January 2000. Prior
to joining Private Business, Mr. Mooney served as Director of Sales for Cardinal
Health, Inc. from 1996 to 1998. From 1993 to 1996, Mr. Mooney was in several
management and sales positions with Alcon Laboratories, Inc.
Peter S. Scully joined Private Business in 1994 and currently serves as
President of Private Business Insurance, Inc., a wholly owned subsidiary of
Private Business, Inc. and President and Chief Executive Officer of the
Company's retail inventory management services subsidiary, RMSA (Retail
Merchandising Service Automation). Mr. Scully was a Vice President/Regional
Manager - Business Development from 1996 to 1998, becoming a Senior Vice
President in 1998. He held that position until 2000 when he became President of
PB insurance. Mr. Scully also became President and Chief Executive Officer of
RMSA effective January 1, 2002. Prior to joining Private Business, Mr. Scully
was a management consultant with Price Waterhouse.
7
EXECUTIVE COMPENSATION
The following table provides information as to annual, long-term or
other compensation earned during fiscal years ended December 31, 2001, 2000 and
1999 by the Company's Chief Executive Officers and the persons who, at December
31, 2001, were the other four most highly compensated executive officers of the
Company (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/(#)
- --------------------------- ---- --------- ------- --------------- ------------
Thomas L. Black(2) 2001 159,771(3) 220,000 2,616 333,333
Chief Executive Officer 2000 N/A N/A N/A N/A
1999 N/A N/A N/A N/A
Kevin M. McNamara(2) 2001 35,000 105,000 332,036(4) 100,000
Chief Executive Officer 2000 210,000 -- -- 13,333
1999 85,000 50,000 -- 333,333
Henry M. Baroco 2001 82,932 70,000 144,402(5) 200,000
Chief Operating Officer 2000 N/A N/A N/A N/A
1999 N/A N/A N/A N/A
Joseph P. Mooney 2001 193,333 80,000 3,393 33,333
Chief Sales Officer 2000 160,000 50,000 71,230(6) 25,000
1999 112,342 30,000 -- --
Peter S. Scully, 2001 168,083 60,000 49,306(6) 13,333
President, Private Business Insurance 2000 140,000 25,000 16,885(6) 11,666
and President and CEO of RMSA 1999 100,000 65,000 -- 6,333
Fred P. Read(7) 2001 135,000 35,000 6,966 13,333
Chief Financial Officer 2000 100,000 25,000 -- 5,200
1999 95,000 25,000 -- 8,133
(1) In accordance with the rules of the Securities and Exchange Commission,
the compensation described in this table does not include medical,
group life insurance or other benefits received by these executive
officers which are available generally to all salaried employees of
Private Business and perquisites and other personal benefits received
by these executive officers, which do not exceed the lesser of $50,000
or 10% of any such officer's salary and bonus disclosed in this table.
(2) On February 1, 2001, Thomas L. Black replaced Mr. McNamara as the
Company's Chief Executive Officer. Mr. McNamara remained with Private
Business in an advisory capacity until November 30, 2001.
(3) In 2001, Mr. Black opted to receive his salary in the form of stock.
This amount represents the grossed up fair market value of the 43,608
shares of common stock Mr. Black received in lieu of cash compensation.
(4) This amount represents severance and other miscellaneous taxable fringe
benefits paid to Mr. McNamara.
(5) This amount represents taxable fringe benefits for a company owned car
given to Mr. Baroco and for a loan that was forgiven by Towne prior to
the merger in consideration for Mr. Baroco's entering into a new
employment agreement that reduced the term of the agreement from three
years to two years and reduced the period for which insurance benefits
would be provided from until death to until age 65.
(6) These amounts represent relocation expenses paid by Private Business.
(7) Mr. Read resigned from the Company effective December 31, 2001. Option
Grants. The tables below provides certain information with respect to
grants of stock options to the Named Executive Officers pursuant to the
Company's Stock Option Plan during the year ended December 31, 2001.
