Vertrue Inc – ‘S-3/A’ on 4/8/04

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Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction   —   Form S-3
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-3/A       Member Works S-3/A Document                           56    268K 
 2: EX-23.1     Consent Exhibit                                        1      5K 
 3: EX-25.1     Memberworks Exhibit 25.1                              41    139K 

S-3/A   —   Member Works S-3/A Document
Document Table of Contents

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As filed with the Securities and Exchange Commission on April 8, 2004 
                                                     Registration No. 333-110885
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------------
 AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------------

MEMBERWORKS INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware                                 06-1276882   
   (State or other jurisdiction          (I.R.S. Employer Identification Number)
of incorporation or organization)                                           

MemberWorks Incorporated
 680 Washington Boulevard., Suite 1100
Stamford, CT 06901
(203) 324-7635
 (Address, including zip code, and telephone number, including
 area code, of registrant's principal executive offices)
--------------------------
George Thomas Esq.
MemberWorks Incorporated
680 Washington Boulevard, Suite 1100
Stamford, CT 06901
(203) 324-7635
 (Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copy to:
 Steven T. Giove, Esq.
 Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
(212) 848-4000
--------------------------

       Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as         
determined by market conditions.                                                
        If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following 
box. | |                                                                        
  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, other than securities offered only in connection with   
dividend or interest reinvestment plans, 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, please check the following box
and list the Securities Act registration number of the earlier effective        
registration statement for the same offering. | |                               
   If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, 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, please check the following box. | |                                        

CALCULATION OF REGISTRATION FEE                                                 

                                                        [Enlarge/Download Table]

                                                                                                                      
                                                                                            Proposed                  
                                                                            Proposed         Maximum                  
                                                         Amount to       Maximum Offering   Aggregate      Amount of  
               Title of each Class of                  be Registered      Price per Unit  Offering Price  Registration
            Securities to be Registered                     (1)               (2)              (2)            Fee     
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
5.50% Convertible Senior Subordinated Notes due 2010....$90,000,000           100%         $90,000,000        (3)     
Common stock, par value $0.01 per share.............2,229,651 shares(4)        -                -             (4)     
======================================================================================================================
                                                                                              (Footnotes on next page)

The registrant hereby amends this Registration Statement on such date as may be 
necessary to delay its effective date until the registrant 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 Securities and Exchange Commission, acting pursuant to said Section 
8(a), may determine.                                                            
================================================================================

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

(1)  $90,000,000 aggregate principal amount of notes and 2,229,651 shares of    
 common stock issuable upon conversion of the notes are being registered
hereby.                                                               

(2)  Estimated solely for the purpose of calculating the registration fee       
pursuant to Rule 457.                                                 

(3)  Registration fee of $7,281 was previously paid by registrant.              

(4)  Reflects the number of shares of common stock issuable upon conversion of  
   the notes being registered hereunder at the rate of approximately 24.7739
shares of common stock per $1,000 principal amount at maturity of the 
 notes. Under Rule 416 under the Securities Act, the number of shares of
common stock registered includes an indeterminate number of shares of 
 common stock that may be issued in connection with a stock split, stock
     dividend, recapitalization or similar event. No additional registration fee
 is required pursuant to Rule 457(i) under the Securities Act because no
   additional consideration will be received in connection with the exercise
of the conversion privilege.                                          

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PROSPECTUS                                                                      
----------                                                                      
 Dated April 8, 2004

 $90,000,000

MEMBERWORKS INCORPORATED

5.50% Convertible Senior Subordinated Notes due 2010
 and
Common Stock issuable upon conversion of the Notes

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

This prospectus relates to $90,000,000 aggregate principal amount at  
maturity of 5.50% Convertible Senior Subordinated Notes due 2010 of MemberWorks 
Incorporated. The notes may be sold from time to time by or on behalf of the    
selling securityholders named in this prospectus or in supplements to this      
prospectus. This prospectus also relates to 2,229,651 shares of our common      
stock, par value $0.01 per share, issuable upon conversion of the notes held by 
certain selling securityholders, plus such additional indeterminate number of   
shares as may become issuable upon conversion of the notes by reason of         
adjustment to the conversion price in certain circumstances.                    

    We will pay interest on the notes on April 1 and October 1 of each
year, beginning April 1, 2004. The selling securityholders may sell all or a    
portion of the notes in market transactions, negotiated transactions or         
otherwise and at prices which will be determined by the prevailing market price 
for the notes or in the negotiated transactions. The selling securityholders    
also may sell all or a portion of the shares of common stock from time to time  
on the Nasdaq National Market, in the negotiated transactions or otherwise, and 
at prices which will be determined by the prevailing market price for the shares
or in negotiated transactions. The selling securityholders will receive all of  
the proceeds from the sale of the notes and the common stock. We will not       
receive any proceeds from the sale of notes or common stock by the selling      
securityholders.                                                                

      Holders of the notes may convert the notes into shares of our common
  stock at any time prior to the maturity date of the notes (unless previously
redeemed or repurchased) at a conversion price of approximately $40.37 per
share (equivalent to an initial conversion rate of approximately 24.7739  
shares per $1,000 principal amount of notes), subject to adjustment as set
forth in this prospectus.                                                 

        On or after October 6, 2008, we may redeem some or all of the notes at
100% of their principal amount plus accrued and unpaid interest to, but   
excluding, the redemption date.                                           

      Upon the occurrence of a change of control, holders of the notes may
require us to repurchase all or part of their notes for cash.                   

     Shares of our common stock are quoted on the Nasdaq National Market
under the symbol "MBRS." The closing sales price of the shares on April 5, was  
$35.02 per share.                                                               

      The notes were originally issued in a private placement to qualified
institutional buyers in reliance on Rule 144A under the Securities Act of 1933, 
as amended.                                                                     

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

       Investing in the notes involves risks, some of which are described in
the "Risk Factors" section beginning on page 5 of this prospectus.              

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

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a     
criminal offense.                                                               

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

 The date of this prospectus is April 8, 2004.

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 TABLE OF CONTENTS

Page                                                                            
FORWARD-LOOKING STATEMENTS....................................................ii
SUMMARY........................................................................1
RISK FACTORS...................................................................5
RATIO OF EARNINGS TO FIXED CHARGES............................................13
USE OF PROCEEDS...............................................................14
PRICE RANGE OF THE COMMON STOCK AND DIVIDEND POLICY...........................15
DESCRIPTION OF NOTES..........................................................16
DESCRIPTION OF OUR CAPITAL STOCK..............................................31
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS...............................33
SELLING SECURITYHOLDERS.......................................................38
PLAN OF DISTRIBUTION..........................................................41
LEGAL MATTERS.................................................................42
EXPERTS.......................................................................42
WHERE YOU CAN FIND MORE INFORMATION...........................................42
INCORPORATION BY REFERENCE....................................................42

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

        This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission, or SEC, using a "shelf" registration    
process. Under this shelf registration process, the selling securityholders may,
from time to time, offer notes or shares of our common stock owned by them. Each
time the selling securityholders offer notes or common stock under this         
prospectus, they will be provided a copy of this prospectus and, if applicable, 
a copy of a prospectus supplement. You should read both this prospectus and, if 
applicable, any prospectus supplement together with the information incorporated
by reference in this prospectus. See "Where You Can Find More Information" and  
"Incorporation by Reference" for more information.                              

      You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or        
inconsistent information, you should not rely on it. We are not making an offer 
to sell these securities in any jurisdiction where the offer or sale is not     
permitted. You should assume that the information appearing in this prospectus  
or any documents incorporated by reference in this prospectus is accurate only  
as of the date on the front cover of the applicable document or as specifically 
indicated in the document. Our business, financial condition, results of        
operations and prospects may have changed since that date.                      

      References in this prospectus to "MemberWorks," "we," "us" and "our"
refer to MemberWorks Incorporated and its subsidiaries, unless the context      
indicates otherwise.                                                            

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FORWARD-LOOKING STATEMENTS

       This prospectus contains or incorporates by reference forward-looking
statements that are based on current expectations, estimates, forecasts and     
projections about the industry in which we operate and our beliefs and          
assumptions. These forward-looking statements include statements that do not    
relate solely to historical or current facts and can be identified by the use of
words such as "believe," "expect," "estimate," "project," "continue" or         
"anticipate." These forward-looking statements are made pursuant to safe harbor 
provisions of the Private Securities Litigation Reform Act of 1995.             

         Forward-looking statements are not guarantees of future performance and
are based on a number of assumptions and estimates that are inherently subject  
to significant risks and uncertainties, many of which are beyond our control,   
cannot be foreseen and reflect future business decisions that are subject to    
change. Therefore, actual outcomes and results may differ materially from what  
is expressed or forecasted in such forward-looking statements. Among the many   
factors that could cause actual results to differ materially from the           
forward-looking statements are:                                                 

   --   Higher than expected membership cancellations or lower than expected
membership renewal rates;                                   

--   Changes in the marketing techniques of credit card issuers;      

--   Increases in the level of commission rates and other compensation
required by marketing partners to actively market with us;  

     --   Potential reserve requirements by business partners such as our credit
card processors;                                            

--   Unanticipated termination of marketing agreements;               

     --   The extent to which we can continue to successfully develop and market
   new products and services and introduce them on a timely basis;

--   Unanticipated changes in or termination of our ability to process
membership fees through third parties, including credit card
processors and bank card associations;                      

--   Our ability to introduce new programs on a timely basis;         

     --   Our ability to develop and implement operational and financial systems
to manage growing operations;                               

  --   Our ability to recover from a complete or partial system failure or
  impairment, other hardware or software related malfunctions or
programming errors;                                         

--   The degree to which we are leveraged;                            

 --   Our ability to obtain financing on acceptable terms to finance our
    growth strategy and to operate within the limitations imposed by
financing arrangements;                                     

   --   Our ability to integrate acquired businesses into our management and
operations and operate successfully;                        

--   Further changes in the already competitive environment for our   
products or competitors' responses to our strategies;       

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--   Changes in the growth rate of the overall U.S. economy, or the   
international economy where we do business, such that credit
        availability, interest rates, consumer spending and related consumer
debt are impacted.                                          

   --   Additional government regulations and changes to existing government
     regulations of the Company's industry including the Federal Trade
     Commission's 2003 amendment to its Telemarketing Sales Rule which
creates a national do-not-call list;                        

   --   Whether competitors of Lavalife move to a transactional-based model;

 --   Our ability to compete with other companies that have financial or
other advantages;                                           

--   Adverse movement in foreign exchange rates;                      

--   Our ability to attract and retain active members and users;      

--   Adverse results of litigation or regulatory matters; and         

--   New accounting pronouncements.                                   

Many of these factors are beyond our control and our business,
financial condition, results of operations and cash flows may be adversely      
affected by these factors.                                                      

        These factors are not exclusive. All of the forward-looking statements
made or incorporated by reference in this prospectus are qualified by these     
cautionary statements and you are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this prospectus. 
Except as required by law, we do not have any intention or obligation to        
publicly update any forward-looking statements, whether as a result of new      
information, future events or otherwise.                                        

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--------------------------------------------------------------------------------
 SUMMARY

         The following summary is qualified in its entirety by the more detailed
information included elsewhere or incorporated by reference in this prospectus. 
Because this is a summary, it may not contain all the information that may be   
important to you. You should read the entire prospectus, as well as the         
information incorporated by reference, before making an investment decision.    

MemberWorks Incorporated

         We are a leading provider of innovative membership programs. We combine
marketing innovation, entrepreneurial energy and consumer insight to create     
industry leading membership programs that provide substantial benefits to our   
members, clients and vendors. Our members benefit by receiving significant      
discounts and insightful information on everyday items in the areas of          
healthcare, personal finance, insurance, travel, entertainment, fashion,        
personal security and more. In addition, our members save time by purchasing    
goods and services and obtaining useful information over the telephone or the   
internet. Our clients (organizations who offer the membership programs to their 
customers) benefit by receiving royalty payments in exchange for providing us   
with new members. Our clients also benefit because the membership programs are  
designed to strengthen their relationships with customers. For the participating
vendors (whose products or services are offered through the membership          
programs), the membership programs provide an opportunity for the vendors to    
reach a large number of demographically attractive consumers while incurring    
minimal incremental marketing costs.                                            

      Our programs are primarily marketed under the name of the membership
program to customers through arrangements with our clients, which include banks 
and other financial institutions, e-commerce companies, direct response         
television companies, catalog companies, retailers, major oil companies and     
other organizations with large numbers of individual customers. In many cases,  
these businesses lack the core competency to successfully design, market and    
manage membership programs. As a result, these businesses seek to outsource to  
providers that are able to apply advanced database systems to capture, process  
and store consumer and market information, are able to use their experience to  
provide effective membership programs and are able to realize economies of      
scale. In addition, businesses seeking to implement a membership program demand 
that the provider of those programs has the expertise to continue to introduce  
innovative new programs and has resources, such as an extensive vendor network  
and experienced management team, to launch membership programs quickly and      
successfully.                                                                   

   We solicit members for our programs primarily by direct marketing
methods and we have been able to effectively diversify our distribution channels
since our initial public offering in 1996, at which time our primary method of  
solicitation was outbound telemarketing. For the six months ended December 31,  
2003, outbound telemarketing was the source for approximately 10% of our new    
member enrollments. We believe we are the leading designer and provider of      
innovative membership programs in the United States due to our senior           
management's extensive knowledge of the industry, our extensive vendor network  
and our relationships with leading consumer-driven organizations with large     
numbers of individual account holders and customers. We also possess the        
in-house operational capabilities and expertise to perform most aspects of our  
business with minimal reliance on third-party outsourcing. For instance, we     
generally create most of our own marketing, creative and fulfillment materials. 
We also maintain in-house call center facilities to process phone inquiries from
our members. We believe this in-house approach enables us to provide better     
customer service and market our products more efficiently.                      

      Most of our membership programs are for one-year renewable terms and
our members are generally entitled to unlimited use of the services during the  
membership period. We have traditionally marketed membership programs which have
an up-front annual membership fee. However, in fiscal 2003, we expanded our     
marketing of membership programs for which membership fees are payable in       
monthly installments. In the fourth quarter of fiscal 2003, approximately half  
of our new member enrollments were in monthly payment programs and we intend to 
further increase the mix of monthly payment programs in fiscal 2004. In general,
membership fees vary depending upon the particular service offered by the       
membership program. During the first six months of fiscal 2004, annual          
membership fees averaged approximately $106 per year and monthly membership fees
averaged $11.18 per month. Our membership programs had approximately 6.3 million
members as of December 31, 2003.                                                

         MemberWorks Incorporated, a Delaware corporation, was organized in 1996
and did business as CardMember Publishing Corporation from 1989 to 1996.        

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        Our principal office is located at 680 Washington Boulevard, Stamford,
CT 06901 and our phone number is (203) 324-7635. Our fiscal year ends June 30 of
each year.                                                                      

Recent Developments                                           

      Acquisition. On April 1, 2004, we completed our previously announced
acquisition of the assets and capital stock of Lavalife Inc., a leading provider
of online and interactive voice response ("IVR") based personals services.      
Lavalife will operate as a wholly owned subsidiary of MemberWorks. The purchase 
price for the Lavalife acquisition was approximately Cdn$152.5 million and was  
funded with cash on hand and borrowings under our $45.0 million amended and     
restated senior secured credit facility, entered into on March 25, 2004,. In    
connection with the acquisition, Lavalife's senior management purchased         
approximately 259,000 shares of our restricted common stock at the closing of   
the Lavalife acquisition for approximately $9.1 million.                        

       Senior Secured Credit Facility. On March 25, 2004, we entered into an
amended and restated senior secured credit facility that allows borrowings of up
to $45.0 million. The senior secured credit facility was provided by a syndicate
of banks led by LaSalle Bank National Association. As of March 25, 2004, there  
were no borrowings under the senior secured credit facility and the availability
was reduced by an outstanding letter of credit of $5.5 million.                 

    Senior Notes Offering. On April 8, 2004, we priced our offering of
$150.0 million in aggregate principal amount of our 9.25% Senior Notes due 2014 
sold at 98.418% of the principle amount. We expect to close the sale of the     
Senior Notes on April 13, 2004. We intend to use $15.0 million of the net       
proceeds to repay amounts borrowed under our senior secured credit facility and 
to use the remainder of the proceeds for general corporate purposes, including  
working capital, future acquisitions and purchases of our common stock under our
stock buyback program.                                                          

    For further information regarding our acquisition of Lavalife, our
Senior Notes offering and our amended and restated senior secured credit        
facility, please see our current report on Forms 8-K filed March 4, 2004, March 
26, 2004 and April 5, 2004, all of which are incorporated by reference herein.  
For further information regarding the pricing of our Senior Notes, please see   
our current report on Form 8-K filed on April 8, 2004, incorporated herein.     

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The Notes 

Issuer................ MemberWorks Incorporated                                 

Notes..................We issued $90.0 million aggregate principal amount of    
                     5.50% Convertible Senior Subordinated Notes due 2010 in
                   a private placement on September 30, 2003.  Each note
                was issued at a price of $1,000 per note and has a
     principal amount at maturity of $1,000.

Maturity Date..........October 1, 2010, unless earlier converted, redeemed by us
                     at our option, or repurchased by us at your option upon
 a change of control of MemberWorks.

Interest Rate..........5.50% per year.  Interest will be payable semiannually in
            arrears on April 1 and October 1 of each year,
                     commencing April 1, 2004.  The initial interest payment
                    will include accrued interest from September 30, 2003.

Ranking................The notes will be unsecured and                          

                                --  subordinated in right of payment to all of
                                our existing and future senior indebtedness;

                               --  equal in right of payment to our existing
                                and future senior subordinated indebtedness;

                              --  senior in right of payment to our future
                  subordinated indebtedness; and

                          --  effectively subordinated in right of
                      payment to all existing and future
                                indebtedness and other liabilities of any of
                        our existing or future subsidiaries.

As of February 29, 2004:          

                             --  our outstanding senior indebtedness was
                                approximately $5.5 million.  In addition, we
                              had $22.5 million available under our bank
                                  credit facility (all of which, if drawn, would
              rank senior to the notes);

                               --  we had no outstanding senior subordinated
     indebtedness; and

                              --  our subsidiaries had approximately $20.5
                                 million of liabilities outstanding, excluding
             intercompany liabilities.

Conversion Rights......Holders may convert their notes into common stock at any 
                     time prior to the close of business on the business day
             prior to the maturity date of the notes, unless
                 previously redeemed or repurchased, at a conversion
                 price of approximately $40.37 per share (equal to a
                 conversion rate of approximately 24.7739 shares per
                      $1,000 principal amount of notes), subject to adjustment
                    as described under "Description of Notes -- Conversion
Rights."                          

