UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
OR
¨ | 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 001-35846
West Corporation
(Exact name of registrant as specified in its charter)
DELAWARE | 47-0777362 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
11808 Miracle Hills Drive, Omaha, Nebraska | 68154 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (402) 963-1200
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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
At October 30, 2014, 84,176,835 shares of the registrants common stock were outstanding.
In this report, West, the Company, we, us and our refers to West Corporation and subsidiaries.
2
Item 1. Financial Statements (Unaudited)
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
West Corporation and subsidiaries
Omaha, Nebraska
We have reviewed the accompanying condensed consolidated balance sheet of West Corporation and subsidiaries (the Company) as of September 30, 2014, and the related condensed consolidated statements of operations and of comprehensive income for the three-month and nine-month periods ended September 30, 2014 and 2013, and of stockholders deficit and of cash flows for the nine-month periods ended September 30, 2014 and 2013. These interim financial statements are the responsibility of the Companys management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of West Corporation and subsidiaries as of December 31, 2013, and the related consolidated statements of operations, comprehensive income, stockholders deficit, and cash flows for the year then ended (not presented herein); and in our report dated February 20, 2014 (June 17, 2014 as to notes 1, 3, and 16), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2013 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
November 6, 2014
3
WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
REVENUE |
$ | 713,201 | $ | 665,366 | $ | 2,080,416 | $ | 1,998,285 | ||||||||
COST OF SERVICES |
338,778 | 310,533 | 985,828 | 931,539 | ||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
253,473 | 231,407 | 729,867 | 715,292 | ||||||||||||
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OPERATING INCOME |
120,950 | 123,426 | 364,721 | 351,454 | ||||||||||||
OTHER INCOME (EXPENSE): |
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Interest expense, net of interest income of $41, $45, $228 and $208 |
(47,606 | ) | (51,242 | ) | (144,923 | ) | (181,310 | ) | ||||||||
Debt call premium and accelerated amortization of deferred financing costs |
(51,735 | ) | | (51,735 | ) | (23,105 | ) | |||||||||
Other |
2,290 | 1,654 | 5,397 | 1,555 | ||||||||||||
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Other expense |
(97,051 | ) | (49,588 | ) | (191,261 | ) | (202,860 | ) | ||||||||
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INCOME BEFORE INCOME TAX EXPENSE |
23,899 | 73,838 | 173,460 | 148,594 | ||||||||||||
INCOME TAX EXPENSE |
7,789 | 27,690 | 63,313 | 55,723 | ||||||||||||
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NET INCOME |
$ | 16,110 | $ | 46,148 | $ | 110,147 | $ | 92,871 | ||||||||
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EARNINGS PER COMMON SHARE: |
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Basic Common |
$ | 0.19 | $ | 0.55 | $ | 1.31 | $ | 1.20 | ||||||||
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Diluted Common |
$ | 0.19 | $ | 0.54 | $ | 1.29 | $ | 1.18 | ||||||||
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: |
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Basic |
84,090 | 83,581 | 83,950 | 77,274 | ||||||||||||
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Diluted |
85,611 | 85,042 | 85,400 | 78,720 | ||||||||||||
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DIVIDENDS DECLARED: |
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Dividends declared per share |
$ | 0.225 | $ | 0.225 | $ | 0.675 | $ | 0.45 | ||||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
4
WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income |
$ | 16,110 | $ | 46,148 | $ | 110,147 | $ | 92,871 | ||||||||
Foreign currency translation adjustments, net of tax of $7,570, $(3,744), $8,593 and $(494) |
(15,658 | ) | 6,109 | (14,950 | ) | 806 | ||||||||||
Reclassification of a cash flow hedge into earnings, net of tax of $0, $0, $0 and $1,349 |
| | | (2,201 | ) | |||||||||||
Unrealized gain on cash flow hedges, net of tax of $0, $0, $0 and $(2,444) |
| | | 3,987 | ||||||||||||
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Comprehensive income |
$ | 452 | $ | 52,257 | $ | 95,197 | $ | 95,463 | ||||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
5
WEST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
$ | 165,933 | $ | 230,041 | ||||
Trust and restricted cash |
23,671 | 21,679 | ||||||
Accounts receivable, net of allowance of $8,164 and $9,809 |
487,115 | 450,189 | ||||||
Deferred income taxes receivable |
7,969 | | ||||||
Prepaid assets |
52,681 | 36,032 | ||||||
Deferred expenses |
64,488 | 53,633 | ||||||
Other current assets |
25,940 | 29,996 | ||||||
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Total current assets |
827,797 | 821,570 | ||||||
PROPERTY AND EQUIPMENT: |
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Property and equipment |
1,339,486 | 1,280,420 | ||||||
Accumulated depreciation and amortization |
(967,015 | ) | (915,655 | ) | ||||
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Total property and equipment, net |
372,471 | 364,765 | ||||||
GOODWILL |
2,044,928 | 1,823,921 | ||||||
INTANGIBLE ASSETS, net of accumulated amortization of $565,704 and $528,936 |
404,215 | 231,441 | ||||||
OTHER ASSETS |
279,814 | 244,567 | ||||||
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TOTAL ASSETS |
$ | 3,929,225 | $ | 3,486,264 | ||||
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LIABILITIES AND STOCKHOLDERS DEFICIT |
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CURRENT LIABILITIES: |
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Accounts payable |
$ | 99,421 | $ | 82,678 | ||||
Deferred revenue |
142,365 | 113,405 | ||||||
Accrued expenses |
298,221 | 249,682 | ||||||
Current maturities of long-term debt |
3,121 | 11,877 | ||||||
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Total current liabilities |
543,128 | 457,642 | ||||||
LONG-TERM OBLIGATIONS, less current maturities |
3,755,681 | 3,513,470 | ||||||
DEFERRED INCOME TAXES |
137,522 | 112,476 | ||||||
OTHER LONG-TERM LIABILITIES |
177,805 | 142,848 | ||||||
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Total liabilities |
4,614,136 | 4,226,436 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 12) |
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STOCKHOLDERS DEFICIT |
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Common stock $0.001 par value, 475,000 shares authorized, 84,214 and 83,745 shares issued and 84,122 and 83,653 shares outstanding |
84 | 84 | ||||||
Additional paid-in capital |
2,149,198 | 2,132,441 | ||||||
Retained deficit |
(2,801,735 | ) | (2,855,189 | ) | ||||
Accumulated other comprehensive loss |
(27,150 | ) | (12,200 | ) | ||||
Treasury stock at cost (92 shares for both periods) |
(5,308 | ) | (5,308 | ) | ||||
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Total stockholders deficit |
(684,911 | ) | (740,172 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT |
$ | 3,929,225 | $ | 3,486,264 | ||||
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The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
6
WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
Nine Months Ended | ||||||||
September 30, | ||||||||
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
$ | 110,147 | $ | 92,871 | ||||
Adjustments to reconcile net income to net cash flows from operating activities: |
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Depreciation |
90,492 | 85,172 | ||||||
Amortization |
53,482 | 49,406 | ||||||
Provision for share based compensation |
10,179 | 8,154 | ||||||
Deferred income tax (benefit) expense |
(24,627 | ) | 3,668 | |||||
Amortization of deferred financing costs |
22,707 | 20,313 | ||||||
Other |
10 | 93 | ||||||
Changes in operating assets and liabilities, net of business acquisitions: |
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Accounts receivable |
(29,977 | ) | (12,739 | ) | ||||
Other assets |
(60,961 | ) | (29,636 | ) | ||||
Accounts payable |
25,224 | (15,979 | ) | |||||
Accrued wages and benefits |
16,594 | 26,774 | ||||||
Accrued expenses, other liabilities and income tax payable |
116,980 | 48,632 | ||||||
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Net cash flows from operating activities |
330,250 | 276,729 | ||||||
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CASH FLOWS USED IN INVESTING ACTIVITIES: |
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Business acquisitions |
(385,457 | ) | (13 | ) | ||||
Purchases of property and equipment |
(113,682 | ) | (87,980 | ) | ||||
Other |
(1,993 | ) | (1,166 | ) | ||||
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Net cash flows used in investing activities |
(501,132 | ) | (89,159 | ) | ||||
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CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of notes due 2022 |
1,000,000 | | ||||||
Payments on notes and term loan facilities |
(950,000 | ) | (450,000 | ) | ||||
Proceeds from initial public offering, net of offering costs |
| 398,266 | ||||||
Proceeds from revolving credit facilities |
197,000 | 85,000 | ||||||
Payments on revolving credit facilities |
(12,765 | ) | (85,000 | ) | ||||
Dividends paid |
(56,751 | ) | (37,840 | ) | ||||
Payments of deferred financing and other debt related costs |
(27,280 | ) | (30,760 | ) | ||||
Debt redemption premiums paid on senior and subordinated notes |
(43,987 | ) | (16,502 | ) | ||||
Principal repayments on long-term obligations |
(780 | ) | (18,132 | ) | ||||
Proceeds from stock options exercised and ESPP shares issued including excess tax benefits |
5,418 | 815 | ||||||
Other |
| (9 | ) | |||||
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Net cash flows from (used in) financing activities |
110,855 | (154,162 | ) | |||||
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EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS |
(4,081 | ) | (1,546 | ) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
(64,108 | ) | 31,862 | |||||
CASH AND CASH EQUIVALENTS, Beginning of period |
230,041 | 179,111 | ||||||
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CASH AND CASH EQUIVALENTS, End of period |
$ | 165,933 | $ | 210,973 | ||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid during the period for interest and call premiums on senior and subordinated notes |
$ | 177,229 | $ | 179,317 | ||||
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Cash paid during the period for income taxes, net of refunds of $5,455 and $2,629 |
$ | 62,209 | $ | 36,831 | ||||
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SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES: |
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Acquisition of property through accounts payable commitments |
$ | 4,678 | $ | 8,585 | ||||
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The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
7
WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Common Stock |
Additional Paid - in Capital |
Retained Deficit |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total Stockholders Deficit |
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BALANCE, January 1, 2014 |
$ | 84 | $ | 2,132,441 | $ | (2,855,189 | ) | $ | (5,308 | ) | $ | (12,200 | ) | $ | (740,172 | ) | ||||||||
Net income |
110,147 | 110,147 | ||||||||||||||||||||||
Dividends declared (cash dividends / $0.675 per share) |
(56,693 | ) | (56,693 | ) | ||||||||||||||||||||
Other comprehensive loss, net of tax of $8,593 (Note 10) |
(14,950 | ) | (14,950 | ) | ||||||||||||||||||||
Executive Deferred Compensation Plan activity (59,260 shares issued) |
2,561 | 2,561 | ||||||||||||||||||||||
Shares issued from the Employee Stock Purchase Plan (220,220 shares) |
4,759 | 4,759 | ||||||||||||||||||||||
Stock options exercised including related tax benefits (109,615 shares) |
| 1,149 | 1,149 | |||||||||||||||||||||
Share based compensation |
8,288 | 8,288 | ||||||||||||||||||||||
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BALANCE, September 30, 2014 |
$ | 84 | $ | 2,149,198 | $ | (2,801,735 | ) | $ | (5,308 | ) | $ | (27,150 | ) | $ | (684,911 | ) | ||||||||
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BALANCE, January 1, 2013 |
$ | 62 | $ | 1,720,639 | $ | (2,941,948 | ) | $ | (5,308 | ) | $ | (23,131 | ) | $ | (1,249,686 | ) | ||||||||
Net income |
92,871 | 92,871 | ||||||||||||||||||||||
Dividends declared (cash dividends / $0.45 per share) |
(37,626 | ) | (37,626 | ) | ||||||||||||||||||||
Other comprehensive income, net of tax of $(1,589) (Note 10) |
2,592 | 2,592 | ||||||||||||||||||||||
Executive Deferred Compensation Plan activity |
3,060 | 3,060 | ||||||||||||||||||||||
Issuance of common stock in connection with our initial public offering (21,275,000 shares) |
21 | 401,012 | 401,033 | |||||||||||||||||||||
Initial public offering costs |
(2,767 | ) | (2,767 | ) | ||||||||||||||||||||
Stock options exercised including related tax benefits (164,827 shares) |
1 | 1,567 | 1,568 | |||||||||||||||||||||
Share based compensation |
6,346 | 6,346 | ||||||||||||||||||||||
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BALANCE, September 30, 2013 |
$ | 84 | $ | 2,129,857 | $ | (2,886,703 | ) | $ | (5,308 | ) | $ | (20,539 | ) | $ | (782,609 | ) | ||||||||
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The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
8
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS
Business Description: West Corporation (the Company or West) is a leading provider of technology-enabled communication services. We, us and our also refer to West and its consolidated subsidiaries, as applicable. We offer a broad range of communication and network infrastructure solutions that help manage or support essential communications. Our services include conferencing and collaboration, public safety services, Internet Protocol (IP) communications, interactive services such as automated notifications, large-scale agent services and telecom services. The scale and processing capacity of our proprietary technology platforms, combined with our expertise in managing voice and data transactions, enable us to provide reliable, high-quality, mission-critical communications designed to maximize return on investment for our clients. Our clients include Fortune 1000 companies, along with small and medium enterprises in a variety of industries, including telecommunications, retail, financial services, public safety, technology and healthcare. We have sales and operations in the United States, Canada, Europe, the Middle East, Asia-Pacific, Latin America and South America.
We operate in two reportable segments:
| Unified Communications, including conferencing and collaboration, IP communications and interactive services; and |
| Communication Services, including public safety services, telecom services and agent services. |
Effective January 1, 2014, we implemented a revised organizational structure which our Chief Executive Officer utilizes for making strategic and operational decisions and allocating resources. Under the revised organizational structure, automated call processing services management and operations have been moved from the Communication Services segment to the Unified Communications segment and have been combined with alerts and notifications to form interactive services. Beginning in the first quarter of 2014, all prior period comparative information has been recast to reflect this change as if it had taken place in all periods presented.
Unified Communications
Conferencing & Collaboration. Operating under the InterCall® brand, we are the largest conferencing services provider in the world based on conferencing revenue, according to Wainhouse Research. During the nine months ended September 30, 2014, we managed approximately 120 million conference calls, an 8 percent increase over the same period in 2013. We provide our clients with an integrated global suite of meeting services. InterCall also offers multimedia event services designed to give our clients the ability to create, manage, distribute and reuse content internally and externally. Through a combination of proprietary products and strategic partnerships, our clients have the tools to support diverse internal and external multimedia requirements.
IP Communications. We provide our clients with enterprise class IP communications solutions enabled by our technology. We offer hosted IP-private branch exchange (PBX) and enterprise call management, hosted and managed multiprotocol label switching (MPLS) network solutions, unified communications partner solution portfolio services, cloud-based security services and professional services and systems integration expertise.
Interactive Services. We help our clients automate, navigate and solve their communication challenges across the customer lifecycle. We design, integrate, deliver and manage applications, services, platforms and networks that aim to improve the customer experience and drive efficiencies for our clients. Our technology uses an omni-channel approach that brings together voice, text, email, push notification, fax, video, web, social media, hosted contact center and mobile to create an automated customer experience across channels. In 2013, our interactive voice response (IVR), hosted contact center, and alerts and notifications platforms received and delivered 2.8 billion calls and data messages on behalf of our clients. With the acquisition on April 21, 2014, of Reliance Holding, Inc., doing business through its wholly owned subsidiary Reliance Communications, LLC as SchoolMessenger (SchoolMessenger), we expanded our interactive services, into the K-12 education market.
9
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Communication Services
Public Safety Services. We believe we are one of the largest providers of public safety services, based on the number of 9-1-1 calls that we and other participants in the industry facilitate. Our services are critical in facilitating public safety agencies ability to receive emergency calls from citizens.
Telecom Services. Our telecom services support the merging of traditional telecom, mobile and IP technologies to service providers and enterprises. We are a leading provider of local and national tandem switching services to carriers throughout the United States. We leverage our proprietary customer traffic information system, sophisticated call routing and control facility to provide tandem interconnection services to the competitive marketplace, including wireless, wire-line, cable telecom and Voice over Internet Protocol (VoIP) companies.
Agent Services. We provide our clients with large-scale agent services. We target opportunities that allow our agent services to be a part of larger strategic client engagements and with clients for whom these services can add value. We believe that we are known in the industry as a premium provider of these services. We offer a flexible model that includes on-shore, off-shore and home-based agent capabilities to fit our clients needs. With the acquisition of Health Advocate, Inc. on June 13, 2014, we expanded Agent Services presence in the healthcare industry.
Basis of Consolidation The unaudited condensed consolidated financial statements include the accounts of West and its wholly-owned subsidiaries and reflect all adjustments (all of which are normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results, and cash flows for the interim periods. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, contained in our Annual Report on Form 10-K for the year ended December 31, 2013. All intercompany balances and transactions have been eliminated. Our results for the three and nine months ended September 30, 2014 are not necessarily indicative of what our results will be for other interim periods or for the full fiscal year.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition Conferencing services are generally billed and revenue recognized on a per participant minute basis. Web collaboration services are generally billed and revenue recognized on a per participant minute basis or, in the case of operating license arrangements, generally billed in advance and revenue recognized ratably over the service life period. IP communications services are generally billed and revenue recognized on a per seat basis. Interactive services are generally billed, and revenue recognized, on a per call, per message or per minute basis, or ratably over the contract term. We also charge clients for additional features, such as conference call recording, transcription services or professional services. Public safety services revenue is generated primarily from monthly fees based on the number of billing telephone numbers and cell towers covered under contract. In addition, product sales and installations are generally recognized upon completion of the installation and client acceptance of a fully functional system or, for contracts that are completed in stages, recognized upon completion of such stages and client acceptance. Contracts for annual recurring services such as support and maintenance agreements are generally billed in advance and are recognized as revenue ratably (on a monthly basis) over the contractual periods.
10
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue for telecom services is recognized in the period the service is provided and when collection is reasonably assured. These telecom services are primarily comprised of switched access charges for toll-free origination services, which are paid primarily by interexchange carriers.
Agent services revenue is generated in the month that services are performed, and services are generally billed based on call duration, hours of input, number of calls or a contingent basis. Revenue for contingent collection services and overpayment identification and recovery services is recognized in the month collection payments are received based upon a percentage of cash collected or other agreed upon contractual parameters. Revenue for health advocacy services is based on Per Employee Per Month fees charged under prepayment agreements for services and is recognized as revenue for the periods billed. Fees for future service periods are deferred until the service is performed.
Dividend - We funded the dividends paid in 2013 and the first nine months of 2014 with cash generated by our operations, and we anticipate funding future dividends with cash generated by our operations. The declaration and payment of all future dividends, if any, will be at the sole discretion of our Board of Directors. On each of February 20, 2014, May 15, 2014 and August 21, 2014, we paid a $0.225 per common share quarterly dividend. The total dividend paid was approximately $18.9 million to shareholders of record as of the close of business on February 10, 2014, May 5, 2014 and August 11, 2014, respectively, for a total of approximately $56.8 million.
Recent Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09 Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company will adopt ASU 2014-09 during the first quarter of fiscal 2017. We are still assessing the impact on the Companys consolidated condensed financial statements.
11
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. ACQUISITIONS
911 Enable
On September 2, 2014, we acquired the 911 Enable business of Connexon Group, Inc. (911 Enable), a provider of emergency communications solutions for IP-based enterprise customers across the United States and Canada. The purchase price was approximately $42.2 million and was funded with cash on hand.
In the preliminary purchase price allocation, goodwill of $20.2 million, not deductible for tax purposes, and finite-lived intangible assets of $21.7 million were recorded. The acquisition was integrated into our Communication Services segment, within public safety services. This will expand our enterprise VoIP 911 and public safety communications to deliver improved emergency response services to business, government, education and non-profit organizations.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date for 911 Enable. The finite-lived intangible assets are comprised of trade names ($1.4 million), technology ($4.9 million), non-competition agreements ($0.2 million) and customer relationships ($15.2 million) and will be amortized over their useful lives which range from three to ten years.
(Amounts in thousands) | September 2, 2014 |
|||
Working Capital |
$ | 494 | ||
Property and equipment |
59 | |||
Intangible assets |
21,685 | |||
Goodwill |
20,198 | |||
|
|
|||
Total assets acquired |
42,436 | |||
|
|
|||
Long-term liabilities |
258 | |||
|
|
|||
Total liabilities assumed |
258 | |||
|
|
|||
Net assets acquired |
$ | 42,178 | ||
|
|
Health Advocate
On June 13, 2014, we acquired Health Advocate, Inc. (Health Advocate), a leading provider of healthcare advocacy services. The purchase price was approximately $265.9 million and was funded with cash on hand and use of our revolving trade accounts receivable financing facility.