8
Option Grants. The tables below provides certain information with
respect to grants of stock options to the Named Executive Officers pursuant to
the Company's Stock Option Plan during the year ended December 31, 2001.
Options/SAR Grants in Last Fiscal Year
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS/ EXERCISE MARKET APPRECIATION FOR
UNDERLYING SARS GRANTED OR BASE PRICE ON OPTIONS TERM(2)
OPTIONS TO EMPLOYEES PRICE DATE OF EXPIRATION --------------------
NAME GRANTED(1) IN FISCAL YEAR(1) ($/SHARE) GRANT DATE 5% 10%
---- ------------ ------------------ --------- -------- ----------- --------- -------
Thomas L. Black 166,667(3) 8.7% $ 3.000 $2.010 8/12/11 45,680 368,904
83,333(4) 4.3% $12.000 $2.010 8/12/11 0 0
83,333(4) 4.3% $18.000 $2.010 8/12/11 0 0
Kevin M. McNamara(5) 100,000(6) 5.2% $ 3.750 $3.750 1/31/11 235,835 597,653
Henry Baroco 200,000(7) 10.4% $ 2.070 $2.070 9/06/11 260,362 659,809
3,180(8) 0.2% $ 2.200 $2.200 2/15/06 1,933 4,271
Joseph P. Mooney 33,333(4) 1.7% $ 2.718 $2.718 3/06/11 56,977 144,392
Peter S. Scully 13,333(4) 0.7% $ 2.718 $2.718 3/06/11 22,791 57,756
Fred P. Read(9) 3,333(4) 0.2% $ 2.718 $2.718 3/06/11 5,697 14,438
10,000(3) 0.5% $ 1.550 $1.550 9/30/11 9,748 24,703
(1) The percent of total options granted was calculated based on a total of
1,921,103 options granted during the fiscal year, which includes
963,436 options granted in connection with the merger to replace
existing Towne options.
(2) The potential realizable values illustrate values that might be
realized upon exercise immediately prior to the expiration of the term
of these options using 5% and 10% appreciation rates, as required by
the Securities and Exchange Commission, compounded annually. These
values do not, and are not intended to, forecast possible future
appreciation, if any, of the Company's stock price. Additionally, these
values do not take into consideration the provisions of the options
providing for vesting over a period of years or termination of options
following termination of employment.
(3) These options vested immediately upon date of grant.
(4) These options vest 1/48th per month from the date of grant.
(5) Mr. McNamara resigned as Chief Executive Officer of Private Business
Effective February 1, 2001
(6) 66,667 of these options vest 1/12th per month from February 2001 and
33,333 of these options vest 1/6th per month from July 2001.
(7) 100,000 of these options vested immediately upon date of grant and the
remaining 100,000 vest 1/48th per month from the date of grant.
(8) These options vest one year from the date of grant.
(9) Mr. Read resigned as Chief Financial Officer of Private Business
effective December 31, 2001
9
Option Exercise and Values. The table below provides information as to
exercise of options by The Named Executive Officers during the 2001 fiscal year
under the option plans and the year-end value of unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SECURITIES OPTIONS/SARS IN-THE-MONEY OPTIONS
UNDERLYING AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
OPTIONS VALUE ------------------------------- ---------------------------
NAME EXERCISED(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------- ----------- ------------- ----------- -------------
Thomas L. Black 0 N/A 201,387 131,946 0 0
Kevin M. McNamara(2) 0 N/A 225,094 11,111 0 0
Henry Baroco 0 N/A 336,585 131,195 0 0
Joseph P. Mooney 0 N/A 22,316 44,186 0 0
Peter S. Scully 0 N/A 19,540 21,630 17 0
Fred P. Read(3) 0 N/A 28,638 9,727 503 0
(1) This amount represents the aggregate of the number of "in-the-money"
options multiplied by the difference between $1.60, the fair market
value of the Common Stock at December 31, 2001, and the exercise price
for that option. Options are classified as "in-the-money" if the market
value of the underlying common stock exceeds the exercise price of the
option. Actual values which may be realized, if any, upon the exercise
of options will be based on the per share market price of the common
stock at the time of exercise and are thus dependent upon future
performance of the common stock.
