PRIVATE BUSINESS INC, S-1/A, 1999-05-03

PRIVATE BUSINESS INC
S-1/A, 1999-05-03
BUSINESS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 1999

REGISTRATION NO. 333-75013
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PRIVATE BUSINESS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
TENNESSEE 7389 62-1453841
(State or other jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

9010 OVERLOOK BOULEVARD
BRENTWOOD, TENNESSEE 37027
TELEPHONE: (615) 221-8400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
JERRY L. COVER
9010 OVERLOOK BOULEVARD
BRENTWOOD, TENNESSEE 37027
TELEPHONE: (615) 221-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:

<TABLE>
<S> <C>
MARK MANNER STEPHEN A. RIDDICK
HARWELL HOWARD HYNE GABBERT & MANNER, P.C. BROBECK, PHLEGER & HARRISON LLP
1800 FIRST AMERICAN CENTER 701 PENNSYLVANIA AVENUE N.W.
NASHVILLE, TENNESSEE 37238 WASHINGTON, DC 20004
(615) 256-0500 (202) 220-6000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier registration statement for the same offering. [
] _____________________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________________

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, no par value.. 8,222,500 $15.00 $123,337,500 $34,287.83
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</TABLE>

(1) Estimated in accordance with Rule 457(o) solely for the purpose of
calculating the registration fee $31,970 of which was paid with initial
filing.

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PRIVATE BUSINESS HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL PRIVATE BUSINESS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS SUBJECT TO COMPLETION

MAY 3, 1999

7,150,000 SHARES

(PRIVATE BUSINESS LOGO)

COMMON STOCK

------------------

We are offering 7,150,000 shares of common stock in an initial public
offering. We intend to apply for quotation of the common stock on the Nasdaq
National Market under the symbol "PBIZ." We expect that the initial public
offering price will be between $13.00 and $15.00 per share. The market price of
the shares of common stock after this offering may be higher or lower than the
initial public offering price.

INVESTING IN THE COMMON STOCK INVOLVES MATERIAL RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.

------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds to Private Business................................ $ $
</TABLE>

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

We have granted the underwriters a 30-day option to purchase up to
1,072,500 additional shares of common stock at the initial public offering price
to cover any over-allotments.

We expect to issue these shares on , 1999.

BT Alex. Brown

Lehman Brothers

Salomon Smith Barney

, 1999
<PAGE> 3

[PHOTOGRAPH OF TWO BUSINESS MEN STANDING IN FRONT OF A LARGE SCREEN PROJECTION
OF THE BUSINESS MANAGER REPORT VIEWER COMPUTER SCREEN. THERE IS A PRIVATE
BUSINESS LOGO IN THE TOP RIGHT HAND CORNER AND BUSINESS MANAGER ACROSS THE
BOTTOM]
<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and financial statements and notes appearing elsewhere in this
prospectus. Generally, the information in this prospectus assumes that the
over-allotment option granted to the underwriters is not exercised. This
prospectus gives effect to a two-for-one split of our common stock to be
effected in the form of a stock dividend and the conversion of all shares of our
outstanding convertible preferred stock into an aggregate of 11,248,802 shares
of common stock, both of which will occur immediately prior to this offering.

OUR BUSINESS

Private Business is a leading provider of integrated services and products
that help community banks provide accounts receivable financing to their small
business customers. Our solution is called Business Manager(R) and is based on
software, marketing services and online electronic transaction processing. One
element of this solution is our proprietary software that enables our expanding
network of over 1,100 client banks to purchase accounts receivable from their
small business customers. The banks then process, bill and track those
receivables on an ongoing basis. As a major component of our solution, we work
with client banks to design, implement and manage the sale of Business Manager
accounts receivable financing services to their small business customers. We
also give our client banks the option of outsourcing application hosting and
transaction processing. In this case, we host the Business Manager software in
our data center and provide transaction processing services from our facilities.
The client banks are able to receive accounts receivable information and make
funding decisions electronically through secure Internet connections to our data
center. Business Manager uses Windows-based technology and is easy-to-use,
flexible and scalable. Business Manager has been endorsed by the American
Bankers Association through its subsidiary, Corporation for American Banking,
since 1994.

We believe that the small business sector is largely underserved by
financial service companies primarily because it is very difficult to cost
effectively manage the sale and support of sophisticated financing products to
small businesses. Community banks, in particular, frequently seek differentiated
financial products to help attract and retain small business customers in their
respective markets. However, these banks generally have not engaged in accounts
receivable financing for small businesses due to perceived credit risks and the
costs and burdens of tracking and controlling the purchased receivables.
Community banks also typically lack the product, marketing and technology
expertise needed to successfully implement a receivables financing process.
Because of the challenges created by ongoing consolidation in the banking
industry and increased competition from national and regional banks, many
community banks are changing their business practices and pursuing new
strategies for growth and customer retention. According to the Federal Deposit
Insurance Corporation these strategies may include:

- outsourcing business functions

- expanding the use of non-traditional funding

- partnering with non-bank service providers

- emphasizing personalized services and developing niches or specialty
offerings to serve a broader customer base
1
<PAGE> 5

The Business Manager solution allows banks to provide differentiated, high
margin financial services to their existing small business customers and to new
prospects without incurring the cost of internal technology development and
additional personnel.

Typically, we sign exclusive license agreements with our client banks to
use the Business Manager software and related services with terms ranging from
three to five years. Under our standard contracts, we receive initial fees for
set-up of Business Manager and ongoing royalty payments equal to a percentage of
every receivable purchased by our client banks. During 1998, approximately 70%
of our revenue resulted from ongoing royalty payments as our client banks
purchased approximately $5.6 billion of receivables.

OUR STRATEGY

We intend to grow our business by implementing the following strategies:

Increase the Number of Business Development Managers. We intend to
increase the number of Business Development Managers by approximately 45% to 146
in 1999 in order to expand into additional geographic areas and increase the
penetration of Business Manager in currently covered regions. Business
Development Managers are our sales personnel who work with client banks to
market the Business Manager accounts receivable financing services to small
businesses.

Expand and Market In-house Processing Facilities. We are expanding our
processing and service center in Williamson County, Tennessee and intend to
increase the marketing of our outsourced electronic processing services to our
client banks.

Expand Electronic Commerce Services. We intend to increase the number of
Electronic Commerce Specialists by approximately 40% to 24 in 1999 to market and
implement electronic links among our client banks, their customers and our own
processing and service center. Our Electronic Commerce Specialists facilitate
electronic communication among us, client banks and small businesses, making
certain that a small business' electronic accounting system correctly
communicates with the Business Manager software.

Continue to Broaden Product and Services Offering. We have a growing
distribution network of over 1,100 client banks reaching over 8,500 small
businesses. We want to use this distribution channel to offer new products and
services, such as point-of-sale communications systems, key man life insurance
and commercial equipment leasing. Most new offerings will be designed to use an
Internet based delivery system. We intend to establish a small business focused
Internet portal providing relevant business information and enabling
communications and commerce among small businesses and use this channel to
market additional products and services to small businesses.

Target Major Metropolitan Areas Through Our Private Business Capital
Subsidiary. In 1999 we plan to increase from seven to 26 the number of sales
managers for Private Business Capital, Inc., our wholly owned subsidiary.
Through Private Business Capital, we sell our Business Manager solution in major
metropolitan areas directly to the small business market and work with national
and regional funding sources where we do not have community bank relationships.

Pursue Strategic Acquisitions and Alliances. Our industry is in its early
stage of development, and we believe we will have opportunities to acquire or
create alliances with other companies. We have no current commitments or
understandings with respect to any material acquisitions.
2
<PAGE> 6

ABOUT US

Private Business, Inc. was incorporated in Tennessee in December 1990. From
incorporation until August 1998, our company was an S Corporation under the
federal tax laws. We are currently a C Corporation. We do not anticipate paying
cash dividends in the forseeable future. Our executive offices are located at
9010 Overlook Boulevard, Brentwood, Tennessee 37027. Our telephone number is
(615) 221-8400. Information contained on our Web site does not constitute a part
of this prospectus.

After this offering, our officers and directors and their affiliates will
own approximately 65.3% of our outstanding stock (63.0% if the underwriters'
over allotment option is exercised in full). As a result, these officers and
directors and their affiliates will be able to control all matters requiring
majority stockholder approval.

THE OFFERING

Common stock offered by Private
Business, Inc........................... 7,150,000 shares

Common stock outstanding after this
offering................................ 28,526,858 shares

Use of proceeds......................... Reduction of indebtedness

Proposed Nasdaq National Market
symbol.................................. "PBIZ"

Common stock outstanding after this offering is based on the number of
shares outstanding as of April 25, 1999. It excludes:

- 2,318,700 shares of common stock issuable upon exercise of options
outstanding as of April 25, 1999 at a weighted average exercise price of
$5.30 per share

- 3,429,300 shares reserved for future grants under Private Business's
stock option plan

3
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary historical consolidated financial data has been
derived from our audited and unaudited consolidated financial statements for the
respective periods and is not necessarily indicative of the future results of
operations. This financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations", the
Consolidated Financial Statements and the notes thereto, and the other
information contained in this prospectus.

We completed a leveraged recapitalization on August 7, 1998 consisting of a
series of transactions including a term loan to us from a bank group, our
redemption of approximately 5.0 million shares of our outstanding common stock,
our issuance of approximately 5.6 million shares of our Series A Convertible
Preferred Stock and our acquisition of the minority interests of Private
Business Insurance, Inc. Recapitalization charges of $13.8 million included
special one time bonuses paid by us to our employees in recognition of their
services to the company, and the fees paid for various services performed
relating to the recapitalization, including investment banking, legal and
accounting services.

On August 7, 1998 we converted from an S Corporation to a C Corporation.
While an S Corporation for the first seven months of 1998, we recorded a state
tax provision of $451,000. While a C Corporation for the last five months of
1998, we recorded a deferred tax benefit of $2.0 million. At the time of
conversion, we recorded a net deferred tax benefit of $1.1 million for the
temporary differences that existed as of the conversion date. Thus, for the year
we recorded an income tax benefit of $2.6 million.

As a result of our election to be treated as an S Corporation for income
tax purposes, we have not been subject to federal income taxes. The unaudited
pro forma net income (loss) available for common stockholders represents the
estimated net income (loss) that would have been available to common
stockholders had we been a C Corporation for income tax purposes for each of the
periods presented.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Software license................................. $ 2,687 $ 3,283 $ 3,193 $ 2,886 $ 2,947 $ 749 $ 731
Royalties........................................ 9,656 18,912 29,028 38,450 43,793 9,767 10,430
Maintenance and other............................ 382 1,528 1,767 2,325 4,065 764 1,250
------- ------- ------- ------- ------- ------- -------
Total revenues........................... 12,726 23,722 33,988 43,660 50,805 11,280 12,410
OPERATING EXPENSES:
General and administrative....................... 2,908 9,189 10,958 11,835 13,397 3,442 3,381
Selling and marketing............................ 6,761 12,474 12,911 15,867 20,494 4,995 5,653
Research and development......................... 252 447 648 1,125 862 196 195
Amortization..................................... 10 76 115 189 443 81 231
Other operating.................................. 911 443 169 340 312 35 78
Recapitalization charges......................... -- -- -- -- 13,781 -- --
------- ------- ------- ------- ------- ------- -------
Total operating expenses................. 10,842 22,629 24,801 29,357 49,289 8,750 9,538
------- ------- ------- ------- ------- ------- -------
Operating income................................. 1,884 1,093 9,187 14,304 1,516 2,530 2,872
OTHER EXPENSES:
Interest expense................................. -- -- -- 146 3,405 58 1,900
Minority interest................................ -- -- -- 140 158 11 --
------- ------- ------- ------- ------- ------- -------
Total other expenses..................... -- -- -- 287 3,562 68 1,900
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes................ 1,884 1,093 9,187 14,017 (2,046) 2,461 972
Income tax provision (benefit)................... 115 129 582 743 (2,585) 136 376
------- ------- ------- ------- ------- ------- -------
Net income....................................... 1,769 964 8,605 13,274 539 2,326 596
Preferred stock dividends and accretion.......... -- -- -- -- (2,204) -- (1,367)
------- ------- ------- ------- ------- ------- -------
Net income (loss) available to common
stockholders................................... $ 1,769 $ 964 $ 8,605 $13,274 $(1,665) $ 2,326 $ (771)
======= ======= ======= ======= ======= ======= =======
</TABLE>

4
<PAGE> 8

<TABLE>
<CAPTION>
MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 35 $ 35
Working capital............................................. (9,624) (2,949)
Total assets................................................ 30,904 29,228
Long-term debt, net of current portion...................... 89,250 --
Total stockholders' equity (deficit)........................ (80,337) 13,911
</TABLE>

- ---------------

(1) Supplemental pro forma net income per share of $0.02 for the year ending
December 31, 1998 and $0.02 for the quarter ended March 31, 1999 was
computed by adjusting the historical net income (loss) per share as
reflected above for the reduction in interest expense after giving effect to
the number of shares that would be required to be sold (at the assumed
initial public offering price of $14.00 per share) to repay $92.4 million in
debt at December 31, 1998 and March 31, 1999, respectively.

(2) The as adjusted column reflects our receipt of the estimated net proceeds
from the sale of the 7,150,000 shares of common stock offered by this
prospectus at an assumed initial public offering price of $14.00 per share
and the application of the net proceeds as described in "Use of Proceeds,"
after deducting the underwriting discount and estimated offering expenses
and conversion of convertible preferred stock to be converted automatically
upon completion of this offering.

5
<PAGE> 9

FORWARD-LOOKING STATEMENTS

Some statements in the Prospectus Summary, Risk Factors, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Business sections, and elsewhere in the prospectus, constitute forward-looking
statements. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Private Business or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include those described
under Risk Factors. There can be no assurance that the forward-looking
statements included in this prospectus will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of this information should not be regarded as a
representation by Private Business or any other person that the objectives and
plans of Private Business will be achieved.

RISK FACTORS

You should be aware that there are various risks, including those described
below, to investing in our common stock. You should carefully consider the risks
described below together with all of the other information included in this
prospectus before making an investment decision. If any of the following risks
actually occur, our business, financial condition or results of operations could
be materially adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment.

WE PRIMARILY DEPEND ON ONE PRODUCT.

We currently derive substantially all of our revenues from the sale of
Business Manager, and we expect to continue to derive significant revenues from
this product and related services. If sales of Business Manager decline, we do
not have sufficient other products or services to replace that lost revenue, so
any events that adversely impact Business Manager will adversely impact our
business. We cannot be certain that we will be able to continue to successfully
market and sell Business Manager or that problems will not develop with Business
Manager that could materially impact our business.

WE DEPEND ON THE BANKING INDUSTRY ALMOST EXCLUSIVELY FOR CLIENTS.

We license Business Manager almost exclusively to banks, and primarily to
community banks. The banking industry is subject to supervision by several
federal and/or state governmental regulatory agencies. The use of Business
Manager by banks is currently in compliance with or is not subject to banking
regulations. But, these regulatory agencies could change or impose new
regulations on banks, including modifying the banks' ability to offer products
and services similar to ours to their small business customers. These new
regulations, if any, could prevent or lessen the use of our services by banks.
Due to our dependence upon the banking industry, any events that adversely
impact the industry in general and community banks in particular, such as
changed or expanded bank regulations, could adversely affect us and our
operations.

6
<PAGE> 10

WE MAY BE UNSUCCESSFUL IN MARKETING TO NEW CLIENT BANKS OR RETAINING CURRENT
CLIENT BANKS.

Our success depends to a large degree on our ability to convince
prospective client banks to purchase Business Manager and offer it to small
businesses. We have spent, and will continue to spend, considerable resources
educating potential customers about our products and services. However, even
with these educational efforts, we may not be able to maintain market acceptance
and client retention. In addition, as we continue to offer new products and
expand our services, existing and potential client banks or their small business
customers may be unwilling to accept the new products or services.

WE MAY BE UNABLE TO PROMOTE BUSINESS MANAGER TO NEW AND EXISTING SMALL BUSINESS
CUSTOMERS.

Other than the initial license fee and a small annual support fee, we do
not generate any income from banks licensing Business Manager unless small
businesses finance their accounts receivable through our client banks. If we and
our client banks cannot convince existing and potential small business customers
of the benefits of Business Manager, such businesses will not be willing to use
our solution.

WE MAY NOT BE ABLE TO ATTRACT AND HIRE ENOUGH QUALIFIED SALES AND MARKETING
PERSONNEL TO MEET OUR GROWTH PLANS.

An important part of our growth strategy is to hire a significant number of
additional sales and marketing personnel in order to increase our marketing
capabilities in our current markets and expand the number of markets we serve.
Since competition for experienced sales and marketing personnel is intense, we
cannot be certain that we will be able to attract enough sales and marketing
personnel or that those we do hire will be able to generate new business at the
rate we currently expect. If we are unable to hire enough sales and marketing
personnel or those we hire are not as productive as we expect, we may not be
able to implement our growth plans.

WE INTEND TO GROW OUR BUSINESS AT A RAPID RATE, WHICH MAY BE DIFFICULT FOR US TO
SUSTAIN OR MANAGE.

Our business has grown significantly in size and complexity over the past
several years. We may not be able to sustain this growth. This growth has
placed, and any additional growth would be expected to continue to place, a
significant strain on our management, systems and operational resources. We
anticipate that continued growth, if any, will require that we recruit, hire and
retain a substantial number of new managerial, finance, sales, marketing and
support personnel.

We cannot be certain that we will be successful in recruiting, hiring or
retaining such personnel. Our ability to compete effectively and to manage our
future growth, if any, will depend on our ability to maintain and improve our
operational, financial, and management information systems on a timely basis and
to expand, train, motivate and manage our work force. If we continue to grow, we
cannot be certain that our personnel, systems, procedures and controls will be
adequate to support our operations.

Also, one element of our growth strategy is to actively evaluate and pursue
strategic acquisitions of and alliances with businesses that are complementary
to ours. We cannot be certain that we will be able to integrate fully any such
acquisitions or alliances with our existing operations or otherwise implement
our growth strategy. If our management is unable to manage growth effectively,
our business, financial condition or results of operations could be materially
adversely affected.

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<PAGE> 11

WE INTEND TO EXPAND OUR PRODUCTS AND SERVICES OFFERING, WHICH MAY LOWER OUR
OVERALL PROFIT MARGIN.

Part of our business strategy is to expand our products and services
offering, including offering leasing services for the equipment needs of small
businesses. We believe that we can provide these services profitably, but such
services are likely to generate a lower profit margin than our current products
and services. As a result, by offering additional products and services, we may
lower our overall profit margin. Although gross revenues would likely increase,
the lowering of our profit margin may be viewed negatively by the stock market,
resulting in a reduction in our stock price.

THE BUSINESS MANAGER SOLUTION MAY NOT BE AS SUCCESSFUL IN A SLOWER ECONOMY.

Since the introduction of Business Manager, the United States economy
generally has been fairly strong. If the United States economy weakens or enters
into a recession or depression, our client banks and their small business
customers may view the services and benefits provided by Business Manager
differently and may be reluctant to use the products and services we provide. In
addition, in an economic recession or depression, the customers of small
businesses may reduce their purchases of goods and services thus reducing
accounts receivable eligible for our solution. This development could have a
material adverse effect on our business, operating results and financial
condition.

THE FINANCIAL SERVICES MARKET IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO
EFFECTIVELY COMPETE.

The market for small business financial services is competitive, rapidly
evolving, fragmented and highly sensitive to new product introductions and
marketing efforts by industry participants.

We face primary competition from a limited number of companies that offer
to banks products similar to Business Manager. We believe that we are the
largest of the companies offering these services in terms of revenues and number
of client banks under contract.

We also compete with banks that use their internal information technology
departments to develop proprietary systems or purchase software from third
parties to offer similar services to small businesses. In addition, we compete
with traditional sources of financial services to small businesses such as lines
of credit, amortizing loans and factoring. Many banks and other traditional
providers of financing are much larger and more established than Private
Business, have significantly greater resources, generate more revenues and have
greater name recognition.

We cannot be certain that our competitors will not develop products and
services comparable or superior to those that we have developed or adapt more
quickly to new technologies, evolving industry trends or changing small business
requirements. Most providers of traditional sources of financing have already
established relationships with small businesses, may be able to leverage these
relationships to discourage these customers from purchasing the Business Manager
solution or persuade them to replace our products with their products.

We expect that competition will increase as other established and emerging
companies enter the accounts receivable financing market, as new products and
technologies are introduced and as new competitors enter the market. In
addition, as we develop new services, such as commercial equipment leasing, we
may begin competing with companies with whom we have not previously competed.
Increased competition may result in price

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<PAGE> 12

reductions, lower profit margins and loss of our market share, any of which
could have a material adverse effect on our business, financial condition and
operating results.

WE DEPEND ON KEY EMPLOYEES.

Our future performance will also largely depend on the efforts and
abilities of our executive officers, as well as our key employees described in
"Management" and on our ability to retain them. Generally, our executive
officers and key employees do not have employment agreements. The loss of any of
our executive officers or key employees could have a material adverse effect on
our business, operating results and financial condition.

YEAR 2000 COMPLIANCE ISSUES AT CLIENT BANKS AND THEIR SMALL BUSINESS CUSTOMERS
MAY IMPACT OUR SERVICES.

Year 2000 computer issues create risks for Private Business. We have
performed tests of all major functionality with the Business Manager software
and our tests showed that its is fully year 2000 compliant. However, there may
be client banks and small business customers with computers or related software
programs that are not year 2000 compliant. The failure of client banks or their
small business customers to be year 2000 compliant could have an adverse impact
on our ability to process transactions for such banks and their customers. In
addition, we do not know what the effect would be if the customers of the small
businesses have problems as a result of year 2000 issues. In addition, we may
experience reduced sales of our products as potential customers are concerned
about the year 2000. Potential client banks may reduce their budgets for new
services such as Business Manager due to increased expenditures on their own
year 2000 compliance efforts.

OUR EXECUTIVE OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL OWN A LARGE
PERCENTAGE OF OUR VOTING STOCK.

Following the completion of this offering, our executive officers,
directors and their affiliates will beneficially own approximately 65.3% of the
outstanding shares of common stock (63.0% if the underwriters over allotment
option is exercised in full). As a result, these stockholders will be able to
control all matters requiring stockholder approval and, thereby, our management
and affairs. Matters that typically require stockholder approval include:

- election of directors

- approval of mergers or consolidations

- sale of all or substantially all of our assets

This concentration of ownership may delay, deter or prevent acts that would
result in a change of control of Private Business, which in turn could reduce
the market price of our common stock.

OUR CHARTER AND BYLAWS AND TENNESSEE LAW CONTAIN PROVISIONS THAT COULD
DISCOURAGE A TAKEOVER.

Our charter and our bylaws and Tennessee law contain provisions that could
make it more difficult for a third party to obtain control of Private Business.
For example, our charter provides for a staggered board of directors, restricts
the ability of stockholders to call a special meeting and prohibits stockholder
action by written consent and our bylaws allow the board to expand its size and
fill any vacancies without stockholder approval. In addition, the Tennessee
Business Corporation Act contains provisions such as the Tennessee Business
Combination Act and the Tennessee Greenmail Act which impose restrictions on
stockholder

9
<PAGE> 13

actions. For more information on antitakeover provisions in our charter, bylaws
and Tennessee law, please see the description of these provisions beginning on
page 54.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

Sales of a substantial number of shares of common stock in the public
market following the completion of this offering could have a material adverse
effect on the market price of our common stock. All shares sold in this offering
will be freely tradable unless purchased by an affiliate of Private Business.
The remaining shares of common stock outstanding after the completion of this
offering will be available for sale in the public market as follows:

<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR SALE NUMBER OF SHARES
- ----------------------------- ----------------
<S> <C>
Immediately after completion of this offering....... 28,054
90 days after completion of this offering........... 487,447
150 days after completion of this offering.......... 4,172,271
180 days after completion of this offering.......... 12,516,814
210 days after completion of this offering.......... 4,172,272
----------
Total..................................... 21,376,858
==========
</TABLE>

After completion of this offering, the holders of all of the 21,376,858
shares of common stock outstanding prior to this offering will be entitled to
registration rights. If such holders, by exercising their registration rights,
cause a large number of securities to be registered and sold in the public
market, such sales could have an adverse effect on the market price for our
common stock. If we were to include, in a company-initiated registration, shares
held by such holders pursuant to the exercise of their registration rights, such
sales may have an adverse effect on our ability to raise needed capital.

WE MAY BE UNABLE TO PROTECT ADEQUATELY OUR PROPRIETARY TECHNOLOGY.

Our success and ability to compete are dependent largely upon our
proprietary technology. We cannot be certain that we have taken adequate steps
to deter misappropriation or independent third-party development of our
technology. In addition, we cannot be certain that third parties will not assert
infringement claims in the future or, if infringement claims are asserted, that
such claims will be resolved in our favor. Although we are not currently subject
to any dispute either protecting our proprietary technology or asserting a third
party claim against our proprietary technology, any infringement claims resolved
against us could have a material adverse effect on our business, financial
condition or results of operations.

FAILURE OF OUR NETWORK INFRASTRUCTURE AND EQUIPMENT WOULD HAVE A MATERIAL EFFECT
ON OUR BUSINESS.

Failure of our network infrastructure and equipment, upon which our
business is greatly dependent, as well as the occurrence of significant human
error, a natural disaster or other unanticipated problems could halt our
services, damage network equipment and result in substantial expense to repair
or replace damaged equipment. In addition, the failure of our telecommunications
providers to supply the necessary services could also interrupt our business, in
particular, the application hosting and transaction processing services we offer
to our client banks via secure Internet connections. The inability to supply
these services to our customers could negatively affect our business, financial
condition and results of operations and may also harm our reputation.

10
<PAGE> 14

USE OF PROCEEDS

The estimated net proceeds to Private Business from the sale of the
7,150,000 shares of common stock, at an assumed initial public offering price of
$14.00 per share, will be approximately $92.4 million ($106.3 million if the
underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses payable
by Private Business. We intend to use the net proceeds to reduce indebtedness.
As of April 25, 1999, we had $38.5 million outstanding under a $40.0 million
loan at 7.78125%, $54.8 million outstanding under a $55.0 million loan at
8.03125% and $3.0 million outstanding under a revolver at 9.0%. This credit
facility was incurred in connection with Private Business's recapitalization and
used to redeem outstanding shares of common stock and repay mortgage
indebtedness. The credit facility is payable in quarterly installments with one
portion due in full in August 2004 and another portion due in full in August
2006.

In the event the overallotment option is exercised, the remaining balance
of the net proceeds will be used for additional reduction of debt and general
corporate purposes, including expansion of sales and marketing activities, and
working capital. Pending application of the net proceeds as described above,
Private Business intends to invest the net proceeds of the offering in
short-term, investment-grade, interest-bearing securities.

DIVIDEND POLICY

We intend to retain any future earnings to support operations and to
finance the growth and development of our business, and we do not anticipate
paying cash dividends for the foreseeable future. Under our current credit
facility, we are prohibited contractually from declaring any dividends, except
for dividends on our convertible preferred stock and dividends that are payable
solely in our common stock. As of March 31, 1999, there were $3.5 million in
accrued dividends on our convertible preferred stock. These dividends will be
forfeited automatically upon the conversion of the preferred stock in
conjunction with the completion of this offering.

Private Business was an S Corporation for federal income tax purposes from
incorporation until August 7, 1998. Prior to the recapitalization on August 7,
1998, Private Business paid dividends totaling $22.9 million, mainly for the
purpose of providing cash to the stockholders with which to pay the federal
income taxes applicable to our net income. Since terminating our S Corporation
status, Private Business has not paid any cash dividends on its common stock.

11
<PAGE> 15

CAPITALIZATION

The following table sets forth our long-term debt and capitalization as of
March 31, 1999 on an actual basis and as adjusted to reflect the sale of
7,150,000 shares of common stock offered by us in this offering at the assumed
initial public offering price of $14.00 per share, and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. This table should be read in conjunction with our financial statements
and notes thereto, which are included elsewhere in this prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations, net.................................. $ 94,250 $ 5,000
--------- -------
Stockholders' equity
Preferred stock, series A convertible, no par value;
5,624,404 authorized, issued and outstanding, actual
and no shares outstanding as adjusted.................. 60,000 --
Common stock, no par value; 11,960,455 shares authorized,
5,064,028 shares issued and outstanding, actual;
100,000,000 shares authorized, 28,526,858 shares issued
and outstanding as adjusted............................ -- --
Additional paid-in capital................................ (131,073) 24,852
Retained earnings (accumulated deficit)................... (9,265) (10,941)
--------- -------
Total stockholders' equity (deficit).............. (80,337) 13,911
--------- -------
Total capitalization.............................. $ 13,913 $18,911
========= =======
</TABLE>

The "As Adjusted" column:

- excludes 2,318,700 shares of common stock issuable upon exercise of
outstanding options as of April 25, 1999 at a weighted average exercise
price of $5.30 per share

- excludes 3,429,300 shares reserved for future grants under our stock
option plan and

- includes 11,248,802 shares of common stock issuable upon conversion of
convertible preferred stock to be converted automatically in conjunction
with the completion of this offering.

12
<PAGE> 16

DILUTION

The net tangible book value of our common stock at December 31, 1998 was
$(85.5) million or $(4.00) per share (assuming the conversion of all shares of
convertible preferred stock into common stock in connection with this offering).
Net tangible book value per share represents the amount of our stockholders'
equity less intangible assets divided by the total number of shares of common
stock outstanding for the period immediately prior to this offering.

Net tangible book value dilution per share represents the difference
between the amount per share paid by the purchasers of shares of common stock in
this offering and the net tangible book value per share of common stock
immediately after completion of this offering. After giving effect to our sale
of 7,150,000 shares of common stock offered by this prospectus at the assumed
initial public offering price of $14.00 per share, after deducting underwriting
discounts and commissions and estimated offering expenses and giving effect to
the conversion of 11,248,802 shares of outstanding convertible preferred stock
to be converted in connection with this offering, our net tangible book value as
of December 31, 1998 would have been $6.9 million, or $0.24 per share. This
represents an immediate increase in net tangible book value of $4.24 per share
to existing stockholders and an immediate dilution in net tangible book value of
$13.76 per share to new investors purchasing shares at the assumed initial
public offering price. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 14.00
Net tangible book value per share at December 31, 1998...... $ (4.00)
Increase per share attributable to new investors............ $ 4.24
--------
Net tangible book value per share after this offering....... $ 0.24
--------
Net tangible book value dilution per share to new
investors................................................. $ 13.76
========
</TABLE>

The following table sets forth, as of December 31, 1998, the difference
between the number of shares of common stock purchased from Private Business,
the total consideration paid and the average price per share paid by the
existing stockholders and by the new investors at the assumed public offering
price of $14.00 per share for shares purchased in this offering, before
deducting the underwriting discounts and commissions and estimated offering
expenses:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 21,376,864 74.9% $ 63,860,370 38.9% $2.98
New investors................. 7,150,000 25.1 100,100,000 61.1 14.00
---------- ----- ------------ -----
Total............... 28,526,864 100.0% $163,960,370 100.0%
========== ===== ============ =====
</TABLE>

The foregoing tables assume no exercise of outstanding stock options. The
tables exclude 2,318,700 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of $5.30 per share, and
3,429,300 shares reserved for future grants under our stock option plan. To the
extent that outstanding options are exercised, there will be further dilution to
new investors.

13
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The selected historical consolidated financial data for the five year
period ended December 31, 1998 has been derived from the consolidated financial
statements of Private Business, Inc. which have been audited by Arthur Andersen
LLP, independent auditors, and are included elsewhere in this prospectus. The
selected historical financial data for the quarters ended March 31, 1998 and
1999 is derived from unaudited financial statements which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial condition and
the results of operations. Operating results for the quarter ended March 31,
1999 are not indicative of results for the full year. The selected historical
consolidated financial data are not necessarily indicative of results to be
expected for any future period and should be read in conjunction with
"Management's Discussion and Analysis of the Financial Condition and Results of
Operations" and the Consolidated Financial Statements, including the notes
thereto.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Software license................................ $ 2,687 $ 3,283 $ 3,193 $ 2,886 $ 2,947 $ 749 $ 731
Royalties....................................... 9,656 18,912 29,028 38,450 43,793 9,767 10,430
Maintenance and other........................... 382 1,528 1,767 2,325 4,065 764 1,250
------- ------- ------- ------- ------- ------- -------
Total revenues.......................... 12,726 23,722 33,988 43,660 50,805 11,280 12,410
OPERATING EXPENSES:
General and administrative...................... 2,908 9,189 10,958 11,835 13,397 3,442 3,381
Selling and marketing........................... 6,761 12,474 12,911 15,867 20,494 4,995 5,653
Research and development........................ 252 447 648 1,125 862 196 195
Amortization.................................... 10 76 115 189 443 81 231
Other operating................................. 911 443 169 340 312 35 78
Recapitalization charges........................ -- -- -- -- 13,781(1) -- --
------- ------- ------- ------- ------- ------- -------
Total operating expenses................ 10,842 22,629 24,801 29,357 49,289 8,750 9,538
------- ------- ------- ------- ------- ------- -------
Operating income................................ 1,884 1,093 9,187 14,304 1,516 2,530 2,872
OTHER EXPENSES:
Interest expense................................ -- -- -- 146 3,405 58 1,900
Minority interest............................... -- -- -- 140 158 11 --
------- ------- ------- ------- ------- ------- -------
Total other expenses.................... -- -- -- 287 3,562 68 1,900
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes............... 1,884 1,093 9,187 14,017 (2,046) 2,461 972
Income tax provision (benefit).................. 115 129 582 743 (2,585)(2) 136 376
------- ------- ------- ------- ------- ------- -------
Net income...................................... 1,769 964 8,605 13,274 539 2,326 596
Preferred stock dividends and accretion......... -- -- -- -- (2,204) -- (1,367)
------- ------- ------- ------- ------- ------- -------
Net income (loss) available to common
stockholders.................................. $ 1,769 $ 964 $ 8,605 $13,274 $(1,665) $ 2,326 $ (771)
======= ======= ======= ======= ======= ======= =======
EARNINGS (LOSS) PER SHARE:
Basic........................................... $ 0.09 $ 0.05 $ 0.43 $ 0.66 $ (0.10) $ 0.12 $ (0.08)
======= ======= ======= ======= ======= ======= =======
Diluted......................................... $ 0.09 $ 0.05 $ 0.42 $ 0.65 $ (0.10) $ 0.11 $ (0.08)
======= ======= ======= ======= ======= ======= =======
WEIGHTED AVERAGE SHARES USED IN CALCULATING
EARNINGS PER SHARE:
Basic........................................... 20,000 20,009 20,056 20,056 15,919 20,056 10,128
======= ======= ======= ======= ======= ======= =======
Diluted......................................... 20,000 20,054 20,305 20,428 15,919 20,856 10,128
======= ======= ======= ======= ======= ======= =======
</TABLE>

14
<PAGE> 18

<TABLE>
<CAPTION>
AS OF DECEMBER 31, MARCH 31, 1999
----------------------------------------------- -------------------------
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED(5)
------- ------- ------- ------- ------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 1,149 $ 1,986 $ 6,391 $ 4,816 $ 285 $ 35 $ 35
Working capital.......................... (495) (550) 2,852 2,772 (7,834) (9,624) (2,949)
Total assets............................. 3,158 5,466 16,386 20,995 31,596 30,904 29,228
Long-term debt, net of current portion... -- -- 846 4,078 90,375 89,250 --
Total stockholders' equity (deficit)..... 378 937 8,128 8,643 (79,584) (80,337) 13,911
</TABLE>

- ---------------

(1) Consists of charges that we incurred in connection with a series of
transactions completed on August 7, 1998 that effectively resulted in our
recapitalization. The transactions include a term loan to us from a bank
group, our redemption of approximately 5.0 million shares of our outstanding
common stock, our issuance of approximately 5.6 million shares of our
convertible preferred stock and our acquisition of the minority interests of
Private Business Insurance, Inc. Also included in the recapitalization
charges are a special one time bonus paid by us to our employees in
recognition of services to the company and the fees paid for various
services performed relating to the recapitalization, including investment
banking, legal and accounting services.