Health Advocate estimates it serves over 40 million Americans through more than 10,000 client relationships, including many of the nations largest employers, by helping members personally navigate healthcare and insurance-related issues, saving them time and money. Health Advocate leverages the power of pricing transparency and personalized health communications to help members make better informed decisions and get more value out of the healthcare system. Additional services include wellness coaching, employee assistant programs (EAPs), a nurse line, biometrics screenings and chronic care solutions. Health Advocates technology platform combined with clinical and health plan and claims billing experts can support consumers with a wide range of healthcare or health insurance issues.
In the preliminary purchase price allocation, goodwill of $162.0 million, not deductible for tax purposes, and finite-lived intangible assets of $150.2 million were recorded. The acquisition was integrated into our Communication Services, within agent services, to expand our services in the healthcare industry. Further, Health Advocates strong competitive position in the health advocacy market and Health Advocates suite of consumer focused services and health solutions provides cross-selling opportunities with our existing healthcare client base.
12
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date for Health Advocate. The finite-lived intangible assets are comprised of trade names ($30.1 million), technology ($36.4 million), non-competition agreements ($2.8 million) and customer relationships ($80.9 million) and will be amortized over their useful lives which range from four to twenty years.
(Amounts in thousands) | June 13, 2014 |
|||
Working Capital |
$ | (2,538 | ) | |
Property and equipment |
6,055 | |||
Other assets, net |
72 | |||
Intangible assets |
150,190 | |||
Goodwill |
161,964 | |||
|
|
|||
Total assets acquired |
315,743 | |||
|
|
|||
Non-current deferred taxes |
41,940 | |||
Long-term liabilities |
7,913 | |||
|
|
|||
Total liabilities assumed |
49,853 | |||
|
|
|||
Net assets acquired |
$ | 265,890 | ||
|
|
SchoolMessenger
On April 21, 2014, we acquired SchoolMessenger, a leading provider of notification and mobile communication solutions for the K-12 education market. The purchase price was approximately $77.4 million and was funded with cash on hand.
In the preliminary purchase price allocation, goodwill of $52.5 million, not deductible for tax purposes, and finite-lived intangible assets of $40.1 million were recorded. The acquisition was integrated into our Unified Communications segment, within interactive services, to expand our interactive services into the adjacent education vertical market.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date for SchoolMessenger. The finite-lived intangible assets are comprised of trade names ($1.7 million), technology ($8.8 million), non-competition agreements ($1.3 million) and customer relationships ($28.3 million) and will be amortized over their useful lives which range from three to twenty years.
13
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Amounts in thousands) | April 21, 2014 |
|||
Working Capital |
$ | (9,914 | ) | |
Property and equipment |
1,574 | |||
Intangible assets |
40,145 | |||
Goodwill |
52,513 | |||
|
|
|||
Total assets acquired |
84,318 | |||
|
|
|||
Non-current deferred taxes |
4,789 | |||
Long-term liabilities |
2,157 | |||
|
|
|||
Total liabilities assumed |
6,946 | |||
|
|
|||
Net assets acquired |
$ | 77,372 | ||
|
|
Revenue attributable to 911 Enable, Health Advocate and SchoolMessenger from their acquisition dates to September 30, 2014, was $0.8 million, $26.5 million and $11.8 million, respectively. Net income attributable to these three acquisitions from their acquisition dates was not significant.
Acquisition costs for the three months ended September 30, 2014 and 2013 were $1.5 million and $0.2 million, respectively, and are included in selling, general and administrative expenses. Acquisition costs for the nine months ended September 30, 2014 and 2013 were $3.2 million and $0.9 million, respectively, and are included in selling, general and administrative expenses.
The excess of the acquisition costs over the fair value of the assets acquired and liabilities assumed for the purchase of 911 Enable, Health Advocate and SchoolMessenger were assigned to goodwill based on preliminary estimates. We are in the process of completing the acquisition accounting for certain intangible assets and liabilities. The process of completing the acquisition accounting involves numerous time consuming steps for information gathering, verification and review. We expect to finalize this process within twelve months following the respective acquisition dates.
Pro forma
Assuming the acquisitions of 911 Enable, Health Advocate and SchoolMessenger occurred as of the beginning of the periods presented, our unaudited pro forma results of operations for the three and nine months ended September 30, 2014 and 2013 would have been, in thousands (except per share amounts), as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenue |
$ | 715,102 | $ | 696,112 | $ | 2,135,780 | $ | 2,087,373 | ||||||||
Net Income |
$ | 15,616 | $ | 41,907 | $ | 104,009 | $ | 79,314 | ||||||||
Earnings per share - basic |
$ | 0.19 | $ | 0.50 | $ | 1.24 | $ | 1.03 | ||||||||
Earnings per share - diluted |
$ | 0.18 | $ | 0.49 | $ | 1.22 | $ | 1.01 |
The pro forma results above are not necessarily indicative of the operating results that would have actually occurred if the acquisitions had been in effect on the date indicated, nor are they necessarily indicative of future results of the combined company.
3. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table presents the activity in goodwill by reporting segment, in thousands, for the nine months ended September 30, 2014 and year ended December 31, 2013:
14
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Unified Communications |
Communication Services |
Consolidated | ||||||||||
Balance at January 1, 2014 |
$ | 1,001,442 | $ | 822,479 | $ | 1,823,921 | ||||||
Foreign currency translation adjustment |
(13,437 | ) | (5 | ) | (13,442 | ) | ||||||
Acquisitions |
52,513 | 182,162 | 234,675 | |||||||||
Acquisition accounting adjustments |
(226 | ) | | (226 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance at September 30, 2014 |
$ | 1,040,292 | $ | 1,004,636 | $ | 2,044,928 | ||||||
|
|
|
|
|
|
|||||||
Balance at January 1, 2013 |
$ | 994,372 | $ | 822,479 | $ | 1,816,851 | ||||||
Foreign currency translation adjustment |
7,070 | | 7,070 | |||||||||
|
|
|
|
|
|
|||||||
Balance at December 31, 2013 |
$ | 1,001,442 | $ | 822,479 | $ | 1,823,921 | ||||||
|
|
|
|
|
|
The following table presents the gross carrying amount and accumulated impairment charge of goodwill, in thousands:
As of | ||||||||
September 30, 2014 | December 31, 2013 | |||||||
Gross carrying amount |
$ | 2,082,603 | $ | 1,861,596 | ||||
Accumulated impairment (1) |
(37,675 | ) | (37,675 | ) | ||||
|
|
|
|
|||||
Net carrying amount |
$ | 2,044,928 | $ | 1,823,921 | ||||
|
|
|
|
(1) | The impairment was recorded in 2010. |
Other intangible assets
Below is a summary of the major intangible assets for each identifiable intangible asset, in thousands:
15
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of September 30, 2014 | ||||||||||||
Intangible assets |
Acquired Cost |
Accumulated Amortization |
Net Intangible Assets |
|||||||||
Customer lists |
$ | 667,088 | $ | (445,657 | ) | $ | 221,431 | |||||
Technology & Patents |
170,221 | (80,071 | ) | 90,150 | ||||||||
Trade names (indefinite-lived) |
37,710 | | 37,710 | |||||||||
Trade names (finite-lived) |
69,834 | (24,374 | ) | 45,460 | ||||||||
Other intangible assets |
25,066 | (15,602 | ) | 9,464 | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 969,919 | $ | (565,704 | ) | $ | 404,215 | |||||
|
|
|
|
|
|
|||||||
As of December 31, 2013 | ||||||||||||
Intangible assets |
Acquired Cost |
Accumulated Amortization |
Net Intangible Assets |
|||||||||
Customer lists |
$ | 547,860 | $ | (422,367 | ) | $ | 125,493 | |||||
Technology & Patents |
122,099 | (72,549 | ) | 49,550 | ||||||||
Trade names (indefinite-lived) |
47,110 | | 47,110 | |||||||||
Trade names (finite-lived) |
27,414 | (20,389 | ) | 7,025 | ||||||||
Other intangible assets |
15,894 | (13,631 | ) | 2,263 | ||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 760,377 | $ | (528,936 | ) | $ | 231,441 | |||||
|
|
|
|
|
|
Amortization expense for finite-lived intangible assets was $18.3 million and $13.9 million for the three months ended September 30, 2014 and 2013, respectively, and $44.5 million and $41.8 million for the nine months ended September 30, 2014 and 2013, respectively. The 2014 annual impairment analysis of goodwill and intangible assets will be in the fourth quarter. Estimated amortization expense for the intangible assets noted above for the entire year of 2014 and the next five years is as follows:
2014 |
$61.0 million | |
2015 |
$63.7 million | |
2016 |
$51.8 million | |
2017 |
$42.7 million | |
2018 |
$37.7 million | |
2019 |
$33.7 million |
16
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. ACCRUED EXPENSES
Accrued expenses, in thousands, consisted of the following as of:
September 30, 2014 |
December 31, 2013 |
|||||||
Accrued wages |
$ | 84,837 | $ | 61,945 | ||||
Accrued phone |
56,591 | 48,201 | ||||||
Interest payable |
44,080 | 48,793 | ||||||
Accrued other taxes (non-income related) |
39,481 | 42,022 | ||||||
Income taxes payable |
28,150 | 5,922 | ||||||
Acquisition obligation |
6,115 | | ||||||
Accrued lease expense |
4,361 | 3,204 | ||||||
Accrued employee benefit costs |
3,609 | 5,992 | ||||||
Deferred income tax |
| 7,697 | ||||||
Other accrued expenses |
30,997 | 25,906 | ||||||
|
|
|
|
|||||
$ | 298,221 | $ | 249,682 | |||||
|
|
|
|
5. LONG-TERM OBLIGATIONS
Long-term debt is carried at amortized cost. Long-term obligations, in thousands, consist of the following as of:
September 30, |
December 31, |
|||||||
|
|
|||||||
2014 | 2013 | |||||||
Senior Secured Term Loan Facility, due 2016 |
$ | 311,317 | $ | 312,097 | ||||
Senior Secured Term Loan Facility, due 2018 |
1,813,250 | 2,063,250 | ||||||
Accounts Receivable Securitization, due 2018 |
184,235 | | ||||||
8 5/8% Senior Notes, paid in 2014 |
| 500,000 | ||||||
7 7/8% Senior Notes, due 2019 |
450,000 | 650,000 | ||||||
5 3/8% Senior Notes, due 2022 |
1,000,000 | | ||||||
|
|
|
|
|||||
3,758,802 | 3,525,347 | |||||||
|
|
|
|
|||||
Less: current maturities |
(3,121 | ) | (11,877 | ) | ||||
|
|
|
|
|||||
Long-term obligations |
$ | 3,755,681 | $ | 3,513,470 | ||||
|
|
|
|
Senior Secured Term Loan Facility and Senior Secured Revolving Credit Facility
On January 24, 2014, we modified our senior secured term loan facilities (Senior Secured Credit Facilities) by entering into Amendment No. 4 to the Amended and Restated Credit Agreement (the Credit Agreement) among West Corporation, certain of our domestic subsidiaries, Wells Fargo Bank, National Association (Wells Fargo), as administrative agent, and the various lenders party thereto (the Fourth Amendment). The Fourth Amendment provided for a 25 basis point reduction in the applicable LIBOR interest rate margins and a 25 basis point reduction in the LIBOR interest rate floors of all term loans. In connection with the Fourth Amendment, we incurred refinancing expenses of approximately $5.8 million, which will be amortized into interest expense over the remaining life of the Amended Credit Agreement (as defined below).
On July 1, 2014, the Company, Wells Fargo, as administrative agent, and the various lenders party thereto further modified our Senior Secured Credit Facilities by entering into Amendment No. 5 to Amended and Restated Credit Agreement (the Fifth Amendment, and the Credit Agreement, as previously amended and further amended by the Fifth Amendment, the Amended Credit Agreement). The Fifth Amendment provided for:
17
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
a new delayed draw term loan A facility (the TLA) to be made available, in a single borrowing, at any time on or before December 31, 2014 in the form of TLA loans having terms substantially similar to the existing term loans under our Senior Secured Credit Facilities, except with respect to pricing, amortization and maturity, in an aggregate principal amount of $350.0 million. The TLA matures July 1, 2019. The proceeds of the TLA will be used at our option (i) to prepay in part the Senior Secured Term Loan Facilities due in 2016 (the 2016 Maturity Term Loans) and the Senior Secured Term Loan Facilities due in 2018 (the 2018 Maturity Term Loans and, together with the 2016 Maturity Term Loans, the Term Loans) and pay accrued but unpaid interest thereon, (ii) to redeem any of our 7.875% Senior Notes due 2019, (iii) for working capital and general corporate purposes and (iv) to pay fees and expenses incurred in connection with the TLA;
annual amortization (payable in quarterly installments) in respect of the TLA at a 2.5% annual rate in the year ending June 30, 2015, a 5.0% annual rate in the year ending June 30, 2016, a 7.5% annual rate in the year ending June 30, 2017 and a 10.0% annual rate thereafter until the maturity date, at which point all remaining amounts outstanding under the TLA shall become due and payable;
an interest rate margin applicable to the TLA that is based on the Companys total leverage ratio and ranges from 1.50% to 2.25% for LIBOR rate loans and from 0.50% to 1.25% for base rate loans;
a senior secured revolving credit facility (the Senior Secured Revolving Credit Facility) to be made available under the Amended Credit Agreement in replacement of, and in the form of revolving credit loans having terms substantially similar to, the existing senior secured revolving credit facility under our Credit Agreement (except with respect to pricing and maturity), in an aggregate principal amount of $300.0 million that matures July 1, 2019; and
an interest rate margin applicable to the Senior Secured Revolving Credit Facility that is based on the Companys total leverage ratio and ranges from 1.50% to 2.25% for LIBOR rate loans and from 0.50% to 1.25% for base rate loans.
As of September 30, 2014, the interest rate margins applicable to the term loans due June 30, 2018 were 2.50% for LIBOR rate loans and 1.50% for base rate loans, and the interest rate margins applicable to the term loans due July 15, 2016 were 2.0% for LIBOR rate loans and 1.00% for base rate loans. The Fourth Amendment also provides for interest rate floors applicable to the term loans. The interest rate floors effective September 30, 2014 were 0.75% for the LIBOR component of LIBOR rate loans and 1.75% for the base rate component of base rate loans.
In connection with the Fifth Amendment, we incurred refinancing expenses of approximately $5.3 million, which will be amortized into interest expense over the remaining life of the 2018 Maturity Term Loans, the TLA and the Senior Secured Revolving Credit Facility.
2022 Senior Notes
On July 1, 2014, we issued $1.0 billion aggregate principal amount of our 5.375% Senior Notes due 2022 (the 2022 Senior Notes). The 2022 Senior Notes mature on July 15, 2022 and were issued at par. The 2022 Senior Notes were offered in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act).
18
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The net proceeds from the offering were approximately $986.5 million, after deducting underwriting discounts and offering expenses. On July 1, 2014, we used a portion of the net proceeds from the 2022 Senior Notes to repurchase pursuant to tender offers:
| $270.8 million aggregate principal amount of the 8.625% Senior Notes due 2018 (the 2018 Senior Notes). The aggregate repurchase price for the 2018 Senior Notes was $298.7 million including accrued interest of $10.8 million and tender offer premium of $17.1 million; |
| $200.0 million aggregate principal amount of the 7.875% Senior Notes due 2019 (the 2019 Senior Notes). The aggregate repurchase price for the 2019 Senior Notes was $215.3 million including accrued interest of $2.0 million and tender offer premium of $13.3 million. |
In addition, on July 1, 2014, we used a portion of the net proceeds from the 2022 Senior Notes to repay a portion of the 2018 Maturity Term Loans. The total aggregate principal amount repaid on the 2018 Maturity Term Loans was $250.0 million.
On July 17, 2014, we used a portion of the net proceeds from the 2022 Senior Notes, together with cash on hand to redeem the remaining $229.2 million aggregate principal amount of the 2018 Senior Notes for an aggregate redemption price of $242.9 million, including payments of the $9.9 million redemption premium, $3.7 million make-whole premium and accrued interest of $0.1 million.
The 2022 Senior Notes bear interest at a rate of 5.375% per year, payable semiannually in arrears on July 15 and January 15 of each year, beginning January 15, 2015. The 2022 Senior Notes will mature July 15, 2022. The 2022 Senior Notes are unsecured senior obligations and rank equally in right of payment with all of our future senior debt and are senior to all of our future subordinated debt. Each of our domestic wholly owned subsidiaries that guarantees our Senior Secured Credit Facilities guarantee the notes with guarantees that rank equal in right of payment to all existing and future senior debt of such subsidiary. The 2022 Senior Notes and guarantees are effectively subordinated to our existing and future secured debt and that of the guarantors to the extent of the value of the assets securing such debt.
In connection with the 2022 Senior Notes, we incurred refinancing expenses of approximately $16.0 million, which will be amortized into interest expense over the remaining life of the 2022 Senior Notes.
2018 Senior Notes
In connection with the issuance of the 2022 Senior Notes, on June 17, 2014, we commenced a tender offer to purchase any and all of our outstanding $500.0 million in aggregate principal amount of the 2018 Senior Notes. Total offer consideration for each $1,000 principal amount of the 2018 Senior Notes tendered was $1,063.09, including an early tender premium of $20.00 per $1,000 principal amount of the 2018 Senior Notes for those holders who properly tendered their 2018 Senior Notes on or before June 30, 2014. Upon consummation of the tender offer on July 1, 2014, approximately $270.8 million aggregate principal amount of the 2018 Senior Notes was purchased. Total consideration paid for the tender offer, including early tender premium payment and accrued interest, was approximately $298.7 million.
The redemption date for the call of the 2018 Senior Notes was July 17, 2014 at a redemption price equal to 104.313% of the principal amount of the 2018 Senior Notes and make-whole premium. The Company redeemed the remaining $229.2 million aggregate principal amount of the 2018 Senior Notes for an aggregate redemption price of $242.9 million including payments of the $9.9 million redemption premium, $3.7 million make-whole premium and accrued interest of $0.1 million. In addition we recorded accelerated amortization of deferred financing costs of $5.9 million in connection with the redemption of the 2018 Senior Notes. Following this redemption, none of the 2018 Senior Notes remained outstanding.
19
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2019 Senior Notes
In connection with the issuance of the 2022 Senior Notes, on June 17, 2014, we commenced a tender offer to purchase up to $200.0 million in aggregate principal amount of the 2019 Senior Notes. Total offer consideration for each $1,000 principal amount of the 2019 Senior Notes tendered was $1,066.29, including an early tender premium of $20.00 per $1,000 principal amount of the 2019 Senior Notes for those holders who properly tendered their 2019 Senior Notes on or before June 30, 2014. Upon consummation of the tender offer on July 1, 2014, $200.0 million aggregate principal amount of the 2019 Senior Notes was purchased. Total consideration paid for the tender offer, including early tender premium payment and accrued interest, was approximately $215.3 million. In addition, we recorded accelerated amortization of deferred financing costs of $1.8 million in connection with the purchase of the $200.0 million aggregate principal amount of the 2019 Senior Notes.
On October 16, 2014 we delivered a redemption notice for the remaining $450.0 million of 2019 Senior Notes. The redemption premium is $17.7 million and will be deposited with the 2019 Senior Notes indenture trustee on November 14, 2014. We intend to use proceeds from the TLA, the Senior Secured Revolving Credit Facility and cash on hand to pay in full the 2019 Senior Notes, redemption premium and accrued interest.
At September 30, 2014, we were in compliance with our financial debt covenants.
6. HEDGING ACTIVITIES
Periodically, we have entered into interest rate swaps to hedge the cash flows from our variable rate debt, which effectively converts the hedged portion under our outstanding senior secured term loan facility to fixed rate debt. The initial assessments of hedge effectiveness were performed using regression analysis. The periodic measurements of hedge ineffectiveness are performed using the change in variable cash flows method. The cash flow hedges were recorded at fair value with a corresponding entry, net of taxes, recorded in other comprehensive income (OCI) until earnings were affected by the hedged item. In June 2013, three interest rate swaps with an aggregate notional value of $500.0 million matured. The interest rate on these three interest rate swaps ranged from 1.685% to 1.6975%. At September 30, 2014 and December 31, 2013, we did not have any interest rate swaps.