(2) Mr. McNamara resigned as Chief Executive Officer of Private Business
Effective February 1, 2001.
(3) Mr. Read resigned as Chief Financial Officer of Private Business
effective December 31, 2001.
EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENT
Kevin McNamara
Effective October 31, 1999, Private Business entered into an Executive
Employment Agreement with Mr. McNamara as Private Business's Chief Executive
Officer that was subsequently superceded by an Amended and Restated Executive
Employment Agreement, also effective October 31, 1999. Mr. McNamara's agreement
provides for an annual base salary of not less than $210,000 and an annual
incentive cash bonus of up to 100% of his base salary upon achievement of
certain performance criteria to be established from time to time. The employment
agreement provides that Mr. McNamara will be appointed to Private Business's
board of directors and has an initial term of two years, subject to automatic
annual renewals absent prior notice from either party. Mr. McNamara received a
$50,000 additional payment upon execution of the employment agreement.
The employment agreement further provides for the grant to Mr. McNamara
of options to acquire 166,666 shares of Private Business's common stock at an
exercise price equal to the closing trading price on October 29, 1999
(multiplied times three to reflect the one-for-three stock split), of $6.375; an
additional 83,333 shares at an exercise price of $24.00 per share; and an
additional 83,333 shares at an exercise price of $36.00 per share. These options
vest over three years at the rate of 1/36th per month and constitute incentive
stock options to the extent eligible under applicable tax laws, and, with
respect to any excess, nonqualified stock options.
The employment agreement provides for various payments to Mr. McNamara
upon cessation of employment, depending on the circumstances. If Private
Business terminates Mr. McNamara's employment for
10
"Cause" or if he resigns prior to a "Change in Control" (other than due to an
uncured material breach by Private Business), Mr. McNamara will receive his pro
rata base salary and perquisites to the date of termination. If Mr. McNamara
dies or becomes disabled during his term of employment, he will receive his pro
rata base salary, perquisites and incentive bonus to the date of termination or
resignation.
If, prior to an "Initial Change in Control Event," Private Business
terminates Mr. McNamara's employment due to a "Discharge Event," or he resigns
based on an uncured material breach by Private Business, then Mr. McNamara will
receive a lump sum payment equal to his base salary and "Average Bonus." If
prior to an "Initial Change in Control Event" Private Business terminates his
employment without "Cause" and without a "Discharge Event," Mr. McNamara will
receive the greater of (i) his base salary and "Average Bonus" or (ii) his base
salary and standard incentive bonus for the remainder of the unexpired term of
the employment agreement.
If after an "Initial Change in Control Event," Private Business
terminates Mr. McNamara's employment other than for "Cause," death or
disability, or if Mr. McNamara voluntarily resigns for any reason other than his
death or disability, then the agreement generally provides that Private Business
will pay Mr. McNamara a lump sum termination payment of twice his base salary
and his "Average Bonus."
The employment agreement provides certain time periods for the exercise
of Mr. McNamara's options should his employment cease, which are generally more
favorable after a "Change in Control." All options granted to Mr. McNamara
immediately vest and become exercisable upon a Change in Control, and are
extinguished should he be terminated for "Cause."
The employment agreement indemnifies Mr. McNamara for excise taxes
imposed upon him based on his receipt of any "excess parachute payment" within
the meaning of Section 280G(b) of the Internal Revenue Code. Mr. McNamara agreed
in the employment agreement not to compete within the continental United States
with the "Business Activities" of Private Business during the term of his
employment and the following two years, nor to solicit Private Business's
employees during such period for employment elsewhere.
On February 1, 2001, Mr. McNamara and Private Business entered into a
Mutual Separation Agreement With Waiver and Release of All Claims. This
agreement provided for the termination of Mr. McNamara's employment agreement,
the waiver of any claims between the parties, and a severance payment of
$315,000. Furthermore, the agreement provides that all of Mr. McNamara's vested
options to purchase shares of Private Business common stock shall continue to be
exercisable for a period of two years from February 1, 2001.
