10-K/A 1 c94064a1e10vkza.htm AMENDMENT TO ANNUAL REPORT e10vkza
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K/ A
(Amendment No. 1)
     
þ
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For The Fiscal Year Ended December 31, 2004
 
or
 
o
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the transition period from           to
Commission File Number 000-21771
West Corporation
(Exact name of registrant as specified in its charter)
     
DELAWARE
(State or other jurisdiction of incorporation of organization)		   47-0777362
(IRS Employer Identification No.)
 
11808 Miracle Hills Drive, Omaha, Nebraska
(Address of principal executive offices)		   68154
(Zip Code)
Registrant’s telephone number, including area code: (402) 963-1200
Securities registered pursuant to Section 12 (b) of the Act: None.
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $0.01 per share
(Title of class)
     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 þ          No o
      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.     o
      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o
      The aggregate market value of the voting common equity held by non-affiliates (computed by reference to the average bid and asked price of such common equity) as of June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter was approximately $566.3 million. At February 18, 2005, 68,386,683 shares of common stock of the registrant were outstanding.
 
 

EXPLANATORY NOTE
      We are filing this Amendment No. 1 (this “Amendment”) to Registrant’s Annual Report on Form 10-K/ A to provide the information required by Part III. In view of our intention to hold our 2005 annual meeting of stockholders on June 10, 2005, our 2005 proxy statement will not be filed with the Securities and Exchange Commission (“SEC”) within 120 days after the end of our fiscal year. This Amendment only amends Part III of the original Form 10-K as set forth herein.
TABLE OF CONTENTS
             
 PART III
   Directors and Executive Officers of the Registrant     2  
   Executive Compensation     4  
   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     7  
   Certain Relationships and Related Transactions     8  
   Principal Accountant Fees and Services     8  
 Certification
 Certification

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Item 10. Directors and Executive Officers of the Registrant
Directors
      Thomas B. Barker (Age 50) Director since 1997. Mr. Barker joined us in 1991 as Executive Vice President of West Interactive Corporation. He was promoted to President and Chief Operating Officer of West in March 1995. He was promoted to President and Chief Executive Officer in September of 1998. He is currently our Chief Executive Officer. His term will expire in 2006.
      William E. Fisher (Age 58) Director since 1997. Mr. Fisher is the Chairman of the Board of SJE Holdings, a regional coffee chain. Previously, he was President of Global Software Services, with CSG Systems, Inc., and served in that role from September 2001 until his retirement in September 2004. Prior to the position with Global Software Services, he was the founder, Chairman of the Board and Chief Executive Officer of Transaction Systems Architects, Inc. (“TSAI”) from its inception in 1993 until he retired from the company in May 2001. TSAI is an Omaha-based company that develops, markets and supports a broad line of software products and services primarily focused on facilitating electronic payments. His term will expire in 2006.
      George H. Krauss (Age 62) Director since 2001. Mr. Krauss is Of Counsel to Kutak Rock LLP, a law firm, and a consultant to America First Companies, an investment company in Omaha, Nebraska. Mr. Krauss was a partner of Kutak Rock from 1975 to 1997 and became Of Counsel in 1997. Mr. Krauss is a director of Gateway, Inc. and America First Mortgage Investments, Inc. He is also a director of a number of closely held companies and investment firms. His term will expire in 2007.
      Greg T. Sloma (Age 53) Director since 1997. Mr. Sloma was appointed to the Board of Directors in 1997. In August 2004, Mr. Sloma became President and Chief Financial Officer of SpeedNet Services, Inc., a broadband wireless Internet Service Provider. Previously, he was Executive Vice President and Chief Financial Officer of SpeedNet Services, Inc. From July 2001 to January 2004, Mr. Sloma was Vice Chairman, Director of Mergers & Acquisitions of Data Transmission Network Corporation (“DTN”), an Omaha based provider of electronic information and communication services. Prior to holding that position, Mr. Sloma served as DTN’s President and Chief Executive Officer. He was an employee of DTN beginning in April 1993, holding the positions of President & Chief Operating Officer, Executive Vice President and Chief Financial Officer and Executive Vice President and Chief Operating Officer. Prior to joining DTN, Mr. Sloma was a partner at Deloitte & Touche LLP specializing in tax consulting. He has been nominated for re-election at the annual shareholder meeting.
      Gary L. West (Age 60) Director since 1987. Mr. West co-founded WATS Marketing of America in 1978 and remained with that company until 1985. He joined West in July 1987 after the expiration of a noncompetition agreement with WATS. Mr. West has served as our Chairman of the Board of Directors since joining West. Gary West and Mary West are husband and wife. He has been nominated for re-election at the annual shareholder meeting.
      Mary E. West (Age 59) Director since 1986. Mrs. West co-founded WATS Marketing of America in 1978 and remained with that company until December 1985. In January 1986, she founded West. Mrs. West has served as our Vice Chair of the Board of Directors since 1987. Mary West and Gary West are wife and husband. Her term will expire in 2007.
Board Committees
      The Board has an audit committee and a compensation committee. The following describes for each committee its current membership, the number of meetings held during 2004 and its mission.
Board independence and nominating committee matters
      West is a “controlled company” as that term is defined by Nasdaq listing standards. A controlled company is a company of which more than 50% of the voting power is held by an individual, group or other company. Currently, Gary West and Mary West hold 66% of our voting power. Under Nasdaq listing