The following presents, in thousands, the impact of interest rate swaps on the consolidated statement of operations for the three and nine months ended September 30, 2013.
Amount of gain | ||||||||||||
Amount of gain | reclassified from OCI | |||||||||||
recognized in OCI | into earnings for the | |||||||||||
for the three months | Location of gain | three months ended | ||||||||||
Derivatives designated | ended September 30, | reclassified from OCI | September 30, | |||||||||
as hedging instruments |
2013 | into net income | 2013 | |||||||||
Interest rate swaps |
$ | | Interest expense | $ | | |||||||
|
|
|
|
|||||||||
For the nine months | For the nine months | |||||||||||
ended September 30, | ended September 30, | |||||||||||
2013 | 2013 | |||||||||||
Interest rate swaps |
$ | 1,786 | Interest expense | $ | 2,985 | |||||||
|
|
|
|
20
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FAIR VALUE DISCLOSURES
Accounting Standards Codification 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC 820 apply to other accounting pronouncements that require or permit fair value measurements. ASC 820:
| Defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and |
| Establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. |
Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:
| Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial instrument. |
| Level 3 inputs are unobservable inputs for assets or liabilities. |
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Following is a description of the valuation methodologies used for assets and liabilities measured at fair value.
Trading Securities (Asset). The assets held in the West Corporation Executive Retirement Savings Plan and the West Corporation Nonqualified Deferred Compensation Plan represent mutual funds, invested in debt and equity securities, classified as trading securities in accordance with the provisions of Accounting Standards Codification 320 InvestmentsDebt and Equity Securities considering the employees ability to change the investment allocation of their deferred compensation at any time. Quoted market prices are available for these securities in an active market; therefore the fair value of these securities is determined by Level 1 inputs.
We evaluate classification within the fair value hierarchy at each period. There were no transfers between any levels of the fair value hierarchy during the periods presented.
21
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Assets and liabilities measured at fair value on a recurring basis, in thousands, are summarized below:
Fair Value Measurements at September 30, 2014 Using: | ||||||||||||||||||||
Quoted Prices | Significant | |||||||||||||||||||
in Active | Other | Significant | Assets / | |||||||||||||||||
Markets for | Observable | Unobservable | Liabilities | |||||||||||||||||
Carrying | Identical Assets | Inputs | Inputs | at Fair | ||||||||||||||||
Description |
Amount | (Level 1) | (Level 2) | (Level 3) | Value | |||||||||||||||
Other Assets |
||||||||||||||||||||
Trading securities |
$ | 63,501 | $ | 63,501 | $ | | $ | | $ | 63,501 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2013 Using: | ||||||||||||||||||||
Quoted Prices | Significant | |||||||||||||||||||
in Active | Other | Significant | Assets / | |||||||||||||||||
Markets for | Observable | Unobservable | Liabilities | |||||||||||||||||
Carrying | Identical Assets | Inputs | Inputs | at Fair | ||||||||||||||||
Description |
Amount | (Level 1) | (Level 2) | (Level 3) | Value | |||||||||||||||
Other Assets |
||||||||||||||||||||
Trading securities |
$ | 53,397 | $ | 53,397 | $ | | $ | | $ | 53,397 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The fair value of our 5.375% senior notes and 7.875% senior notes based on market quotes, which we determined to be Level 1 inputs, at September 30, 2014 was approximately $1,394.1 million compared to the carrying amount of $1,450.0 million. The fair value of our 7.875% senior notes based on market quotes, which we determined to be Level 1 inputs, at December 31, 2013 was approximately $701.2 million compared to the carrying amount of $650.0 million. Our 8.625% senior notes were paid in full in July 2014. At December 31, 2013 the fair value or our 8.625% senior notes was $542.5 million compared to the carrying value of $500.0 million.
The fair value of our senior secured term loan facilities was estimated using current market quotes on comparable debt securities from various financial institutions. All of the inputs used to determine the fair market value of our senior secured term loan facilities are Level 2 inputs and obtained from an independent source. The fair value of our senior secured term loan facilities at September 30, 2014 was approximately $2,118.5 million compared to the carrying amount of $2,124.6 million. The fair value of our senior secured term loan facilities at December 31, 2013 was approximately $2,385.0 million compared to the carrying amount of $2,375.3 million.
8. STOCK-BASED COMPENSATION
2006 Executive Incentive Plan
Stock options granted under the West Corporation 2006 Executive Incentive Plan (2006 EIP) prior to 2012 vest over a period of five years, with 20% of the stock option becoming exercisable on each of the first through fifth anniversaries of the grant date. Stock options granted under the 2006 EIP in 2012 and 2013 vest over a period of four years, with 25% of the stock option becoming exercisable on each of the first through fourth anniversaries of the grant date. Once an option has vested, it generally remains exercisable until the tenth anniversary of the grant date so long as the participant continues to provide services to the Company.
22
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2013 Long-Term Incentive Plan
Prior to the completion of our initial public offering (IPO) on March 27, 2013, we adopted, and subsequently amended, the 2013 Long-Term Incentive Plan (as amended, 2013 LTIP) which is intended to provide our officers, employees, non-employee directors and consultants with added incentive to remain employed by or perform services for us and align such individuals interests with those of our stockholders. Under the terms of the 2013 LTIP, 8,500,000 shares of common stock will be available for stock options, restricted stock or other types of equity awards granted under the 2013 LTIP, subject to adjustment for stock splits and other similar changes in capitalization. The number of available shares will be reduced by the aggregate number of shares that become subject to outstanding awards granted under the 2013 LTIP. To the extent that shares subject to an outstanding award granted under the 2013 LTIP are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or by reason of the settlement of such award in cash, then such shares will again be available under the 2013 LTIP.
Stock options granted under the 2013 LTIP vest over a period of four years, with 25% of the stock option becoming exercisable on each of the first through fourth anniversaries of the grant date. Once an option has vested, it generally remains exercisable until the tenth anniversary of the grant date so long as the participant continues to provide services to the Company. Restricted stock granted under the 2013 LTIP vests over a period of three or four years, with a ratable portion of the restricted stock award vested on each anniversary of the grant date until fully vested, unless earlier forfeited as a result of termination of service to the Company prior to the applicable vesting date. Dividends are payable in respect of shares of unvested restricted stock either at the time of the dividend is paid to stockholder or upon vesting of the restricted stock in accordance with the terms of the applicable restricted stock award agreement.
2006 Executive Incentive Plan and 2013 Long-Term Incentive Plan Stock Options
The following table presents the stock option activity under the 2006 EIP and 2013 LTIP for the nine months ended September 30, 2014.
Options Outstanding | ||||||||||||
Options | Weighted | |||||||||||
Available | Number | Average | ||||||||||
for Grant | of Options | Exercise Price | ||||||||||
Balance at January 1, 2014 |
8,005,398 | 3,022,823 | $ | 27.21 | ||||||||
Options granted |
(217,785 | ) | 217,785 | 24.72 | ||||||||
Options exercised |
| (50,832 | ) | 17.64 | ||||||||
Canceled or forfeited (2013 LTIP) |
20,674 | (20,674 | ) | 23.72 | ||||||||
Canceled or forfeited (2006 EIP) |
| (199,056 | ) | 29.50 | ||||||||
Restricted stock granted |
(1,400,966 | ) | | | ||||||||
Restricted stock canceled |
18,552 | | | |||||||||
|
|
|
|
|
|
|||||||
Balance at September 30, 2014 |
6,425,873 | 2,970,046 | $ | 27.06 | ||||||||
|
|
|
|
|
|
At September 30, 2014, we expect that approximately 20% of options granted will be canceled or forfeited over the vesting period. At September 30, 2014, the intrinsic value of options vested and exercisable was approximately $4.2 million. The aggregate intrinsic value of options outstanding at September 30, 2014, was approximately $11.2 million. The aggregate intrinsic value of options outstanding, vested and expected to vest at September 30, 2014, was approximately $10.4 million.
23
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes the information on the options granted under the 2006 EIP and 2013 LTIP at September 30, 2014:
Outstanding | Vested and Exercisable | |||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
Remaining | Average | Average | ||||||||||||||||||
Range of | Number of | Contractual | Exercise | Number of | Exercise | |||||||||||||||
Exercise Prices |
Options | Life (years) | Price | Options | Price | |||||||||||||||
$0.00 - $13.12 | 100,234 | 2.18 | $ | 13.12 | 100,234 | $ | 13.12 | |||||||||||||
13.13 - 28.88 | 2,238,331 | 7.79 | 25.18 | 637,964 | 25.52 | |||||||||||||||
28.89 - 50.88 | 603,858 | 7.29 | 34.02 | 603,858 | 34.02 | |||||||||||||||
50.89 - 84.80 | 27,623 | 5.91 | 77.54 | 19,785 | 76.70 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$0.00 - $84.80 | 2,970,046 | 7.48 | $ | 27.06 | 1,361,841 | $ | 29.12 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
Options Outstanding | ||||||||||||
Options | Weighted | |||||||||||
Available | Number | Average | ||||||||||
Executive Management Rollover Options |
for Grant | of Shares | Exercise Price | |||||||||
Balance at January 1, 2014 |
| 71,199 | $ | 5.47 | ||||||||
Exercised |
| (58,783 | ) | 5.47 | ||||||||
|
|
|
|
|
|
|||||||
Balance at September 30, 2014 |
| 12,416 | $ | 5.47 | ||||||||
|
|
|
|
|
|
The executive rollover options are fully vested and have an average remaining life of 0.9 years. The aggregate intrinsic value of these options at September 30, 2014 was approximately $0.3 million.
We account for the stock option grants under the 2006 EIP and 2013 LTIP in accordance with Accounting Standards Codification 718, Compensation-Stock Compensation. The fair value of each option granted was estimated on the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for grants during the period.
Nine months ended September 30, | ||||||||
2014 | 2013 | |||||||
Risk-free interest rate |
2.02 | % | 1.45 | % | ||||
Dividend yield |
3.64 | % | 2.41 | % | ||||
Expected volatility |
29.10 | % | 35.40 | % | ||||
Expected life (years) |
6.25 | 6.25 | ||||||
Fair value of option award |
$ | 4.90 | $ | 6.73 |
24
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The risk-free interest rate for periods within the expected life of the option is based on the zero-coupon U.S. government treasury strip with a maturity which approximates the expected life of the option at the time of grant.
At September 30, 2014 and 2013, there was approximately $11.3 million and $15.8 million, respectively, of unrecorded and unrecognized compensation expense related to unvested stock options, awarded under the 2006 EIP and 2013 LTIP in aggregate, which will be recognized over the remaining vesting period of approximately 1.8 years as of September 30, 2014.
Restricted Stock
On July 30, 2014, 83,269 restricted shares awarded on July 30, 2013 vested, 68,040 of which were issued and 15,229 of which were retired to cover the associated payroll taxes.
During the nine months ended September 30, 2014, pursuant to our agreement with our non-employee directors who are not affiliated with our former sponsors, we issued 12,591 shares of common stock with an aggregate fair value of approximately $0.3 million. 4,203 of these shares were granted to a new non-employee director and are fully vested subject to a pro rata forfeiture if the director does not remain on the board for at least six months. The remaining 8,388 shares were issued as an annual equity grant to our other two non-employee directors who are not affiliated with our former sponsors. These shares vest on the one-year anniversary of the date of grant.
During September 2014, we issued 1,331,150 restricted stock awards and 57,225 restricted stock units to certain key employees. These awards vest ratably with 25% of the award becoming exercisable on each of the first through fourth anniversaries of the award date. The fair value of these awards at the date of grant was approximately $41.1 million and will be recognized over the remaining vesting period of approximately 3.9 years as of September 30, 2014.
2013 Employee Stock Purchase Plan
During the fourth quarter of 2013, we implemented the 2013 Employee Stock Purchase Plan (ESPP), under which the sale of 1.0 million shares of our common stock has been authorized and reserved. Employees may designate up to 50% of their annual compensation for the purchase of stock, subject to a per person limit of 2,000 shares in any offering period or calendar year. The price for shares purchased under the ESPP is 85% of the market closing price on the last day of the quarterly purchase period. No employee will be authorized to purchase common stock through the ESPP if, immediately after the purchase, the employee (or any other person whose stock would be attributed to such employee under U.S. tax law) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any parent of the Company or any subsidiary. In addition, no participant will be entitled to purchase stock under the ESPP at a rate which, when aggregated with his or her rights to purchase stock under all other employee stock purchase plans of the Company and its subsidiaries, exceeds $25,000 in fair market value, determined as of the date of grant (or such other limit as may be imposed by U.S. tax law), for each calendar year in which any option granted to the participant under any such plans is outstanding at any time. As of September 30, 2014, 220,220 shares had been issued under the ESPP. For the three and nine months ended September 30, 2014, we recognized compensation expense for this plan of $0.2 million and $0.8 million, respectively.
25
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Stock-Based Compensation Expense
For the three months ended September 30, 2014 and 2013, stock-based compensation expense was $4.0 million and $3.1 million, respectively. For the nine months ended September 30, 2014 and 2013, stock-based compensation expense was $10.2 million and $8.2 million, respectively.
9. EARNINGS PER SHARE
Diluted earnings per share reflects the potential dilution that could result if options or other contingently issuable shares were exercised or converted into common stock and notional shares from the Nonqualified Deferred Compensation Plan were granted. Diluted earnings per common share assumes the exercise of stock options using the treasury stock method.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(In thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Earnings Per Common Share: |
||||||||||||||||
Basic |
$ | 0.19 | $ | 0.55 | $ | 1.31 | $ | 1.20 | ||||||||
Diluted |
$ | 0.19 | $ | 0.54 | $ | 1.29 | $ | 1.18 | ||||||||
Weighted Average Number of Shares Outstanding: |
||||||||||||||||
Basic - Common |
84,090 | 83,581 | 83,950 | 77,274 | ||||||||||||
Dilutive Impact of Equity Incentive Plans: |
||||||||||||||||
Common Shares |
1,521 | 1,461 | 1,450 | 1,446 | ||||||||||||
Diluted Common Shares |
85,611 | 85,042 | 85,400 | 78,720 |
Diluted earnings per share are computed using the weighted-average number of common shares and dilutive potential common shares outstanding during the period. Dilutive potential common shares result from the assumed exercise of outstanding stock options and unvested restricted stock, by application of the treasury stock method that have a dilutive effect on earnings per share and notional shares of the Company in the West Corporation Nonqualified Deferred Compensation Plan. At September 30, 2014 and 2013, 631,481 and 2,691,542 stock options were outstanding with an exercise price equal to or exceeding the market value of our common stock, and therefore the shares underlying such options were excluded from the computation of shares contingently issuable upon exercise of the options.
26
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Activity within accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2014 and 2013 were as follows (net of tax):
Accumulated | ||||||||||||
Foreign | Cash | Other | ||||||||||
Currency | Flow | Comprehensive | ||||||||||
Translation | Hedges | Income (Loss) | ||||||||||
BALANCE, July 1, 2014 |
$ | (11,492 | ) | $ | | $ | (11,492 | ) | ||||
Foreign currency translation adjustment, net of tax of $7,570 |
(15,658 | ) | | (15,658 | ) | |||||||
|
|
|
|
|
|
|||||||
BALANCE, September 30, 2014 |
$ | (27,150 | ) | $ | | $ | (27,150 | ) | ||||
|
|
|
|
|
|
|||||||
BALANCE, January 1, 2014 |
$ | (12,200 | ) | $ | | $ | (12,200 | ) | ||||
Foreign currency translation adjustment, net of tax of $8,593 |
(14,950 | ) | | (14,950 | ) | |||||||
|
|
|
|
|
|
|||||||
BALANCE, September 30, 2014 |
$ | (27,150 | ) | $ | | $ | (27,150 | ) | ||||
|
|
|
|
|
|
|||||||
Foreign | Cash | Other | ||||||||||
Currency | Flow | Comprehensive | ||||||||||
Translation | Hedges | Income (Loss) | ||||||||||
BALANCE, July 1, 2013 |
$ | (26,648 | ) | $ | | $ | (26,648 | ) | ||||
Foreign currency translation adjustment, net of tax of $(3,744) |
6,109 | | 6,109 | |||||||||
|
|
|
|
|
|
|||||||
BALANCE, September 30, 2013 |
$ | (20,539 | ) | $ | | $ | (20,539 | ) | ||||
|
|
|
|
|
|
|||||||
BALANCE, January 1, 2013 |
$ | (21,345 | ) | $ | (1,786 | ) | $ | (23,131 | ) | |||
Foreign currency translation adjustment, net of tax of $(494) |
806 | | 806 | |||||||||
Reclassification of cash flow hedge into earnings, net of tax of $1,349 (1) |
| (2,201 | ) | (2,201 | ) | |||||||
Unrealized gain on cash flow hedges, net of tax of $(2,444) |
| 3,987 | 3,987 | |||||||||
|
|
|
|
|
|
|||||||
BALANCE, September 30, 2013 |
$ | (20,539 | ) | $ | | $ | (20,539 | ) | ||||
|
|
|
|
|
|
(1) | Recorded as interest expense in the condensed consolidated statement of operations. |
27
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
11. BUSINESS SEGMENTS
We operate in two business segments:
Unified Communications, including conferencing and collaboration, IP communications and interactive services; and
Communication Services, including public safety services, telecom services and agent services.
Effective January 1, 2014, we implemented a revised organizational structure which our Chief Executive Officer utilizes for making strategic and operational decisions and allocating resources. Under the revised organizational structure, automated call processing services management and operations have been moved from the Communication Services segment to the Unified Communications segment and have been combined with alerts and notifications to form interactive services. Beginning in the first quarter of 2014, all prior period comparative information has been recast to reflect this change as if it had taken place in all periods presented.
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(amounts in thousands) | ||||||||||||||||
Revenue: |
||||||||||||||||
Unified Communications |
$ | 404,511 | $ | 396,659 | $ | 1,221,328 | $ | 1,200,161 | ||||||||
Communication Services |
322,777 | 280,399 | 903,136 | 820,968 | ||||||||||||
Intersegment eliminations |
(14,087 | ) | (11,692 | ) | (44,048 | ) | (22,844 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 713,201 | $ | 665,366 | $ | 2,080,416 | $ | 1,998,285 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating Income: |
||||||||||||||||
Unified Communications |
$ | 95,166 | $ | 105,247 | $ | 292,186 | $ | 299,369 | ||||||||
Communication Services |
25,784 | 18,179 | 72,535 | 52,085 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 120,950 | $ | 123,426 | $ | 364,721 | $ | 351,454 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Depreciation and Amortization |
||||||||||||||||
(Included in operating income) |
||||||||||||||||
Unified Communications |
$ | 27,654 | $ | 25,395 | $ | 79,386 | $ | 73,698 | ||||||||
Communication Services |
25,210 | 20,404 | 64,588 | 60,880 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 52,864 | $ | 45,799 | $ | 143,974 | $ | 134,578 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Capital Expenditures: |
||||||||||||||||
Unified Communications |
$ | 14,263 | $ | 15,978 | $ | 36,566 | $ | 41,135 | ||||||||
Communication Services |
16,208 | 11,594 | 44,976 | 33,045 | ||||||||||||
Corporate |
2,140 | 1,825 | 19,046 | 3,914 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 32,611 | $ | 29,397 | $ | 100,588 | $ | 78,094 | ||||||||
|
|
|
|
|
|
|
|
As of September 30, | As of December 31, | |||||||
2014 | 2013 | |||||||
(amounts in thousands) | ||||||||
Assets: |
||||||||
Unified Communications |
$ | 1,751,674 | $ | 1,734,585 | ||||
Communication Services |
1,609,875 | 1,317,879 | ||||||
Corporate |
567,676 | 433,800 | ||||||
|
|
|
|
|||||
Total |
$ | 3,929,225 | $ | 3,486,264 | ||||
|
|
|
|
28
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For the three months ended September 30, 2014 and 2013, our largest 100 clients represented 53% and 56% of our total revenue, respectively. For the nine months ended September 30, 2014 and 2013, our largest 100 clients represented 53% and 55% of our total revenue, respectively.
