<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
CHECK ONE:
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ____ TO ____.
COMMISSION FILE NUMBER 000-25959
PRIVATE BUSINESS, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1453841
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
9010 OVERLOOK BLVD. 37027
BRENTWOOD, TENNESSEE (Zip Code)
(Address of principal executive offices)
(615) 221-8400
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b)of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of registrant's voting stock held by
non-affiliates of the registrant, computed by reference to the price at which
the stock was sold, or average of the closing bid and asked prices, as of March
20, 2000 was $18,694,778.
On March 20, 2000, 27,465,259 shares of the registrant's $0.01 par
value Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning the
executive officers and directors of the Company as of April 15, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kevin M. McNamara 44 Chief Executive Officer and Director
Jerry L. Cover 48 President and Director
Fred P. Read 45 Chief Financial Officer
Jeffrey R. Cantwell 42 Chief Technical Officer
Joseph P. Mooney 32 Chief Sales Officer
Gregg E. Colson 37 Senior Vice President Client Services
William B. King 55 Chairman of the Board
Gregory A. Thurman 51 Director
Thomas L. Black 48 Director
Brian J. Conway 41 Director
Bruce R. Evans 41 Director
Gary W. Cage 55 Director
Fred C. Goad 59 Director
</TABLE>
Kevin M. McNamara joined the Company as Chief Executive Officer and
Director on October 31, 1999. Prior to joining Private Business, Mr. McNamara
served as Senior Vice President and Chief Financial Officer of ENVOY
Corporation, a leading publicly traded provider of healthcare EDI and
transaction processing services, from 1996-1999. From 1994-1995, Mr. McNamara
was President of NaBANCO Merchant Services Corporation, one of the world's
then-largest merchant credit card processors.
Jerry L. Cover joined Private Business in 1991 and currently serves as
President 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 1997. He served as Chief Executive Officer during 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 until becoming 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.
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
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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.
Joseph P. Mooney joined Private Business in 1998 and currently serves
as Chief Sales Officer. Mr. Mooney was Vice President/Regional Manager--Business
Development until becoming Chief Sales Officer in January 2000. Prior to joining
Private Business, Mr. Mooney served as Director of Sales for Cardinal Health,
Inc. from 1996 to 1998. From 1993 to 1996, Mr. Mooney was in several management
and sales positions with Alcon Laboratories, Inc.
Gregg E. Colson joined Private Business in 1991 and currently serves as
Senior Vice President of Client Services. He has held numerous roles within the
Company's technology area since 1991, including Vice President, Product
Development/Electronic Commerce and Director of Training/Technical Support.
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.
Gregory A. Thurman co-founded Private Business in 1991 and has served
as a Director since that time. He served as 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.
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
Chief Executive Officer from 1991 until 1995.
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,
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Massachusetts where he has been employed since 1986. Mr. Evans serves as a
Director of Omtool, Ltd., DSET Corporation and several privately-held companies.
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.
Fred C. Goad has served as a Director since February 2000. Mr. Goad
became a Director and President of ENVOY Corporation in August 1984. On August
3, 1995, Mr. Goad was elected Chairman and Co-Chief Executive Officer of ENVOY
and currently serves in such capacity in addition to being a Director. Mr. Goad
also serves on the Board of Directors for Performance Food Group, Ingram
Entertainment, Oacis Healthcare, and was a founding member of the Nashville
Healthcare Council.
COMMITTEES OF THE BOARD OF DIRECTORS
All directors generally hold office for three-year terms and then until
their successors have been duly elected and qualified. The Board of Directors of
the Company is divided into three classes. The term of the Class 1 directors
will expire at the 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, successors to the class of directors whose
term expires at such meeting will be elected to serve for a three-year term and
until their successors are duly elected and qualified.
During fiscal 1999, the Board of Directors held 11 meetings and acted
by 3 written consent actions. Each director attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors and (ii)
the total number of meetings held by all committees on which the individual
director served.
The Board of Directors currently has two committees: the Audit
Committee and the Compensation Committee. The Compensation Committee makes
recommendations concerning salaries and incentive compensation for executives of
the Company. The Compensation Committee consists of Messrs. Black, Evans and
King. The Compensation Committee met one time during fiscal 1999. The Audit
Committee reviews and approves the annual report of the Company's independent
auditors. Messrs. Black, Cage and Thurman serve on the Audit Committee. The
Audit Committee met one time during fiscal 1999.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
the registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Such executive officers, directors and greater than 10% shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. The SEC requires public companies to disclose
whether persons required to make such filings missed or made late filings. The
Company believes that during fiscal 1999, all such filings and disclosure
requirements were met within the time allowed for all persons subject to Section
16(a).
ITEM 11. EXECUTIVE COMPENSATION.
The following table provides information as to annual, long-term or
other compensation we paid during fiscal years ended December 31, 1999, 1998 and
1997 for the Company's Chief Executive Officers and the persons who, at December
31, 1999, were the other four most highly compensated executive officers of the
Company (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS (#)
- --------------------------- ---- ------ ----- --------------- -----------
<S> <C> <C> <C> <C>
Kevin M. McNamara, (2) 1999 85,000 50,000 -- 1,000,000
Chief Executive Officer 1998 N/A N/A N/A N/A
1997 N/A N/A N/A N/A
Jerry L. Cover, 1999 201,115 0 -- 115,000
President 1998 202,000 118,000 3,002,132(3) 40,000
1997 154,802 75,000 -- 90,000
Fred P. Read, 1999 96,115 50,000 -- 24,400
Chief Financial Officer 1998 101,305 40,000 202,441(3) 16,000
1997 85,125 25,000 -- 14,000
Jeffrey R. Cantwell, 1999 110,000 50,000 -- 24,400
Chief Technical Officer 1998 100,100 35,000 249,766(3) 20,000
1997 89,007 30,000 -- 18,000
Joseph T. Stewart, (4) 1999 126,794 0 -- 64,400
Chief Operating Officer
</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 $50,000
or 10% of any such officer's salary and bonus disclosed in this table.
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<PAGE> 6
(2) Mr. McNamara joined the Company on October 31, 1999.
(3) Mr. Cover, Mr. Read and Mr. Cantwell received special one time bonuses
in 1998 in conjunction with our recapitalization in recognition of
their contributions to the Company. These bonuses do not represent the
customary incentive structure of Private Business.
(4) Mr. Stewart resigned his position with the Company effective
January 14, 2000.