Tom Black
Effective February 1, 2001, Private Business entered into an Executive
Employment Agreement with Mr. Black as Private Business's Chief Executive
Officer. Mr. Black's agreement provides for an annual base salary of not less
than $210,000 and an annual incentive cash bonus of up to 100% of his base
salary upon achievement of certain performance criteria to be established from
time to time. Mr. Black may elect to take all or a portion of his base salary
and bonus in the form of cash or common stock of Private Business. For fiscal
2001, Mr. Black elected to take his base salary in the form of common stock. As
a result, Mr. Black received 43,608 shares of Common Stock. The employment
agreement provides that Mr. Black will serve as a member of Private Business's
board of directors and shall be nominated for re-election as a director at the
Company's annual meeting.
The employment agreement further provides for the grant to Mr. Black of
options to acquire 333,333 shares of Private Business's common stock, of which
166,667 shall vest immediately upon grant and the remaining 166,666 vest ratably
over a four year period. The 166,667 options that vest immediately have an
exercise price of $3.00 per share; 83,333 options have an exercise price of
$12.00 per share; and 83,333 options have an exercise price of $18.00 per share.
These options constitute incentive stock options to the extent eligible under
applicable tax laws, and, with respect to any excess, nonqualified stock
options.
The employment agreement provides for various payments to Mr. Black
upon cessation of employment, depending on the circumstances. If Private
Business terminates Mr. Black's employment for "Cause" or if he resigns prior to
a "Change in Control" (other than due to a "Constructive Discharge"), Mr. Black
will receive his pro rata
11
base salary and perquisites to the date of termination. If Mr. Black dies or
becomes disabled during his term of employment, he will receive his pro rata
base salary, perquisites and incentive bonus to the date of termination or
resignation.
If, prior to an "Initial Change in Control Event," Private Business
terminates Mr. Black's employment due to a "Discharge Event," or if his
employment ceases due to a "Constructive Discharge," then Mr. Black will receive
a lump sum payment equal to his base salary and "Average Bonus." If prior to an
"Initial Change in Control Event" Private Business terminates his employment
without "Cause" (other than due to a "Constructive Discharge") and without a
"Discharge Event," Mr. Black will receive a lump sum payment equal to two times
his base salary and "Average Bonus."
If after an "Initial Change in Control Event," Private Business
terminates Mr. Black's employment other than for "Cause," death or disability,
or if Mr. Black voluntarily resigns for any reason other than his death or
disability, then the agreement generally provides that Private Business will pay
Mr. Black a lump sum termination payment of one to two times his base salary and
his "Average Bonus," depending on certain factors such as the Company's stock
price as of the date of the "Initial Change of Control Event."
The employment agreement provides certain time periods for the exercise
of Mr. Black's options should his employment cease, which are generally more
favorable after a "Change in Control." All options granted to Mr. Black
immediately vest and become exercisable upon a Change in Control, and are
extinguished should he be terminated for "Cause."
Mr. Black agreed in the employment agreement not to compete within the
continental United States with the "Business Activities" of Private Business
during the term of his employment and the following two years, nor to solicit
Private Business's employees during such period for employment elsewhere.
Henry Baroco
Effective upon the consummation of the merger, Private Business entered
into an Executive Employment Agreement with Mr. Baroco as Private Business's
Chief Operating Officer. Mr. Baroco's agreement provides for an annual base
salary of not less than $225,000 and an annual incentive cash bonus of up to
100% of his base salary upon achievement of certain performance criteria to be
established from time to time. The employment agreement has an initial term from
the effective date of the merger until January 1, 2002, subject to automatic
annual renewals absent prior notice from either party.
Mr. Baroco's employment agreement further provides for the grant to Mr.
Baroco of options to acquire 200,000 shares of Private Business's common stock
at an exercise price equal to the closing trading price on the effective date of
the merger. One half of this initial option grant vested on December 31, 2001.
The remaining one half of the option grant vest 1/48th per month beginning on
the date of the merger and for each month thereafter that Mr. Baroco continues
to be employed by Private Business.