(2) On August 7, 1998, we converted from an S Corporation to a C Corporation.
While an S Corporation for the first seven months of 1998, recorded a state
tax provision of $451,000. While a C Corporation for the last five months of
1998, we recorded a deferred tax benefit of $2.0 million. At the time of
conversion, we recorded a net deferred tax benefit of $1.1 million for the
temporary differences that existed as of the conversion date. Thus, for the
year we recorded an income tax benefit of $2.6 million.

(3) As a result of our election to be treated as an S Corporation for income tax
purposes, we have not been subject to federal income taxes. The unaudited
pro forma net income (loss) available for common stockholders represents the
estimated net income (loss) that would have been available to common
stockholders had we been a C Corporation for income tax purposes for each of
the periods presented.

(4) Supplemental pro forma net income (loss) per share of $0.02 for the year
ending December 31, 1998 and $0.02 for the quarter ended March 31, 1999 was
computed by adjusting the historical net income (loss) per share as
reflected above for the reduction in interest expense after giving effect to
the number of shares sold (at the assumed initial public offering price of
$14.00 per share) to repay $92.4 million in debt at December 31, 1998 and
March 31, 1999, respectively.

(5) The as adjusted column reflects our receipt of the estimated net proceeds
from the sale of the 7,150,000 shares of common stock offered at an assumed
initial public offering price of $14.00 per share, the application of the
net proceeds as described in "Use of Proceeds," and conversion of
convertible preferred stock to be converted automatically upon completion of
this offering, after deducting the underwriting discount and estimated
offering expenses.

15
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this
prospectus.

OVERVIEW

We are a leading provider of integrated services and products that help
community banks provide accounts receivable financing to their small business
customers. Our solution is called Business Manager and is based on software,
marketing services and online electronic transaction processing. One element of
this solution is our proprietary software that enables our expanding network of
over 1,100 client banks to purchase accounts receivable from their small
business customers. The banks then process, bill and track those receivables on
an ongoing basis. As a major component of our solution, we work with client
banks to design, implement and manage the sale of Business Manager accounts
receivable financing services to their small business customers. We also give
our client banks the option of outsourcing to us their application hosting and
transaction processing through secure Internet connections, thereby allowing
them to receive accounts receivable information and make funding decisions
electronically.

We generate revenues from three main sources:

- software license fees from new client banks

- ongoing royalties earned on client bank purchases of small business
accounts receivable

- maintenance fees and other revenues, comprised primarily of fees received
for insurance brokerage services, paper-based form sales, software
maintenance fees and processing services

Software license fees consist of two components: the license fee and the
customer training and support fee. These are one-time fees that we earn upon the
initial licensing of our Business Manager software to a community bank. Our
license agreements are executed with terms ranging from three to five years and
are renewable for subsequent terms. We recognize revenues from the license fee
at the time of initiation of the agreement and the customer training and support
fee ratably over the twelve-month service period subsequent to signing the
license agreement. Software license fees range from $17,500 to $250,000 and are
generally based on the asset size of the client bank.

There are two types of royalty fees. The first type is earned upon the
client bank's initial purchase of a small business' accounts receivable during
the first 30 days in our program. The second type is an ongoing royalty fee
earned from subsequent period purchases. Both types of fees are based on a
percentage of the receivables that a client bank purchases from its small
business customers during each month. For the year ended December 31, 1998,
ongoing royalty fees represented over 70% of our total revenues.

Maintenance fees and other revenues include several ancillary products and
services we provide to client banks. Annual software maintenance fees are
generated from our client banks starting on the first anniversary date of the
Business Manager license agreement and annually thereafter. These revenues are
recognized ratably over a twelve-month period beginning on the first anniversary
date of the agreement. Additionally, since 1995, we have brokered, through our
Private Business Insurance subsidiary, credit and fraud insurance products for a
national insurance company. We earn fees based on a percentage of the

16
<PAGE> 20

premium that is paid to the insurance company. We also provide a standard set of
forms that client banks may purchase and use in the normal course of
administering the Business Manager program. Revenues related to these forms are
recognized in the period that they are shipped to the client bank. We offer
processing services to our client banks for an additional fee based on the
volume of transactions processed through the system. We expect revenues from
processing services to increase in the future.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship of the identified consolidated statement of operations items to
total revenues.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------- ----------------
1996 1997 1998 1998 1999
----- ----- ----- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license.............................. 9.4% 6.6% 5.8% 6.6% 5.9%
Royalties..................................... 85.4 88.1 86.2 86.6 84.0
Maintenance and other......................... 5.2 5.3 8.0 6.8 10.1
----- ----- ----- ----- -----
Total revenues........................ 100.0 100.0 100.0 100.0 100.0
Operating expenses:
General and administrative.................... 32.2 27.1 26.4 30.5 27.2
Selling and marketing......................... 38.0 36.3 40.3 44.3 45.6
Research and development...................... 1.9 2.6 1.7 1.7 1.6
Amortization.................................. 0.3 0.4 0.9 0.7 1.9
Other operating............................... 0.5 0.8 0.6 0.3 0.6
Recapitalization charges...................... -- -- 27.1 -- --
----- ----- ----- ----- -----
Total operating expenses.............. 73.0 67.2 97.0 77.6 76.9
Operating income................................ 27.0 32.8 3.0 22.4 23.1
Other expenses:
Interest expense........................... -- 0.3 6.7 0.5 15.3
Minority interest.......................... -- 0.3 0.3 0.1 --
----- ----- ----- ----- -----
Total other expenses.................. -- 0.7 7.0 0.6 15.3
----- ----- ----- ----- -----
Income (loss) before income taxes............... 27.0 32.1 (4.0) 21.8 7.8
Income tax provision (benefit).................. 1.7 1.7 (5.1) 1.2 3.0
----- ----- ----- ----- -----
Net income...................................... 25.3% 30.4% 1.1% 20.6% 4.8%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998

Software license. Software license fees decreased 2.5% to $731,000 for the
three months ended March 31, 1999, compared to $749,000 for the three months
ended March 31, 1998. The decrease reflects slightly lower average fees paid
with the execution of new license agreements during the three months ended March
31, 1999. Software license fees accounted for 5.9% of total revenue for the
three months ended March 31, 1999, compared to 6.6% for the three months ended
March 31, 1998.

Royalties. Royalties increased 6.8% to $10.4 million for the three months
ended March 31, 1999, compared to $9.8 million for the three months ended March
31, 1998. This increase resulted from additional funding through the Business
Manager program. Royalties accounted for 84.0% of total revenue for the first
three months ended March 31, 1999,

17
<PAGE> 21

compared to 86.6% for the three months ended March 31, 1998. Program funding
increased 7% to $1.3 billion for the first three months ended March 31, 1999,
compared to $1.2 billion for the first three months ended March 31, 1998.

Maintenance and other. Maintenance and other fees increased 63.7% to $1.2
million for the three months ended March 31, 1999, compared to $764,000 for the
three months ended March 31, 1998. Insurance fees increased 99.2% to $701,000
for the three months ended March 31, 1999, compared to $352,000 for the three
months ended March 31, 1998. This increase primarily resulted from increased
participation of client banks and small businesses in our credit and fraud
insurance programs. Software maintenance fees increased 62.5% to $140,000 for
the three months ended March 31, 1999, compared to $86,000 for the three months
ended March 31, 1998. The increase in software maintenance fees reflects
renewals of contracts with banks which were new participants the previous year.
Maintenance and other fees accounted for 10.1% of total revenue for the first
three months ended March 31, 1999, compared to 6.8% for the three months ended
March 31, 1998.

Total revenues. As a result of the changes in the foregoing revenue
categories, total revenues increased 10.0% to $12.4 million for the three months
ended March 31, 1999, compared to $11.3 million for the three months ended March
31, 1998.

General and administrative. General and administrative expenses include
the cost of our executive, finance, human resources, information services,
support services, administrative functions and general operations. General and
administrative expenses decreased 1.8% for the three months ended March 31,
1999, compared to the three months ended March 31, 1998.

Selling and marketing. Selling and marketing expenses include the cost of
wages and commissions paid to our dedicated business development and bank sales
forces, travel costs of the dedicated sales force, recruiting for new personnel,
and marketing fees associated with direct and telemarketing programs. Selling
and marketing expenses increased 13.2% to $5.7 million for the three months
ended March 31, 1999, compared to $5.0 million for the three months ended March
31, 1998. This increase is primarily due to the hiring of 22 additional sales
staff and additional marketing programs provided to client banks.

Research and development. Research and development expenses include the
direct costs associated with developing new versions of the Business Manager
system. Research and development costs decreased slightly to $195,000 for the
three months ended March 31, 1999, compared to $196,000 for the three months
ended March 31, 1998.

Amortization. Amortization costs include the cost of amortizing intangible
assets, including trademarks and the associated costs of goodwill and debt
issuance costs related to our recapitalization in 1998. Amortization increased
185.5% to $231,000 for the three months ended March 31, 1999, compared to
$81,000 for the three months ended March 31, 1998. The increase is primarily
related to increased amortization of debt issuance costs associated with our
recapitalization transaction.

Other operating expenses. Other operating expenses include property taxes
and other miscellaneous costs associated with providing support and services for
bank clients. Other operating expenses increased 120.6% to $78,000 for the three
months ended March 31, 1999, compared to $35,000 for the three months ended
March 31, 1998. The increase is primarily related to a full period of operating
expenses and property taxes associated with the property.

18
<PAGE> 22

Operating income. As a result of the above factors, our operating income
increased 13.5% to $2.9 million for the three months ended March 31, 1999,
compared to $2.5 million for the three months ended March 31, 1998.

Interest expense. Interest expense increased $1.8 million to $1.9 million
for the three months ended March 31, 1999, compared to $58,000 for the three
months ended March 31, 1998. This increase was primarily due to $95 million of
new long-term debt incurred in connection with our recapitalization transaction
completed in August 1998. Total indebtedness as of March 31, 1999 was $96.3
million compared to $4.1 million as of March 31, 1998.

Minority interest expenses. Minority interest expenses consisted of the
share of the earnings of Private Business Insurance allocated to its minority
stockholders. Concurrent with the closing of the recapitalization transaction
completed in August 1998, we purchased the minority interest in Private Business
Insurance; therefore no minority interest expense was incurred for the three
months ended March 31, 1999.

Income tax provision. The income tax provision was $376,000 for the three
months ended March 31, 1999, compared to $136,000 for the three months ended
March 31, 1998. The tax provision is related to utilization of a portion of the
Company's net operating loss carryforwards and decreases in other deferred tax
assets.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Software license. Software license fees increased 2.1% to $2.9 million for
the year ended December 31, 1998, compared to $2.9 million for the year ended
December 31, 1997. This slight increase was primarily due to larger average fees
paid with the execution of new license agreements, partially offset by a
decrease in the number of new license agreements entered into in 1998. The
average fee increased in 1998 to $17,900 from $12,700 in 1997. Software license
fees accounted for 5.8% of total revenues for the year ended December 31, 1998,
compared to 6.6% for the year ended December 31, 1997. This decrease is
primarily due to more rapid growth of royalties and maintenance and other
revenues.

Royalties. Royalties increased 13.9% to $43.8 million for the year ended
December 31, 1998, compared to $38.5 million for the year ended December 31,
1997. This increase resulted from larger amounts of receivables purchased
through Business Manager, partially offset by a decrease in the average fee per
receivable charged by our client banks to their small business customers, of
which we receive a percentage. The decrease in the average fee is primarily due
to an increase in the average size of the receivables portfolio purchased by our
client banks. Receivables purchased by our client banks increased 21.7% to
approximately $5.6 billion for the year ended December 31, 1998, compared to
approximately $4.6 billion for the year ended December 31, 1997. As a percentage
of total revenues, royalties decreased to 86.2% for the year ended December 31,
1998, from 88.1% for the year ended December 31, 1997, primarily due to a
greater increase in maintenance and other revenues during the same period.

Maintenance and other. Maintenance and other fees increased 74.9% to $4.1
million for the year ended December 31, 1998, compared to $2.3 million for the
year ended December 31, 1997. Insurance fees increased 143.6% to $2.4 million
for the year ended December 31, 1998, compared to $944,000 for the year ended
December 31, 1997. This increase primarily resulted from increased participation
of client banks and small businesses in our credit and fraud insurance programs.
Revenues from the sale of forms to client banks decreased 13.7% to $515,000 for
year ended December 31, 1998, compared to $597,000 for the year ended December
31, 1997. This decrease resulted from our client banks utilizing

19
<PAGE> 23

their own business forms. Software maintenance fees, which were initially
introduced as part of our standard license agreement in 1995, increased 57.4% to
$441,000 for the year ended December 31, 1998, compared to $280,000 for the year
ended December 31, 1997. This increase resulted from more client banks
completing their first anniversary of participation in the Business Manager
program as compared to the year ended December 31, 1997. Processing fees
increased by $159,000 to $176,000 for the year ended December 31, 1998, compared
to $16,000 for the year ended December 31, 1997. This increase resulted from
increased marketing of our processing capabilities and a significant increase in
the utilization of our processing services by our client banks. Other
miscellaneous revenues increased 16.3% to $568,000 for the year ended December
31, 1998, from $488,000 for the year ended December 31, 1997. As a percentage of
total revenues, maintenance and other revenues increased to 8.0% for the year
ended December 31, 1998, from 5.3% for the year ended December 31, 1997.

Total revenues. As a result of changes in the foregoing revenue
categories, total revenues increased 16.3% to $50.8 million for the year ended
December 31, 1998, compared to $43.7 million for the year ended December 31,
1997.

General and administrative. General and administrative expenses increased
13.2% to $13.4 million for the year ended December 31, 1998, compared to $11.8
million for the year ended December 31, 1997. This increase was primarily due to
the hiring of 54 additional employees to support our expanding client base,
projected growth and new product initiatives. General and administrative
expenses as a percentage of total revenues decreased to 26.4% for the year ended
December 31, 1998 from 27.1% for the year ended December 31, 1997.

Selling and marketing. Selling and marketing expenses increased 29.2% to
$20.5 million for the year ended December 31, 1998, compared to $15.9 million
for the year ended December 31, 1997. This increase was primarily due to the
hiring of 31 additional business development sales personnel, additional
marketing programs and additional travel expenses associated with our expanded
marketing efforts. Selling and marketing expenses as a percentage of total
revenues increased to 40.3% for the year ended December 31, 1998 from 36.3% for
the year ended December 31, 1997.

Research and development. Research and development expenses decreased
23.3% to $862,000 for the year ended December 31, 1998, compared to $1.1 million
for the year ended December 31, 1997. This decrease reflects the reassignment of
employees previously dedicated to software development. This reassignment
resulted from the expansion of our electronic commerce and processing services.
Research and development expenses as a percentage of total revenues decreased to
1.7% for the year ended December 31, 1998 from 2.6% for the year ended December
31, 1997.

Amortization. Amortization expenses include the cost of amortizing
intangible assets, including trademarks and the associated costs of goodwill and
debt issuance costs related to our recapitalization in 1998. Amortization
increased 134.6% to $443,000 for the year ended December 31, 1998, compared to
$189,000 for the year ended December 31, 1997. The increase is primarily related
to $6.0 million of goodwill and debt issuance costs associated with our
recapitalization transaction completed in August 1998.

Other operating expenses. Other operating expenses include property taxes
and other miscellaneous costs associated with providing support and services to
our client banks. Other operating expenses remained relatively constant at
$312,000 for the year ended December 31, 1998, compared to $340,000 for the year
ended December 31, 1997.

20
<PAGE> 24

Recapitalization charges. Recapitalization charges were $13.8 million for
the year ended December 31, 1998. These expenses consisted of special one time
bonuses totaling $10.0 million to employees and $3.8 million of transaction
related fees, including investment banking, legal and accounting fees. The $10.0
million special one time bonus was given to our employees by the company in
recognition of the employees contribution to Private Business. As a group, our
officers received approximately $8.2 million of the special one-time bonus.

Operating income. As a result of the above factors, our operating income
decreased 89.4% to $1.5 million for the year ended December 31, 1998, compared
to $14.3 million for the year ended December 31, 1997. Excluding
recapitalization charges of $13.8 million, operating income would have been
$15.3 million for the year ended December 31, 1998, representing an increase of
6.9% over the comparable prior year period.

Interest expense. Interest expense increased $3.2 million to $3.4 million
for the year ended December 31, 1998, from $146,000 for the year ended December
31, 1997. This increase was primarily due to $95.0 million of new long-term debt
incurred in connection with our recapitalization transaction completed in August
1998.

Minority interest expenses. Minority interest expenses increased $18,000
to $158,000 for the year ended December 31, 1998, from $140,000 for the year
ended December 31, 1997. Minority interest expense consists of the share of the
earnings of Private Business Insurance allocated to its minority stockholders.
Concurrent with the closing of the recapitalization transaction completed in
August 1998, we purchased the minority interest in Private Business Insurance.

Income tax provision (benefit). The income tax benefit was $2.6 million
for the year ended December 31, 1998 compared to a tax provision of $743,000 for
the year ended December 31, 1997. This change is a result of our conversion from
an S Corporation to a C Corporation during 1998. In 1997, the entire tax
provision was for state income taxes, whereas in 1998, the tax benefit consisted
of a benefit recorded at the time of conversion of $1.1 million and a benefit of
$2.0 million for the net operating loss incurred during the C Corporation period
in 1998 offset by a state income tax provision of $451,000 during the 1998 S
Corporation period.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Software license. Software license fees decreased 9.6% to $2.9 million for
the year ended December 31, 1997, compared to $3.2 million for the year ended
December 31, 1996. This decrease reflects lower average fees paid upon the
execution of new license agreements. Software license fees accounted for 6.6% of
total revenues for the year ended December 31, 1997, compared to 9.4% for the
year ended December 31, 1996.

Royalties. Royalties increased 32.4% to $38.4 million for the year ended
December 31, 1997, compared to $29.0 million for the year ended December 31,
1996, primarily due to an increase in the amount of receivables purchased by our
client banks during the same period. As a percentage of total revenues,
royalties increased to 88.1% for the year ended December 31, 1997, from 85.4%
for the year ended December 31, 1996.

Maintenance and other. Maintenance and other revenues increased 31.6% to
$2.3 million for the year ended December 31, 1997, compared to $1.8 million for
the year ended December 31, 1996. Insurance fees increased 252.4% to $944,000
for the year ended December 31, 1997, compared to $268,000 for the year ended
December 31, 1996. This increase primarily resulted from increased participation
of our client banks and small

21
<PAGE> 25

businesses in our credit and fraud insurance programs. Revenues from the sale of
forms to our client banks decreased 8.2% to $596,000 for year ended December 31,
1997, compared to $651,000 for the year ended December 31, 1996. This decrease
resulted from our client banks utilizing their own business forms. Software
maintenance fees increased 198.3% to $280,000 for the year ended December 31,
1997, compared to $94,000 for the year ended December 31, 1996. This increase
represents additional software maintenance fees charged to client banks at the
end of the first year of service on the Business Manager program. Processing
fees increased to $16,000 for the year ended December 31, 1997, compared to none
for the year ended December 31, 1996. This increase resulted from the
commencement of our processing services offering in 1997. Other miscellaneous
revenues decreased 35.2% to $488,000 for the year ended December 31, 1997, from
$754,000 for the year ended December 31, 1996. As a percentage of total
revenues, maintenance and other revenues increased to 5.3% for the year ended
December 31, 1997, from 5.2% for the year ended December 31, 1996.

Total revenues. As a result of the changes in the foregoing revenue
categories, total revenues increased 28.4% to $43.7 million for the year ended
December 31, 1997, compared to $34.0 million for the year ended December 31,
1996.

General and administrative. General and administrative expenses increased
8.0% to $11.8 million for the year ended December 31, 1997, compared to $11.0
million for the year ended December 31, 1996. This increase was primarily due to
the hiring of additional employees to support our expanding client base and new
product initiatives. General and administrative expenses as a percentage of
total revenues decreased to 27.1% for the year ended December 31, 1997 from
32.2% for the year ended December 31, 1996.

Selling and marketing. Selling and marketing expenses increased 22.9% to
$15.9 million for the year ended December 31, 1997, compared to $12.9 million
for the year ended December 31, 1996. This increase was primarily due to the
hiring of additional dedicated sales personnel and the expansion of our existing
marketing programs. Selling and marketing expenses as a percentage of total
revenues decreased to 36.3% for the year ended December 31, 1997 from 38.0% for
the year ended December 31, 1996.

Research and development. Research and development expenses increased
73.6% to $1.1 million for the year ended December 31, 1997, compared to $648,000
for the year ended December 31, 1996. This increase reflects the personnel costs
associated with the additional staff hired for the production of new releases of
Business Manager. Research and development expenses as a percentage of total
revenues increased to 2.6% for the year ended December 31, 1997 from 1.9% for
the year ended December 31, 1996.

Amortization. Amortization expenses include the cost of amortizing
intangible assets, including trademarks and the costs of capitalized software
development. Amortization increased 63.9% to $189,000 for the year ended
December 31, 1997, compared to $115,000 for the year ended December 31, 1996.
This increase was primarily due to additional capitalized software development
costs.

Other operating expenses. Other operating expenses increased 102.0% to
$340,000 for the year ended December 31, 1997, compared to $169,000 for the year
ended December 31, 1996. This increase resulted from the payment of additional
property taxes on real estate purchased in the last quarter of 1996.

Operating income. As a result of the above factors, our operating income
increased 55.6% to $14.3 million for the year ended December 31, 1997, compared
to $9.2 million for the year ended December 31, 1996.

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<PAGE> 26

Interest expense. Interest expense was $146,000 for the year ended
December 31, 1997. This interest expense was associated with debt incurred for
the construction of our corporate headquarters. We had no interest expense for
the year ended December 31, 1996.

Minority interest expenses. Minority interest expenses were $140,000 for
the year ended December 31, 1997. These minority interest expenses were
attributable to our majority-owned subsidiary, Private Business Insurance,
becoming profitable in 1997. We had no minority interest expenses for the year
ended December 31, 1996.

QUARTERLY INFORMATION

The following tables set forth our unaudited financial data for each of the
last eight quarters, including such amounts expressed as a percentage of total
revenues. This unaudited quarterly information has been prepared on the same
basis as the consolidated financial statements and, in the opinion of
management, reflects all adjustments (consisting of normal recurring entries)
necessary for a fair presentation of the information for the periods presented.
The operating results for any quarter are not necessarily indicative of results
for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
JUNE 30, SEP. 30, DEC. 31, MARCH 31, JUNE 30, SEP. 30, DEC. 31, MARCH 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license............... $ 902 $ 637 $ 771 $ 749 $ 688 $ 640 $ 869 $ 731
Royalties...................... 9,332 10,209 10,748 9,767 11,117 11,359 11,549 10,430
Maintenance and other.......... 487 643 663 764 938 1,083 1,280 1,250
------- ------- ------- ------- ------- ------- ------- -------
Total revenues........... 10,721 11,490 12,182 11,280 12,744 13,083 13,698 12,410
Operating expenses:
General and administrative..... 2,900 2,916 2,883 3,442 3,476 3,243 3,168 3,381
Selling and marketing.......... 4,255 3,986 4,209 4,995 5,434 5,022 5,153 5,653
Research and development....... 281 270 270 196 177 185 152 195
Amortization................... 47 47 47 81 151 234 88 231
Other operating................ 88 88 88 35 45 104 127 78
Recapitalization charges....... -- -- -- -- -- 13,761 20 --
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 7,571 7,307 7,497 8,750 9,282 22,548 8,708 9,538
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss).......... 3,150 4,183 4,685 2,530 3,461 (9,466) 4,991 2,872
Other expenses:
Interest expense............... 6 70 70 58 77 1,264 2,006 1,900
Minority interest.............. 27 34 62 10 115 31 -- --
------- ------- ------- ------- ------- ------- ------- -------
Total other expenses..... 33 104 132 68 192 1,296 2,006 1,900
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes.......................... 3,116 4,078 4,553 2,461 3,269 (10,762) 2,985 972
Income tax provision (benefit)... 203 240 159 136 185 (1,704) (1,202) 376
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................ $ 2,913 $ 3,838 $ 4,394 $ 2,326 $ 3,084 $(9,058) $ 4,187 $ 596
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

23
<PAGE> 27

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
JUNE 30, SEP. 30, DEC. 31, MARCH 31, JUNE 30, SEP. 30, DEC. 31, MARCH 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license............... 8.4% 5.5% 6.3% 6.6% 5.4% 4.9% 6.3% 5.9%
Royalties...................... 87.0 88.9 88.2 86.6 87.2 86.8 84.3 84.0
Maintenance and other.......... 4.5 5.6 5.4 6.8 7.4 8.3 9.3 10.1
------- ------- ------- ------- ------- ------- ------- -------
Total revenues........... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Operating expenses:
General and administrative..... 27.1 25.4 23.7 30.5 27.3 24.8 23.1 27.2
Selling and marketing.......... 39.7 34.7 34.6 44.3 42.6 38.4 37.6 45.6
Research and development....... 2.6 2.3 2.2 1.7 1.4 1.4 1.1 1.6
Amortization................... 0.4 0.4 0.4 0.7 1.2 1.8 0.6 1.9
Other operating................ 0.8 0.8 0.7 0.3 0.4 0.8 0.9 0.6
Recapitalization charges....... -- -- -- -- -- 105.2 0.1 --
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 70.6 63.6 61.5 77.6 72.8 172.3 63.6 76.9
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss).......... 29.4 36.4 38.5 22.4 27.2 (72.4) 36.4 23.1
Other expenses:
Interest expense............... 0.1 0.6 0.6 0.5 0.6 9.7 14.6 15.3
Minority interest.............. 0.3 0.3 0.5 0.1 0.9 0.2 -- --
------- ------- ------- ------- ------- ------- ------- -------
Total other expenses..... 0.3 0.9 1.1 0.6 1.5 9.9 14.6 15.3
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes.......................... 29.1 35.5 37.4 21.8 25.7 (82.3) 21.8 7.8
Income tax provision (benefit)... 1.9 2.1 1.3 1.2 1.5 (13.0) (8.8) 3.0
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................ 27.2% 33.4% 36.1% 20.6% 24.2% (69.2)% 30.6% 4.8%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

SEASONALITY

We have generally realized lower revenues and income in the first quarter
and, to a lesser extent, in the second quarter of the year. We believe that this
is primarily due to a general slowdown in economic activity following the fourth
quarter's holiday season and more specifically a decrease in purchased
receivables by our client banks. Therefore, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and that
such comparison cannot be relied upon as indicators of our future performance.
Due to the relatively fixed nature of costs such as personnel, facilities and
equipment costs, our revenue decline in a quarter will typically result in lower
profitability for that quarter.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our growth primarily through investments from stockholders
and funds generated from operations.

Our operating activities used cash for the three months ended March 31,
1999 and for the year ended December 31, 1998 of $1.7 million and $1.2 million,
respectively, and provided cash for the years ended December 31, 1997 and 1996
of $12.7 million and $10.2 million, respectively. In 1999, our operating cash
was used primarily for employee salaries and wages and interest expense related
to the credit facility. In 1998, our operating cash was used primarily by
employee salaries and wages, the recapitalization charges and costs associated
with debt origination fees. In 1998, our main sources of operating cash were
attributable to revenues generated from client banks. In 1997 and 1996, cash
from operating activities was generated primarily by our net income.

Cash used in investing activities was approximately $669,000, $6.7 million,
$4.9 million, and $5.2 million for the three months ended March 31, 1999 and the
years ended

24
<PAGE> 28

December 31, 1998, 1997 and 1996, respectively. This cash was used primarily for
capital expenditures in the ordinary course of business. Cash was also used to
purchase the minority interests of Private Business Insurance in 1998. Our
capital expenditures relate primarily to purchases of furniture, fixtures and
equipment and, in 1997 and 1996, to the construction of our corporate
facilities. We expect that our cost of purchases of property and equipment will
increase as our employee base grows and as we expand our processing and
electronic commerce capabilities. We did not have any material commitments for
capital expenditures as of March 31, 1999.

Additionally, in 1996, we purchased approximately 13.2 acres of land for
approximately $1.9 million and began the construction of our corporate office
building. In concert with the construction, we entered into an agreement with
SunTrust Bank for a construction loan of approximately $4.1 million. Upon
completion of the building project, the construction loan converted into a five
year term loan at a rate of interest equal to LIBOR plus 1.6%. This loan was
repaid upon the completion of the recapitalization on August 7, 1998.

Cash provided by financing activities totaled $2.1 million for the three
months ended March 31, 1999, which consisted of proceeds from our credit
facility partially offset by repayments of long-term debt. Cash provided by
financing activities totaled $3.4 million for the year ended December 31, 1998,
which consisted of the proceeds from our credit facility and the sale of our
preferred stock, offset by cash used to redeem a portion of the shares of common
stock held by our stockholders, to fund an escrow account for potential
indemnification claims in connection with the recapitalization transaction and
to pay dividends to our common stockholders. In the recapitalization, we
repurchased 49.5% of the then outstanding common stock on a pro-rata basis from
all stockholders at a price of $27.90 per share. Cash used in financing
activities totaled approximately $9.4 million during 1997, primarily due to
distributions to stockholders totaling approximately $12.8 million to fund their
individual income tax liabilities associated with our S Corporation taxable
income, offset by cash provided by the proceeds from a construction loan from
SunTrust Bank of approximately $3.3 million incurred in connection with our
purchase of real estate. In 1996, cash used in financing activities totaled
approximately $569,000, primarily due to distributions to stockholders totaling
approximately $1.4 million, offset by cash provided by the proceeds from a
construction loan from SunTrust Bank of approximately $846,000.

In August 1998, Private Business entered into a credit facility with Fleet
National Bank and other lenders. Under the credit facility, Private Business
borrowed approximately $95.0 million at the closing of the redemption. The
credit facility provides for a term loan in the amount of $40.0 million, a
separate term loan in the amount of $55.0 million, and a revolving line of
credit in the amount of $15.0 million, including a $3.0 million sublimit for
swing line advances and a $2.0 million sublimit for standby letters of credit.
The credit facility bears interest in accordance with a grid pricing formula
based on the achievement of various financial ratios. The formula calls for
advances to bear interest ranging from 0.25% to 1.50% above prime rate and for
other advances to bear interest ranging from 1.50% to 2.75% above the Eurodollar
rate.

The $40.0 million loan is generally repayable in quarterly installments
which increase annually until the sixth anniversary of the loan. The $55.0
million loan is repayable in equal quarterly installments until December 31,
2004, at which time the required quarterly payments increase dramatically until
maturity. The revolver bears an annual commitment fee and matures concurrently
with the $40.0 million loan. As of March 31, 1999, Private Business had $38.5
million outstanding under the $40.0 million loan at 7.78125%, $54.8 million

25
<PAGE> 29

outstanding under the $55.0 million loan at 8.03125%, no amounts outstanding
under the revolver or the swing line and no outstanding letters of credit.

The credit facility is secured by a pledge of all of our assets. The common
stockholders and some of the preferred stockholders also entered into negative
pledge agreements by which they agreed not to pledge or encumber their shares of
our capital stock prior to repayment of the credit facility in full or a
qualified public offering of our capital stock. The credit facility limits our
ability to incur additional indebtedness beyond that incurred in connection with
our recapitalization, except for:

- debt used to purchase property or equipment in the ordinary course of
business

- up to $2.0 million in capitalized leases

- up to $1.0 million in unsecured debt

The credit facility also imposes financial covenants and requirements on us
and contains limitations on our ability to sell material assets, redeem capital
stock and pay dividends, among other actions.

As of March 31, 1999, we had a deficit in working capital of approximately
$9.6 million compared to a working capital deficit of approximately $7.8 million
as of December 31, 1998. The change in working capital resulted primarily from
an increase in short-term borrowings partially offset by decreases in accounts
payable and accrued liabilities; and a decrease in accounts receivable. As of
December, 1998, we had a deficit in working capital of approximately $7.8
million as compared to working capital of $2.8 million and $2.9 million at
December 31, 1997 and 1996, respectively. The change in working capital from
December 31, 1998 to December 31, 1997 resulted primarily from increases in
restricted cash, which represents an escrow account for potential
indemnification claims in connection with the recapitalization transaction,
accounts payable and accrued liabilities, the current portion of our credit
facility and dividends payable.

We intend to use up to all of the net proceeds generated from this offering
to reduce our indebtedness. All outstanding preferred stock will be converted
into common stock at the time of this offering and all accrued dividends will be
forfeited automatically upon the conversion. These two events, in conjunction
with this offering, will reduce our working capital requirements for future
periods and as a result, we believe our current cash balances and cash flow from
operations will be sufficient to meet our working capital and capital
expenditure requirements for at least the next 18 months.

We may, in the future, acquire businesses or products complementary to our
business, although we cannot be certain that any such acquisitions will be made.
The need for cash to finance additional working capital or to make acquisitions
may cause us to seek additional equity or debt financing. We cannot be certain
that such financing will be available, or that our need for higher levels of
working capital will not have a material adverse effect on our business,
financial condition or results of operations.

26
<PAGE> 30

YEAR 2000 COMPLIANCE

The term "year 2000 issue" refers to the necessity of converting computer
information systems so that such systems recognize more than two digits to
identify a year in any given date field and are thereby able to differentiate
between years in the 20th and 21st centuries ending with the same two digits
(e.g. 1900 and 2000). We have performed tests of all major functionality within
the Business Manager software, specifically those areas which utilize date
fields. Our tests show that the Business Manager software is year 2000
compliant.

We have established a task force to review our exposure to potential year
2000 issues. The task force has and will continue to coordinate the
identification, evaluation, and implementation of changes to computer systems
and applications necessary to achieve a year 2000 date conversion with no effect
on or disruption to our business operations. We are also evaluating non-system
issues relative to the year 2000 and beyond.

We have communicated with our suppliers, client banks, financial
institutions and others to assess their year 2000 compliance. We will continue
to assess the potential impact in the event of non-compliance. Based on these
communications we believe the potential failure of third parties' systems will
not have a material adverse impact on our operations, cash flows or financial
condition.