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standards, a controlled company like West does not need to maintain a nominating committee or a majority of independent directors on its board. However, independent directors of controlled companies are required to hold meetings at which only the independent directors are present. Our independent directors met separately twelve times during 2004.
Audit committee
William E. Fisher, George H. Krauss and Greg T. Sloma
      The audit committee met eight times in 2004. The audit committee is responsible for:
  •  Meeting with our independent accountants regarding audits and the adequacy of our accounting and control systems;
 
  •  Engaging a firm of certified independent accountants to serve as our independent accountants;
 
  •  Authorizing all audit fees and other professional services rendered by the independent accountants;
 
  •  Reviewing the independence of the accountants; and
 
  •  Ensuring the objectivity of our financial statements.
      The audit committee is also responsible for preparing the audit committee report required by SEC rules.
      The Board has determined that each audit committee member is independent in accordance with Nasdaq listing standards and SEC regulations, and that William Fisher and Greg Sloma each is an “audit committee financial expert” as defined by the SEC.
Compensation committee
William E. Fisher, George H. Krauss and Greg T. Sloma
      The compensation committee met one time in 2004. The compensation committee reviews and approves our compensation and benefit programs, ensures the competitiveness of these programs and advises the Board on the development and succession for executives.
      The compensation committee is also responsible for preparing the compensation committee report required by SEC rules.
Section 16(a) beneficial ownership reporting compliance
      Our directors and executive officers file reports with the SEC indicating the number of shares of our common stock that they owned when they became a director or executive officer and, after that, any changes in their ownership of our common stock. They must also provide us with copies of these reports. These reports are required by Section 16(a) of the Securities Exchange Act of 1934. We have reviewed the copies of the reports that we have received and written representations of the accuracy of these reports from these individuals.
      Messrs. Barker, Etzler, Mendlik and Strubbe each filed one late Form 4 in connection with stock acquired in the Executive Deferred Compensation Plan, while Mr. Stangl filed two late Form 4’s in connection with stock acquired in the Executive Deferred Compensation Plan. Messrs. Lavin, Stangl and Sturgeon each filed one late Form 4 in connection with the sale of stock through exercising stock options. Mr. Sloma filed one late Form 4 in connection with the sale of stock by his dependent child. Except for the foregoing, during 2004 the directors and executive officers complied with all Section 16(a) reporting requirements.
Code of Ethics
      West has adopted a Code of Ethical Business Conduct that applies to its directors and executive officers, including its chief executive officer and chief financial officer. A copy of West’s Code of Ethical Business Conduct may be obtained without charge by sending a written request to West Corporation, 11808 Miracle

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Hills Drive, Omaha, Nebraska 68154. The Code of Ethical Business Conduct is also available on West’s website at www.west.com.
Item 11. Executive Compensation
Executive compensation
      The following table summarizes the compensation paid to our chief executive officer and our four other most highly compensated executive officers. There were no stock appreciation rights outstanding during the fiscal year ended December 31, 2004.
                                                   
                    Long-Term    
                    Compensation    
                Awards    
        Annual Compensation   Restricted   Securities    
    Fiscal       Stock   Underlying   All Other
Name and Principal Position   Year   Salary ($)   Bonus ($)   Awards (#)   Options (#)   Compensation ($)(1)
                         
Thomas B. Barker
     2004       741,538       1,321,790       —       142,858       65,164  
  Chief Executive Officer     2003       475,000       1,168,364       —       360,450       76,495  
  and Director     2002       475,000       —       —       50,000       16,075  
 
Nancee R. Berger
     2004       494,454       883,379       —       114,286       17,681  
  President and Chief     2003       310,000       653,275       —       286,982       15,979  
  Operating Officer     2002       290,000       —       —       —       16,075  
 
J. Scott Etzler
     2004       411,080       544,755       —       10,000       14,559  
  President — InterCall Inc.(2)     2003       457,544       2,740,034       —       35,000       10,793  
 