The employment agreement provides for various payments to Mr. Baroco
upon cessation of employment, depending on the circumstances. If Mr. Baroco is
terminated for "Cause" at any time, he will receive his pro rata base salary and
perquisites to the date of termination. If Mr. Baroco dies or becomes disabled
during his term of employment, he will receive his pro rata base salary,
perquisites and incentive bonus to the date of termination or resignation.
If Mr. Baroco resigns after January 1, 2002 or if he is terminated by
Private Business without "Cause" at any time, then Mr. Baroco will receive
$930,000, payable in equal 1/24th monthly payments over a term of two years.
Furthermore, any of Mr. Baroco's vested options will remain exercisable for the
remainder of their stated term and Mr. Baroco will continue to receive life and
health insurance benefits until Mr. Baroco reaches the age 65, and his wife will
continue to receive life and health insurance benefits until she reaches age 65.
12
COMPENSATION COMMITTEE REPORT
Compensation Policy
The compensation committee of Private Business's board of directors
intends to make Private Business's executive compensation package competitive
with the marketplace, with an emphasis on compensation in the form of equity
ownership, the value of which is contingent on the long-term market performance
of Private Business's Common Stock. The compensation committee also seeks to
control Private Business's fixed costs and to enhance Private Business's annual
performance by providing executive officers with opportunities to earn annual
cash bonuses for achieving company and individual performance goals. In
establishing Private Business's compensation policies, the compensation
committee also considers information regarding levels and practices at other
companies in related industries that are comparable to Private Business.
Although the compensation committee does not establish specific targets
for compensation of Private Business's executive officers relative to executive
officers at comparable companies, the compensation committee believes that the
compensation for Private Business's executive officers generally falls in the
median range of executive compensation for such comparable companies.
Executive Officer Compensation
The annual compensation package of executive officers of Private
Business provides for base salaries, as well as for the opportunity to receive
annual bonuses that are related, among other factors, to company performance and
individual performance. Private Business also provides long-term equity based
compensation generally through participation in the 1994 Stock Option Plan and
1999 Stock Option Plan. This assures that key management employees have a
meaningful stake in Private Business, the ultimate value of which is dependent
on Private Business's long-term stock price appreciation, and that the interests
of executive officers are aligned with those of Private Business's shareholders.
Base Salary. Executive officers' base salaries reflect their positions
and experience. Annual base salary increases for executive officers are
established as a result of an analysis of each executive's individual
performance during the prior year, the overall performance of Private Business
during the prior year and his or her level of responsibility, prior experience
and breadth of knowledge. Private Business believes that current executive
officer salaries are competitive with comparable companies.
Annual Bonus. To control fixed salary costs and reward annual
performance, Private Business pays annual bonuses to executive officers for
achieving company and individual performance goals. In setting annual bonus
awards, the compensation committee considers, among other factors, Private
Business's revenue growth, the development and expansion of its business,
improvement of management structures, and general management objectives. Actual
awards are recommended by the Chief Executive Officer and approved by the
compensation committee based on its assessment of each executive's individual
performance and responsibility for Private Business's financial and business
condition.
Stock Options. The 1994 Stock Option Plan and 1999 Stock Option Plan
permit grants of incentive stock options and non-qualified stock options. The
incentive stock options are granted with an exercise price at the fair market
value on the grant date, vest over a four-year period, and expire after 10
years. Non-qualified stock options are granted with an exercise price
established by the board of directors, vest from immediately after the date of
grant up to four years after the date of grant and expire after 10 years.
Accordingly, stock options have value only if the stock price appreciates from
the date such options are granted. This component of executive compensation
focuses executives on long-term creation of shareholder value and encourages
equity ownership in Private Business. In determining the actual size of stock
option awards under the Stock Option Plans, the compensation committee considers
the value of the stock on the date of grant, competitive practices, the
executive's stock holdings, the amount of options previously granted to the
executive, individual performance, and Private Business's performance.