We have completed several projects as part of planned upgrades or
replacements of our hardware and information systems and as part of our year
2000 compliance plan. We believe that the implementation of these projects had
the effect of making our hardware and information systems year 2000 compliant.

During 1998, we spent approximately $100,000 to upgrade hardware and
software systems we identified as not being year 2000 compliant. We do not
anticipate expenditures related to year 2000 to be material during 1999. The
projected costs for 1999 are based upon management's best estimates, which were
derived utilizing numerous assumptions of future events. There can be no
guarantee, however, that these cost estimates will be achieved, and actual
results could differ materially. Based on our efforts, we believe that our
hardware and information systems will be year 2000 compliant by October 1999.

As part of our year 2000 preparations, we have identified our most
reasonably likely worst case scenario as having some of our client banks and
their small business customers not achieving year 2000 compliance. We do not
currently believe that a lack of year 2000 compliance by some of our client
banks and their small business customers will have a material adverse effect on
our operations, cash flows or financial condition.

NEW PRONOUNCEMENTS

SFAS 130, "Reporting Comprehensive Income" establishes standards for
displaying comprehensive income and its components in our consolidated financial
statements. Comprehensive income encompasses all changes in stockholders equity
with the exception of those transactions arising with its owners. The adoption
of this pronouncement had no material effect on our results of operations.

SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for reporting information about operating
segments in our annual consolidated financial statements and requires reporting
selected information about operating segments in interim financial reports. The
standard also establishes requirements for related disclosure about our products
and services, geographic areas and major customers. We operate in one industry
segment, and accordingly, the adoption of this pronouncement had no effect on
our presentation of operating results or financial position.
27
<PAGE> 31

MARKET RISK

Foreign currency, commodity price and other relevant market risks. Our
revenues and expenses are both generated and denominated in United States
Dollars, and as such, changes in exchange rates will not have an impact on our
operating results, financial position or cash flows. We do not maintain any
investments in commodities and as such do not have any risk exposures. There are
no other relevant market risks that we have identified that could have a
material impact on our operating results, financial position or cash flows.

Interest rate risk. Our exposure to market risk for changes in interest
rates relate primarily to our long-term debt obligations totaling $94.1 million
at December 31, 1998. These long-term debt obligations expire in 2004 and 2006.
In the event that interest rates associated with these debt obligations were to
increase 100 basis points, the impact on future cash flows would be
approximately $940,000.

INFLATION

We do not believe that inflation has had a material effect on our results
of operation. There can be no assurance, however, that our business will not be
affected by inflation in the future.

28
<PAGE> 32

BUSINESS

GENERAL

Private Business is a leading provider of integrated services and products
that help community banks provide accounts receivable financing to their small
business customers. Our solution is called Business Manager and is based on
software, marketing services and online electronic transaction processing. One
element of this solution is our proprietary software that enables our expanding
network of over 1,100 client banks to purchase accounts receivable from their
small business customers. The banks then process, bill and track those
receivables on an ongoing basis. As a major component of our solution, we work
with client banks to design, implement and manage the sale of Business Manager
accounts receivable financing services to their small business customers. We
also give our client banks the option of outsourcing application hosting and
transaction processing. In this case, we host the Business Manager software in
our data center and provide transaction processing services from our facilities.
The client banks are able to receive accounts receivable information and make
funding decisions electronically through secure Internet connections to our data
center. Business Manager uses Windows-based technology and is easy-to-use,
flexible and scalable.

Business Manager has been endorsed by the American Bankers Association,
through its subsidiary, Corporation for American Banking, since 1994. The
American Bankers Association employs a competitive process in endorsing
products, including conducting interviews with banks and customers regarding the
product. Only 16 companies have the American Bankers Association's endorsement,
and Business Manager is the only product of its type that has received the
endorsement.

As a complement to Business Manager, we advise and train our client banks
concerning risk management procedures and offer insurance products that mitigate
their exposure to fraud and non-payment. We assume none of the payment risk in
the bank's purchase of receivables; all such risk falls upon the client banks
and their small business customers.

The Business Manager solution benefits both our client banks and their
small business customers. The solution introduces our client banks to a new type
of high margin fee generating service, helping them attract new small business
customers and enhance existing customer relationships. Business Manager also
provides small business customers with access to a new type of bank financing.

Typically, we provide our services under exclusive long-term contracts with
client banks with terms ranging from three to five years. We receive initial
fees for set-up and ongoing royalty payments equal to a percentage of every
receivable purchased by the banks from their small business customers. During
1998, approximately 70% of our revenue resulted from ongoing royalty payments.

During 1998, our network of client banks purchased approximately $5.6
billion of accounts receivable from approximately 8,500 small businesses.

INDUSTRY BACKGROUND

The primary drivers of our business are:

- the growing acceptance of electronic commerce among community banks and
small businesses

- the need for alternative financing for small businesses

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- the desire of community banks to attract and retain small business
customers using alternative financing products

Electronic Commerce Services for the Financial Sector. The market for
electronic commerce products and services in the United States has grown
dramatically in recent years. A large portion of the electronic commerce
services and infrastructure has been provided by third-party vendors and
outsourcing companies. The financial sector has been a major user of outsourced
electronic commerce services. Examples of outsourced electronic commerce
applications in this sector include electronic authorization, processing and
settlement of credit card transactions and electronic data interchange.

Most of the outsourced electronic commerce activity in the financial sector
has focused on servicing the larger merchants and businesses. However, small
businesses have many of the same needs as do large businesses and also some
unique needs particularly suited for electronic commerce outsourcing. While
small businesses have taken advantage of outsourcing and/or electronic commerce
services such as credit card and merchant services, other services generally
have been unavailable in the small business credit and cash management market.

Financing for Small Businesses. Dun & Bradstreet tracks about 10.9 million
small businesses in the U.S. with less than $25 million of annual sales. Private
Business believes that approximately six million of these businesses are
potential prospects for the Business Manager system based on their size,
industry and receivables patterns. We target small businesses with up to $25
million in sales. We focus on small businesses that extend credit to customers,
particularly in the manufacturing, trucking and transportation, wholesale
distribution, health services, retail and business services industries. Our
ideal target markets are small businesses with more than $100,000 in
receivables. We believe that, for many of these small businesses, the need for
working capital is a significant obstacle to growth, and that these businesses
spend much time, money and effort on receivables and cash management. Many of
these small businesses are growing rapidly and are financially sound, but are
not eligible for sufficient traditional bank financing. For example, some
businesses are too new or operate in industries or geographic areas that make
the bank uncomfortable with the security typically available in a traditional
lending environment. In other cases, businesses have reached their bank's credit
limit for traditional bank financing.

Despite the fact that the small business sector provides a very large and
potentially profitable market opportunity, financial services providers have
encountered difficulty in managing cost effective sales and support of targeted
financial services to small businesses. Community banks have generally provided
basic financial services such as business deposit accounts and credit card
merchant services and, in some instances, traditional lines of credit to small
businesses. However, these banks typically have been unable to provide to small
businesses more sophisticated cash management products such as accounts
receivable or lease financing services.

The Community Bank Market. In response to the competitive pressures
arising from deregulation and consolidation, many community banks are adapting
their business practices to meet these new challenges. According to the Federal
Deposit Insurance Corporation ("FDIC"), strategies for coping with these
pressures may include:

- outsourcing business functions

- expanding the use of non-traditional financing

- partnering with non-bank service providers

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<PAGE> 34

- emphasizing personalized services and developing niches or specialty
offerings to serve a broader customer base

At the same time, given the limited asset base of community banks and the
need to improve margins, the adoption of these strategies must take into account
the need to control operating expenses, maintain proper risk control and
minimize operating complexity.

OUR SOLUTION, BUSINESS MANAGER

Business Manager is an integrated solution that includes software, targeted
marketing services, online transaction processing, and ongoing support. Business
Manager enables the management of accounts receivable financing for community
banks, from the purchase of receivables from small businesses to the ongoing
processing, billing and tracking of these receivables. The banks either process
the transactions themselves or outsource this activity to our in-house
processing facility. To automate the process further, we offer electronic links
to the banks and their small business customers through secure connections to
our Internet communications infrastructure.

Our extensive network of local Business Development Managers helps our
client banks develop new marketing strategies and facilitate the market
penetration of Business Manager. Following the initial sale of Business Manager
to our client banks, our Business Development Managers help our client banks
design, implement and manage the sale of the Business Manager accounts
receivable financing program to the client banks' small business customers and
prospects. Utilizing a database of likely small business customers of the
program, the Business Development Manager generally works directly with the
client banks' commercial loan officers to target and meet with qualified small
business customers as part of the direct sale of the program to these
businesses. Once the client bank has signed up a new small business customer,
our Business Development Managers continue to work with the small business
customer in conjunction with the bank loan officer to ensure proper
implementation and post-implementation support. We also help design the
appropriate procedures and controls to successfully implement Business Manager
in order to minimize risk to our client banks.

Business Manager allows banks to provide differentiated, high margin
financial services to their existing small business customers and to new
prospects without incurring the cost of internal technology development and
additional personnel. Business Manager can benefit our client banks by:

- increasing their revenues with high margin fee income

- creating additional relationships with their existing small business
customers

- attracting new small business customers

- improving access to small business customers' financial information,
enabling better credit decisions

Business Manager can also benefit a bank's small business customers by:

- improving cash flow and making funds available for growth

- providing customized aging, sales and customer balance reports

- reducing management time, effort and cost associated with billing and
tracking receivables

- improving receivables tracking and payment by involving the bank

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STRATEGY

We intend to grow our business by implementing the following strategies:

Increase the Number of Business Development Managers. We intend to hire
more Business Development Managers in order to expand into additional geographic
areas and increase the penetration of Business Manager in currently covered
regions. Our experience indicates that increasing the number of Business
Development Managers relative to the number of client banks results in increased
Business Development Manager productivity. During 1998, we increased the number
of Business Development Managers for Business Manager by over 20%, and we intend
to increase the number of Business Development Managers by approximately 45% in
1999.

Expand and Market Our In-house Processing and Service Capabilities. We are
expanding our processing and service center in Williamson County, Tennessee.
With expanded capability, we intend to increase our marketing of the processing
and service center. Our processing and service center provides our client banks
with an outsourcing alternative for processing and customer service and allows
for quick implementation of Business Manager with minimum training while
reducing the need of our client banks to assign or hire dedicated staff. These
features assist in the retention of existing client banks and in the attraction
of new client banks. Furthermore, use of the processing and service center
eliminates restrictions on the growth of Business Manager due to a client bank's
difficulty in adding staff or office space. We believe that a growing number of
our new client banks will use the processing and service center.

Expand Electronic Commerce Services. We are expanding our electronic
commerce offering by hiring new Electronic Commerce Specialists, enhancing our
Internet communications infrastructure and more actively marketing our
electronic commerce services. Our 14 Electronic Commerce Specialists work
directly with our client banks and their small business customers to implement
browser based electronic communications through our Internet server between the
small business and the bank. We intend to hire seven additional Electronic
Commerce Specialists in 1999. Additionally, we are upgrading our Internet
communications infrastructure to improve security, scalability, redundancy and
availability. We are also actively marketing our capabilities in every new sale
of Business Manager to increase adoption of our electronic commerce solution. To
date, approximately 225 banks and 550 small business customers use these
services.

Continue to Broaden Product and Services Offerings. We are successfully
using our sales and distribution channel to offer new products and services to
our expanding network of over 1,100 client banks. For example, we have
introduced credit and fraud insurance, database marketing services, and industry
focused applications for the medical and dental markets. In 1999, we intend to
offer key man life insurance, point of sale communications systems and a leasing
product for small businesses. Additionally, with the enhancement of our Internet
communications infrastructure, we intend to establish a small business focused
Internet portal providing relevant business information and enabling
communications and commerce among small businesses. In addition, we intend to
use this channel to market additional products and services to small businesses.

Target Major Metropolitan Areas Through Our Private Business Capital
Subsidiary. With a sales presence in Philadelphia, Chicago, Atlanta and Los
Angeles, our Private Business Capital subsidiary markets the Business Manager
solution directly to small businesses in major metropolitan markets. We intend
to increase the number of dedicated sales managers in Private Business Capital
from seven to 26 during 1999. Though Private Business typically offers these
financing opportunities to local client banks, we also work

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with regional and national funding sources to provide financing if our client
banks are unable to participate.

Pursue Strategic Acquisitions and Alliances. The market for financial
services offered to small businesses through community banks is fragmented, and
our industry is still in its formative stage. We believe there is an opportunity
for strategic transactions such as acquisitions, alliances or other partnerships
to broaden our product portfolio and assist us in delivering our services
efficiently. We intend to actively evaluate and pursue strategic transactions to
better position our business. We have no current commitments or understandings
with respect to any material acquisitions.

SUMMARY OF THE BUSINESS MANAGER PROCESS

The following diagram describes the typical process through which we
deliver our solution.

(GRAPHIC)

(1) We sign up a new bank for the Business Manager solution and train the bank
personnel. We assign a Business Development Manager to help market Business
Manager to small businesses.

(2) The bank signs up a small business customer for Business Manager.

(3) The small business customer generates receivables in the normal course of
business.

(4) The small business customer submits its receivables to the bank for
purchase.

(5) The bank pays the small business customer cash for the face value of the
receivables, less a discount that the bank keeps for its services and less a
percentage of the face value of the receivables, which is paid into a
reserve account. The bank pays part of its discount to us.

(6) The purchaser of goods or services pays the receivable directly to the bank.
In the event that the purchaser of goods or services does not pay the bank
within a designated period, the small business customer repurchases the
receivable.

(7) At the end of each month, the reserve account is adjusted to reflect the
condition of the receivables.

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PRODUCTS & SERVICES

We provide the following products and services through our Business Manager
solution:

Marketing Services. We provide comprehensive marketing services to client
banks as a key part of the Business Manager solution. We analyze a bank's market
area using our extensive database and provide a detailed assessment of the
market opportunity for Business Manager in a given geographic area. A Business
Development Manager uses this market analysis to help the client bank sell
Business Manager to small businesses.

At February 28, 1999, we employed approximately 105 full-time Business
Development Managers, including eight regional managers. Each Business
Development Manager is responsible for two to 20 banks, depending on bank size
and market potential, with the typical Business Development Manager responsible
for ten banks. The Business Development Manager and the client bank work
together, using the market analysis, to develop a prospect list of the bank's
small business customers who would be likely Business Manager users. The master
prospect list is prioritized, and, together, the client bank and a Business
Development Manager approach the businesses on that list. As a follow-up, a
Business Development Manager periodically contacts small business customers on
the system to help the client bank to retain the small business customer.

Business Manager Software. We develop, update and support the Business
Manager software, a Windows-based software package installed at the client
banks, that enables banks to purchase and manage accounts receivable from their
small business customers. Business Manager provides over 50 detailed reports to
keep the client bank and the small business owner informed about the performance
and aging of the receivables. In addition, Business Manager's software enables
the client bank to periodically verify customers' receivables balances for risk
control purposes.

Processing Services. Our processing and service center can perform for the
client bank and its small business customers all the processing and service
functions that would normally be performed by the client bank's operations
staff. With this option, the processing and service center provides all data
entry, account set-up, batch processing, lock box maintenance, preparation and
mailing of statements and verification letters, invoicing and response to
customer service inquiries. The client bank retains the decision making
responsibility for credit underwriting and for monitoring the small business'
daily financial transaction activity.

Electronic Commerce Capabilities. We provide electronic commerce
capabilities that enable data exchange between the small business customer, our
client banks and our service center. This enables small business customers to
deliver new invoice information electronically and have this information
accessed by our client banks through a Web browser. The small business can
upload this data directly from their accounting software such as Peachtree or
Quickbooks or input this data into a predetermined form provided through the
Internet server and accessible via a Web browser. Our Internet communications
infrastructure provides the gateway to a central repository for this
information. This infrastructure also enables small businesses to access
critical cash management reports online through their Web browser. We believe
this capability reduces the time and cost of processing new invoices for the
small business and enhances our client banks' relationships with their small
business customers.

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Risk Management Procedures. The Business Manager solution also assists
client banks with credit risk management. Controlled management of credit-worthy
businesses' receivables under Business Manager provides an additional level of
security for client banks including multiple payment sources:

- Underwriting Control. The client bank decides which businesses
participate in the Business Manager system and approves limits on the
amount of receivables to be purchased from those businesses.

- Monitoring Capability. Information provided by the Business Manager
software enables the bank to monitor the payment performance of the
receivables, to detect trends in the business that may impact the bank's
risk, and to facilitate verification of receivables owed.

- Primary Source of Payment. The receivables purchased by the bank are the
primary source of payment. In most cases, a small business' customer
makes payment of the receivables directly to the client bank.

- Reserve. As the client bank buys receivables from small businesses, a
portion of the purchase price is paid to a reserve account to protect the
client bank against potential losses on the receivables. The reserve is
adjusted each month to reflect the condition of the receivables.

- Repurchase Obligation. The small business maintains ultimate
responsibility for accounts receivable collection, and receivables that
age beyond a designated period (typically 90 days) are repurchased by the
small business. Client banks may require additional collateral and
personal guarantees to secure the repurchase obligation.

Credit and Fraud Insurance. Our insurance brokerage subsidiary offers two
insurance products for the Business Manager solution. Both products are
primarily underwritten by Continental Credit, an affiliate of CNA Financial
Corporation and one of the nation's major multi-line insurers. Accounts
receivable credit insurance protects the client bank and/or its small business
customers from default in payment of the receivable. Fraud insurance protects
the client bank from two types of fraudulent acts by the client banks'
commercial business customers: fraudulent invoices and diversion of customer
payments.

TRAINING AND SUPPORT

We conduct a variety of training activities for our client banks. This
training is designed to give bank personnel detailed operating knowledge of the
Business Manager solution and the roles that both bank and Private Business
personnel play in the system's success for a particular client bank.

An initial two-day training session is conducted approximately 40 times per
year at our corporate training center by experienced members of our training and
bank services departments. These sessions encompass training for both bank
credit officers and for process coordinators who operate the Business Manager
software. Process coordinators receive detailed instruction and practical
training in effective utilization of the Business Manager software. Credit
officers learn how Business Manager relationships are developed as well as how
they are underwritten, documented, and monitored. Newly licensed banks send both
a credit officer and a process coordinator to this training prior to
implementation of the program, and banks may send additional personnel to these
sessions for training or re-training at any time. In addition, both beginning
and advanced software training for bank process coordinators is offered
throughout the year at various locations around the country.

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<PAGE> 39

Other bank credit officers and relationship managers periodically receive
training in the business development and risk control aspects of the program,
either at the bank site or at mini-conferences held at various locations around
the country.

In addition to training, Private Business offers a variety of support
services to its client banks, including:

- Technical Support. We maintain a technical support department that
handles approximately 30,000 calls annually and is available five days a
week from 7 am to 7 pm (Central Standard Time) to field questions from
client banks and resolve any problems that may be encountered during
processing.

- Field Support. Our six regionally placed field support technicians visit
a client bank periodically to examine its processing procedures, and they
are available for on-site troubleshooting.

- Electronic Commerce Specialists. We have 14 Electronic Commerce
Specialists that help banks and small business customers set up secure
Internet connections to the processing facility in the bank or to our own
processing and service center. These specialists also assist small
business customers in facilitating electronic communication between their
accounting systems and the processing facilities.

- Bank Services. Our bank services department, comprised of three former
commercial bankers, works with client banks on a variety of banking
issues that arise related to the Business Manager solution, including
dealing with regulatory issues, documentation, credit policies, risk
control and operational issues.

- Reference Guide. We provide full documentation in our reference guide as
a comprehensive resource for the ongoing operation of the Business
Manager solution. This reference guide serves as a source book for
answers to day-to-day questions about the software, as well as credit and
operations issues.

SALES AND MARKETING

Our sales effort is focused on marketing Business Manager to banks and
their small business customers.

Our dedicated bank sales force of 15 sales professionals (at February 28,
1999) targets community banks, primarily those which have assets of $1 billion
or less. As of September 30, 1998, there were 8,527 FDIC insured commercial
banks with total assets less than $1 billion. These sales professionals utilize
our database marketing tools to provide a detailed analysis of small businesses
that are likely candidates for the Business Manager product in the prospect
bank's market area.

Once a bank has licensed Business Manager, one of our approximately 105
Business Development Managers works with the bank, combining the bank's customer
list with our prospect analysis and creating a prioritized master prospect list.
Our Business Development Managers and our network of banks together form a
channel for the sale of Business Manager to small businesses.

We also have ten dedicated direct sales professionals (at February 28,
1999) as part of our Private Business Capital subsidiary. These sales
professionals market directly to small businesses in major metropolitan markets.
Though Private Business typically offers these financing opportunities to local
client banks, we also work with regional and national funding sources to provide
financing if our client banks are unable to participate.

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We also employ six marketing professionals (at February 28, 1999) who are
responsible for the design and production of internal and external marketing
materials. These marketing professionals also attend trade shows and coordinate
various marketing programs, such as direct mail campaigns and conferences.

CUSTOMERS AND CONTRACTS

As of December 31, 1998, Business Manager was licensed to over 1,100 banks.
No client bank contributed more than five percent of our revenue in 1996, 1997
or 1998. As of December 31, 1998, over 8,500 small businesses had signed
agreements with our client banks to sell their accounts receivable.

The typical licensing agreement between Private Business and a client bank
provides that the bank pay an initial fee upon execution of the agreement and an
annual maintenance fee on each anniversary date thereafter. In addition, the
license agreement provides that the bank pay a fee equal to a percentage of the
receivables purchased by the bank from a new small business customer during the
first thirty days after signing such small business customer. Thereafter, the
license agreement provides for a monthly ongoing fee based on a percentage of
the discount charged against the receivables purchased from each small business
customer.

The licensing agreements generally have terms of three to five years plus
provisions that the bank pay ongoing fees on all accounts transferred to a
similar program for a period of 48 months after termination.

If we provide the processing services to the bank, there is a processing
addendum to the licensing agreement which generally has a one year term and
automatically renews for successive one year terms unless terminated. The
processing addendum provides for set up fees and transaction processing fees.
The processing addendum includes a confidentiality provision with respect to all
information received from the client bank relating to the small business
customer and its accounts.

We also provide client banks with a form Business Manager agreement to be
used between the client bank and its small business customers. Private Business
is not a party to this agreement, but the general form of the agreement provides
that the bank will purchase up to a set amount of the small business' accounts
receivable for the face amount less a discount. The Business Manager agreement
provides that the bank will establish an interest bearing reserve account for
the benefit of the small business and will deposit a portion (generally between
ten percent and 20 percent) of the face amount of each receivable purchased into
such reserve account. The agreement further provides that the bank may require
the small business to repurchase all or any portion of any receivable if any
minimum payment remains unpaid after a designated period (generally 90 to 120
days). These agreements have a term of one year and are automatically extended
for additional one year periods, but may be terminated without penalty upon 60
days written notice.

TECHNOLOGY

The Business Manager software program is a PC-based system written
primarily in Smalltalk and "C." It is capable of running in stand-alone mode or
supporting multiple users on Novell or Microsoft NT networks. It exists both in
a full 32 bit version and a version utilizing Win32s. This enables the software
to run under Windows 3.1, Windows 95/98, or Windows NT. For reporting, it relies
on the Crystal Reports report writer. It requires at least 32 MB of RAM and
approximately 25 MB of disk space to install. Disk space needed for usage varies
with the size of the bank's portfolio, but is usually under 200 MB. Upgrades to

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the program are released periodically and generally no less than annually.
Private Business also has the ability to handle non-PC-based small businesses.
As of February 28, 1999, we had 21 people engaged in software engineering,
product development and quality assurance.

Our processing and service facility receives invoice information from
businesses, via our Internet server and uses a PC-based server system to process
this information. The processing and service center uses fail-safe fiber ring
communications and is connected to two separate telecommunications service
providers. The facility has a back-up power generator used in case of power
outage.

COMPETITION

The market for small business financial services is intensely competitive,
fragmented and rapidly changing. We believe that we compete effectively as a
result of our highly trained and motivated sales force as well as the
functionality of Business Manager.

We face primary competition from companies offering products similar to
Business Manager to banks. Only a limited number of companies offer solutions
similar to Business Manager. We believe that we are the largest of such
companies offering these services in terms of revenue and number of client
banks.

We also compete with banks that use their internal information technology
departments to develop proprietary systems or purchase software from third
parties to offer similar services to small businesses, and with providers of
traditional sources of financing to small businesses such as lines of credit,
amortizing loans and factoring. Many banks and other traditional providers of
financing are much larger and more established than Private Business. Most
providers of traditional sources of financing and banks have already established
relationships with small businesses, may be able to leverage their relationships
to discourage these customers from purchasing Business Manager or persuade them
to replace our products with their products.

We expect that competition will increase as other established and emerging
companies enter the accounts receivable financing market, as new products and
technologies are introduced and as new competitors enter the market. In
addition, as we develop new services, such as equipment leasing, we may begin
competing with companies with whom we have not previously competed. Increased
competition may result in price reductions, lower profit margins and loss of our
market share, any of which could materially adversely affect our business,
financial condition and operating results.

EQUIPMENT AND FACILITIES

We own a 36,000 square foot modern corporate office building in Brentwood,
Tennessee, situated on approximately 5.1 acres of land. This building houses our
executive offices as well as administration/operations and other staffs. We
lease approximately 23,500 square feet of office space in Brentwood, Tennessee
and Franklin, Tennessee for processing, insurance and some staff offices. We
recently sold approximately 8.1 acres of undeveloped land adjacent to the
corporate office to a developer who will build a new building. We will lease
approximately 45,000 square feet of office space in this building on a long-term
basis. We intend to move our processing and service center into the new building
which will replace our currently leased space and allow for future expansion. We
expect to occupy the new facility in mid to late 2000.

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EMPLOYEES

At February 28, 1999, Private Business employed 347 people, four of whom
were part-time employees. We have 136 employees involved in direct sales,
marketing and business development activities.

LEGAL PROCEEDINGS

From time to time, Private Business is subject to claims and suits arising
in the ordinary course of business. We are not currently a party to any
proceeding which, in management's opinion, would have a material adverse effect
on our business, financial condition or results of operations.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth information regarding Private Business's
Directors, executive officers and key employees as of March 31, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Directors and Executive Officers
William B. King......................... 54 Chairman of the Board
Jerry L. Cover.......................... 47 President, Chief Executive Officer and
Director
Fred P. Read............................ 44 Vice President -- Finance and Chief
Financial Officer
Joseph T. Stewart....................... 59 Chief Operating Officer
Jeffrey R. Cantwell..................... 41 Chief Technical Officer
Thomas L. Black......................... 47 Director
Gary W. Cage............................ 54 Director
Brian J. Conway......................... 40 Director
Bruce R. Evans.......................... 40 Director
Gregory A. Thurman...................... 50 Director
Key Employees
C. Paul Sims............................ 48 Senior Vice President -- Director of
Bank Services
Will Martin............................. 55 Senior Vice President -- Corporate
Development
Stephen D. Giddens...................... 48 Senior Vice President -- Director of
Business Development
James Wrigley........................... 36 Senior Vice President -- Director of
Bank Sales
R. Paul McCulloch....................... 40 President of Private Business Insurance
Deborah C. Taylor....................... 33 Vice President -- Recruiting and Human
Resources
Tea K. Hoffmann......................... 35 Vice President -- General Counsel
Paul Wholley............................ 42 Vice President -- Director of Client
Services
James T. Quinn.......................... 38 Vice President -- Director of Sales for
Private Business Capital
</TABLE>

William B. 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 stockholder,
director and/or chairman of a number of privately-held companies during the past
five years. He currently serves as a director of one publicly-held company,
Harbinger Corporation, Atlanta, Georgia.

Jerry L. Cover joined Private Business in 1991 and currently serves as
President, Chief Executive Officer and Director. Mr. Cover served as our
Executive Vice President and Chief Operating Officer from 1994 until 1997 and
has served as President and a Director since

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1997. He was elected Chief Executive Officer in 1999. Prior to joining Private
Business, Mr. Cover owned and operated small businesses for 17 years.

Fred P. Read joined Private Business in 1995 and has served as Vice
President -- Finance since that time. Mr. Read became Chief Financial Officer in
1998. Prior to joining Private Business, Mr. Read served as division
controller/chief financial officer of Columbia/HCA Information Services, Inc.,
in Nashville, Tennessee, the information services subsidiary of Columbia/HCA
Corporation, from 1986 through 1995.

Joseph T. Stewart joined Private Business in November 1998 as Senior Vice
President and currently serves as Chief Operating Officer. Prior to joining
Private Business, Mr. Stewart served as chief operating officer of PMT Services
Inc., a merchant credit card acquiring company, from 1996 until 1998 and served
as executive vice president of First Data Corp. from 1985 until 1996.

Jeffrey R. Cantwell joined Private Business in 1993 as Vice
President -- Research and Development and currently serves as Chief Technical
Officer, a position which he has held since 1997. Prior to 1993, Mr. Cantwell
was a member of the faculty of the Electrical Engineering Department at
Vanderbilt University for more than seven years.

Thomas L. Black co-founded Private Business in 1991 and has served as a
Director since that time. Mr. Black currently serves as chief executive officer
of Imagic Corporation, Nashville, Tennessee, a check imaging software company,
and as chief executive officer of Tecniflex Inc. in Republic, Missouri, a check
processing equipment maintenance and servicing company. Mr. Black served as our
Chief Executive Officer from 1991 until 1995.

Gary W. Cage has served as a Director since March 1999. Mr. Cage currently
serves as president, chief executive officer and director of Monarch Dental
Corporation, Dallas, Texas, a dental services company. He served as chief
operating officer of Monarch from 1996 to 1997 and, from 1992 to 1996, Mr. Cage
served as chief financial officer, senior vice president, treasurer and
secretary of EmCare Holdings, Inc., in Dallas, Texas, a provider of management
services to emergency physicians.

Brian J. 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.

Bruce R. Evans has served as a Director since August 1998. Since 1991, Mr.
Evans has been a general partner of Summit Partners, a venture capital firm in
Boston, Massachusetts where he has been employed since 1986. Mr. Evans serves as
a director of Pediatrix Medical Group, Inc., Omtool, Ltd., DSET Corporation and
several privately-held companies.

Gregory A. Thurman co-founded Private Business in 1991 and has served as a
Director since that time. He served as our President from 1995 until 1997. From
1990 to 1995, he served as chief executive officer and President of FISI*Madison
Financial Corporation. Since March 1999, he has been the chairman of the board
of Journal Communications, Inc., a magazine publishing company in Franklin,
Tennessee.

C. Paul Sims joined Private Business in 1994 and currently serves as Senior
Vice President and Director of Bank Services. Prior to joining Private Business,
Mr. Sims spent 19 years in the banking industry, including 13 years with Union
Planters National Bank, during which he served as Regional President of Union
Planters National Bank in Nashville and Regional Executive Vice President of the
bank for the Middle Tennessee area.

41
<PAGE> 45

Will Martin joined Private Business in 1998 and has served as Senior Vice
President for Corporate Development since that time. Prior to joining Private
Business, Mr. Martin served as a founding partner in a Nashville, Tennessee law
firm from 1975 until 1993. Mr. Martin served as Deputy Assistant Secretary for
International Affairs at the National Oceanic and Atmospheric Administration in
Washington, D.C. from 1993 until 1998.

Stephen D. Giddens joined Private Business in 1992 as a Business
Development Manager and assumed his current position in 1997. Prior to joining
Private Business, Mr. Giddens served as Director of Business Development with
Quaker Oats, Inc. in Chicago from 1982 until 1992.

James Wrigley joined Private Business in 1994 as a Bank Sales
Representative for the Midwest region. In 1995, he served as a National Bank
Sales Representative for Private Business before becoming Director of Bank Sales
in 1996. Prior to joining Private Business, Mr. Wrigley worked in several sales
and management positions for Dun & Bradstreet Information Services.

R. Paul McCulloch joined Private Business in 1995 to head Private Business
Insurance. Prior to joining Private Business, Mr. McCulloch was President of
Crump Financial Services of Nashville from 1990 until 1995. Mr. McCulloch also
worked as a Vice President and Manager at Swett and Crawford Insurance Brokers
from 1985 until 1990.

Deborah C. Taylor joined Private Business in 1993 in her current position
as Vice President -- Recruiting and Human Resources. Prior to joining Private
Business, Ms. Taylor spent more than ten years in the sales industry.

Tea K. Hoffmann joined Private Business in 1993 as a Business Development
Manager before assuming the position of General Counsel in 1994. Prior to
joining Private Business, Ms. Hoffmann worked for the Tennessee Criminal Court
of Appeals and as an attorney for a Nashville law firm.

Paul Wholley joined Private Business in 1992 as a Bank Sales Representative
in the northeast United States and in 1998 assumed the position of Vice
President -- Director of Client Services. Prior to joining Private Business, Mr.
Wholley held sales and management positions with Southwestern Publishing Company
and Versyss, Inc.

James T. Quinn joined Private Business in 1995 as a Business Development
Manager in the northeast United States before becoming Vice
President -- Director of Sales for Private Business Capital in 1998. Mr. Quinn
spent over ten years in sales and sales management positions including six years
experience as a district sales manager for Southwestern Company.

Upon the completion of this offering, the Board of Directors will be
divided into three classes, each of whose members will serve for a staggered
three-year term. Messrs. Cover and Thurman will be Class 1 Directors, Messrs.
Black, Conway and King will be Class 2 Directors and Messrs. Cage and Evans will
be Class 3 Directors. At each annual meeting of stockholders, a class of
directors will be elected for a three-year term to succeed the director or
directors of the same class whose terms are then expiring. The initial terms of
the Class 1 Directors, Class 2 Directors and Class 3 Directors expire upon the
election and qualification of successor directors at the annual meeting of
stockholders held during calendar years 2000, 2001, and 2002, respectively. Each
officer serves at the discretion of the Board of Directors.

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<PAGE> 46

BOARD COMMITTEES

The Audit Committee consists of Messrs. Black, Thurman and Cage. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent public accountants, reviews the results and scope of
the audit and other services provided by Private Business's independent public
accountants and reviews and evaluates Private Business's control functions.

The Compensation Committee consists of Messrs. Black, Evans, and King. The
Compensation Committee administers the issuance of stock options under Private
Business's stock option plan, makes recommendations regarding Private Business's
"non-qualified" stock options and various incentive compensation and benefit
plans and determines salaries for the executive officers and incentive
compensation for employees and consultants of Private Business.

DIRECTOR COMPENSATION

Commencing upon completion of this offering, non-employee directors will
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. In March 1999, Mr. Cage, an independent director who does
not own any of our stock, was granted an option to purchase 20,000 shares of our
common stock at an exercise price per share equal to the initial public offering
price. No other non-employee directors have received stock option grants. Mr.
Cover, Private Business's only employee director, received his stock option
grants for his service as an employee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to March 1999, Private Business did not have a Compensation Committee
of the Board of Directors, and the entire board participated in all compensation
decisions. During 1998, Mr. Cover was an officer of Private Business, as well as
a director. In March 1999, the Board formed Private Business's Compensation
Committee to review and recommend to the Board the compensation and benefits for
Private Business's executive officers and administer Private Business's stock
option plan. No members of the Compensation Committee are employees of Private
Business.