Platform-based service revenue includes services provided in both the Unified Communications and Communication Services segments, while agent-based service revenue is provided in the Communication Services segment. During the three months ended September 30, 2014 and 2013, revenue from platform-based services was $502.6 million and $483.0 million, respectively. During the nine months ended September 30, 2014 and 2013, revenue from platform-based services was $1,504.4 million and $1,459.4 million, respectively. During the three months ended September 30, 2014 and 2013, revenue from agent-based services was $213.6 million and $185.6 million, respectively. During the nine months ended September 30, 2014 and 2013, revenue from agent-based services was $586.8 million and $548.7 million, respectively. The platform-based and agent services revenues are presented prior to intercompany eliminations.
For the three months ended September 30, 2014 and 2013, revenues from non-U.S. countries were approximately 17% and 18% of consolidated revenues, respectively. For the nine months ended September 30, 2014 and 2013, revenues from non-U.S. countries were approximately 18% and 19% of consolidated revenues, respectively. During these periods no individual foreign country accounted for greater than 10% of revenue. Revenue is attributed to an organizational region based on location of the billed customers account. Geographic information by organizational region, in thousands, is noted below:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
(amounts in thousands) | ||||||||||||||||
Revenue: |
||||||||||||||||
Americas - United States |
$ | 589,234 | $ | 542,673 | $ | 1,697,826 | $ | 1,621,745 | ||||||||
Europe, Middle East & Africa (EMEA) |
77,175 | 73,963 | 245,597 | 233,469 | ||||||||||||
Asia Pacific |
40,215 | 43,184 | 118,606 | 125,572 | ||||||||||||
Americas - Other |
6,577 | 5,546 | 18,387 | 17,499 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 713,201 | $ | 665,366 | $ | 2,080,416 | $ | 1,998,285 | ||||||||
|
|
|
|
|
|
|
|
As of September 30, | As of December 31, | |||||||
2014 | 2013 | |||||||
(amounts in thousands) | ||||||||
Long-Lived Assets: |
||||||||
Americas - United States |
$ | 2,883,498 | $ | 2,432,477 | ||||
Europe, Middle East & Africa (EMEA) |
188,222 | 204,282 | ||||||
Asia Pacific |
27,900 | 25,209 | ||||||
Americas - Other |
1,808 | 2,726 | ||||||
|
|
|
|
|||||
Total |
$ | 3,101,428 | $ | 2,664,694 | ||||
|
|
|
|
For the three months ended September 30, 2014 and 2013, the aggregate gain (loss) on transactions denominated in currencies other than the functional currency of West Corporation or any of its subsidiaries was approximately $3.4 million and ($2.9) million, respectively. For the nine months ended September 30, 2014 and 2013, the aggregate gain (loss) on transactions denominated in currencies other than the functional currency of West Corporation or any of its subsidiaries was approximately $0.7 million and ($4.0) million, respectively.
29
WEST CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
12. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, we and certain of our subsidiaries are defendants in various litigation matters and are subject to claims from our clients for indemnification, some of which may involve claims for damages that are substantial in amount. We do not believe the disposition of matters and claims currently pending will have a material effect on our financial position, results of operations or cash flows.
13. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND SUBSIDIARY NON- GUARANTORS
West Corporation and our U.S. based wholly owned subsidiary guarantors, jointly, severally, fully and unconditionally are responsible for the payment of principal, premium and interest on our senior notes and senior subordinated notes. Presented below, in thousands, is condensed consolidated financial information for West Corporation and our subsidiary guarantors and subsidiary non-guarantors for the periods indicated.
30
WEST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(AMOUNTS IN THOUSANDS)
For the Three Months Ended September 30, 2014 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations and Consolidating Entries |
Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | 578,662 | $ | 134,539 | $ | | $ | 713,201 | ||||||||||
COST OF SERVICES |
| 262,594 | 76,184 | | 338,778 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
(439 | ) | 208,457 | 45,455 | | 253,473 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME |
439 | 107,611 | 12,900 | | 120,950 | |||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||
Interest Expense, net of interest income |
(32,463 | ) | (21,512 | ) | 6,369 | | (47,606 | ) | ||||||||||||
Debt call premium and accelerated amortization of deferred financing costs |
(51,735 | ) | | | | (51,735 | ) | |||||||||||||
Subsidiary Income |
66,909 | 37,675 | | (104,584 | ) | | ||||||||||||||
Other, net (1) |
53 | (24,857 | ) | 27,094 | | 2,290 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense) |
(17,236 | ) | (8,694 | ) | 33,463 | (104,584 | ) | (97,051 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
(16,797 | ) | 98,917 | 46,363 | (104,584 | ) | 23,899 | |||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
(32,907 | ) | 32,096 | 8,600 | | 7,789 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME |
$ | 16,110 | $ | 66,821 | $ | 37,763 | $ | (104,584 | ) | $ | 16,110 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments, net of tax of $7,570 |
(15,658 | ) | | (15,658 | ) | 15,658 | (15,658 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income |
$ | 452 | $ | 66,821 | $ | 22,105 | $ | (88,926 | ) | $ | 452 | |||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Other, net includes intercompany transactions that eliminate in consolidation. |
31
WEST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(AMOUNTS IN THOUSANDS)
For the Nine Months Ended September 30, 2014 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations and Consolidating Entries |
Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | 1,654,892 | $ | 425,524 | $ | | $ | 2,080,416 | ||||||||||
COST OF SERVICES |
| 753,220 | 232,608 | | 985,828 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
5,185 | 580,087 | 144,595 | | 729,867 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
(5,185 | ) | 321,585 | 48,321 | | 364,721 | ||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||
Interest Expense, net of interest income |
(97,792 | ) | (65,637 | ) | 18,506 | | (144,923 | ) | ||||||||||||
Debt call premium and accelerated amortization of deferred financing costs |
(51,735 | ) | | | | (51,735 | ) | |||||||||||||
Subsidiary Income |
215,849 | 103,984 | | (319,833 | ) | | ||||||||||||||
Other, Net (1) |
8,062 | (65,394 | ) | 62,729 | | 5,397 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense) |
74,384 | (27,047 | ) | 81,235 | (319,833 | ) | (191,261 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME BEFORE INCOME TAX EXPENSE |
69,199 | 294,538 | 129,556 | (319,833 | ) | 173,460 | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
(40,948 | ) | 78,911 | 25,350 | | 63,313 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME |
110,147 | 215,627 | 104,206 | (319,833 | ) | 110,147 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments, net of tax of $8,593 |
(14,950 | ) | | (14,950 | ) | 14,950 | (14,950 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income |
$ | 95,197 | $ | 215,627 | $ | 89,256 | $ | (304,883 | ) | $ | 95,197 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(1) Other, net includes intercompany transactions that eliminate in consolidation. |
|
32
WEST CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(AMOUNTS IN THOUSANDS)
For the Three Months Ended September 30, 2013 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations and Consolidating Entries |
Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | 535,262 | $ | 130,104 | $ | | $ | 665,366 | ||||||||||
COST OF SERVICES |
| 240,884 | 69,649 | | 310,533 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
4,430 | 182,834 | 44,143 | | 231,407 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
(4,430 | ) | 111,544 | 16,312 | | 123,426 | ||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||
Interest Expense, net of interest income |
(33,662 | ) | (23,171 | ) | 5,591 | | (51,242 | ) | ||||||||||||
Subsidiary Income |
60,175 | 26,000 | | (86,175 | ) | | ||||||||||||||
Other, net (1) |
4,925 | (15,904 | ) | 12,633 | | 1,654 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense) |
31,438 | (13,075 | ) | 18,224 | (86,175 | ) | (49,588 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME BEFORE INCOME TAX EXPENSE |
27,008 | 98,469 | 34,536 | (86,175 | ) | 73,838 | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
(19,140 | ) | 38,350 | 8,480 | | 27,690 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME |
46,148 | 60,119 | 26,056 | (86,175 | ) | 46,148 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments, net of tax of $(3,744) |
6,109 | | 6,109 | (6,109 | ) | 6,109 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income |
$ | 52,257 | $ | 60,119 | $ | 32,165 | $ | (92,284 | ) | $ | 52,257 | |||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Other, net includes intercompany transactions that eliminate in consolidation. |
33
WEST CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
(AMOUNTS IN THOUSANDS)
For the Nine Months Ended September 30, 2013 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations and Consolidating Entries |
Consolidated | ||||||||||||||||
REVENUE |
$ | | $ | 1,599,666 | $ | 398,619 | $ | | $ | 1,998,285 | ||||||||||
COST OF SERVICES |
| 719,532 | 212,007 | | 931,539 | |||||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
6,222 | 576,908 | 132,162 | | 715,292 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
OPERATING INCOME (LOSS) |
(6,222 | ) | 303,226 | 54,450 | | 351,454 | ||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||
Interest expense, net of interest income |
(121,595 | ) | (76,354 | ) | 16,639 | | (181,310 | ) | ||||||||||||
Subordinated debt call premium and accelerated amortization of deferred financing costs |
(23,105 | ) | | | | (23,105 | ) | |||||||||||||
Subsidiary Income |
174,090 | 78,548 | | (252,638 | ) | | ||||||||||||||
Other, net (1) |
7,145 | (49,432 | ) | 43,842 | | 1,555 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense) |
36,535 | (47,238 | ) | 60,481 | (252,638 | ) | (202,860 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
INCOME BEFORE INCOME TAX EXPENSE |
30,313 | 255,988 | 114,931 | (252,638 | ) | 148,594 | ||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
(62,558 | ) | 82,280 | 36,001 | | 55,723 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
NET INCOME |
92,871 | 173,708 | 78,930 | (252,638 | ) | 92,871 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency translation adjustments, net of tax of $(494) |
806 | | 806 | (806 | ) | 806 | ||||||||||||||
Reclassification of cash flow hedges, net of tax of $1,349 |
(2,201 | ) | | | | (2,201 | ) | |||||||||||||
Unrealized gain on cash flow hedges net of tax of $(2,444) |
3,987 | | | | 3,987 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income |
$ | 95,463 | $ | 173,708 | $ | 79,736 | $ | (253,444 | ) | $ | 95,463 | |||||||||
|
|
|
|
|
|
|
|
|
|
34
WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
September 30, 2014 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations and Consolidating Entries |
Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 31,521 | $ | 5,611 | $ | 128,801 | $ | | $ | 165,933 | ||||||||||
Trust cash |
6,284 | 17,387 | | | 23,671 | |||||||||||||||
Accounts receivable, net |
| 44,619 | 442,496 | | 487,115 | |||||||||||||||
Intercompany receivables |
| 1,149,639 | | (1,149,639 | ) | | ||||||||||||||
Deferred income taxes receivable |
77,457 | 15,067 | | (84,555 | ) | 7,969 | ||||||||||||||
Prepaid assets |
8,170 | 33,592 | 10,919 | | 52,681 | |||||||||||||||
Deferred expenses |
| 50,048 | 14,440 | | 64,488 | |||||||||||||||
Other current assets |
4,122 | 6,683 | 15,135 | | 25,940 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
127,554 | 1,322,646 | 611,791 | (1,234,194 | ) | 827,797 | ||||||||||||||
Property and equipment, net |
71,477 | 263,134 | 37,860 | | 372,471 | |||||||||||||||
INVESTMENT IN SUBSIDIARIES |
2,380,017 | 429,761 | | (2,809,778 | ) | | ||||||||||||||
GOODWILL |
| 1,871,456 | 173,472 | | 2,044,928 | |||||||||||||||
INTANGIBLES, net |
| 392,342 | 11,873 | | 404,215 | |||||||||||||||
OTHER ASSETS |
154,362 | 97,385 | 28,067 | | 279,814 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL ASSETS |
$ | 2,733,410 | $ | 4,376,724 | $ | 863,063 | $ | (4,043,972 | ) | $ | 3,929,225 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
||||||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||||||
Accounts payable |
$ | 4,539 | $ | 55,393 | $ | 39,489 | $ | | $ | 99,421 | ||||||||||
Deferred revenue |
| 112,721 | 29,644 | | 142,365 | |||||||||||||||
Intercompany payables |
1,053,688 | | 95,951 | (1,149,639 | ) | | ||||||||||||||
Accrued expenses |
61,040 | 261,821 | 59,915 | (84,555 | ) | 298,221 | ||||||||||||||
Current maturities of long-term debt |
1,078 | 2,043 | | | 3,121 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
1,120,345 | 431,978 | 224,999 | (1,234,194 | ) | 543,128 | ||||||||||||||
LONG - TERM OBLIGATIONS, less current maturities |
2,182,671 | 1,388,775 | 184,235 | | 3,755,681 | |||||||||||||||
DEFERRED INCOME TAXES |
17,212 | 115,588 | 4,722 | | 137,522 | |||||||||||||||
OTHER LONG-TERM LIABILITIES |
98,093 | 62,647 | 17,065 | | 177,805 | |||||||||||||||
TOTAL STOCKHOLDERS EQUITY (DEFICIT) |
(684,911 | ) | 2,377,736 | 432,042 | (2,809,778 | ) | (684,911 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
$ | 2,733,410 | $ | 4,376,724 | $ | 863,063 | $ | (4,043,972 | ) | $ | 3,929,225 | |||||||||
|
|
|
|
|
|
|
|
|
|
35
WEST CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS (AMOUNTS IN THOUSANDS)
|
| |||||||||||||||||||
December 31, 2013 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations and Consolidating Entries |
Consolidated | ||||||||||||||||
ASSETS |
||||||||||||||||||||
CURRENT ASSETS: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 129,445 | $ | | $ | 111,909 | $ | (11,313 | ) | $ | 230,041 | |||||||||
Trust and restricted cash |
6,283 | 15,396 | | | 21,679 | |||||||||||||||
Accounts receivable, net |
| 67,217 | 382,972 | | 450,189 | |||||||||||||||
Intercompany receivables |
| 1,099,177 | 12,929 | (1,112,106 | ) | | ||||||||||||||
Deferred income taxes receivable |
95,120 | 9,908 | | (105,028 | ) | | ||||||||||||||
Prepaid assets |
3,639 | 25,034 | 7,359 | | 36,032 | |||||||||||||||
Deferred expenses |
| 43,290 | 10,343 | | 53,633 | |||||||||||||||
Other current assets |
4,469 | 8,003 | 17,524 | | 29,996 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
238,956 | 1,268,025 | 543,036 | (1,228,447 | ) | 821,570 | ||||||||||||||
Property and equipment, net |
68,330 | 248,584 | 47,851 | | 364,765 | |||||||||||||||
INVESTMENT IN SUBSIDIARIES |
1,859,586 | 466,182 | | (2,325,768 | ) | | ||||||||||||||
GOODWILL |
| 1,637,725 | 186,196 | | 1,823,921 | |||||||||||||||
INTANGIBLES, net |
| 213,306 | 18,135 | | 231,441 | |||||||||||||||
OTHER ASSETS |
139,370 | 85,431 | 19,766 | | 244,567 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL ASSETS |
$ | 2,306,242 | $ | 3,919,253 | $ | 814,984 | $ | (3,554,215 | ) | $ | 3,486,264 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
||||||||||||||||||||
CURRENT LIABILITIES: |
||||||||||||||||||||
Accounts payable |
$ | 6,705 | $ | 56,212 | $ | 31,074 | $ | (11,313 | ) | $ | 82,678 | |||||||||
Intercompany payables |
898,700 | | 213,406 | (1,112,106 | ) | | ||||||||||||||
Deferred revenue |
| 85,665 | 27,740 | | 113,405 | |||||||||||||||
Accrued expenses |
76,859 | 224,559 | 53,292 | (105,028 | ) | 249,682 | ||||||||||||||
Current maturities of long-term debt |
4,102 | 7,775 | | | 11,877 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
986,366 | 374,211 | 325,512 | (1,228,447 | ) | 457,642 | ||||||||||||||
LONG - TERM OBLIGATIONS, less current maturities |
1,966,256 | 1,547,214 | | | 3,513,470 | |||||||||||||||
DEFERRED INCOME TAXES |
10,603 | 99,817 | 2,056 | | 112,476 | |||||||||||||||
OTHER LONG-TERM LIABILITIES |
83,189 | 40,483 | 19,176 | | 142,848 | |||||||||||||||
TOTAL STOCKHOLDERS EQUITY (DEFICIT) |
(740,172 | ) | 1,857,528 | 468,240 | (2,325,768 | ) | (740,172 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
$ | 2,306,242 | $ | 3,919,253 | $ | 814,984 | $ | (3,554,215 | ) | $ | 3,486,264 | |||||||||
|
|
|
|
|
|
|
|
|
|
36
WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
Nine Months Ended September 30, 2014 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Elimination and Consolidating Entries |
Consolidated | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: |
$ | | $ | 239,605 | $ | 79,332 | $ | 11,313 | $ | 330,250 | ||||||||||
CASH FLOWS USED IN INVESTING ACTIVITIES: |
||||||||||||||||||||
Business acquisitions |
(385,439 | ) | | (18 | ) | | (385,457 | ) | ||||||||||||
Purchase of property and equipment |
(19,046 | ) | (78,271 | ) | (16,365 | ) | | (113,682 | ) | |||||||||||
Intercompany financing |
379,309 | | | (379,309 | ) | | ||||||||||||||
Other |
| (1,993 | ) | | | (1,993 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flows used in investing activities |
(25,176 | ) | (80,264 | ) | (16,383 | ) | (379,309 | ) | (501,132 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |
||||||||||||||||||||
Proceeds from issuance of notes due 2022 |
1,000,000 | | | | 1,000,000 | |||||||||||||||
Payments on notes and term loan facilities |
(950,000 | ) | | | | (950,000 | ) | |||||||||||||
Proceeds from revolving credit and accounts receivable securitization facilities |
| | 197,000 | | 197,000 | |||||||||||||||
Payments on revolving credit and accounts receivable securitization facilities |
| | (12,765 | ) | | (12,765 | ) | |||||||||||||
Dividends paid |
(56,751 | ) | | | | (56,751 | ) | |||||||||||||
Payments of deferred financing and other debt related costs |
(27,159 | ) | | (121 | ) | | (27,280 | ) | ||||||||||||
Debt redemption premiums paid on senior notes |
(43,987 | ) | | | | (43,987 | ) | |||||||||||||
Principal repayments on long-term obligations |
(269 | ) | (511 | ) | | | (780 | ) | ||||||||||||
Proceeds from stock options exercised and ESPP shares issued including excess tax benefits |
5,418 | | | | 5,418 | |||||||||||||||
Intercompany financing |
| (153,219 | ) | (226,090 | ) | 379,309 | | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash flows from (used in) financing activities |
(72,748 | ) | (153,730 | ) | (41,976 | ) | 379,309 | 110,855 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS |
| | (4,081 | ) | | (4,081 | ) | |||||||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
(97,924 | ) | 5,611 | 16,892 | 11,313 | (64,108 | ) | |||||||||||||
CASH AND CASH EQUIVALENTS, Beginning of period |
129,445 | | 111,909 | (11,313 | ) | 230,041 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
CASH AND CASH EQUIVALENTS, End of period |
$ | 31,521 | $ | 5,611 | $ | 128,801 | $ | | $ | 165,933 | ||||||||||
|
|
|
|
|
|
|
|
|
|
37
WEST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)
Nine Months Ended September 30, 2013 | ||||||||||||||||||||
Parent / Issuer |
Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Elimination and Consolidating Entries |
Consolidated | ||||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES: |
$ | | $ | 211,572 | $ | 67,456 | $ | (2,299 | ) | $ | 276,729 | |||||||||
CASH FLOWS USED IN INVESTING ACTIVITIES: |
||||||||||||||||||||
Business acquisitions |
| | (13 | ) | | (13 | ) | |||||||||||||
Purchase of property and equipment |
(3,913 | ) | (66,175 | ) | (17,892 | ) | | (87,980 | ) | |||||||||||
Other |
| (1,166 | ) | | | (1,166 | ) | |||||||||||||
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Net cash flows used in investing activities |
(3,913 | ) | (67,341 | ) | (17,905 | ) | | (89,159 | ) | |||||||||||
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CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: |
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Payments on subordinated notes |
(450,000 | ) | | | | (450,000 | ) | |||||||||||||
Proceeds from initial public offering, net of offering costs |
398,266 | | | | 398,266 | |||||||||||||||
Proceeds from revolving credit facilities |
| | 85,000 | | 85,000 | |||||||||||||||
Payments on revolving credit facilities |
| | (85,000 | ) | | (85,000 | ) | |||||||||||||
Dividends paid |
(37,840 | ) | | | | (37,840 | ) | |||||||||||||
Payments of deferred financing and other debt related costs |
(30,760 | ) | | | | (30,760 | ) | |||||||||||||
Debt redemption premiums paid on subordinated notes |
(16,502 | ) | | | | (16,502 | ) | |||||||||||||
Principal repayments on long-term obligations |
(6,210 | ) | (11,922 | ) | | | (18,132 | ) | ||||||||||||
Proceeds from stock options exercised including excess tax benefits |
815 | | | | 815 | |||||||||||||||
Other |
(9 | ) | | | | (9 | ) | |||||||||||||
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Net cash flows from (used in) financing activities |
(142,240 | ) | (11,922 | ) | | | (154,162 | ) | ||||||||||||
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Intercompany |
169,088 | (134,130 | ) | (34,958 | ) | | | |||||||||||||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS |
| | (1,546 | ) | | (1,546 | ) | |||||||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
22,935 | (1,821 | ) | 13,047 | (2,299 | ) | 31,862 | |||||||||||||
CASH AND CASH EQUIVALENTS, Beginning of period |
106,010 | 1,821 | 71,280 | | 179,111 | |||||||||||||||
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CASH AND CASH EQUIVALENTS, End of period |
$ | 128,945 | $ | | $ | 84,327 | $ | (2,299 | ) | $ | 210,973 | |||||||||
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14. SUBSEQUENT EVENTS
On November 3, 2014, we completed the acquisition of the assets of GroupCast, L.L.C., a provider of alert and notification services for corporations, government entities and K-12 school districts that operates under two brands, GroupCast and SchoolReach. The purchase price was approximately $13.5 million and was funded with cash on hand.