Option Grants. The following table provides certain information with
respect to grants of stock options to the Named Executive Officers pursuant to
the Company's Stock Option Plan during the year ended December 31, 1999.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS MARKET RATE OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTIONS
UNDERLYING EMPLOYEES OR BASE ON DATE TERM(2)
OPTIONS IN FISCAL PRICE OF EXPIRATION -----------------------
NAME GRANTED (1) YEAR ($/SHARE) GRANT DATE 5% 10%
----------- ----- --------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin M. McNamara 500,000 19.7 2.125 2.125 10/28/09 668,201 1,693,351
250,000 9.8 8.00 2.125 10/28/09 0 0
250,000 9.8 12.00 2.125 10/28/09 0 0
Jerry L. Cover 40,000 1.6 8.00 8.00 03/31/09 201,246 509,998
75,000 3.0 8.00 8.00 05/25/09 337,337 956,245
Fred P. Read 14,400 0.6 8.00 8.00 03/31/09 72,499 183,599
10,000 0.4 8.00 8.00 05/25/09 50,312 127,499
Jeffrey R. Cantwell 14,400 0.6 8.00 8.00 03/31/09 72,499 183,599
10,000 0.4 8.00 8.00 05/25/09 50,312 127,499
Joseph T. Stewart 14,400 0.6 8.00 8.00 03/31/09 72,499 183,599
50,000 2.0 8.00 8.00 05/25/09 251,558 637,497
</TABLE>
(1) Options granted to Mr. McNamara become exercisable one thirty-sixth
(1/36) per month, the options granted to the other Named Executive
Officers generally become exercisable one forty-eighth (1/48) per
month.
(2) The potential realizable values illustrate values that might be
realized upon exercise immediately prior to the expiration of the term
of these options using 5% and 10% appreciation rates, as required by
the Securities and Exchange Commission, compounded annually. These
values do not, and are not intended to, forecast possible future
appreciation, if any, of the Company's stock price.
Option Exercise and Values. The following table provides information as
to exercise of options by The Named Executive Officers during the 1999 fiscal
year under the option plans and the year-end value of unexercised options.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF UNDERLYING VALUE OF UNEXERCISED
SECURITIES UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
UNDERLYING AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
OPTIONS VALUE ------------------------------- ----------------------------
NAME EXERCISED(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin M. McNamara 0 N/A 83,333 916,667 $112,001 $1,231,999
Jerry L. Cover 95,167 164,166 120,938 184,895 275,213 173,130
Fred P. Read 4,917 27,035 19,441 40,042 31,119 24,196
Jeffrey R. Cantwell 0 N/A 54,108 46,292 169,182 34,626
Joseph T. Stewart 0 N/A 15,942 68,458 0 0
</TABLE>
(1) This amount represents the aggregate of the number of "in-the-money"
options multiplied by the difference between $4.813, the fair market
value of the Common Stock at December 31, 1999, and the exercise price
for that option. Options are classified as "in-the-money" if the market
value of the underlying common stock exceeds the exercise price of the
option. Actual values which may be realized, if any, upon the exercise
of options will be based on the per share market price of the common
stock at the time of exercise and are thus dependent upon future
performance of the common stock.
DIRECTOR COMPENSATION
Non-employee directors receive $1,000 cash compensation for each board
meeting they attend. Directors are reimbursed for expenses incurred in
connection with attendance at board and committee meetings. In March 1999, Mr.
Cage, an independent director was granted an option to purchase 20,000 shares of
common stock at an exercise price of $8.00 per share. In February 2000, Mr.
Goad, an independent director was granted an option to purchase 10,000 shares of
common stock at an exercise price of $4.00 per share. No other non-employee
directors have received stock option grants. Mr. McNamara and Mr. Cover, Private
Business's only employee directors, received their stock option grants for their
service as an employee.
EMPLOYMENT AGREEMENT
Effective October 31, 1999, the Company entered into an Executive
Employment Agreement with Mr. McNamara as the Company's Chief Executive Officer
which was subsequently superceded by an Amended and Restated Executive
Employment Agreement, also effective October 31, 1999. Mr. McNamara's agreement
provides for an annual base salary of not less than $210,000 and an annual
incentive cash bonus of up to 100% of his base salary upon achievement of
certain performance criteria to be established from time to time. The employment
agreement provides that Mr. McNamara will be appointed to the Company's Board of
Directors and has an initial term of two years, subject to automatic annual
renewals absent prior notice from either party. Mr. McNamara received a $50,000
additional payment upon execution of the employment agreement.
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The employment agreement further provides for the grant to Mr. McNamara
of options to acquire 500,000 shares of the Company's common stock at an
exercise price equal to the closing trading price on October 29, 1999 of $2.125;
an additional 250,000 shares at an exercise price of $8.00 per share; and an
additional 250,000 shares at an exercise price of $12.00 per share. These
options vest over three years at the rate of 1/36th per month and constitute
incentive stock options to the extent eligible under applicable tax laws, and,
with respect to any excess, nonqualified stock options.
The employment agreement provides for various payments to Mr. McNamara
upon cessation of employment, depending on the circumstances. If the Company
terminates Mr. McNamara's employment for "Cause" or if he resigns prior to a
"Change in Control" (other than due to an uncured material breach by the
Company), Mr. McNamara will receive his pro rata base salary and perquisites to
the date of termination. If Mr. McNamara dies or becomes disabled during his
term of employment, he will receive his pro rata base salary, perquisites and
incentive bonus to the date of termination or resignation.
If, prior to an "Initial Change in Control Event," the Company
terminates Mr. McNamara's employment due to a "Discharge Event," or he resigns
based on an uncured material breach by the Company, then Mr. McNamara will
receive a lump sum payment equal to his base salary and "Average Bonus." If
prior to an "Initial Change in Control Event" the Company terminates his
employment without "Cause" and without a "Discharge Event," Mr. McNamara will
receive the greater of (i) his base salary and "Average Bonus" or (ii) his base
salary and standard incentive bonus for the remainder of the unexpired term of
the employment agreement.
If after an "Initial Change in Control Event," the Company terminates
Mr. McNamara's employment other than for "Cause," death or disability, or if Mr.
McNamara voluntarily resigns for any reason other than his death or disability,
then the agreement generally provides that the Company will pay Mr. McNamara a
lump sum termination payment of twice his base salary and his "Average Bonus"
The employment agreement provides certain time periods for the exercise
of Mr. McNamara's options should his employment cease, which are generally more
favorable after a "Change in Control." All options granted to Mr. McNamara
immediately vest and become exercisable upon a Change in Control, and are
extinguished should he be terminated for "Cause."