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<PAGE> 47

EXECUTIVE COMPENSATION

The following table sets forth the compensation we paid during the fiscal
year ended December 31, 1998 to Private Business's Chief Executive Officer and
the two other most highly compensated executive officers serving at December 31,
1998, who received compensation in excess of $100,000 in fiscal 1998:

SUMMARY COMPENSATION TABLE (1)

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jerry L. Cover....................... 1998 $202,000 $150,000 40,000 $3,002,132(2)
Chief Executive Officer 1997 154,802 118,000 90,000
1996 133,725 75,000 60,000
Fred P. Read......................... 1998 101,305 40,000 16,000 202,441(2)
Chief Financial Officer 1997 85,125 25,000 14,000
1996 75,308 12,000 6,000
Jeffrey R. Cantwell.................. 1998 100,100 35,000 20,000 249,766(2)
Chief Technical Officer 1997 89,007 30,000 18,000
1996 85,808 25,000 12,000
</TABLE>

- ---------------

(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) Mr. Cover, Mr. Read and Mr. Cantwell received special one time bonuses in
1998 in conjunction with our recapitalization in recognition of their
contributions to the company. These bonuses do not represent the customary
incentive structure of Private Business.

44
<PAGE> 48

Option Grants. The table below provides information on grants of stock
options pursuant to Private Business's option plans during the 1998 fiscal year
to the named executive officers. Additional grants have been made to officers,
directors and other employees since December 31, 1998. Private Business grants
no stock appreciation rights.

OPTION GRANTS IN THE FISCAL YEAR ENDING DECEMBER 31, 1998

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR FOR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jerry L. Cover................. 40,000 8.5%(1) $ 5.334 09/01/2008 $134,181 $340,041
Fred P. Read................... 16,000 3.4%(1) 5.334 09/01/2008 53,672 136,016
Jeffrey R. Cantwell............ 20,000 4.3%(1) 5.334 09/01/2008 67,090 170,020
</TABLE>

- ---------------

(1) Percentages are based on a total of 470,000 options granted to employees,
officers and directors in fiscal 1998.

(2) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the Securities and Exchange Commission and, therefore,
are not intended to forecast possible future appreciation, if any, of
Private Business's common stock price.

Option Exercises and Values. The table below provides information as to
exercises of options by Messrs. Cover, Read and Cantwell during the 1998 fiscal
year under the option plans and the year-end value of unexercised options.

OPTION HOLDINGS AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
--------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jerry L. Cover......................... 141,000 145,000 $1,834,920(1) $1,639,800(1)
Fred P. Read........................... 10,500 29,500 128,360(1) 306,180(1)
Jeffrey R. Cantwell.................... 35,250 40,750 459,345(1) 432,135(1)
</TABLE>

- ---------------

(1) Options are classified as "in-the-money" if the market value of the
underlying common stock exceeds the exercise price of the option. The per
share value of such in-the-money options is the difference between the
option exercise price and $14.00, the assumed initial public offering price.
Such amounts may not necessarily be realized. 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.

45
<PAGE> 49

NON-QUALIFIED STOCK OPTION AGREEMENTS

Private Business has issued non-qualified option agreements to purchase an
aggregate of 1,748,000 shares of its common stock to a number of its employees,
providing them with an equity interest in Private Business and the opportunity
to benefit from any appreciation in the value of our stock. These options were
not issued pursuant to a plan and are considered non-qualified options as that
phrase is described in Treasury Regulation Section 1-83-7. The options are
evidenced by individual stock option agreements.

Each stock option agreement specifies when each option vests and the
exercise price for each option. Payment for shares of Private Business common
stock to be issued upon exercise of an option may be made, at the discretion of
the Board of Directors, either in cash, common stock or unexercised portions of
vested options. Options are nontransferable, other than by will or the laws of
descent and distribution. Generally, under each stock option agreement, the
option terminates on the earlier of ten years from the date such option is
granted or the employee's termination.

The number of shares of common stock that may be granted under the stock
option agreements or the options granted thereunder will be proportionately
adjusted in the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting our common stock.

Generally, in the event an optionee is terminated by reason of retirement,
disability, or death, the option will immediately become vested and the optionee
or his or her representative may exercise the option for twelve months following
termination or until the expiration of the term of the option, whichever occurs
first. If the employment of an optionee is terminated for "cause," as defined in
the stock option plan, any unexercised options held by optionee will expire. In
the event the option holder is terminated for any reason other than disability,
death or cause, the holder may exercise his or her option for three months
following termination or the expiration of the stated term of the option,
whichever occurs first.

The stock option agreements provide that options will be fully vested
immediately prior to a change of control of Private Business. A change in
control occurs in the event of a merger or consolidation with another
corporation resulting in less than 75% of the outstanding voting securities of
the surviving or resulting corporation being owned by the former stockholders of
Private Business, a sale of all or substantially all of our assets to another
corporation which is not a wholly-owned subsidiary, or a person acquiring more
than 60% of the outstanding voting securities of Private Business.

1999 STOCK OPTION PLAN

Under Private Business's 1999 Amended and Restated Stock Option Plan,
incentive and non-qualified stock options to purchase shares of our common stock
are available for grant to our employees and other service providers, providing
them with an equity interest in Private Business and the opportunity to benefit
from any appreciation of the value of such stock. The stock option plan allows
for both incentive stock options ("ISOs") and nonqualified stock options
("NQSOs") to purchase in the aggregate up to 4,000,000 shares of our common
stock to be granted by the Board of Directors. As of April 30, 1999, we had
granted options to purchase 570,700 shares at the initial public offering price.

The stock option plan is administered by the compensation committee of the
Board of Directors. Subject to some limitations, this committee has the
authority to determine the

46
<PAGE> 50

recipients of options, the number of shares of common stock to be issued upon
exercise of each option, the exercise periods of each option and conditions
subject to which options may be exercised.

The stock option plan provides that the exercise price of an ISO must not
be less than 100% of the fair market value of Private Business's common stock on
the day the incentive stock option is granted as determined in good faith by the
committee. The exercise price of an ISO in the case of an employee who owns
stock representing more than ten percent of the total combined voting power of
all classes of stock of Private Business must not be less than 110% of the fair
market value of Private Business's common stock on the day that incentive stock
option is granted. Shares subject to options granted under the stock option plan
that expire, terminate or are canceled without having been exercised in full are
again eligible for issuance under the stock option plan. The exercise price of a
NQSO will be determined by the committee without regard to the fair market value
of the stock. ISOs are nontransferable other than by will or the laws of descent
and distribution. However, the Committee may allow NQSOs to be transferred only
to members of the holders immediate family members, trusts for the benefit of
such family members and entities owned by such family members; provided,
however, the holder must not receive any consideration for such a transfer.

Generally, in the event an ISO holder is terminated as an employee due to
disability or death, the holder or his or her representative may exercise any
unexercised stock options for a period of one year following termination. If the
ISO holder is terminated for any reason other than disability, death, or cause,
the holder may exercise his or her incentive stock option for a period of three
months following termination. Private Business may allow an incentive stock
option to continue beyond the three month period, in which case the incentive
stock option will become a non-qualified option. If either an ISO or a NQSO
holder is terminated for "cause," as defined in the stock option plan, the
unexercised options expire. If the holder of a NQSO is terminated for any reason
other than for cause, the NQSO will continue unless otherwise determined by the
committee.

In the event of any sale of or transfer of not less than 50% of Private
Business's common stock, the sale of substantially all of the assets of Private
Business, or the dissolution or liquidation of Private Business, one-half of an
optionee's unvested incentive stock options will become fully vested and be
exercisable prior to any such transaction.

401(K) PLAN

Private Business and its affiliates offer a 401(k) Plan for all eligible
employees who are over 18 years of age. Private Business may make matching
discretionary contributions and the Board of Directors has authorized a matching
contribution for 1998 of 100% of each participant's contributions up to a
maximum of $1,000 per participant. No employee may contribute more than 15% of
wages to the 401(k) Plan, and employees are limited to a contribution of no more
than $10,000. Matching funds vest in the participant's account over a period of
seven years of vesting service. The total matching contribution for 1998 was
$151,858.

47
<PAGE> 51

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of May 1, 1999 and immediately following the
offering by: (1) each person who is known by us to own beneficially more than
five percent of our common stock; (2) each director and executive officer named
in the Summary Compensation Table; and (3) all of our directors and executive
officers as a group. To our knowledge, each of the persons named in the
following table has sole voting and investment power as to the shares shown
unless otherwise noted. Unless otherwise noted, the address of each holder
listed below is our corporate address.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES PERCENTAGE OF
BENEFICIALLY SHARES
OWNED PRIOR TO BENEFICIALLY
SHARES BENEFICIALLY THE OWNED AFTER THE
NAME OWNED OFFERING(1) OFFERING(1)
- ---- ------------------- -------------- ---------------
<S> <C> <C> <C>
Summit Partners(2)(3)(4)............... 4,255,797 19.9% 14.9%
TA Associates Group(2)(4)(5)........... 4,255,797 19.9% 14.9%
Thomas L. Black........................ 2,848,718 13.3% 10.0%
William B. King(6)..................... 2,848,718 13.3% 10.0%
The William B. King Jr. Annuity
Trust -- 1997........................ 2,848,718 13.3% 10.0%
Cendant Corporation(2)(4).............. 1,874,801 8.8% 6.6%
Gregory A. Thurman(7).................. 2,848,718 13.3% 10.0%
The Gregory A. Thurman Annuity
Trust -- 1997........................ 1,875,057 8.8% 6.6%
Jerry L. Cover(8)...................... 173,083 * *
Fred P. Read........................... 16,733 * *
Jeffrey R. Cantwell.................... 44,067 * *
Gary W. Cage........................... 20,000 * *
Brian J. Conway(5)..................... 10,462 * *
Bruce R. Evans(3)...................... 4,255,797 19.9% 14.9%
All directors and officers as a group
(19 persons)(9)...................... 13,224,259 60.7% 45.7%
</TABLE>

- ---------------

* Indicates less than one percent

(1) The percentages shown are based on 21,376,858 shares of common stock
outstanding prior to the offering and 28,526,858 shares of common stock
outstanding after the offering. Pursuant to Rule 13d-3 under 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 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. is 600
Atlantic Avenue, Suite 2800, Boston, MA 02210. The address for TA Associates
Group is 125 High Street Tower, Suite 2500, Boston, MA 02110. The address
for Cendant Corporation is 6 Sylvan Way, Parsippany, NJ 07054.

(3) Includes 3,296,482 shares held by Summit Ventures V, L.P. 551,219 shares
held by Summit V Companion Fund, L.P., 220,488 shares held by Summit V
Advisors Fund (QP), L.P., 67,379 shares held by Summit V Advisors Fund, L.P.
and 120,229 shares

48
<PAGE> 52

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.

(4) Summit Partners, TA Associates Group, and Cendant Corporation currently own
convertible preferred stock which will be converted into common stock
immediately prior to the completion of this offering.

(5) Includes 3,236,657 shares owned by TA/Advent VIII, L.P.; 890,530 shares
owned by Advent Atlantic & Pacific III L.P.; 63,930 shares owned by TA
Executives Fund LLC; 64,680 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 stockholder, 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 10,462 shares held by TA Investors, LLC.

(6) Includes 2,848,718 shares owned by The William B. King Jr. Annuity
Trust-1997.

(7) Includes 1,875,057 shares owned by The Gregory A. Thurman Annuity
Trust-1997.

(8) Includes options to purchase 173,083 shares of common stock.

(9) Includes options to purchase 422,308 shares of common stock.

49
<PAGE> 53

RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

RECAPITALIZATION TRANSACTION

General. On August 7, 1998, Private Business and its stockholders
consummated three related transactions:

- the redemption from its stockholders (the "Selling Stockholders") of
4,963,751 shares of its common stock for an aggregate purchase price of
$138,340,358

- a $110,000,000 credit agreement with Fleet National Bank and other
lenders

- the issuance of 5,624,404 shares of newly authorized Series A
convertible preferred stock (the "Convertible Preferred") for an aggregate
purchase price of $60,000,000. Private Business used the proceeds from the
issuance of the Convertible Preferred and the credit facility:

- to fund the redemption

- to pay aggregate bonuses of $10,006,000 to employees of Private
Business

- to repay mortgage indebtedness of Private Business

- for general working capital purposes, including the payment of
fees and expenses related to these transactions

In connection with the recapitalization, Messrs. King, Thurman and Black
received $34,612,863, $35,279,098 and $37,701,169, respectively, for the
redemption of a portion of their common stock. In addition, Messrs. Cover, Read
and Cantwell received special bonuses in conjunction with the recapitalization
of $3,002,132, $202,441 and $249,766, respectively.

The shares acquired by Private Business in the redemption constituted 49.5%
of the then-outstanding common stock. An escrow reserve of $5,000,000 of the
price paid in the redemption is being held until 30 days after Private Business
delivers audited financial statements for its 1999 fiscal year to the holders of
the Convertible Preferred (the "Preferred Holders") to secure any claims for
indemnification that may be made by the Preferred Holders in connection with the
redemption of common stock and the issuance of the Convertible Preferred. To the
extent not claimed, the escrow reserve will be distributed to the Selling
Stockholders at the conclusion of the escrow period.

Stockholders Agreement. In connection with the recapitalization, the
Preferred Holders and the Selling Stockholders entered into a stockholders
agreement on August 7, 1998. Prior to a qualified public offering of Private
Business's capital stock, the stockholders agreement restricts the sale or
transfer of shares of common stock except in limited instances or in compliance
with a co-sale procedure which permits Preferred Holders to participate in the
proposed sale. A qualified public offering is defined as a registered public
offering of common stock in which Private Business receives gross proceeds
exceeding $40 million, at a price per share of at least $16 (if the offering
closes on or before June 30, 1999) or $23.34 (if the offering closes after June
30, 1999) which prices will be adjusted in the event of specified corporate
actions, such as our proposed stock split. The stockholders agreement also
grants "drag-along" rights in which two-thirds of the Preferred Holders can
cause the remaining Preferred Holders to participate in significant events such
as a merger of Private Business or a sale of stock or substantially all of
Private Business's assets. Subject to specified parameters, the stockholders
agreement also grants contractual pre-emptive rights to stockholders of Private
Business to participate in offerings of capital stock, other securities or
rights to acquire securities of Private Business. All of the Preferred Holders
have waived their preemptive rights under the stockholders agreement with
respect to this offering.

50
<PAGE> 54

The stockholders agreement also obligates stockholders to vote their shares
of capital stock to elect up to nine directors, as follows:

- Mr. King, Mr. Thurman and Mr. Black (so long as each owns at least 10% of
Private Business's fully diluted capital stock)

- subject to ownership thresholds, one individual nominated by TA
Associates, Inc., one individual nominated by Summit Partners, LLC and
one individual nominated by holders of two-thirds of the Convertible
Preferred

- one member of Private Business's management

- two non-employee directors

By its terms, the stockholders agreement will terminate upon the
consummation of this offering.

In addition, Private Business's charter prior to the initial public
offering contained voting provisions that allowed the Selling Stockholders to
maintain voting control over Private Business even though they no longer owned
50% of our stock. To accomplish this result, the charter provided that the
Preferred Holders would be entitled to approximately nine-tenths of a vote per
share on the majority of matters submitted to the stockholders of Private
Business for a vote. In connection with this offering, we have amended and
restated our charter again and it no longer contains these provisions.

Registration Rights Agreement. In connection with the recapitalization,
the Preferred Holders, Private Business and the Selling Stockholders entered
into a registration rights agreement on August 7, 1998, which grants demand
registration rights to the Preferred Holders, exercisable generally by
two-thirds of the Preferred Holders. These demand registration rights can be
exercised (subject to limitations) up to two times after the earlier of August
7, 2000 or ninety days after an initial public offering of Private Business's
common stock. Notwithstanding the above, the registration rights agreement
provides for unlimited demand registration rights (subject to limitations) with
respect to registrations on Form S-3 so long as the aggregate sales proceeds to
Preferred Holders is anticipated to exceed $1.5 million. Other conditions must
also be met before Private Business must honor a demand registration request.
Private Business is required to pay all registration expenses pursuant to the
registration rights agreement, subject to limitations in the agreement.

The registration rights agreement also provides that, subject to
limitations including the discretion of the managing underwriter in an
underwritten offering, the Preferred Holders may request inclusion of their
shares in any registration of securities by Private Business. All of the
Preferred Holders have waived any right under the registration rights agreements
to participate in this offering.

Noncompetition Agreements. In connection with the recapitalization,
Private Business entered into noncompetition agreements on August 7, 1998, with
each of Messrs. King, Black, Thurman, Brasser, Keith and Cover. The
noncompetition agreements generally expire on the earlier of five years from
execution or three years after the restricted individual is no longer an
employee or director of Private Business or its subsidiaries. The noncompetition
agreements generally prohibit these individuals from competing with business
activities which Private Business or its affiliates actually conduct while the
individual serves as a director, officer or employee of Private Business or
activities which Private Business or its affiliates are actively planning to
conduct at the time the individual ceases to be a director, officer or employee
and actually conduct within the following twelve months. The noncompetition
agreements also restrict these individuals from soliciting employees of

51
<PAGE> 55

Private Business. Private Business also entered into key employee noncompetition
agreements with various non-stockholder employees.

Cendant Termination and Noncompetition Agreement. In connection with the
recapitalization, Private Business, Mr. King, Mr. Keith and Cendant Corporation
entered into a termination and noncompetition agreement on August 7, 1998, which
terminated a right of first refusal in favor of Cendant which Mr. King granted
in 1995 with respect to his equity interest in Private Business. The termination
and noncompetition agreement also restricts Cendant, subject to exceptions, from
competing against Private Business for three years with respect to the purchase
or financing of merchant receivables. In addition, Private Business agreed that
for three years, subject to exceptions, it would not offer products or services
similar to products offered to banks by Cendant's subsidiary, FISI*Madison
Financial Corporation, or offer products or services related to the sale to
individual consumers of accidental death and injury insurance.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

Lease Agreement. 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 uses this building for its electronic commerce
operations. The lease expires on November 30, 1999, with an option to renew the
lease on a month-to-month basis for no more than four months. The base annual
rent under the lease is $78,750 per annum, payable in advance monthly
installments of $6,562.50. Private Business believes this lease is on terms as
favorable to us as we could have obtained in an arms-length negotiation with
unaffiliated third parties.

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 1998 paid
an aggregate of $180,000 for such services. All of these arrangements have been
terminated.

Indemnification Agreements. In connection with the recapitalization,
Private Business entered into indemnification agreements as of August 7, 1998,
with each of Messrs. King, Black, Thurman, Conway, and Evans, as Directors of
Private Business. Subject to limitations, such as the requirement that the
directors must have acted in good faith, the indemnification agreements grant
broad contractual rights of indemnification to the directors for liabilities and
expenses they may incur arising from any suit or proceeding that arises as a
result of their status as a director of Private Business. The indemnification
agreements provide for the maximum indemnification permitted by the Tennessee
Business Corporation Act ("TBCA"). In March 1999, Private Business entered into
identical indemnification agreements as part of its employment benefits with
executive officers and key employees who are listed in "Management". The
indemnification agreements also obligate Private Business in selected instances
to advance indemnifiable expenses to the indemnitee.

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RELATED PARTY TRANSACTION POLICY

Any future 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.

DESCRIPTION OF CAPITAL STOCK

Private Business's authorized capital stock consists of 100,000,000 shares
of common stock, no par value and 20,000,000 shares of preferred stock. Upon
completion of this offering and the conversion of the Convertible Preferred in
connection with this offering, 28,526,858 shares of common stock will be issued
and outstanding, and no shares of preferred stock will be outstanding. The
discussion below assumes the conversion of all of the Convertible Preferred has
occurred. The following summary of Private Business's capital stock describes
all material provisions of, but does not purport to be complete, and is subject
to, and qualified in its entirety by, Private Business's charter and the bylaws
that are included as exhibits to the Registration Statement of which this
prospectus forms a part and by the provisions of applicable law.

COMMON STOCK

The issued and outstanding shares of common stock are, and the shares of
common stock being offered will be upon payment therefor, validly issued, fully
paid and nonassessable. Subject to the prior rights of the holders of any
preferred stock, the holders of outstanding shares of common stock are entitled
to receive dividends out of assets legally available therefor at such time and
in such amounts as the Board of Directors may from time to time determine. The
shares of common stock are not redeemable or convertible, and the holders
thereof have no preemptive or subscription rights to purchase any securities of
Private Business. Upon liquidation, dissolution or winding up of Private
Business, the holders of common stock are entitled to receive pro rata the
assets of Private Business which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of preferred stock then outstanding. Each outstanding share of
common stock is entitled to vote on all matters submitted to a vote of
stockholders.

We intend to apply for quotation of the common stock on the Nasdaq National
Market under the symbol "PBIZ."

PREFERRED STOCK

The Board of Directors may, without any further vote or action by our
stockholders, from time to time, direct the issuance of shares of preferred
stock in one or more series with such designations, rights, preferences and
limitations as the Board of Directors may determine, including the consideration
received therefor. The Board of Directors also has the authority to determine
the number of shares comprising each series, dividend rates, redemption
provisions, liquidation preferences, sinking fund provisions, conversion rights
and voting rights without the approval by the holders of common stock. Although
it is not possible to state the effect that any issuance of preferred stock
might have on the rights of holders of common stock, the issuance of preferred
stock may have one or more of the following effects:

- to restrict common stock dividends if preferred stock dividends have not
been paid

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<PAGE> 57

- to dilute the voting power and equity interest of holders of common stock
to the extent that any series of preferred stock has voting rights or is
convertible into common stock

- to prevent current holders of common stock from participating in the
distribution of the company's assets upon liquidation until any
liquidation preferences granted to holders of preferred stock are
satisfied. In addition, the issuance of preferred stock may have the
effect of discouraging a change in control of Private Business by, for
example, granting voting rights to holders of preferred stock that
require approval by the separate vote of the holders of preferred stock
for any amendment to our charter or any reorganization, consolidation,
merger or other similar transaction involving Private Business. As a
result, the issuance of the preferred stock may discourage bids for the
common stock at a premium over the market price therefor, and could have
a materially adverse effect on the market value of the common stock. Upon
consummation of the offering and the conversion in full of the
Convertible Preferred, there will be no shares of preferred stock
outstanding. The Board of Directors does not presently intend to issue
any shares of preferred stock.

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CHARTER AND BYLAWS

General. Our charter and bylaws contain provisions that could discourage
potential acquisition proposals and could delay or prevent a change in control
of Private Business. These provisions are intended to enhance the likelihood of
continuity and stability in the composition of the Board of Directors and in the
policies formulated by the Board of Directors and to discourage transactions
that may involve an actual or threatened change in control of Private Business.
These provisions are designed to reduce the vulnerability of Private Business to
an unsolicited acquisition proposal and to discourage certain tactics that may
be used in proxy fights. However, such provisions may discourage third parties
from making tender offers for our shares. As a result, the market price of the
common stock may not benefit from any premium which might occur in anticipation
of a threatened or actual change in control. Such provisions also may have the
effect of preventing changes in the management of Private Business.

Board of Directors. The charter and bylaws provide for the Board of
Directors of Private Business to be divided into three classes, as nearly equal
in number as possible. The term of the Class 1 Directors will expire at the 2000
annual meeting of stockholders; the term of the Class 2 Directors will expire at
the 2001 annual meeting of stockholders; and the term of the Class 3 Directors
will expire at the 2002 annual meeting of stockholders (and in all cases when
their respective successors are duly elected and qualified). At each annual
meeting of stockholders, successors to the class of directors whose term expires
at such meeting will be elected to serve for three-year terms or until their
successors are duly elected and qualified. Directors may be removed by the
stockholders only for cause.

The charter and bylaws provide that the Board of Directors shall consist of
no less than one nor more than twelve members (except that such maximum number
may be increased from time to time to reflect the rights of holders of preferred
stock) with the actual number set from time to time by resolution adopted by a
majority of the Board of Directors. Upon the completion of this offering, the
Board of Directors will consist of seven members. The charter and the bylaws
provide that the Board of Directors is authorized to create additional
directorships (up to the maximum number permitted) and to elect additional
directors thereto to serve for the full term of the class of directors in which
such directorship was created. The provisions of the Tennessee Business Code,
the charter and the bylaws relating

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to the removal of directors and the filling of vacancies on the Board of
Directors will preclude a third party from removing incumbent directors' without
cause and simultaneously gaining control of the Board of Directors by filling,
with its own nominees, the vacancies created by removal. These provisions also
reduce the power of stockholders generally, even those with a majority voting
power in the company, to remove incumbent directors without cause and to fill
vacancies on the Board of Directors.

Stockholder Action and Special Meetings. The charter and bylaws provide
that any action of the common stockholders must be effected at a duly called
meeting and not by a consent in writing.

Our charter and bylaws do not permit our stockholders to call special
meetings of stockholders. A special meeting of stockholders may only be called
by the President or a majority of the Board of Directors.

Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The bylaws establish an advance notice procedure for the
nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors as well as for other
stockholder proposals to be considered at stockholders' meetings. Notice to
Private Business from a stockholder who proposes to nominate a person at a
meeting for election as a director must contain:

- the name and residence address of the stockholder who intends to make the
nomination and the name, age and address of the nominee

- the principal occupation and business address of the nominee

- the class and number of shares held of record, beneficially and by proxy,
by the stockholder and the nominee as of the record date of such meeting
(if such record date is publicly available) and as of the date of such
notice

- such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement or
otherwise required pursuant to Regulation 14A under the Exchange Act,
including the consent of each nominee to serve as a director of the
company if so elected

The presiding officer of the meeting may refuse to acknowledge the nomination of
any person not made in compliance with this nomination procedure. The purpose of
requiring advance notice is to afford the Board of Directors an opportunity to
consider the qualifications of the proposed nominees or the merits of other
stockholder proposals and, to the extent deemed necessary or desirable by the
Board of Directors, to inform stockholders about those matters. Although the
advance notice provisions do not give the Board of Directors any power to
approve or disapprove of stockholder nominations or proposals for action by the
company, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the procedures
established by the bylaws are not followed and of discouraging or deterring a
third party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposals, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
Private Business and its stockholders.

Amendment of the Charter. The charter requires the affirmative vote of the
holders of at least 70% of the outstanding shares of the company's capital stock
entitled to vote thereon and 50% of the members of the Board of Directors in
order to amend the range of the permitted size of the Board of Directors. These
voting requirements will make it more difficult for stockholders to make changes
in the charter which would be designed to

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facilitate the exercise of control over Private Business. In addition, the
requirement for approval by at least a 70% stockholder vote will enable the
holders of a minority of the voting securities of the company to prevent the
holders of a majority or more of such securities from amending these provisions
of the charter.

ANTITAKEOVER LEGISLATION

Business Combination Act. The Tennessee Business Combination Act (the
"Combination Act") contained in TBCA sections 48-103-201 through 48-103-209
provides that any corporation to which the Combination Act applies, which
includes Private Business, shall not engage in any business combination with an
interested stockholder for a period of five years from the date that such
stockholder became an interested stockholder unless prior to such date the Board
of Directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder.

The Combination Act defines business combination generally to mean any:

- merger or consolidation

- share exchange

- sale, lease, exchange, pledge, mortgage, transfer or other disposition
(in one transaction or a series of transactions) of assets representing
10% or more of (A) the market value of the corporation's consolidated
assets, (B) the market value of the corporation's outstanding shares

- the corporation's consolidated net income; issuance or transfer of shares
from the corporation to the interested stockholder

- plan of liquidation or dissolution

- transaction in which the interested stockholder's proportionate share of
the outstanding shares of any class of securities is increased

- financing arrangements pursuant to which the interested stockholder,
directly or indirectly, receives a benefit except proportionately as a
stockholder

Under the Combination Act an interested stockholder generally is defined as
any person who is the direct or indirect beneficial owner of ten percent or more
of any class or series of the outstanding voting stock, or any affiliate or
associate of the corporation who has been the direct or indirect beneficial
owner of ten percent of more of the voting power of any class or series of the
corporation's stock at any time within the five year period preceding the date
in question.

Some business combinations are exempt from the Combination Act, such as
those of the selling shareholders who were interested stockholders prior to the
time the corporation's stock is registered under Section 12(g) of the Exchange
Act. Consummation of a business combination that is subject to the five-year
moratorium is permitted after such period provided the transaction complies with
all applicable charter and bylaw requirements and applicable Tennessee law and
is approved by at least two-thirds of the outstanding voting stock not
beneficially owned by the interested stockholder, or when the transaction meets
fair price criteria. The fair price criteria include, without limitation, the
requirement that the per share consideration received in any such business
combination by each of the stockholders is equal to the highest of:

- the highest per share price paid by the interested stockholder during the
preceding five-year period for shares of this same class or series plus
interest thereon from such

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date at a treasury bill rate, less the aggregate amount of any cash
dividends paid and the market value of any dividends paid other than in
cash since such earliest date, up to the amount of such interest

- the highest preferential amount, if any, such class or series is entitled
to receive on liquidation

- the market value of the shares on either the date the business
combination is announced or the date when the interested stockholder
reaches the ten percent threshold, whichever is higher, plus interest
thereon less dividends as set forth above

Greenmail Act. The Tennessee Greenmail Act (the "Greenmail Act"),
contained in TBCA sections 48-103-501 through 48-103-505, prohibits any
publicly-traded Tennessee corporation from purchasing any of its shares at a
price above the market value from any person who holds more than three percent
of the class of securities to be purchased if such person has held the shares
for less than two years. For purposes of the Greenmail Act, the market value is
the average of the highest and lowest closing market price for such shares
during the 30 trading days preceding the purchase and sale of the shares;
provided that, if the seller of such shares has commenced a tender offer or has
announced an intention to seek control of the corporation, such market price
shall be based upon the average of the highest and lowest closing price for such
shares during the thirty trading days preceding the commencement of such tender
offer or the making of such announcement. The Greenmail Act permits the
corporation to purchase such shares if the purchase has been approved by the
affirmative vote of a majority of the outstanding shares of each class of voting
stock issued by the corporation or if the corporation makes an offer of at least
equal value per share to all holders of shares of such class. Any person who
sells securities to a corporation in violation of the Greenmail Act is liable to
the corporation for damages equal to two times the amount by which the aggregate
sum paid by the corporation for such securities exceeds the maximum amount
permitted under the Greenmail Act.

The effects of the Combination Act and the Greenmail Act may be to render
more difficult a change of control of Private Business by delaying, deferring or
preventing a tender offer or takeover attempt that a stockholder might consider
to be in such stockholder's best interest, including an attempt that might
result in the payment of a premium over the market price for the shares held by
such stockholder.

LIMITATION ON DIRECTORS' LIABILITY

The TBCA permits corporations to limit or terminate the personal liability
of directors to corporations and their stockholders for monetary damages for
breach of the directors' fiduciary duties of care. The duty of care requires
that, when acting on behalf of the corporation, directors must exercise informed
business judgment based on all material information reasonably available to
them. Absent the limitations now authorized by such legislation, directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their fiduciary duties
of care. Although the TBCA does not change the directors' duties of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission.

Our charter limits the liability of directors (in their capacity as
directors but not in their capacity as officers) to Private Business or its
stockholders to the fullest extent permitted by the TBCA, as so amended.
Specifically, no director of Private Business will be personally liable for
monetary damages for breach of the director's fiduciary duty as a director,
except for liability:

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- for any breach of the director's duty of loyalty to Private Business or
its stockholders

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law

- under Section 48-18-304 of the TBCA, which relates to unlawful payments
of dividends or unlawful stock repurchases or redemptions

- for any transaction from which the director derived an improper personal
benefit. The inclusion of this provision in the charter may have the
effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care,
even though such an action, if successful, might otherwise have
benefitted Private Business and its stockholders

INDEMNIFICATION AND INSURANCE

Under our charter, and in accordance with Section 48-18-502 of the TBCA,
Private Business will indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than a "derivative" action by or in the right of Private Business) by
reason of the fact that such person is or was a director of Private Business,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of Private Business, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe was unlawful.

The charter provides that Private Business will pay for the expenses
incurred by an indemnified director in defending the proceedings specified above
in advance of their final disposition, provided that such person agrees to
reimburse Private Business if it is ultimately determined that such person is
not entitled to indemnification. The charter also provides that Private Business
may, in its sole discretion, indemnify any person who is or was one of its
employees and agents or any person who is or was serving at the request of
Private Business as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise to the same
degree as the foregoing indemnification of directors and officers. In addition,
Private Business may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of Private Business or another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against and incurred by such person in such capacity, or
arising out of the person's status as such whether or not Private Business would
have the power or obligation to indemnify such person against such liability
under the provisions of the TBCA. Private Business maintains insurance for the
benefit of Private Business's officers and directors insuring such persons
against various liabilities, including liabilities under the securities laws.

In addition, Private Business has entered into indemnification agreements
with its officers, directors and key employees as described in Indemnification
Agreements on page 52.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is SunTrust Bank,
Atlanta.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. Upon completion of this offering, we will have outstanding an aggregate
of 28,526,858 shares of our common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless
such shares are purchased by "affiliates" as that term is defined in Rule 144
under the Securities Act (the "Affiliates"). The remaining 21,376,858 shares of
common stock held by existing stockholders are "restricted securities" as that
term is defined in Rule 144 under the Securities Act. Restricted securities may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or 701 promulgated under the
Securities Act, which rules are summarized below.

As a result of such contractual restrictions described below and the
provisions of Rules 144, additional shares will be available for sale in the
public market, subject to presentation of evidence satisfactory to Private
Business, including an opinion of counsel acceptable to Private Business, that
such sales may be made without registration pursuant to the Securities Act as
follows:

- 28,054 shares of common stock currently outstanding will be available for
sale into the public market following the effectiveness of the
registration statement

- 2,318,700 shares of common stock issuable upon exercise of currently
outstanding options will be eligible for sale following the effectiveness
of a registration statement on Form S-8 covering the stock options, which
we expect to file shortly after the completion of this offering

- 487,447 shares of common stock currently outstanding will be eligible for
sale under Rule 144 91 days after the date of this prospectus

- the remainder of the restricted securities will be eligible for sale from
time to time thereafter upon expiration of their respective one-year
holding periods

LOCK-UP AGREEMENTS

All of our officers and directors and certain of our stockholders have
entered into lock-up agreements under which they agreed not to transfer or
otherwise dispose of, directly or indirectly, without the consent of BT Alex.
Brown Incorporated, any shares of our common stock or any securities convertible
into or exchangeable or exercisable for shares of our common stock for a period
of 150 days following the date of this prospectus. Transfers or dispositions may
be made after that time as follows:

- no more than 20% of such securities after 150 days following the date of
this prospectus

- no more than an additional 60% of such securities after 180 days
following the date of this prospectus

- the balance of such securities after 210 days following the date of this
prospectus

Transfers or dispositions can be made during the lock-up periods in the
case of gifts for estate planning purposes where the donee signs a lock-up
agreement.