Paul M. Mendlik
     2004       250,000       469,356       —       100,000       262,217  
  Chief Financial Officer,     2003       250,000       374,610       —       100,000       254,777  
  Executive Vice President —     2002       36,960       41,667       80,000       —       3,306  
  CFO and Treasurer(3)                                                
 
Todd B. Strubbe
     2004       250,000       451,503       —       —       31,767  
  President, — West Direct,     2003       250,000       400,000       —       —       48,884  
  Inc. and West Interactive     2002       250,000       100,000       —       —       55,571  
  Corporation(4)                                                
 
(1)  These amounts reflect matching contributions made on behalf of each officer pursuant to our 401(k) Plan, Executive Retirement Savings Plan or Non-Qualified Deferred Compensation Plan and medical, dental and life insurance premiums paid on behalf of each officer. Mr. Etzler’s other compensation also includes a car allowance of $7,200 and $4,800 in 2004 and 2003, respectively.
 
(2)  Mr. Etzler joined West as the President of InterCall Inc. upon the acquisition of InterCall on May 9, 2003. His 2003 compensation includes a $2,000,000 bonus paid by InterCall upon the closing of the acquisition.
 
(3)  Mr. Mendlik joined us in November 2002. Mr. Mendlik entered into restricted stock agreements with us pursuant to which he received 80,000 shares of our restricted common stock. Twenty percent of these shares vested on January 1, 2003 another twenty percent vested on November 4, 2004. The remaining shares will vest on the third, fourth and fifth anniversaries of the date of grant. The restricted shares are subject to forfeiture until vested. Mr. Mendlik has the right to vote and receive dividends on these shares even if they have not vested. The fair value of these shares on the grant date was $1,346,000 or $16.825 per share. During 2004, Mr. Mendlik sold 16,000 shares under a 10 b 5-1 trading plan. At December 31, 2004, the remaining 64,000 shares had a market value of $2,119,040. We recognize compensation expense over the vesting period. During 2002, 2003 and 2004, we recognized $269,200, $403,047 and $323,036 as compensation, respectively.
 
(4)  Mr. Strubbe joined West Direct in July 2001. Mr. Strubbe received $47,342 for moving expenses in 2002. This amount is included in other compensation.

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Employment agreements
      We have employment agreements with each of the executive officers named in the summary compensation table. The agreements specify a base salary and performance-based bonuses. Mr. Barker’s employment agreement for 2005 provides that he is our chief executive officer and receives an annual base salary of $750,000. Ms. Berger’s employment agreement for 2005 provides that she is our president and chief operating officer and receives an annual base salary of $500,000. Mr. Etzler’s employment agreement for 2005 provides that he is the president of InterCall and receives an annual base salary of $425,000. Mr. Mendlik’s employment agreement for 2005 provides that he is our executive vice president, chief financial officer and treasurer and receives an annual base salary of $385,000. Mr. Strubbe’s employment agreement for 2005 provides that he is the president of West Direct Inc. and West Interactive Corporation and receives an annual base salary of $250,000.
      The agreements automatically renew each year unless the parties to the agreement give notice of non-renewal. In the event of death, termination for any reason or resignation, we will pay any salary earned through the date of termination, any bonus earned at the end of the month immediately preceding the date of termination and all vested benefits, if any, as of the date of termination. In the event of termination without cause, or resignation, the executive will or may remain as a consultant to us for a period of time that varies from twelve to twenty-four months depending upon the executive.

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Option grants in 2004
      The following table summarizes options granted during 2004 to the persons named in the summary compensation table.
                                                 
                    Potential Realized Value at
        % of Total           Assumed Annual Rates of
    Number of   Options           Stock Price Appreciation for
    Securities   Granted to           Option Term
    Underlying   Employees in   Exercise Price   Expiration    
Name   Options (#)   Fiscal Year   ($/share)   Date   5% ($)   10% ($)
                         
Thomas B. Barker
     35,714       2.0 %     23.37       01/02/14       1,359,534       2,164,831  
      35,714       2.0 %     24.79       04/01/14       1,442,142       2,296,370  
      35,714       2.0 %     25.20       07/01/14       1,465,993       2,334,350  
      35,716       2.0 %     29.48       10/01/14       1,715,076       2,730,971  
                                     
      142,858       8.0 %                     5,982,745       9,526,522  
                                     
Nancee R. Berger
     28,571       1.6 %     23.37       01/02/14       1,087,620       1,731,853  
      28,571       1.6 %     24.79       04/01/14       1,153,705       1,837,083  
      28,571       1.6 %     25.20       07/01/14       1,172,787       1,867,467  
      28,573       1.6 %     29.48       10/01/14       1,372,070       2,184,792  
                                     