The employment agreement indemnifies Mr. McNamara for excise taxes
imposed upon him based on his receipt of any "excess parachute payment" within
the meaning of Section 280G(b) of the Internal Revenue Code. Mr. McNamara agrees
in the employment agreement not to compete within the continental United States
with the "Business Activities" of the Company during the term of his employment
and the following two years, nor to solicit the Company's employees during such
period for employment elsewhere.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Private Business is authorized to issue 100,000,000 shares of common
stock and 20,000,000 shares of preferred stock. As of March 31, 2000, there were
27,465,259 shares of common stock and no shares of preferred stock issued and
outstanding. The following table sets forth as of March 31, 2000 information
with respect to the beneficial ownership of our outstanding common stock by (i)
each director of Private Business, (ii) each executive officer named in the
Summary Compensation Table herein, (iii) all directors and executive officers as
a group, and (iv) each stockholder known by Private Business to be the
beneficial owner of more than 5% of its outstanding common stock. Except as
otherwise indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares of common stock owned by them,
except to the extent such power may be shared with a spouse.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED(1)
--------------------------
NAME NUMBER PERCENT
- ---- ------ -------
<S> <C> <C>
Summit Partners (2)(3) 4,427,295 16.1
TA Associates Group (2)(4) 4,427,295 16.1
Cendent Corporation (2) 1,874,801 6.8
James C. Gooch (5) 1,698,294 6.2
Thomas L. Black 2,968,514 10.8
William B. King 1,325,720 4.8
Gregory A. Thurman 2,375,635 8.6
Kevin M. McNamara (6) 222,222 *
Jerry L. Cover (7) 298,875 1.1
Fred P. Read (8) 31,000 *
Joseph T. Stewart (9) 24,733 *
Jeffrey R. Cantwell (9) 61,858 *
Gary W.Cage (9) 20,000 *
Fred C. Goad (10) 20,000 *
Bruce R.Evans (3) 4,427,295 16.1
Brian J. Conway (4) 4,427,295 16.1
All directors and executive officers as group 16,241,721 58.0
(14 persons) (11)
</TABLE>
- ----------------
* Less than 1%
(1) The percentages shown are based on 27,465,259 shares of Common Stock
outstanding on March 31, 2000. Pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"), shares of Common
Stock which a person has the right to acquire pursuant to the exercise
of stock options and warrants held by such holder that are exercisable
within sixty (60) days of such date are deemed outstanding for the
purpose of computing the percentage ownership of such person, but are
not deemed outstanding for computing the percentage ownership of any
other person.
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(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 3,429,322 shares held by Summit Ventures V, L.P., 573,432
shares held by Summit V Companion Fund, L.P., 229,373 shares held by
Summit V Advisors Fund (QP), L.P., 70,094 shares held by Summit V
Advisors Fund, L.P. and 125,074 shares held by Summit Investors III,
L.P. Mr. Evans is a general partner of Summit Investors III, L.P. and
is a member of Summit Partners, LLC, which is the general partner of
Summit Ventures V, L.P., Summit V Companion Fund, L.P., Summit V
Advisors Fund (QP), L.P. and Summit V Advisors Fund, L.P. Mr. Evans may
be deemed to share voting and investment power with respect to all
shares held by the partnerships. Mr. Evans disclaims beneficial
ownership of these shares, except to the extent of his pecuniary
interest therein.
(4) Includes 3,367,087 shares owned by TA/Advent VIII, L.P.; 926,416 shares
owned by Advent Atlantic & Pacific III L.P.; 66,506 shares owned by TA
Executives Fund LLC; 67,286 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 10,884 shares held by TA Investors, LLC.
(5) Includes 848,897 shares held by The Joshua C. King Trust and 848,897
shares held by the William B. King III Trust. Mr. Gooch is trustee of
both trusts
(6) Includes options to purchase 152,778 shares of common stock.
(7) Includes options to purchase 202,708 shares of common stock.
(8) Includes options to purchase 26,083 shares of common stock.
(9) The amount shown consists of options to purchase shares of common
stock. These individuals do not own any shares of common stock.
(10) Includes options to purchase 10,000 shares of common stock.
(11) Includes options to purchase 536,734 shares of common stock.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 expired April 30, 2000, 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 1999 paid
an aggregate of $34,945 for such services. All of these arrangements have been
terminated.
RELATED PARTY TRANSACTION POLICY
Private Business has a policy that any transactions between Private
Business and its officers, directors and affiliates will be on terms as
favorable to Private Business as can be obtained from unaffiliated third
parties. Such transactions with such persons will be subject to approval by a
majority of our outside directors or will be consistent with policies approved
by such outside directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is currently composed of Mr.
Black, Mr. Evans and Mr. King. No executive officer of the Company serves as a
member of the compensation committee or as a director of any other entity whose
executive officer(s) serves as a director of the Company.
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SIGNATURES
Pursuant to the requirements of Schedule 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
PRIVATE BUSINESS, INC.
\s\ Fred P. Read
-----------------------
Fred P. Read
Chief Financial Officer
Date: April 28, 2000
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
3.1 Amended and Restated Charter of the Company (incorporated by reference
to Exhibit 3.1 of the Company's Registration Statement on No. 333-75013
Form S-1)
3.2 Amended and Restated Bylaws of Private Business (incorporated by
referenced to Exhibit 3.2 to the Company's Registration Statement No.
333- 75013 on Form S-1).
10.1 Stock Purchase Agreement dated as of July 24, 1998 (incorporated by
referenced to Exhibit 10.1 to the Company's Registration Statement No.
333-75013 on Form S-1).
10.2 Stockholders Agreement dated as of August 7, 1998 (incorporated by
referenced to Exhibit 10.2 to the Company's Registration Statement No.
333-75013 on Form S-1).
10.3 Registration Rights Agreement dated as of August 7, 1998 (incorporated
by referenced to Exhibit 10.3 to the Company's Registration Statement
No. 333-75013 on Form S-1).
10.4 Credit Agreement dated as of August 7, 1998 (incorporated by referenced
to Exhibit 10.4 to the Company's Registration Statement No. 333-75013
on Form S-1).
10.4.1 Amendment No. 1 to Credit Agreement dated as of May 5, 1999
(incorporated by referenced to Exhibit 10.4.1 to the Company's
Registration Statement No. 333-75013 on Form S-1).
10.4.2 Amendment No. 2 to Credit Agreement dated as of December 31, 1999
(incorporated by referenced to Exhibit 10.4.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999).
10.5 Form of Indemnification Agreement between Private Business and each of
its Officers and Directors (incorporated by referenced to Exhibit 10.5
to the Company's Registration Statement No. 333-75013 on Form S-1).
10.6 Form of Nonqualified Stock Option Agreement without change of control
provision (incorporated by referenced to Exhibit 10.6 to the Company's
Registration Statement No. 333-75013 on Form S-1).
10.7 Form of Nonqualified Stock Option Agreement with change of control
provision (incorporated by referenced to Exhibit 10.7 to the Company's
Registration Statement No. 333-75013 on Form S-1).
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
10.8 Private Business, Inc. 1999 Amended and Restated Stock Option Plan
(incorporated by referenced to Exhibit 10.8 to the Company's
Registration Statement No. 333-75013 on Form S-1).
10.9 Cendant Termination and Non Competition Agreement. (incorporated by
referenced to Exhibit 10.9 to the Company's Registration Statement No.
333- 75013 on Form S-1).
10.10 Employment Agreement between the Company and Kevin M. McNamara
(incorporated by referenced to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999).
10.10.1 Amended and Restated Executive Employment Agreement between the Company
and Kevin M. McNamara.
10.11 Lease Between Triple Brentwood as Landlord and Private Business, Inc.
as Tenant (incorporated by referenced to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999)
21 Subsidiaries of Private Business (incorporated by referenced to Exhibit
21 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999)
</TABLE>
The attachments referenced in these exhibits are not included in this
filing but are available from Private Business upon request.