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RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately 285,269 shares immediately after this offering

- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.

RULE 144(K)

Under Rule 144(k), a person who is not deemed to have been one of our
Affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an Affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.

RULE 701

In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock or option plan or other written agreement
are eligible to resell such shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with some restrictions,
including the holding period, contained in Rule 144.

REGISTRATION RIGHTS

After this offering, the holders of 21,376,858 shares of our common stock,
or their transferees, will be entitled to rights with respect to the
registration of such shares under the Securities Act. After such a registration,
these shares that are registered will be freely tradable without restriction
under the Securities Act.

STOCK OPTIONS

Shortly after completion of this offering, we plan to file a registration
statement on Form S-8 under the Securities Act covering shares of common stock
reserved for issuance under the 1999 stock option plan and also shares of common
stock issuable upon exercise of options granted outside the 1999 stock option
plan. As of April 30, 1999, options to purchase 2,318,700 shares of common stock
were issued and outstanding, 692,040 of which are vested. This registration
statement is expected to be filed and become effective as soon as practicable
after the date of this prospectus. Accordingly, shares registered under such
registration statement will, subject to lock-up agreements, vesting provisions
and Rule 144 volume limitations applicable to our Affiliates, be available for
sale in the open market immediately after the registration statement becomes
effective.

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PLAN OF DISTRIBUTION

Subject to the terms and conditions of the underwriting agreement, the
underwriters, named below through their representatives BT Alex. Brown
Incorporated, Lehman Brothers Inc. and Salomon Smith Barney have severally
agreed to purchase from us the following respective numbers of shares of common
stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Lehman Brothers Inc.........................................
Salomon Smith Barney........................................
--------
Total.............................................
========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters are subject to conditions precedent and that the underwriters will
purchase all of the shares of common stock offered hereby if any of such shares
are purchased.

We have been advised by the representatives that the underwriters propose
to offer the shares of our common stock to the public at the initial public
offering price set forth on the cover page of this prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the initial public offering,
the offering price and other selling terms may be changed by the
representatives.

We have granted the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to 1,072,500 additional
shares of common stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. To the extent that the underwriters exercise such option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of common stock to be purchased by
it in the above table bears to 7,150,000, and we will be obligated, pursuant to
the option to sell such shares to the underwriters. The underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the common stock offered hereby. If purchased, the underwriters will
offer such additional shares on the same terms as those on which the 7,150,000
shares are being offered.

We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act.

We have agreed not to offer, sell, sell short, transfer, hypothecate,
pledge or otherwise dispose of any shares of our common stock or other
securities convertible into or exchangeable or exercisable for shares of our
common stock or derivatives of our common stock (or agreement for such) for a
period of 180 days after the date of this prospectus, directly or indirectly, by
us or otherwise, except as consideration for business acquisitions, on exercise
of currently outstanding stock options or on the issuance of options to key
employees and directors under our stock option plans and the exercise of such
options, without the prior written consent of BT Alex. Brown Incorporated.

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- no more than 20% of such securities after 150 days following the date of
this prospectus

- no more than an additional 60% of such securities after 180 days
following the date of this prospectus

- the balance of such securities after 210 days following the date of this
prospectus

Transfers or dispositions can be made during the lock-up periods in the
case of gifts for estate planning purposes where the donee signs a lock-up
agreement.

The representatives have advised us that the underwriters do not intend to
confirm sales to any account over which they exercise discretionary authority.

To facilitate this offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the market price of our common
stock. Specifically, the underwriters may over-allot shares of our common stock
in connection with this offering, thereby creating a short position in the
underwriters' syndicate account. Additionally, to cover such over-allotments or
to stabilize the market price of our common stock, the underwriters may bid for,
and purchase, shares of our common stock in the open market. Any of these
activities may maintain the market price of our common stock at a level above
that which might otherwise prevail in the open market. The underwriters are not
required to engage in these activities, and, if commenced, any such activities
may be discontinued at any time. The representatives of the underwriters, on
behalf of the syndicate of underwriters, also may reclaim selling concessions
allowed to an underwriter or dealer, if the syndicate repurchases shares
distributed by that underwriter or dealer.

The underwriters and their respective affiliates may be lenders to, engage
in transactions with, and perform services for us in the ordinary course of
business. We paid $3.0 million to BT Alex. Brown in consideration of its
providing advisory services to us in connection with the recapitalization. The
amount paid for these services was determined by arms' length negotiations
between us and BT Alex. Brown. We believe that such amount is within standard
industry parameters for a transaction of that nature. In addition, BT Investment
Partners, Inc. owns approximately 1.75% of our outstanding common stock.

Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in such negotiations will be
prevailing market conditions, the results of our operations in recent periods,
the market capitalizations and stages of development of other companies which we
and the representatives of the underwriters believe to be comparable to us,
estimates of our business potential, the present state of our development and
other factors deemed relevant.

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LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for Private Business by Harwell Howard Hyne Gabbert & Manner, P.C.,
Nashville, Tennessee. Some legal matters related to this offering will be passed
upon for the underwriters by Brobeck, Phleger & Harrison LLP, Washington, D.C.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1997 and 1998, and for each of the three years in the respective periods ended
December 31, 1996, December 31, 1997 and December 31, 1998 included in this
prospectus and Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

Private Business has filed with the SEC a registration statement on Form
S-l pursuant to the Securities Act with respect to the common stock offered
hereby. The prospectus does not contain all the information set forth in the
registration statement, some of which is omitted as permitted by the rules and
regulations of the SEC. Statements contained in the prospectus as to the
contents of any contract, agreement or other document filed with the
registration statement as exhibits are necessarily summaries of such documents,
and each such statement is qualified in its entirety by reference to the copy of
the applicable document filed as an exhibit to the registration statement. For
further information about Private Business and the securities offered hereby,
reference is made to the registration statement and to the consolidated
financial statements, schedules and exhibits filed as a part thereof.

Upon completion of the offering, Private Business will be subject to the
information requirements of the Exchange Act, and, in accordance therewith, will
file reports and other information with the SEC. The registration statement, the
exhibits and schedules forming a part thereof and the reports and other
information filed by Private Business with the SEC in accordance with the
Exchange Act may be inspected without charge at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following regional offices of the SEC: 7 World Trade Center, Suite 1300, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois, 60661-2511. Copies of such materials or any part
thereof may also be obtained from the Public Reference Room of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may obtain
information regarding the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an Internet Web site at
http://www.sec.gov that contains reports, proxy statements and other
information.

63
<PAGE> 67

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998.......................... F-4
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1996, 1997 and 1998.................... F-5
Consolidated Statements of Cash Flows for the years December
31, 1996, 1997 and 1998................................... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Consolidated Balance Sheets as of December 31,
1998 and March 31, 1999................................... F-20
Unaudited Consolidated Statements of Operations for the
three months ended March 31, 1998 and March 31, 1999...... F-21
Unaudited Consolidated Statements of Cash Flows for the
three months ended March 31, 1998 and March 31, 1999...... F-22
Notes to Unaudited Consolidated Financial Statements........ F-23
</TABLE>

F-1
<PAGE> 68

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Private Business, Inc.:

We have audited the accompanying consolidated balance sheets of PRIVATE
BUSINESS, INC. (a Tennessee Corporation) and subsidiaries as of December 31,
1997 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Private Business, Inc. and
subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

Nashville, Tennessee
March 17, 1999

F-2
<PAGE> 69

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998

<TABLE>
<CAPTION>
1997 1998
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 4,815,720 $ 285,370
Accounts receivable -- trade, net of allowance for
doubtful accounts of $60,000 and $60,000,
respectively............................................ 5,404,754 5,527,200
Accounts receivable -- other.............................. 410,314 151,528
Deferred tax asset........................................ -- 1,103,749
Other current assets...................................... 275,246 903,356
----------- -------------
Total current assets............................... 10,906,034 7,971,203
----------- -------------
PROPERTY AND EQUIPMENT, NET................................. 9,679,106 10,455,587
OTHER ASSETS:
Restricted cash........................................... -- 5,000,000
Note receivable........................................... 19,911 7,474
Software development costs, net........................... 332,444 309,061
Deferred tax asset........................................ -- 1,932,117
Intangible and other assets, net.......................... 57,309 5,920,730
----------- -------------
Total other assets................................. 409,664 13,169,382
----------- -------------
Total assets....................................... $20,994,804 $ 31,596,172
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,369,863 $ 2,448,759
Accrued liabilities....................................... 4,818,518 5,754,453
Dividends payable......................................... -- 2,174,564
Deferred revenue.......................................... 1,839,676 1,677,239
Current portion of long-term debt......................... 105,723 3,750,000
----------- -------------
Total current liabilities.......................... 8,133,780 15,805,015
----------- -------------
OTHER LONG-TERM PAYABLE..................................... -- 5,000,000
LONG TERM DEBT, net of current portion...................... 4,078,277 90,375,000
----------- -------------
Total liabilities.................................. 12,212,057 111,180,015
----------- -------------
MINORITY INTEREST........................................... 140,126 --
----------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, Series A Convertible, no par value;
5,624,404 authorized, issued and outstanding in 1998.... -- 60,000,000
Common stock, no par value; 12,000,000 and 11,960,455
shares authorized and 10,027,779 and 5,064,028 shares
issued and outstanding, respectively.................... -- --
Additional paid-in capital................................ 1,190,000 (131,090,397)
Retained earnings (accumulated deficit)................... 7,452,621 (8,493,446)
----------- -------------
Total stockholders' equity (deficit)............... 8,642,621 (79,583,843)
----------- -------------
Total liabilities and stockholders' equity......... $20,994,804 $ 31,596,172
=========== =============
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-3
<PAGE> 70

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Software license.............................. $ 3,193,475 $ 2,885,575 $ 2,946,846
Royalties..................................... 29,027,633 38,449,795 43,792,518
Maintenance and other......................... 1,767,289 2,325,005 4,065,196
----------- ----------- -----------
Total revenues........................ 33,988,397 43,660,375 50,804,560
----------- ----------- -----------
OPERATING EXPENSES:
General and administrative.................... 10,958,473 11,835,326 13,396,932
Selling and marketing......................... 12,910,929 15,867,499 20,493,785
Research and development...................... 647,741 1,124,550 862,102
Amortization.................................. 115,277 188,947 443,339
Other operating............................... 168,508 340,361 311,787
Recapitalization charges...................... -- -- 13,780,741
----------- ----------- -----------
Total operating expenses.............. 24,800,928 29,356,683 49,288,686
----------- ----------- -----------
OPERATING INCOME................................ 9,187,469 14,303,692 1,515,874
OTHER EXPENSES:
Interest expense.............................. -- 146,438 3,404,581
Minority interest............................. -- 140,126 157,551
----------- ----------- -----------
Total other expenses.................. 286,564 3,562,132
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES............... 9,187,469 14,017,128 (2,046,258)
Income tax provision (benefit).................. 582,038 743,448 (2,584,909)
----------- ----------- -----------
NET INCOME...................................... 8,605,431 13,273,680 538,651
Preferred stock dividends and accretion......... -- -- (2,203,776)
----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS.................................. $ 8,605,431 $13,273,680 $(1,665,125)
----------- ----------- -----------
EARNINGS (LOSS) PER SHARE:
Basic......................................... $ 0.86 $ 1.32 $ (0.21)
----------- ----------- -----------
Diluted....................................... $ 0.85 $ 1.30 $ (0.21)
----------- ----------- -----------
PRO FORMA INFORMATION ASSUMING CONVERSION TO C
CORP (Note 11):
Net income (loss) available to common
stockholders............................... $ 5,534,156 $ 8,540,375 $(5,116,903)
----------- ----------- -----------
Basic......................................... $ 0.55 $ 0.85 $ (0.64)
----------- ----------- -----------
Diluted....................................... $ 0.55 $ 0.84 $ (0.64)
----------- ----------- -----------
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-4
<PAGE> 71

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
PREFERRED STOCK RETAINED
SERIES A CONVERTIBLE ADDITIONAL EARNINGS
----------------------- COMMON PAID-IN (ACCUMULATED
SHARES AMOUNT STOCK CAPITAL DEFICIT) TOTAL
--------- ----------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1995.......................... -- $ -- 10,027,779 $ 1,190,000 $ (252,802) $ 937,198
Common stock dividends..................... -- -- -- -- (1,414,839) (1,414,839)
Net income................................. -- -- -- -- 8,605,431 8,605,431
--------- ----------- ---------- ------------- ------------ -------------
BALANCE,
December 31, 1996.......................... -- -- 10,027,779 1,190,000 6,937,790 8,127,790
Common stock dividends..................... -- -- -- -- (12,758,849) (12,758,849)
Net income................................. -- -- -- -- 13,273,680 13,273,680
--------- ----------- ---------- ------------- ------------ -------------
BALANCE,
December 31, 1997.......................... -- -- 10,027,779 1,190,000 7,452,621 8,642,621
Net income through August 7, 1998.......... -- -- -- -- 6,828,321 6,828,321
Common stock dividends..................... -- -- -- -- (7,775,615) (7,775,615)
Preferred stock dividends.................. -- -- -- -- (2,174,564) (2,174,564)
Issuance of preferred stock................ 5,624,404 60,000,000 -- (322,005) -- 59,677,995
Payments to common stockholders in
recapitalization......................... -- -- (4,963,751) (131,987,604) (6,505,327) (138,492,931)
Net loss for C Corp period................. -- -- -- -- (6,289,670) (6,289,670)
Accretion on preferred stock............... -- -- -- 29,212 (29,212)
------------
Comprehensive income (loss) for C Corp
period................................. (6,318,882)
--------- ----------- ---------- ------------- ------------ -------------
BALANCE,
December 31, 1998.......................... 5,624,404 $60,000,000 5,064,028 $(131,090,397) $(8,493,446) $ (79,583,843)
========= =========== ========== ============= ============ =============
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-5
<PAGE> 72

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
1996 1997 1998
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 8,605,431 $13,273,680 $ 538,651
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 585,871 909,549 1,605,259
Bad debt expense.......................................... -- 60,000 --
Deferred taxes............................................ -- -- (3,035,866)
Minority interest......................................... -- 140,126 157,551
Changes in assets and liabilities:
Accounts receivable..................................... (1,164,934) (2,308,909) (122,446)
Other current assets.................................... (714,422) 31,263 (369,324)
Other noncurrent assets................................. 9,747 (3,428) (1,851,945)
Accounts payable........................................ 1,994,261 (858,573) 1,078,894
Accrued liabilities..................................... 1,230,150 1,005,237 935,935
Deferred revenue........................................ (341,206) 469,104 (162,437)
------------ ----------- ------------
Net cash provided by (used in) operating
activities....................................... 10,204,898 12,718,049 (1,225,728)
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (5,103,050) (4,644,158) (1,938,401)
Software development costs................................ (151,540) (284,865) (229,107)
Proceeds from sale of equipment........................... 5,969 38,209 --
Acquisition of minority interest.......................... -- -- (4,500,000)
Payments received on notes receivable..................... 17,911 18,035 12,437
------------ ----------- ------------
Net cash used in investing activities.............. (5,230,710) (4,872,779) (6,655,071)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt issuance..................... 845,613 3,338,387 95,000,000
Repayments on note payable................................ -- -- (4,184,000)
Repayments on long-term debt.............................. -- -- (875,000)
Proceeds from sale of preferred stock, net................ -- -- 59,677,995
Payments to common stockholders in recapitalization....... -- -- (138,492,931)
Dividends on common stock................................. (1,414,839) (12,758,849) (7,775,615)
------------ ----------- ------------
Net cash provided by (used in) financing
activities....................................... (569,226) (9,420,462) 3,350,449
------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH............................. 4,404,962 (1,575,192) (4,530,350)
CASH at beginning of year................................... 1,985,950 6,390,912 4,815,720
------------ ----------- ------------
CASH at end of year......................................... $ 6,390,912 $ 4,815,720 $ 285,370
============ =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for income taxes during period.............. $ 202,560 $ 762,214 $ 851,957
============ =========== ============
Cash payments of interest during period................... $ 2,344 $ 194,555 $ 3,404,581
============ =========== ============
SUPPLEMENTAL NONCASH DISCLOSURES:
Dividends accrued on preferred stock...................... $ -- $ -- $ 2,174,564
============ =========== ============
</TABLE>

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-6
<PAGE> 73

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Private Business, Inc. ("the Company") was incorporated under the laws of
the state of Tennessee on December 26, 1990 for the purpose of developing,
marketing and servicing a software package to be used by financial institutions
to purchase and manage small business receivables. The Company operates
primarily in the United States and its customers consist of banks of various
sizes, primarily community banks. During 1998, the Company purchased the
minority interests in three majority owned subsidiaries, Private Business
Insurance, Inc. ("Insurance"), Private Business Processing, Inc. ("Processing")
and Private Business Capital, Inc. ("Capital"). Insurance brokers credit and
fraud insurance, which is underwritten through a third party, to its customers.
Processing performs the outsourced Business Manager functions for various client
banks and Capital markets the Business Manager accounts receivable financing
solution directly to small businesses.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. The Company records minority interest in
earnings to the extent of earnings allocable to minority interests and minority
interests in losses to the extent minority interests capital exists. As
mentioned above, all minority interest in subsidiaries were purchased by the
Company during 1998. All significant intercompany transactions and balances have
been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.

RESTRICTED CASH

In connection with the purchase of the treasury stock by the Company during
1998, the Company is required to maintain cash in escrow for payment to the
buyers of the convertible preferred stock if claims arise in connection with the
purchase and to the sellers of the treasury shares to the extent the escrow is
not subject to such claims. The cash is held in escrow until the 30th day
following the delivery of the Company's 1999 audited financial statements to the
purchasers. The restricted cash balance is offset by a long term payable to
either the buyers of the convertible preferred stock, if so claimed, or to the
sellers of the treasury stock when the escrow agreement terminates.

PROPERTY AND EQUIPMENT

Depreciation is calculated using an accelerated method over 39 years for
buildings, 5 to 10 years for equipment and software and the life of the lease
for all leasehold improvements. Expenditures for maintenance and repairs are
charged to expense as incurred, whereas expenditures for renewals and
betterments are capitalized.

F-7
<PAGE> 74
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SOFTWARE DEVELOPMENT COSTS

Development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as incurred
until technological feasibility has been established. After such time, any
additional costs are capitalized in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 86, Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed. Capitalized software
development costs are amortized on a straight-line basis over three years.

INTANGIBLE AND OTHER ASSETS

Intangible and other assets consist primarily of the excess of purchase
price over the fair value of the identifiable assets acquired for the minority
share of Insurance purchased during 1998 and debt issuance costs associated with
the bank debt acquired during 1998. The excess of the purchase price over the
fair value of unidentifiable assets acquired (goodwill) is being amortized on a
straight-line basis over a period of 20 years. Debt issuance costs are being
amortized on a straight-line basis over the respective terms of the bank loans.

REVENUE RECOGNITION

The Company accounts for software revenues in accordance with the American
Institute of Certified Public Accountants' Statement of Position 97-2, Software
Revenue Recognition ("SOP 97-2"). Further, the Company has adopted the
provisions of SOP 98-4 ("Software Revenue Recognition"), which supercedes and
clarifies certain provisions of SOP 97-2.

Software Licenses

The Company licenses its software under automatically renewing agreements,
which allows the licensees use of the software for the term of the agreement and
each renewal period. The fee charged for this license is specifically stated in
the contract and is not inclusive of any postcontract customer support. The
agreement does not allow for cancellation during the term of the agreement;
therefore, the entire fee is non-refundable and is recognized at the time a
contract is signed and executed and the software has been mailed.

The original license agreement also includes a fee for postcontract
customer support (PCS), which must be renewed annually. This fee covers all
customer training costs, marketing assistance, phone support, and any and all
software enhancements and upgrades. The Company defers the entire amount of this
fee and recognizes it over the twelve-month period in which the PCS services are
provided.

Royalties

The Company's license agreements are structured in a manner that provides
for a continuing royalty to be paid for all receivables purchased by customers.
These royalties are recognized as earned based on the volume of receivables
purchased by customers.

F-8
<PAGE> 75
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maintenance and Other

Maintenance revenue is deferred and recognized over the period in which PCS
services are provided. Insurance's, Medical's and Capital's revenues are
recognized as the services are performed.

INCOME TAXES

During 1996 and 1997 and through August 7, 1998, the Company was an S
Corporation, which resulted in all federal tax liability flowing through to the
stockholders. On August 7, 1998 the Company converted to a C Corporation,
therefore income earned from that date through December 31, 1998 is subject to
federal income taxes. The income tax provisions recorded in both 1996 and 1997
and through August 7, 1998 in the accompanying financial statements are for
state income taxes.

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS 109"). Under
the asset and liability method of SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
fiscal years in which those temporary differences are expected to be recovered
or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.

CONCENTRATION OF REVENUES

Substantially all of the Company's revenues are generated from financial
institutions who in turn provide cash management services to small and medium
size operations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

To meet the reporting requirements of SFAS No. 107, Disclosures About Fair
Value of Financial Instruments, the Company calculates the fair value of
financial instruments at quoted market prices. At December 31, 1998, there were
no material differences in the book values of the Company's financial
instruments and their related fair values.

LONG-LIVED ASSETS

The Company utilizes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of, to periodically
evaluate the carrying value of its properties and other long-lived assets in
relation to the future undiscounted cash flows of the related assets to assess
recoverability.

F-9
<PAGE> 76
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COMPREHENSIVE INCOME

During 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 requires that the changes in the amounts of certain items,
including gains and losses on certain securities, be shown in the financial
statements. The Company adopted the provisions of SFAS No. 130 on January 1,
1998.

SEGMENT DISCLOSURES

During 1998, the Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes standards for
the method that business enterprises report information about operating segments
in annual and interim financial statements. SFAS No. 131 also establishes
standards for related disclosures about products and services, geographic area
and major customers. The Company operates in one industry segment, banking
services, and accordingly, the adoption of SFAS No. 131 had no impact on the
Company's financial statement disclosures.

RECLASSIFICATION

Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform to the 1998 presentation.

2. RECAPITALIZATION

On August 7, 1998, the Company completed a series of transactions
effectively resulting in a recapitalization of the Company. A summary of the
transactions is as follows:

- The Company purchased 4,963,751 (49.5%) shares of the Company's common
stock then outstanding for $138,492,931 ($27.90 per share), which
includes acquisition costs of approximately $152,000. The common stock
was immediately retired. In accordance with generally accepted
accounting principles, the entire consideration paid has been
reflected as cost of the common stock (which had an estimated fair
market value of $19.77 per share prior to the issuance of the debt)
and has been reflected as a reduction of paid-in-capital and
undistributed earnings as of the recapitalization date.

- The Company acquired term loan debt from a bank in the amount of
$93,429,311, net of debt issuance costs of $1,570,689. (Note 5)

- The Company issued 5,624,404 shares of Series A Convertible Preferred
Stock for $10.67 per share, or $60,000,000. The Company determined
that the issuance price per share of $10.67 was the fair market value
of the Company's stock after the issuance of the debt. Costs
associated with the issuance of these shares approximated $322,000 and
have been netted against additional paid-in capital in the
accompanying consolidated financial statements. (Note 8)

- The Company acquired the minority interests of Insurance for
$4,500,000, which resulted in approximately $4,100,000 of goodwill
being recorded.

Taking into consideration the above events, the Company also adjusted the
exercise prices for all stock options outstanding as of August 7, 1998. The
adjusted exercise prices meet the criteria set forth in Emerging Issues Task
Force 90-9, therefore the repricing of the options did not result in a new
measurement date and no additional compensation expense

F-10
<PAGE> 77
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

has been recorded in the accompanying consolidated financial statements.
Furthermore, the Company's Board of Directors approved a special bonus to
employees totaling approximately $10,000,000, which is included in
Recapitalization charges in the accompanying consolidated statement of
operations. Also included in Recapitalization charges are fees paid for various
services performed relating to the recapitalization, including investment
banking, legal and accounting services, which amounted to approximately
$3,800,000.

3. PROPERTY AND EQUIPMENT

Property and equipment are classified as follows:

<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Building.............................................. $5,650,950 $ 5,826,015
Land.................................................. 1,968,000 1,968,000
Purchased software.................................... 602,599 1,204,244
Leasehold improvements................................ 167,685 174,640
Furniture and equipment............................... 2,978,325 4,095,475
---------- -----------
11,367,559 13,268,374
Less accumulated depreciation....................... (1,688,453) (2,812,787)
---------- -----------
$9,679,106 $10,455,587
========== ===========
</TABLE>

4. INTANGIBLE AND OTHER ASSETS

Intangible and other assets consist of the following:

<TABLE>
<CAPTION>
1997 1998
------- ----------
<S> <C> <C>
Goodwill, net of accumulated amortization of $3,000 and
$86,152................................................. $17,000 $4,046,171
Debt issuance costs, net of accumulated amortization of
$111,010................................................ -- 1,758,239
Other, net................................................ 40,309 116,320
------- ----------
$57,309 $5,920,730
======= ==========
</TABLE>

5. SHORT-TERM BORROWINGS

The Company has a revolving credit facility agreement in place with a bank
that allows for the Company to draw up to a maximum of $15,000,000. The facility
matures August 7, 2004. The interest rate is based on the Eurodollar or prime
rate plus a margin (7.78125% at December 31, 1998). As of December 31, 1998
there were no amounts drawn against this facility. See Note 6 for additional
information.

F-11
<PAGE> 78
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DESCRIPTION 1997 1998
- ----------- ---------- -----------
<S> <C> <C>
Term Loan A with a bank, principal due quarterly
beginning December 31, 1998; interest due monthly at
the Eurodollar or bank prime rate plus a margin
(7.78125% at December 31, 1998); matures August 7,
2004................................................ $ -- $39,250,000
Term Loan B with a bank, principal due quarterly
beginning December 31, 1998; interest due monthly at
the Eurodollar or bank prime plus a margin (8.03125%
at December 31, 1998); matures August 7, 2006....... -- 54,875,000
Note payable with a bank, interest payable monthly at
LIBOR plus 1.60%, retired in 1998................... 4,184,000 --
---------- -----------
4,184,000 94,125,000
Less current portion................................ (105,723) (3,750,000)
---------- -----------
$4,078,277 $90,375,000
========== ===========
</TABLE>

Term Loans A and B and the revolving credit facility are secured by
substantially all assets of the Company and its subsidiaries. All three debt
instruments include certain restrictive financial covenants related to maximum
capital expenditures, minimum earnings before interest, taxes, depreciation and
amortization ("EBITDA"), ratio of consolidated debt to EBITDA, interest coverage
ratio and fixed coverage ratio. As of December 31, 1998, the Company was in
compliance with these covenants.

The debt agreement prohibits the Company from declaring and paying any
dividends during the respective terms of the loans.

The interest margin for the term loans above is determined by the lender
based on the ratio of consolidated debt to EBITDA.

Future maturities of long-term debt are due as follows:

<TABLE>
<S> <C>
1999........................................................ $ 3,750,000
2000........................................................ 5,000,000
2001........................................................ 7,000,000
2002........................................................ 8,750,000
2003........................................................ 9,750,000
Thereafter.................................................. 59,875,000
-----------
$94,125,000
===========
</TABLE>

F-12
<PAGE> 79
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

Income tax expense (benefit) consisted of the following for the three years
ended December 31, 1998:

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- -----------
<S> <C> <C> <C>
Current state income tax expense............. $582,038 $743,448 $ 450,957
Conversion from S Corp to C Corp status...... -- -- (1,053,581)
Deferred tax benefit......................... -- -- (1,982,285)
-------- -------- -----------
Income tax expense (benefit), net............ $582,038 $743,448 $(2,584,909)
======== ======== ===========
</TABLE>

For the first seven months of 1998, the Company, as a S Corp, had income
before taxes of approximately $7,300,000 for which a state tax provision of
$450,957 was recorded. At the time of conversion from an S Corp to a C Corp, the
Company recorded a net deferred tax asset of approximately $1,054,000 for the
temporary differences that existed as of the conversion date. For the last five
months of 1998, the Company, as a C Corp, had a taxable loss of approximately
$5,300,000, resulting in an income tax benefit of approximately $1,982,000. A
reconciliation of the tax benefit from the U.S. Federal statutory rate to the
effective rate for the C Corp period ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Tax benefit at U.S. Federal statutory rate.................. $(3,263,938)
State tax benefit........................................... (279,766)
Expenses not deductible..................................... 1,561,419
-----------
$(1,982,285)
===========
</TABLE>

All tax provisions for 1996, 1997 and the first seven months of 1998 were
state income tax provisions.

Significant components of the Company's deferred tax liabilities and
assets, using a tax rate of 38% at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
1998
----------
<S> <C>
Current assets (liabilities):
Reserves on assets........................................ $ (131,956)
Liabilities not yet deductible............................ 1,235,705
----------
Net current assets................................ 1,103,749
----------
Noncurrent assets (liabilities):
Net operating loss carryforwards.......................... 1,942,757
Other..................................................... (10,640)
----------
Net noncurrent asset.............................. 1,932,117
----------
Total net deferred tax asset...................... $3,035,866
==========
</TABLE>

Net operating loss carryforwards of approximately $5,113,000 expire in
2018.

In accordance with SFAS 109, management has evaluated the need for a
valuation allowance for the Company's deferred tax assets. Based on expected
future earnings, management believes that deferred tax assets are realizable,
and therefore no valuation allowance has been provided.

F-13
<PAGE> 80
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. CONVERTIBLE PREFERRED STOCK

On August 7, 1998 the Company sold 5,624,404 shares of Series A Convertible
Preferred Stock for a total of $60,000,000. The preferred stock is entitled to
dividends, in preference to the holders of any and all other classes of capital
stock of the Company, at a rate of $.96 per share of preferred stock per annum
commencing on the date of issuance.

The Series A Convertible Preferred Stock, in the event of any liquidation,
dissolution or winding up of the Company, contains a liquidation preference over
all other capital stock of the Company equal to the greater of $10.6678 per
share plus any accumulated but unpaid dividends or the fair market value
redemption price as determined by the Board of Directors.

Beginning in 2003 and annually thereafter through 2005, the holders of not
less than two-thirds of the voting power of the Convertible Preferred Stock may
elect to require the Company to redeem up to one-third of the Convertible
Preferred Stock in each period for an amount equal to the face amount of the
preferred or convertible stock. For Convertible Preferred Stock redeemed in
2005, the amount required to be paid by the Company is the higher of the market
value as defined or face amount. Prior to 2003, the preferred stock is not
redeemable at the option of the holder, except under certain extraordinary
transactions, including a merger or consolidation of the Company, the sale or
transfer of all or substantially all of the properties and assets of the
Company, any purchase by any party other than the existing stockholders that
results in a party owning a majority of the voting power immediately after such
purchase, the redemption or repurchase of shares representing a majority of the
voting power of the outstanding shares of capital stock of the Company or a
public offering not constituting a qualified public offering.

The Series A Convertible Preferred Stock is convertible to common stock on
a one share for one share basis at the option of the preferred stockholders at
any time, upon the written election of the stockholders, without the payment of
any additional consideration. The common stock conversion rate is subject to
adjustment from time to time as outlined in the Company's Certificate of
Incorporation ("Certificate"). In the event of the Company's first underwritten
qualified offering to the public (listed for trading on either the New York
Stock Exchange or the Nasdaq National Market) at a designated offering price and
yielding a minimum net proceeds pursuant to an effective registration statement
under the Securities Act of 1933, each share of Series A Convertible Preferred
Stock shall be automatically converted, without the payment of any additional
consideration or any accumulated but undeclared dividends, into shares of common
stock.

In the event that any public offering of the Company's common stock does
not meet the minimum offering price or net proceed amounts as defined in the
Certificate, the Company intends to obtain a commitment from each preferred
stockholder to convert the preferred stock to common stock prior to the
consummation of the public offering.

9. DIVIDENDS

The common stock dividend amounts declared in 1996, 1997 and 1998 are
included in the consolidated statements of stockholders' equity in the years
declared. All respective amounts declared during the calendar years 1996, 1997
and 1998 were paid during that year. The 1998 preferred stock dividend of
$2,174,564 is recorded as a payable in the accompanying consolidated balance
sheet.

F-14
<PAGE> 81
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. EMPLOYEE STOCK OPTION PLAN

As of December 31, 1998, the Board of Directors had granted nonqualified
stock options to certain key employees. All options, if not exercised or
otherwise specified, expire after 10 years and cannot be sold or transferred to
any other party. All options granted, unless otherwise specified, require a five
year vesting period from the date of grant. If an employee is terminated or
leaves the Company prior to the options being vested, the options are forfeited
and must be returned to the Company. All stock options granted are accounted for
in accordance with Accounting Principles Board ("APB") Opinion No. 25., which
requires that compensation cost be measured by the difference between the quoted
market price of the stock at the date of grant or award and the option price.

A summary of the status of the Company's stock options is as follows for
the three years ended December 31, 1998:

<TABLE>
<CAPTION>
1996
--------------------------
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at beginning of period.................... 210,500 $0.83
Granted............................................. 183,000 3.06
Exercised........................................... -- --
Canceled............................................ -- --
------- -----
Outstanding at end of period.......................... 393,500 $1.86
======= =====
Exercisable......................................... 35,000 $0.66
======= =====
</TABLE>

<TABLE>
<CAPTION>
1997
--------------------------
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at beginning of period.................... 393,500 $1.86
Granted............................................. 293,000 4.12
Exercised........................................... -- --
Canceled............................................ (12,500) 1.93
------- -----
Outstanding at end of period.......................... 674,000 $2.84
======= =====
Exercisable........................................... 35,000 $0.66
======= =====
</TABLE>

F-15
<PAGE> 82
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1998
--------------------------
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at beginning of period.................... 674,000 $ 2.84
Granted.......................................... 237,000 10.67
Exercised........................................ -- --
Canceled......................................... (27,500) 3.14
------- ------
Outstanding at end of period.......................... 883,500 $ 4.93
======= ======
Exercisable........................................... 35,000 $ 0.66
======= ======
</TABLE>

The Company has not recorded compensation expense relating to these
options, as in the opinion of the Board of Directors and management, the
Company's common stock had a market value as of the date of grant that
approximated the respective exercise prices above.

As discussed above, the Company accounts for all options using APB No. 25,
however all 1996 through 1998 options are subject to the disclosure requirements
of SFAS No. 123. SFAS No. 123 requires that compensation expense, related to
options granted, be calculated based on the fair value of the options as of the
date of grant. The fair value calculations take into account the exercise prices
and expected lives of the options, the current price of the underlying stock,
its expected volatility, the expected dividends on the stock, and the current
risk-free interest rate for the expected life of the option. Under SFAS No. 123,
the fair value of the 1996, 1997 and 1998 options at the date of grant was
approximately $1.78, $2.25 and $3.19 per share, respectively. The fair value was
calculated using a risk-free rate of 6.065%, 5.75% and 4.45% for 1996, 1997 and
1998, respectively, and an expected life of the options of eight years. Had the
Company adopted SFAS 123 to account for such options, the Company's pro forma
net income and earnings per share would be as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) available to common
stockholders........................... $8,564,431 $13,150,680 $(1,882,125)
Earnings per share:
Basic.................................. $ 0.85 $ 1.31 $ (0.24)
========== =========== ===========
Diluted................................ $ 0.84 $ 1.29 $ (0.24)
========== =========== ===========
</TABLE>

11. NET INCOME (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by dividing
net income (loss) by the weighted average number of common and common equivalent
shares outstanding during the fiscal year, which includes the additional
dilution related to conversion of stock options as computed under the treasury
stock method. Neither the outstanding stock options nor the Series A Convertible
Preferred Stock have been included in the adjusted weighted average common
shares outstanding for 1998 as the effects of conversion are antidilutive.