13
Compensation of the Chief Executive Officer
Mr. Kevin M. McNamara was the Chief Executive Officer until January 31,
2001. On February 1, 2001, Thomas L. Black replaced Mr. McNamara as Private
Business's Chief Executive Officer. Both Mr. McNamara and Mr. Black had
employment agreements with the Company, both of which are described under the
heading "Employment Agreements." The compensation committee and the board of
directors approved a total compensation package that was designed to be
competitive with compensation provided to chief executive officers at companies
of size comparable to Private Business as well as provide a compensation level
and structure necessary to obtain an executive with Mr. McNamara's and Mr.
Black's experience and credentials. Mr. Black's employment agreement provided
for an annual salary of $210,000 in fiscal year 2001 and a bonus in the amount
of up to 100% of his base salary upon achievement of certain performance targets
established by the board of directors.
Tax Regulations
Section 162(m) of the Internal Revenue Code of 1986, as amended,
generally disallows a tax deduction to public companies for executive
compensation in excess of $1 million. It is not anticipated that the Company
will pay any of its executive officers compensation in excess of $1 million in
the 2002 fiscal year and, accordingly, to date the Company has not adopted a
policy in this regard.
The above compensation committee report is not deemed to be part of a
document filed with the SEC pursuant to the Securities Act or the Securities
Exchange Act and is not to be deemed incorporated by reference in any documents
filed under the Securities Act or the Exchange Act, without the express written
consent of Private Business.
The members of the compensation committee
Mr. William B. King
Mr. Bruce R. Evans
Mr. David B. Ingram
Mr. Richardson M. Roberts
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's compensation committee is currently composed of Mr. Evans
and Mr. King. No executive officer of the Company serves as a member of the
compensation committee or as a director of any other entity whose executive
officer(s) serves as a director of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Lease Agreements. On October 27, 1997, Private Business leased a
building containing approximately 6,740 square feet of property in Franklin,
Tennessee from Madison Land Company, a company which is co-owned by Mr. King,
one of our directors. Private Business used this building for its electronic
commerce operations. Total rent paid to Madison Land Co. was approximately
$43,000 and $79,000 for 2000 and 1999, respectively. The lease with Madison Land
Co. expired on April 1, 2000 and was not renewed. Private Business believes this
lease was on terms as favorable to us as we could have obtained in an
arms-length negotiation with unaffiliated third parties.
In September 2001, the Company began leasing some of its office space
to Tecniflex, Inc. which is primarily owned by Mr. King, one of our directors
and Mr. Black, our Chief Executive Officer and a director. The lease is for
eight months and expires on April 30, 2002. The rent income for 2001 totaled
$39,000.
14
Administrative Support Agreements. Private Business has, in the past,
provided various management and administrative functions for Board Member, Inc.,
Magellan Corp., Madison Land Company, Maryland Farms Land, LLC, Maryland Farms
South, LLC, Private Business Partners, Inc., Careers, Inc., Imagic Corporation,
Discount Brokerage Services, Inc. and Senior Achievement. These companies are
owned or partially owned by various stockholders of Private Business. The
services that were provided included provision of general accounting as well as
allowing employees to participate in our benefits programs. The companies paid
for these services based upon their actual use of the services and in 1999 paid
an aggregate of $34,945 for such services. All of these arrangements have been
terminated.
Legal Fees. During the year ended December 31, 2001, the Company paid
fees of approximately $119,000 for legal services to a law firm in which Mr.
Sturm, one of our directors is a partner.
Communication Services. During the year ended December 31, 2001, the
Company paid fees of approximately $44,000 for communication services to The
InterCept Group, Inc., of which Mr. Sturm, one of our directors is a director.
RELATED PARTY TRANSACTION POLICY
Private Business has a policy that any transactions between Private
Business and its officers, directors and affiliates will be on terms as
favorable to Private Business as can be obtained from unaffiliated third
parties. Such transactions with such persons will be subject to approval by a
majority of our outside directors or will be consistent with policies approved
by such outside directors.
