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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
FOR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
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AMENDMENT NO. 2
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Commission File No. 0-21527
MEMBERWORKS INCORPORATED
(Exact name of registrant as specified in its charter)
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DELAWARE 06-1276882
(State of Incorporation) (I.R.S. Employer
Identification No.)
9 West Broad Street;
Stamford, Connecticut 06902
(Address of principal executive offices) (Zip Code)
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(203) 324-7635
(Registrant's telephone number,
including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $0.01 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of the voting stock held by non- affiliates of the
Registrant at October 20, 1998 was $164,167,665. The aggregate market value was
computed by reference to the closing price of the Registrant's Common Stock as
of that date. (For purposes of calculating this amount only, all directors,
executive officers and shareholders reporting beneficial ownership of more than
10% of the Registrant's Common Stock are considered to be affiliates.) The
number of shares of Common Stock outstanding as of October 20, 1998 was
15,576,950.
DOCUMENTS INCORPORATED BY REFERENCE
None
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FORM 10-K/A
TABLE OF CONTENTS
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ITEM DESCRIPTION PAGE
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PART III
10. Directors and Executive Officers of the Registrant..................... 3
12. Security Ownership of Certain Beneficial Owners and Management......... 5
13. Certain Relationships and Related Transactions......................... 6
Signature.............................................................. 7
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Item 10. Directors and Executive Officers of the Registrant
The executive officers of the registrant of the Company, and their
respective ages as of June 30, 1998, are as follows:
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Name Age Position
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Gary A. Johnson 43 President and Chief Executive Officer, Director
Dennis P. Walker 53 Executive Vice President, Director
James B. Duffy 44 Senior Vice President and Chief Financial Officer
David Schachne 37 Senior Vice President - New Business Development
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GARY A. JOHNSON, a co-founder of the Company, has served as President
and Chief Executive Officer and a director of the Company since its
inception. From 1987 to 1989, Mr. Johnson founded and served as President of
American Target Group Marketing, a marketer of membership services for
magazine publishers. From 1983 to 1987, Mr. Johnson was Vice President of
New Product Development and Marketing for CUC, a membership program services
marketing firm. From 1981 to 1983, Mr. Johnson was a Marketing Director of
the Marketing Consulting Division of General Electric. Mr. Johnson received
a B.S. from Tufts University and an M.B.A. from Harvard Business School.
DENNIS P. WALKER, a co-founder of the Company, has served as Executive
Vice President and a director of the Company since its inception. Prior to
founding the Company, Mr. Walker founded and served as President of Walker
Enterprises, a direct marketing and credit card merchandising business from
1978 to 1988. Mr. Walker received a B.A. from the University of Nebraska.
JAMES B. DUFFY joined the Company as Senior Vice President and Chief
Financial Officer in June 1996. Prior to joining the Company, Mr. Duffy served
in various senior financial management positions, most recently as Senior Vice
President, Business Planning, at Merck Medco Managed Care, Inc., a prescription
benefit management company, from 1986 to 1996.
DAVID SCHACHNE joined the Company as Senior Vice President - Marketing
in 1990. Prior to joining the Company, Mr. Schachne was Vice president of
Sleep Technologies, Inc., a manufacturer and wholesaler of home furnishing
products. Mr. Schachne received a B.A. from the State University of New
York, Albany and his M.B.A. from Harvard Business School.
The Company's Board of Directors is divided into three classes, with
members of each class holding office for staggered three-year terms. The Board
currently consists of two Class I directors, whose terms expire at the 2000
Annual Meeting of Shareholders, two Class II directors, whose terms expire at
the 1998 Annual Meeting of Shareholders and two Class III directors whose terms
expire at the 1999 Annual Meeting of Shareholders (in all cases subject to the
election of their successors and to their earlier death, resignation or
removal).
Stephen J. Clearman and Michael R. O'Brien have been nominated to serve as
Class II directors after the expiration of their terms at the 1998 Annual
Meeting of Shareholders. The Company has no nominating committee, and all
nominations are made by the Board of Directors. Each nominee has indicated his
willingness to serve, if elected, by the stockholders at the 1998 Meeting of
Shareholders.
Set forth below are the name, age and certain other information with
respect to each director and nominee for director of the Company.