F-16
<PAGE> 83
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents information necessary to calculate earnings
per share for the three years ended December 31, 1998:

<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) available to common
stockholders.......................... $ 8,605,431 $13,273,680 $(1,665,125)
=========== =========== ===========
Weighted average common shares
outstanding........................... 10,027,779 10,027,779 7,959,550
Plus additional shares from common stock
equivalent shares:
Options............................... 124,559 186,038 --
----------- ----------- -----------
Adjusted weighted average common shares
outstanding........................... 10,152,338 10,213,817 7,959,550
=========== =========== ===========
</TABLE>

As mentioned in Note 7, the Company converted from an S Corp to a C Corp on
August 7, 1998. The following pro forma amounts present the basic earnings per
share and diluted earnings per share as if the Company had been a C Corp for all
three years ended December 31, 1998:

<TABLE>
<CAPTION>
(PRO FORMA)
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) available to common
stockholders.......................... $ 8,605,431 $13,273,680 $(1,665,125)
Additional tax provision................ (3,071,275) (4,733,305) (3,451,778)
----------- ----------- -----------
Pro forma net income (loss) available
to common stockholders............. $ 5,534,156 $ 8,540,375 $(5,116,903)
=========== =========== ===========
Basic earnings (loss) per share......... $ 0.55 $ 0.85 $ (0.64)
=========== =========== ===========
Diluted earnings (loss) per share....... $ 0.55 $ 0.84 $ (0.64)
=========== =========== ===========
</TABLE>

12. COMMITMENTS AND CONTINGENCIES

The Company leases office space and office equipment under various
operating lease agreements. Rent expense for the years ended December 31, 1996,
1997 and 1998 totaled approximately $475,000, $370,000 and $379,000,
respectively, and is included in general and administrative expense in the
consolidated statement of operations.

As of December 31, 1998, the future minimum lease payments relating to the
operating lease obligations are as follows:

F-17
<PAGE> 84
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is also subject to various legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not materially
affect the financial position of the Company.

13. EMPLOYEE SAVINGS PLAN

The Company has an employee savings plan, the Private Business, Inc. 401(k)
Profit Sharing Plan ("the Plan"), which permits participants to make
contributions by salary reduction pursuant to section 401(k) of the Internal
Revenue Code. The Company matches contributions ($.50, $.50 and $1 in 1996, 1997
and 1998, respectively, for every $1 contributed by employees) up to a maximum
of $500, $750 and $1,000 per employee per year for 1996, 1997 and 1998,
respectively, and may, at its discretion, make additional contributions to the
plan. Employees are eligible for participation beginning with the quarter
immediately following one year of service. Total contributions made by the
Company to the plan were $44,754, $105,767 and $151,858 in 1996, 1997 and 1998,
respectively, and is included in the general and administrative expense in the
consolidated statements of operations.

14. RELATED PARTY TRANSACTIONS

Prior to 1999, the Company performed various management and administration
functions for Board Member, Inc.; Madison Land; Maryland Farms Land, LLC;
Maryland Farms South, LLC; Private Business Partners, Inc.; Careers, Inc.;
Discount Brokerage Services, Inc.; Senior Achievement; and Imagic Corporation,
which are owned by some of the principal stockholders of the Company. The
Company charges a monthly management fee, which is equal to a percentage of
certain Company employees' salaries for these services. These charges totaled
approximately $55,000, $74,000 and $180,000 for 1996, 1997 and 1998,
respectively and have been netted against general and administrative expenses in
the accompanying statements of operations.

The Company entered into two promissory note agreements dated February 7,
1994 and June 15, 1994 for $50,000 and $15,000, respectively, with A.R. Systems,
Inc. ("A.R. Systems") and Monty E. Strecker, the sole stockholder of A.R.
Systems and a former employee of the Company. The terms of the notes call for
quarterly principal and interest payments beginning January 1 and July 1, 1995,
respectively, and ending on February 1 and April 1, 1999, respectively.
Outstanding principal on the notes totaled $37,946, $19,911 and $7,474 at
December 31, 1996, 1997 and 1998, respectively. The Company has also entered
into an option agreement dated February 7, 1994 with A.R. Systems and Monty E.
Strecker, which gives the Company the exclusive right to purchase A.R. Systems
for a term of five years from the date of the agreement. The agreement is
nonbinding to the Company and the formula for calculating the purchase price is
explicitly stated in the agreement. As of December 31, 1998, the Company has not
exercised this option.

The Company leases office space from Madison Land Co., which is owned by
some of the principal stockholders of the Company. Effective December 1, 1997,
there is a formal lease agreement between the two parties for rental payments of
$75,000 and a term of one year. Total rent paid to Madison Land Co. was
approximately $75,000, $43,000 and $75,000 for 1996, 1997 and 1998,
respectively.

F-18
<PAGE> 85
PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 1996 and 1997, Board Member, Inc. owed the Company
$111,384 and $148,262, respectively for payables processed and paid by the
Company, which are reimbursed by Board Member, Inc. as funds are available. As
of December 31, 1998, the Company owed Board Member, Inc. $34,462, relating to
an overpayment made by Board Member, Inc. to the Company. This amount is
included in Accounts receivable -- other in the accompanying consolidated
balance sheet.

During 1996, the Company financed the start-up of Careers, Inc., which is
owned by some of the principal stockholders of the Company. As of December 31,
1997 and 1998, respectively, Careers, Inc. owed the Company $41,728 and $803
related to payables processed and paid by the Company which is included in
Accounts receivable -- other in the accompanying consolidated balance sheet.

During 1996, the Company purchased land from Private Business Partners,
Inc., which is owned by some of the principal stockholders of the Company. The
purchase price was $1,963,000.

During 1997, the Company financed the start-up of Imagic Corporation, which
is owned by some of the principal stockholders of the Company. As of December
31, 1997 and 1998, respectively, Imagic Corporation owed the Company $53,265 and
$2,712.

F-19
<PAGE> 86

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1998 AND MARCH 31, 1999

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 285,370 $ 35,065
Accounts receivable -- trade, net of allowance for
doubtful accounts of $60,000 and $85,000,
respectively............................................ 5,527,200 5,125,137
Accounts receivable -- other.............................. 151,528 225,219
Deferred tax asset........................................ 1,103,749 828,032
Other current assets...................................... 903,356 1,154,227
------------- -------------
Total current assets............................... 7,971,203 7,367,680
------------- -------------
PROPERTY AND EQUIPMENT, NET................................. 10,455,587 10,631,844
OTHER ASSETS:
Restricted cash........................................... 5,000,000 5,000,000
Note receivable........................................... 7,474 --
Software development costs, net........................... 309,061 298,469
Deferred tax asset........................................ 1,932,117 1,831,683
Intangible and other assets, net.......................... 5,920,730 5,774,432
------------- -------------
Total other assets................................. 13,169,382 12,904,584
------------- -------------
Total assets....................................... $ 31,596,172 $ 30,904,108
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings..................................... $ -- $ 3,000,000
Accounts payable.......................................... 2,448,759 1,703,607
Accrued liabilities....................................... 5,754,453 3,259,513
Dividends payable......................................... 2,174,564 3,524,420
Deferred revenue.......................................... 1,677,239 1,504,019
Current portion of long-term debt......................... 3,750,000 4,000,000
------------- -------------
Total current liabilities.......................... 15,805,015 16,991,559
------------- -------------
OTHER LONG-TERM PAYABLE..................................... 5,000,000 5,000,000
LONG TERM DEBT, net of current portion...................... 90,375,000 89,250,000
------------- -------------
Total liabilities.................................. 111,180,015 111,241,559
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, Series A Convertible, no par value;
5,624,404 authorized, issued and outstanding............ 60,000,000 60,000,000
Common stock, no par value; 11,960,455 shares authorized
and 5,064,028 shares issued and outstanding,
respectively............................................ -- --
Additional paid-in capital................................ (131,090,397) (131,072,870)
Accumulated deficit....................................... (8,493,446) (9,264,581)
------------- -------------
Total stockholders' deficit........................ (79,583,843) (80,337,451)
------------- -------------
Total liabilities and stockholders' equity......... $ 31,596,172 $ 30,904,108
============= =============
</TABLE>

F-20
<PAGE> 87

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999

(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1999
----------- -----------
<S> <C> <C>
REVENUES:
Software license.......................................... $ 749,497 $ 730,780
Royalties................................................. 9,766,912 10,429,785
Maintenance and other..................................... 763,506 1,249,644
----------- -----------
Total revenues.................................... 11,279,914 12,410,209
OPERATING EXPENSES:
General and administrative................................ 3,442,158 3,380,609
Selling and marketing..................................... 4,995,234 5,652,887
Research and development.................................. 196,402 195,228
Amortization.............................................. 80,985 231,207
Other operating........................................... 35,256 77,790
Recapitalization charges.................................. -- --
----------- -----------
Total operating expenses.......................... 8,750,034 9,537,721
----------- -----------
OPERATING INCOME............................................ 2,529,880 2,872,488
OTHER EXPENSES:
Interest expense.......................................... 57,643 1,900,089
Minority interest......................................... 10,814 --
----------- -----------
Total other expenses.............................. 68,457 1,900,089
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES........................... 2,461,423 972,399
Income tax provision (benefit).............................. 135,880 376,151
----------- -----------
NET INCOME.................................................. 2,325,543 596,248
Preferred stock dividends and accretion..................... -- (1,367,383)
----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS.......... $ 2,325,543 $ (771,135)
=========== ===========
EARNINGS (LOSS) PER SHARE:
Basic..................................................... $ 0.23 $ (0.15)
=========== ===========
Diluted................................................... $ 0.22 $ (0.15)
=========== ===========
PRO FORMA INFORMATION ASSUMING CONVERSION TO C CORP
Net income (loss) available to common stockholders........ $ 1,475,241
===========
Basic..................................................... $ 0.14
===========
Diluted................................................... $ 0.14
===========
</TABLE>

F-21
<PAGE> 88

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1999

(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,325,543 $ 596,248
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 401,661 657,034
Deferred taxes............................................ -- 376,151
Minority interest......................................... 10,814 --
Changes in assets and liabilities:
Accounts receivable..................................... 463,165 402,063
Other current assets.................................... (304,834) (324,502)
Other noncurrent assets................................. -- --
Accounts payable........................................ 153,633 (745,150)
Accrued liabilities..................................... (1,986,025) (2,494,940)
Deferred revenue........................................ (418,265) (173,220)
----------- -----------
Net cash provided by (used in) operating
activities....................................... 645,692 (1,706,316)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................... (242,093) (602,084)
Software development costs................................ (53,750) (74,379)
Payments received on notes receivable..................... -- 7,474
----------- -----------
Net cash used in investing activities.............. (295,843) (668,989)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings....................... -- 3,000,000
Repayments on long-term debt.............................. (35,050) (875,000)
Dividends on common stock................................. (3,132,507) --
----------- -----------
Net cash provided by (used in) financing
activities....................................... (3,167,557) 2,125,000
----------- -----------
NET DECREASE IN CASH........................................ (2,817,708) (250,305)
CASH at beginning of year................................... 4,815,720 285,370
----------- -----------
CASH at end of the period................................... $ 1,998,012 $ 35,065
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for income taxes during period.............. $ 458,500 $ --
=========== ===========
Cash payments of interest during period................... $ 65,289 $ 1,900,089
=========== ===========
SUPPLEMENTAL NONCASH DISCLOSURES:
Dividends accrued on preferred stock...................... $ -- $ 1,349,856
=========== ===========
</TABLE>

F-22
<PAGE> 89

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of March 31, 1999 and the consolidated
statements of operations and cash flows for the periods ended March 31, 1998 and
March 31, 1999 have been prepared by the Company in accordance with the
accounting policies described in its annual financial statements for the year
ended December 31, 1998 and should be read in conjunction with the notes
thereto.

In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position at
March 31, 1999 and results of operations and changes in cash flows for all
periods presented have been made. The results of operations for the period ended
March 31, 1999 are not necessarily indicative of the operating results for the
full year.

2. NET INCOME (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding during the year, which includes the additional dilution related to
conversion of stock options as computed under the treasury stock method for the
three months ended March 31, 1998. Neither the outstanding stock options nor the
Series A Convertible Preferred Stock have been included in the adjusted weighted
average common shares outstanding for the three months ended March 31, 1999, as
the effects of conversion are antidilutive.

The following table presents information necessary to calculate earnings
per share for the three months ended March 31, 1998 and 1999:

<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1999
----------- -----------
<S> <C> <C>
Net income (loss) available to common stockholders....... $ 2,325,543 $ (771,135)
=========== ===========
Weighted average common shares outstanding............... 10,027,779 5,064,028
Plus additional shares from common stock equivalent
shares:
Options................................................ 400,519 --
----------- -----------
Adjusted weighted average common shares outstanding...... 10,428,298 5,064,028
=========== ===========
</TABLE>

F-23
<PAGE> 90

PRIVATE BUSINESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. STOCK SPLIT

In May 1999, the Company's Board of Directors approved a 2-for-1 stock
split. The stock split is to occur in conjunction with the pending initial
public offering of the Company's common stock. Because the stock split is not
effective until such event occurs, the audited and unaudited financial
statements included in this prospectus have not been adjusted to reflect the
impact of the proposed stock split. Earnings per common share amounts, after
giving retroactive effect to the 2-for-1 stock split, are presented below for
all of the per share amounts disclosed in the financial statements and the notes
to the financial statements:

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ---------------
1996 1997 1998 1998 1999
----- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
Net income (loss) per common share:
Reported
Basic.......................... $0.43 $0.66 $(0.10) $0.12 $(0.08)
===== ===== ====== ===== ======
Diluted........................ $0.42 $0.65 $(0.10) $0.11 $(0.08)
===== ===== ====== ===== ======
Pro forma (S Corp to C Corp
Conversion)
Basic.......................... $0.28 $0.43 $(0.32) $0.07
===== ===== ====== =====
Diluted........................ $0.27 $0.42 $(0.32) $0.07
===== ===== ====== =====
Pro forma (giving effect for SFAS
123)
Basic.......................... $0.43 $0.66 $(0.12)
===== ===== ======
Diluted........................ $0.42 $0.64 $(0.12)
===== ===== ======
</TABLE>

4. EMPLOYEE STOCK OPTION PLAN

On April 14, 1999, the Board of Directors of the Company approved the 1999
employee stock option plan. The 1999 stock option plan increased the pool of
common stock reserved for issuance under this plan and all other option and
stock purchase plans to a maximum of two million common shares. Additionally,
the Board of Directors authorized the grant of 275,350 (pre-stock split) stock
options to be effective upon completion of the Company's initial public offering
with an exercise price equal to the initial public offering price. These options
vest over forty-eight months and expire ten years from the date of grant.

F-24
<PAGE> 91

- ------------------------------------------------------
- ------------------------------------------------------

YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THE PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 1
Forward-Looking Statements.......... 6
Risk Factors........................ 6
Use of Proceeds..................... 11
Dividend Policy..................... 11
Capitalization...................... 12
Dilution............................ 13
Selected Consolidated Financial
Data.............................. 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 16
Business............................ 29
Management.......................... 40
Principal Stockholders.............. 48
Relationships and Related Party
Transactions...................... 50
Description of Capital Stock........ 53
Shares Eligible for Future Sale..... 59
Plan of Distribution................ 61
Legal Matters....................... 63
Experts............................. 63
Where You Can Find More
Information....................... 63
Index to Financial Statements....... F-1
</TABLE>

------------------

UNTIL , 1999 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

7,150,000 SHARES

(PRIVATE BUSINESS LOGO)

COMMON STOCK
-------------------
PROSPECTUS
-------------------
BT Alex. Brown

Lehman Brothers

Salomon Smith Barney

, 1999

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 92

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated costs and expenses (all of
which will be paid by Private Business) in connection with the offering
described in the registration statement.

<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 34,288
NASD Filing Fee............................................. 12,000
NASDAQ National Market Listing Fee.......................... 95,000
Printing and Engraving Expense.............................. 125,000
Legal Fees and Expenses..................................... 300,000
Auditors' Fees and Expenses................................. 125,000
Transfer Agent and Registrar Fees and Expenses.............. 11,500
Miscellaneous............................................... 22,212
--------
Total............................................. $725,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

(a) The Tennessee Business Corporation Act provides that a corporation may
indemnify any of its directors against liability incurred in connection with a
proceeding except for liability (a) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 48-18-304 of the TBCA, or (d) for any transaction from
which the director derived an improper personal benefit.

(b) Article VIII of our charter sets forth the extent to which officers or
directors of Private Business may be insured or indemnified against any
liabilities which they may incur. The general effect of this provision is that
any person made a party to any action, suit or proceeding by reason of the fact
that he or she is or was a director of Private Business will be indemnified by
Private Business against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding, to the fullest extent permitted
under the laws of the State of Tennessee. In addition, this provision provides
that, in Private Business's sole discretion, Private Business may, by specific
action of the board of directors, indemnify officers, employees or agents to the
same extent as a director. Private Business a policy of directors' and officers'
insurance that would generally provide the funds necessary for Private Business
to meet its obligations under its charter.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In connection with our recapitalization, on August 7, 1998 we purchased
4,963,751 shares of our common stock for an aggregate purchase price of
$138,340,358. Immediately thereafter on August 7, 1998, we sold 5,624,404 shares
of our Series A convertible preferred stock in connection with our
recapitalization for an aggregate purchase price of $60,000,000. Both of these
transactions were deemed to be exempt from registration under Section 4(2) of
the Securities Act as transactions not involving a public offering.

II-1
<PAGE> 93

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------- -----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Charter of Private Business.
3.2 -- Amended and Restated Bylaws of Private Business.
4.1 -- Provisions of Articles of Incorporation defining the rights
of security holders. See Exhibit 3.1.
*4.2 -- Form of common stock certificate.
*5 -- Opinion of Harwell Howard Hyne Gabbert & Manner, P.C.
**10.1 -- Stock Purchase Agreement dated as of July 24, 1998.
**10.2 -- Stockholders Agreement dated as of August 7, 1998.
**10.3 -- Registration Rights Agreement dated as of August 7, 1998.
**10.4 -- Credit Agreement dated as of August 7, 1998.
*10.4.1 -- Amendment No. 1 to Credit Agreement dated as of ,
1999
**10.5 -- Form of Indemnification Agreement between Private Business
and each of its Officers and Directors.
**10.6 -- Form of Nonqualified Stock Option Agreement without change
of control provision.
**10.7 -- Form of Nonqualified Stock Option Agreement with change of
control provision.
10.8 -- Private Business, Inc. 1999 Amended and Restated Stock
Option Plan.
**21 -- Subsidiaries of Private Business.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Harwell Howard Hyne Gabbert & Manner, P.C.
(included in Exhibit 5).
**24 -- Power of Attorney (included on page II-4).
**27 -- Financial Data Schedule (FOR SEC USE ONLY).
</TABLE>

- ---------------

* To be filed by amendment

** Filed with original filing

The attachments referenced in these exhibits are not included in this
filing but are available from Private Business upon request.

(b) The following report and schedule is filed as part of the Registration
Statement:

<TABLE>
<S> <C>
Report of Independent Public Accountants.................... S-1
Schedule II -- Valuation and Qualifying Accounts............ S-2
</TABLE>

No other schedules are required or are applicable.

II-2
<PAGE> 94

ITEM 17. UNDERTAKINGS.

Private Business hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Private
Business pursuant to the foregoing provisions, or otherwise, Private Business
has been advised that in the opinion of the SEC this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. If a claim for indemnification against these liabilities (other
than the payment by Private Business of expenses incurred or paid by a director,
officer or controlling person of Private Business in the successful defense of
any action, suit or proceeding) is asserted against Private Business by the
director, officer or controlling person in connection with the securities being
registered, Private Business will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of the issue.

Private Business hereby undertakes that:

1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by Private Business pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 95

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Private
Business has duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Brentwood, State of Tennessee, on April 30, 1999.

PRIVATE BUSINESS, INC.

By: /s/ JERRY L. COVER
------------------------------------
Principal Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board April 30, 1999
- --------------------------------------------------------
William B. King

/s/ JERRY L. COVER President (Principal April 30, 1999
- -------------------------------------------------------- Executive Officer)
Jerry L. Cover

/s/ FRED P. READ Vice President, Chief April 30, 1999
- -------------------------------------------------------- Financial Officer
Fred P. Read (Principal Financial and
Accounting Officer)

Director April , 1999
- --------------------------------------------------------
Thomas L. Black

* Director April 30, 1999
- --------------------------------------------------------
Gregory A. Thurman

* Director April 30, 1999
- --------------------------------------------------------
Brian J. Conway

* Director April 30, 1999
- --------------------------------------------------------
Bruce R. Evans

* Director April 30, 1999
- --------------------------------------------------------
Gary W. Cage
</TABLE>

By: /s/ FRED P. READ
----------------------------------

Fred P. Read

Attorney-in-fact

II-4
<PAGE> 96

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Private Business, Inc.:

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Private Business, Inc. and subsidiaries
for the three years ended December 31, 1998 included in the Form S-1 and have
issued our report thereon dated March 17, 1999. Our audits were made for the
purpose of forming an opinion on the basic consolidated financial statements
taken as a whole. The schedule listed under Item 14(a)(ii) is the responsibility
of the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth herein in relation to the basic
consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 17, 1999

S-1
<PAGE> 97

SCHEDULE II
PRIVATE BUSINESS, INC.

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO COSTS
BEGINNING OF AND DEDUCTIONS BALANCE AT
PERIOD EXPENSES(1) (CHARGE OFFS)(1) END OF PERIOD
------------ ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful accounts...... $60,000 $ -- $ -- $60,000
======= ======= ======= =======
Year ended December 31, 1997:
Allowance for doubtful accounts...... $ 0 $60,000 $ -- $60,000
======= ======= ======= =======
Year ended December 31, 1996:
Allowance for doubtful accounts...... $ 0 $ -- $ -- $ 0
======= ======= ======= =======
</TABLE>

- ---------------

(1) Additions to the allowance for doubtful accounts are included in general and
administrative expense. All deductions or charge offs are charged against
the allowance for doubtful accounts.

S-2

<PAGE> 1

EXHIBIT 1

_______________ Shares

Private Business, Inc.

Common Stock

($_____ Par Value)

UNDERWRITING AGREEMENT

_______________, 1999

BT Alex. Brown Incorporated
BancBoston Robertson Stephens Inc.
Lehman Brothers Inc.
As Representatives of the
Several Underwriters
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202

Gentlemen:

Private Business, Inc., a Tennessee corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of __________ shares of the Company's Common
Stock, $_____ par value (the "Firm Shares"). The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company also proposes to sell at the
Underwriters' option up to __________ additional shares of the Company's Common
Stock (the "Option Shares") as set forth below.

As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
called the "Shares."

<PAGE> 2

In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:

1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Underwriters as
follows:

(a) A registration statement on Form S-1 (File No. 333-75013) with
respect to the Shares has been carefully prepared by the Company in conformity
with the requirements of the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") promulgated thereunder and has been filed
with the Commission. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
the Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore been
delivered by the Company to you. Such registration statement, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the Act,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has been filed
as of the date of this Agreement. "Prospectus" means (a) the form of prospectus
first filed with the Commission pursuant to Rule 424(b) or (b) the last
preliminary prospectus included in the Registration Statement filed prior to the
time it becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares, together with any term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary prospectus
included in the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."

(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Tennessee, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries of
the Company as listed in Exhibit A hereto (collectively, the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement. The Subsidiaries are the only
subsidiaries, direct or indirect, of the Company. The Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification. The outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and, except for the pledge
of such shares in connection with the Company's credit facility, are owned by
the Company free and clear of all liens, encumbrances and equities and claims;
and no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into shares of
capital stock or any other ownership interests in the Subsidiaries are
outstanding.

-2-
<PAGE> 3

(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
Shares to be issued and sold by the Company have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and non-assessable; and no preemptive rights of stockholders exist with respect
to any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of the Shares as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any shares of Common Stock.

(d) The information set forth under the caption "Capitalization" in the
Prospectus is true and correct. All of the Shares conform to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.

(e) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Prospectus and any amendments or supplements thereto will contain, all
statements which are required to be stated therein by, and will conform, to the
requirements of the Act and the Rules and Regulations. The Registration
Statement and any amendment thereto do not contain, and will not contain, any
untrue statement of a material fact and do not omit, and will not omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus and any amendments and
supplements thereto do not contain, and will not contain, any untrue statement
of material fact; and do not omit, and will not omit, to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
any Underwriter through the Representatives, specifically for use in the
preparation thereof.

(f) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as set forth in the
Registration Statement, present fairly the financial position and the results of
operations and cash flows of the Company and the consolidated Subsidiaries, at
the indicated dates and for the indicated periods. Such financial statements and
related schedules have been prepared in accordance with generally accepted
principles of accounting, consistently applied throughout the periods involved,
except as disclosed herein, and all adjustments necessary for a fair
presentation of results for such periods have been made. The summary financial
and statistical data included in the Registration Statement presents fairly the
information shown therein and such data has been compiled on a basis consistent
with the financial statements presented therein and the books and records of the
Company. The pro forma financial statements and other pro forma financial
information included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma bases

-3-
<PAGE> 4

described therein, and, in the opinion of the Company, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.

(g) Arthur Andersen LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.

(h) There is no action, suit, claim or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency or otherwise and, to the
knowledge of the Company, there is no claim for indemnification pending or
threatened against the Company in connection with the recapitalization of the
Company, which if determined adversely to the Company or any of its Subsidiaries
might result in any material adverse change in the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and of the Subsidiaries taken as a whole
or to prevent the consummation of the transactions contemplated hereby, except
as set forth in the Registration Statement.

(i) The Company and the Subsidiaries have good and marketable title to
all of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those reflected
in such financial statements (or as described in the Registration Statement) or
which are not material in amount. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration Statement.

(j) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith. All tax liabilities have been adequately provided
for in the financial statements of the Company.

(k) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not been
any material adverse change or any development involving a prospective material
adverse change in or affecting the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise), or prospects of
the Company and its Subsidiaries taken as a whole, whether or not occurring in
the ordinary course of business, and there has not been any material transaction
entered into or any material transaction that is probable of being entered into
by the Company or the Subsidiaries, other than transactions in the ordinary
course of business and changes and transactions described in the Registration
Statement, as it may be amended or supplemented. The Company and the
Subsidiaries have no material contingent obligations which are not disclosed in
the Company's financial statements which are included in the Registration
Statement.

-4-
<PAGE> 5

(l) Neither the Company nor any of the Subsidiaries is or with the
giving of notice or lapse of time or both, will be, in violation of or in
default under its Charter or By-Laws or under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
and the Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the Charter or By-Laws of the
Company or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction.

(m) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission
or the National Association of Securities Dealers, Inc. (the "NASD") has been
obtained or made and is in full force and effect.

(n) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor any of
the Subsidiaries has infringed any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole. The Company knows of no material
infringement by others of patents, patent rights, trade names, trademarks or
copyrights owned by or licensed to the Company.

(o) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares.

(p) Neither the Company nor any Subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940, as
amended (the "1940 Act") and the rules and regulations of the Commission
thereunder.

(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded

-5-
<PAGE> 6

accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

(r) The Company and each of its Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of their respective properties and
as is customary for companies engaged in similar industries.

(s) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the Company
would have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.

(t) (i) To the best of the Company's knowledge and belief, except as
otherwise disclosed in writing to the Underwriters, (A) each of the Company and
its Subsidiaries has conducted its business in compliance with applicable
Environmental Laws, including without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (B) none of the properties owned
by the Company and its Subsidiaries contain any Hazardous Substance as a result
of any activity of any of the Founding Companies in amounts exceeding the levels
permitted by applicable Environmental Laws, (C) the Company and its Subsidiaries
have not received any notices, demand letters or requests for information from
any Federal, state, local or foreign governmental entity or third party
indicating that it may be in violation of, or liable under, any Environmental
Law in connection with the ownership or operation of its business, (D) there are
no civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened, against the Company or any
of the Subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (E) no reports have been filed, or are required to be filed,
by the Company or any of the Subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (F) no Hazardous Substance has been disposed of, released or transported in
violation of any applicable Environmental Law from any properties owned by the
Company or any of the Subsidiaries as a result of any activity of the Company or
of any of the Subsidiaries during the time such properties were owned, leased,
or operated by the Company or any of the Subsidiaries, (G) there have been no
environmental investigations, studies, audits, tests, reviews or other analysis
regarding compliance or non-compliance with any applicable Environmental Law
conducted by or which are in the possession of the Company or any of the
Subsidiaries relating to the activities of the Company or any of the
Subsidiaries (H) there are no underground storage tanks on, in or under any
properties owned by Company or any of its Subsidiaries and no underground
storage

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<PAGE> 7

tanks have been closed or removed from any of such properties during the time
such properties were owned, leased or operated by the Company or any of its
Subsidiaries, (I) there is no asbestos or asbestos containing material present
in any of the properties owned by the Company or any of its Subsidiaries, and no
asbestos has been removed from any of such properties during the time such
properties were owned, leased or operated by it, and (J) neither the Company nor
any of its Subsidiaries nor any of their respective properties are subject to
any material liabilities or expenditures (fixed or contingent) relating to any
suit, settlement, court order, administrative order, regulatory requirement,
judgment or claim asserted or arising under any Environmental Law, except for
violations of the foregoing clauses (A) through (J) that, singly or in the
aggregate, would not reasonably be expected to have a material adverse effect on
the condition or (financial or otherwise) business, management, properties,
assets, rights, operations or prospects of the Company and its Subsidiaries
taken as a whole.

(ii) As used herein, "Environmental Law" means any Federal,
State, local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any governmental
entity relating to (A) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other nature resource) or to human health or safety or (B)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances, in each case as amended as in effect on the Closing
Date. The term Environmental Law includes, without limitation, (X) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, each as amended and as in effect on the Closing Date, and
(Y) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.

(iii) As used herein, "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated, or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any
Environmental Law. Hazardous Substance includes any substance to which exposure
is regulated by any governmental authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos or asbestos containing material, urea, formaldehyde, foam
insulation, lead or polychlorinated biphenyls.

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<PAGE> 8
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.

(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $_____ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof.

(b) Payment for the Firm Shares to be sold hereunder is to be made in
same day funds via wire transfer to the order of the Company against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of BT
Alex. Brown Incorporated, 1 South Street, Baltimore, Maryland, at 10:00 a.m.,
Baltimore time, on the third business day after the date of this Agreement or at
such other time and date not later than five business days thereafter as you and
the Company shall agree upon, such time and date being herein referred to as the
"Closing Date." (As used herein, "business day" means a day on which the New
York Stock Exchange is open for trading and on which banks in New York are open
for business and are not permitted by law or executive order to be closed.) The
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representatives at least one business day prior to the
Closing Date.

(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase the
Option Shares at the price per share as set forth in paragraph (a) of this
Section 2. The option granted hereby may be exercised in whole or in part by
giving written notice (i) at any time before the Closing Date and (ii) only once
thereafter within 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising the
option, the names and denominations in which the Option Shares are to be
registered and the time and date at which such certificates are to be delivered.
The time and date at which certificates for Option Shares are to be delivered
shall be determined by the Representatives but shall not be earlier than three
nor later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein referred to
as the "Option Closing Date"). If the date of exercise of the option is three or
more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The number of Option Shares to be purchased by
each Underwriter shall be in the same proportion to the total number of Option
Shares being purchased as the number of Firm Shares being purchased by such
Underwriter bears to __________, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriters. You, as Representatives of the several Underwriters,
may cancel such option at any time prior to its expiration by giving written
notice of such cancellation to the Company. To the extent, if any, that the
option is exercised, payment for the Option Shares shall be made on the Option
Closing Date in same day funds via wire transfer to the order of the Company
against delivery of certificates therefor at the offices of BT Alex.
Brown Incorporated, 1 South Street, Baltimore, Maryland.

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<PAGE> 9

3. OFFERING BY THE UNDERWRITERS.

It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.

It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.

4. COVENANTS OF THE COMPANY.

(a) The Company will (A) use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules and
Regulations is followed, to prepare and timely file with the Commission under
Rule 424(b) of the Rules and Regulations a Prospectus in a form approved by the
Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives shall not
previously have been advised and furnished with a copy or to which the
Representatives shall have reasonably objected in writing or which is not in
compliance with the Rules and Regulations

(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have become
effective, (B) of receipt of any comments from the Commission, (C) of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, and (D) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to prevent
the issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.

(c) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that may
reasonably be requested), and of all amendments thereto, as the Representatives
may reasonably request.

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<PAGE> 10

(d) The Company will comply with the Act and the Rules and Regulations,
the Exchange Act, and the rules and regulations of the Commission thereunder, so
as to permit the completion of the distribution of the Shares as contemplated in
this Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.

(e) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earnings statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.

(f) The Company will, for a period of five years from the Closing Date,
deliver to the Representatives copies of annual reports and copies of all other
documents, reports and information furnished by the Company to its stockholders
or filed with any securities exchange pursuant to the requirements of such
exchange or with the Commission pursuant to the Act or the Exchange Act, as
amended. The Company will deliver to the Representatives similar reports with
respect to significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial statements.

(g) No offering, sale, short sale or other disposition of any shares of
Common Stock of the Company or other securities convertible into or exchangeable
or exercisable for shares of Common Stock or derivative of Common Stock (or
agreement for such) will be made for a period of 180 days after the date of this
Agreement, directly or indirectly, by the Company otherwise than hereunder or
with the prior written consent of BT Alex. Brown Incorporated.

(h) The Company will use its best efforts to arrange for the quotation
of, subject to notice of issuance, the Shares on the Nasdaq Stock Market.

(i) The Company has caused each officer and director and certain
shareholders of the Company to furnish to you, on or prior to the date of this
Agreement, a letter or letters, in form and substance satisfactory to the
Underwriters, pursuant to which each such person shall agree not to offer, sell,
sell short, pledge or otherwise dispose (collectively, "Lockup Transactions") of
any shares of Common Stock of the Company or other capital stock of the Company,
or any other securities convertible, exchangeable or exercisable for Common
Shares or derivative of

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<PAGE> 11

Common Shares owned by such person (collectively, the "Securities") or request
the registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition of) for a period of 150 days
after the date of this Agreement, directly or indirectly, except with the prior
written consent of BT Alex. Brown Incorporated (the "Lockup Agreements"). It is
understood that such individuals may engage in Lockup Transactions with respect
to (a) no more than 20% of the Securities after 150 days following the date of
this Agreement; (b) no more than an additional 60% of the Securities after 180
days following the date of this Agreement; and (c) the balance of the Securities
after 210 days following the date of this Agreement.