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as may, will, should, expect, plan, anticipate, could, intend, target, project, contemplate, believe, estimate, predict, potential or continue or other similar words.
These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We have described in the Risk Factors section contained in our Annual Report on Form 10-K for the year ended December 31, 2013 the principal risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.
The forward-looking statements in this report represent our views as of the date of this report. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this report.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements (unaudited) and the Notes thereto.
Business Overview
We are a leading provider of technology-enabled, communication services. We offer a broad range of communication and network infrastructure solutions that help manage or support essential communications. Our services include conferencing and collaboration, public safety services, IP communications, interactive services such as automated notifications, large-scale agent services and telecom services. The scale and processing capacity of our proprietary technology platforms, combined with our expertise in managing voice and data transactions, enable us to provide reliable, high-quality, mission-critical communications designed to maximize return on investment for our clients. Our clients include Fortune 1000 companies, along with small and medium enterprises in a variety of industries, including telecommunications, retail, financial services, public safety, technology and healthcare. We have sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific, Latin America and South America.
Since our founding in 1986, we have invested significantly to expand our technology platforms and develop our operational processes to meet the complex communications needs of our clients. We have evolved our business mix from labor-intensive communication services to predominantly diversified and platform-based technology-driven voice and data services.
Investing in technology and developing specialized expertise in the industries we serve are critical components to our strategy of enhancing our services and delivering operational excellence. In 2013, we managed over 58 billion telecom minutes and approximately 148 million conference calls, facilitated over 290 million 9-1-1 calls, and our IVR, hosted contact center and alert and notifications platforms received and delivered over 2.8 billion calls and data messages. With approximately 758,000 telecom ports to handle conference calls, alerts and notifications and customer service calls at September 30, 2014, we believe our platforms provide scale and flexibility to handle greater transaction volume than our competitors, offer superior service and develop new
39
offerings. These ports include approximately 465,000 IP ports, which we believe provide us with the only large-scale proprietary, distributed IP-based global conferencing platform deployed and in use today. Our technology-driven platforms allow us to provide a broad range of complementary automated and agent service offerings to our diverse client base.
Since 2005, our revenue from platform-based services has grown from 37% of total revenue to 72% for the nine months ended September 30, 2014, and our operating income from platform-based services has grown from 53% of total operating income to 92% over the same period. As in the past, we will continue to seek and invest in higher margin businesses, irrespective of whether the associated services are delivered to our customers through agent services or a platform-based environment. We expect our platform-based service lines to grow at a faster pace than agent services and, as a result to continue to increase as a percentage of our total revenue.
Financial Operations Overview
Revenue
In our Unified Communications segment, our interactive services are generally billed, and revenue recognized, on a per call, per message basis or per minute basis, or ratably over the contract term. Our conferencing and collaboration services and IP communications services are generally billed on a per participant minute or per seat basis. Billing rates for these services vary depending on participant geographic location, type of service (such as audio, video or web conferencing) and type of message (such as voice, text, email or fax). We also charge clients for additional features, such as conference call recording, transcription services or professional services. Since we entered the conferencing services business, the average rate per minute that we charge has declined while total minutes sold has increased. This is consistent with industry trends. We expect this trend to continue for the foreseeable future.
In our Communication Services segment, our public safety services are generally billed per month based on the number of billing telephone numbers or cell towers covered under each client contract. We also bill monthly for our premise-based database solution. In addition, we bill for sales, installation and maintenance of our communication equipment technology solutions. Our agent services are generally billed on a per minute or per hour basis. We are generally paid on a contingent fee basis for our receivables management and overpayment identification and recovery services as well as for certain other agent services. Our telecom services are generally billed based on usage of toll-free origination services. Revenue for health advocacy services is based on Per Employee Per Month fees charged under prepayment agreements for services and is recognized as revenue for the periods billed. Fees for future service periods are deferred until the service is performed.
Cost of Services
The principal component of cost of services for our Unified Communications segment is our variable telephone expense. Significant components of our cost of services in this segment also include labor expense, primarily related to commissions for our sales force. Because the services we provide in this segment are largely platform-based, labor expense is less significant than the labor expense we experience in our Communication Services segment.
The principal component of cost of services for our Communication Services segment is labor expense. Labor expense in costs of services primarily reflects compensation and benefits for the agents providing our agent services, but also includes compensation for personnel dedicated to public safety database management, manufacturing and development of our premise-based public safety solution as well as commissions for our sales professionals. We generally pay commissions to sales professionals on both new sales and incremental revenue generated from existing clients. Significant components of our cost of services in this segment also include variable telephone expense.
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Selling, General and Administrative Expenses
The principal component of our selling, general and administrative expenses (SG&A) is salary and benefits for our sales force, client support staff, technology and development personnel, senior management and other personnel involved in business support functions. SG&A also includes certain fixed telephone costs as well as other expenses that support the ongoing operation of our business, such as facilities costs, certain service contract costs, equipment depreciation and maintenance and amortization of finite-lived intangible assets.
Key Drivers Affecting Our Results of Operations
Factors Related to Our Indebtedness. On each of February 20, 2013, January 24, 2014 and July 1, 2014, West, certain domestic subsidiaries of West, as subsidiary borrowers, Wells Fargo, as administrative agent, and the various lenders party thereto modified Senior Secured Credit Facilities by entering into Amendment No. 3 (the Third Amendment), the Fourth Amendment and the Fifth Amendment to Amended and Restated Credit Agreement, respectively, in each case amending the Amended Credit Agreement (as previously amended by Amendment No. 1 to Amended and Restated Credit Agreement, dated as of August 15, 2012, Amendment No. 2 to Amended and Restated Credit Agreement, dated as of October 24, 2012, the Third Amendment, Fourth Amendment and the Fifth Amendment).
The Third Amendment provided for a reduction in the applicable margins and interest rate floors of all term loans, extended the maturity of a portion of the term loans due July 2016 to June 2018, and added a further step down to the applicable margins of all term loans under the Amended Credit Agreement upon satisfaction of certain conditions, which conditions were satisfied effective as of April 30, 2013, continued to apply as of December 31, 2013 and were removed as a condition pursuant to the Fourth Amendment.
The Fourth Amendment provided for a 25 basis point reduction in the applicable LIBOR interest rate margins and a 25 basis point reduction in the LIBOR interest rate floors of all Term Loans (as defined below). The Fourth Amendment also provided for interest rate floors applicable to the Term Loans. The interest rate floors effective September 30, 2014 were 0.75% for the LIBOR component of LIBOR rate loans and 1.75% for the base rate component of base rate loans.
As of September 30, 2014, we had outstanding the following senior secured term loans:
| The 2018 Maturity Term Loans in an aggregate principal amount of approximately $1.8 billion. The 2018 Maturity Term Loans will mature on June 30, 2018, and the interest rate margins applicable to the 2018 Maturity Term Loans were 2.50% for LIBOR rate loans and 1.50% for base rate loans; and |
| The 2016 Maturity Term Loans in an aggregate principal amount of approximately $311.3 million. The 2016 Maturity Term Loans will mature on July 15, 2016, and the interest rate margins applicable to the 2016 Maturity Term Loans were 2.0% for LIBOR rate loans and 1.00% for base rate loans. |
On July 1, 2014, we issued $1.0 billion aggregate principal amount of our 2022 Senior Notes. In July 2014, we used a portion of the net proceeds from the 2022 Senior Notes to redeem in full $500.0 million aggregate principal amount of the 2018 Senior Notes and $200.0 million aggregate principal amount of the 2019 Senior Notes. Also, on July 1, 2014, we used a portion of the net proceeds from the 2022 Senior Notes to repay $250.0 million aggregate principal amount of the 2018 Maturity Term Loans.
On July 1, 2014, we modified our Senior Secured Credit Facilities by entering into the Fifth Amendment. The Fifth Amendment provided for a new delayed draw TLA facility to be made available, in a single borrowing, at any time on or before December 31, 2014 in the form of TLA loans having terms substantially similar to the existing term loans under our Senior Secured Credit Facilities, except with respect to pricing, amortization and maturity, in an aggregate principal amount of $350.0 million. The TLA matures on July 1, 2019, provided, that the maturity date shall be April 2, 2018 if an aggregate principal amount of $500.0 million or greater of 2018 Maturity Term Loans remains outstanding on such date. The proceeds of the TLA will be used at our option (i) to prepay in part 2016 Maturity Term Loans and 2018 Maturity Term Loans and pay accrued but unpaid interest thereon, (ii) to redeem any 2019 Senior Notes, (iii) for working capital and general corporate purposes and (iv) to pay fees and expenses incurred in connection with the TLA. Annual amortization (payable in quarterly
41
installments) in respect of the TLA will be payable at: a 2.5% annual rate in the year ending June 30, 2015 (amortization to be at a 0.625% quarterly rate for the full fiscal quarters following incurrence); a 5.0% annual rate in the year ending June 30, 2016, in the second year following the Fifth Amendment Effective Date; a 7.5% annual rate in the year ending June 30, 2017; and a 10.0% annual rate thereafter until the maturity date, at which point all remaining outstanding TLA shall become due and payable.
On August 26, 2013, our revolving trade accounts receivable financing facility was amended and extended. The amended and extended facility provides for $185.0 million in available financing, an extension of the maturity date to June 30, 2018, a reduction of the unused commitment fee to 0.45% from 0.50% and a decrease in the LIBOR spread on borrowings to 135 basis points from 150 basis points. We further amended the amended and extended facility as of April 9, 2014 to include additional guarantors and as of June 2, 2014 to modify the eligibility criteria for certain receivables.
Acquisition Activities. Identifying and successfully integrating acquisitions of value-added service providers has been a key component of our business strategy. We will continue to seek opportunities to expand our suite of communication services across industries, geographies and end-markets. While we expect this will occur primarily through organic growth, we have and will continue to acquire assets and businesses that strengthen our value proposition to clients and drive value to us. We have developed an internal capability to source, evaluate and integrate acquisitions that we believe has created value for shareholders. Since 2005, we have invested approximately $2.4 billion in strategic acquisitions. We believe there are acquisition candidates that will enable us to expand our capabilities and markets and intend to continue to evaluate acquisitions in a disciplined manner and pursue those that provide attractive opportunities to enhance our growth and profitability.
Overview of 2014 Results
The following overview highlights the areas we believe are important in understanding our results of operations for the three and nine months ended September 30, 2014. This summary is not intended as a substitute for the detail provided elsewhere in this quarterly report or for our consolidated financial statements and notes thereto included elsewhere in this quarterly report.
| Our revenue increased $47.8 million, or 7.2% during the three months ended September 30, 2014 compared to revenue during the three months ended September 30, 2013. |
| Our revenue increased $82.1 million, or 4.1% during the nine months ended September 30, 2014 compared to revenue during the nine months ended September 30, 2013. |
| Our operating income decreased $2.5 million, or 2.0% during the three months ended September 30, 2014 compared to operating income during the three months ended September 30, 2013. |
| Our operating income increased $13.3 million, or 3.8%, during the nine months ended September 30, 2014 compared to operating income during the nine months ended September 30, 2013. |
| Our cash flows from operating activities increased $45.4 million, or 54.6%, during the three months ended September 30, 2014 compared to cash flows from operating activities during the three months ended September 30, 2013. |
| Our cash flows from operating activities increased $53.5 million, or 19.3%, during the nine months ended September 30, 2014 compared to cash flows from operating activities during the nine months ended September 30, 2013. |
| Effective January 1, 2014, we implemented a revised organizational structure. Under the revised organizational structure, automated call processing services management and operations have been moved from the Communication Services segment to the Unified Communications segment and have been combined with alerts and notifications to form interactive services. Beginning in the first quarter of 2014, all prior period comparative information has been recast to reflect this change as if it had taken place in all periods presented. |
| On January 24, 2014, we amended our Senior Secured Credit Facilities which provided for a reduction in applicable margins and interest rate floors of all Term Loans. |
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| On April 21, 2014, we acquired SchoolMessenger, a leading provider of notification and mobile communication solutions for the K-12 education market. The purchase price was approximately $77.4 million and was funded by cash on hand. The acquisition was integrated into our Unified Communications segment. |
| On June 13, 2014, we acquired Health Advocate a leading provider of healthcare advocacy services. The purchase price was approximately $265.9 million and was funded by cash on hand and use of our revolving trade accounts receivable financing facility. The acquisition was integrated into our Communication Services segment. |
| On July 1, 2014, we issued $1.0 billion aggregate principal amount of our 2022 Senior Notes. In July 2014, we used a portion of the net proceeds from the 2022 Senior Notes to redeem in full $500.0 million aggregate principal amount of the 2018 Senior Notes and $200.0 million aggregate principal amount of the 2019 Senior Notes. Also, on July 1, 2014, we used a portion of the net proceeds from the 2022 Senior Notes to repay $250.0 million aggregate principal amount of the 2018 Maturity Term Loans. |
| On July 1, 2014, we modified our Senior Secured Credit Facilities by entering into the Fifth Amendment. |
| On September 2, 2014, we acquired 911 Enable, a provider of emergency communications solutions for IP-based enterprise customers across the United States and Canada. The purchase price was approximately $42.2 million and was funded by cash on hand. The acquisition was integrated into our Communication Services segment. |
Comparison of the Three and Nine Months Ended September 30, 2014 and 2013
Revenue: Total revenue for the three months ended September 30, 2014 increased $47.8 million, or 7.2%, to $713.2 million from $665.4 million for the three months ended September 30, 2013. This increase included $30.3 million from the acquisitions of 911 Enable, Health Advocate and SchoolMessenger. The remaining $17.5 million increase in revenue for the three months ended September 30, 2014 was due to organic growth.
For the nine months ended September 30, 2014, total revenue increased $82.1 million, or 4.1%, to $2,080.4 million from $1,998.3 million for the nine months ended September 30, 2013. This increase during the nine months ended September 30, 2014 included revenue of $39.1 million from the acquisitions of 911 Enable, Health Advocate and SchoolMessenger. The SchoolMessenger acquisition closed on April 21, 2014. SchoolMessengers results have been included in the Unified Communications segment since that date. The Health Advocate acquisition closed on June 13, 2014. Health Advocates results have been included in the Communication Services segment since that date. The 911 Enable acquisition closed on September 2, 2014. 911 Enables results have been included in the Communication Services segment since that date. The remaining $43.0 million increase in revenue for the nine months ended September 30, 2014, relative to the prior year period, was due to organic growth.
For the three months ended September 30, 2014 and 2013, our largest 100 clients represented 53% and 56% of our total revenue, respectively. For the nine months ended September 30, 2014 and 2013, our largest 100 clients represented 53% and 55% of our total revenue, respectively.
Revenue by business segment:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||||||||||
2014 | 2013 | Change | % Change | 2014 | 2013 | Change | % Change | |||||||||||||||||||||||||||
Revenue in thousands: |
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Unified Communications |
$ | 404,511 | $ | 396,659 | $ | 7,852 | 2.0 | % | $ | 1,221,328 | $ | 1,200,161 | $ | 21,167 | 1.8 | % | ||||||||||||||||||
Communication Services |
322,777 | 280,399 | 42,378 | 15.1 | % | 903,136 | 820,968 | 82,168 | 10.0 | % | ||||||||||||||||||||||||
Intersegment eliminations |
(14,087 | ) | (11,692 | ) | (2,395 | ) | NM | (44,048 | ) | (22,844 | ) | (21,204 | ) | NM | ||||||||||||||||||||
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Total |
$ | 713,201 | $ | 665,366 | $ | 47,835 | 7.2 | % | $ | 2,080,416 | $ | 1,998,285 | $ | 82,131 | 4.1 | % | ||||||||||||||||||
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NMNot Meaningful |
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For the three months ended September 30, 2014, Unified Communications revenue increased $7.9 million, or 2.0%, to $404.5 million from $396.7 million for the three months ended September 30, 2013. This increase during the three months ended September 30, 2014 included revenue of $7.1 million from the acquisition of SchoolMessenger. Revenue from our conferencing and collaboration services increased $2.9 million, while revenue from our interactive services, excluding the SchoolMessenger revenue, decreased $1.6 million. Conferencing revenue attributable to increased usage and new customer usage was offset by a decline in the rates charged to existing customers for those services. The volume of minutes used for our reservationless services, which accounts for the majority of our conferencing revenue, grew approximately 5.5% for the three months ended September 30, 2014 over the three months ended September 30, 2013, while the average rate per minute for reservationless services declined by approximately 9.2% for the three months ended September 30, 2014 over the three months ended September 30, 2013.
For the nine months ended September 30, 2014, Unified Communications revenue increased $21.2 million, or 1.8%, to $1,221.3 million from $1,200.2 million for the nine months ended September 30, 2013. This increase during the nine months ended September 30, 2014 included revenue of $11.8 million from the acquisition of SchoolMessenger. Revenue from our conferencing and collaboration services increased $17.2 million, while revenue from our interactive services, excluding the SchoolMessenger revenue decreased $7.0 million. The increase was primarily attributable to the addition of new customers as well as an increase in usage primarily of our web and audio-based services by our existing customers and the acquisition of SchoolMessenger. Revenue attributable to increased usage and new customer usage was partially offset by a decline in the rates charged to existing customers for those services. The volume of minutes used for our reservationless conferencing services, which accounts for the majority of our conferencing revenue, grew approximately 6.6% for the nine months ended September 30, 2014 over the nine months ended September 30, 2013, while the average rate per minute for reservationless services declined by approximately 8.1%.
Since we entered the conferencing services business, the average rate per minute that we charge has declined while total minutes sold has increased. This is consistent with industry trends, which we expect to continue for the foreseeable future.
During the three months ended September 30, 2014, Unified Communications international revenue was $116.2 million, a decrease of 0.2% over the three months ended September 30, 2013. During the nine months ended September 30, 2014, Unified Communications international revenue grew to $360.4 million, an increase of 1.6% over the nine months ended September 30, 2013.
For the three months ended September 30, 2014, Communication Services revenue increased $42.4 million, or 15.1%, to $322.8 million from $280.4 million for the three months ended September 30, 2013. This increase during the three months ended September 30, 2014 included revenue of $23.2 million from the acquisitions of Health Advocate and 911 Enable. The remaining increase in revenue of $19.2 million for the three months ended September 30, 2014 was due to organic growth of 6.8%. Revenue from agent-based services for the three months ended September 30, 2014, increased $28.1 million compared with the three months ended September 30, 2013. Revenue from public safety and telecom services for the three months ended September 30, 2014 increased $14.3 million compared with the three months ended September 30, 2013. $2.5 million of the increase in public safety and telecom services revenue is internal with other West entities and eliminated in our consolidated results.