<PAGE> 1
EXHIBIT 10.10.1
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT OF
KEVIN M. MCNAMARA
This Amended and Restated Executive Employment Agreement ("AGREEMENT")
is entered into between PRIVATE BUSINESS, INC., a Tennessee corporation
("COMPANY"), and KEVIN M. MCNAMARA, a resident of Brentwood, Tennessee
("EXECUTIVE"), executed effective October 31, 1999. The Company and the
Executive are sometimes referred to herein as the "PARTIES."
1. Introduction. The Company and Executive entered into an Executive
Employment Agreement on and effective October 31, 1999 (the "ORIGINAL
AGREEMENT"). Since execution of the Original Agreement, the Company and
the Executive have acknowledged certain ambiguities contained in
Section 8 of the Original Agreement, which they now desire to clarify
by amending and restating the terms and conditions of Executive's
employment by the Company in this Agreement, effective as of October
31, 1999.
2. Employment. The Company hereby employs the Executive and the
Executive hereby accepts employment with the Company upon terms and
conditions set forth herein.
3. Duties and Responsibilities.
a. Extent of Service. The Executive shall, during the
term of this Agreement, devote such of his entire time,
attention, energies and business efforts to his duties as an
executive of the Company as are reasonably necessary to carry
out his duties specified in Paragraph 3.2 below. The Executive
shall not, during the term of this Agreement, engage in any
other business activity (whether or not such business activity
is pursued for gain, profit or other pecuniary advantage) if
such business activity would impair the Executive's ability to
carry out his duties hereunder. This Paragraph 3.1, however,
shall not be construed to prevent the Executive from investing
his personal assets as a passive investor.
b. Position and Duties. Subject to the power of the
Board of Directors of the Company to elect and remove officers
and the power of the stockholders to remove directors, the
Executive shall serve the Company as Chief Executive Officer
and be appointed to the Board of Directors by the current
members of the Board of Directors; and shall perform,
faithfully and diligently, the services and functions relating
to such office or otherwise reasonably incident to such office
as may be designated from time to time by the Board of
Directors of the Company or its designee(s); provided that all
such services and functions shall be reasonable and within the
Executive's area of expertise, and provided further that the
Executive shall be physically capable of performing the same.
<PAGE> 2
c. Place of Employment. During the term of this
Agreement, the Company shall maintain its principal executive
offices in the Nashville, Tennessee area, and the Executive's
primary place of employment shall be at such principal
executive offices. During the term of this Agreement, the
Company will provide the Executive with a private office and
other customary staff support services commensurate with the
services and functions to be performed by him hereunder.
4. Salary and Other Benefits. Subject to the terms and conditions
of this Agreement:
a. Salary. As compensation for his services under and
during the term of his employment under this Agreement, the
Executive shall be paid an annual salary of not less than Two
Hundred Ten Thousand Dollars ($210,000), payable in accordance
with the then current payroll policies of the Company. Such
salary shall be subject to increase by the Board of Directors
of the Company (or the appropriate committee thereof) from
time to time. The annual salary payable from time to time by
the Company to the Executive pursuant to this Paragraph 4.1 is
herein sometimes referred to as his "BASE SALARY."
b. Incentive Bonus Eligibility. Beginning with calendar
year 2000, the Executive shall be eligible to be paid an
annual incentive cash bonus of up to one hundred percent
(100%) of his Base Salary subject to performance criteria for
the Company and Executive established from time to time by the
Board of Directors, or its designee(s), and Executive.
c. Stock Option Grants.
(a) Executive shall be granted options
to acquire Five Hundred Thousand (500,000)
shares of the Company's common stock at an
exercise price equal to the closing trading
price of such stock on October 29, 1999.
Such grant shall be made pursuant to an
Incentive Stock Option Agreement between the
Company and Executive to the extent
Executive is eligible for incentive options
under applicable tax laws and, with respect
to any excess, a Non-Qualified Stock Option
Agreement between the Company and the
Executive. Such agreement(s) will provide
for vesting of such options over three (3)
years at the rate of 1/36th per month. In
all events such options shall be subject to
the terms and conditions of the Company's
1999 Amended and Restated Stock Option Plan,
as the same
may be amended from time to time (the "STOCK
OPTION PLAN").
(b) Executive shall also be granted,
effective the effective date of this
Agreement reflected above,
2
<PAGE> 3
options to acquire an aggregate of Five
Hundred Thousand (500,000) shares of the
Company's common stock at the following
exercise prices:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Per Share
---------------- ------------------------
<S> <C>
250,000 $ 8.00
250,000 $ 12.00
</TABLE>
Such grants shall be made pursuant to an Incentive Stock Option
Agreement between the Company and Executive to the extent Executive is
eligible for incentive options under applicable tax laws and, with
respect to any excess, a Non-Qualified Stock Option Agreement between
the Company and Executive. Such agreement(s) will provide for vesting
of such options over three (3) years at the rate of 1/36th per month.
In all events such options shall be subject to the terms and conditions
of the Stock Option Plan.
d. Other Benefits. As long as the Executive is employed
by the Company, the Executive shall be entitled to receive the
following benefits in addition to his Base Salary:
(a) The Executive shall have the right
to participate in all group benefit plans of
the Company in accordance with the Company's
regular practices with respect to its senior
officers.
(b) The Executive shall be entitled to
reimbursement from the Company for
reasonable out-of-pocket expenses incurred
by him in the course of the performance of
his duties hereunder, subject to compliance
with the Company's standard expense policies
and procedures.
(c) The Executive shall be entitled to
such vacation, holidays and other paid or
unpaid leaves of absence as are consistent
with the Company's other senior officers.
e. Initial Payment. Within five (5) days of Executive's
execution of this Agreement, the Company shall pay Executive
an initial payment, in addition to any other payments under
this Agreement, of Fifty Thousand Dollars ($50,000), subject
to the Company's standard payroll practices and withholding
taxes. In the event Executive resigns within ninety (90) days
of the date hereof, he shall refund the initial payment to the
Company in full within five (5) days.
5. Term. The term of this Agreement shall be for an initial
period of two (2) years and two (2) months ending on December 31, 2001,
and shall thereafter automatically be extended for an additional period
of one (1) year on a yearly basis, unless on or before October 1 of any
subsequent year, either the Executive or the Company gives the other
party notice that the term of this Agreement will not be so extended,
in which case the term of this Agreement will end on the end of the
year
3
<PAGE> 4
designated in the notice. Notwithstanding the foregoing, the
indemnification provisions of this Agreement contained in Paragraph 10
shall survive until the expiration of the statute of limitations for
assessment of any excise tax under Section 4999 of the Code with regard
to an Excess Parachute Payment on account of the Change of Control.
6. Termination and Resignation. The Company shall have the right
to terminate the Executive's employment hereunder at any time and for
any reason, and upon any such termination the Executive shall be
entitled to receive from the Company prompt payment of the amount
determined pursuant to the applicable subparagraph of Paragraph 7
below. The Executive shall have the right to terminate his employment
hereunder at any time by resignation, and he shall thereupon be
entitled to receive from the Company prompt payment of the amount
determined pursuant to the applicable subparagraph of Paragraph 7
below.