AUDIT COMMITTEE REPORT
The audit committee provides assistance to the board in fulfilling its
obligations with respect to matters involving the accounting, auditing,
financial reporting and internal control functions of Private Business. Among
other things, the audit committee reviews and discusses with management and with
Private Business's outside auditors the results of the year-end audit of Private
Business, including the audit report and audited financial statements. The board
of directors, in its business judgment, has determined that all members of the
audit committee are "independent" directors, qualified to serve on the audit
committee pursuant to Rule 4200(a)(15) of the NASD's listing standards. The
board has adopted a written charter of the audit committee.
As set forth in the charter, management of the Company is responsible
for the preparation, presentation and integrity of the Company's controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
auditing the Company's financial statements and expressing an opinion as to
their conformity and generally accepted accounting principles.
In connection with its review of Private Business's audited financial
statements for the fiscal year ended December 31, 2001, the audit committee
reviewed and discussed the audited financial statements with management and the
independent auditors, and discussed with the Company's independent auditors, the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU 380), as currently in effect. In addition, the audit
committee received the written disclosures and the letter from Arthur Andersen
LLP ("Andersen") required by Independence Standards Board Standard No. 1
(Independence Discussions with audit committees), as currently in effect and
discussed with Andersen their independence from Private Business. The audit
committee has determined that the provision of non-audit services rendered by
Andersen to Private Business is compatible with maintaining the independence of
Andersen from Private Business, but the audit committee will periodically review
the non-audit services rendered by Andersen.
The members of the audit committee are not professionally engaged in
the practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the audit committee rely without independent verification on the information
provided to them and on the representations made by management and the
independent accountants. Accordingly, the audit committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate
15
accounting and financial reporting principles or appropriate internal control
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the audit committee's
considerations and discussions referred to above do not assure that the audit of
the Company's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the Company's auditors are in fact "independent."
Based on the review and discussions referred to above and subject to
the limitations on the role and responsibilities of the audit committee referred
to above and in the charter, the audit committee recommended to Private
Business's board of directors that the audited financial statements be included
in Private Business's annual report on Form 10-K for its fiscal year ended
December 31, 2001, for filing with the Securities and Exchange Commission.
The Members of the Audit Committee
Mr. Brian J. Conway
Mr. Gregory S. Daily
Mr. Glenn W. Sturm
Mr. Frank W. Brown
FEES TO ARTHUR ANDERSEN LLP
For the fiscal year ended December 31, 2001, the total fees paid to our
auditors, Andersen, were as follows:
Audit Fee.
For professional services rendered by Andersen for the audit of the
Company's annual financial statements for the fiscal year ended December 31,
2001, and the reviews of the financial statements included in the Company's
Forms 10-Q for that fiscal year, the Company was billed aggregate fees of
approximately $157,000.
Financial Information Systems Design and Implementation Fees.
For the year ended December 31, 2001, Andersen did not render
professional services described in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X.
All Other Fees.
For the year ended December 31, 2001, for all other services rendered
by Andersen, which included $384,000 for tax advisory services, $6,500 for
assurance advisory and consultation services in relation to the Company's
preparation and filing of its 2001 Form 10-K and 10-K/A, $23,000 for audit
services in relation to the Company's 401(K) Savings Plans, and Employee Stock
Option Plan, and $61,000 for services in connection with the Towne merger and
SEC filings related thereto, the Company was billed aggregate fees of
approximately $474,500.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP served as the Company's
Independent Public Accountants for the 2001 fiscal year. A representative of
Andersen will attend the meeting, will have an opportunity to make a statement
and will answer appropriate questions from our stockholders. Given the recent
events affecting Andersen, the Company's Board of Directors and its audit
committee are carefully evaluating the Company's options for the appointment of
independent auditors. As of the date of this Proxy Statement, the Board had not
yet completed the process of selecting an independent auditor for the fiscal
year ended December 31, 2002.