For the nine months ended September 30, 2014, Communication Services revenue increased $82.2 million, or 10.0%, to $903.1 million from $821.0 million for the nine months ended September 30, 2013. This increase during the nine months ended September 30, 2014 included revenue of $27.3 million from the acquisitions of Health Advocate and 911 Enable. The remaining increase in revenue of $54.9 million for the nine months ended September 30, 2014 was due to organic growth of 6.7%. Revenue from agent-based services for the nine months ended September 30, 2014 increased $38.1 million compared with the nine months ended September 30, 2013. Revenue from public safety and telecom services for the nine months ended September 30, 2014 increased $43.8 million compared with the nine months ended September 30, 2013. $20.0 million of the increase in public safety and telecom services revenue is internal with other West entities and eliminated in our consolidated results.
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Cost of services: Cost of services consists of direct labor, telephone expense and other costs directly related to providing services to clients. Cost of services for the three months ended September 30, 2014 increased approximately $28.2 million, or 9.1%, to $338.8 million, from $310.5 million for the three months ended September 30, 2013. As a percentage of revenue, cost of services increased to 47.5% for the three months ended September 30, 2014, compared to 46.7% for the three months ended September 30, 2013. Cost of services for the nine months ended September 30, 2014 increased $54.3 million, or 5.8%, to $985.8 million from $931.5 million for the nine months ended September 30, 2013. As a percentage of revenue, cost of services increased to 47.4% for the nine months ended September 30, 2014, compared to 46.6% for the nine months ended September 30, 2013.
Cost of services by business segment:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
% of | % of | % | % of | % of | % | |||||||||||||||||||||||||||||||||||||||||||
2014 | Revenue | 2013 | Revenue | Change | Change | 2014 | Revenue | 2013 | Revenue | Change | Change | |||||||||||||||||||||||||||||||||||||
In thousands: |
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Unified Communications |
$ | 171,455 | 42.4 | % | $ | 161,586 | 40.7 | % | $ | 9,869 | 6.1 | % | $ | 515,970 | 42.2 | % | $ | 493,692 | 41.1 | % | $ | 22,278 | 4.5 | % | ||||||||||||||||||||||||
Communication Services |
180,053 | 55.8 | % | 159,397 | 56.8 | % | 20,656 | 13.0 | % | 508,972 | 56.4 | % | 457,033 | 55.7 | % | 51,939 | 11.4 | % | ||||||||||||||||||||||||||||||
Intersegment eliminations |
(12,730 | ) | NM | (10,450 | ) | NM | (2,280 | ) | NM | (39,114 | ) | NM | (19,186 | ) | NM | (19,928 | ) | NM | ||||||||||||||||||||||||||||||
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Total |
$ | 338,778 | 47.5 | % | $ | 310,533 | 46.7 | % | $ | 28,245 | 9.1 | % | $ | 985,828 | 47.4 | % | $ | 931,539 | 46.6 | % | $ | 54,289 | 5.8 | % | ||||||||||||||||||||||||
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NMNot Meaningful
Unified Communications cost of services for the three months ended September 30, 2014 increased $9.9 million, or 6.1%, to $171.5 million from $161.6 million for the three months ended September 30, 2013. The increase in cost of services for the three months ended September 30, 2014 included $1.5 million from the SchoolMessenger acquisition. The remaining increase is primarily driven by increased service volume. As a percentage of this segments revenue, Unified Communications cost of services increased to 42.4% for the three months ended September 30, 2014 from 40.7% for the three months ended September 30, 2013.
Unified Communications cost of services for the nine months ended September 30, 2014 increased $22.3 million, or 4.5%, to $516.0 million from $493.7 million for the nine months ended September 30, 2013. The increase in cost of services for the nine months ended September 30, 2014 included $3.1 million from the SchoolMessenger acquisition. The remaining increase is primarily driven by increased service volume. As a percentage of this segments revenue, Unified Communications cost of services increased to 42.2% for the nine months ended September 30, 2014 from 41.1% for the nine months ended September 30, 2013. The increase in cost of services as a percentage of revenue for the three and nine months ended September 30, 2014 is due primarily to lower average rate per minute charged to customers and changes in geographic and product mix.
Communication Services cost of services for the three months ended September 30, 2014 increased $20.7 million, or 13.0%, to $180.1 million from $159.4 million for the three months ended September 30, 2013. The increase in cost of services for the three months ended September 30, 2014 was partially driven by increased service volume. The increase in cost of services for the three months ended September 30, 2014 included $9.5 million from the Health Advocate and 911 Enable acquisitions. As a percentage of this segments revenue, Communication Services cost of services improved to 55.8% for the three months ended September 30, 2014, compared to 56.8% for the three months ended September 30, 2013.
Communication Services cost of services for the nine months ended September 30, 2014 increased $51.9 million, or 11.4%, to $509.0 million from $457.0 million for the nine months ended September 30, 2013. The increase in cost of services for the nine months ended September 30, 2014 was driven by increased service volume. The increase in cost of services for the nine months ended September 30, 2014 included $11.0 million from the Health Advocate and 911 Enable acquisitions. As a percentage of this segments revenue, Communication Services cost of services increased to 56.4% for the nine months ended September 30, 2014, compared to 55.7% for the nine months ended September 30, 2013. The increase in cost of services as a percentage of revenue for the nine months ended September 30, 2014 was primarily due to an increase in internal platform-based services, which had a 0.8% impact on Communication Services cost of services as a percentage of revenue during that period.
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Selling, general and administrative expenses: SG&A expenses increased $22.1 million, or 9.5%, to $253.5 million for the three months ended September 30, 2014, from $231.4 million for the three months ended September 30, 2013. During the three months ended September 30, 2014, SG&A expenses from the acquired entities, SchoolMessenger, Health Advocate and 911 Enable were $19.5 million in the aggregate. As a percentage of revenue, SG&A expenses increased to 35.5% for the three months ended September 30, 2014 from 34.8% for the three months ended September 30, 2013.
SG&A expenses increased $14.6 million, or 2.0%, to $729.9 million for the nine months ended September 30, 2014 from $715.3 million for the nine months ended September 30, 2013. During the nine months ended September 30, 2014, SG&A expenses from the acquired entities, SchoolMessenger, Health Advocate and 911 Enable were $26.0 million in the aggregate. SG&A expenses in the nine months ended September 30, 2013, included $25.0 million for Sponsor management fees and related termination of the management agreement in connection with the IPO and $3.0 million of IPO related bonuses (collectively, the IPO Sponsor Fees and IPO Bonuses). As a percentage of revenue, SG&A expenses improved to 35.1% for the nine months ended September 30, 2014, compared to 35.8% for the nine months ended September 30, 2013. For the nine months ended September 30, 2013, the IPO Sponsor Fees and IPO Bonuses had a 1.4% impact on SG&A expenses as a percentage of revenue.
Selling, general and administrative expenses by business segment:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
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Unified Communications |
$ | 137,890 | 34.1 | % | $ | 129,826 | 32.7 | % | $ | 8,064 | 6.2 | % | $ | 413,172 | 33.8 | % | $ | 407,100 | 33.9 | % | $ | 6,072 | 1.5 | % | ||||||||||||||||||||||||
Communication Services |
116,940 | 36.2 | % | 102,823 | 36.7 | % | 14,117 | 13.7 | % | 321,629 | 35.6 | % | 311,850 | 38.0 | % | 9,779 | 3.1 | % | ||||||||||||||||||||||||||||||
Intersegment eliminations |
(1,357 | ) | NM | (1,242 | ) | NM | (115 | ) | NM | (4,934 | ) | NM | (3,658 | ) | NM | (1,276 | ) | NM | ||||||||||||||||||||||||||||||
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$ | 253,473 | 35.5 | % | $ | 231,407 | 34.8 | % | $ | 22,066 | 9.5 | % | $ | 729,867 | 35.1 | % | $ | 715,292 | 35.8 | % | $ | 14,575 | 2.0 | % | ||||||||||||||||||||||||
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NMNot Meaningful
Unified Communications SG&A expenses for the three months ended September 30, 2014 increased $8.1 million, or 6.2%, to $137.9 million from $129.8 million for the three months ended September 30, 2013. The increase in SG&A for the three months ended September 30, 2014 included $5.1 million from the SchoolMessenger acquisition. As a percentage of this segments revenue, Unified Communications SG&A expenses increased to 34.1% for the three months ended September 30, 2014 compared to 32.7% for the three months ended September 30, 2013.
Unified Communications SG&A expenses for the nine months ended September 30, 2014 increased $6.1 million, or 1.5%, to $413.2 million from $407.1 million for the nine months ended September 30, 2013. The increase in SG&A for the nine months ended September 30, 2014 included $8.9 million from the SchoolMessenger acquisition. As a percentage of this segments revenue, Unified Communications SG&A expenses improved to 33.8% for the nine months ended September 30, 2014 compared to 33.9% for the nine months ended September 30, 2013. The IPO Sponsor Fees and IPO Bonuses allocated to Unified Communications were $19.3 million for the nine months ended September 30, 2013. Such allocated portion of the IPO Sponsor Fees and IPO Bonuses had a 1.6% impact on SG&A expenses as a percentage of revenue for Unified Communications.
Communication Services SG&A expenses for the three months ended September 30, 2014 increased $14.1 million, or 13.7%, to $116.9 million from $102.8 million for the three months ended September 30, 2013. The increase in SG&A for the three months ended September 30, 2014 included $14.4 million from the Health Advocate and 911 Enable acquisitions. As a percentage of this segments revenue, Communication Services SG&A expenses improved to 36.2% for the three months ended September 30, 2014 compared to 36.7% for the three months ended September 30, 2013.
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Communication Services SG&A expenses for the nine months ended September 30, 2014 increased $9.8 million, or 3.1%, to $321.6 million from $311.9 million for the nine months ended September 30, 2013. The increase in SG&A for the nine months ended September 30, 2014 included $17.1 million from the Health Advocate and 911 Enable acquisitions. As a percentage of this segments revenue, Communication Services SG&A expenses improved to 35.6% for the nine months ended September 30, 2014, compared to 38.0% for the nine months ended September 30, 2013. The IPO Sponsor Fees and IPO Bonuses allocated to Communication Services were $8.7 million for the nine months ended September 30, 2013. Such allocated portion of the IPO Sponsor Fees and IPO Bonuses had a 1.1% impact on SG&A expenses as a percentage of revenue for Communication Services.
Operating income: Operating income for the three months ended September 30, 2014 decreased $2.5 million, or 2.0%, to $121.0 million from $123.4 million for the three months ended September 30, 2013. As a percentage of revenue, operating income for the three months ended September 30, 2014 decreased to 17.0%, from 18.6% for the three months ended September 30, 2013.
Operating income for the nine months ended September 30, 2014 increased $13.3 million, or 3.8%, to $364.7 million from $351.5 million for the nine months ended September 30, 2013. As a percentage of revenue, operating income for the nine months ended September 30, 2014 decreased to 17.5%, from 17.6% for the nine months ended September 30, 2013. This increase in operating income was primarily the result of the IPO Sponsor Fees and IPO Bonuses of $28.0 million recorded during the nine months ended September 30, 2013. The IPO Sponsor Fees and IPO Bonuses had a 1.4% impact on operating income as a percentage of revenue.
Operating income by business segment:
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
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Unified Communications |
$ | 95,166 | 23.5 | % | $ | 105,247 | 26.5 | % | $ | (10,081 | ) | -9.6 | % | $ | 292,186 | 23.9 | % | $ | 299,369 | 24.9 | % | $ | (7,183 | ) | -2.4 | % | ||||||||||||||||||||||
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25,784 | 8.0 | % | 18,179 | 6.5 | % | 7,605 | 41.8 | % | 72,535 | 8.0 | % | 52,085 | 6.3 | % | 20,450 | 39.3 | % | ||||||||||||||||||||||||||||||
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$ | 120,950 | 17.0 | % | $ | 123,426 | 18.6 | % | $ | (2,476 | ) | -2.0 | % | $ | 364,721 | 17.5 | % | $ | 351,454 | 17.6 | % | $ | 13,267 | 3.8 | % | |||||||||||||||||||||||
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Unified Communications operating income for the three months ended September 30, 2014 decreased $10.1 million, or 9.6%, to $95.2 million from $105.2 million for the three months ended September 30, 2013. As a percentage of this segments revenue, Unified Communications operating income decreased to 23.5% for the three months ended September 30, 2014 from 26.5% for the three months ended September 30, 2013.
Unified Communications operating income for the nine months ended September 30, 2014 decreased $7.2 million, or 2.4%, to $292.2 million from $299.4 million for the nine months ended September 30, 2013. As a percentage of this segments revenue, Unified Communications operating income decreased to 23.9% for the nine months ended September 30, 2014 from 24.9% for the nine months ended September 30, 2013 due to the factors discussed above for revenue, cost of services and SG&A expenses. The IPO Sponsor Fees and IPO Bonuses, recorded during the nine months ended September 30, 2013 and allocated to Unified Communications, had a 1.6% impact on operating income as a percentage of revenue for Unified Communications.
Communication Services operating income for the three months ended September 30, 2014 increased $7.6 million, or 41.8%, to $25.8 million from $18.2 million for the three months ended September 30, 2013. As a percentage of this segments revenue, Communication Services operating income improved to 8.0% for the three months ended September 30, 2014 from 6.5% for the three months ended September 30, 2013 due to the factors discussed above for revenue, cost of services and SG&A expenses for Communication Services.
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Communication Services operating income for the nine months ended September 30, 2014 increased $20.5 million, or 39.3%, to $72.5 million from $52.1 million for the nine months ended September 30, 2013. As a percentage of this segments revenue, Communication Services operating income improved to 8.0% for the nine months ended September 30, 2014 from 6.3% for the nine months ended September 30, 2013. The IPO Sponsor Fees and IPO Bonuses, recorded during the nine months ended September 30, 2013 and allocated to Communication Services, had a 1.1% impact on operating income as a percentage of revenue for Communication Services.
Other income (expense): Other income (expense) includes interest expense from borrowings under credit facilities and outstanding notes, the debt redemption premiums and accelerated amortization of deferred financing costs on the redemption of our 2018 Senior Notes, partial redemption on our 2019 Senior Notes and partial repayment of our 2018 Maturity Term Loans, the aggregate foreign exchange gain (loss) on affiliate transactions denominated in currencies other than the functional currency and interest income from short-term investments. Other income (expense) for the three months ended September 30, 2014 was ($97.1) million compared to ($49.6) million for the three months ended September 30, 2013. Other income (expense) for the nine months ended September 30, 2014 was ($191.3) million compared to ($202.9) million for the nine months ended September 30, 2013. Interest expense for the three and nine months ended September 30, 2014 was $47.6 million and $145.1 million, respectively, compared to $51.3 million and $181.5 million, respectively, for the three and nine months ended September 30, 2013.
Upon completion of the full redemption of the 2018 Senior Notes and partial redemption of the 2019 Senior Notes in July, 2014, we recorded as other non-operating expense a $30.4 tender premium, a $9.9 million redemption premium, a $3.7 million make-whole premium and $7.7 million for the accelerated amortization of the remaining balance of deferred financing costs associated with the 2018 Senior Notes and pro rata acceleration of the deferred financing costs associated with the 2019 Senior Notes.
Upon completion of the redemption of the $450.0 million senior subordinated notes on April 26, 2013, we recorded as other non-operating expense $6.6 million for the accelerated amortization of the remaining balance of deferred financing costs associated with the senior subordinated notes. During the nine months ended September 30, 2013, we recorded as other non-operating expense $16.5 million for the 103.667% subordinated debt call premium of our $450.0 million senior subordinated notes.
During the three and nine months ended September 30, 2014, we recognized a $2.9 million gain and $3.3 million gain, respectively, on affiliate transactions denominated in foreign currencies. During the three and nine months ended September 30, 2013, we recognized a $0.9 million loss and a $3.7 million loss, respectively, on affiliate transactions denominated in foreign currencies.
During the three months ended September 30, 2014, we recognized a $0.7 million loss in marking the investments in our non-qualified retirement plans to market compared to a $2.5 million gain during the three months ended September 30, 2013. During the nine months ended September 30, 2014, we recognized a $1.8 million gain in marking the investments in our non-qualified retirement plans to market compared to a $5.0 million gain during the nine months ended September 30, 2013.
Net income: Our net income for the three months ended September 30, 2014 decreased $30.0 million, or 65.1%, to $16.1 million from $46.1 million for the three months ended September 30, 2013. Our net income for the nine months ended September 30, 2014 increased $17.2 million, or 18.6%, to $110.1 million from $92.9 million for the nine months ended September 30, 2013. Net income includes a provision for income tax expense at an effective tax rate of approximately 32.6% for the three months ended September 30, 2014 and 36.5% for the nine months ended September 30, 2014, compared to an effective tax rate of approximately 37.5% for the three and nine months ended September 30, 2013. This reduction in our effective tax rate is the result of changes in our permanently invested foreign capital and ownership of intellectual property and associated international tax involving multiple jurisdictions.
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For the three and nine months ended September 30, 2014, expenses associated with the refinancing of our debt had a $34.9 million negative impact on net income. For the nine months ended September 30, 2013, IPO Sponsor Fees and IPO Bonuses, subordinated debt call premium and accelerated interest expense for the deferred financing costs associated with the senior subordinated notes had a $31.9 million negative impact on net income.
Earnings per common share: Earnings per common share-basic for the three and nine months ended September 30, 2014 were $0.19 and $1.31, respectively, compared to earnings per share-basic for the three and nine months ended September 30, 2013 of $0.55 and $1.20, respectively. Earnings per common share-diluted for the three and nine months ended September 30, 2014 were $0.19 and $1.29, respectively, compared to earnings per share-diluted for the three and nine months ended September 30, 2013 of $0.54 and $1.18, respectively.
Liquidity and Capital Resources
We have historically financed our operations and capital expenditures primarily through cash flows from operations supplemented by borrowings under our senior secured credit facilities, revolving credit facilities and asset securitization facilities.
Our current and anticipated uses of our cash, cash equivalents and marketable securities are to fund operating expenses, acquisitions, capital expenditures, interest payments, tax payments, quarterly dividends and the repayment of principal on debt.
The following table summarizes our net cash flows by category for the periods presented:
For the Nine Months Ended September 30, | ||||||||||||||||
In thousands: | 2014 | 2013 | Change | % Change |
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Net cash flows from operating activities |
$ | 330,250 | $ | 276,729 | $ | 53,521 | 19.3 | % | ||||||||
Net cash flows used in investing activities |
$ | (501,132 | ) | $ | (89,159 | ) | $ | (411,973 | ) | 462.1 | % | |||||
Net cash flows from (used in) financing activities |
$ | 110,855 | $ | (154,162 | ) | $ | 265,017 | -171.9 | % |
Net cash flows from operating activities increased $53.5 million, or 19.3%, to $330.3 million for the nine months ended September 30, 2014, compared to net cash flows from operating activities of $276.7 million for the nine months ended September 30, 2013. The increase in net cash flows from operating activities is primarily due to improvements in net income and the timing of vendor and interest payments offset by the timing of collections of accounts receivable.
Days sales outstanding, a key performance indicator we utilize to monitor the accounts receivable average collection period and assess overall collection risk, was 63 days at both September 30, 2014 and September 30, 2013.
Net cash flows used in investing activities increased $412.0 million, or 462.1%, to $501.1 million for the nine months ended September 30, 2014, compared to net cash flows used in investing activities of $89.2 million for the nine months ended September 30, 2013. During the nine months ended September 30, 2014, business acquisition investing was $385.4 million greater than the comparable nine months ended September 30, 2013 as a result of the acquisitions of SchoolMessenger, Health Advocate and 911 Enable. During the nine months ended September 30, 2014, cash used for capital expenditures was $113.7 million compared to $88.0 million for the nine months ended September 30, 2013. The increase in capital expenditures is due primarily to an initiative to consolidate several of our data centers and the related expansion of our network infrastructure.