      114,286       6.4 %                     4,786,182       7,621,195  
                                     
J. Scott Etzler
     2,500       0.1 %     23.37       01/02/14       95,168       151,539  
      2,500       0.1 %     24.79       04/01/14       100,951       160,747  
      2,500       0.1 %     25.20       07/01/14       102,620       163,406  
      2,500       0.1 %     29.48       10/01/14       120,050       191,159  
                                     
      10,000       0.4 %                     418,789       666,851  
                                     
Paul M. Mendlik
     25,000       1.4 %     23.37       01/02/14       951,682       1,515,394  
      25,000       1.4 %     24.79       04/01/14       1,009,507       1,607,472  
      25,000       1.4 %     25.20       07/01/14       1,026,204       1,634,058  
      25,000       1.4 %     29.48       10/01/14       1,200,495       1,911,588  
                                     
      100,000       5.6 %                     4,187,888       6,668,512  
                                     
                                     
Todd B. Strubbe
     —       —       —               —       —  
                                     
Aggregate option exercises in 2004 and option values
      The following table summarizes aggregate option exercises in 2004 and their values.
                                                 
            Number of Securities    
            Underlying   Value of Unexercised
            Unexercised Options at   in-the Money Options
    Shares       Fiscal Year-End(#)   at Fiscal Year-End($)
    Acquired on   Value        
Name   Exercise (#)   Realized($)   Exercisable   Unexercisable   Exercisable   Unexercisable
                         
Thomas B. Barker
     —       —       915,114       438,194       20,171,491       4,858,629  
Nancee R. Berger
     —       —       596,747       329,521       13,238,252       3,669,955  
J. Scott Etzler
     —       —       8,750       36,250       67,244       275,731  
Paul M. Mendlik
     —       —       25,000       175,000       288,219       1,604,656  
Todd B. Strubbe
     —       —       37,500       12,500       465,563       155,188  

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Director compensation
Director fees and expenses
      In 2004, non-employee directors received an annual retainer of $35,000. In addition, audit committee members receive $10,500 for the year-end audit committee meeting. Non-employee directors may elect to participate in our deferred compensation plan with matching contributions provided by us. During 2004, Messrs. Fisher, Krauss and Sloma, our non-employee directors, each received $45,500 in directors’ fees.
      In addition, we reimburse directors for all reasonable expenses incurred in connection with their attendance at Board meetings.
Stock incentive plan
      Directors are granted options to acquire 14,000 shares of common stock when they are first elected to the Board. For this initial grant, options for 6,000 shares vest on the first anniversary of the date of grant and options for 4,000 shares vest on the second and third anniversary of the date of grant.
      Thereafter, directors are also granted options to purchase 5,000 shares of common stock as of each annual meeting provided they remain a director at such time. For these annual grants, options for 1,000 shares vest on the first anniversary of the date of grant and options for 2,000 shares vest on the second and third anniversary of the date of grant.
Compensation committee interlocks and insider participation
      Our compensation committee is composed of William E. Fisher, George H. Krauss and Greg T. Sloma. No member of our compensation committee is, or was during 2004, an executive officer of another company whose board of directors has a comparable committee on which one of our executive officers serves. We lease a building that is owned by a partnership controlled by Gary L. West and Mary E. West. Additional information about this lease is described in Item 13 below.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security ownership
      The following table summarizes the beneficial ownership of our common stock as of April 15, 2005 for:
  •  each person who we know beneficially owns more than 5% of our common stock;
 
  •  each director and nominee for director;
 
  •  each executive officer; and
 
  •  all directors and executive officers as a group.
                 
    Amount   Percent of
Name and Address of Beneficial Owners(1)   Beneficially Owned   Common Shares
         
Gary L. West(2)
     45,462,363       66.4 %
Mary E. West(2)
     45,462,363       66.4 %
Thomas B. Barker(3)
     1,129,601       1.7 %
Greg T. Sloma(4)
     32,850       *  
William E. Fisher(5)
     19,500       *  
George H. Krauss(6)
     23,000       *  
Nancee R. Berger(7)
     693,871       1.0 %
J. Scott Etzler(8)
     10,000       *  

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    Amount   Percent of
Name and Address of Beneficial Owners(1)   Beneficially Owned   Common Shares
         
Paul M. Mendlik(9)
     114,000       *  
Todd B. Strubbe(10)
     116,002       *  
All directors and executive officers as a group (14 persons)(11)
     47,986,288       70.1 %
 
  * Less than 1%
  (1)  The address of each of our executive officers and directors is c/o West Corporation, 11808 Miracle Hills Drive, Omaha, Nebraska 68154.
 