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Redemption of Notes at                                                          
Our Option............We may redeem all or a portion of the notes for cash at 
                    any time on or after October 6, 2008, at 100% of their
                   principal amount plus accrued and unpaid interest to,
                    but excluding, the redemption date.  We will therefore
                      be required to make at least 10 interest payments on the
               notes before being able to redeem any notes.  See
             "Description of Notes -- Optional Redemption by
MemberWorks."                     

Use of Proceeds........We will not receive any proceeds from the sale by any    
                  selling securityholder of the notes or the shares of
                 common stock issuable upon conversion of the notes.

Sinking Fund...........None.                                                    

DTC Eligibility........The notes will be issued in book-entry form and will be  
                      represented by one or more permanent global certificates
                  deposited with a custodian for and registered in the
                   name of a nominee of The Depository Trust Company, or
                      DTC, in New York, New York.  Beneficial interests in any
                  of the notes will be shown on, and transfers will be
                      effected only through, records maintained by DTC and its
                     direct and indirect participants, and any such interest
                    may not be exchanged for definitive securities, except
                     in limited circumstances.  See "Description of Notes --
   Form, Denomination and Registration."

Trading Symbol for Our                                                          
Common Stock..........Our common stock is traded on the Nasdaq National Market
under the symbol "MBRS."          

Risk Factors...........See "Risk Factors" beginning on page 5 of this prospectus
                and the other information in this prospectus for a
                 discussion of factors you should consider carefully
     before deciding to invest in the notes.

   For a more complete description of the Notes, see "Description of
Notes." For a more complete description of the common stock, see "Description of
Capital Stock."                                                                 

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RISK FACTORS

         You should carefully consider the following risks, as well as the other
information contained in this prospectus, before investing in the notes. If any 
of the following risks actually occur, our business could be harmed. You should 
refer to the other information set forth in this prospectus and our consolidated
financial statements and the related notes incorporated by reference herein. For
more information about risks associated with Lavalife's business, see our       
current report on Form 8-K filed on March 26, 2004 and incorporated by reference
herein.                                                                         

 Risks Related to the Offering

The price of the notes may fluctuate significantly as a result of the volatility
of the price for our common stock.                                              

    Because the notes are convertible into shares of our common stock,
volatility or depressed prices for our common stock could have a similar effect 
on the trading price of the notes. In addition, if you convert any notes into   
common stock, the value of the common stock you receive may fluctuate           
significantly.                                                                  

The volatility of the market price of our common stock could adversely affect   
our stockholders.                                                               

        The market price of our common stock has been, and may continue to be,
relatively volatile. In fiscal 2003, the highest closing sales price of our     
stock was $24.00 on April 29, 2003 and the lowest closing sales price of our    
stock was $14.00 on January 27, 2003. The high and low closing sales prices of  
our common stock were $25.00 and $7.98 in fiscal 2002 and $37.06 and $18.69 in  
fiscal 2001. Factors which may affect the market price for our common stock     
include:                                                                        

     --   actual or anticipated variations in our quarterly operating results or
  financial condition or in those of our competitors or clients;

     --   announcements by us or our competitors of new programs or acquisitions
of new businesses;                                          

--   market conditions or trends in our industry;                     

    --   introduction of program enhancements by other competitors that reduce
the demand for our programs;                                

--   changes in financial estimates by securities analysts;           

--   general economic conditions in the United States and Canada;     

--   unexpected departures of key personnel;                          

--   changes in the market valuations of our competitors;             

--   the sale of a large amount of our common stock by our largest    
shareholders;                                               

--   the other risk factors listed in this section; and               

--   new accounting pronouncements.                                   

      Sales of substantial amounts of shares of common stock in the public
market could adversely affect the market price of our common stock. As of March 
23, 2004 we had 10,265,000 shares of common stock outstanding.                  

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The notes are subordinated. You will receive payment on your notes only if we   
have funds remaining after we have paid any existing and future senior          
indebtedness.                                                                   

         The notes will be unsecured and subordinated in right of payment to all
of our existing and future senior indebtedness. Currently we have a $45.0       
million bank credit facility, which had no borrowings outstanding as of March   
25, 2004. As of March 25, 2004, the availability under the bank credit facility 
was reduced by an outstanding letter of credit of $5.5 million. In the future,  
we may incur additional senior indebtedness. In the event of our bankruptcy,    
liquidation or reorganization or upon acceleration of the notes due to an event 
of default under the indenture and in certain other events, our assets will be  
available to pay obligations on the notes only after all senior indebtedness has
been paid. As a result, there may not be sufficient assets remaining to pay     
amounts due on any or all of the outstanding notes.                             

The notes will effectively be subordinated to the liabilities of our            
subsidiaries.                                                                   

       Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the    
notes to participate in those assets, will be effectively subordinated to the   
claim of that subsidiary's creditors, including trade creditors. In addition,   
even if we were a creditor of any of our subsidiaries, our rights as a creditor 
would be subordinate to any security interest in the assets of our subsidiaries 
and any indebtedness of our subsidiaries senior to that held by us. Our         
subsidiaries have no obligation to pay any amounts due on the notes or to       
provide us with funds for our payment obligations, whether by dividends,        
distributions, loans or other payments. As of February 29, 2004, our            
subsidiaries had approximately $20.5 million of indebtedness and other          
liabilities outstanding.                                                        

If an active trading market for the notes does not develop, then the market     
price of the notes may decline or you may not be able to sell your notes.       

 The notes comprise a new issue of securities for which there is
currently no public market. We do not intend to list the notes on any national  
securities exchange or automated quotation system. If the notes are traded, they
may trade at a discount from their offering price, depending on prevailing      
interest rates, the market for similar securities, the price of our common      
stock, our performance and other factors. The initial purchasers advised us that
they intend to make a market in the notes. However, they are not obligated to   
make a market and may discontinue this market activity at any time without      
notice. As a result, we do not know whether an active trading market will       
develop for the notes. To the extent that an active trading market does not     
develop, the price at which you may be able to sell the notes, if at all, may be
less than the price you pay for them.                                           

Increased leverage may harm our financial condition and results of operations.  

       At February 29, 2004, we had $90 million of outstanding indebtedness.
We may incur additional indebtedness in the future and the notes do not restrict
our future issuance of indebtedness. Our level of indebtedness will have several
important effects on our future operations, including, without limitation:      

   --   a greater portion of our cash flow from operations will be dedicated
       to the payment of any interest required with respect to outstanding
indebtedness;                                               

   --   increases in our outstanding indebtedness and leverage will increase
         our vulnerability to adverse changes in general economic and industry
conditions, as well as to competitive pressure; and         

   --   depending on the levels of our outstanding indebtedness, our ability
to obtain additional financing for working capital, capital 
      expenditures, general corporate and other purposes may be limited.

Our ability to make payments of principal and interest on our 
indebtedness depends upon our future performance, which will be subject to the  
success of the marketing of our programs, general economic conditions, and      
financial, business and other factors affecting our operations, many of which   
are beyond our control. If we are not able to generate sufficient cash flow from
operations in the future to service our indebtedness, we may be required, among 
other things:                                                                   

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--   to seek additional financing in the debt or equity markets;      

--   to refinance or restructure all or a portion of our indebtedness,
including the notes;                                        

--   to sell selected assets; and/or                                  

--   to reduce or delay planned expenditures on new marketing.        

         Such measures might not be sufficient to enable us to service our debt.
In addition, any such financing, refinancing or sale of assets might not be     
available on economically favorable terms.                                      

The notes will not contain restrictive covenants, and there is limited          
protection in the event of a change in control.                                 

 The indenture under which the notes are issued does not contain
restrictive covenants that would protect you from several kinds of transactions 
that may adversely affect you. In particular, the indenture does not contain    
covenants that limit our ability to pay dividends or make distributions on or   
redeem our capital stock or limit our ability to incur additional indebtedness  
and, therefore, may not protect you in the event of a highly leveraged          
transaction or other similar transaction. In addition, the requirement that we  
offer to repurchase the notes upon a change of control is limited to the        
transactions specified in the definition of a "change of control" under         
"Description of Notes -- Repurchase at Option of Holders Upon a Change of       
Control." Accordingly, we could enter into certain transactions, such as        
acquisitions, refinancings or a recapitalization, that could affect our capital 
structure and the value of our common stock but would not constitute a change of
control.                                                                        

We may not have sufficient funds to repurchase notes upon a change of control.  

       Should a "change of control" occur, no assurance can be given that we
will have sufficient funds available to purchase notes which are tendered for   
repurchase. A failure by us to repurchase tendered notes will constitute an     
event of default under the indenture.                                           

We have never paid any dividends on our common stock.                           

 To date we have not paid, and the terms of our credit agreement
prohibit us from paying, any cash dividend. We anticipate that all of our       
earnings in the foreseeable future will be retained for use in our business and 
to repurchase our common stock under our stock buyback program.                 

If we pay cash dividends on our common stock, you will be deemed to have        
received a taxable dividend without the receipt of any cash.                    

         If we pay a cash dividend on our common stock, and an adjustment to the
conversion price results, you will be deemed to have received a taxable dividend
subject to U.S. federal income tax, to the extent of our current or accumulated 
earnings and profits, without the receipt of any cash. See "United States       
Federal Income Tax Consequences -- Constructive Dividends."                     

Future sales of our common stock in the public market could lower our stock     
price.                                                                          

       Future sales of our common stock in the public market could lower our
stock price and impair our ability to raise funds in stock offerings. As of     
March 23, 2004, we had 10,265,000 outstanding shares of our common stock. As of 
March 23, 2004, our outstanding shares are subject to dilution by 3,380,000     
shares of common stock issuable upon the exercise of outstanding stock options, 
of which 1,914,000 are currently exercisable.                                   

      We may also issue additional shares of common stock as consideration
for future acquisitions or other investments. Sales of a substantial amount of  
common stock in the public market, or the perception that these sales may occur,
could adversely affect the market price of our common stock prevailing from time
to time in the public market and could impair our ability to raise funds in     
additional stock offerings.                                                     

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 Risks Related to Our Business

Our profitability depends on members continuing to retain their memberships in  
our programs. Increased cancellations could impair our profitability.           

     We generally incur losses and negative cash flow during the initial
year of an individual membership program, as compared to renewal years. This is 
due primarily to marketing costs associated with obtaining a new member. In     
addition, we experience a higher percentage of cancellations during the initial 
membership period as compared to renewal periods. Annual members may cancel     
their membership at any time during the membership period generally for a pro   
rata refund of the membership fee based on the remaining portion of the         
membership period. Monthly members are billed each month after the trial period 
until they cancel their membership. Accordingly, the profitability of each of   
our programs depends on recurring and sustained membership renewals and         
increased cancellations could have a material adverse effect on our business,   
financial condition, results of operations and cash flows.                      

Our business may suffer if we fail to successfully integrate Lavalife or other  
businesses we acquire in the future or to properly assess the risks in          
particular transactions.                                                        

        We have acquired the assets and outstanding capital stock of Lavalife,
and we may acquire other businesses and assets in the future. The successful    
integration of the acquired businesses and assets, such as Lavalife, into our   
existing operations can be critical to our future performance. Acquired         
businesses may not be successfully integrated with our operations or produce the
anticipated benefits in a timely manner, or at all. Failure to successfully     
integrate acquired businesses or to achieve anticipated operating synergies or  
cost savings could have a material adverse effect on our business, financial    
condition, results of operations and cash flows. Although we attempt to evaluate
the risks inherent in each transaction and to value acquisition candidates      
appropriately, we cannot assure you that we will properly ascertain all such    
risks or that acquired businesses and assets will perform as we expect or       
enhance the value of our Company as a whole. In addition, acquired companies or 
businesses may have larger than expected liabilities that are not covered by the
indemnification, if any, we obtain from the seller.                             

The loss of our key clients could have a material adverse effect on our results 
of operations.                                                                  

Membership programs sponsored by our two largest clients, West
Corporation and Citibank, N.A. (and its affiliates), accounted for 16% and 21%  
of our revenue, respectively, for the fiscal year ended June 30, 2003 and 18%   
and 13% of our revenue, respectively, for the six months ended December 31,     
2003. A loss of our key clients or a decline in the businesses of the operations
of the clients from which we acquire new members could have a material adverse  
effect on our results of operations. There can be no assurance that one or more 
of our key or other clients will not terminate their relationship with us or    
suffer a decline in their business from which we acquire new members.           

We market many of our membership programs through credit card issuers. A        
downturn in the credit card industry or changes in the marketing techniques of  
credit card issuers could adversely affect us.                                  

       Our future success is dependent in large part on continued demand for
our membership programs within our clients industries. In particular, membership
programs marketed through our credit card issuer clients accounted for a        
significant amount of our revenues in fiscal 2003. A significant downturn in the
credit card industry or a trend in that industry to reduce or eliminate its use 
of membership programs could have a material adverse effect on our business,    
financial condition, results of operations and cash flows.                      

The unanticipated termination of agreements with vendors could have a material  
adverse effect on our business.                                                 

   We depend on vendors to provide most of the products and services
included in the programs that we market. The vendors generally operate pursuant 
to non-exclusive agreements with us that may be terminated by the vendor with   
limited prior notice. There can be no assurance that, in the event a vendor     

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ceases operations, or terminates, breaches or chooses not to renew its agreement
with us, a replacement vendor could be retained on a timely basis, if at all. In
addition, vendors are independent contractors and the level and quality of      
services they provide is outside our control. Any service interruptions, delays 
or quality problems could result in customer dissatisfaction and membership     
cancellations and/or termination of clients' relationships with us, which could 
have a material adverse effect on our business, financial condition, results of 
operations and cash flows.                                                      

We depend on credit card processors to obtain payments for us.                  

    We depend on credit card processors to obtain payments for us. The
credit card processors operate pursuant to agreements that may be terminated    
with limited prior notice. In the event a credit card processor ceases          
operations or terminates its agreement with us, there can be no assurance a     
replacement credit card processor could be retained on a timely basis, if at    
all. Any service interruptions, delays or quality problems could result in      
delays in collecting payments, which could have a material adverse effect on our
business, financial condition, results of operations and cash flows.            

Our efforts to increase the share of monthly payment programs in our program mix
may adversely affect our cash flow.                                             

  We have traditionally marketed membership programs which have an
up-front annual membership fee. However, in fiscal 2003, we expanded our        
marketing of membership programs for which membership fees are payable in       
monthly installments. During the first half of fiscal 2004, more than 60% of our
new member enrollments were in monthly payment programs, and we expect the      
proportion of our monthly payment programs to increase throughout fiscal 2004.  
Our increased emphasis on monthly payment programs adversely affects our cash   
flow because the immediate cost of acquiring a new member is higher than the    
first month's membership fee.                                                   

We may be unable to compete effectively with other companies in our industry    
that have financial or other advantages.                                        

   We believe that the principal competitive factors in our industry
include the ability to identify, develop and offer innovative membership        
programs, the quality and breadth of membership programs offered, competitive   
pricing and in-house marketing expertise. Our competitors offer membership      
programs which provide products or services similar to, or which compete        
directly with, those provided by us. These competitors include, among others,   
Aegon, N.V., Trilegiant (a subsidiary of Cendant Corporation), Fortis and       
General Electric Financial Assurance. In addition, we could face competition if 
our current clients or other companies were to introduce their own in-house     
membership programs.                                                            

        Some of these competitors have substantially larger customer bases and
greater financial and other resources than we do. To date, we have effectively  
competed with such competitors. There can be no assurance that:                 

   --   our competitors will not increase their emphasis on programs similar
to those we offer;                                          

  --   our competitors will not provide programs comparable or superior to
those we provide at lower membership fees;                  

--   our competitors will not adapt more quickly than us to evolving  
industry trends or changing market requirements;            

--   new competitors will not enter the market; or                    

   --   other businesses (including our current clients) will not themselves
introduce in-house membership programs.                     

    Such increased competition may result in price reductions, reduced
operating margins or loss of market share, any of which could materially        
adversely affect our business, financial condition and results of operations.   

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Additionally, because contracts between clients and program providers are often 
exclusive with respect to a particular program, potential clients may be        
prohibited from contracting with us to promote a new program if the products and
services provided by our program are similar to, or overlap with, the products  
and services provided by an existing program of a competitor.                   

We depend on key executive and marketing personnel.                             

         We are dependent on certain key members of our management and marketing
staff, particularly our Chief Executive Officer, Gary Johnson. In addition, we  
believe that our future success will depend in part upon our ability to attract 
and retain highly skilled managerial and marketing personnel. We face           
significant competition for such personnel, and we may be unsuccessful in hiring
or retaining the personnel we require. The failure to hire and retain such      
personnel could have a material adverse effect on our business, financial       
condition and results of operations.                                            

Our industry is increasingly subject to federal and state government regulation.

We market our membership programs through various distribution
channels, including MemberLinkTM (our inbound marketing channel), online        
marketing, outbound telemarketing and direct mail. These channels are regulated 
at both state and federal levels and we believe that these channels will be     
subject to increasing regulation, particularly in the area of consumer privacy. 
Such regulation may limit our ability to solicit new members or to offer        
products or services to existing members.                                       

       The telemarketing industry has become subject to an increasing amount
of federal and state regulation as well as general public scrutiny. For example,
the Federal Telephone Consumer Protection Act of 1991 limits the hours during   
which telemarketers may call consumers and prohibits the use of automated       
telephone dialing equipment to call certain telephone numbers. The Federal      
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 and Federal   
Trade Commission ("FTC") regulations prohibit deceptive, unfair or abusive      
practices in telemarketing sales. The FTC's 2003 Amendment to its Telemarketing 
Sales Rule created a national do-not-call list which became effective October 1,
2003. Both the FTC and state attorneys general have authority to prevent        
telemarketing activities deemed by them to be "unfair or deceptive acts or      
practices." Further, some states have enacted laws, and others are considering  
enacting laws, targeted directly at regulating telemarketing practices,         
including the creation of do-not-call lists, and any such laws could adversely  
affect or limit our operations.                                                 

        Compliance with these regulations is generally our responsibility, and
we could be subject to a variety of enforcement and/or private actions for any  
failure to comply with such regulations. Our provision of membership programs   
requires us to comply with certain state regulations and any changes to such    
regulations could materially increase our compliance costs. The risk of our     
noncompliance with any rules and regulations enforced by a federal or state     
consumer protection authority may subject us or our management to fines or      
various forms of civil or criminal prosecution, any of which could have a       
material adverse effect on our business, financial condition and results of     
operations. Also, the media often publicizes perceived noncompliance with       
consumer protection regulations and violations of notions of fair dealing with  
consumers, and the membership services industry is susceptible to peremptory    
charges by the media of regulatory noncompliance and unfair dealing.            

