MemberWorks Reports Settlement with Fla. A.G.

June 28, 2004

MemberWorks Inc., a provider in bringing value to consumers through an array of membership programs and services in insurance, healthcare, personal finance, travel, entertainment, fashion and personals services, has entered into a voluntary settlement with the Florida Attorney General’s office to alleviate concerns that some of its past marketing practices may have confused some consumers.

“This agreement demonstrates our continued commitment to consumers of all states to achieve the highest levels of consumer satisfaction, including our “no questions asked” refund policy for unauthorized charge complaints which is designed to eliminate any possible consumer confusion and maximize our already-high customer satisfaction levels,” said MemberWorks CEO Gary Johnson. “We expect that the agreement will have little new effect on our business in Florida as it serves to formalize our already existing national marketing best practices in the state.” MemberWorks expressly denies the allegations in the state’s complaint. As part of the agreement, MemberWorks will pay costs of investigation of $950,000 to the state. The agreement has been signed and is subject to necessary approvals.

As a result of the settlement agreement, MemberWorks will record a $950,000 charge ($570,000 net of tax) or $0.04 per share in the fiscal fourth quarter ending June 30, 2004. Accordingly, earnings per share guidance will be adjusted from the $0.60 to $0.65 per share given in the company’s April 28, 2004 earnings release to $0.56 to $0.61 per share. In addition, the guidance previously provided on operating cash flow before changes in assets and liabilities is being decreased from $13.0 – $15.0 million to $12.0 to $14.0 assuming the utilization of net operating loss carry forwards.

The settlement will have no impact on net cash provided by operating activities guidance previously provided for the fiscal 2004 fourth quarter as the payment will be made subsequent to June 30, 2004.

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