16
COMPANY PERFORMANCE
Rules promulgated by the SEC require that the Company include in this
Proxy Statement a line graph which compares the yearly percentage change in
cumulative total shareholder return on the Company's Common Stock with (a) the
performance of a broad equity market indicator, the Nasdaq Stock Market (US)
(the "Broad Index") and (b) the performance of a published industry index or
peer group index, Russell 2000 (the "Industry Index"). The Company does not
believe it has an industry peer group. The following graph compares the yearly
percentage change in the return on the Company's Common Stock since May 26,
1999, the date on which the Company's Common Stock first began trading on the
Nasdaq National Market, with the cumulative total return on the Broad Index and
the Industry Index. The graph assumes the investment of $100 in the Company's
Common Stock on May 26, 1999, the investment of $100 in the Broad Index and the
Industry Index on May 26, 1999, and that with respect to each hypothetical
investment, all dividends were reinvested.
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG PRIVATE BUSINESS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE RUSSELL 2000 INDEX
[GRAPH]
- - $100 invested on 5/26/99 in stock or index -
including reinvestment of dividends.
Fiscal year ending December 31.
17
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
the registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Such executive officers, directors and greater than 10% shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. The SEC requires public companies to disclose in
their proxy statements whether persons required to make such filings missed or
made late filings. During fiscal 2001, all such filings and disclosure
requirements were met within the time allowed for all persons subject to Section
16(a) except for Mr. Daily who filed two late Form 4 filings which related to 18
purchase transactions. In addition, Mr. Black filed one late Form 4 in 2002
which related to his Common Stock received in lieu of cash compensation.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2003 Annual
Meeting must be received by the Company not later than December 21, 2002 for
inclusion in its Proxy Statement and form of proxy relating to that meeting.
Stockholders who intend to present a proposal at the 2003 Annual Meeting without
inclusion of such proposal in the Company's proxy materials are required to
provide such proposals to the Company no later than March 6, 2003. Any such
proposals, as well as any questions relating thereto, should be directed to
Michael Berman, Vice President - General Counsel, 9020 Overlook Blvd.,
Brentwood, Tennessee, 37027.
OTHER BUSINESS
It is not anticipated that any other business will arise during the
Annual Meeting as the management of the Company has no other business to present
and does not know that any other person will present any other business.
However, if any other business should be presented at the meeting, the persons
named in the enclosed proxy intend to take such action as will be in harmony
with the policies of the management of the Company.
MISCELLANEOUS
It is important that proxies be returned promptly to avoid unnecessary
expense. Therefore, stockholders who do not expect to attend in person are
urged, regardless of the number of shares of stock owned, to date, sign and
return the enclosed proxy promptly.
18
PROXY PRIVATE BUSINESS, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS, MAY 21, 2002
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas L. Black, Gerard M. Hayden, Jr. or
either of them, as proxies, with power of substitution, to vote all shares of
the undersigned at the Annual Meeting of the Stockholders of Private Business,
Inc., to be held on May 21, 2002, at 9:00 a.m. Central Daylight Time, at our
corporate offices, 9020 Overlook Boulevard, Brentwood, Tennessee and at any
adjournments or postponements thereof, in accordance with the following
instructions:
(1) ELECTION OF CLASS 3 DIRECTORS
<Table>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</Table>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE CHECK THE
BOX TO VOTE "FOR" ALL NOMINEES AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN
THE LIST BELOW.)
Bruce R. Evans Frank W. Brown David B. Ingram
(2) In their discretion, on such other matters as may properly come before the
meeting.
[ ] FOR DISCRETION [ ] AGAINST DISCRETION [ ] ABSTAIN
(Continued on reverse side)
(Continued from other side)
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR THE NOMINEES IN THE ELECTION
OF CLASS 3 DIRECTORS AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
<Table>
Dated: , 2002
--------------------------------- ------------------------------------------
Dated: , 2002
--------------------------------- ------------------------------------------
Signatures of stockholder(s) should correspond
exactly with the name printed hereon. Joint owners
should each sign personally. Executors,
administrators, trustees, etc., should give full
title and authority.
</Table>
PRIVATE BUSINESS, INC.
9020 OVERLOOK BOULEVARD
BRENTWOOD, TENNESSEE 37027