Net cash flows from financing activities increased $265.0 million, to $110.9 million for the nine months ended September 30, 2014, compared to net cash flows used in financing activities of $154.2 million for the nine months ended September 30, 2013. During the nine months ended September 30, 2014, net proceeds from our $1.0 billion 2022 Senior Notes were received. $950 million of the 2022 Senior Notes proceeds were used to fully redeem the $500.0 million 2018 Senior Notes and partially redeem $200.0 million of the 2019 Senior Notes. $250.0 million was paid on the 2018 Maturity Term Loans. Proceeds from the 2022 Senior Notes were also used to pay debt redemption premiums in the aggregate of $44.0 million. During the nine months ended September 30, 2014, net proceeds from revolving credit facilities were $184.2 million During the nine months ended September 30, 2013, the
49
revolving credit facilities were undrawn. During the nine months ended September 30, 2013, net proceeds from our IPO net of related offering costs were $398.3 million. During the nine months ended September 30, 2013, we redeemed $450.0 million 11% senior subordinated notes. The redemption price was 103.667% of the principal amount of the senior subordinated notes. During the nine months ended September 30, 2014, dividends of $56.8 million were declared and paid compared to $37.8 million of dividend and dividend equivalent payments during the nine months ended September 30, 2013. During the nine months ended September 30, 2014 and 2013, deferred financing and other debt related costs of $27.3 million and $30.8 million, respectively, were paid in connection with refinancing activities during each respective period.
As of September 30, 2014, the amount of cash and cash equivalents held by our foreign subsidiaries was $106.4 million. We have accrued U.S. taxes on $205.5 million of unremitted foreign earnings and profits. We have determined foreign earnings of approximately $169.8 million will be indefinitely reinvested. Based on our current projected capital needs and the current amount of cash and cash equivalents held by our foreign subsidiaries, we do not anticipate incurring any material tax costs beyond our accrued tax position in connection with such repatriation, but we may be required to accrue for unanticipated additional tax costs in the future if our expectations or the amount of cash held by our foreign subsidiaries change.
Subject to legally available funds, we intend to pay a quarterly cash dividend at a rate equal to approximately $18.9 million per quarter (or an annual rate of $75.6 million). Based on approximately 84.2 million shares of common stock outstanding, this implies a quarterly dividend of approximately $0.225 per share (or an annual dividend of approximately $0.90 per share). We anticipate funding our dividend with cash generated by our operations. The declaration and payment of all future dividends, if any, will be at the sole discretion of our Board of Directors. On October 30, 2014, we announced a $0.225 per common share quarterly dividend. The dividend is payable November 26, 2014 to shareholders of record as of the close of business on November 17, 2014.
On November 3, 2014, we completed the acquisition of the assets of GroupCast, L.L.C., a provider of alert and notification services for corporations, government entities and K-12 school districts that operates under two brands GroupCast and SchoolReach. The purchase price was approximately $13.5 million and was funded with cash on hand.
Given our current levels of cash on hand, anticipated cash flows from operations and available borrowing capacity, we believe we have sufficient liquidity to conduct our normal operations and pursue our business strategy in the ordinary course.
Senior Secured Term Loan Facility
On January 24, 2014, we modified our Senior Secured Credit Facilities by entering into the Fourth Amendment. The Fourth Amendment provided for a 25 basis point reduction in the applicable LIBOR interest rate margins and a 25 basis point reduction in the LIBOR interest rate floors of all Term Loans. As of September 30, 2014, the interest rate margins applicable to the 2018 Maturity Term Loans were 2.50% for LIBOR rate loans and 1.50% for base rate loans, and the interest rate margins applicable to the 2016 Maturity Term Loans were 2.0% for LIBOR rate loans and 1.00% for base rate loans. The Fourth Amendment also provides for interest rate floors applicable to the Term Loans. The interest rate floors as of September 30, 2014 were 0.75% for the LIBOR component of LIBOR rate loans and 1.75% for the base rate component of base rate loans.
In connection with the Fourth Amendment, the Company incurred refinancing fees and expenses of approximately $5.8 million, which will be amortized into interest expense over the remaining life of the Senior Secured Credit Facilities.
On July 1, 2014, we used a portion of the net proceeds from the 2022 Senior Notes to repay a portion of the 2018 Maturity Term Loans. The total aggregate principal amount repaid on the 2018 Maturity Term Loans was $250.0 million. Our Senior Secured Credit Facilities bear interest at variable rates. At September 30, 2014, our Senior Secured Credit Facilities required annual principal payments of approximately $3.1 million, paid quarterly with balloon payments at maturity dates of July 15, 2016 and June 30, 2018 of approximately $305.9 million and $1,813.3 million respectively. The effective annual interest rates, inclusive of debt amortization costs, on the Senior Secured Credit Facilities for the three and nine months ended September 30, 2014 were 4.14% and 4.05%, respectively, compared to 4.37% and 5.01%, respectively, during the three and nine months ended September 30, 2013.
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On July 1, 2014, we further modified our Senior Secured Credit Facilities by entering into the Fifth Amendment. The Fifth Amendment provided for a new delayed draw TLA facility to be made available, in a single borrowing, at any time on or before December 31, 2014 in the form of TLA loans having terms substantially similar to the existing term loans under our Senior Secured Credit Facilities, except with respect to pricing, amortization and maturity, in an aggregate principal amount of $350.0 million. The TLA matures on July 1, 2019, provided that the maturity date shall be April 2, 2018 if an aggregate principal amount of $500.0 million or greater of 2018 Maturity Term Loans remain outstanding on such date. The proceeds of the TLA will be used at our option (i) to prepay in part 2016 Maturity Term Loans and 2018 Maturity Term Loans and pay accrued but unpaid interest thereon, (ii) to redeem any 2019 Senior Notes, (iii) for working capital and general corporate purposes and (iv) to pay fees and expenses incurred in connection with the incurrence of the TLA. Annual amortization (payable in quarterly installments) in respect of the TLA will be payable at: a 2.5% annual rate in the year ending June 30, 2015 (amortization to be at a 0.625% quarterly rate for the full fiscal quarters following incurrence); a 5.0% annual rate in the year ending June 30, 2016, in the second year following the Fifth Amendment Effective Date; a 7.5% annual rate in the year ending June 30, 2017; and a 10.0% annual rate thereafter until the maturity date, at which point all remaining outstanding TLA shall become due and payable.
The TLA notes will bear interest at variable rates. The interest rate margin applicable to the TLA will be based on the Companys total leverage ratio and range from 1.50% to 2.25% for LIBOR rate loans and from 0.50% to 1.25% for base rate loans.
Senior Secured Revolving Credit Facility
Prior to the Fifth Amendment, our senior secured revolving credit facility provided senior secured financing of up to $201.0 million and matured on January 15, 2016. We were required to pay each non-defaulting lender a commitment fee of 0.375% in respect of any unused commitments under the senior secured revolving credit facility. The commitment fee in respect of unused commitments under the senior secured revolving credit facility was subject to adjustment based upon our total leverage ratio.
The Senior Secured Revolving Credit Facility was undrawn for the three and nine months ended September 30, 2014 and September 30, 2013.
The Fifth Amendment provided for a new Senior Secured Revolving Credit Facility to be made available under our Amended Credit Agreement in replacement of, and in the form of revolving credit loans having terms substantially similar to, the $201.0 million senior secured revolving credit facility referred to above (except with respect to pricing and maturity) in an aggregate principal amount of $300.0 million that mature on July 1, 2019 provided that, the maturity date shall be April 2, 2018 if an aggregate principal amount of $500.0 million or greater of 2018 Maturity Term Loans remains outstanding on such date. The proceeds of the Senior Secured Revolving Credit Facility are to be used solely (i) to prepay in full revolving credit loans outstanding under the previous senior secured credit facilities, and pay accrued but unpaid interest thereon, and to terminate all commitments under, in each case, the previous senior secured revolving credit facility in effect immediately prior to giving effect to the Fifth Amendment, (ii) for working capital and general corporate purposes (including dividends and distributions and acquisitions) and (iii) to pay fees and expenses incurred in connection with the establishment and incurrence of the TLA, the Senior Secured Revolving Credit Facility and any related transactions.
The interest rate margin applicable to the Senior Secured Revolving Credit Facility is based on our total leverage ratio and ranges from 1.50% to 2.25% for LIBOR rate loans (LIBOR plus 2.25% at September 30, 2014), and from 0.50% to 1.25% for base rate loans (base rate plus 1.25% at September 30, 2014). We are required to pay each non-defaulting lender a commitment fee of 0.375% in respect of any unused commitments under the Senior Secured Revolving Credit Facility. The commitment fee in respect of unused commitments under the Senior Secured Revolving Credit Facility is subject to adjustment based upon our total leverage ratio.
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The Fifth Amendment revised certain negative covenants contained in the Credit Agreement to reflect the size of the Company and current market terms and to extend the total leverage ratio financial covenant under the Credit Agreement in effect immediately prior to the Fifth Amendment through the maturity of the TLA and the Senior Secured Revolving Credit Facility with certain step downs in such ratio levels for test periods ending after December 31, 2015.
Subsequent to September 30, 2014, after giving effect to the Fifth Amendment, which provided for a reset to the availability under the uncommitted incremental facilities, the Company may request additional tranches of term loans or increases to the revolving credit facility in an aggregate amount not to exceed $500.0 million, plus the aggregate principal payments made in respect of the term loans thereunder following July 1, 2014 (other than such payments made with the proceeds of the 2022 Notes or the proceeds of the TLA). Availability of such additional tranches of term loans or increases to the revolving credit facility is subject to the absence of any default and pro forma compliance with financial covenants and, among other things, the receipt of commitments by existing or additional financial institutions.
The senior secured revolving credit facilities were undrawn for the nine and twelve months ended September 30, 2014 and December 31, 2013.
2018 Senior Notes
On October 5, 2010, we issued $500.0 million aggregate principal amount of 2018 Senior Notes.
In connection with the issuance of the 2022 Senior Notes on June 17, 2014 we commenced a tender offer to purchase any and all of our outstanding $500 million in aggregate principal amount of the 2018 Senior Notes. Total offer consideration for each $1,000 principal amount of the 2018 Senior Notes tendered was $1,063.09, including an early tender premium of $20.00 per $1,000 principal amount of the 2018 Senior Notes for those holders who properly tendered their 2018 Senior Notes on or before June 30, 2014. Upon consummation of the tender offer on July 1, 2014, approximately $270.8 million aggregate principal amount of the 2018 Senior Notes was purchased. Total additional consideration paid for the tender offer, including early tender premium payment and accrued interest, was approximately $298.7 million.
The redemption date for the call of the 2018 Senior Notes was July 17, 2014 and the redemption price was 104.313% of the principal amount of the 2018 Senior Notes and make whole-premium. In addition, the Company paid accrued and unpaid interest on the redeemed 2018 Senior Notes up to, but not including, the redemption date. Following this redemption, none of the 2018 Senior Notes remained outstanding.
2019 Senior Notes
On November 24, 2010, we issued $650.0 million aggregate principal amount of 2019 Senior Notes.
In connection with the issuance of the 2022 Notes on June 17, 2014 we commenced a tender offer to purchase up to $200.0 million in aggregate principal amount of the 2019 Senior Notes. Total offer consideration for each $1,000 principal amount of the 2019 Senior Notes tendered was $1,066.29 including an early tender premium of $20.00 per $1,000 principal amount of the 2019 Senior Notes for those holders who properly tendered their 2019 Senior Notes on or before June 30, 2014. Upon consummation of the tender offer on July 1, 2014, $200.0 million aggregate principal amount of the 2019 Senior Notes was purchased. Total additional consideration paid for the tender offer, including early tender premium payment and accrued interest, was approximately $215.3 million.
At any time prior to November 15, 2014, we may redeem all or a part of the 2019 Senior Notes at a redemption price equal to 100% of the principal amount of 2019 Senior Notes redeemed plus the applicable premium (as defined in the indenture governing the 2019 Senior Notes) as of, and accrued and unpaid interest to, the date of redemption, subject to the right of holders of 2019 Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.
On and after November 15, 2014, we may redeem the 2019 Senior Notes in whole or in part at the redemption prices (expressed as percentages of principal amount of the 2019 Senior Notes to be redeemed) set forth below plus accrued and unpaid interest thereon to the applicable date of redemption, subject to the right of holders of 2019 Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on November 15 of each of the years indicated below:
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Year |
Percentage | |||
2014 |
103.938 | |||
2015 |
101.969 | |||
2016 and thereafter |
100.000 |
On October 16, 2014, we delivered a redemption notice for the 2019 Senior Notes. The redemption premium is $17.7 million and will be deposited with the 2019 Senior Notes indenture trustee on November 14, 2014. We intend to use proceeds from the TLA, the Senior Secured Revolving Credit Facility and cash on hand to pay in full the 2019 Senior Notes, redemption premium and accrued interest.
2022 Senior Notes
On July 1, 2014 we issued $1.0 billion aggregate principal amount of 2022 Senior Notes. The 2022 Senior Notes mature on July 15, 2022 and were issued at par. The 2022 Senior Notes were offered in a private offering exempt from the registration requirements of the Securities Act.
At any time prior to July 15, 2017, we may redeem all or a part of the 2022 Senior Notes at a redemption price equal to 100% of the principal amount of 2022 Senior Notes redeemed plus the applicable premium (as defined in the indenture governing the 2022 Senior Notes) as of, and accrued and unpaid interest to, the date of redemption, subject to the right of holders of 2022 Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.
On and after July 15, 2017, we may redeem the 2022 Senior Notes in whole or in part at the redemption prices (expressed as percentages of principal amount of the 2022 Senior Notes to be redeemed) set forth below plus accrued and unpaid interest thereon to the applicable date of redemption, subject to the right of holders of 2022 Senior Notes of record on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on July 15 of each of the years indicated below:
Year |
Percentage | |||
2017 |
104.031 | |||
2018 |
102.688 | |||
2019 |
101.344 | |||
2020 and thereafter |
100.000 |
At any time (which may be more than once) before July 15, 2017, we can choose to redeem up to 40% of the outstanding notes with money that we raise in one or more equity offerings, as long as (i) we pay 105.375% of the face amount of the notes, plus accrued and unpaid interest; (ii) we redeem the notes within 90 days after completing the equity offering; and (iii) at least 60% of the aggregate principal amount of the notes issued remains outstanding afterwards.
We and our subsidiaries, affiliates or significant shareholders may from time to time, in our sole discretion, purchase, repay, redeem or retire any of our outstanding debt or equity securities (including any publicly issued debt or equity securities), in privately negotiated or open market transactions, by tender offer or otherwise.
Amended and Extended Asset Securitization
On August 26, 2013, the revolving trade accounts receivable financing facility between West Receivables LLC, a wholly-owned, bankruptcy-remote direct subsidiary of West Receivables Holdings LLC and Wells Fargo was amended and extended. The amended and extended facility provides for $185.0 million in available financing
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and the term of the facility was extended to August 27, 2018. The amended and extended facility also reduced the unused commitment fee to 0.45% from 0.50% and lowered the LIBOR spread on borrowings to 135 basis points from 150 basis points. We have further amended the amended and extended facility as of April 9, 2014 to include additional guarantors and, as of June 2, 2014, to modify the eligibility criteria for certain receivables. Under the amended and extended facility, West Receivables Holdings LLC sells or contributes trade accounts receivables to West Receivables LLC, which sells undivided interests in the purchased or contributed accounts receivables for cash to one or more financial institutions. The availability of the funding is subject to the level of eligible receivables after deducting certain concentration limits and reserves. The proceeds of the facility are available for general corporate purposes. West Receivables LLC and West Receivables Holdings LLC are consolidated in our condensed consolidated financial statements included elsewhere in this report. At September 30, 2014, $184.2 million was outstanding under the amended and extended asset securitization facility. At December 31, 2013, the amended and extended asset securitization facility was undrawn. The highest balance outstanding during the nine months ended September 30, 2014 and 2013 on this facility was $185.0 million and $50.0 million, respectively.
Debt Covenants
Senior Secured Credit Facilities and Senior Secured Revolving Credit Facility We are required to comply on a quarterly basis with a maximum total leverage ratio covenant and a minimum interest coverage ratio covenant. Pursuant to the Amended Credit Agreement, the total leverage ratio of consolidated total debt to Consolidated EBITDA (as defined in our Amended Credit Agreement) may not exceed 6.50 to 1.0 at September 30, 2014, and the interest coverage ratio of Consolidated EBITDA to the sum of consolidated interest expense must be not less than 1.85 to 1.0. The total leverage ratio will become more restrictive over time (adjusted annually until the maximum leverage ratio reaches 5.5 to 1.0 as of December 31, 2017). Both ratios are measured on a rolling four-quarter basis. We were in compliance with these financial covenants at September 30, 2014. The Amended Credit Agreement also contains various negative covenants, including limitations on indebtedness, liens, mergers and consolidations, asset sales, dividends and distributions or repurchases of our capital stock, investments, loans and advances, capital expenditures, payment of other debt, transactions with affiliates and changes in our lines of business.
The Amended Credit Agreement includes certain customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, the invalidity of material provisions of the documentation with respect to the Senior Secured Credit Facilities, the failure of collateral under the security documents for the Senior Secured Credit Facilities, the failure of the Senior Secured Credit Facilities to be senior debt under the subordination provisions of certain of our subordinated debt we may have outstanding from time to time and a change of control of us. If an event of default occurs, the lenders under the Senior Secured Credit Facilities will be entitled to take certain actions, including the acceleration of all amounts due under the Senior Secured Credit Facilities and all actions permitted to be taken by a secured creditor. We believe that for the foreseeable future, the Senior Secured Credit Facilities offer us sufficient capacity for our indebtedness financing requirements and we do not anticipate that the limitations on incurring additional indebtedness included in the Amended Credit Agreement will materially impair our financial condition or results of operations.
2019 Senior Notes and 2022 Senior Notes The indentures governing the 2019 Senior Notes and the 2022 Senior Notes contain covenants limiting, among other things, our ability and the ability of our restricted subsidiaries to: incur additional debt or issue certain preferred shares, pay dividends on or make distributions in respect of our capital stock or make other restricted payments, make certain investments, sell certain assets, create liens on certain assets to secure debt, consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets, enter into certain transactions with our affiliates and designate our subsidiaries as unrestricted subsidiaries. We were in compliance with these financial covenants at September 30, 2014.
Accounts Receivable Securitization - The amended and extended revolving trade accounts receivable financing facility contains various customary affirmative and negative covenants and also contains customary default and termination provisions, which provide for acceleration of amounts owed under the program upon the occurrence of certain specified events, including, but not limited to,
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failure to pay yield and other amounts due, defaults on certain indebtedness, certain judgments, changes in control, certain events negatively affecting the overall credit quality of collateralized accounts receivable, bankruptcy and insolvency events and failure to meet financial tests requiring maintenance of certain leverage and coverage ratios, similar to those under our Senior Secured Credit Facility.
Our failure to comply with these debt covenants may result in an event of default which, if not cured or waived, could accelerate the maturity of our indebtedness. If our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. If our cash flows and capital resources are insufficient to fund our debt service obligations and keep us in compliance with the covenants under our Amended Credit Agreement or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness including the notes. We cannot ensure that we would be able to take any of these actions, that these actions would be successful and would permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including our Senior Secured Credit Facilities and the indentures that govern the notes. The Amended Credit Agreement and the indentures that govern the notes restrict our ability to dispose of assets and use the proceeds from the disposition. As a result, we may not be able to consummate those dispositions or use the proceeds to meet our debt service or other obligations, and any proceeds that are available may not be adequate to meet any debt service or other obligations then due.
If we cannot make scheduled payments on our debt, we will be in default, and as a result:
| our debt holders could declare all outstanding principal and interest to be due and payable; |
| the lenders under our Senior Secured Credit Facilities could terminate their commitments to lend us money and foreclose against the assets securing our borrowings; and |
| we could be forced into bankruptcy or liquidation. |
Contractual Obligations
We have contractual obligations that may affect our financial condition. However, based on managements assessment of the underlying provisions and circumstances of our material contractual obligations, there is no known trend, demand, commitment, event or uncertainty that is reasonably likely to occur which would have a material effect on our financial condition or results of operations.