7. Payments Upon Termination and Resignation.
a. Pro Rata Payments Upon Termination for Cause,
Resignation Prior to Change in Control, Death or Disability.
If (a) the Company at any time terminates the Executive's
employment for Cause (as defined below), or (b) prior to the
occurrence of a Change In Control (as defined below) of the
Company, the Executive voluntarily resigns for any reason
other than because of an uncured material breach by the
Company of any term of this Agreement, then in each case the
Executive shall be entitled to receive only his Base Salary on
a pro rata basis to the date of termination plus any amounts
due Executive through the date of termination in accordance
with Paragraph 4.4. If the Executive during the term of this
Agreement dies or becomes disabled (being the inability of the
Executive to perform his normal employment duties for six (6)
months during any twelve (12) month period because of either
physical or mental incapacity), the Executive or his estate
shall be entitled to receive any amounts due Executive
pursuant to Section 4.4 and to receive his Base Salary plus
Bonus on a pro rata basis to the date of termination or
resignation. For purposes of this Paragraph 7.1, "pro rata"
shall mean the product of the Executive's annual Base Salary
and Bonus that would have been payable had the Executive's
employment not terminated multiplied by a fraction the
denominator of which is 365 and the numerator of which is the
number of days during the calendar year that have passed
through the date of the termination of the Executive's
employment.
b. Base Salary and Average Bonus Payment Upon
Termination Prior to Initial Change in Control Event or Upon
Resignation Based on Material Breach Prior to Change in
Control. If (a) prior to the occurrence of an Initial Change
in Control Event (as defined below), the Company terminates
the Executive's employment because of a Discharge Event (as
defined below), or if (b) prior to the occurrence of a Change
in Control of the Company, the Executive resigns because of
the uncured material breach by the Company of any term of this
Agreement, then in each case the Executive shall be entitled
to receive a lump sum payment equal to his Base Salary and
Average Bonus (as defined below). If prior to the occurrence
of an Initial Change in Control Event the Company terminates
the Executive's
4
<PAGE> 5
employment without Cause and without a Discharge Event, then
the Executive shall be entitled to receive the greater of (a)
a lump sum payment equal to his Base Salary and Average Bonus,
or (b) his Base Salary and Bonus as provided in Paragraph 4.2
for the remainder of the unexpired term of this Agreement.
c. Multiple Base Salary Payment Upon Termination After
Initial Change of Control Event or Upon Termination or
Resignation After a Change in Control. If after the occurrence
of an Initial Change of Control Event of the Company, the
Company terminates the Executive's employment hereunder (a)
because of a Discharge Event, or (b) without Cause and without
any Discharge Event, then in either case the Company will pay
to the Executive a lump sum termination payment equal to two
(2) times the sum of his Base Salary and his Average Bonus (as
defined below) (collectively, the "LUMP SUM PAYMENT"). If
after the occurrence of a Change in Control of the Company,
(a) the Company terminates the Executive's employment
hereunder for any reason other than for Cause (other than his
death or disability), or (b) the Executive voluntarily resigns
his employment hereunder for any reason (other than his death
or disability), then in each case the Company will pay to the
Executive the Lump Sum Payment.
d. Certain Definitions. The following terms not defined
elsewhere in this Agreement shall have the following
definitions:
(a) "AVERAGE BONUS" shall mean that
result obtained by dividing the sum of the
Bonuses, if any, actually paid to the
Executive pursuant to Paragraph 4.2 above in
respect of the two (2) years immediately
preceding the year in which a Change in
Control of the Company occurs by the number
of years during such two-year period in
which the Executive was entitled to receive
a bonus pursuant to Paragraph 4.2 above;
provided, however, that with respect to a
termination of employment that occurs prior
to 2001, the Average Bonus of the Executive
shall be the greater of (i) fifty percent
(50%) of the Base Salary of the Executive,
or (ii) the Bonus Executive actually
received with respect to calendar year 2000.
(b) Termination by the Company of the
Executive's employment for "CAUSE" shall
mean termination upon the willful
misappropriation of funds or properties of
the Company or the willful contravention of
the standards referred to in the last
sentence of Paragraph 11 below. For purposes
of this definition, no act, or failure to
act, on the Executive's part shall be
considered "willful" unless done, or omitted
to be done, by the Executive not in good
faith and without reasonable belief that the
Executive's action or omission was in the
best interest of the Company.
Notwithstanding the foregoing, the
5
<PAGE> 6
Executive shall not be deemed to have been
terminated for Cause unless and until there
shall have been delivered to the Executive a
copy of a resolution, duly adopted by the
affirmative vote of not less than three-
quarters (3/4) of the entire membership of
the Board of Directors of the Company at a
meeting of the Board duly called and held
(after reasonable notice to the Executive
and an opportunity for the Executive,
together with his counsel, to be heard
before the Board) finding that in the good
faith opinion of the Board the Executive was
guilty of the conduct set forth above and
specifying the particulars thereof in
detail.
(c) A "CHANGE IN CONTROL" shall be
conclusively deemed to have occurred if (and
only if) any of the following shall have
taken place: (i) a change in control is
reported by the Company in response to
either Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended
("EXCHANGE ACT"), or Item 1 of Form 8-K
promulgated under the Exchange Act; (ii) any
person (as such term is used in Section
13(d) and 14(d)(2) of the Exchange Act) is
or becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act)
directly or indirectly, of securities of the
Company representing forty percent (40%) or
more of the combined voting power of the
Company's then outstanding securities; or
(iii) following the election or removal of
directors, a majority of the Board consists
of individuals who were not members of the
Board two (2) years before such election or
removal, unless the election of each
director who was not a director at the
beginning of such two-year period has been
approved in advance by directors
representing at least a majority of the
directors then in office who were directors
at the beginning of the two-year period.
(d) The "CODE" shall refer to the
Internal Revenue of 1986, as amended.
(e) A "DISCHARGE EVENT" shall have
occurred if the Executive shall have
received a copy of a resolution duly adopted
by the affirmative vote of a majority of the
members of the Compensation Committee of the
Board of Directors of the Company finding
that, upon the recommendation of and for the
reasons cited by the Chairman of the
Company, the Executive is no longer
discharging his duties in a manner
consistent with the effective administration
of the affairs of the Company
6
<PAGE> 7
and hence the continued employment of the
Executive is no longer in the best interest
of the Company.
(f) An "INITIAL CHANGE IN CONTROL
EVENT" shall be conclusively deemed to have
occurred when any individual, group,
partnership, corporation, trust or other
entity ("PERSON") initiates a course of
action or conduct that, in the good faith
judgment of the Board of Directors of the
Company, might reasonably be expected to
lead to a Change in Control of the Company.