       We currently maintain rigorous security and quality controls that are
intended to ensure that all of our marketing practices meet or exceed industry  
standards and all applicable state and federal laws and regulations. We only    
collect and maintain customer data that is necessary to administer our business 
activities, such as a customer's name, address and encrypted billing            
information. For marketing and modeling purposes, we only use publicly available
information, such as demographic, neighborhood and lifestyle data. We do not    
resell any confidential customer information that is obtained or derived from   
our marketing efforts, nor do we purchase consumer information from financial   
institutions. However, there can be no assurance that our efforts will continue 
to meet all applicable state and federal laws and regulations in the future.    

Risks Related to Lavalife's Business

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Competitors may move to a transactional model for their services.               

        Currently, Lavalife is one of a few online dating services that offers
its IVR and web services on a transactional model. This means that customers buy
credits, but only spend them when communicating with other users. Other         
companies offer a subscription service, in which a customer pays a monthly fee  
for access to the online dating service, whether or not they actually           
communicate with other users. Lavalife believes that a transactional model is   
more attractive to new users, who will join due to a lower initial cost and the 
ability to easily control their spending. At the same time, unused credits lower
the churn of customers as they provide incentive for customers to return. If    
other companies were to offer their services in a transactional model, Lavalife 
could lose market share, which could materially adversely affect Lavalife's     
business, financial condition and results of operations.                        

Lavalife may be unable to compete effectively with other companies in its       
industry that have financial or other advantages.                               

      The online dating industry is characterized by the need to achieve a
critical mass of users in each geographic area in order to attract and offer    
services to customers. In order to compete effectively, Lavalife must attract   
new users through marketing, brand recognition, competitive and innovative      
pricing and quality technology.                                                 

Lavalife's competitors, such as Match.com, a subsidiary of    
InterActiveCorp., and Yahoo! Personals, as well as other similar companies,     
offer services similar to Lavalife's. Some of these competitors have larger     
customer bases and greater financial and other resources than Lavalife. To date,
Lavalife has effectively competed with such companies. However, there can be no 
assurance that:                                                                 

         the competitors will not increase their emphasis on programs similar to
those offered by Lavalife;                                    

     the competitors will not provide services comparable or superior to
those provided by Lavalife at a lower cost to the user;       

       the competitors will not adapt more quickly than Lavalife to evolving
industry trends or changing market requirements; or           

       additional competitors with greater financial or other resources will
emerge.                                                       

    Such increased competition may result in price reductions, reduced
operating margins or loss of market share, any of which could materially        
adversely affect Lavalife's business, financial condition and results of        
operations.                                                                     

Lavalife depends on its ability to attract and retain active members.           

       Lavalife's future success depends in large part upon continued demand
for its services. A number of factors could affect the frequency with which     
customers utilize Lavalife's services or whether they use them at all. These    
factors include the popularity of online dating and the availability of         
alternative services. Any significant decline in usage could have a material    
adverse effect on Lavalife's business, financial condition and results of       
operations.                                                                     

   The online dating market is still young and rapidly evolving. The
adoption of online dating requires the acceptance of a new way of meeting other 
singles and exchanging information. Many of Lavalife's potential customers have 
little or no experience using the Internet as a dating tool, and therefore,     
Lavalife also competes with traditional methods of meeting other singles. If    
online dating acceptance declines or if Lavalife is not able to anticipate      
changes in the online dating market, its business, results of operations and    
financial condition could be adversely affected.                                

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Lavalife relies heavily on its information technology and if access to this     
technology is impaired or interrupted, or if Lavalife fails to further develop  
this technology, Lavalife's business could be harmed.                           

      Lavalife's success depends in large part upon its ability to process
and manage substantial amounts of information. Lavalife must continue developing
and enhancing its information systems to remain competitive. This may require   
the acquisition of equipment and software and the development, either internally
or through independent consultants, of new proprietary software. Any            
interruption or loss of its information technology capabilities could harm      
Lavalife's business, financial condition, results of operations and cash flows. 

        If competitors introduce new products with new technologies, or if new
industry standards emerge, Lavalife's existing technology may become obsolete.  
Lavalife's future success will depend on its ability to do the following:       

enhance existing products;                                    

develop and license new products and technologies; and        

     respond to technological advances and emerging industry trends on a
cost-effective and timely basis.                              

 The market for online dating services is characterized by rapid
technological developments, new product introductions and evolving industry     
standards. The emerging character of these products and services and their rapid
evolution will require continuous improvement in the performance, features and  
reliability of Lavalife's service, particularly in response to competitive      
offerings. Lavalife may not be successful in responding to these developments in
a timely and cost-effective manner. In addition, the widespread adoption of new 
online technologies or standards could require Lavalife to make substantial     
expenditures to modify or adapt its websites and services. Any substantial      
expenditures could have a material adverse effect on Lavalife's business,       
financial condition and results of operations.                                  

    A critical part of Lavalife's service is its website that produces
search results, provides opportunities for interaction and tracks member        
activity for billing purposes. A failure to adapt its website, transaction      
processing systems and network infrastructure to consumer requirements or       
emerging trends could lead users to move to competitor's services and could have
a material adverse effect on Lavalife's business, financial condition, results  
of operations and cash flows.                                                   

Lavalife relies on computer and communication systems. Computer viruses or other
system failures may cause Lavalife's systems to incur delays or interruptions.  

Lavalife's business is highly dependent on computer and       
telecommunications systems and any temporary or permanent loss of either system 
could have a material adverse effect on Lavalife. In particular, computer       
viruses may cause Lavalife's systems to incur delays or other service           
interruptions and could damage its reputation which, in turn, could             
significantly harm Lavalife's business, financial condition and results of      
operations. The inadvertent transmission of computer viruses could expose       
Lavalife to a material risk of loss or litigation and possible liability. The   
continuing and uninterrupted performance of Lavalife's systems is critical to   
its success, as members may become dissatisfied by any service interruptions.   
Sustained or repeated system failures would reduce the attractiveness of        
Lavalife's system services and could result in reduced traffic and revenues.    

The success of Lavalife's business depends on maintaining the integrity of its  
systems and infrastructure.                                                     

         A fundamental requirement for online commerce and communications is the
secure transmission of confidential information, such as credit card numbers or 
other personal information, over public networks. If any compromise of          
Lavalife's security were to occur, it could have a detrimental effect on its    
reputation and adversely affect Lavalife's ability to attract customers. As     
Lavalife's operations continue to grow in both size and scope, Lavalife will    
need to improve and upgrade its systems and infrastructure. This may require    
Lavalife to commit substantial financial, operational and technical resources   
before the volume of business increases, with no assurance that the volume of   
business will increase.                                                         

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A portion of Lavalife's revenues and expenses are denominated in foreign        
currencies and its results may be affected by foreign currency exchange rate    
fluctuations.                                                                   

      Lavalife is exposed to currency exchange rate fluctuations because a
portion of its sales and expenses are denominated in currencies other than the  
U.S. dollar. In addition, a significant portion of Lavalife's sales are         
denominated in a different currency than their expenses. As a result, Lavalife's
financial performance may be negatively affected by currency fluctuations. For  
example, changes in exchange rates between the U.S. dollar and other currencies,
particularly the Canadian dollar, affect Lavalife's sales and expenses          
denominated in currencies other than the U.S. dollar and may have a negative    
impact on the value of Lavalife's assets located outside the United States. In  
addition, Lavalife may expand its international operations in the future.       
Although Lavalife has historically entered into hedging transactions designed to
mitigate these currency risks, there can be no assurance that we will be        
successful in doing so in the future and that currency fluctuations will not    
have a material adverse effect on Lavalife's business, financial condition and  
results of operations.                                                          

Lavalife depends on key executives.                                             

 Lavalife is dependent on certain key members of its management,
particularly Chairman and Chief Executive Officer Bruce Croxon, Vice President  
of International Corporate Development Nicholas Paine and Vice President of     
Product Design Ed Lum. In addition, Lavalife's future success will depend in    
part upon its ability to attract and retain highly skilled personnel. The       
failure to hire and retain such personnel could have a material adverse effect  
on its business, financial condition and results of operations.                 

Changing laws and regulations and legal uncertainties regarding the Internet may
impair Lavalife's growth and harm its businesses.                               

       A number of proposed laws and regulations regarding the Internet that
could impact Lavalife's businesses, including with respect to consumer privacy, 
have been proposed or considered. Lavalife cannot predict whether any of these  
types of laws or regulations will be enacted or amended and what effect, if any,
such laws or regulations would have on its businesses, financial condition or   
results of operations. In addition, the application of various sales, use and   
other tax provisions under state and local law could have a material adverse    
effect on Lavalife's businesses, financial condition and results of operations. 

Risks Related to Our Combined Business

We depend in part on the communication channels through which we market and     
service our products, such as telephone, internet and the United States Postal  
Service. An interruption of, or an increase in the billing rate for, such       
communication channels could adversely affect our business.                     

         We market and service our product and programs by various communication
channels, including telephone, internet and mail, and accordingly, our business 
is dependent on the quality of service of providers of these communication      
channels. Any significant interruption in these communication channels could    
adversely affect us. In addition, rate increases imposed by providers would     
increase our and our clients' operating expenses and could have a material      
adverse effect on our business, financial condition, results of operations and  
cash flows.                                                                     

The success of our business depends on introduction of popular new programs or  
services or the enhancement of existing programs or services.                   

       Our business is substantially dependent on our ability to develop and
successfully introduce popular new programs or provide enhancements to existing 
programs which generate consumer loyalty. Failure to introduce new programs in a
timely manner could result in our competitors acquiring additional market share.
In addition, the introduction or announcement of new innovative programs by us  
or by others, could render existing programs obsolete or result in a delay or   
decrease in orders for existing programs as customers evaluate new programs.    

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Similarly, Lavalife's business is substantially dependent on its ability to     
refine existing service offerings and to introduce new interactive services.    
Therefore, the announcement or introduction of new innovative programs by us or 
others, or our failure to introduce new programs which generate broad consumer  
appeal, or Lavalife's inability to refine its service offerings or introduce new
services could have a material adverse effect on our business, financial        
condition, results of operations and cash flows.                                

We may need to raise additional capital in the future to fund liquidity and     
capital requirements, which may not be available to us on favorable terms.      

         Our future liquidity and capital requirements will depend upon numerous
factors, including the success of our membership programs, market developments, 
potential acquisitions and additional repurchases of our common stock. We may   
need to raise additional funds to support expansion, develop new membership     
programs, respond to competitive pressures, acquire complementary businesses or 
take advantage of unanticipated opportunities. The indenture governing the notes
will contain, and the credit agreement under our senior secured credit facility 
contains covenants that may restrict our ability to finance operations or       
capital needs. We experienced negative cash flow in the period following the    
terrorist attacks of September 11, 2001 and may experience negative cash flow in
the future as a result of various factors, some of which are outside of our     
control. We cannot be certain that we will be able to obtain adequate financing 
on favorable terms or at all.                                                   

We rely on our computer and communication systems. If such systems fail or are  
unable to keep pace with technological advances, our business would suffer.     

         Our business is highly dependent on our computer and telecommunications
systems and any temporary or permanent loss of either system, for whatever      
reason, could have a material adverse effect on our business, financial         
condition and results of operations. In addition, the technologies on which we  
are dependent to compete effectively and meet our clients' needs are rapidly    
evolving and in many instances are characterized by short product life cycles.  
As a result, we are dependent on ongoing, significant investment in advanced    
computer and telecommunications technology, including automated call            
distributors and digital switches. Our inability to anticipate and adapt to     
technological shifts and to develop new and enhanced technology on a timely     
basis could have a material adverse effect on our business, financial condition,
results of operations and cash flows.                                           

Our operating results fluctuate from quarter to quarter.                        

    Our quarterly revenues, expenses and operating results have varied
significantly in the past and may vary significantly from quarter to quarter in 
the future. Factors which could cause our financial results to fluctuate        
include:                                                                        

--   increased or decreased cancellation of member enrollments;       

--   the rate of renewal by existing members;                         

    --   our ability to introduce new programs or products or enhance existing
  programs or products on a timely basis and the introduction of
programs or products by our competitors;                    

--   the mix of our client base;                                      

--   seasonality of the businesses of our clients;                    

--   market acceptance and demand for our and our clients' membership 
programs generally;                                         

  --   the mix of programs we offer and the price points of such programs;

     --   increased commission rates and other compensation required by clients;

--   the mix of our marketing channels;                               

--   unanticipated service interruptions;                             

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--   movement in foreign exchange rates;                              

--   adverse outcomes of litigation or regulatory matters;            

--   the availability of vendors to support programs we offer;        

    --   the level of enthusiasm for health and fitness, travel, entertainment
       and leisure activities, and other lifestyle elements underlying the
programs; and                                               

--   competitive pressures on selling prices.                         

       Many of these factors are beyond our control. Operating results would
be adversely affected if projected revenues for a given quarter are not         
achieved. In addition, any future acquisitions by us could have a material      
adverse effect on our results of operations, particularly in quarters           
immediately following consummation of such transactions, while the operations of
the acquired business are being integrated into our operations.                 

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RATIO OF EARNINGS TO FIXED CHARGES

    Set forth below is information concerning our ratio of earnings to
fixed charges on a consolidated basis for the periods indicated. This ratio     
shows the extent to which our business generates enough earnings after the      
payment of all expenses other than interest to make required interest payments  
on our debt.                                                                    

       For the purpose of computing the ratios of earnings to fixed charges,
"earnings" consist of income before tax and fixed charges. "Fixed charges"      
consist of interest expense, amortization of expenses related to indebtedness,  
and the portion of rental expense which is considered to be representative of   
the interest factors in our leases.                                             

                                                        [Enlarge/Download Table]

                                                                                      
                             Six Months Ended                                         
                               December 31,          Fiscal Year Ended June 30,       
                            ------------------ ---------------------------------------
                                   2003          2003     2002   2001    2000     1999
                            ------------------ -------- ------- ------ -------- ------
Ratio of earnings to fixed         8.22         15.52x   17.69x   (1)    6.75x   8.60x
 charges                                                                              

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

(1) For the year ended June 30, 2001, earnings were insufficient to cover fixed 
charges by $32.2 million.                                                       

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 USE OF PROCEEDS

       The selling securityholders will receive all of the net proceeds from
the sale of the notes or the shares of common stock sold under this prospectus. 
We will not receive any of the proceeds from sales by the selling               
securityholders of the notes or the underlying common stock.                    

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                         PRICE RANGE OF THE COMMON STOCK AND DIVIDEND POLICY

     Our common stock is quoted and traded on the Nasdaq National Market
under the symbol "MBRS." The table below shows the range of reported high and   
low closing sale prices per share for our common stock on the Nasdaq National   
Market for the periods indicated.                                               

                                                        [Enlarge/Download Table]

                                                                                               
                                                                       High            Low     
                                                                   -------------  -------------
Fiscal Year Ended June 30, 2001                                                                
     First Quarter ended September 30.............................    $37.06          $26.62   
     Second Quarter ended December 31.............................     36.19           19.38   
     Third Quarter ended March 31.................................     27.94           18.69   
     Fourth Quarter ended June 30.................................     26.00           20.31   
Fiscal Year Ended June 30, 2002                                                                
     First Quarter ended September 30.............................    $25.00          $17.90   
     Second Quarter ended December 31.............................     21.00            7.98   
     Third Quarter ended March 31.................................     18.93           14.26   
     Fourth Quarter ended June 30.................................     18.53           16.27   
Fiscal Year Ended December 31, 2003                                                            
     First Quarter ended September 30.............................    $18.80          $12.48   
     Second Quarter ended December 31.............................     19.53           16.65   
     Third Quarter ended March 31.................................     20.71           14.00   
     Fourth Quarter ended June 30.................................     24.00           19.30   
Fiscal Year Ended June 30, 2004                                                                
     First Quarter ended September 30.............................    $38.22          $19.75   
     Second Quarter ended December 31.............................     34.00           24.16   
     Third Quarter ended March 31.................................     36.77           26.96   
     Fourth Quarter ended June 30 (through April 5, 2004).........     35.02           34.23   

      As of April 5, 2004, the closing sales price for our common stock as
reported by the Nasdaq National Market was $35.02 per share.                    

  We had 1,245 common stockholders of record as of March 23, 2004.

       We have not declared or paid to date, and currently are not permitted
by the terms of our credit agreement to pay, any cash dividends. We anticipate  
that all of our earnings in the foreseeable future will be retained for use in  
our business and to repurchase our common stock under our stock buyback program.
Our future dividend policy will depend on our earnings, capital requirements,   
financial condition, requirements of the financing agreements to which we are a 
party and other factors considered relevant by our Board of Directors.          

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DESCRIPTION OF NOTES

        We issued $90,000,000 aggregate principal amount of notes in a private
placement on September 30, 2003, under an indenture between us and Deutsche Bank
Trust Company Americas, as trustee. The terms of the notes include those        
provided in the indenture, the notes and those provided in the registration     
rights agreement, which we entered into with the initial purchasers. The        
following description is only a summary of the material provisions of the notes,
the indenture and the registration rights agreement. We urge you to read these  
documents in their entirety because they, and not this description, will define 
your rights as holders of the notes. You may request copies of these documents  
at our address set forth above under the caption "Summary."                     

         When we refer to "MemberWorks," "we," "our" or "us" in this section, we
refer only to MemberWorks Incorporated, a Delaware corporation, and not its     
subsidiaries.                                                                   

Brief Description of the Notes                                                  

The notes are:                                                

--   limited to $90.0 million in aggregate principal amount;          

     --   our unsecured senior subordinated obligations, ranking junior in right
     of payment to all of our existing and future senior indebtedness,
 equally in right of payment to our future senior subordinated
          indebtedness and senior in right of payment to our future subordinated
       indebtedness, but as indebtedness of MemberWorks, the notes will be
effectively subordinated to all existing and future secured 
          indebtedness to the extent of the value of the related security and to
     all existing and future indebtedness and other liabilities of our
subsidiaries;                                               

  --   convertible into our common stock at an initial conversion price of
      approximately $40.37 per share, subject to adjustment as described
below under "-- Conversion Rights";                         

   --   redeemable at our option in whole or in part beginning on October 6,
  2008 upon the terms set forth under "-- Optional Redemption by
MemberWorks";                                               

--   subject to repurchase by us at your option if a change of control
       occurs as set forth below under "-- Repurchase at Option of Holders
Upon a Change of Control"; and                              

  --   due on October 1, 2010, unless earlier converted, redeemed by us at
   our option or repurchased by us at your option upon a change of
control of MemberWorks.                                     

     The indenture does not contain any financial covenants and does not
restrict us or our subsidiaries from paying dividends, incurring additional debt
or issuing or repurchasing our other securities. In addition, the indenture will
not protect you in the event of a highly leveraged transaction or a change in   
control of MemberWorks except to the extent described below under "-- Repurchase
at Option of Holders upon a Change of Control."                                 