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Class I Directors
Marc S. Tesler, 52, has been a director of the Company since January
1996. Since July 1995, he has been a member of the general partner of
Technology Crossover Ventures, L.P., a private partnership specializing in
information technology investments. From 1982 to June 1995, Mr. Tesler served
in various positions at Chancellor Capital Management, an investment
management firm, most recently as head of its Alternative Asset Management
Group. Mr. Tesler received his B.S. from the University of Massachusetts and
his M.B.A. from New York University.
Alec L. Ellison, 35, has been a director of the Company since 1989.
Mr. Ellison has served as Managing Director of Broadview Associates LLC, an
investment bank, since 1988. Prior to 1988, Mr. Ellison was affiliated with
the Technology and Emerging Growth Group of Morgan Stanley & Co.
Incorporated, an investment banking firm. Mr. Ellison holds a B.A. from Yale
University and an M.B.A. from Harvard Business School, where he was a Baker
Scholar.
Nominees For Class II Directors
Stephen J. Clearman, 47, has been a director of the Company since
1989. Since 1984, Mr. Clearman has been a general partner of Geocapital
Partners, a venture fund he co-founded. Mr. Clearman received a B.A. from
Haverford College, an M.S. from Columbia University and a J.D. from Harvard
Law School. Mr. Clearman is also a director of Expert Software, Inc. and
World Access, Inc., formerly Restor Industries, Inc.
Michael R. O'Brien, 55, has been a director of the Company since June
1996. Mr. O'Brien founded Catalina Marketing Corporation ("Catalina"), a
direct marketing company, in 1983, and served as Catalina's President until
1989 and as its Chairman of the Board and Chief Executive Officer until 1992.
Since 1992, Mr. O'Brien has been Chairman Emeritus of, and a consultant to,
Catalina. Prior to founding Catalina, Mr. O'Brien was President of TRIM,
Inc., a marketing research and information company specializing in the
utilization of scanner data. Previously, he held various sales management
positions with several consumer product manufacturers, including the Liggett
Group, Inc. Mr. O'Brien received a B.A. from the University of Kansas.
Class III Directors
Gary A. Johnson, 43, a co-founder of the Company, has served as
President and Chief Executive Officer and a director of the Company since its
inception. From 1987 to 1989, Mr. Johnson founded and served as President of
American Target Group Marketing, a marketer of membership services for
magazine publishers. From 1983 to 1987, Mr. Johnson was Vice President of New
Product Development and Marketing of CUC International, Inc., a membership
program services marketing firm. From 1981 to 1983, Mr. Johnson was a
Marketing Director of the Marketing Consulting Division of General Electric.
Mr. Johnson received a B.S. from Tufts University and an M.B.A. from Harvard
Business School.
Dennis P. Walker, 53, a co-founder of the Company, has served as
Executive Vice President and a director of the Company since its inception.
Prior to founding the Company, Mr. Walker founded and served as President of
Walker Enterprises, a direct marketing and credit card merchandising business
from 1978 to 1988. Mr. Walker received a B.A. from the University of Nebraska.
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of October 20, 1998,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each director and each person nominated
to become a director of the Company, (iii) each executive officer of the Company
named in the Summary Compensation Table set forth under the caption "Executive
Compensation" in Form 10K/A and (iv) all current directors and executive
officers of the Company as a group:
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PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OF SHARES COMMON STOCK
1) BENEFICIAL OWNERS BENEFICIALLY OWNED(1) OUTSTANDING (2)
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J. & W. Seligman & Company, Inc. .... 1,590,150 10.2%
100 Park Avenue
New York, NY 10017
Geocapital II, L.P.(3) .............. 1,401,032 9.0%
One Bridge Plaza
Fort Lee, NJ 07024
Capital Research & Management ....... 961,700 6.2%
333 South Hope Street
Los Angeles, CA 90071
2) DIRECTORS, EXECUTIVE OFFICERS AND
NOMINEES
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Gary A. Johnson(4) .................. 1,668,500 10.6%
Dennis P. Walker(5) ................. 1,598,800 10.2%
Stephen J. Clearman(6) .............. 1,566,311 10.0%
Alec L. Ellison(7) .................. 1,415,066 9.1%
Marc S. Tesler(8) ................... 773,740 5.0%
Michael R. O'Brien(9) ............... 40,600 *
James B. Duffy(10) .................. 96,000 *
David Schachne(11) .................. 133,462 *
All current directors and executive
officers as a group (8 persons)
(4)(5)(6)(7)(8)(9)(10)(11)........... 5,891,447 36.9%
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* Less than 1%.