For example and without limiting the scope
of the foregoing, an Initial Change in
Control Event would include the public
announcement or other disclosure by a Person
of its intention (i) to acquire by private
or open market purchase, tender offer,
exchange offer, or otherwise forty percent
(40%) or more of the combined voting power
of the Company's outstanding securities, or
(ii) to solicit proxies or consents for the
removal of at least three (3) incumbent
directors or the election of at least three
(3) persons to serve as directors of the
Company in opposition to nominees proposed
by the Board of Directors of the Company.
(g) A "MATERIAL BREACH" by the Company
of this Agreement shall include, without
limitation, the removal of the Executive
without his prior written consent from the
position of Chief Executive Officer and/or a
Director (except in the event of termination
for Cause or a Discharge Event).
8. Exercise of Options.
a. In the event, prior to a Change in Control:
(a) Executive's employment is
terminated by the Company for any reason
other than for Cause, Executive's stock
options which are vested as of such time
shall remain exercisable for a period of no
less than two (2) years, as determined by
the Company's Board of Directors or
committee established by the Board of
Directors to administer the Stock Option
Plan, subject to the terms and conditions of
the Stock Option Plan including, without
limitation, provisions regarding the maximum
period during which incentive stock options
may be exercised;
(b) Executive's employment is
terminated by the Company for Cause,
Executive's stock options shall terminate in
accordance with the Stock Option Plan;
7
<PAGE> 8
(c) Executive's employment is
terminated pursuant to Executive's death or
permanent disability, Executive's vested
stock options shall remain exercisable until
the earlier of the expiration of the option
term specified in the applicable options
agreement(s), or a period of no less than
two (2) years from the Date of Termination,
as determined by the Company's Board of
Directors or committee established by the
Board of Directors to administer the Stock
Option Plan, subject to the terms and
conditions of the Stock Option Plan
regarding the maximum period during which
incentive stock options may be exercised; or
(d) Executive's employment is
terminated pursuant to Executive's
resignation, Executive's vested stock
options shall remain exercisable for ninety
(90) days after the Date of Termination,
unless a longer period is established by the
Company's Board of Directors or committee
established by the Board of Directors to
administer the Stock Option Plan, subject in
all events to the terms and conditions of
the Stock Option Plan including, without
limitation, provisions regarding the maximum
period during which incentive stock options
may be exercised.
b. Contemporaneously with the occurrence of a Change in Control
of the Company, all outstanding options previously granted to
the Executive under any then existing Company stock option,
stock appreciation or other employee incentive plan that are
not otherwise exercisable by the Executive at the time the
Change in Control of the Company occurs will immediately vest
and become exercisable. In the event, after a Change in
Control:
(a) Executive's employment is
terminated by the Company for any reason
other than for Cause, Executive's vested
stock options shall remain exercisable until
the earlier of the expiration of the option
term specified in the applicable option
agreement(s), or five (5) years from the
Date of Termination, subject to the terms
and conditions of the Stock Option Plan
regarding the maximum period during which
incentive stock options may be exercised;
(b) Executive's employment is
terminated by the Company for Cause,
Executive's stock options shall terminate in
accordance with the Stock Option Plan;
(c) Executive's employment is
terminated pursuant to Executive's death or
permanent disability, Executive's vested
stock options shall remain
8
<PAGE> 9
exercisable until the earlier of the
expiration of the option term specified in
the applicable option agreement(s), or a
period of no less than two (2) years from
the Date of Termination, as determined by
the Company's Board of Directors or
committee established by the Board of
Directors to administer the Stock Option
Plan, subject to the terms and conditions of
the Stock Option Plan regarding the maximum
period during which incentive stock options
may be exercised; or
(d) Executive's employment is
terminated pursuant to Executive's
resignation, Executive's vested stock
options shall remain exercisable until the
earlier of the expiration of the option term
specified in the applicable option
agreement(s), or five (5) years from the
Date of Termination, subject in all events
to the terms and conditions of the Stock
Option Plan regarding the maximum period
during which incentive stock options may be
exercised.
c. For purposes of Section 8.1 and 8.2, the "maximum
period during which incentive stock options may be exercised"
shall be determined without regard to any requirement in the
Plan that incentive stock options be exercised within a
certain time after termination of Executive's employment.
Accordingly, in the event Executive ceases to be employed by
the Company, any incentive stock option issued to Executive
that is not exercised within the time period specified in
Section 7.8, 7.9 or 7.10 of the Stock Option Plan, as
applicable, may continue to be exercisable as a non-qualified
stock option for the term specified in Section 8.1(a) or (c)
or Section 8.2(a), (c) or (d) hereof, as applicable.
9. Tax Reimbursement Payment.
a. Notwithstanding anything to the contrary contained in
this Agreement, in any plan of the Company, or in any other
agreement or understanding, the Company will pay to the
Executive, at the times herein specified, an amount (the
"ADDITIONAL AMOUNT") equal to the excise tax under Section
4999 of the Internal Revenue Code of 1986, as amended (the
"CODE"), if any, incurred or to be incurred by the Executive
by reason of the payments under this Agreement, acceleration
of vesting of stock options, stock appreciation rights or
restricted stock granted under the Company's various stock
option, stock appreciation or other employee incentive plans,
or payments under any other plan, agreement or understanding
between the Executive and the Company, constituting Excess
Parachute Payments (as defined below), plus all excise taxes
and federal, state and local income taxes incurred or to be
incurred by the Executive with respect to receipt of the
Additional Amount. For purposes of this Agreement, the term
"EXCESS PARACHUTE PAYMENT" shall mean any payment or any
portion thereof which would be an "excess parachute payment"
within the meaning of Section 280G(b) of the Code, and which
would result in the imposition of an excise tax on the
Executive under
9
<PAGE> 10
Section 4999 of the Code. Attached hereto as Exhibit A is an
example illustrating the computation of the Additional Amount.
b. All determinations required to be made regarding the
Additional Amount, including whether payment of any Additional
Amount is required and the amount of any Additional Amount,
shall be made by the independent accounting firm which is
advising the Company (the "ACCOUNTING FIRM"), which shall
provide detailed support calculations to the Company and the
Executive on or before the last day of the calendar year
during which occurs the Change of Control (the "CHANGE OF
CONTROL YEAR"). In computing taxes, the Accounting Firm shall
use the highest marginal federal, state and local income tax
rates applicable to single taxpayers for the year in which the
Additional Amount is to be paid (unless, within thirty (30)
days after the occurrence of the Change in Control the
Executive specifies in writing to the Company his marginal tax
rate) and shall assume the full deductibility of state and
local income taxes for purposes of computing federal income
tax liability. The portion of the Additional Amount based on
the excise tax as determined by the Accounting Firm to be due
for the Change of Control Year shall be paid to the Executive
no later than March 1 immediately following the end of the
Change of Control Year. The portion of the Additional Amount
based on the excise tax as determined by the Accounting firm
to be due for each calendar year following the Change of
Control Year shall be paid to the Executive on or before March
1 immediately following the end of each such calendar year. If
the Company determines that the excise tax for any year will
be different from the amount originally calculated in the
report of the Accounting Firm delivered at the end of the
Change of Control Year, then the Company shall provide to the
Executive detailed support calculations by the Accounting Firm
specifying the basis for the change in the Additional Amount.