  (2)  Shares held by Gary and Mary West are held in joint tenancy with right of survivorship. Voting power of these shares is shared between them.
 
  (3)  Includes 1,011,477 shares subject to options.
 
  (4)  Includes 450 shares held by Mr. Sloma’s daughter and 1,400 shares held by Mr. Sloma’s son. Also includes 31,000 shares subject to options.
 
  (5)  Includes 19,000 shares subject to options.
 
  (6)  Includes 23,000 shares subject to options.
 
  (7)  Includes 668,492 shares subject to options.
 
  (8)  Includes 10,000 shares subject to options.
 
  (9)  Includes 50,000 shares subject to options.
(10)  Includes 37,500 shares subject to options.
 
(11)  Includes 2,234,725 shares subject to options.
      The table above does not include 159,847 shares notionally granted under our Nonqualified Deferred Compensation Plan at April 14, 2005. These shares have not been granted, do not carry voting rights and cannot be sold until the end of the deferral periods, which begin in 2008.
      Except as otherwise noted, each person named in the table above has sole voting and investment power with respect to the shares. Beneficial ownership and percentages are calculated in accordance with SEC rules. Beneficial ownership includes shares subject to options that are currently exercisable or exercisable within 60 days following April 15, 2005.
Item 13. Certain Relationships and Related Transactions
Lease
      We lease a building located at 9910 Maple Street, Omaha, Nebraska, which houses a contact center and several administrative support departments. The building has 43,000 square feet of leasable space and sits on approximately 4.4 acres. This building is owned by 99-Maple Partnership, a partnership owned and controlled by Gary L. West, our Chairman, and Mary E. West, our Vice Chair and Secretary. This lease commenced on April 1, 1988, and was renewed most recently on December 10, 2003, for a term of ten years. In accordance with the previous arrangement, the rent will be $89,635 per month between September 1, 2003 and August 31, 2004, $55,542 per month between September 1, 2004 and August 31, 2009 and $60,917 per month between September 1, 2009 and August 31, 2014. In addition to payment of rent, we are obligated to pay all taxes, insurance and maintenance pertaining to the building.
Item 14. Principal Accountant Fees and Services
Deloitte & Touche LLP
      The audit committee has appointed Deloitte & Touche LLP (“D&T”) as external auditor to audit our financial statements for the year ending December 31, 2005.

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      All services were reviewed with our audit committee and senior management to confirm that the performance of such services was consistent with maintaining D&T’s independence.
Fees
      The following table summarizes the fees we paid to D&T in 2004 and 2003.
                 
Fee Type   2004   2003
         
Audit
   $ 591,265     $ 308,350  
Audit-related
     80,000       402,442  
Tax
     337,896       302,057  
All other
     —       —  
             
Total
   $ 1,009,161     $ 1,012,849  
      Audit Fees — Audit fees consist of fees paid for the audits of our annual financial statements and for the reviews of the financial statements included in our Quarterly Reports on Form 10-Q. The increase in fees from 2003 to 2004 was primarily due to the acquisition of Worldwide and the resulting increase in the size of the engagement and hours required to perform additional audit functions to comply with the attestation provisions of the Sarbanes-Oxley Act of 2002.
      Audit-Related Fees — Audit-related fees consist of fees paid for our SEC filings, advisory services and the audit of our 401(k) Plan.
      Tax Fees — Tax fees consist of fees paid for recurring tax consultation, state tax credit incentive programs, employment tax planning, transfer pricing studies and international tax consultation.
      Our audit committee pre-approved all of the foregoing services.

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EXHIBIT INDEX
         
Exhibit    
Number    
     
  31 .01   Certification pursuant to 18 U.S.C. section 7241 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
  31 .02   Certification pursuant to 18 U.S.C. section 7241 as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002

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SIGNATURES
      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  WEST CORPORATION
  By:  /s/ Thomas B. Barker
 
 
  Thomas B. Barker
  Chief Executive Officer
  (Principal Executive Officer)
April 29, 2005
      Pursuant to the requirements of the Securities Exchange Act of 1934, this Amendment No. 1 to Registrant’s Annual Report on Form 10-K/ A has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
             
Signatures   Title   Date
         
 
/s/ Thomas B. Barker
 
Thomas B. Barker		   Chief Executive Officer and Director (Principal Executive Officer)   April 29, 2005
 
/s/ Paul M. Mendlik
 
Paul M. Mendlik		   Executive Vice President — Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)   April 29, 2005