(j) The Company shall apply the net proceeds of its sale of the Shares
as set forth in the Prospectus and shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Act.

(k) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as would
require the Company or any of the Subsidiaries to register as an investment
company under the 1940 Act.

(l) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for the Common
Stock.

(m) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.

5. COSTS AND EXPENSES.

The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Company under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company; the cost
of printing and delivering to, or as requested by, the Underwriters copies of
the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement and the Underwriters' Invitation Letter; the filing fee of the
Commission; the filing fee of the NASD and the Listing Fee of the Nasdaq Stock
Market. The Company shall not, however, be required to pay for any of the
Underwriter's expenses except that, if this Agreement shall not be consummated
because the conditions in Section 6 hereof are not satisfied, or because this
Agreement is terminated by the Representatives pursuant to Section 11 hereof, or
by reason of any failure, refusal or inability on the part of the Company to
perform any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on its part to be performed, unless such failure to
satisfy said condition or to comply with said terms is due to the default or
omission of any Underwriter, then the Company shall reimburse the several
Underwriters for their reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder; but in no event

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<PAGE> 12

shall the Company be liable to any of the several Underwriters for damages on
account of the Underwriters' loss of anticipated profits from the sale by them
of the Shares.

6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.

The several obligations of the Underwriters to purchase the Firm Shares
on the Closing Date and the Option Shares, if any, on the Option Closing Date
are subject to the accuracy, as of the Closing Date or the Option Closing Date,
as the case may be, of the representations and warranties of the Company
contained herein, and to the performance by the Company of its covenants and
obligations hereunder and to the following additional conditions:

(a) The Registration Statement and all post-effective amendments
thereto shall have become effective; and any and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made, and any
request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company, shall be contemplated
by the Commission and no injunction, restraining order, or order of any nature
by a Federal or state court of competent jurisdiction shall have been issued as
of the Closing Date which would prevent the issuance of the Shares.

(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinions of Harwell Howard Hyne
Gabbert & Manner, P.C., counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters (and
stating that it may be relied upon by counsel to the Underwriters) to the effect
that:

(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Tennessee, with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; each of the
Subsidiaries has been duly organized and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement; the Company and each of the
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued and are fully paid and non-assessable and are owned by the Company; and,
to the best of such counsel's knowledge, the outstanding shares of capital stock
of each of the Subsidiaries is owned free and clear of all liens, encumbrances
and equities and claims, except for the pledge of such shares in connection with
the Company's credit facility; and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to convert
any obligations into any shares of capital stock or of any other ownership
interests in the Subsidiaries are outstanding.

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<PAGE> 13

(ii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of the Company's Common Stock have been duly authorized; the
outstanding shares of the Company's Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; all of the Shares conform
to the description thereof contained in the Prospectus; the certificates for the
Shares, assuming they are in the form filed with the Commission, are in due and
proper form; the shares of Common Stock, including the Option Shares, if any, to
be sold by the Company pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue or sale thereof.

(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.

(iv) The Registration Statement has become effective under the
Act and, to the best of the knowledge of such counsel, no stop order proceedings
with respect thereto have been instituted or are pending or threatened under the
Act.

(v) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the Act and the Rules and Regulations and the applicable
rules and regulations of the Commission thereunder (except that such counsel
need express no opinion as to the financial statements and related schedules
included therein).

(vi) The statements under the captions "Business--Customers
and Contracts," "Management--Non-Qualified Stock Options," "--Incentive Stock
Option Plan," "--401(k) Plan," "Relationships and Related Party Transactions,"
"Description of Capital Stock" and "Shares Eligible for Future Sale" in the
Prospectus, insofar as such statements constitute a summary of documents
referred to therein or matters of law, fairly summarize in all material respects
the information called for with respect to such documents and matters.

(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or described
as required, and such contracts and documents as

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<PAGE> 14

are summarized in the Registration Statement or the Prospectus are fairly
summarized in all material respects.

(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.

(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or By-Laws of the Company, or any
agreement or instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound.

(x) This Agreement has been duly authorized, executed and
delivered by the Company.

(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the NASD as to which such counsel need express
no opinion) except such as have been obtained or made, specifying the same.

(xii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.

In rendering such opinion, Harwell Howard Hyne Gabbert & Manner, P.C.
may rely as to matters governed by the laws of states other than Tennessee or
Federal laws on local counsel in such jurisdictions, provided that in each case
Harwell Howard Hyne Gabbert & Manner, P.C. shall state that they believe that
they and the Underwriters are justified in relying on such other counsel. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, at the time it
became effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and statistical information therein). With respect to such
statement, Harwell Howard Hyne Gabbert & Manner, P.C. may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.

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<PAGE> 15

(c) The Representatives shall have received from Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters, an opinion dated the Closing Date or
the Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv) and (x) of Paragraph (b) of this
Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Tennessee. In rendering such opinion,
Brobeck, Phleger & Harrison LLP. may rely as to all matters governed other than
by the laws of the State of Maryland and the District of Columbia or Federal
laws on the opinion of counsel referred to in Paragraph (b) of this Section 6.
In addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information therein). With
respect to such statement, Brobeck, Phleger & Harrison LLP may state that their
belief is based upon the procedures set forth therein, but is without
independent check and verification.

(d) You shall have received, on each of the dates hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, in form
and substance satisfactory to you, of Arthur Andersen LLP confirming that they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in their
opinion the financial statements and schedules examined by them and included in
the Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.

(e) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the Option Closing Date, as the case may
be, each of them severally represents as follows:

(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission;

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<PAGE> 16

(ii) The representations and warranties of the Company
contained in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be;

(iii) All filings required to have been made pursuant to Rules
424 or 430A under the Act have been made;

(iv) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement were true and
correct, and such Registration Statement and Prospectus did not omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been set forth
in a supplement to or an amendment of the Prospectus which has not been so set
forth in such supplement or amendment; and

(v) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business.

(f) The Company shall have furnished to the Representatives such
further certificates and documents confirming the representations and
warranties, covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.

(g) The Firm Shares and Option Shares, if any, shall have been approved
for designation upon notice of issuance on the Nasdaq Stock Market.

(h) The Lockup Agreements described in Section 4(i) are in full force
and effect.

The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are
satisfactory in all material respects to the Representatives and to Brobeck,
Phleger & Harrison LLP, counsel for the Underwriters.

If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.

In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).

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<PAGE> 17

7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.

The obligations of the Company to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.

8. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act, against any losses, claims, damages or liabilities to which such
Underwriter or any such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage or liability,
action or proceeding or in responding to a subpoena or governmental inquiry
related to the offering of the Shares, whether or not such Underwriter or
controlling person is a party to any action or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company may otherwise have.

(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse upon demand any legal or other expenses reasonably incurred by
the Company or any such director, officer, or

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<PAGE> 18

controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not the
Company or any such director, officer, or controlling person is a party to any
action or proceeding; provided, however, that each Underwriter will be liable in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.

(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case any
such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation) the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel acceptable to the indemnified party within a reasonable period of time
after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder

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<PAGE> 19

(whether or not any indemnified party is an actual or potential party to such
claim, action or proceeding) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action or proceeding.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.

(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution

-19-
<PAGE> 20

may be sought under this Section 8 hereby consents to the jurisdiction of any
court having jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any such
proceeding in which such other contributing party is a party.

(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.

9. DEFAULT BY UNDERWRITERS.

If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the Shares
which such Underwriter has agreed to purchase and pay for on such date
(otherwise than by reason of any default on the part of the Company, you, as
Representatives of the Underwriters, shall use your reasonable efforts to
procure within 36 hours thereafter one or more of the other Underwriters, or any
others, to purchase from the Company such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or Option Shares, as the case may
be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 36 hours you, as such Representatives, shall not have procured such
other Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of Firm Shares or Option Shares, as the case may be, with
respect to which such default shall occur exceeds 10% of the Firm Shares or
Option Shares, as the case may be, covered hereby, the Company or you as the
Representatives of the Underwriters will have the right, by written notice given
within the next 36-hour period to the parties to this Agreement, to terminate
this Agreement without liability on the part of the non-defaulting Underwriters
or of the Company except to the extent provided in Section 8 hereof. In the
event of a default by any Underwriter or Underwriters, as set forth in this
Section 9, the Closing Date or Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as Representatives,

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<PAGE> 21

may determine in order that the required changes in the Registration Statement
or in the Prospectus or in any other documents or arrangements may be effected.
The term "Underwriter" includes any person substituted for a defaulting
Underwriter. Any action taken under this Section 9 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.

10. NOTICES.

All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows: if to the Underwriters, to BT Alex. Brown
Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention: David
Weaver; with a copy to BT Alex. Brown Incorporated, 1 South Street, Baltimore,
Maryland 21202. Attention: General Counsel; if to the Company, to Private
Business, Inc., 9010 Overlook Boulevard, Brentwood, Tennessee 37027, Attn: Jerry
L. Cover, President and Chief Executive Officer, with a copy to Harwell Howard
Hyne Gabbert & Manner, P.C., 1800 First American Center, Nashville, Tennessee
37238, Attention: Mark Manner, Esquire.

11. TERMINATION.

This Agreement may be terminated by you by notice to the Company as
follows:

(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;

(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries taken as a whole, whether or not arising in the ordinary course
of business; (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of the
Shares; (iii) trading generally shall have been suspended or materially limited
on or by, as the case may be, any of the New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market; (iv) the enactment, publication, decree
or other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations of the
Company; (v) declaration of a banking moratorium by United States or New York
State authorities, (vi) any downgrading in the rating of the Company's debt
securities, if applicable, by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Exchange Act);
(vii) the suspension of trading of the Company's Common Stock on the Nasdaq
Stock Market or (viii) the

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<PAGE> 22

taking of any action by any governmental body or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or

12. SUCCESSORS.

This Agreement has been and is made solely for the benefit of the
Underwriters and the Company and their respective successors, executors,
administrators, heirs and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or
obligation hereunder. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign merely because of such purchase.

13. INFORMATION PROVIDED BY UNDERWRITERS.

The Company and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), and the information under the
caption "Plan of Distribution" in the Prospectus.

14. MISCELLANEOUS.

The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Shares under
this Agreement.

This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware.

If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.

Very truly yours,

PRIVATE BUSINESS, INC.

By:
-------------------------------------------
President and Chief Executive Officer

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<PAGE> 23

The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.

BT ALEX. BROWN INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INC.
LEHMAN BROTHERS INC.

As Representatives of the several
Underwriters listed on Schedule I

By: BT Alex. Brown Incorporated

By:
-------------------------------------
Authorized Officer

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<PAGE> 24

SCHEDULE I

SCHEDULE OF UNDERWRITERS

<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
- ----------- ---------------------

<S> <C>
BT Alex. Brown Incorporated
BancBoston Robertson Stephens Inc.
Lehman Brothers Inc.

Total
</TABLE>

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<PAGE> 25

EXHIBIT A

SUBSIDIARIES

Private Business Insurance, Inc.

Private Business Processing, Inc.

Private Business Capital, Inc.

-25-

<PAGE> 1

EXHIBIT 3.1

SECOND AMENDED AND RESTATED CHARTER

PRIVATE BUSINESS, INC.

FIRST: The name of the Corporation (hereinafter called the
"Corporation") is PRIVATE BUSINESS, INC..

SECOND: The address, including street, number, city, and county, of
the registered office of the Corporation in the State of Tennessee is 9010
Overlook Drive, Brentwood, Tennessee, 37027. The name of the registered agent at
such address is Jerry Cover.

THIRD: The nature of the business or purposes of the Corporation
is to engage in any lawful act or activity for which corporations may be
organized under the Tennessee Business Corporation Act.

FOURTH:

1. The maximum number of shares of stock which the Corporation
shall have the authority to issue is one hundred million (100,000,000) shares of
Common Stock, without par value, which shares shall not be subject to any
preemptive rights, and twenty million (20,000,000) shares of undesignated
preferred stock without par value.

2. Pursuant to the Tennessee Business Corporation Act, a
statement of the designations, powers, preferences and rights, and the
qualifications, limitations and restrictions thereof, in respect of each class
of capital stock is as follows:

A. PREFERRED STOCK

The Board of Directors is hereby expressly authorized at any time, and
from time to time, to provide for the issuance of shares of preferred stock in
one or more series, with such voting powers, full or limited, or no voting
powers, and with such designations, preferences and relative, participating,
optional or other rights, and qualifications or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions providing for the issue
thereof adopted by a majority of the Board of Directors then in office and the
certificate of designations filed under the Tennessee Business Corporation Act
setting forth such resolution or resolutions, including (without limiting the
generality thereof) the following as to each such series:

(i) the designation of such series;

<PAGE> 2

(ii) the dividends, if any, payable with respect to such series,
the rates or basis for determining such dividends, any
conditions and dates upon which such dividends shall be
payable, the preferences, if any, of such dividends over, or
the relation of such dividends to, the dividends payable on
the Common Stock or any other series of preferred stock,
whether such dividends shall be noncumulative or cumulative,
and, if cumulative, the date or dates from which such
dividends shall be cumulative;

(iii) whether shares of such series shall be redeemable at the
option of the Board of Directors or the holder, or both, upon
the happening of a specified event and, if redeemable, whether
for cash, property or rights, including securities of the
Corporation, the time, prices or rates and any adjustment and
other terms and conditions of such redemption;

(iv) the terms and amount of any sinking, retirement or purchase
fund provided for the purchase or redemption of shares of such
series;

(v) whether shares of such series shall be convertible into or
exchangeable for shares of Common Stock or any other series of
preferred stock, at the option of the Corporation or of the
holder, or both, or upon the happening of a specified event
and, if provision be made for such conversion or exchange, the
terms, prices, rates, adjustments and any other terms and
conditions thereof;

(vi) the extent, if any, to which the holders of shares of such
series shall be entitled to vote with respect to the election
of directors or otherwise, including, without limitation, the
extent, if any, to which such holders shall be entitled,
voting as a series or as a part of a class, to elect one or
more directors upon the happening of a specified event or
otherwise;

(vii) the restrictions, if any, on the issue or reissue of shares of
such series or any other series;

(viii) the extent, if any, to which the holders of shares of such
series shall be entitled to preemptive rights; and

(ix) the rights of the holders of shares of such series upon the
liquidation of the Corporation or any distribution of its
assets.

B. COMMON STOCK

(i) Voting Rights. All holders of Common Stock shall be entitled
to notice of any stockholders' meeting. Subject to the
provisions of any applicable law and

2
<PAGE> 3

except as otherwise provided in this Certificate of
Incorporation or by the resolution or resolutions providing
for the issue of shares of preferred stock, all voting rights
shall be vested solely in the Common Stock. The holders of
shares of Common Stock shall be entitled to vote upon the
election of directors and upon any other matter submitted to
the stockholders for a vote. Each share of Common Stock issued
and outstanding shall be entitled to one noncumulative vote. A
fraction of a share of Common Stock shall not be entitled to
any voting rights whatsoever. Any action required or permitted
to be taken by the holders of the shares of Common Stock may
be effected solely at an annual or special meeting of the
stockholders, duly called and held in accordance with law, the
Bylaws and this Charter, and not by the consent of the holders
of the shares of Common Stock.

(ii) Dividends and Distributions. No payment of dividends or
distributions shall be made to the holders of shares of Common
Stock unless and until the holders of shares of preferred
stock receive any preferential amounts to which they are
entitled under this Article or in the resolution or
resolutions providing for the issue of shares of preferred
stock. Subject to the limitation set forth in the preceding
sentence of this Paragraph (i) and except as otherwise
provided by this Charter or in the resolution or resolutions
providing for the issue of shares of preferred stock, the
holders of shares of Common Stock shall be entitled to receive
such dividends and distributions as may be declared upon such
shares of Common Stock, from time to time by a resolution or
resolutions adopted by the Board of Directors.

(iii) Liquidation, Dissolution or Winding Up. Except as otherwise
provided in this Charter and subject to the rights of holders,
if any, of preferred stock to receive preferential liquidation
distributions to which they are entitled under this Article or
under the resolution or resolutions providing for the issue of
shares of preferred stock, in the event of any liquidation,
dissolution or winding up of the Corporation, whether
voluntary or involuntary, after payment or provision for
payment of the debts and liabilities of the Corporation, all
assets of the Corporation shall be shared pro rata among the
holders of the Common Stock.

3. Except as otherwise provided in this Charter or by applicable
law, the Corporation's capital stock, regardless of class, may be issued for
such consideration and for such corporate purposes as the Board of Directors may
from time to time determine by a resolution or resolutions adopted by a majority
of the Board of Directors then in office.

FIFTH: The Corporation shall have perpetual existence.

3
<PAGE> 4

SIXTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors, or any class of them, and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Tennessee may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the Tennessee Business Corporation Act, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths (3/4) in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.

SEVENTH:

1. The management of the business and the conduct of the affairs
of the Corporation shall be vested in its Board of Directors.

2. The Board of Directors shall be comprised of not less than one
(1) or more than twelve (12) members, the exact numbers to be fixed from time to
time by the Board of Directors pursuant to a resolution adopted by a majority of
directors then in office. The number of directors of the Corporation may be
increased or decreased outside of this range only in the following manner:

A. By a majority of the shareholders of the Corporation entitled
to vote if the then existing Board of Directors of the
Corporation unanimously approve the proposed increase or
decrease in members; or

B. By a vote of the holders of 70% or more of the combined voting
power of the then outstanding shares of stock entitled to vote
generally in the election of directors voting together as a
single class.

3. The Board of Directors shall be divided into three classes,
designated Class 1, Class 2 and Class 3. Each class shall consist, as nearly as
may be possible, of one-third of the number of directors constituting the Board
of Directors. The term of office for Class 1 directors will first expire at the
annual meeting of stockholders for 2000; the term of office of Class 2 directors
will first expire at the annual meeting of stockholders for 2001; and the term
of office of Class 3 directors will first expire at the annual meeting of
stockholders for 2002, and in each case until their successors are duly elected
and

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<PAGE> 5

qualified. At each annual meeting of stockholders commencing with the first
annual meeting of stockholders, successors to the class of directors whose terms
expire at the annual meeting of stockholders shall be elected by stockholders
for a three-year term and until their successors are duly elected and qualified.
Except as otherwise provided herein or in the Bylaws, increases in the size of
the Board of Directors shall be distributed among the classes so as to render
the class as nearly equal in size as possible. Whenever the holders of preferred
stock issued pursuant to this Charter or the resolution or resolutions adopted
by a majority of the Board of Directors then in office providing for the issue
of shares of preferred stock shall have the right, voting as a separate class,
to elect directors, the election, term of office, filling of vacancies and other
terms of such directorships shall be governed by the terms of this Charter or
such resolution or resolutions, as the case may be, and such directorships shall
not be divided into serial classes or otherwise subject to this Section 3 unless
expressly so provided therein.

4. Subject to the rights, if any, of any holders of preferred
stock issued pursuant to this Charter to elect Directors and to remove any
Director whom the holders of any such stock have the right to elect, any
Director (including persons elected by Directors to fill vacancies in the Board
of Directors) may be removed from office (i) only with cause and (ii) only by
the affirmative vote of at least two-thirds of the total votes which would be
eligible to be cast by stockholders in the election of such Director. At least
30 days prior to any meeting of stockholders at which it is proposed that any
Director be removed from office, written notice of such proposed removal shall
be sent to the Director whose removal will be considered at the meeting. For
purposes of this Charter, "cause," with respect to the removal of any Director
shall mean only (i) conviction of a felony, (ii) declaration of unsound mind by
order of court, (iii) gross dereliction of duty, (iv) commission of any action
involving moral turpitude, or (v) commission of an action which constitutes
intentional misconduct or a knowing violation of law if such action in either
event results both in an improper substantial personal benefit and a material
injury to the Corporation.

5. Except as otherwise provided herein or in the Bylaws, a
vacancy in the Board of Directors may be filled pursuant to the appointment of a
director by the majority of the directors then in office.

6. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of this Charter shall entitle the holder thereof to the right to vote
at any meeting of stockholders except as otherwise provided by applicable law;
provided, that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.

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<PAGE> 6

7. Notwithstanding anything contained in the Bylaws or this
Charter of the Corporation to the contrary, the affirmative vote of the holders
of at least 70% of the voting power of all of the shares of stock of the
Corporation entitled to vote generally in the election of directors voting
together as a single class shall be required to alter, amend or repeal this
Article Seventh or adopt any provision inconsistent therewith.

EIGHTH: No person shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a Director of the Corporation, except for liability (a) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 48-18-304 of the Tennessee Business
Corporation Act, or (d) for any transaction from which the Director derived an
improper personal benefit. If the Tennessee Business Corporation Act is amended
after the effective date of this Charter to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of each past or present Director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Tennessee Business Corporation
Act, as so amended.

Any repeal or modification of this Article Eighth by (a) the
stockholders of the Corporation or (b) an amendment to the Tennessee Business
Corporation Act (unless such statutory amendment provides to the contrary) shall
not adversely affect any right or protection existing at the time of such repeal
or modification with respect to any acts or omissions occurring before such
repeal or modification, of a person serving as a Director prior to or at the
time of such repeal or modification.

Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative and whether formal or informal
(hereafter a "Proceeding"), by reason of the fact that he or she is or was a
director of the corporation or is or was serving at the request of the
corporation as a director of another corporation, or of a partnership, limited
liability company, joint venture, trust or other enterprise, including service
with respect to employee benefit plans (hereinafter as "Indemnitee"), whether
the basis of such Proceeding is alleged action in an official capacity as a
director or in any other capacity while serving as a director, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Tennessee Business Corporation Act, as the same may be amended
(but, in the case of any such indemnification rights than such law permitted the
corporation to provide prior to such amendment), against all expense, liability
and loss (including but not limited to counsel fees, judgments, fines, ERISA,
exercise taxes or penalties and amounts paid in settlement) reasonably incurred
or suffered by such Indemnitee in connection therewith and such indemnification
shall continue as to an Indemnitee who has ceased to be a director, and shall
inure to the benefit of the Indemnitee's heirs, executors and administrators.
The right to indemnification conferred in this Article Eighth shall be a
contract right and shall include with respect to directors the right to be paid
by the

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corporation the expenses incurred in any such Proceeding in advance of its final
disposition (hereinafter an "Advancement of Expenses"); provided, however, that
an Advancement of Expenses incurred by an Indemnitee shall be made only upon (i)
delivery to the corporation of an undertaking, by or on behalf of such
Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such Indemnitee is not entitled to be indemnified for such expenses
under this Article Eighth or otherwise, (ii) the Indemnitee furnishes the
corporation with a written affirmation of his or her good faith belief that he
or she has met the standards for indemnification under the Tennessee Business
Corporation Act, and (iii) a determination is made that the facts then known to
those making the determination would not preclude indemnification.

The corporation may indemnify and advance expenses to an officer,
employee or agent who is not a director to the same extent as to a director by
specific action of the corporation's Board of Directors or by contract.

The rights to indemnification and to the Advancement of Expenses
conferred in this Article Eighth shall not be exclusive of any other right that
any person may have or hereafter acquire under any statute, this Charter, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, and the
corporation is hereby permitted to grant additional rights to indemnification
and Advancement of Expenses to the fullest extent permitted by law, by
resolution of directors, or an agreement providing for such rights.

The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, limited liability company, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the corporation would have the power to indemnify such person against such
expense, liability or loss under the Tennessee Business Corporation Act.

NINTH:

1. From time to time any of the provisions of this Charter may be
amended, altered or repealed in accordance with the laws of the State of
Tennessee at the time in force; provided, however, that the affirmative vote of
the holders of at least a majority of the outstanding shares of the
Corporation's capital stock entitled to vote thereon and a majority of the
members of the Board of Directors then holding office is required to amend those
provisions of this Charter set forth in Articles Seventh, Eighth, Ninth, or
Tenth.

2. Except where a higher percentage affirmative vote is required
by this Charter or the Corporation's Bylaws, the Corporation's Bylaws may be
amended, added to or repealed by an affirmative vote of at least a majority of
either (i) the shares of the Corporation's capital stock entitled to vote
thereon, or (ii) the Board of Directors.

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<PAGE> 8

TENTH: Only the President or a majority of the Board of Directors
of the Corporation may call special meetings of stockholders.

<PAGE> 1

EXHIBIT 3.2

SECOND AMENDED AND RESTATED BYLAWS
OF
PRIVATE BUSINESS, INC.

ARTICLE I
MEETINGS OF STOCKHOLDERS

1.1 Annual Meeting. The annual meeting of the stockholders shall
be held, at such place within or without the state of incorporation as may be
designated by the Board of Directors, on such date and at such time as shall be
designated each year by the Board of Directors and stated in the notice of the
meeting. At the annual meeting the stockholders shall elect directors by a
plurality vote and transact such other business as may properly be brought
before the meeting.

1.2 Special Meetings. Special meetings of the stockholders may be
called by the President or a majority of the Board of Directors. The place of
said meetings shall be designated by the directors. The business transacted at
special meetings of the stockholders of the corporation shall be confined to the
business stated in the notice given to the stockholders.

1.3 Notice of Stockholder Meetings. Written or printed notice of
stockholders meetings shall state the place, day, and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called and the person or persons calling the meeting; notice may be
communicated in person, by mail or private carrier or by other means of written
communication by or at the direction of the President, Secretary, officer, or
person calling the meeting to each stockholder entitled to vote at the meeting.
Such notice shall be delivered not less than ten (l0) nor more than sixty (60)
days before the date of the meeting; provided, however, that any such notice may
be waived in writing, either prior to or subsequent to such meeting.

1.4 Advance Notice Requirements. The provisions of this
Section 1.4 are in addition to, and do not waive, any standards in effect under
applicable federal or state law regarding stockholder proposals.

(a) At an annual or special meeting of stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before a meeting, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors or the President, (ii) otherwise properly brought before the
meeting by or at the direction of the Board of Directors or President, or (iii)
brought before the meeting by a stockholder in accordance with these Bylaws. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or

<PAGE> 2

mailed and received at the principal executive offices of the corporation not
less than ninety (90) nor more than one hundred twenty (120) days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by the
stockholder, to be timely, must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting and not later than the
close of business on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. A stockholder's notice shall set forth
as to each matter the stockholder proposes to bring before the meeting (i) a
brief description of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting, (ii) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business, (iii) the class and number of shares which are beneficially owned
by the stockholder as of the record date of the meeting (if such record date is
publicly available) and as of the date of the notice, and (iv) any material
interest of the stockholder in such business. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual or special
meeting except in accordance with the procedures set forth in this Section
1.4(a). The chairman of the meeting shall, if the facts warrant, determine that
the business was not properly brought before the meeting and in accordance with
the provisions of this Section 1.4(a), and if he shall so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.

(b) Notwithstanding anything to the contrary set forth in these Bylaws,
including the provisions of Section 1.4(a), only persons who are nominated in
accordance with the procedures set forth in this Section 1.4(b) shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the corporation may be made at a meeting of stockholders
by or at the direction of a majority of the Board of Directors or a duly
authorized committee thereof (which committee in the case of any nomination of a
director who is to be an Independent Director (as such term is defined in
Section 2.2 below) shall have a majority of Independent Directors) or by any
stockholder of the corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
1.4(b). Such nominations, other than those made by or at the direction of the
Board of Directors or a duly authorized committee thereof, shall be made
pursuant to written notice timely made in writing to the Secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the corporation within
the time periods specified in Section 1.4(a). Such notice shall set forth (i) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director (w) the name, age, business address and residence
address of such person, (x) the principal occupation or employment of such
person (y) the class and number of shares of the corporation which are
beneficially owned by such person as of the record date of such meeting (if such
record

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date is publicly available) and as of the date of such notice, and (z) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including, without limitation, such person's written consent to being named in
the proxy statement as a nominee and to serve as a director if elected); and
(ii) as to the stockholder giving notice (y) the name and address, as they
appear on the corporation's books, of such stockholder, and (z) the class and
number of shares of the corporation's capital stock which are beneficially owned
by such stockholder as of the record date of the meeting (if such record date is
publicly available) and as of the date of such notice. At the request of the
Board of Directors or a committee appointed by it, any person nominated by the
board or such committee for election as a director shall furnish to the
Secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director unless nominated in accordance with
the procedure set forth in this Section 1.4(b). The chairman of the meeting
shall, if the facts warrant, determine that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.

1.5 Quorum Requirements. A majority of the shares entitled to
vote, present in person or represented by proxy, shall constitute a quorum for
the transaction of business. A meeting may be adjourned despite the absence of a
quorum, and notice of an adjourned meeting need not be given if the time and
place to which the meeting is adjourned are announced at the meeting at which
the adjournment is taken. When a quorum is present at any meeting, a majority in
interest of the stock there represented shall decide any question brought before
such meeting, unless the question is one upon which, by express provision of the
Charter or Bylaws, or by the laws of Tennessee, a larger or different vote is
required, in which case such express provision shall govern the decision of such
question.

1.6 Voting and Proxies. Every stockholder entitled to vote at a
meeting may do so either in person or by proxy appointment made by an instrument
in writing subscribed by such stockholder which proxy shall be filed with the
secretary of the meeting before being voted. Such proxy shall entitle the
holders thereof to vote adjournment of such meeting, but shall not be valid
after the final adjournment thereof. No proxy shall be valid after the
expiration of three (3) years from the date of its execution, unless the said
instrument expressly provides for a longer period.

ARTICLE II
BOARD OF DIRECTORS

2.1 Qualification and Election. Directors need not be stockholders
or residents of this State, but must be of legal age. They shall be elected by a
plurality of the votes cast at the annual meetings of the stockholders or at a
special meeting of the stockholders

3
<PAGE> 4

called for that purpose. Each director shall hold office until the expiration of
the term for which he is elected, and thereafter until his successor has been
elected and qualified.

2.2 Number. The Board of Directors shall be comprised of not less
than one (1) or more than twelve (12) members, the exact numbers to be fixed
from time to time by the Board of Directors pursuant to a resolution adopted by
a majority of directors then in office. The number of directors of the
Corporation may be increased or decreased outside of this range only in the
following manner:

(a) By a majority of the shareholders of the Corporation entitled to
vote if the then existing Board of Directors of the Corporation unanimously
approve the proposed increase or decrease in members; or

(b) By a vote of the holders of 70% or more of the combined voting
power of the then outstanding shares of stock entitled to vote generally in the
election of directors voting together as a single class.

Notwithstanding anything contained in these Bylaws or the Charter of
the Corporation to the contrary, the affirmative vote of the holders of at least
70% of the voting power of all of the shares of stock of the Corporation
entitled to vote generally in the election of directors voting together as a
single class shall be required to alter, amend or repeal this Section 2.2 or
adopt any provision inconsistent therewith.

At least two of the Directors shall at all times (except temporarily
pending the filling of a vacancy as hereinafter provided) be persons
("Independent Directors") who are not officers, employees or owners (except for
less than 1% of any public company) of any corporation, partnership or other
person (including themselves) which has any relationship with this corporation
that would prevent such person from serving on the Audit Committee of the Board
of Directors of a corporation having stock listed on the Nasdaq National Market.

2.3 Classes. The Board of Directors shall be divided into three
classes, designated Class 1, Class 2 and Class 3. Each class shall consist, as
nearly as may be possible, of one-third of the number of directors constituting
the Board of Directors. The term of office for Class 1 directors will first
expire at the annual meeting of stockholders for 2000; the term of office of
Class 2 directors will first expire at the annual meeting of stockholders for
2001; and the term of office of Class 3 directors will first expire at the
annual meeting of stockholders for 2002, and in each case until their successors
are duly elected and qualified. At each annual meeting of stockholders
commencing with the first annual meeting of stockholders, successors to the
class of directors whose terms expire at the annual meeting of stockholders
shall be elected by stockholders for a three-year term and until their
successors are duly elected and qualified. Except as otherwise provided herein
or in the Charter, increases in the size of the Board of Directors shall be
distributed among the classes so as to render the class as nearly equal in size
as possible.

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<PAGE> 5

Whenever the holders of preferred stock issued pursuant to the Charter or the
resolution or resolutions adopted by a majority of the Board of Directors then
in office providing for the issue of shares of preferred stock shall have the
right, voting as a separate class, to elect directors, the election, term of
office, filling of vacancies and other terms of such directorships shall be
governed by the terms of the Charter or such resolution or resolutions, as the
case may be, and such directorships shall not be divided into serial classes or
otherwise subject to this Section 2.3 unless expressly so provided therein.

2.4 Meetings. The annual meeting of the Board of Directors shall
be held immediately after the adjournment of the annual meeting of the
stockholders, at which time the officers of the corporation shall be elected.
The board may also designate more frequent intervals for regular meetings.
Special meetings may be called at any time by the chairman of the board,
President, or any two directors. Members of the Board of Directors may
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
in such manner shall constitute presence in person at such a meeting.

2.5 Notice of Directors' Meetings. The annual and all regular
board meetings may be held without notice of the date, time, place or purpose of
the meeting. Special meetings shall be held upon notice sent by any usual means
of communication not less than twenty-four (24) hours before the meeting noting
the date, time and place of the meeting. The notice need not describe the
purposes of the special meeting. Attendance by a director at a meeting or
subsequent execution or approval by a director of the minutes of a meeting or a
consent action shall constitute a waiver of any defects in notice of such
meeting and/or consent action.

2.6 Quorum and Vote. A majority of the Directors then in office
shall constitute a quorum for transaction of business at any meeting of the
Board of Directors; provided, however, that a quorum for transaction of business
with respect to any matter in which any director (or affiliate of such director)
who is not an Independent Director has any interest shall consist of a majority
of the directors including a majority of the Independent Directors, then in
office. Except as otherwise required by law or by the Charter, the act of a
majority of directors present at a meeting at which a quorum is present shall
constitute the act of the Board of Directors, except that no act relating to any
matter in which any director (or affiliate of such director) who is not an
Independent Director has any interest shall be the act of the Board unless a
majority of the Independent Directors on the Board vote for such act.

2.7 Executive Committee, Audit Committee, Compensation Committee,
and Other Committees. The Board of Directors, by a resolution adopted by a
majority of its members, may designate an executive committee, consisting of two
or more directors, an audit committee, a majority of the members of which shall
be Independent Directors, a compensation committee and other committees,
consisting of two or more directors. If any

5
<PAGE> 6

committee may take or authorize any act as to any matter in which any director
(or affiliate of such director) who is not an Independent Director has or may
have any interest, a majority of the members of such committee shall be
Independent Directors , except that any such committee consisting of only two
directors may have one Independent Director and one director who is not an
Independent Director. The Board may delegate to such committee or committees any
and all such authority as it deems desirable, including the right to delegate to
an executive committee the power to exercise all the authority of the Board of
Directors in the management of the affairs and property of the corporation,
except those powers which the Board of Directors is specifically prohibited from
delegating pursuant to the Tennessee Business Corporation Act. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.