10. Indemnification. In addition to such indemnification by the
Company afforded Executive pursuant to a separate Indemnification
Agreement executed on or about the date hereof, the terms of which are
hereby incorporated by reference, Executive shall be indemnified as
follows:
a. Litigation Costs. If the Executive shall have to
institute litigation brought in good faith to enforce any of
his rights under the Agreement, the Company shall indemnify
the Executive for his reasonable attorney's fees and
disbursements incurred in any such litigation.
b. Excise Tax. In the event that an excise tax is ever
assessed by the Internal Revenue Service against the Executive
(or if the Company and the Executive mutually agree that an
excise tax is payable) by reason of the payment under this
Agreement, acceleration of vesting of stock options, stock
appreciation rights or restricted stock granted under the
Company's stock option, stock appreciation or other employee
incentive plans, or payments under any other plan, agreement
or understanding between the Executive and the Company,
constituting Excess Parachute Payments, and if such excise tax
was not included in the determination by the Accounting Firm
of the Additional Amount that has been actually paid to the
Executive,
10
<PAGE> 11
the Company agrees to indemnify the Executive by paying to the
Executive the amount of such excise tax, together with any
interest and penalties, including reasonable legal and
accounting fees and other out-of-pocket expenses incurred by
the Executive, attributable to the failure to pay such excise
tax by the date it was originally due, plus all federal, state
and local income taxes incurred with respect to payment of the
excise tax calculated in a manner analogous to Exhibit A. Upon
Executive's receipt from the Internal Revenue Service ("IRS")
of any deficiency notice, notice of assessment or any other
written communication relating to the excise tax on Excess
Parachute Payment, Executive shall give notice thereof to the
Company within ten (10) business days of receipt thereof. In
the event of any dispute concerning the potential excise tax
(including any administrative proceedings within the IRS of
court proceedings), the Company, as the indemnifying party,
shall be entitled to assume the defense of such a dispute or
proceeding, no Compromise or settlement of such claim may be
effected without the Company's and Executive's mutual consent
(which consents shall not be unreasonably withheld) and the
Company shall have no liability with respect to any compromise
or settlement of such claims effected without its consent. In
addition, in the event the Company assumes defense of any
proceeding, the Executive shall not be entitled to
indemnification for outside legal fees and expenses
independently incurred by Executive. This indemnification
obligation shall survive the termination of the Agreement and
shall apply to all such excise taxes on Excess Parachute
Payments, whether due before or after termination of
employment.
c. Repayment of Excess Payment. If the excise tax for
any year which is actually imposed on the Executive is finally
determined to be less than the amount taken into account in
the calculation of the Additional Amount that was paid to the
Executive pursuant to Paragraph 9, then the Executive shall
repay to the Company, at the time that the amount of such
reduction in excise tax is finally determined, the portion of
the Additional Amount attributable to such reduction
(including the portion of the Additional Amount attributable
to the excise tax and federal and state income taxes imposed
on the Additional Amount being repaid by the Executive, to the
extent that such repayment results in a reduction in such
excise tax, federal or state income tax), plus interest on the
amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code.
11. Preservation of Business; Fiduciary Responsibility. The
Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the
services of present employees and to preserve the business relations of
the Company with suppliers, distributors, customers and others. The
Executive shall not commit any act, or in any way assist others to
commit any act, which would injure the Company. So long as the
Executive is employed by the Company, the Executive shall observe and
fulfill proper standards of fiduciary responsibility attendant upon his
service and office.
11
<PAGE> 12
12. Restrictive Covenants.
a. Non-Compete. During the term of this Agreement
(including any renewal periods as provided in Paragraph 5) and
for a period of twenty-four (24) months following the
termination of Executive's employment with the Company under
this Agreement, whether Executive's employment terminates
pursuant to the provisions of Paragraph 6 of this Agreement or
otherwise (collectively, the "RESTRICTED PERIOD"), Executive
covenants and agrees that he will not, without the express
approval of the Board of Directors, directly or indirectly
anywhere in the continental United States engage in any
activity which is, or participate or invest in, or provide or
facilitate the provision of financing to, or assist (whether
as owner, shareholder, member, partner, director, officer,
trustee, employee, agent or consultant, or in any other
capacity), any business, organization or person other than the
Company (or any subsidiary or affiliate of the Company) whose
business, activities, products or services (collectively,
"BUSINESS ACTIVITIES") are competitive with either (i) any of
the Business Activities conducted or offered by the Company or
its subsidiaries or affiliates during any period in which
Executive is employed by the Company or any of its
subsidiaries or affiliates, which Business Activities shall
include in any event and without limitation providing software
products and marketing, training, management, billing,
collection and insurance brokerage services to entities in the
business of purchasing or financing accounts receivable or in
the factoring business, or (ii) any other Business Activities
which the Company or its subsidiaries or affiliates conducts
or offers on, or is actively planning and actually conducts or
offers within twelve (12) months after the date Executive's
employment with the Company terminates. Notwithstanding the
foregoing, Executive may own, directly or indirectly, solely
as an investment, securities of any entity if Executive (a) is
not a controlling person with respect to such entity and (b)
does not, directly or indirectly, own five percent (5%) or
more of any class of the securities of such entity.
b. Trade Secrets; Confidential Information. Executive
covenants and agrees that, at all times during and after the
Restricted Period, he shall keep secret and not disclose to
others or appropriate to his own use or the use of others any
trade secrets, or secret or confidential information or
knowledge pertaining to the Company Business or the affairs of
the Company or any of its affiliates including without
limitation trade know-how, trade secrets, consultant
contracts, customer lists, pricing policies, operational
methods, marketing plans or strategies, product development
techniques or plans, business acquisition plans, new personnel
acquisition plans, technical processes, designs and design
projects, inventions and research projects; provided, however,
that the following shall not constitute a breach or violation
of this Paragraph: any disclosure made by the Executive in the
course of his employment by the Company as provided in this
Agreement, or any disclosure reasonably believed by Executive
to be compelled by law or legal process. Information shall not
be deemed confidential or secret for purposes of this
Agreement if it is generally known in the industry.