        As of February 29, 2004, we had outstanding approximately $5.5 million
of indebtedness that would rank senior to the notes. In addition, we had $22.5  
million available under our bank credit facility (all of which would rank senior
to the notes if drawn). As of February 29, 2004, our subsidiaries had           
outstanding approximately $20.5 million of indebtedness and other liabilities,  
all of which would be effectively senior to the notes.                          

         No sinking fund is provided for the notes. The notes are not subject to
defeasance. The notes were issued only in registered form in denominations of   
$1,000 and any integral multiple of $1,000 above that amount. No service charge 
will be made for any registration of transfer or exchange of notes, but we may  
require payment of a sum sufficient to cover any tax or other governmental      
charge payable in connection therewith.                                         

  You may present definitive notes for conversion, registration of
transfer and exchange, without service charge, at our office or agency in New   

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York City, which shall initially be the office or agency of the trustee in New  
York City. For information regarding conversion, registration of transfer and   
exchange of global notes, see "-- Form, Denomination and Registration."         

Interest                                                                        

     The notes will bear interest from September 30, 2003 at the rate of
5.50% per year. We will pay interest semiannually in arrears on April 1 and     
October 1 of each year to the holders of record at the close of business on the 
preceding March 15 and September 15, respectively, beginning April 1, 2004.     
There are two exceptions to the preceding sentence:                             

  --   In general, we will not pay accrued and unpaid interest on any note
       that is converted into our common stock. See "--Conversion Rights--
Conversion Procedures"; and                                 

  --   We will pay interest to a person other than the holder of record on
         the relevant record date if we redeem, or holders elect to require us
        to repurchase, the notes on a date that is after the record date and
   on or prior to the corresponding interest payment date. In this
        instance, we will pay accrued and unpaid interest on the notes being
          redeemed to, but excluding, the redemption date or repurchase date, as
         the case may be, to the same person to whom we will pay the principal
of those notes.                                             

       We will pay the principal of, interest on, and any additional amounts
due in respect of the global notes to DTC in immediately available funds.       

        In the event definitive notes are issued, we will pay interest and any
additional amount due on:                                                       

     --   definitive notes having an aggregate principal amount of $5,000,000 or
less by check mailed to the holders of those notes;         

 --   definitive notes having an aggregate principal amount of more than
 $5,000,000 by wire transfer in immediately available funds if
requested by the holder of those notes; and                 

--   at maturity, we will pay the principal of and interest on the    
    definitive notes at our office or agency in New York City, which
     initially will be the office or agency of the trustee in New York
City.                                                       

       Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.                                                           

Conversion Rights                                                               

General                                                             

   You may convert any outstanding notes (or portions of outstanding
notes) into our common stock, initially at the conversion price of approximately
$40.37 per share, equal to a conversion rate of approximately 24.7739 shares per
$1,000 principal amount of notes. The conversion price will be subject to       
adjustment as described below under "Conversion Price Adjustments". We will not 
issue fractional shares of common stock upon conversion of notes. Instead, we   
will pay cash to you in an amount equal to the market value of that fractional  
share based upon the closing sale price of our common stock on the trading day  
immediately preceding the conversion date. You may convert notes only in        
denominations of $1,000 and whole multiples of $1,000.                          

      You may exercise conversion rights at any time prior to the close of
business on the business day prior to the final maturity date of the notes.     
However, if you are a holder of notes that have been called for redemption, you 
must exercise your conversion rights prior to the close of business on the      
second business day preceding the redemption date, unless we default in payment 
of the redemption price on the redemption date. In addition, if you have        
exercised your right to require us to repurchase your notes because a change of 
control has occurred, you may convert your notes into our common stock only if  
you withdraw your notice and convert your notes prior to the close of business  
on the business day immediately preceding the change of control repurchase date.

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Conversion Procedures                                               

       Except as provided below, if you convert your notes into common stock
on any day other than an interest payment date, you will not receive any        
interest that has accrued on these notes since the prior interest payment date. 
By delivering to the holder the number of shares issuable upon conversion,      
determined by dividing the principal amount of the notes being converted by the 
conversion price, together with a cash payment, if any, in lieu of fractional   
shares, we will satisfy our obligation with respect to the converted notes. That
is, accrued but unpaid interest will be deemed to be paid in full rather than   
canceled, extinguished or forfeited.                                            

     If you convert after a record date for an interest payment date but
prior to the corresponding interest payment date, you will receive on the       
interest payment date interest accrued and paid on such notes, notwithstanding  
the conversion of such notes prior to such interest payment date, because you   
will have been the holder of record on the corresponding record date. However,  
at the time you surrender such notes for conversion, you must pay us an amount  
equal to the interest that has accrued and will be paid on the notes being      
converted on the interest payment date. The preceding sentence does not apply,  
however, to a holder that converts, after a record date for an interest payment 
date but prior to the corresponding interest payment date, notes that we call   
for redemption prior to such conversion on a redemption date that is on or prior
to the third business day after such interest payment date. Accordingly, if we  
call your notes for redemption on a date that is after a record date for an     
interest payment date but on or prior to the third business day after the       
corresponding interest payment date, and prior to the redemption date you choose
to convert your notes, you will receive on the date that has been fixed for     
redemption the amount of interest you would have received if you had not        
converted your notes.                                                           

       You will not be required to pay any transfer taxes or duties relating
to the issuance or delivery of our common stock if you exercise your conversion 
rights, but you will be required to pay any transfer tax or duties which may be 
payable relating to any transfer involved in the issuance or delivery of the    
common stock in a name other than yours. Certificates representing shares of    
common stock will be issued or delivered only after all applicable transfer     
taxes and duties, if any, payable by you have been paid.                        

    To convert interests in a global note, you must deliver to DTC the
appropriate instruction form for conversion pursuant to DTC's conversion        
program.                                                                        

To convert a definitive note, you will be required to:        

     --   complete the conversion notice on the back of the note (or a facsimile
of it);                                                     

    --   deliver the completed conversion notice and the notes to be converted
to the specified office of the conversion agent;            

   --   pay all funds required, if any, relating to interest on the notes to
         be converted to which you are not entitled, as described in the third
preceding paragraph; and                                    

   --   pay all transfer taxes or duties, if any, as described in the second
preceding paragraph.                                        

    The conversion date will be the date on which all of the foregoing
requirements have been satisfied. The notes will be deemed to have been         
converted immediately prior to the close of business on the conversion date. We 
will deliver, or cause to be delivered, to you a certificate for the number of  
shares of common stock into which the notes are converted (and cash in lieu of  
any fractional shares) as soon as practicable on or after the conversion date.  

Conversion Price Adjustments                                        

 We will adjust the initial conversion price for certain events,
including:                                                                      

        (1) issuances of our common stock as a dividend or distribution on our
common stock;                                                                   

    (2) certain subdivisions, combinations or reclassifications of our
common stock;                                                                   

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       (3) issuances to all or substantially all holders of our common stock
of certain rights or warrants to purchase our common stock (or securities       
convertible into our common stock) at less than (or having a conversion price   
per share less than) the current market price of our common stock;              

     (4) distributions to all or substantially all holders of our common
stock of shares of our capital stock, evidences of our indebtedness or assets   
(including securities), but excluding:                                          

   --   dividends or distributions referred to in paragraph (1) above;

--   rights or warrants referred to in paragraph (3) above;     

    --   dividends or distributions paid exclusively in cash referred to
in paragraph (5) below; or                            

--   dividends and distributions in connection with a           
  reclassification, consolidation, merger, statutory share
         exchange, combination, sale or conveyance resulting in a change
           in the conversion consideration pursuant to the fourth succeeding
paragraph;                                            

        (5) dividends or other distributions consisting exclusively of cash to
all or substantially all holders of our common stock, other than dividends or   
distributions made in connection with our liquidation, dissolution or           
winding-up; and                                                                 

 (6) purchases of our common stock pursuant to a tender offer or
exchange offer made by us or any of our subsidiaries to the extent that the cash
and value of any other consideration included in the payment per share of common
stock exceeds the closing sale price per share of our common stock on the       
trading day next succeeding the last date on which tenders or exchanges may be  
made pursuant to such tender or exchange offer.                                 

   We will not make any adjustment if holders may participate in the
transaction or in certain other cases. In cases where the fair market value of  
assets, debt securities or certain rights, warrants or options to purchase our  
securities, applicable to one share of common stock, distributed to             
stockholders:                                                                   

   --   equals or exceeds the average closing price of the common stock over
        the ten consecutive trading day period ending on the record date for
such distribution, or                                       

--   such average closing price exceeds the fair market value of such 
         assets, debt securities or rights, warrants or options so distributed
by less than $1.00,                                         

rather than being entitled to an adjustment in the conversion price, the holder 
of a note will be entitled to receive upon conversion, in addition to the shares
of common stock, the kind and amount of assets, debt securities or rights,      
warrants or options comprising the distribution that such holder would have     
received if such holder had converted such notes immediately prior to the record
date for determining the shareholders entitled to receive the distribution.     

    We will not make an adjustment in the conversion price unless such
adjustment would require a change of at least 1% in the conversion price then in
effect at such time. We will carry forward and take into account in any         
subsequent adjustment any adjustment that would otherwise be required to be     
made. Except as stated above, we will not adjust the conversion price for the   
issuance of our common stock or any securities convertible into or exchangeable 
for our common stock or carrying the right to purchase any of the foregoing.    

         In the event that we distribute shares of capital stock of a subsidiary
of ours, the conversion price will be adjusted, if at all, based on the market  
value of the subsidiary stock so distributed relative to the market value of our
common stock, in each case over a measurement period following the distribution,
unless we elect to reserve the pro rata portion of such shares for the benefit  
of the holders of the notes.                                                    

If we:                                                        

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  --   reclassify or change our common stock (other than changes resulting
from a subdivision or combination); or                      

     --   consolidate or combine with or merge into any person or sell or convey
          to another person all or substantially all of our property and assets,

and the holders of our common stock receive stock, other securities or other    
property or assets (including cash or any combination thereof) with respect to  
or in exchange for their common stock, each outstanding note will, without the  
consent of any holders of notes, become convertible only into the consideration 
the holders of notes would have received if they had converted their notes      
immediately prior to such reclassification, change, consolidation, combination, 
merger, statutory share exchange, sale or conveyance. We may not become a party 
to any such transaction unless its terms are consistent with the foregoing.     

   If a taxable distribution to holders of our common stock or other
transaction occurs which results in any adjustment of the conversion price      
(including an adjustment at our option), you may, in certain circumstances, be  
deemed to have received a distribution subject to U.S. income tax as a dividend.
For example, you will be deemed to have received a constructive distribution    
from us to the extent of any change in the conversion rate of the notes made to 
compensate you for cash dividends paid to holders of our common stock. In       
certain other circumstances, the absence of an adjustment may result in a       
taxable dividend to the holders of our common stock. See "United States Federal 
Income Tax Consequences."                                                       

      We may from time to time, to the extent permitted by law, reduce the
conversion price of the notes by any amount for any period of at least 20 days. 
In that case, we will give at least 15 days' notice of such decrease. We may    
make such reductions in the conversion price, in addition to those set forth    
above, as our board of directors deems advisable to avoid or diminish any income
tax to holders of our common stock resulting from any dividend or distribution  
of stock (or rights to acquire stock) or from any event treated as such for     
income tax purposes.                                                            

        If we adjust the conversion price pursuant to the above provisions, we
will issue a press release through Dow Jones & Company, Inc., Bloomberg Business
News or a similar newswire service containing the relevant information and make 
this information available on our web site or through another public medium as  
we may use at that time.                                                        

Subordination                                                                   

      The payment of principal, interest and premium, if any, on the notes
will be subordinated in right of payment, as set forth in the indenture, to the 
prior payment in full of all senior indebtedness of MemberWorks, including      
senior indebtedness incurred after the date the notes are issued.               

       Upon any distribution to creditors of MemberWorks in a liquidation or
dissolution of MemberWorks or in a bankruptcy, reorganization, insolvency,      
receivership or similar proceeding relating to MemberWorks or its property, an  
assignment for the benefit of creditors or any marshalling of MemberWorks'      
assets and liabilities, the holders of senior indebtedness will be entitled to  
receive payment in full in cash of all obligations due in respect of such senior
indebtedness (including interest after the commencement of any such proceeding  
at the rate specified in the applicable senior indebtedness, whether or not an  
allowable claim in any such proceeding) before the holders of notes will be     
entitled to receive any payment with respect to the notes, and until all        
obligations with respect to senior indebtedness are paid in full, any           
distribution to which the holders of notes would be entitled shall be made to   
the holders of senior indebtedness.                                             

     MemberWorks also may not make any payment upon or in respect of the
notes if:                                                                       

          --   a default in the payment of the principal of, premium, if any, or
      interest on designated senior indebtedness occurs and is
continuing; or                                    

   --   any other default occurs and is continuing with respect to
        designated senior indebtedness that permits holders of the
             designated senior indebtedness as to which such default relates

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              to accelerate its maturity (or that would permit such holders to
            accelerate with the giving of notice or the passage of time or
        both) and the trustee receives a notice of such default (a
               "Payment Blockage Notice") from MemberWorks or the holders of any
designated senior indebtedness.                   

Payments on the notes may and shall be resumed:               

      --   in the case of a payment default, upon the date on which such
default is cured or waived; and                   

          --   in case of a nonpayment default, the earlier of the date on which
              such nonpayment default is cured or waived or 179 days after the
               date on which the applicable Payment Blockage Notice is received,
           unless the maturity of any designated senior indebtedness has
been accelerated.                                 

      No new period of payment blockage may be commenced unless and until:

         --   360 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice; and                

      --   all scheduled payments of principal, interest and premium, if
            any, on the notes that have come due have been paid in full in
cash.                                             

     No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have   
been waived for a period of not less than 90 days.                              

         The indenture further requires that MemberWorks promptly notify holders
of senior indebtedness if payment of the notes is accelerated because of an     
event of default.                                                               

     As a result of the subordination provisions described above, in the
event of a liquidation or insolvency, the holders of notes may recover less     
ratably than creditors of MemberWorks who are holders of senior indebtedness.   
See "Risk Factors -- The notes are subordinated. You will receive payment on    
your notes only if we have funds remaining after we have paid any existing and  
future senior indebtedness." You will receive payment on your notes only if we  
have funds remaining after we have paid any existing and future senior          
indebtedness. As of February 29, 2004, we had outstanding $5.5 million of senior
indebtedness.                                                                   

"senior indebtedness" means:                                  

 --   all indebtedness of MemberWorks outstanding under credit
          facilities and all hedging obligations with respect thereto;

       --   any other indebtedness permitted to be incurred by MemberWorks
           under the terms of the indenture, unless the instrument under
               which such indebtedness is incurred expressly provides that it is
         on a parity with or subordinated in right of payment to the
notes; and                                        

         --   all principal, interest (including interest accruing on or after
             the filing of any petition in bankruptcy or for reorganization,
           whether or not a claim for post-filing interest is allowed in
            such proceeding), premium, penalties, fees, charges, expenses,
             indemnification, reimbursement obligations, damages, guarantees
              and other liabilities or amounts payable under the documentation
          governing any indebtedness of MemberWorks referred to above.

   Notwithstanding anything to the contrary in the foregoing, senior
indebtedness will not include:                                                  

       --   any liability for federal, state, local or other taxes owed or
owing by MemberWorks;                             

      --   any indebtedness of MemberWorks to any of its subsidiaries or
other affiliates;                                 

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--   any trade payables; or                                 

         --   any indebtedness of MemberWorks that is incurred in violation of
the indenture.                                    

       "Indebtedness" means, with respect to any person, any indebtedness of
such person, whether or not contingent, in respect of borrowed money or         
evidenced by bonds, notes, debentures or similar instruments or letters of      
credit (or reimbursement agreements in respect thereof) or banker's acceptances 
or representing capital lease obligations or the balance deferred and unpaid of 
the purchase price of any property or representing any hedging obligations,     
except any obligations that constitutes an accrued expense, deferred revenue or 
trade payable, if and to the extent any of the foregoing indebtedness (other    
than letters of credit and hedging obligations) would appear as a liability upon
a balance sheet of such person prepared in accordance with GAAP, as well as all 
indebtedness of others secured by a lien on any assets of such person (whether  
or not such indebtedness is assumed by such person) and, to the extent not      
otherwise included, the guarantee by such person of any indebtedness of any     
other person.                                                                   

    "designated senior indebtedness" means (1) any senior indebtedness
outstanding under any credit facility and (2) any other senior indebtedness     
permitted under the indenture, the principal amount of which is $25.0 million or
more and that has been designated by MemberWorks as "designated senior          
indebtedness." The indenture does not restrict the creation of senior           
indebtedness or any other indebtedness in the future. For information concerning
our potential incurrence of additional senior indebtedness, see "Risk Factors --
The notes will not contain restrictive covenants, and there is limited          
protection in the event of a change of control."                                

        We will be obligated to pay reasonable compensation to the trustee and
to indemnify the trustee against any losses, liabilities or expenses incurred by
it in connection with its duties relating to the notes. The trustee's claims for
such payments will be senior to those of holders of the notes in respect of all 
funds collected or held by the trustee.                                         

Optional Redemption by MemberWorks                                              

      We may not redeem the notes in whole or in part at any time prior to
October 6, 2008. At any time on or after October 6, 2008, we may redeem some or 
all of the notes on at least 30 but not more than 60 days' prior notice, at a   
redemption price equal to 100% of the principal amount of notes to be redeemed, 
plus accrued and unpaid interest to, but excluding, the redemption date. In each
case, we will pay accrued and unpaid interest on the notes being redeemed to,   
but excluding, the redemption date. In the event the notes are converted into   
our common stock after the date the notice of the redemption is mailed and prior
to the third business day after the optional redemption date, we will pay       
interest on such notes. See "-- Conversion Rights -- Conversion Procedures."    

Procedures for Partial Redemption                                   

         If we do not redeem all of the notes, the trustee will select the notes
to be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by   
lot or on a pro rata basis. If any notes are to be redeemed in part only, we    
will issue a new note or notes in principal amount equal to the unredeemed      
principal portion thereof. If a portion of your notes are selected for partial  
redemption and you convert a portion of your notes, the converted portion will  
be deemed to be part of the portion of notes selected for redemption.           

Repurchase at Option of Holders upon a Change of Control                        

Repurchase upon a Change of Control                                 

         If a change of control occurs, holders may require us to repurchase all
or any portion of their notes not previously called for redemption at a         
repurchase price equal to 100% of the principal amount of the notes to be       
repurchased plus any accrued and unpaid interest to, but excluding, the         
repurchase date. The principal amount submitted for repurchase by a holder must 
be equal to $1,000 or a whole multiple of $1,000.                               