ARTICLE III
OFFICERS

3.1 Number. The corporation shall have a President, a Secretary,
and such other officers as the Board of Directors shall from time to time deem
necessary. Any two (2) or more offices may be held by the same person, except
the offices of President and Secretary.

3.2 Election and Term. The officers shall be elected by, and shall
hold office at the pleasure of, the Board of Directors.

3.3 Duties. All officers shall have such authority and perform
such duties in the management of the corporation as are normally incident to
their offices and as the Board of Directors may from time to time provide.

ARTICLE IV
RESIGNATIONS, REMOVALS AND VACANCIES

4.1 Resignations. Any officer or director may resign at any time
by giving written notice to the Chairman of the Board, the President or the
Secretary. Any such resignation shall take effect at the time specified therein,
or, if no time is specified, then upon its acceptance by the Board of Directors.

4.2 Removal of Officers. Any officer or agent may be removed at
any time with or without cause by the Board of Directors.

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4.3 Removal of Directors. Any or all of the directors may be
removed at any time only for "cause" by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the corporation entitled
to vote generally in the election of directors (considered for this purpose as
one class). "Cause" for purposes of these Bylaws shall be: (i) any fraudulent or
dishonest act or activity by the director; or (ii) behavior materially
detrimental to the business of the Corporation.

4.4 Vacancies. Newly created directorships resulting from an
increase in the number of directors, and vacancies occurring in any office or
directorship for any reason, including removal of an officer or director, may be
filled by the vote of a majority of the directors remaining in office, even if
less than a quorum exists; provided, however, that any vacancy created by
removal of a director pursuant to Section 4.3 may be filled by action of the
stockholders taken at the same meeting at which the vacancy was created, such
action to be taken upon the affirmative vote of the holders of not less than a
majority of the voting power of the outstanding capital stock of the corporation
entitled to vote in the election of directors, voting as a single class.

ARTICLE V
CAPITAL STOCK

5.1 Stock Certificates. Every stockholder shall be entitled to a
certificate or certificates of capital stock of the corporation in such form as
may be prescribed by the Board of Directors. Unless otherwise decided by the
board, such certificates shall be signed by the President and the Secretary of
the corporation, however, any or all of the signatures may be a facsimile. The
corporation shall be entitled to treat the holder of record of any share or
shares of stock of the corporation as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it has actual or other notice thereof, except as provided by law.

5.2 Transfer of Shares. Shares of stock may be transferred on the
books of the corporation by delivery and surrender of the properly assigned
certificate, but subject to any restrictions on transfer imposed by either the
applicable securities laws or any stockholder agreement.

5.3 Loss, Theft or Destruction of Certificates. In the case of the
loss, theft, mutilation, or destruction of a certificate of stock, a duplicate
certificate may be issued upon such terms as the Board of Directors shall
prescribe.

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<PAGE> 8

ARTICLE VI
ACTION BY CONSENT

6.1 Directors. Whenever the directors are required or permitted to
take any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by all the persons or
entities entitled to vote thereon, and such action shall be as valid and
effective as any action taken at a regular or special meeting of the directors.

6.2 Stockholders. Any action required or permitted to be taken by
the holders of the issued and outstanding stock of the Corporation may be
effected solely at an annual or special meeting of stockholders duly called and
held in accordance with law, the Charter and these Bylaws, and not by the
consent in writing of such stockholders or any of them, provided, however, that
holders of shares of any series of the Corporation's preferred stock may
exercise the special voting rights, if any, of such series to elect directors
upon the occurrence of certain events specified in the Charter or in the
resolution or resolutions adopted by a majority of the Board of Directors then
in office providing for the issue of any series of preferred stock pursuant to
the Charter, in any manner now or hereafter permitted by the Charter or the
Tennessee Business Corporation Act.

ARTICLE VII
AMENDMENT OF BYLAWS

Except where specifically stated otherwise, these Bylaws may be
amended, added to or repealed by an affirmative vote of a majority of either (1)
the shares of the corporation's capital stock entitled to vote thereon
represented at any duly constituted stockholders' meeting, or (2) the Board of
Directors.

ARTICLE VIII
FISCAL YEAR

The fiscal year for the corporation shall be fixed from time to time by
the Board of Directors.

CERTIFICATION

I certify that these Bylaws were adopted by written consent of the
Board of Directors of the corporation and became effective on May __, 1999.

-------------------------------------------
Jerry Cover
President

<PAGE> 1
EXHIBIT 10.8

================================================================================

PRIVATE BUSINESS, INC.

1999 Amended and Restated Stock Option Plan

================================================================================

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. Purpose.........................................................................................1

Section 2. Definitions.....................................................................................1
2.1 "Board of Directors" or "Board".................................................................1
2.2 "Code"..........................................................................................1
2.3 "Committee".....................................................................................1
2.4 "Common Stock"..................................................................................1
2.5 "Employee"......................................................................................1
2.6 "Incentive Stock Option" or "ISO"...............................................................2
2.7 "Non-Qualified Option"..........................................................................2
2.8 "Option"........................................................................................2
2.9 "Participant"...................................................................................2
2.10 "Subsidiary"....................................................................................2

Section 3. Eligibility.....................................................................................2

Section 4. Common Stock Subject to the Plan................................................................2
4.1 Number..........................................................................................2
4.2 Terminated/Reacquired Options...................................................................2

Section 5. Administration of the Plan......................................................................3
5.1 Committee.......................................................................................3
5.2 Authority of Committee..........................................................................3
5.3 Plan Interpretation.............................................................................3
5.4 Committee Interpretations Conclusive............................................................4
5.5 Committee Voting................................................................................4
5.6 Committee Exculpation...........................................................................4
5.7 Granting of Options to Directors and Officers...................................................4

Section 6. Terms and Conditions of Option Agreements.......................................................4
6.1 Option Agreements...............................................................................4
6.2 Number of Shares and Vesting Schedule...........................................................5
6.3 Payment of Exercise Price with Previously Issued Stock..........................................5
6.4 Modification, Extension and Renewal of Options..................................................5
6.5 Rights as a Stockholder.........................................................................5
6.6 Other Option Agreement Provisions...............................................................5

Section 7. Terms and Conditions of Option Agreements Relating to ISOs......................................6
7.1 Option Price....................................................................................6
7.2 Term............................................................................................6
7.3 Restrictions on Option Price for Certain Employees..............................................6
7.4 Withholding and Payment of Taxes................................................................6
7.5 Options not Treated as ISOs.....................................................................7
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.6 Information Supplied to Participant.............................................................7
7.7 Restrictions on Transfer........................................................................7
7.8 Cessation of Employment in General..............................................................7
7.9 Cessation of Employment Due to Permanent and Total Disability...................................7
7.10 Cessation of Employment Due to Death............................................................8
7.11 Cessation of Employment for Cause...............................................................8

Section 8. Terms and Conditions of Option Agreements Relating to NQOs......................................8
8.1 Option Price....................................................................................8
8.2 Term............................................................................................8
8.3 Withholding and Payment of Taxes................................................................8
8.4 Restrictions on Transfer........................................................................9
8.5 Cessation of Employment.........................................................................9
8.6 Cessation of Employment for Cause...............................................................9

Section 9. Adjustments.....................................................................................9
9.1 Reorganization, Merger, Recapitalization, Etc...................................................9
9.2 Acceleration of Vesting Upon Certain Corporate Transactions....................................10
9.3 Limited Rights Upon Company's Restructure......................................................10
9.4 Effect of Options on Company's Capital and Business Structure..................................10

Section 10. Effect of the Plan on Employment Relationship..................................................10

Section 11. Amendment of the Plan..........................................................................11

Section 12. Compliance with Rule 16b-3 and Code Section 422................................................11

Section 13. Listing of Shares..............................................................................11

Section 14. Indemnification of Committee...................................................................11

Section 15. Termination of the Plan........................................................................12

Section 16. Application of Funds...........................................................................12

Section 17. No Obligation to Exercise Options..............................................................12

Section 18. Effective Date of the Plan.....................................................................12
</TABLE>

<PAGE> 4

PRIVATE BUSINESS, INC.
1999 AMENDED AND RESTATED STOCK OPTION PLAN

On February 9, 1999 the Board of Directors of Private Business, Inc.
adopted the 1999 Incentive Stock Option Plan. Pursuant to Section 9 of such
Plan, the Board hereby amends said Plan in its entirety and restates said Plan
as follows:

Section 1. Purpose. The purpose of the PRIVATE BUSINESS, INC. 1999
Amended and Restated Stock Option Plan (the "Plan") is to promote the interests
of PRIVATE BUSINESS, INC., a Tennessee corporation (the "Company"), and its
stockholders by providing an opportunity to selected Employees, as defined in
section 2.5 below, of the Company or any Subsidiary thereof to purchase Common
Stock of the Company. By encouraging such stock ownership, the Company seeks to
attract, retain and motivate such Employees and encourage them to devote their
best efforts to the business and financial success of the Company. It is
intended that this purpose will be effected by the granting of Incentive Stock
Options and Non-Qualified Stock Options to acquire Common Stock of the Company.
Under the Plan, the Committee shall have the authority (in its sole discretion)
to grant Incentive Stock Options within the meaning of section 422(b) of the
Code and Non-Qualified Options to which section 421 of the Code does not apply.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").

Section 2. Definitions. For purposes of the Plan, the following terms
used herein shall have the following meanings, unless a different meaning is
clearly required by the context.

2.1 "Board of Directors" or "Board" shall mean the Board of
Directors of the Company.

2.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.

2.3 "Committee" shall mean the Compensation Committee of the
Board of Directors or such other committee established by the Board of Directors
to which it delegates administration of the Plan under section 5.1 hereof, or if
no committee is then administering the Plan, the Board of Directors.

2.4 "Common Stock" shall mean the common stock, without par
value, of the Company.

2.5 "Employee" shall mean, (i) with respect to an ISO, any
person who, at the time an ISO is granted to such person hereunder, is employed,
as such term is used in section 422 of the Code and described in Treasury
Regulation section 1.421-7(h)(1), by the Company or any Subsidiary of the
Company, and (ii) with respect to a NQO, any person employed by or performing
services, whether as an employee or otherwise, for the Company or any Subsidiary
of the Company, including, without limitation, directors, officers, consultants
and advisors of the Company or a Subsidiary thereof.

<PAGE> 5

2.6 "Incentive Stock Option" or "ISO" shall mean an option to
purchase Common Stock granted under the Plan that constitutes and shall be
treated as an "incentive stock option," as such phrase is defined in section
422(b) of the Code.

2.7 "Non-Qualified Option" or "NQO" shall mean an option to
purchase Common Stock granted to an Employee pursuant to the Plan that is
described in Treasury Regulation section 1.83-7 with respect to which section
421 of the Code does not apply.

2.8 "Option" shall mean any ISO or NQO granted under this
Plan.

2.9 "Participant" shall mean an Employee to whom an Option has
been granted pursuant to this Plan.

2.10 "Subsidiary" shall have the meaning set forth for
"subsidiary corporation" in section 424(f) of the Code.

Section 3. Eligibility. Options may be granted to any Employee. The
Committee shall have the sole authority to select the persons to whom Options
are to be granted hereunder and to determine whether a person is to be granted
an ISO, a NQO or a combination thereof. No person shall have any right to
participate in the Plan. Any Participant may hold at any time more than one (1)
Option, but only upon such terms as provided hereunder and any agreement(s)
evidencing such Option(s).

Section 4. Common Stock Subject to the Plan.

4.1 Number. The total number of shares of Common Stock for
which Options may be granted under this Plan and all other option and stock
purchase plans of the Company shall not exceed in the aggregate Two Million
(2,000,000) shares of Common Stock.

4.2 Terminated/Reacquired Options. The shares of Common Stock
that may be subject to Options granted under this Plan may be either authorized
and unissued shares or shares reacquired at any time and now or hereafter held
as treasury stock as the Committee may determine. In the event any outstanding
Option expires or is terminated for any reason, the shares allocable to the
unexercised portion of such Option shall again become available for issuance
pursuant to the Plan. If any shares of Common Stock acquired pursuant to the
exercise of an Option shall have been repurchased or reacquired by the Company,
then such shares shall again become available for issuance pursuant to the Plan.

Section 5. Administration of the Plan.

5.1 Committee. The Plan shall be administered by the Company's
Compensation Committee of the Board of Directors or, at the Board of Directors'
discretion, any committee established by the Board of Directors to which it
delegates the administration of the Plan. If at any time there is no
Compensation Committee in existence and the Board of Directors has not delegated
the administration of the Plan to any other

<PAGE> 6

committee established by the Board, then the Company's Board of Directors shall
administer the Plan and, in such event, all references herein to the Committee
shall be deemed to be references to the Board of Directors.

5.2 Authority of Committee. The Committee shall have the sole
authority and discretion under the Plan (i) to select the Employees who are to
be granted Options hereunder; (ii) to designate whether any Option to be granted
hereunder is to be an ISO or a NQO; (iii) to establish the number of shares of
Common Stock that may be issued upon the exercise of each Option; (iv) to
determine the time and the conditions subject to which Options may be exercised
in whole or in part; (v) to determine the form of the consideration that may be
used to purchase shares of Common Stock upon exercise of any Option (including
the circumstances under which the Company's issued and outstanding shares of
Common Stock may be used by a Participant to exercise an Option); (vi) to
provide financing, upon such terms and conditions as the Committee shall
determine, to Participants for the purchase of Common Stock upon the exercise of
Options granted hereunder; (vii) to impose restrictions and/or conditions with
respect to shares of Common Stock acquired upon exercise of an Option; (viii) to
determine the circumstances under which shares of Common stock acquired upon
exercise of any Option may be subject to repurchase by the Company; (ix) to
determine the circumstances and conditions subject to which shares acquired upon
exercise of an Option may be sold or otherwise transferred, including, without
limitation, the circumstances and conditions subject to which a proposed sale of
shares of Common Stock acquired upon exercise of an Option may be subject to the
Company's right of first refusal (as well as the terms and conditions of any
such right of first refusal); (x) to establish vesting provisions for any Option
relating to the time (or the circumstance) when the Option may be exercised by a
Participant, including vesting provisions that may be contingent upon the
Company meeting specified financial goals; (xi) to accelerate the time when
outstanding Options may be exercised, provided, however, that any ISO may be
"accelerated" only as permitted by section 424(h) of the Code; and (xii) to
establish any other terms, restrictions and/or conditions applicable to any
Option not inconsistent with the provisions of the Plan and, with respect to
ISOs, the provisions of sections 422 and 424 of the Code.

5.3 Plan Interpretation. The Committee shall be authorized to
interpret the Plan and any Option granted hereunder and may, from time to time,
adopt such rules and regulations, not inconsistent with the provisions of the
Plan, as it may deem advisable to carry out the purpose of the Plan.

5.4 Committee Interpretations Conclusive. The interpretation
and construction by the Committee of any provision of the Plan, any Option
granted hereunder or any agreement evidencing any such Option shall be final and
conclusive upon all parties, except as may otherwise be determined by the Board
of Directors.

5.5 Committee Voting. Subject to section 5.7 hereof, directors
of the Company (or members of the Committee) who are either eligible for Options
hereunder, or to whom Options have been granted hereunder, may vote on any
matter affecting the administration of the Plan or the granting of Options under
the Plan; provided, however, that no director (or member of the Committee) shall
vote upon the granting of an Option to

<PAGE> 7

himself, but any such director (or Committee member) may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
(or the Committee) at which the Plan is administered or action is taken with
respect to the granting of any Option.

5.6 Committee Exculpation. All expenses and liabilities
incurred by the Committee in the administration of the Plan shall be borne by
the Company. The Committee may employ attorneys, consultants, accountants or
other persons in connection with the administration of the Plan. The Company,
and its officers and directors, shall be entitled to rely upon the advice,
opinions or valuations of any such persons. No member of the Committee or Board
of Directors shall be liable for any action, determination or interpretation
taken or made in good faith with respect to the Plan or any Option granted
hereunder.

5.7 Granting of Options to Directors and Officers.
Administrative discretion regarding the selection of any director or officer of
the Company to whom Options may be granted pursuant to this Plan, or the
determination of the number of shares of Common Stock that may be allocated to
such Option, and the terms thereof, shall be exercised in the following manner:
(i) approval in advance by the full Board of Directors; (ii) approval in advance
by a committee that is composed solely of two or more Non-Employee Directors, as
such term is defined under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934; (iii) approval in advance by a majority of the
Company's shareholders in accordance with Rule 16b-3; (iv) ratification by a
majority of the Company's shareholders no later than the next annual shareholder
meeting; or (v) the execution of an agreement by such officer or director
whereby such officer or director agrees to retain the issuer equity securities
for a period of six (6) months following their acquisition in accordance with
Rule 16b-3.

Section 6. Terms and Conditions of Option Agreements.

6.1 Option Agreements. The terms and conditions of each Option
granted under the Plan shall be specified by the Committee, shall be set forth
in a written Option agreement between the Company and the Participant in such
form as the Committee shall approve, and shall be clearly identified therein as
an ISO or a NQO. The terms and conditions of each ISO shall be such that each
ISO issued hereunder shall constitute and be treated as an "incentive stock
option" as defined in section 422 of the Code. The terms and conditions of each
NQO shall be such that each NQO granted hereunder shall not constitute or be
treated as an Incentive Stock Option and will be a non-qualified option for
Federal income tax purposes as described in Treasury Regulation section 1.83-7.
Except as otherwise provided in the Plan or the Code, terms and conditions of
any Option granted hereunder need not be identical to those of any other Option
granted hereunder.

6.2 Number of Shares and Vesting Schedule. Each Option shall
state the number of shares to which it pertains and the requirements and vesting
schedule thereof, if any.

<PAGE> 8

6.3 Payment of Exercise Price with Previously Issued Stock.
Except as otherwise provided in an Option agreement between the Company and a
Participant, the Committee may permit the option price for any Option granted
under the Plan to be paid, in whole or in part, with previously issued Common
Stock of the Company (valued as of the date of exercise of such Option).

6.4 Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, and with
respect to ISOs as permitted by the Code, the Committee, in its discretion, may
modify, extend or renew outstanding Options granted under the Plan, or accept
the surrender of outstanding Options (to the extent not theretofore exercised)
and authorize the granting of new Options and substitutions therefor; provided,
however, that no modification, extension, renewal, revision or cancellation of
an Option shall, without the consent of the Participant thereof, cause an ISO to
become a NQO or, except as otherwise set forth herein, alter or impair any
rights or obligations under any Option theretofore granted under the Plan.

6.5 Rights as a Stockholder. No Participant or transferee of
an Option granted hereunder shall have any rights as a stockholder of the
Company with respect to any shares of Common Stock to which such Option relates
until the date of the issuance of a stock certificate to him for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
otherwise required by section 9 hereof.

6.6 Other Option Agreement Provisions. The Option agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of Options, as the Committee
shall deem advisable. Any Option agreement relating to ISOs shall contain such
limitations and restrictions upon the exercise of such ISOs as shall be
necessary in order that such ISOs will be "incentive stock options" as defined
in section 422 of the Code, or to conform to any change in the law, which
provisions shall control any inconsistent or contradictory provision of the
Plan.

Section 7. Terms and Conditions of Option Agreements Relating to
ISOs.

7.1 Option Price. The option price of each ISO shall not be
less than one hundred percent (100%) (or one hundred ten percent (110%) in the
case of an Employee referred to in section 7.3 hereof) of the fair market value,
as determined in good faith by the Committee in accordance with section
422(b)(4) and 422(c)(7) of the Code, of the shares of Common Stock subject to
the ISO on the date the ISO is granted, but in no event shall the option price
be less than the par value of such shares, if any, which price shall be payable
in U.S. dollars upon the exercise of such ISO and paid, except as otherwise
provided in section 6.14, in cash or by check immediately upon exercise.

7.2 Term. The Committee shall fix the term of all ISOs granted
pursuant to the Plan, including the date on which such ISO shall expire and
terminate; provided, however, that such term shall in no event exceed ten (10)
years from the date on which such ISO is granted (or, in the case of an ISO
granted to an Employee referred to in section

<PAGE> 9

7.3 hereof, such term shall in no event exceed five (5) years from the date on
which such ISO is granted). Each ISO shall be exercisable in such amount or
amounts, under such conditions and at such times or intervals or in such
installments as shall be determined by the Committee in its sole discretion.

7.3 Restrictions on Option Price for Certain Employees. An ISO
shall not be granted to an Employee who, at the time the ISO is granted, owns
(actually or constructively under the provisions of section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or Subsidiary of the Company (taking into
account the attribution rules of section 424(d) of the Code), unless the option
price is at least one hundred ten percent (110%) of the fair market value
(determined as of the time the ISO is granted) of the shares of Common Stock
subject to the ISO and the ISO, by its terms, is not exercisable more than five
(5) years from the date it is granted.

7.4 Withholding and Payment of Taxes. In the event the Company
or any Subsidiary of the Company is required to withhold any Federal, state or
local taxes in respect of any compensation income realized by the Participant as
a result of any disposition of any shares of Common Stock acquired upon exercise
of an ISO granted hereunder that causes such ISO to cease to be treated as an
incentive stock option for Federal income tax purposes, the Company shall deduct
from any payments of any kind otherwise due to such Participant the aggregate
amount of such Federal, state or local taxes required to be so withheld or, if
such payments are insufficient to satisfy such Federal, state or local taxes, or
if no such payments are due or to become due to such Participant, then such
Participant shall be required to pay to the Company, or make other arrangements
satisfactory to the Company regarding payment to the Company of, the aggregate
amount of any such taxes. All matters with respect to the total amount of taxes
to be withheld in respect of any such compensation income shall be determined by
the Committee in its sole discretion.

7.5 Options not Treated as ISOs. If upon the exercise of one
or more Options granted pursuant to this or any other plan of the Company or any
Subsidiary of the Company that are designated as ISOs upon the grant thereof, a
portion of such exercised Options are not treated as ISOs pursuant to Code
section 422(d), which sets a limit upon the aggregate fair market value
(determined at the time the ISOs are granted) of stock subject to ISOs that may
become exercisable by the Participant thereof for the first time during any
calendar year, then the Company shall issue one or more certificates evidencing
the Common Stock acquired pursuant to the exercise of ISOs and one or more
certificates evidencing the Common Stock acquired pursuant to the exercise of
Options not treated as ISOs in accordance with section 422 of the Code and shall
so identify such certificates in the Company's stock transfer records.

7.6 Information Supplied to Participant. Following a transfer
of stock to a Participant pursuant to such Participant's exercise of an ISO, the
Company or any Subsidiary of the Company shall (on or before January 31 of the
calendar year following the year of such transfer) furnish to such Participant
the written statement prescribed by section 6039 of the Code and the Treasury
Regulations promulgated thereunder.

<PAGE> 10

7.7 Restrictions on Transfer. Each ISO, by its terms, shall
not be transferable otherwise than by last will and testament or the laws of
descent and distribution, and, during a Participant's lifetime, shall be
exercisable only by the Participant.

7.8 Cessation of Employment in General. Except as otherwise
provided in section 7.9 (relating to permanent and total disability), 7.10
(relating to death), and 7.11 (relating to "cause"), in the event a Participant
shall cease to be employed by the Company or a Subsidiary of the Company for any
reason, the unexercised portion of any ISO held by such Participant at that time
may only be exercised within three (3) months after the date on which the
Participant ceases to be so employed, and only to the extent that the
Participant could have otherwise exercised such ISO as of the date on which he
ceases to be so employed; provided, however, if the Participant shall die within
said three (3) month period, then the period during which any ISO may be
exercised shall be extended to the date that is one (1) year after the
Participant ceases to be employed by the Company; provided, further, that in no
event may such ISO be exercised beyond the expiration of the term of the ISO.
Notwithstanding the foregoing, the Company may, within three (3) months after
the Participant ceases to be employed by the Company, agree in writing to allow
the Option to continue for its otherwise unexpired term. If the Company agrees
to so allow such Option to continue, such Option shall thereafter constitute and
be treated as a NQO.

7.9 Cessation of Employment Due to Permanent and Total
Disability. In the event a Participant shall cease to be employed by the Company
or any Subsidiary of the Company by reason of his "permanent and total
disability" (within the meaning of section 22(e)(3) of the Code), the
unexercised portion of any ISO held by such Participant at that time may only be
exercised within one (1) year after the date on which the Participant ceases to
be so employed, and only to the extent that the Participant could have otherwise
exercised such ISO as of the date on which such Participant ceases to be so
employed; provided that in no event may such ISO be exercised beyond the
expiration of the term of the ISO.

7.10 Cessation of Employment Due to Death. In the event a
Participant shall die while in the employ of the Company or a Subsidiary of the
Company, the unexercised portion of any ISO held by such Participant at the time
of such Participant's death may only be exercised within one (1) year after the
date of such Participant's death, and only to the extent that the Participant
could have otherwise exercised such ISO at the time of his death. In such event,
such ISO may be exercised by the executor or administrator of the Participant's
estate or by any person or persons who shall have acquired the ISO directly from
the Participant by last will and testament or the applicable laws of descent and
distribution.

7.11 Cessation of Employment for Cause. In the event a
Participant is terminated from employment with the Company for "cause," such
Participant's right to exercise any ISO granted hereunder, whether vested or
non-vested, shall terminate upon written notice of discharge. For purposes of
this paragraph, "cause" shall mean final conviction of a felony, adjudication of
bankruptcy, nonacceptance of office or conduct prejudicial to the interests of
the Company.

<PAGE> 11

Section 8. Terms and Conditions of Option Agreements Relating to
NQOs.

8.1 Option Price. The option price of each NQO shall be as
determined by the Committee. The Committee may, in its sole discretion, include
in a NQO issued to an Employee a provision providing for a reduction of the
option price at a set future date or dates on the condition that certain Company
objectives, as determined by the Committee, shall have been achieved by such
date.

8.2 Term. The Committee shall fix the term of all NQOs granted
pursuant to the Plan, including the date on which such NQO shall expire and
terminate. Each NQO shall be exercisable in such amount or amounts, under such
conditions and at such times or intervals or in such installments as shall be
determined by the Committee in its sole discretion.

8.3 Withholding and Payment of Taxes. In the event the Company
or any Subsidiary of the Company is required to withhold any Federal, state or
local taxes in respect of any compensation income realized by the Participant as
a result of the grant, disposition, or exercise of a NQO granted hereunder or of
any shares of Common Stock acquired upon exercise of a NQO, the Company or the
Subsidiary of the Company shall deduct from any payments of any kind otherwise
due to such Participant the aggregate amount of such Federal, state or local
taxes required to be so withheld or, if such payments are insufficient to
satisfy such Federal, state or local taxes, or if no such payments are due or to
become due to such Participant, then such Participant shall be required to pay
to the Company or the Subsidiary of the Company or make other arrangements
satisfactory to the Company or the Subsidiary of the Company regarding payment
to the Company or the Subsidiary of the Company of the aggregate amount of any
such taxes. All matters with respect to the total amount of taxes to be withheld
in respect of any such compensation income shall be determined by the Committee
in its sole discretion.

8.4 Restrictions on Transfer. Except as provided in this
section 8.4 or as specifically permitted in the governing Option agreement, no
NQO shall be transferable by the Participant other than by last will and
testament or the applicable laws of descent and distribution and, during the
lifetime of the Participant, NQOs granted hereunder may be exercised only by the
Participant. Notwithstanding anything in this section 8.4 to the contrary, any
Participant may transfer such Participant's NQO to members of his immediate
family, to one or more trusts for the benefit of such family members, or to
partnerships or limited liability companies in which such family members or
trusts are the only partners or members, if (i) the Option agreement with
respect to which such NQO relates expressly so provides, and (ii) the
Participant does not receive any consideration for the transfer. Any NQO held by
any such transferee would continue to be subject to the same terms and
conditions that are applicable to such NQO immediately prior to its transfer.

8.5 Cessation of Employment. In the event a Participant shall
cease to be employed by the Company or a Subsidiary of the Company because of
death or permanent and total disability (within the meaning of Code section
22(e)(3)) or any other reason other than for "cause," as defined in section 8.6,
the unexercised portion of any NQO held by such Participant at that time shall
continue unless otherwise determined by

<PAGE> 12

the Committee. If the Committee decides not to continue a NQO, the Committee
may, in its sole absolute discretion, establish time periods in which a
Participant who has ceased to be employed by the Company may exercise such
Participant's NQO. In no event may a NQO be exercised beyond the term of such
NQO.

8.6 Cessation of Employment for Cause. In the event a
Participant is terminated from employment with the Company for "cause," such
Participant's right to exercise any NQO granted hereunder, whether vested or
non-vested, shall terminate upon notice of discharge. For purposes of this
paragraph, "cause" shall mean final conviction of a felony, adjudication of
bankruptcy, nonacceptance of office or conduct prejudicial to the interests of
the Company.

Section 9. Adjustments.

9.1 Reorganization, Merger, Recapitalization, Etc. Subject to
any required action by the Company's shareholders, in the event that, after the
adoption of the Plan by the Board of Directors, the outstanding shares of the
Company's Common Stock shall be increased or decreased or changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation through reorganization, merger or
consolidation, recapitalization, reclassification, stock split, split-up,
combination or exchange of shares or declaration of any dividends payable in
Common Stock or in any other manner effected without the receipt of
consideration by the Company, the Committee shall appropriately adjust (i) the
number of shares of Common Stock (and the option price per share) subject to the
unexercised portion of any outstanding Option (to the nearest possible full
share), provided, however, that the limitations of sections 422 and 424 of the
Code shall apply with respect to adjustments made to ISOs so as not to cause any
ISO to cease to qualify as an ISO under section 422 of the Code, and (ii) the
number of shares of Common Stock for which Options may be granted under this
Plan, as set forth in section 4.1 hereof, and such adjustments shall be
effective and binding for all purposes of this Plan.

9.2 Acceleration of Vesting Upon Certain Corporate
Transactions. Notwithstanding section 9.1, in the event of (i) any sale or
transfer for value of not less than fifty percent (50%) of the Company's Common
Stock (whether by purchase, merger, or other transaction or transactions) or
(ii) the sale of substantially all of the assets and business of the Company,
one-half (1/2) of each Participant's unvested Options shall become vested and
shall be exercisable within such time prior to any such transaction as may be
determined by the Board of Directors of the Company as set forth in a written
notice provided to the Participant prior to such transaction. Upon the
liquidation or dissolution of the Company, all unvested Options shall become
vested and be exercisable within such time prior to such liquidation or
dissolution as may be determined by the Board of Directors of the Company as set
forth in a written notice provided to the Participant prior to such liquidation
or dissolution.

9.3 Limited Rights Upon Company's Restructure. Except as
hereinbefore expressly provided in this section 9, a Participant shall have no
rights by reason of any subdivision or consolidation of shares of Company stock
of any class or the

<PAGE> 13

payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution, liquidation,
merger, or consolidation, or spin-off of assets or stock of another corporation,
and any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option granted hereunder.

9.4 Effect of Options on Company's Capital and Business
Structure. The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.

Section 10. Effect of the Plan on Employment Relationship. Neither the
Plan nor any Option granted hereunder to an Employee shall be construed as
conferring upon such Participant any right to continue in the employ of the
Company or the service of the Company or any Subsidiary, as the case may be, or
limit in any respect the right of the Company or any Subsidiary to terminate
such Participant's employment or other relationship with the Company or any
Subsidiary, as the case may be, at any time.

Section 11. Amendment of the Plan. The Board of Directors may, as
permitted by law, amend the Plan from time to time as it deems desirable;
provided, however, that, without the approval of the holders of a majority of
the outstanding Common Stock of the Company entitled to vote thereon at a
shareholders' meeting, the Board of Directors may not amend the Plan to (i)
increase (except for increases due to adjustments in accordance with section 9
hereof) the aggregate number of shares of Common Stock for which Options may be
granted hereunder, (ii) increase the benefits accruing to a Participant under
this Plan, provided, however, with respect to ISOs, benefits may be increased
only to the extent such amendment or increase in benefits will not cause ISOs
granted hereunder to be treated as other than ISOs, (iii) change the class of
Employees eligible to receive Options under the Plan, or (iv) make any other
revision to the Plan that requires shareholder approval under the Code.
Notwithstanding any other provision of the Plan, shareholder approval of
amendments to the Plan need not be obtained if such approval is not required
under section 422 of the Code.

Section 12. Compliance with Rule 16b-3 and Code Section 422. The
Company shall use its best efforts to maintain the Plan, and to assure the
Options are granted and exercised under the Plan, in accordance with Rule 16b-3
(to the extent Rule 16b-3 could be applicable to any transaction in securities
arising in connection with the Plan), as that Rule may be amended from time to
time and, with respect to ISOs, section 422 of the Code, as that section may be
amended from time to time, and any and all successor statutes and regulations
thereof, including without limitation, the seeking of any appropriate amendments
to the Plan and all requisite approvals and consents of such amendments;
provided, however, that except as otherwise set forth in the Plan, the Company
shall take no action that adversely affects Options then outstanding under the
Plan without the prior written consent of the holders of such Options.

<PAGE> 14

Section 13. Listing of Shares. Each Option will be subject to the
requirement that if, at any time the Board or Committee determines that the
listing, registration or qualification of the shares subject to such Option upon
any securities exchange or under any state or federal securities or other law or
regulation, or the consent or approval of any governmental regulatory body, is
necessary as a condition to or in connection with the granting of the Option or
the issue or purchase of Common Stock to which the Option relates, the Option
may not be exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval will have been effected or obtained free of
any conditions not acceptable to the Board or Committee. The holder of the
Option will supply the Company with such certificates, representations, opinions
of counsel and information as the Company may request, including, without
limitation, an investment letter certifying that all shares being purchased
under an Option are being acquired for investment and not for the purpose of
resale or distribution, and will otherwise cooperate with the Company in
obtaining such listing, registration, qualification, consent or approval.

Section 14. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct in
the performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding, a Committee member shall in
writing offer the Company the opportunity, at its expense, to handle and defend
the same.

Section 15. Termination of the Plan. The Board of Directors may
terminate the Plan at any time. Unless the Plan shall theretofore have been
terminated by the Board, the Plan shall terminate ten (10) years after the date
of its initial adoption by the Board of Directors. No Option may be granted
hereunder after termination of the Plan. The termination or amendment of the
Plan shall not alter or impair any rights or obligations under any Option
theretofore granted under the Plan.

Section 16. Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Options granted hereunder shall be
used for general corporate purposes.

Section 17. No Obligation to Exercise Options. The granting of an
Option hereunder shall impose no obligation upon the Participant thereof to
exercise such Option.

Section 18. Effective Date of the Plan. This Plan shall be effective as
of the date of its adoption by the Board of Directors.

<PAGE> 15

This Restated and Amended Plan was adopted and approved by the Board of
Directors on the ____ day of ____________, 1999.

----------------------------------------
Secretary

The Company's shareholders adopted and approved this 1999 Amended and
Restated Stock Option Plan on the ____ day of ______________, 1999.

----------------------------------------
Secretary

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
dated March 17, 1999 included in or made a part of Amendment No. 1 to the
Private Business, Inc. registration statement, and to all references made to our
Firm.

ARTHUR ANDERSEN LLP

Nashville, Tennessee
April 30, 1999