(1) Each person has sole investment and voting power with respect to the
shares indicated, except as otherwise noted. The number of shares of
Common Stock beneficially owned is determined under the rules of the
Securities and Exchange Commission and is not necessarily indicative of
beneficial ownership for any other purpose. The inclusion herein of any
shares of Common Stock deemed beneficially owned does not constitute an
admission of beneficial ownership of such shares. Any reference in the
footnotes below to stock options held by the person in question relates to
stock options which are currently exercisable or exercisable within 60
days after October 20, 1998.
(2) The number of shares deemed outstanding with respect to a named person
includes 15,576,950 shares outstanding as of October 20, 1998 plus any
shares subject to options held by the person in question that are
currently exercisable or exercisable within 60 days after October 20,
1998.
(3) Consists of 1,394,344 shares of Common Stock and 6,688 shares issuable
upon the exercise of presently exercisable warrants held of record by
Geocapital II, L.P., which is part of an affiliated group of entities and
individuals referred to, collectively, as Geocapital.
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(4) Includes 111,000 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998. Includes 54,000 shares held in trust for the benefit of Mr.
Johnson's children; Mr. Johnson disclaims beneficial ownership of such
shares.
(5) Includes 45,300 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998. Includes 184,300 shares held in trust for the benefit of Mr.
Walker's children and 500,000 shares held by Mr. Walker's wife; Mr. Walker
disclaims beneficial ownership of such shares.
(6) Includes 9,000 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998. Mr. Clearman is a general partner of Geocapital II, L.P., and as
such may be deemed to be the beneficial owner of shares held by
Geocapital. Mr. Clearman disclaims beneficial ownership of such shares
except to the extent of his pecuniary interest in Geocapital.
(7) Mr. Ellison is a Managing Director of Broadview Associates LLC, an
affiliate of Geocapital II, L.P., and as such may be deemed to be the
beneficial owner of shares held by Geocapital. Mr. Ellison disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest in Geocapital.
(8) Includes 18,000 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998. Mr. Tesler is an affiliate of Technology Crossover Ventures, L.P.,
Technology Crossover Ventures, C.V., TCV II, V.O.F., Technology Crossover
Ventures II, L.P., TCV II (Q), L.P., TCV II Strategic Partners, L.P. and
Technology Crossover Ventures II, C.V. (together the "TCV Entities"), and
as such may be deemed to be the beneficial owner of shares held by the TCV
Entities. Mr. Tesler disclaims beneficial ownership of such shares except
to the extent of his pecuniary interest in such entities.
(9) Includes 18,000 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998.
(10) Includes 79,000 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998.
(11) Includes 79,000 shares issuable upon the exercise of outstanding options
presently exercisable or exercisable within 60 days after October 20,
1998.
Item 13. Certain Relationships and Related Transactions
As of the closing of the Company's initial public offering in October
1996, the Company adopted a policy that all material transactions between the
Company and its officers, directors and other affiliates must (i) be approved by
a majority of the members of the Company's Board of Directors and by a majority
of the disinterested members of the Company's Board of Directors, and (ii) be on
terms that are no less favorable to the Company than could be obtained from
unaffiliated third parties. In addition, the policy requires that any loans by
the Company to its officers, directors or other affiliates be for bona fide
business purposes only.
During fiscal 1998 the Company paid Broadview Associates, LLC $72,000 for
services rendered during the year.
For a description of option grants to certain executive officers of the
Company, see "Executive Compensation -- Option Grants" in Form 10K/A.
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MEMBERWORKS INCORPORATED SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to the
report to be signed on its behalf by the undersigned thereunto duly authorized.
MEMBERWORKS INCORPORATED
(Registrant)
By: /s/ James B. Duffy
Secretary and
Chief Financial Officer
Date: November 17, 1998
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