    A "change of control" will be deemed to have occurred at such time
after the original issuance of the notes when any of the following has occurred:

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     --   the acquisition by any person, including any syndicate or group deemed
   to be a "person" under Section 13(d)(3) of the Exchange Act, of
     beneficial ownership, directly or indirectly, through a purchase,
   merger or other acquisition transaction or series of purchases,
      mergers or other acquisition transactions of shares of our capital
    stock entitling that person to exercise 50% or more of the total
    voting power of all shares of our capital stock entitled to vote
          generally in elections of directors, other than any acquisition by us,
    any of our subsidiaries or any of our employee benefit plans; or

--   the first day on which a majority of the members of our board of 
directors does not consist of continuing directors; or      

   --   the consolidation or merger of us with or into any other person, any
        merger of another person into us, or any conveyance, transfer, sale,
 lease or other disposition of all or substantially all of our
properties and assets to another person, other than:        

(1)  any transaction:                                       

  --   that does not result in any reclassification, conversion,
           exchange or cancellation of outstanding shares of our capital
stock; and                                        

         --   pursuant to which the holders of 50% or more of the total voting
       power of all shares of our capital stock entitled to vote
           generally in elections of directors immediately prior to such
             transaction have the right to exercise, directly or indirectly,
        50% or more of the total voting power of all shares of our
      capital stock entitled to vote generally in elections of
               directors of the continuing or surviving person immediately after
giving effect to such issuance; and               

          (2)  any merger primarily for the purpose of changing our jurisdiction
              of incorporation and resulting in a reclassification, conversion
           or exchange of outstanding shares of common stock solely into
shares of common stock of the surviving entity.   

      However, a change of control will be deemed not to have occurred if:

--   the closing sale price per share of our common stock for any five
trading days within:                                        

        (i) the period of 10 consecutive trading days ending
    immediately after the later of the change of control or the public
   announcement of the change of control, in the case of a change of
control under the first or second bullet point above; or      

        (ii)the period of 10 consecutive trading days ending
      immediately before the change of control, in the case of a change of
       control under the third bullet point above, equals or exceeds 110% of
       the conversion price of the notes in effect on each such trading day;
or                                                            

 --   all of the consideration in the transaction or transactions (other
      than cash payments for fractional shares and cash payments made in
     respect of dissenters' appraisal rights) constituting a change of
     control consists of shares of common stock traded or to be traded
         immediately following such change of control on a national securities
  exchange or the Nasdaq National Market and, as a result of the
         transaction or transactions, the notes become convertible solely into
such common stock (and any rights attached thereto).        

         Beneficial ownership shall be determined in accordance with Rules l3d-3
and 13d-5 under the Exchange Act (except that a person shall be deemed to have  
beneficial ownership of all securities that such person has the right to        
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition). The term "person" includes any       
syndicate or group which would be deemed to be a "person" under Section l3(d)(3)
under the Exchange Act.                                                         

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    "Continuing directors" means, as of any date of determination, any
member of the board of directors of MemberWorks who:                            

--   was a member of the board of directors on September 24, 2003; or 

   --   was nominated for election or elected to the board of directors with
   the approval of a majority of the continuing directors who were
    members of the board at the time of new director's nomination or
election.                                                   

         The definition of "change of control" includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"  
of our properties and assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. In interpreting this phrase,   
courts, among other things, make a subjective determination as to the portion of
assets conveyed, considering many factors, including the value of assets        
conveyed, the proportion of an entity's income derived from the assets conveyed 
and the significance of those assets to the ongoing business of the entity. To  
the extent the meaning of such phrase is uncertain, uncertainty will exist as to
whether or not a change of control may have occurred and, accordingly, as to    
whether or not the holders of notes will have the right to require us to        
repurchase their notes.                                                         

Repurchase Right Procedures                                         

        Within 30 days after the occurrence of a change of control, we will be
required to give notice to all holders of the occurrence of the change of       
control and of their resulting repurchase right. The repurchase date will be no 
later than 30 days after the date we give that notice. The notice will be       
delivered to the holders at their addresses shown in the register of the        
registrar and to beneficial owners as required by applicable law, stating, among
other things, the procedures that holders must follow to require us to          
repurchase their notes as described below.                                      

    If holders have the right to cause us to repurchase their notes as
described above, we will issue a press release through Dow Jones & Company,     
Inc., Bloomberg Business News or a similar newswire service containing the      
relevant information and make this information available on our web site or     
through another public medium as we may use at that time.                       

      To elect to require us to repurchase notes, each holder must deliver
the repurchase notice so that it is received by the paying agent no later than  
the close of business on the second business day immediately prior to the       
repurchase date, unless we specify a later date, and must state certain         
information, including:                                                         

     --   if certificated notes have been issued, the certificate numbers of the
  holders' notes to be delivered for repurchase or, if not, such
   information as may be required under applicable DTC procedures;

    --   the portion of the principal amount of notes to be repurchased, which
must be $1,000 or an integral multiple of $1,000; and       

    --   that the notes are to be repurchased by us pursuant to the applicable
provision of the indenture.                                 

     A holder may withdraw any repurchase notice by delivering a written
notice of withdrawal to the paying agent prior to the close of business on the  
repurchase date. The notice of withdrawal must state certain information,       
including:                                                                      

--   the principal amount of notes being withdrawn;                   

     --   if certificated notes have been issued, the certificate numbers of the
         notes being withdrawn or, if not, such information as may be required
under applicable DTC procedures; and                        

    --   the principal amount, if any, of the notes that remain subject to the
repurchase notice.                                          

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       The Exchange Act requires the dissemination of certain information to
security holders and that an issuer follow certain procedures if an issuer      
tender offer occurs, which requirements may apply if the repurchase right       
summarized above becomes available to holders of the notes. In connection with  
any offer to require us to repurchase notes as summarized above, we will, to the
extent applicable:                                                              

 --   comply with the provisions of Rule l3e-4, Rule 14e-1 and any other
tender offer rules under the Exchange Act which may then be 
applicable; and                                             

  --   file a Schedule TO or any other required schedule or form under the
Exchange Act.                                               

  Our obligation to pay the repurchase price for notes for which a
repurchase notice has been delivered and not validly withdrawn is conditioned   
upon book-entry transfer or delivery of the notes, together with necessary      
endorsements, to the paying agent at any time after delivery of the repurchase  
notice. We will cause the repurchase price for the notes to be paid promptly    
following the later of the repurchase date or the time of book-entry transfer or
delivery of the notes, together with such endorsements.                         

        If the paying agent holds money sufficient to pay the repurchase price
of the notes for which a repurchase notice has been given on the business day   
following the repurchase date in accordance with the terms of the indenture,    
then, immediately after the repurchase date, the notes will cease to be         
outstanding and interest on the notes will cease to accrue, whether or not the  
notes are delivered to the paying agent. Thereafter, all other rights of the    
holder shall terminate, other than the right to receive the repurchase price    
upon delivery of the notes.                                                     

      We may, to the extent permitted by applicable law and the agreements
governing any of our other indebtedness at the time outstanding, at any time    
purchase the notes in the open market or by tender at any price or by private   
agreement. Any notes so purchased by us shall be surrendered to the trustee for 
cancellation. Any notes surrendered to the trustee may, to the extent permitted 
by applicable law, be reissued or resold or may be surrendered to the trustee   
for cancellation. Any note surrendered to the trustee for cancellation may not  
be reissued or resold and will be canceled promptly.                            

Limitations on Repurchase Rights                                    

   The repurchase rights described above may not necessarily protect
holders of the notes if a highly leveraged or another transaction involving us  
occurs that may adversely affect holders.                                       

    Our ability to repurchase notes upon the occurrence of a change of
control is subject to important limitations. The occurrence of a change of      
control will cause an event of default under, and may otherwise be prohibited or
limited by, the terms of our existing bank credit facility and could cause an   
event of default under, or be prohibited or limited by, the terms of our future 
indebtedness. Further, we cannot assure you that, in that event, we would have  
the financial resources, or would be able to arrange financing, to pay the      
repurchase price for all the notes that might be delivered by holders of notes  
seeking to exercise the repurchase right. Any failure by us to repurchase the   
notes when required following a change of control would result in an event of   
default under the indenture. Any such default may, in turn, cause a default     
under our other indebtedness that may be outstanding at that time. In addition, 
our ability to repurchase notes may be limited by restrictions on our ability to
obtain funds for such repurchase through dividends from our subsidiaries and    
other provisions in agreements that may govern our other indebtedness           
outstanding at the time.                                                        

         The change of control repurchase provision of the notes may, in certain
circumstances, make more difficult or discourage a takeover of our company. The 
change of control repurchase feature, however, is not the result of our         
knowledge of any specific effort by others to accumulate shares of our common   
stock or to obtain control of us by means of a merger, tender offer solicitation
or otherwise or by management to adopt a series of anti-takeover provisions.    
Instead, the change of control purchase feature is a standard term contained in 
convertible securities similar to the notes.                                    

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Consolidation, Merger, Etc.                                                     

    The indenture will provide that we may, without the consent of the
holders of any of the notes, consolidate with or merge into any other person or 
convey, transfer, sell, lease or otherwise dispose of all or substantially all  
of our properties and assets to another person as long as, among other things:  

--   the resulting, surviving or transferee person is organized and   
          existing under the laws of the United States, any state thereof or the
District of Columbia;                                       

     --   that person assumes all of our obligations under the indenture and the
notes; and                                                  

     --   MemberWorks or such successor is not then or immediately thereafter in
         default under the indenture and no event which, after notice or lapse
        of time, would become an event of default under the indenture, shall
have occurred and be continuing.                            

    The occurrence of certain of the foregoing transactions could also
constitute a change of control under the indenture.                             

The covenant described above includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"  
of our properties and assets. There is no precise, established definition of the
phrase "substantially all" under applicable law. In interpreting this phrase,   
courts, among other things, make a subjective determination as to the portion of
assets conveyed, considering many factors, including the value of assets        
conveyed, the proportion of an entity's income derived from the assets conveyed 
and the significance of those assets to the ongoing business of the entity. To  
the extent the meaning of such phrase is uncertain, uncertainty will exist as to
whether or not the restrictions on the sale, lease or disposition of our assets 
described above apply to a particular transaction.                              

Events of Default                                                               

     Each of the following will constitute an event of default under the
indenture:                                                                      

      (1) our failure to pay when due the principal of any of the notes at
maturity, upon redemption or exercise of a repurchase right or otherwise;       

      (2) our failure to pay installment of interest (including additional
amounts, if any) on any of the notes for 30 days after the date when due;       

       (3) our failure to perform or observe any other covenant or agreement
contained in the notes or the indenture for a period of 60 days after written   
notice of such failure, requiring us to remedy the same, shall have been given  
to us by the trustee or to us and the trustee by the holders of at least 25% in 
aggregate principal amount of the notes then outstanding;                       

         (4) a default under any indebtedness for money borrowed by us or any of
our subsidiaries that is a "significant subsidiary" (as defined in Rule 405 of  
the Securities Act) the aggregate outstanding principal amount of which is in an
amount in excess of $10 million, for a period of 30 days after written notice to
us by the trustee or to us and the trustee by holders of at least 25% in        
aggregate principal amount of the notes then outstanding, which default:        

        --   is caused by a failure to pay principal or interest when due on
             such indebtedness by the end of the applicable grace period, if
any, unless such indebtedness is discharged; or   

      --   results in the acceleration of such indebtedness, unless such
        acceleration is waived, cured, rescinded, annulled or such
indebtedness is discharged; and                   

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     (5) certain events of bankruptcy, insolvency or reorganization with
respect to us or any of our subsidiaries that is a significant subsidiary.      

         The indenture will provide that the trustee will, within 90 days of the
occurrence of a default, give to the registered holders of the notes notice of  
all uncured defaults or events of default known to it, but the trustee shall be 
protected in withholding such notice if it, in good faith, determines that the  
withholding of such notice is in the best interest of such registered holders,  
except in the case of a default or event of default in the payment of the       
principal of, or interest on, any of the notes when due or in the payment of any
redemption or repurchase obligation.                                            

    If an event of default specified in clause (5) above occurs and is
continuing with respect to us, then automatically the principal of all the notes
and the interest thereon shall become immediately due and payable. If an event  
of default shall occur and be continuing, other than with respect to clause (5) 
above with respect to us (the default not having been cured or waived as        
provided under "-- Modifications and Amendments" below), the trustee or the     
holders of at least 25% in aggregate principal amount of the notes then         
outstanding may declare the notes due and payable at their principal amount     
together with accrued interest, and thereupon the trustee may, at its           
discretion, proceed to protect and enforce the rights of the holders of notes by
appropriate judicial proceedings. Such declaration may be rescinded or annulled 
with the written consent of the holders of a majority in aggregate principal    
amount of the notes then outstanding if all events of default (other than the   
nonpayment of amounts due solely as a result of such acceleration) have been    
cured or waived.                                                                

       The indenture will contain a provision entitling the trustee, subject
to the duty of the trustee during default to act with the required standard of  
care, to be indemnified by the holders of notes before proceeding to exercise   
any right or power under the indenture at the request of such holders. The      
indenture provides that the holders of a majority in aggregate principal amount 
of the notes then outstanding may direct the time, method and place of          
conducting any proceeding for any remedy available to the trustee or exercising 
any trust or power conferred upon the trustee.                                  

       We will be required to furnish annually to the trustee a statement as
to the fulfillment of our obligations under the indenture.                      

Modifications and Amendments                                                    

Changes Requiring Approval of Each Affected Holder                  

         Except as set forth below and under "-- Changes Requiring No Approval,"
we and the trustee may amend or supplement the indenture or the notes with the  
consent of the holders of a majority in aggregate principal amount of the       
outstanding notes. However, the indenture, including the terms and conditions of
the notes, may not be modified or amended without the written consent or the    
affirmative vote of the holder of each note affected by such change to:         

     --   change the maturity of the principal of or the date any installment of
        interest (including any payment of additional amounts) is due on any
note;                                                       

    --   reduce the principal amount, repurchase price or redemption price of,
     or interest (including any payment of additional amounts) on, any
note;                                                       

--   change the currency of payment of such note or interest thereon; 

    --   impair the right to institute suit for the enforcement of any payment
on or conversion of any note;                               

 --   modify our obligations to maintain an office or agency in New York
City;                                                       

     --   except as otherwise permitted or contemplated by provisions concerning
        corporate reorganizations, adversely affect the repurchase rights of
holders or the conversion rights of holders of the notes;   

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    --   modify the redemption provisions of the indenture in a manner adverse
to the holders of notes; or                                 

--   reduce the percentage in aggregate principal amount of notes     
          outstanding necessary to modify or amend the indenture or to waive any
past default.                                               

Changes Requiring No Approval                                       

        The indenture, including the terms and conditions of the notes, may be
modified or amended by us and the trustee, without the consent of any holders of
notes, for the purposes of, among other things:                                 

--   adding to our covenants for the benefit of the holders of notes; 

--   surrendering any right or power conferred upon us;               

--   providing for conversion rights of holders of notes if any       
        reclassification or change of our common stock or any consolidation,
    merger or sale of all or substantially all of our assets occurs;

--   providing for the assumption of our obligations to the holders of
         notes in the case of a merger, consolidation, conveyance, transfer or
lease;                                                      

  --   reducing the conversion price, provided that the reduction will not
adversely affect the interests of the holders of notes;     

--   complying with the requirements of the SEC in order to effect or 
         maintain the qualification of the indenture under the Trust Indenture
Act of 1939;                                                

--   curing any ambiguity or correcting or supplementing any defective
         provision contained in the indenture, provided that such modification
    or amendment does not, in the good faith opinion of our board of
        directors, adversely affect the interests of the holders of notes in
any material respect; or                                    

  --   adding or modifying any other provisions with respect to matters or
          questions arising under the indenture that we and the trustee may deem
          necessary or desirable and that will not, in the good faith opinion of
         our board of directors, adversely affect the interests of the holders
of notes.                                                   

   The terms of our senior indebtedness may require us to obtain the
consent of our lender before agreeing to amendments to the indenture.           

No Personal Liability of Directors, Officers, Employees or Stockholders         

      None of our directors, officers, employees or stockholders, as such,
shall have any liability for any of our obligations under the notes or the      
indenture or for any claim based on, in respect of or by reason of such         
obligations or their creation. By accepting a note, each noteholder shall waive 
and release all such liability. The waiver and release shall be part of the     
consideration for the issue of the notes.                                       

Governing Law                                                                   

The indenture and the notes are governed by, and construed in 
accordance with, the law of the State of New York.                              

Information Concerning the Trustee and the Transfer Agent                       

       Deutsche Bank Trust Company Americas, as trustee under the indenture,
has been appointed by us as paying agent, conversion agent, registrar and       

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custodian with regard to the notes. The American Stock Transfer & Trust Company 
is the transfer agent and registrar for our common stock. The trustee or its    
affiliates may from time to time in the future provide banking and other        
services to us in the ordinary course of their business.                        

Form, Denomination and Registration                                             

Denomination and Registration                                       

        The notes will be issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and whole multiples of $1,000.         

Global Notes; Book-Entry Form                                       

      Except as provided below, the notes will be evidenced by one or more
global notes deposited with the trustee as custodian for DTC, and registered in 
the name of Cede & Co. as DTC's nominee.                                        

         Record ownership of the global notes may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee,   
except as set forth below. A holder may hold its interests in a global note     
directly through DTC if such holder is a participant in DTC, or indirectly      
through organizations which are direct DTC participants if such holder is not a 
participant in DTC. Transfers between direct DTC participants will be effected  
in the ordinary way in accordance with DTC's rules and procedures and will be   
settled in same-day funds. Holders may also beneficially own interests in the   
global notes held by DTC through certain banks, brokers, dealers, trust         
companies and other parties that clear through or maintain a custodial          
relationship with a direct DTC participant, either directly or indirectly.      
Transfers between direct DTC participants will be effected in the ordinary way  
in accordance with DTC's rules and procedures and will be settled in same-day   
funds.                                                                          

      So long as Cede & Co., as nominee of DTC, is the registered owner of
the global notes, Cede & Co. for all purposes will be considered the sole holder
of the global notes. Except as provided below, owners of beneficial interests in
the global notes:                                                               

   --   will not be entitled to have certificates registered in their names;

--   will not receive or be entitled to receive physical delivery of  
certificates in definitive form; and                        

--   will not be considered holders of the global notes.              

    The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability of an owner
of a beneficial interest in a global note to transfer the beneficial interest in
the global note to such persons may be limited.                                 