12
<PAGE> 13
c. Employees of the Company. During the Restricted
Period, Executive shall not directly or indirectly hire away
or solicit to hire away from the Company or any of its
affiliates any employee of the Company or its affiliates.
d. Property of the Company. All memoranda, notes, lists,
records and other documents (and all copies thereof) made or
compiled by Executive or made available to Executive during
his employment by the Company concerning the business or
affairs of the Company or any of its affiliates, other than
any of such which may also pertain personally to Executive,
shall be the exclusive property of the Company and shall be
delivered to the Company promptly upon the termination of
Executive's employment with the Company or at any other time
on request by the Board of Directors of the Company or such
affiliates.
e. Rights and Remedies Upon Breach. If Executive
breaches, or threatens to commit a breach of, any of the
provisions of Paragraphs 12.1 through 12.4 of this Agreement
(collectively, the "RESTRICTIVE COVENANTS"), the Company shall
have the following rights and remedies, each of which shall be
independent of the other and severally enforceable, and all of
which shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company: (a) the right
and remedy to have any of the Restrictive Covenants
specifically enforced by any court having jurisdiction and in
Tennessee by an arbitration panel as provided in Paragraph 15
of this Agreement, it being hereby acknowledged and agreed by
Executive that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will
not provide an adequate remedy to the Company; and (b) the
right and remedy to require Executive to account for and pay
over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by
Executive as a result of any transactions constituting a
breach of any of the Restrictive Covenants, and Executive
shall account for and pay over such benefits to the Company.
f. Severability of Covenants. If it is determined that
any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given
full effect, without regard to the invalid portions. If it is
determined that any of the Restrictive Covenants, or any part
thereof, is unenforceable because of the duration of such
provision, the geographical area covered thereby, or any other
determination of unreasonableness of the provision, the
arbitration panel making such determination shall have the
power to reduce the duration, area or scope of such provision
and, in its reduced form, such provision shall then be
enforceable and shall be enforced.
13. Notice. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in
writing and shall be deemed given when delivered in person or when
mailed, by certified mail (return receipt requested), postage prepaid,
addressed as follows (or to such other address as a party may specify
by notice pursuant to this provision):
13
<PAGE> 14
(a) To the Company:
Private Business, Inc.
9010 Overlook Boulevard
Brentwood, Tennessee 37027
Attention: Chairman
(b) Kevin M. McNamara
6313 Wescates Court
Brentwood, Tennessee 37027
14. Controlling Law and Performability. The execution, validity,
interpretation and performance of this Agreement shall be governed by
the law of the State of Tennessee.
15. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled by arbitration in
Nashville, Tennessee. In the proceeding the Executive shall select one
(1) arbitrator, the Company shall select one (1) arbitrator and the two
(2) arbitrators so selected shall select a third (3rd) arbitrator. The
decision of a majority of the arbitrators shall be binding on the
Executive and the Company. Should one party fail to select an
arbitrator within five (5) days after notice of the appointment of the
an arbitrator by the other party or should the two (2) arbitrators
selected by the Executive and the Company fail to select an arbitrator
within ten (10) days after the date of the appointment of the last of
such two (2) arbitrators, any person sitting as a Judge of the United
States District Court for the Middle District of Tennessee, Nashville
Division, upon application of the Executive or the Company, shall
appoint an arbitrator to fill such space with the same force and effect
as though such arbitrator had been appointed in accordance with the
first sentence of this Paragraph 15. Any arbitration proceeding
pursuant to this Paragraph 15 shall be conducted in accordance with the
rules of the American Arbitration Association. Judgment may be entered
on the arbitrators' award in any court having jurisdiction.
16. Expenses. The Company will pay or reimburse the Executive for
all costs and expenses (including arbitration and court costs and
attorneys' fees) incurred by the Executive as a result of any claim,
action or proceeding arising out of, or challenging the validity,
advisability or enforceability of this Agreement or any provision
thereof.
17. No Obligation to Mitigate. The Executive shall not be required
to mitigate the amount of any payment provided for in Paragraph 7 by
seeking other employment or otherwise, nor shall the amount of any
payment provided for in Paragraph 7 be reduced by any compensation
earned by the Executive as a result of employment by another employer
or otherwise.
18. Additional Instruments. The Parties shall execute and deliver
any and all additional instruments and agreements that may be necessary
or proper to carry out the purposes of this Agreement.
14
<PAGE> 15
19. Entire Agreement and Amendments. This Agreement contains the
entire agreement of the Parties relating to the matters contained
herein and supersedes all prior agreements and understandings, oral or
written, between the Parties with respect to the subject matter hereof.
This Agreement may be changed only by an agreement in writing signed by
the Party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.
20. Separability. If any provision of the Agreement is rendered or
declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator
or by decree of a court of last resort, the Parties shall promptly meet
and negotiate substitute provisions for those rendered or declared
illegal or unenforceable to preserve the original intent of this
Agreement to the extent legally possible, but all other provisions of
this Agreement shall remain in full force and effect.
21. Assignments. The Company may assign (whether by operation of
law or otherwise) this Agreement only with the written consent of the
Executive, which consent shall not be withheld unreasonably, and in the
event of an assignment of this Agreement, all covenants, conditions and
provisions hereunder shall inure to the benefit of and be enforceable
against the Company's successors and assigns. The rights and
obligations of Executive under this Agreement are personal to him, and
no such rights, benefits or obligations shall be subject to voluntary
or involuntary alienation, assignment or transfer.
22. Effect of Agreement. Subject to the provisions of Paragraph 21
with respect to assignments, this Agreement shall be binding upon the
Executive and his heirs, executors, administrators, legal
representatives and assigns and upon the Company and respective
successors and assigns.
23. Execution. This Agreement may be executed in multiple
counterparts each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
24. Waiver of Breach. The waiver by either Party of a breach of
any provision of the Agreement by the other Party shall not operate or
be construed as a waiver by such Party of any subsequent breach by such
other Party.
15
<PAGE> 16
IN WITNESS WHEREOF, the Parties have executed this Agreement March 30,
2000.
PRIVATE BUSINESS, INC.
By: /s/ William B. King. Chairman
------------------------------------------------
William B. King, Chairman
EXECUTIVE
/s/ Kevin M. McNamara
------------------------------------------------
KEVIN M. MCNAMARA
16
<PAGE> 17
EXHIBIT A
<TABLE>
<S> <C> <C>
1. Excess Parachute Payment Subject to Excise Tax $ 50,000
2. Excise Tax on Item 1 @ 20% $ 10,000
3. Total Additional Amount Under Agreement* $ 24,752
4. Verification of Total Additional Amount
1) Excise Tax on additional $24,752 @ 20% $ 4,950
2) Federal Income tax on $24,752
a) Additional Income $24,752
b) State Income Tax Deduction 0
-------
c) Net Additional Federal Taxable Income 24,752
d) Federal Income Tax @ 39.6% $ 9,802
4) Total Taxes on Additional Amount $ 14,752
5) Net Amount Available to Key Employee to Pay $ 10,000
Excise Tax in #2
</TABLE>
- ----------
*The formula used to compute the Additional Amount is to divide the Excise Tax
amount on the excess parachute payment by a percentage equal to 100% less the
sum of the Excise Tax percentage plus the state income tax percentage plus the
federal tax percentage less a percentage determined by multiplying the federal
tax percentage times the state tax percentage. Thus in the example above, the
following percentages should be subtracted from 100%:
<TABLE>
<S> <C> <C>
1) Excise Tax Percentage - 20.00%
2) Assumed State Tax Percentage - 0.00%
3) Federal Income Tax Percentage - 39.60%
-----
Total 59.60%
Less 39.6% Times 0% 0.00%
-----
59.60%
</TABLE>
The resulting percentage of 100% - 59.60% = 40.40% should be divided into
$10,000 = $24,752.
A-1