  We will wire, through the facilities of the trustee, payments of
principal of and interest on the global notes to Cede & Co., the nominee of DTC,
as the registered owner of the global notes. None of MemberWorks, the trustee   
and any paying agent will have any responsibility or be liable for paying       
amounts due on the global notes to owners of beneficial interests in the global 
notes.                                                                          

        It is DTC's current practice, upon receipt of any payment of principal
of and interest on the global notes, to credit participants' accounts on the    
payment date in amounts proportionate to their respective beneficial interests  
in the notes represented by the global notes, as shown on the records of DTC,   
unless DTC believes that it will not receive payment on the payment date.       
Payments by DTC participants to owners of beneficial interests in notes         
represented by the global notes held through DTC participants will be the       
responsibility of DTC participants, as is now the case with securities held for 
the accounts of customers registered in "street name."                          

       If you would like to convert your notes into common stock pursuant to
the terms of the notes, you should contact your broker or other direct or       
indirect DTC participant to obtain information on procedures, including proper  
forms and cut-off times, for submitting those requests.                         

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         Because DTC can only act on behalf of DTC participants, who in turn act
on behalf of indirect DTC participants and other banks, your ability to pledge  
your interest in the notes represented by global notes to persons or entities   
that do not participate in the DTC system, or otherwise take actions in respect 
of such interest, may be affected by the lack of a physical certificate.        

         Neither MemberWorks nor the trustee (nor any registrar, paying agent or
conversion agent under the indenture) will have any responsibility for the      
performance by DTC or direct or indirect DTC participants of their obligations  
under the rules and procedures governing their operations. DTC has advised us   
that it will take any action permitted to be taken by a holder of notes,        
including, without limitation, the presentation of notes for conversion as      
described below, only at the direction of one or more direct DTC participants to
whose account with DTC interests in the global notes are credited and only for  
the principal amount of the notes for which directions have been given.         

       DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal      
Reserve System, a "clearing corporation" within the meaning of the Uniform      
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for DTC     
participants and to facilitate the clearance and settlement of securities       
transactions between DTC participants through electronic book-entry changes to  
the accounts of its participants, thereby eliminating the need for physical     
movement of certificates. Participants include securities brokers and dealers,  
banks, trust companies and clearing corporations and may include certain other  
organizations, such as the initial purchasers of the notes. Certain DTC         
participants or their representatives, together with other entities, own DTC.   
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial         
relationship with, a participant, either directly or indirectly.                

 Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the global notes among DTC participants, it
is under no obligation to perform or continue to perform such procedures, and   
such procedures may be discontinued at any time. If DTC is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed 
by us within 90 days or an event of default has occurred and is continuing with 
respect to the notes, we will cause notes to be issued in definitive form in    
exchange for the global notes. None of MemberWorks, the trustee or any of their 
respective agents will have any responsibility for the performance by DTC or    
direct or indirect DTC participants of their obligations under the rules and    
procedures governing their operations, including maintaining, supervising or    
reviewing the records relating to, or payments made on account of, beneficial   
ownership interests in global notes.                                            

     According to DTC, the foregoing information with respect to DTC has
been provided to its participants and other members of the financial community  
for informational purposes only and is not intended to serve as a               
representation, warranty or contract modification of any kind.                  

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DESCRIPTION OF OUR CAPITAL STOCK

      Our authorized capital stock consists of 40,000,000 shares of common
stock, $0.01 par value per share, and 1,000,000 shares of preferred stock, $0.01
par value per share.                                                            

Common Stock                                                                    

    As of March 23, 2004, there were 10,265,000 shares of common stock
outstanding held by 1,245 stockholders of record. Holders of common stock are   
entitled to one vote for each share held on all matters submitted to a vote of  
stockholders and do not have cumulative voting rights. Accordingly, holders of a
majority of the shares of common stock entitled to vote in any election of      
directors may elect all of the directors standing for election. Holders of      
common stock are entitled to receive ratably such dividends, if any, as may be  
declared by the Board of Directors out of funds legally available therefor,     
subject to any preferential dividend rights of outstanding preferred stock. Upon
the liquidation, dissolution or winding up of the company, the holders of common
stock are entitled to receive ratably the net assets of the company available   
after the payment of all debts and other liabilities and subject to the prior   
rights of any outstanding preferred stock. Holders of common stock have no      
preemptive, subscription, redemption or conversion rights. The outstanding      
shares of common stock are fully paid and nonassessable. The rights, preferences
and privileges of holders of common stock are subject to, and may be adversely  
affected by, the rights of the holders of shares of any series of preferred     
stock which we may designate and issue in the future.                           

Preferred Stock                                                                 

  The Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue shares of     
preferred stock in one or more series. Each series of preferred stock shall have
the rights, preferences, privileges and restrictions, including voting rights,  
dividend rights, conversion rights, redemption privileges and liquidation       
preferences, as shall be determined by the Board of Directors. We have no       
present plans to issue any shares of preferred stock. It is not possible to     
state the effect of the authorization and issuance of any series of preferred   
stock upon the rights of holders of common stock until the Board of Directors   
determines the specific terms, rights and preferences of such a series of       
preferred stock. However, the effects may include, among other things,          
restricting dividends on our common stock, diluting the voting power of our     
common stock or impairing the liquidation rights of our common stock without    
further action by holders of common stock. In addition, under certain           
circumstances, the issuance of preferred stock may render more difficult or tend
to discourage a merger, tender offer or proxy contest, the assumption of control
by a holder of a large block of our securities or the removal of incumbent      
management, which could thereby depress the market price of our common stock.   

Delaware Law and Certain Charter and By-law Provisions                          

We are subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware     
corporation from engaging in a "business combination" with an "interested       
stockholder" for a period of three years after the date of the transaction in   
which the person became an interested stockholder, unless the business          
combination is approved in a prescribed manner. A "business combination"        
includes mergers, asset sales and other transactions resulting in a financial   
benefit to the interested stockholder. Subject to certain exceptions, an        
"interested stockholder" is a person who, together with affiliates and          
associates, owns, or within three years did own, 15% or more of the             
corporation's voting stock.                                                     

        Our Restated Certificate of Incorporation provides for the division of
the Board of Directors into three classes as nearly equal in size as possible   
with staggered three-year terms. In addition, our certificate of incorporation  
provides that directors may be removed only for cause by the affirmative vote of
the holders of two-thirds of the shares of capital stock of the corporation     
entitled to vote. Under our certificate of incorporation, any vacancy on the    
Board of Directors, however occurring, including a vacancy resulting from an    
enlargement of the Board, may only be filled by vote of a majority of the       
directors then in office. The classification of the Board of Directors and the  
limitations on the removal of directors and filling of vacancies could have the 
effect of making it more difficult for a third party to acquire, or of          
discouraging a third party from acquiring, control of the company.              

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         Our certificate of incorporation also provides that any action required
or permitted to be taken by our stockholders at an annual meeting or special    
meeting of stockholders may only be taken if it is properly brought before such 
meeting and may not be taken by written action in lieu of a meeting. Our        
certificate of incorporation further provides that special meetings of the      
stockholders may only be called by the Chairman of the Board of Directors, the  
Chief Executive Officer or, if none, the President or by the Board of Directors.
Under the Restated By-laws, in order for any matter to be considered "properly  
brought" before a meeting, a stockholder must comply with certain requirements  
regarding advance notice to the company. The foregoing provisions could have the
effect of delaying until the next stockholders meeting stockholder actions which
are favored by the holders of a majority of the outstanding voting securities of
the company. These provisions may also discourage another person or entity from 
making a tender offer for the company's common stock, because such person or    
entity, even if it acquired a majority of the outstanding voting securities of  
the company, would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called stockholders meeting, and
not by written consent.                                                         

     The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is  
required to amend a corporation's certificate of incorporation or by-laws,      
unless a corporation's certificate of incorporation or by-laws, as the case may 
be, requires a greater percentage. Our certificate of incorporation requires the
affirmative vote of the holders of at least 75% of the shares of capital stock  
of the company issued and outstanding and entitled to vote to amend or repeal   
any of the foregoing provisions of our certificate of incorporation. The        
Restated By-laws also may be amended or repealed by a majority vote of the Board
of Directors subject to any limitations set forth in the Restated By-laws. The  
75% stockholder vote would be in addition to any separate class vote that might 
in the future be required pursuant to the terms of any series Preferred Stock   
that might be outstanding at the time any such amendments are submitted to      
stockholders.                                                                   

Transfer Agent and Registrar                                                    

         The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.                                                       

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 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

    The following discussion is a summary of the material U.S. federal
income tax consequences relating to the purchase, ownership and disposition of  
the notes, and of common stock into which notes may be converted, but does not  
purport to be a complete analysis of all of the potential tax consequences that 
may be material to the particular tax situation of an investor. This summary is 
based on the provisions of the Internal Revenue Code of 1986, as amended (the   
"Code"), the applicable Treasury Regulations promulgated or proposed thereunder 
("Treasury Regulations"), administrative pronouncements of the Internal Revenue 
Service ("IRS") and judicial decisions as of the date of this prospectus. All of
those authorities are subject to change, possibly on a retroactive basis, or    
differing interpretations, which could result in U.S. federal income tax        
consequences different from those discussed below. This summary deals only with 
initial beneficial owners of notes that purchase at the initial issue price in  
the offering of the notes, and that will hold the notes, and common stock into  
which notes may be converted, as "capital assets," within the meaning of Section
1221 of the Code. This summary does not discuss the U.S. federal income tax     
consequences applicable to beneficial owners that may be subject to special tax 
rules, such as financial institutions, tax-exempt organizations, expatriates,   
pension funds, regulated investment companies, real estate investment trusts,   
insurance companies, dealers in securities or foreign currencies, traders that  
elect to mark-to-market their securities, persons liable for the alternative    
minimum tax, persons that will hold notes as a position in a hedging            
transaction, "straddle," "conversion transaction" or other risk reduction       
transaction for tax purposes, partnerships or other pass-through entities or    
"U.S. Holders" (as defined below) that have a "functional currency" other than  
the U.S. dollar. Moreover, this summary does not address the effect of any      
applicable state, local or foreign tax laws, or any aspect of U.S. federal tax  
law other than income taxation. We have not sought any ruling from the IRS with 
respect to the statements made and the conclusions reached in this summary, and 
there can be no assurance that the IRS will agree with such statements and      
conclusions. INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR   
OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME AND 
OTHER TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES   
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR    
UNDER ANY APPLICABLE INCOME TAX TREATY.                                         

    As used herein, the term "U.S. Holder" means an initial beneficial
owner of a note that is, for U.S. federal income tax purposes, (i) an individual
who is a citizen or resident of the United States, (ii) a corporation created or
organized in or under the laws of the United States or any State thereof        
(including the District of Columbia), (iii) an estate the income of which is    
subject to U.S. federal income taxation regardless of its source, or (iv) a     
trust that (a) is subject to the primary supervision of a court within the      
United States and one or more U.S. persons, as defined in Section 7701(a)(30) of
the Code, having the authority to control all substantial decisions of the      
trust, or (b) has properly elected under applicable Treasury Regulations to be  
treated as a U.S. person. The term "Non-U.S. Holder" means an initial beneficial
owner of a note that is neither a U.S. Holder nor a partnership for U.S. federal
income tax purposes. If a partnership (including any entity treated as a        
partnership for U.S. federal income tax purposes) holds notes, the U.S. federal 
income tax treatment of a partner generally will depend upon the status of the  
partner and the activities of the partnership. Partners in partnerships holding 
the notes should consult their own tax advisors.                                

U.S. Federal Income Tax Consequences to U.S. Holders                            

Payment of Interest                                                 

     Stated interest on a note generally will be includible in the gross
income of a U.S. Holder as ordinary income at the time such interest is received
or accrued, in accordance with such U.S. Holder's regular method of accounting  
for U.S. federal income tax purposes.                                           

Market Discount                                                                 

       If a U.S. Holder purchases a note for an amount that is less than its
stated redemption price at maturity the amount of the difference will be treated
as "market discount" unless such difference is a specified de minimis amount.   
Market discount is considered to be de minimis if it is less than 1/4 of 1% of  
the note's stated redemption price at maturity multiplied by the number of      
complete years to maturity after the note was acquired. Under the market        
discount rules of the Code, a U.S. Holder will be required to treat any partial 

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principal payment on, or any gain realized upon the sale, redemption or other   
taxable disposition of, a note as ordinary income to the extent of the market   
discount which has not previously been included in income and is treated as     
having accrued on such note at the time of such payment or disposition. In      
addition, if a U.S. Holder acquired a note with market discount such U.S. Holder
may be required to defer the deduction of all or a portion of the interest paid 
or accrued on any indebtedness incurred or maintained to purchase or carry such 
note until the maturity of the note or its earlier disposition in a taxable     
transaction. Market discount is considered to accrue ratably during the period  
from the date of acquisition to the maturity date of a note, unless a U.S.      
Holder elects to include market discount in income on a current basis. A U.S.   
Holder may elect to include market discount in income (generally as ordinary    
income) currently as it accrues, in which case the rules described above        
regarding the deferral of interest deductions will not apply. Such election will
also apply to all debt obligations held or subsequently acquired by the U.S.    
Holder on or after the first day of the taxable year to which the election      
applies. The election may not be revoked without the consent of the IRS. U.S.   
Holders should consult their own tax advisors before making this election.      

Acquisition Premium                                                             

       In general, if a U.S. Holder purchases a note for an amount in excess
of the stated principal amount such U.S. Holder will be treated as having       
purchased such note with acquisition premium in the amount of such excess. A    
U.S. Holder generally may elect to amortize the acquisition premium (with a     
corresponding decrease in adjusted tax basis) over the remaining term of the    
note on a constant yield method as an offset to interest income when includible 
in income under such U.S. Holder's regular method of accounting for U.S. federal
income tax purposes. If such U.S. Holder does not elect to amortize acquisition 
premium, that premium will decrease the gain or increase the loss it would      
otherwise recognize upon a sale or other disposition of the note. An election to
amortize premium on a constant yield method will also apply to all debt         
obligations held or subsequently acquired by the U.S. Holder on or after the    
first day of the taxable year to which the election applies. The election may   
not be revoked without the consent of the IRS. U.S. Holders should consult their
own tax advisors before making this election.                                   

 The rules governing market discount and amortizable premium are
complex, and U.S. Holders should consult their own tax advisors concerning the  
application of these rules.                                                     

Sale, Redemption or Other Taxable Dispositions of Notes             

     Upon the sale, redemption or other taxable disposition of a note, a
U.S. Holder generally will recognize gain or loss equal to the difference, if   
any, between the amount realized on the sale, redemption or other taxable       
disposition, and the U.S. Holder's adjusted tax basis in such note. The U.S.    
Holder's amount realized would equal the amount of cash plus the fair market    
value of any other property received, but would not include any amount          
attributable to accrued but unpaid interest on the note (which amount would be  
taxable as interest to the extent not previously included in gross income by the
U.S. Holder). A U.S. Holder's adjusted tax basis in a note generally will be the
cost of such note to such U.S. Holder. Gain or loss so recognized generally will
be capital gain or loss and will be long-term capital gain or loss if, at the   
time of the sale, redemption or other taxable disposition, the U.S. Holder's    
holding period for the notes is more than one year. Certain U.S. Holders        
(including individuals) are eligible for preferential rates of U.S. federal     
income taxation in respect of long-term capital gains. The deductibility of     
capital losses is subject to limitations under the Code.                        

Constructive Dividends                                              

  The conversion price of the notes is subject to adjustment under
certain circumstances. Under Section 305 of the Code, adjustments to the        
conversion price that increase a U.S. Holder's proportionate share of our assets
or our earnings may in certain circumstances result in a constructive dividend  
that is taxable to such U.S. Holder to the extent of our current and accumulated
earnings and profits, as determined under U.S. federal income tax principles.   
Generally, an increase in the conversion ratio pursuant to a bona-fide          
reasonable formula which has the effect of preventing the dilution of the       
interest of U.S. Holders in the notes will not be considered to result in a     
constructive dividend. However, certain adjustments provided in the notes       
(including, without limitation, adjustments to the conversion price of the notes

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in connection with cash dividends to our stockholders) will not qualify as being
pursuant to a bona-fide reasonable formula. If such adjustments are made, a U.S.
Holder will, to the extent of our current and accumulated earnings and profits, 
be deemed to have received a constructive dividend even though such U.S. Holder 
has not received any cash or property as a result of the adjustment. In         
addition, a failure to adjust the conversion price of the notes to reflect a    
stock dividend or similar event could in some circumstances give rise to a      
constructive dividend to U.S. Holders of common stock.                          

Conversion of the Notes                                             

     A U.S. Holder generally will not recognize any income, gain or loss
upon conversion of a note into common stock, except with respect to (i) cash    
received in lieu of a fractional share of common stock, or (ii) common stock    
that is attributable to accrued but unpaid interest not previously included in  
gross income. Cash received in lieu of a fractional share of common stock upon  
conversion will be treated as a payment in exchange for such fractional share.  
Accordingly, the receipt of cash in lieu of a fractional share of common stock  
generally will result in capital gain or loss (measured by the difference       
between the cash received for the fractional share and the U.S. Holder's        
adjusted tax basis in the note that is allocable to the fractional share).      
Amounts that are attributable to accrued but unpaid interest generally will be  
taxable to the U.S. Holder as interest to the extent not previously included in 
gross income.                                                                   

   A U.S. Holder's initial tax basis in the common stock received on
conversion of a note will be the same as the U.S. Holder's adjusted tax basis in
the note at the time of conversion, reduced by any tax basis allocable to a     
fractional share treated as exchanged for cash. However, the tax basis of common
stock received upon a conversion with respect to accrued but unpaid interest    
should equal the fair market value of such common stock. The holding period for 
the common stock received on conversion generally will include the holding      
period of the note converted. To the extent any common stock issued upon a      
conversion is allocable to accrued interest, however, the U.S. Holder's holding 
period for such common stock may commence on the day following the date of      
delivery of common stock.                                                       

Dividends on Common Stock                                           

       Generally, a distribution by us with respect to our common stock will
be treated as a taxable dividend to the extent of our current or accumulated    
earnings and profits (as determined under U.S. federal income tax principles).  
To the extent that the amount of a distribution exceeds our current and         
accumulated earnings and profits, the excess will constitute a tax-free return  
of capital to the extent of a U.S. Holder's tax basis in the common stock, and  
thereafter as gain from the sale or exchange of such common stock. Certain U.S. 
Holders (including individuals) may qualify, under appropriate circumstances,   
for preferential rates of U.S. federal income taxation in respect of dividend   
income. U.S. Holders that are corporations may be eligible for a                
dividend-received deduction in respect of dividend distributions by us.         

Sale or Other Taxable Dispositions of Common Stock                              

        Upon the sale or other taxable disposition of our common stock, a U.S.
Holder generally will recognize gain or loss equal to the difference between (i)
the amount of cash and the fair market value of any property received upon the  
sale or exchange and (ii) such U.S. Holder's adjusted tax basis in the common   
stock. Such gain or loss generally will be capital gain or loss, and will be    
long-term capital gain or loss if the U.S. Holder's holding period is more than 
one year at the time of the sale or other taxable disposition. Certain U.S.     
Holders (including individuals) can qualify for preferential rates of U.S.      
federal income taxation in respect of long-term capital gains. The deductibility
of capital losses is subject to limitations under the Code.                     

U.S. Federal Income Tax Consequences to Non-U.S. Holders                        

Payment of Interest                                                 

         Subject to the discussion below of backup withholding, interest paid on
the notes to a Non-U.S. Holder generally will not be subject to U.S. federal    
income or withholding tax if:                                                   

      (1) such interest is not effectively connected with the conduct of a
trade or business within the United States by such Non-U.S. Holder;             

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        (2) the Non-U.S. Holder does not actually or constructively own 10% or
more of the total voting power of all classes of our stock entitled to vote     
within the meaning of Section 871(h)(3) of the Code;                            

         (3) the Non-U.S. Holder is not a controlled foreign corporation that is
related to us through stock ownership (for this purpose, the holder of notes    
would be deemed to own the common stock into which the notes could be           
converted); and                                                                 

       (4) (a) the Non-U.S. Holder, under penalty of perjury, certifies that
such Non-U.S. Holder is not a U.S. person (as defined in Section 7701(a)(3) of  
the Code) and provides certain identifying information on the applicable IRS    
Form W-8BEN (or successor form) or (b) the Non-U.S. Holder holds notes through  
certain foreign intermediaries or certain foreign partnerships and the          
certification requirements of applicable Treasury Regulations are satisfied.    
(These certifications may also be provided by a qualified intermediary on behalf
of one or more beneficial owners (or other intermediaries), provided that such  
intermediary has entered into a withholding agreement with the IRS and certain  
other conditions are met.)                                                      

 A Non-U.S. Holder that does not meet the foregoing requirements
generally will be subject to U.S. federal income tax withholding at a rate of   
30% on payments of interest on the notes, unless the interest is effectively    
connected with the conduct of a U.S. trade or business of the Non-U.S. Holder or
a lower treaty rate applies and, in either case, the Non-U.S. Holder provides us
with proper certification on the applicable IRS Form W-8BEN (or successor form) 
as to the holder's exemption from withholding. If the interest is effectively   
connected with the conduct of a U.S. trade or business, the Non-U.S. Holder will
be subject to the U.S. federal income tax on the interest on a net income basis,
generally in the same manner as U.S. Holders. In addition, in the case of a     
corporate Non-U.S. Holder, a branch profits tax equal to 30% (or lower          
applicable treaty rate) may apply to interest that is effectively connected with
the conduct of a U.S. trade or business (subject to certain adjustments).       

Sale or Other Taxable Dispositions of Notes or Common Stock         

   Subject to the discussion below on backup withholding, a Non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax  
on gain recognized on the sale or other taxable disposition of a note, or of the
common stock received upon conversion of a note, unless:                        

      (1) the gain is effectively connected with the conduct of a trade or
business within the United States by such Non-U.S. Holder;                      

       (2) the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the year of such sale or other taxable           
disposition, and certain other requirements are met;                            

        (3) the Non-U.S. Holder is subject to U.S. federal income tax pursuant
to the provisions of the Code applicable to certain U.S. expatriates; or        

       (4) if we have been at any time within the five-year period preceding
such sale or other taxable disposition (or within the Non-U.S. Holder's shorter 
holding period for a note or common stock) a U.S. real property holding         
corporation (a "USRPHC") within the meaning of Section 897(c)(2) of the Code.   

  We do not believe that we are or have been a USRPHC, although no
assurance can be made in this regard. If we were to become a USRPHC, then a     
Non-U.S. Holder would not be subject to U.S. federal income tax in respect of   
gain on the sale or other taxable disposition of our notes or common stock if   
(a) our stock is regularly traded on an established securities market and (b)   
the Non-U.S. Holder did not own actually or constructively more than 5% of our  
common stock at any time during the relevant period.                            

     An individual Non-U.S. Holder described in (1) or (4) above will be
subject to U.S. federal income tax on the net gain derived from the sale or     
other taxable disposition on a net income basis generally in the same manner as 
a U.S. Holder. An individual Non-U.S. Holder described in (2) above will be     

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subject to a flat 30% U.S. federal income tax on the gain derived from the sale 
or other taxable disposition, even though such holder is not considered a       
resident of the United States. A Non-U.S. Holder that is a foreign corporation  
may be subject to a branch profits tax on gain described in (1) or (4) above    
(subject to certain adjustments).                                               

Constructive Dividends                                              

        Adjustments to the conversion price of a note that increase a Non-U.S.
Holder's proportionate share of assets or earnings may in certain circumstances 
result in a constructive dividend subject to a 30% U.S. federal withholding tax.
See "U.S. Holders-- Constructive Dividends" above.                              

Conversion of the Notes                                             

        A Non-U.S. Holder generally will not be subject to U.S. federal income
tax on the conversion of a note into shares of common stock. To the extent a    
Non-U.S. Holder receives cash in lieu of a fractional share on conversion, such 
cash may give rise to gain that would be subject to the rules described above   
with respect to the sale or other taxable disposition of a note or common stock.
To the extent a Non-U.S. Holder receives upon conversion common stock that is   
attributable to accrued but unpaid interest, such common stock may give rise to 
income that would be subject to the rules described above with respect to the   
payments of interest to Non-U.S. Holders.                                       

Dividends on Common Stock                                           

      Subject to the discussion below on backup withholding, dividends, if
any, paid on the common stock to a Non-U.S. Holder generally will be subject to 
a 30% U.S. federal withholding tax, subject to reduction for Non-U.S. Holders   
eligible for the benefits of certain income tax treaties. For this purpose,     
dividends may include certain constructive dividends as discussed in "U.S.      
Holders -- Constructive Dividends" above. A Non-U.S. Holder who wishes to claim 
the benefits of an applicable income tax treaty will be required to satisfy     
certain certification and other requirements. If dividends on the common stock  
are effectively connected with the conduct by the Non-U.S. Holder of a trade or 
business within the United States, then the dividend generally will be exempt   
from the 30% U.S. federal withholding tax provided certain certification        
requirements are met (generally by providing IRS Form W-8ECI), and the Non-U.S. 
Holder generally will be subject to U.S. federal income tax on the dividends on 
a net income basis, generally in the same manner as a U.S. Holder, unless an    
applicable income tax treaty provides otherwise. In addition, if such Non-U.S.  
Holder is a foreign corporation, it may also be subject to a branch profits tax 
on such effectively-connected income at a 30% rate or such lower rate as may be 
specified by an applicable income tax treaty.                                   

Backup Withholding                                                              

  A U.S. Holder of notes or common stock may be subject to "backup
withholding" with respect to certain "reportable payments," including interest  
payments, dividend payments, principal payments on the notes and proceeds from  
the sale or other disposition of the notes or common stock. These backup        
withholding rules apply if the U.S. Holder, among other things, (i) fails to    
furnish a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury, (ii) furnishes an incorrect TIN, (iii)    
fails to report properly interest or dividends or (iv) under certain            
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN furnished is the correct number and that such U.S. Holder 
is not subject to backup withholding. Backup withholding will not apply,        
however, with respect to payments made to certain U.S. Holders, including       
corporations and tax-exempt organizations, provided their exemption from backup 
withholding is properly established.                                            

      Any amount withheld from a payment to a U.S. Holder under the backup
withholding rules is creditable against the U.S. Holder's U.S. federal income   
tax liability, or will otherwise be refundable provided the IRS is furnished    
with the proper information.                                                    

       Under current Treasury Regulations, backup withholding will not apply
to payments made by us or our agent to a Non-U.S. Holder if the Non-U.S. Holder 
provides the certification described above under "Non-U.S. Holders -- Payment of
Interest," or otherwise establishes an exemption.                               

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 SELLING SECURITYHOLDERS

        We originally issued the notes in a private placement on September 30,
2003. The notes were resold by the initial purchasers of the notes to qualified 
institutional buyers under Rule 144A under the Securities Act of 1933, as       
amended. Selling securityholders, including their transferees, pledges or donees
or their successors, may from time to time offer and sell any or all of the     
notes and the common stock into which the notes are convertible pursuant to this
prospectus.                                                                     

         The table below sets forth the name of each selling securityholder, the
principal amounts of notes that may be offered by each selling securityholder   
under this prospectus and the number of shares of common stock into which the   
notes are convertible. Information about the selling securityholders may change 
from time to time. Any changed information will be set forth in prospectus      
supplements or post-effective amendments, as required.                          

      Because the selling securityholders may offer all or some portion of
the notes or the common stock into which the notes are convertible, we cannot   
estimate the amount of notes or common stock that may be held by the selling    
securityholders upon the completion of any sales. For information on the        
procedure for sales by selling securityholders, read the disclosure under the   
heading "Plan of Distribution" below.                                           

                                                        [Enlarge/Download Table]

                                                                                           
                                        Principal                                          
                                           Amount                Number of                 
                                         of Notes                 Shares of                
                                       Beneficially                Common                  
                                           Owned     Percentage   Stock ThatPercentage of  
               Name of                 That May Be     of Notes    May Be    Common Stock  
      Selling Securityholder(1)           Sold(5)     Outstanding Sold(2)(3) Outstanding(4)
-------------------------------------------------------------------------------------------
 Alexandra Investment Management        4,000,000       4.44%      99,096          *       
 Alpine Associates                      3,670,000       4.08%      90,920          *       
 Alpine Partners, L.P.                   480,000          *        11,891          *       
 ATSF - Transamerica Convertible                                                           
  Securities                            4,400,000       4.89%     109,005        1.06%     
 B.C. McCabe Foundation                  200,000          *        4,955           *       
 BNP Paribas Equity Strategies SNC      1,995,000       2.22%      49,424          *       

 Chrysler Corporation Master                                                               
  Retirement Trust                      1,360,000       1.51%      33,693          *       
 Citadel Equity Fund Ltd.               2,215,000       2.46%      54,874          *       
 Citadel Jackson Investment Fund Ltd.    285,000          *        7,061           *       
 Context Convertible Arbitrage Fund,                                                       
  LP.                                   2,250,000       2.50%      55,741          *       
 Context Convertible Arbitrage                                                             
  Offshore Ltd.                         3,775,000       4.19%      93,521          *       
 CooperNeff Convertible Strategies                                                         
  Master Fund, L.P.                     2,004,000       2.23%      49,647          *       
 CSS, L.L.C.                            2,000,000       2.22%      49,548          *       

 Delta Air Lines Master Trust - CV       580,000          *        14,369          *       

 Delta Pilots Disability &                                                                 
  Survivorship Trust - CV                275,000          *        6,813           *       
 Drake Offshore Master Fund, Ltd        8,000,000       8.89%     198,191        1.93%     
 Fore Convertible Master Fund Ltd.      2,018,000       2.24%      49,994          *       
 Guggenheim Portfolio Company VIII,                                                        
  LLC (Cayman) Ltd                       585,000          *        14,493          *       
 Geode U.S. Convertible Arbitrage                                                          
  Fund, a series of Geode Investors                                                        
  LLC                                   1,000,000       1.11%      24,774          *       
 IDEX - Transamerica Convertible                                                           
  Securities Fund                       2,600,000       2.89%      64,412          *       
 Intl. Truck & Engine Corp. Non-                                                           
  Contributory Retirement Plan Trust     700,000          *        17,342          *       
 Intl. Truck & Engine Corp. Retirement                                                     
  Plan for Salaried Employee's Trust     750,000          *        18,580          *       
 KBC Financial Products USA Inc.        4,700,000       5.22%     116,437        1.13%     
 KeySpan Foundation                       90,000          *        2,230           *       
 LDG Limited                              32,000          *         793            *       

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                                                                [Download Table]

                                                                            
Lexington Vantage Fund c/o TQA                                              
 Investors LLC                           8,000       *        198        *  
Lord Abbett Investment Trust - LA                                           
 Convertible Fund                       490,000      *       12,139      *  
Lyxor Context Fund Ltd                  275,000      *       6,813       *  
Lyxor Convertible Arbitrage Fund        133,000      *       3,295       *  
Man Mac 1 Limited                       585,000      *       14,493      *  
Maystone Continuum Mater Fund, Ltd.    4,250,000   4.72%    105,289    1.03%
McMahan Securities Co. L.P.            1,250,000   1.39%     30,967      *  

Microsoft Corporation                   355,000      *       8,795       *  

Motion Picture Industry Health Plan -                                       
 Active Member Fund                     140,000      *       3,468       *  

Motion Picture Industry Health Plan -                                       
 Retiree Member Fund                     90,000      *       2,230       *  
National Bank of Canada c/o Lovell                                          
 NBE Securities, Inc.                  3,000,000   3.33%     74,322      *  
National Fuel & Gas Company                                                 
 Retirement Plan                        225,000      *       5,574       *  

OCM Convertible Trust                  1,095,000   1.22%     27,127      *  
Oxford, Lord Abbett & Co.              1,545,000   1.72%     38,276      *  

Partner Reinsurance Company Ltd.        480,000      *       11,891      *  

Qwest Occupational Health Trust         160,000      *       3,964       *  
Royal Bank of Canada (Northshield)      350,000      *       8,671       *  
Singlehedge U.S. Convertible                                                
 Arbitrage Fund                         333,000      *       8,250       *  
Sphinx Fund                              15,000      *        372        *  

State Employees' Retirement Fund of                                         
 the State of Delaware                  635,000      *       15,731      *  
Sterling Investment Company             500,000      *       12,387      *  
Sturgeon Limited                        285,000      *       7,061       *  
Sunrise Partners Limited Partnership   7,250,000   8.06%    179,611    1.75%
TD Securities (USA) Inc.               2,664,000   2.96%     65,998      *  
Total Fina Elf Finance USA, Inc.        250,000      *       6,193       *  
TQA Master Fund, LTD c/o TQA                                                
 Investors LLC                          372,000      *       9,216       *  
TQA Master Plus Fund, LTD.  c/o TQA                                         
 Investors LLC                          440,000      *       10,901      *  
TQA Special Opportunities Master                                            
 Fund, LTD. c/o TQA Investors LLC.      500,000      *       12,387      *  
UBS AG London F/B/OPB                  14,250,000  15.83%   353,028    3.44%
Univest Convertible Arbitrage Fund II                                       
 Ltd (Northshield)                      250,000      *       6,193       *  

Vanguard Convertible Securities Fund,                                       
 Inc.                                  5,330,000   5.92%    132,045    1.29%
Wachovia Bank, National Association    4,250,000   4.72%    105,289    1.03%
Xavex-Convertible Arbitrage 7 Fund       73,000      *       1,808       *  
Zurich Institutional Benchmarks                                             
 Master Fund, LTD. c/o TQA Investors                                        
 LLC                                     60,000      *       1,486       *  
Total (5)                              90,000,000   100%   2,229,651  21.72%

---------------                                                                 
*  Less than 1%                                                                 
     (1)  Also includes any sale of the notes and the underlying common stock by
      pledgees, donees, transferees or other successors in interest that
  receive such securities by pledge, gift, distribution or other
     non-sale related transfer from the named selling securityholders.
        Information about other selling securityholders will be set forth in
 prospectus supplements, post-effective amendments or in other

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    documents that we file from time to time with the Securities and
  Exchange Commission that are incorporated by reference in this
       prospectus, if required. See "Where You Can Find More Information."

   (2)  Assumes conversion of all of the selling securityholder's notes at a
         conversion rate of 24.7739 per note and a cash payment in lieu of the
       issuance of any fractional share interest. However, this conversion
        rate is subject to adjustment as described under "Description of the
     Notes -- Conversion Rights." As a result, the number of shares of
      common stock issuable upon conversion of the notes may increase or
decrease in the future.                                     

 (3)  Reflects rounding down of fractional common stock issuable to each
selling securityholder upon conversion of the notes.        

     (4)  Calculated based on Rule 13d-3 of the Securities Exchange Act of 1934,
       using 10,265,000 shares of common stock outstanding as of March 23,
         2004. In calculating this amount, we did not treat as outstanding the
common stock issuable upon conversion of notes.             

    (5)  The figures in these columns are based on information supplied to us,
        as of April 7, 2004, by the respective selling securityholders named
    in the table. As of that date, these selling securityholders had
          supplied us with information indicating that, collectively, they owned
          more than $90,000,000 aggregate principal amount of notes (which would
       be convertible into more than 2,229,651 shares of common stock). We
       believe that this reflects that one or more selling securityholders
         supplied us with information for inclusion in the table and then sold
         their notes in transactions exempt from the registration requirements
          of the Securities Act to persons who also supplied us with information
        with respect to the same notes. However, since this prospectus would
        not be applicable to any sale of notes after they have been publicly
     sold utilizing the prospectus, no more than $90,000,000 principal
          amount of notes, nor more than 2,229,651 shares of common stock, could
       be sold utilizing this prospectus. Accordingly, the $90,000,000 and
          2,229,651 totals in these columns have been retained and represent the
     maximum principal amount of notes and maximum number of shares of
common stock that could be sold hereunder.                  

     None of the selling securityholders listed above has, or within the
past three years had, any position, office or any material relationship with us 
or any of our affiliates.                                                       

        To the extent that any of the selling securityholders identified above
are broker-dealers, they are deemed to be, under interpretations of the         
Securities and Exchange Commission, "underwriters" within the meaning of the    
Securities Act.                                                                 

With respect to selling securityholders that are affiliates of
broker-dealers, we believe that such entities acquired their notes or underlying
common stock in the ordinary course of business and, at the time of the purchase
of the notes or the underlying common stock, such selling securityholders had no
agreements or understandings, directly or indirectly, with any person to        
distribute the notes or underlying common stock. To the extent that we become   
aware that such entities did not acquire their notes or underlying common stock 
in the ordinary course of business or did have such an agreement or             
understanding, we will file a post-effective amendment to the registration      
statement of which this prospectus forms a part to designate such affiliate as  
an "underwriter" within the meaning of the Securities Act.                      

        Only selling securityholders identified above who beneficially own the
notes set forth opposite each such selling securityholder's name in the         
foregoing table on the effective date of the registration statement, of which   
this prospectus forms a part, may sell such securities pursuant to the          
registration statement. Prior to any use of this prospectus in connection with  
an offering of the notes or the underlying common stock by any holder not       
identified above, the name and aggregate amount of notes beneficially owned by  
the selling securityholder intending to sell such notes or the underlying common
stock and the aggregate amount of notes or the number of shares of the          
underlying common stock to be offered will be set forth in prospectus           
supplements or post-effective amendments. The prospectus, supplement or         
post-effective amendment will also disclose whether any selling securityholder  
has held any position or office with, has been employed by or otherwise has had 
a material relationship with us during the three years prior to the date of the 
prospectus if such information has not been disclosed herein.                   

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PLAN OF DISTRIBUTION

   The notes and the underlying common stock are being registered to
permit the resale of such securities by the holders of them from time to time   
after the date of this prospectus. We will not receive any of the proceeds from 
the sale by the selling securityholders of the notes and common stock.          

         The selling securityholders may offer and sell the notes and the common
stock into which the notes are convertible from time to time in one or more     
transactions at fixed prices, at prevailing market prices at the time of sale,  
at varying prices determined at the time of sale or at negotiated prices. Such  
sales may be effected by a variety of methods, including the following:         

--   in market transactions;                                          

--   in privately negotiated transactions;                            

--   through the writing of options;                                  

     --   in a block trade in which a broker-dealer will attempt to sell a block
       of securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;           

--   if we agree to it prior to the distribution, through one or more 
underwriters on a firm commitment or best-efforts basis;    

--   through broker-dealers, which may act as agents or principals;   

--   directly to one or more purchasers;                              

--   through agents; or                                               

--   in any combination of the above or by any other legally available
means.                                                      

       The notes originally issued in the private placement are eligible for
trading on the PORTAL market. However, notes sold pursuant to this prospectus   
will no longer be eligible for trading on the PORTAL market. Accordingly, no    
assurance can be given as to the development of liquidity or any trading market 
for the notes.                                                                  

         If a material arrangement with any underwriter, broker, dealer or other
agent is entered into for the sale of any notes and the common stock into which 
the notes are convertible through a secondary distribution or a purchase by a   
broker or dealer, or if other material changes are made in the plan of          
distribution of the notes and the common stock into which the notes are         
convertible, a prospectus supplement will be filed, if necessary, under the     
Securities Act disclosing the material terms and conditions of such arrangement.
The underwriter or underwriters with respect to an underwritten offering of     
notes and the common stock into which the notes are convertible and the other   
material terms and conditions of the underwriting will be set forth in a        
prospectus supplement relating to such offering and, if an underwriting         
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of the prospectus supplement. In connection with the sale of the notes
and the common stock into which the notes are convertible, underwriters will    
receive compensation in the form of underwriting discounts or commissions and   
may also receive commissions from purchasers of notes and underlying common     
stock for whom they may act as agent. Underwriters may sell to or through       
dealers, and such dealers may receive compensation in the form of discounts,    
concessions or commissions from the underwriters or commissions from the        
purchasers for whom they may act as agent.                                      

 To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,         
broker-dealer or agent regarding the sale of the notes or the underlying common 
stock by the selling securityholders. Selling securityholders may decide not to 
sell all or a portion of the notes or the underlying common stock offered by    

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them pursuant to this prospectus or may decide not to sell notes or the         
underlying common stock under this prospectus. In addition, any selling         
securityholder may transfer, devise or give the notes or the underlying common  
stock by other means not described in this prospectus. Any notes or underlying  
common stock covered by this prospectus that qualify for sale pursuant to Rule  
144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A  
rather than pursuant to this prospectus.                                        

     The selling securityholders and any underwriters, broker-dealers or
agents participating in the distribution of the notes and the common stock into 
which the notes are convertible may be deemed to be "underwriters" within the   
meaning of the Securities Act, and any profit on the sale of the notes or common
stock by the selling securityholders and any commissions received by any such   
underwriters, broker-dealers or agents may be deemed to be underwriting         
commissions under the Securities Act. If the selling securityholders were deemed
to be underwriters, the selling securityholders may be subject to statutory     
liabilities including, but not limited to, those of Sections 11, 12 and 17 of   
the Securities Act and Rule 10b-5 under the Exchange Act.                       

       The selling securityholders and any other person participating in the
distribution will be subject to the Exchange Act and the rules and regulations  
under the Exchange Act, including, without limitation, Regulation M, which may  
limit the timing of purchases and sales of any of the notes and the common stock
into which the notes are convertible by the selling securityholders and any     
other relevant person. Furthermore, Regulation M may restrict the ability of any
person engaged in the distribution of the notes and the common stock into which 
the notes are convertible to engage in market-making activities with respect to 
the particular notes and the common stock into which the notes are convertible  
being distributed. All of the above may affect the marketability of the notes   
and the common stock into which the notes are convertible and the ability of any
person or entity to engage in market-making activities with respect to the notes
and the common stock into which the notes are convertible.                      

Under the registration rights agreement, we and the selling   
securityholders will each indemnify the other against certain liabilities,      
including certain liabilities under the Securities Act, or will be entitled to  
contribution in connection with these liabilities.                              

       We have agreed to pay substantially all of the expenses incidental to
the registration, offering and sale of the notes and the underlying common stock
to the public other than commissions, fees and discounts of underwriters,       
brokers, dealers and agents.                                                    

 LEGAL MATTERS

        The validity of the notes offered hereby will be passed upon for us by
Shearman & Sterling LLP, New York.                                              

 EXPERTS

       The financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-K for the year ended June 30, 2003 have been so 
incorporated in reliance on the report of PricewaterhouseCoopers LLP,           
independent accountants, given on the authority of said firm as experts in      
auditing and accounting.                                                        

WHERE YOU CAN FIND MORE INFORMATION 

     We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's website at http://www.sec.gov. You may also read and  
copy any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, and obtain copies of our filings at 
prescribed rates by writing to the Public Reference Section of the SEC at 450   
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at              
1-800-SEC-0330 for further information on the operation of the public reference 
facilities.                                                                     

INCORPORATION BY REFERENCE

We are "incorporating by reference" into this prospectus the  
information we have filed with the SEC, which means that we can disclose        
important information to you by referring you to those documents. The           

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information incorporated by reference is considered to be part of this          
prospectus, and information in documents that we file later with the SEC will   
automatically update and supersede information in this prospectus. We           
incorporate by reference the documents listed below into this prospectus, and   
any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or   
15(d) of the Securities Exchange Act of 1934, as amended, until the offering is 
complete. The documents we incorporate by reference are:                        

    --   Our Annual Report on Form 10-K for the year ended June 30, 2003 filed
on September 15, 2003.                                      

--   Our Quarterly report on Form 10-Q for the fiscal quarters ending 
         September 30, 2003 (filed on November 13, 2003) and December 31, 2003
(filed on February 9, 2004).                                

     --   Our Current Reports on Form 8-K filed on September 22, 2003, September
        25, 2003, September 30, 2003, October 24, 2003, March 4, 2004, March
      26, 2004 (Items 7 and 9), March 26, 2004 (Items 5 and 7), April 5,
2004 and April 8, 2004.                                     

--   Our Proxy Statement on Schedule 14A filed on October 3, 2003.    

   You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:                                        

MemberWorks Incorporated
680 Washington Boulevard
 Stamford, Connecticut 06901
 Attention: Investor Relations
 Telephone: (203) 324-7635

     Any statement contained in a document incorporated by reference, or
deemed to be incorporated by reference, in this prospectus shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a     
statement contained herein or in any other subsequently filed document which    
also is incorporated by reference in this prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,    
except as so modified or superseded, to constitute a part of this prospectus.   
Statements contained in this prospectus as to the contents of any contract or   
other document referred to in this prospectus do not purport to be complete, and
where reference is made to the particular provisions of such contract or other  
document, such provisions are qualified in all respects by reference to all of  
the provisions of such contract or other document.                              

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 PART II

Information Not Required In Prospectus

Item 14.          Other Expenses of Issuance and Distribution                   

    The following table sets forth the various expenses payable by the
registrant in connection with the issuance and distribution of the notes and    
underlying common stock being registered hereby, other than underwriting        
discounts and commissions. All the amounts shown are estimates, except the SEC  
registration fee.                                                               

                                                        [Enlarge/Download Table]

                                                                                      
Securities and Exchange Commission registration fee...............             $7,281 
Accountant's fees and expenses....................................            $60,000 
Legal fees and expenses...........................................           $300,000 
Printing fees and expenses........................................            $60,000 
Trustee's fees and expenses.......................................            $13,000 
NASDAQ listing fees...............................................            $22,297 
                                                                   -------------------
         Total....................................................           $462,578 
                                                                   ===================

Item 15.          Indemnification of Directors and Officers                     

     Section 145 of the Delaware General Corporation Law provides that a
corporation may 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
an action by or in the right of the corporation) by reason of the fact that he  
is or was a director, officer, employee or agent of the corporation, or is or   
was serving at the request of the corporation as a director, officer, employee  
or agent of another corporation, partnership or other enterprise, against all   
expenses (including attorneys' fees), judgments, fines and amounts paid in      
settlement actually and reasonably incurred by them in connection with such     
action, suit or proceeding if he or she acted in good faith and in a manner he  
or she reasonably believed to be in or not opposed to the best interest of the  
corporation and, with respect to any criminal action or proceeding, if he or she
had no reasonable cause to believe their conduct was unlawful. Section 145      
further provides that a corporation similarly may indemnify any such person     
serving in any such capacity who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right 
of the corporation to procure a judgment in its favor, against expenses         
(including attorneys' fees) actually and reasonably incurred in connection with 
the defense or settlement of the action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the    
best interests of the corporation, except that no indemnification may be made   
against expense in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which such action or suit was brought shall determine  
upon application that, despite the adjudication of liability but in view of all 
the circumstances of the case, such person is fairly and reasonably entitled to 
indemnity for such expenses which such court shall deem proper.                 

        Our certificate of incorporation and by-laws provide that we shall, to
the maximum extent permitted under Delaware law, indemnify any director or      
officer of the corporation who is or was made a party to any action or          
proceeding by reason of the fact that he or she is or was an agent of the       
corporation, against liability incurred in connection with such action or       
proceeding. We have entered into agreements with our directors, executive       
officers and some of our other officers implementing such indemnification. In   
addition, our certificate of incorporation limits, to the fullest extent        
permitted by Delaware law, the liability of directors for monetary damages for  
breach of fiduciary duty. We may also purchase and maintain insurance policies  
insuring our directors and officers against certain liabilities they may incur  
in their capacity as directors and officers.                                    

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Item 16.          Exhibits                                                      

       The exhibits to this registration statement are listed in the Exhibit
Index to this registration statement, which Exhibit Index is hereby incorporated
by reference.                                                                   

Item 17.   Undertakings                                                         

The undersigned registrant hereby undertakes:                 

 (a)  (1)  To file, during any period in which offers or sales are being
              made, a post-effective amendment to this registration statement:

            (i)  to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;             

           (ii) to reflect in the prospectus any facts or events arising
                  after the effective date of the registration statement (or
                the most recent post-effective amendment thereof) which,
                 individually or in the aggregate, represent a fundamental
                change in the information in the registration statement.
                  Notwithstanding the foregoing, any increase or decrease in
                  volume of securities offered (if the total dollar value of
          securities offered would not exceed that which was
                 registered) and any deviation from the low or high end of
                    the estimated maximum offering range may be reflected in the
                form of prospectus filed with the Commission pursuant to
                   Rule 424(b) if, in the aggregate, the changes in volume and
                price represent no more than a 20% change in the maximum
                 aggregate offering price set forth in the "Calculation of
             Registration Fee" table in the effective registration
statement;                              

           (iii) to include any material information with respect to the
            plan of distribution not previously disclosed in the
             registration statement or any material change to such
  information in the registration statement;

               provided, however, that the undertakings set forth in clauses (i)
           and (ii) above do not apply if the information required to be
        included in a post-effective amendment by those clauses is
          contained in periodic reports filed with or furnished to the
           Commission by the registrant pursuant to section 13 orsection
   15(d) of the Securities Exchange Act of 1934 that are
       incorporated by reference in this registration statement;

               (2)  That, for the purpose of determining any liability under the
                  Securities Act of 1933, each such post-effective amendment
                   shall be deemed to be a new registration statement relating
                   to the securities offered therein, and the offering of such
                 securities at that time shall be deemed to be the initial
bona fide offering thereof.             

           (3)  To remove from registration by means of a post-effective
              amendment any of the securities being registered which
         remain unsold at the termination of the offering.

   (b)       The undersigned registrant hereby undertakes that, for purposes
            of determining any liability under the Securities Act of 1933,
               each filing of the registrant's annual report pursuant to Section
           13(a) or Section 15(d) of the Securities Exchange Act of 1934
             that is incorporated by reference in the registration statement
            shall be deemed to be a new registration statement relating to
      the securities offered therein, and the offering of such
            securities at that time shall be deemed to be the initial bona
fide offering thereof.                            

(c)       Insofar as indemnification for liabilities arising under the
            Securities Act of 1933 may be permitted to directors, officers
       and controlling persons of the registrant pursuant to the
         foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such
          indemnification is against public policy as expressed in the
             Securities Act of 1933 and is, therefore, unenforceable. In the
             event that a claim for indemnification against such liabilities
               (other than the payment by the registrant of expenses incurred or
      paid by a director, officer or controlling person of the
              registrant in the successful defense of any such action, suit or
              proceeding) is asserted by such director, officer or controlling
            person in connection with the securities being registered, the
              registrant 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 such
            indemnification by it is against public policy as expressed in
          the Securities Act of 1933 and will be governed by the final
adjudication of such issue.                       

(d)       The undersigned registrant hereby undertakes to file an     
               application for the purpose of determining the eligibility of the
             trustee to act under subsection (a) of Section 310 of the Trust
        Indenture Act in accordance with the rules and regulations
               prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.                                    

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SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the   
requirements for filing on Form S-3 and have duly caused this registration      
statement to be signed on our behalf by the undersigned, thereunto duly         
authorized, in the City of Stamford, State of Connecticut, on April 8, 2004.    

                            MEMBERWORKS INCORPORATED

                             By:  /s/  Gary A. Johnson
                                               ---------------------------
                           Gary A. Johnson
                                              President, Chief Executive Officer
                        and Director

  Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the          
capacities indicated on April 8, 2004.                                          

Signature                                  Title      
---------                                  -----      

/s/ Gary A. Johnson                       President, Chief Executive Officer and
---------------------------------         Director                              
Gary A. Johnson                                                                 

/s/ James B. Duffy                        Executive Vice President and          
---------------------------------         Chief Financial Officer               
James B. Duffy                                                                  

/s/  Alec L. Ellison                      Director                              
---------------------------------                                               
Alec L. Ellison                                                                 

/s/ Scott N. Flanders                     Director                              
---------------------------------                                               
Scott N. Flanders                                                               

/s/ Robert Kamerschen                     Director                              
---------------------------------                                               
Robert Kamerschen                                                               

/s/  Michael T. McClorey                  Director                              
---------------------------------                                               
Michael T. McClorey                                                             

/s/ Edward M. Stern                       Director                              
---------------------------------                                               
Edward M. Stern                                                                 

/s/ Marc S. Tesler                        Director                              
---------------------------------                                               
Marc S. Tesler                                                                  

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 EXHIBIT INDEX

Exhibit No.      Description of Exhibits                                  
-----------      -----------------------                                  

3.1*          Restated Certificate of Incorporation of MemberWorks  
            Incorporated, (filed as Exhibit 3.3 to the Company's
            Registration Statement on Form S-1, Registration No.
              333-10541, filed on October 18, 1996, and incorporated
herein by reference).                   

  3.2*          Restated By-laws of MemberWorks Incorporated, as amended
           (filed as Exhibit 3.4 to the Company's Registration
                   Statement on Form S-1, Registration No. 333-10541, filed on
                October 18, 1996, and incorporated herein by reference).

      4.1*          Indenture dated as of September 30, 2003 between MemberWorks
              Incorporated and Deutsche Bank Trust Company Americas,
        Trustee relating to the 5.50% Convertible Senior
                 Subordinated Notes due 2010, including the form of notes.
                  (filed as Exhibit 4.1 to the Company's Quarterly Report on
                    Form 10-Q, Registration No. 333-10541, filed on November, 13
   2003 and incorporated herein by reference).

      4.2*          Registration Rights Agreement dated as of September 30, 2003
                 between MemberWorks Incorporated and Lehman Brothers Inc.
                and CIBC World Markets Corp (filed as Exhibit 4.2 to the
                 Company's Quarterly Report on Form 10-Q, Registration No.
                    333-10541 filed on November 13, 2003 and incorporated herein
by reference).                          

   4.3*          Amended and Restated Registration Rights Agreement, dated
                    September 9, 1994 between MemberWorks Incorporated and Brown
            Brothers Harriman & Co. (filed as Exhibit 4.3 to the
                  Company's Registration Statement on Form S-1, Registration
                 No. 333-10541, filed on October 18, 1996 and incorporated
herein by reference).                   

      4.4*          Registration Rights Agreement dated as of September 20, 1995
               among MemberWorks Incorporated and the Stockholders set
                 forth on Schedule I thereto. (Filed as Exhibit 4.4 to the
                  Company's Registration Statement on Form S-1, Registration
                    No. 333-10541, filed on October 18, 1996 incorporated herein
by reference).                          

5.1*          Opinion of Shearman & Sterling LLP                    

12.1*          Computation of Ratio of Earnings to Fixed Charges.     

23.1           Consent of PricewaterhouseCoopers LLP, as independent  
accountants.                            

24.1*          Power of Attorney (contained on signature page).       

     25.1           Form T-1 Statement of Eligibility of Trustee under the Trust
            Indenture Act of 1939 of Deutsche Bank Trust Company
Americas.                               

------------------                                                            
* Previously filed                                                            

51

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘S-3/A’ Filing		Date		First		Last			Other Filings
		10/1/10		9		25
		10/6/08		3		31
		6/30/04		24					10-K
		4/13/04		8
Filed on:		4/8/04		1		55			8-K
		4/7/04		49
		4/5/04		8		52			8-K
		4/1/04		3		26			8-K
		3/26/04		8		52			8-K
		3/25/04		8		12
		3/23/04		11		49
		3/4/04		8		52			8-K
		2/29/04		9		30
		2/9/04		52					10-Q,  SC 13G/A
		12/31/03		7		52			10-Q
		11/13/03		52		56			10-Q
		10/24/03		52					4,  8-K
		10/3/03		52					DEF 14A
		10/1/03		16
		9/30/03		9		56			10-Q,  8-K,  DEF 14A
		9/25/03		52					8-K
		9/24/03		33					4
		9/22/03		52					8-K
		9/15/03		52					10-K
		6/30/03		14		52			10-K
		4/29/03		11					8-K
		1/27/03		11
		6/30/02		24					10-K,  DEF 14A
		9/11/01		20
		6/30/01		22		24			10-K
		10/18/96		56
		9/20/95		56
		9/9/94		56
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