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The following table summarizes our contractual obligations at September 30, 2014 (amounts in thousands):
Contractual Obligations |
Total | Less than 1 year |
1 - 3 years | 4 - 5 years | After 5 years |
|||||||||||||||
Senior Secured Term Loan Facility, due 2016 |
$ | 311,317 | $ | 3,121 | $ | 308,196 | $ | | $ | | ||||||||||
Senior Secured Term Loan Facility, due 2018 |
1,813,250 | | | 1,813,250 | | |||||||||||||||
7 7/8% Senior Notes, due 2019 |
450,000 | | | 450,000 | | |||||||||||||||
Amended and Extended Asset Securitization, due 2018 |
184,235 | | | 184,235 | | |||||||||||||||
5 3/8% Senior Notes, due 2022 |
1,000,000 | | | | 1,000,000 | |||||||||||||||
Interest payments on fixed rate debt |
589,471 | 89,188 | 178,376 | 160,657 | 161,250 | |||||||||||||||
Estimated interest payments on variable rate debt (1) |
271,113 | 74,370 | 140,735 | 56,008 | | |||||||||||||||
Operating leases |
159,949 | 38,675 | 50,418 | 25,880 | 44,976 | |||||||||||||||
Contractual minimums under telephony agreements (2) |
154,300 | 79,300 | 75,000 | | | |||||||||||||||
Purchase obligations (3) |
88,811 | 76,675 | 9,961 | 2,175 | | |||||||||||||||
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Total contractual cash obligations |
$ | 5,022,446 | $ | 361,329 | $ | 762,686 | $ | 2,692,205 | $ | 1,206,226 | ||||||||||
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(1) | Interest rate assumptions based on October 10, 2014 LIBOR U.S. dollar swap rate curves for the next five years. |
(2) | Based on projected telephony minutes through 2017. The contractual minimum is usage based and could vary based on actual usage. |
(3) | Represents future obligations for capital and expense projects that are in progress or are committed. |
The table above excludes amounts to be paid for taxes and long-term obligations under our Nonqualified Executive Retirement Savings Plan and Nonqualified Executive Deferred Compensation Plan. The table also excludes amounts to be paid for income tax contingencies because the timing thereof is highly uncertain. At September 30, 2014, we had accrued $34.1 million, including interest and penalties for uncertain tax positions.
Capital Expenditures
Our operations continue to require significant capital expenditures for technology, capacity expansion and upgrades. Capital expenditures were $100.6 million for the nine months ended September 30, 2014, compared to $78.1 million for the nine months ended September 30, 2013. We currently estimate our capital expenditures for the remainder of 2014 to be approximately $69.4 to $89.4 million primarily for equipment and upgrades at existing facilities, the consolidation of data centers and related expansion of our network infrastructure.
Off Balance Sheet Arrangements
Performance obligations of several of our subsidiaries are supported by performance bonds and letters of credit. These obligations will expire at various dates through 2015 and are renewed as required. The outstanding commitment on these obligations at September 30, 2014 was $9.0 million.
Effects of Inflation
We do not believe that inflation has had a material effect on our financial position or results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements requires the use of estimates and assumptions on the part of management. The estimates and assumptions used by management are based on our historical experiences combined with managements understanding of current facts and circumstances. Certain of our accounting policies are considered critical as they are both important to the portrayal of our financial condition and results of operations and require significant or complex judgment on the part of management. The accounting policies we consider critical are our accounting policies with respect to revenue recognition, allowance for doubtful accounts, goodwill and other intangible assets, and income taxes.
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For additional discussion of these critical accounting policies, see Managements Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2013. There have not been any significant changes with respect to these policies during the nine months ended September 30, 2014.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk Management
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and changes in the market value of investments. The effect of inflation on our variable interest rate debt is discussed below in Interest Rate Risk.
Interest Rate Risk
As of September 30, 2014, we had $2,124.6 million outstanding under our senior secured term loan facilities, $450.0 million outstanding under our 2019 Senior Notes, $1.0 billion outstanding under our 2022 Senior Notes and $184.2 million outstanding under our revolving trade accounts receivable financing facility.
Due to the interest rate floors, our long-term obligations at variable interest rates would be subject to interest rate risk only if current LIBOR rates exceed the interest rate floors. A 50 basis point change in the variable interest rate at September 30, 2014, would have no impact on our variable interest rate. At September 30, 2014, the 30 and 90 day LIBOR rates were approximately 0.154% and 0.2331%, respectively. As a result of the interest rate floors and prevailing LIBOR rates, material rate increases on our variable rate senior secured term loan facilities in the immediate and near term is unlikely.
Foreign Currency Risk
Our Unified Communications segment conducts business in countries outside of the United States. Revenue and expenses from these foreign operations are typically denominated in local currency, thereby creating exposure to changes in exchange rates. Generally, we do not hedge the foreign currency transactions. Changes in exchange rates may positively or negatively affect our revenue and net income attributed to these subsidiaries.
Based on our level of operating activities in foreign operations during the nine months ended September 30, 2014, a five percent change in the value of the U.S. dollar relative to the Euro and British Pound Sterling would have positively or negatively affected our net operating income by less than one percent.
For the three months ended September 30, 2014 and 2013, the Communication Services segment had no material revenue outside the United States. Our facilities in Canada, Jamaica, Mexico and the Philippines receive calls only from customers in North America under contracts denominated in U.S. dollars and therefore our foreign currency exposure is primarily for expenses incurred in the respective country.
For the three and nine months ended September 30, 2014, revenues from non-U.S. countries were approximately 17% and 18%, respectively, of consolidated revenues. For the three and nine months ended September 30, 2013, revenues from non-U.S. countries were approximately 18% and 19%, respectively, of consolidated revenues. During these periods no individual foreign country accounted for greater than 10% of revenue. At September 30, 2014 and December 31, 2013, long-lived assets from non-U.S. countries were 7% and 9%, respectively. We have generally not entered into forward exchange or option contracts for transactions denominated in foreign currency to hedge against foreign currency risk. We are exposed to translation risk because our foreign operations are in local currency and must be translated into U.S. dollars. As currency exchange rates fluctuate, translation of our Statements of Operations of non-U.S. businesses into U.S. dollars affects the comparability of revenue, expenses, and operating income between periods.
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Investment Risk
Periodically, we have entered into interest rate swap agreements (also referred to as cash flow hedges) to convert variable long-term debt to fixed rate debt. At September 30, 2014, we had no cash flow hedges outstanding.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures. Our management team continues to review our internal controls and procedures and the effectiveness of those controls. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer and Treasurer concluded that, as of September 30, 2014, our disclosure controls and procedures are effective in ensuring that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms and (ii) that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting or in other factors during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. No corrective actions were required or taken.
In the ordinary course of business, we and certain of our subsidiaries are defendants in various litigation matters and are subject to claims from our clients for indemnification, some of which may involve claims for damages that are substantial in amount. We do not believe the disposition of claims currently pending will have a material adverse effect on our financial position, results of operations or cash flows.
In addition to the other information set forth in this report, you should carefully consider the risks described under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2013. If any of the risks described therein occur, our business, financial condition, liquidity and results of operations could be materially affected.
4.1 | Indenture, dated as of July 1, 2014, among West Corporation, the guarantors named on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee, with respect to the 5.375% senior notes due 2022 (incorporated by reference to Exhibit 4.1 to Form 8-K filed July 3, 2014) | |
4.2 | Supplemental Indenture, dated as of July 1, 2014, by and among West Corporation and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of October 5, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporations $500.0 million aggregate principal amount of 8.625% senior notes due 2018 (incorporated by reference to Exhibit 4.2 to Form 8-K filed July 3, 2014) |
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4.3 | Supplemental Indenture No. 4, dated as of August 13, 2014, by and among West Corporation, Reliance Intermediate, Inc., Reliance Holding, Inc., Reliance Communications, LLC, Health Advocate, Inc., WellCall, Inc., Human Management Services, Inc., Corporate Care Works, Inc., RX Advocate, Inc. and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of November 24, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporations 7.875% senior notes due 2019 | |
4.4 | Supplemental Indenture, dated as of August 13, 2014, by and among West Corporation, Reliance Intermediate, Inc., Reliance Holding, Inc., Reliance Communications, LLC, Health Advocate, Inc., WellCall, Inc., Human Management Services, Inc., Corporate Care Works, Inc., RX Advocate, Inc. and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of July 1, 2014, among West Corporation, the guarantors named on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee, with respect to the 5.375% senior notes due 2022 | |
10.1 | Amendment No. 5 to Amended and Restated Credit Agreement, dated as of July 1, 2014, by and among West Corporation, the Subsidiary Borrowers party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, to the amended and restated credit agreement, dated as of October 5, 2010, by and among West Corporation, the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 3, 2014) | |
10.2 | Amendment Number Three to the West Corporation Nonqualified Deferred Compensation Plan, effective as of July 30, 2014 (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed August 5, 2014) (1) | |
10.3 | Form of West Corporation Restricted Stock Award Agreement (1) | |
10.4 | Form of West Corporation Restricted Stock Unit Award Agreement (1) | |
10.5 | Form of West Corporation Performance-Based Restricted Stock Award Agreement (1) | |
10.6 | Form of Change in Control Severance Agreement (1) | |
10.7 | West Corporation Executive Retirement Savings Plan Amended and Restated Effective January 1, 2015 (1) | |
10.8 | Amendment Number One to the West Corporation 2013 Employee Stock Purchase Plan, dated as of October 30, 2014 (1) | |
15.1 | Letter regarding unaudited interim financial information | |
31.01 | Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.02 | Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.01 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.02 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101 | Financial statements from the quarterly report on Form 10-Q of West Corporation for the quarter ended September 30, 2014, filed on November 6, 2014, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders Deficit and (vi) the Notes to Condensed Consolidated Financial Statements filed herewith. |
(1) | Indicates management contract or compensation plan or arrangement. |
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Pursuant to the requirements 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 | ||
By: | /s/ Paul M. Mendlik | |
Paul M. Mendlik | ||
Chief Financial Officer and Treasurer | ||
By: | /s/ R. Patrick Shields | |
R. Patrick Shields | ||
Senior Vice President - | ||
Chief Accounting Officer |
Date: November 6, 2014
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Number |
Description | |
4.1 | Indenture, dated as of July 1, 2014, among West Corporation, the guarantors named on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee, with respect to the 5.375% senior notes due 2022 (incorporated by reference to Exhibit 4.1 to Form 8-K filed July 3, 2014) | |
4.2 | Supplemental Indenture, dated as of July 1, 2014, by and among West Corporation and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of October 5, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporations $500.0 million aggregate principal amount of 8.625% senior notes due 2018 (incorporated by reference to Exhibit 4.2 to Form 8-K filed July 3, 2014) | |
4.3 | Supplemental Indenture No. 4, dated as of August 13, 2014, by and among West Corporation, Reliance Intermediate, Inc., Reliance Holding, Inc., Reliance Communications, LLC, Health Advocate, Inc., WellCall, Inc., Human Management Services, Inc., Corporate Care Works, Inc., RX Advocate, Inc. and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of November 24, 2010, by and among West Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., with respect to West Corporations 7.875% senior notes due 2019 | |
4.4 | Supplemental Indenture No. 1, dated as of August 13, 2014, by and among West Corporation, Reliance Intermediate, Inc., Reliance Holding, Inc., Reliance Communications, LLC, Health Advocate, Inc., WellCall, Inc., Human Management Services, Inc., Corporate Care Works, Inc., RX Advocate, Inc. and The Bank of New York Mellon Trust Company, N.A., to the Indenture, dated as of July 1, 2014, among West Corporation, the guarantors named on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee, with respect to the 5.375% senior notes due 2022 | |
10.1 | Amendment No. 5 to Amended and Restated Credit Agreement, dated as of July 1, 2014, by and among West Corporation, the Subsidiary Borrowers party thereto, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, to the amended and restated credit agreement, dated as of October 5, 2010, by and among West Corporation, the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 to Form 8-K filed July 3, 2014) | |
10.2 | Amendment Number Three to the West Corporation Nonqualified Deferred Compensation Plan, effective as of July 30, 2014 (incorporated by reference to Exhibit 10.5 to the Form 10-Q filed August 5, 2014) (1) | |
10.3 | Form of West Corporation Restricted Stock Award Agreement (1) | |
10.4 | Form of West Corporation Restricted Stock Unit Award Agreement (1) | |
10.5 | Form of West Corporation Performance-Based Restricted Stock Award Agreement (1) | |
10.6 | Form of Change in Control Severance Agreement (1) | |
10.7 | West Corporation Executive Retirement Savings Plan Amended and Restated Effective January 1, 2015 (1) | |
10.8 | Amendment Number One to the West Corporation 2013 Employee Stock Purchase Plan, dated as of October 30, 2014 (1) | |
15.1 | Letter regarding unaudited interim financial information |
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31.01 | Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.02 | Certification pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.01 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.02 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | Financial statements from the quarterly report on Form 10-Q of West Corporation for the quarter ended September 30, 2014, filed on November 6, 2014, formatted in XBRL: (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Statements of Comprehensive Income; (iii) the Condensed Consolidated Balance Sheets; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders Deficit and (vi) the Notes to Condensed Consolidated Financial Statements filed herewith. |
(1) | Indicates management contract or compensation plan or arrangement. |
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Exhibit 4.3
SUPPLEMENTAL INDENTURE NO. 4
Supplemental Indenture No. 4 (this Supplemental Indenture), dated as of August 13, 2014 among Reliance Intermediate, Inc., a Delaware corporation (Reliance Intermediate), Reliance Holding, Inc., a Delaware corporation (Reliance Holding), Reliance Communications, LLC, a California limited liability company (Reliance Communications), Health Advocate, Inc., a Delaware corporation (Health Advocate), WellCall, Inc., a California corporation (WellCall), Human Management Services, Inc., a Pennsylvania corporation (Human Management), Corporate Care Works, Inc., a Florida corporation (Corporate Care) and Rx Advocate, Inc., a Delaware corporation (Rx Advocate and, together with Reliance Intermediate, Reliance Holding, Reliance Communications, Health Advocate, WellCall, Human Management and Corporate Care, each, a Guaranteeing Subsidiary and, together, the Guaranteeing Subsidiaries), West Corporation, a Delaware corporation (the Issuer), and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee).
W I T N E S S E T H
WHEREAS, each of West Corporation and the Guarantors (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee an indenture (the Indenture), dated as of November 24, 2010, providing for the issuance of an unlimited aggregate principal amount of 7 7⁄8% Senior Notes due 2019 (the Notes);
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which each Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the Guarantee);
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and
WHEREAS, all things necessary to make this Supplemental Indenture the legal, valid and binding obligation of the Issuer and each Guaranteeing Subsidiary have been done.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
(2) Agreement to Guarantee. Each Guaranteeing Subsidiary hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and severally unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that:
(i) the principal of and interest, premium and Additional Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors and each Guaranteeing Subsidiary shall be jointly and severally obligated to pay the same immediately. This is a guarantee of payment and not a guarantee of collection.
(b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.
(c) The following are hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.
(d) This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, the Indenture and this Supplemental Indenture, and each Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors (including each Guaranteeing Subsidiary), or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(f) No Guaranteeing Subsidiary shall be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.
(g) As between each of the Guaranteeing Subsidiaries, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guaranteeing Subsidiary for the purpose of this Guarantee.
(h) Each Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guarantee.
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(i) Pursuant to Section 10.02 of the Indenture, after giving effect to all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture, this new Guarantee shall be limited to the maximum amount permissible such that the obligations of each Guaranteeing Subsidiary under this Guarantee will not constitute a fraudulent transfer or conveyance.
(j) This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuers assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes and Guarantee, whether as a voidable preference, fraudulent transfer or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(k) In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(l) This Guarantee shall be a general unsecured senior obligation of each Guaranteeing Subsidiary, ranking pari passu with any other future Senior Indebtedness of each Guaranteeing Subsidiary, if any.
(m) Each payment to be made by a Guaranteeing Subsidiary in respect of this Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
(3) Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
(4) Merger, Consolidation or Sale of All or Substantially All Assets.
(a) Except as otherwise provided in Section 5.01(c) of the Indenture, no Guaranteeing Subsidiary may consolidate or merge with or into or wind up into (whether or not the Issuer or such Guaranteeing Subsidiary is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(i)(A) such Guaranteeing Subsidiary is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guaranteeing Subsidiary) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of such Guaranteeing Subsidiary, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guaranteeing Subsidiary or such Person, as the case may be, being herein called the Successor Person);
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(B) the Successor Person, if other than such Guaranteeing Subsidiary, expressly assumes all the obligations of such Guaranteeing Subsidiary under the Indenture and such Guaranteeing Subsidiarys related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(C) immediately after such transaction, no Default exists; and
(D) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; or
(ii) the transaction is made in compliance with Sections 4.10(a)(1) and (2) of the Indenture;
(b) Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guaranteeing Subsidiary under the Indenture and such Guaranteeing Subsidiarys Guarantee. Notwithstanding the foregoing, any Guaranteeing Subsidiary may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer.
(5) Releases.
The Guarantee of any Guaranteeing Subsidiary shall be automatically and unconditionally released and discharged, and no further action by such Guaranteeing Subsidiary, the Issuer or the Trustee is required for the release of such Guaranteeing Subsidiarys Guarantee, upon:
(1)(A) any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of such Guaranteeing Subsidiary (including any sale, exchange or transfer), after which such Guaranteeing Subsidiary is no longer a Restricted Subsidiary or all or substantially all the assets of such Guaranteeing Subsidiary which sale, exchange or transfer is made in compliance with Sections 4.10(a)(1) and (2) of the Indenture;
(B) the release or discharge of the guarantee by such Guaranteeing Subsidiary of the Senior Credit Facilities or the guarantee which resulted in the creation of the Guarantee, except a discharge or release by or as a result of payment under such guarantee;
(C) the proper designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary; or
(D) the Issuer exercising its Legal Defeasance option or Covenant Defeasance option in accordance with Article 8 of the Indenture or the Issuers obligations under the Indenture being discharged in accordance with the terms of the Indenture; and
(2) such Guaranteeing Subsidiary delivering to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.
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(6) No Recourse Against Others. No director, officer, employee, incorporator or stockholder of any Guaranteeing Subsidiary shall have any liability for any obligations of the Issuer or the Guarantors (including such Guaranteeing Subsidiary) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
(7) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(8) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
(9) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
(10) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary.
(11) Subrogation. Each Guaranteeing Subsidiary shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by each Guaranteeing Subsidiary pursuant to the provisions of Section 2 hereof and Section 10.01 of the Indenture; provided that, if an Event of Default has occurred and is continuing, no Guaranteeing Subsidiary shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under the Indenture or the Notes shall have been paid in full.
(12) Benefits Acknowledged. Each Guaranteeing Subsidiarys Guarantee is subject to the terms and conditions set forth in the Indenture. Each Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.
(13) Successors. All agreements of each Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in Section 2(k) hereof or elsewhere in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
RELIANCE INTERMEDIATE, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
RELIANCE HOLDING, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
RELIANCE COMMUNICATIONS, LLC | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
HEALTH ADVOCATE, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
WELLCALL, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
HUMAN MANAGEMENT SERVICES, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
[Signature Page Supplemental Senior Notes Indenture (2019)]
CORPORATE CARE WORKS, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
RX ADVOCATE, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
[Signature Page Supplemental Senior Notes Indenture (2019)]
SIGNATURE
Pursuant to the requirements of the Act, the trustee, The Bank of New York Mellon Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Houston, and State of Texas, on the 7th day of August, 2014.
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE | ||
By: | /s/ Julie Hoffman-Ramos | |
Name: | Julie Hoffman-Ramos | |
Title: | Vice President |
[Signature Page Supplemental Senior Notes Indenture (2019)]
Acknowledged and Agreed to by:
WEST CORPORATION | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
[Signature Page Supplemental Senior Notes Indenture (2019)]
Exhibit 4.4
SUPPLEMENTAL INDENTURE NO. 1
Supplemental Indenture No. 1 (this Supplemental Indenture), dated as of August 13, 2014 among Reliance Intermediate, Inc., a Delaware corporation (Reliance Intermediate), Reliance Holding, Inc., a Delaware corporation (Reliance Holding), Reliance Communications, LLC, a California limited liability company (Reliance Communications), Health Advocate, Inc., a Delaware corporation (Health Advocate), WellCall, Inc., a California corporation (WellCall), Human Management Services, Inc., a Pennsylvania corporation (Human Management), Corporate Care Works, Inc., a Florida corporation (Corporate Care) and Rx Advocate, Inc., a Delaware corporation (Rx Advocate and, together with Reliance Intermediate, Reliance Holding, Reliance Communications, Health Advocate, WellCall, Human Management and Corporate Care, each, a Guaranteeing Subsidiary and, together, the Guaranteeing Subsidiaries), West Corporation, a Delaware corporation (the Issuer), and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee).
W I T N E S S E T H
WHEREAS, each of West Corporation and the Guarantors (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee an indenture (the Indenture), dated as of July 1, 2014, providing for the issuance of an unlimited aggregate principal amount of 5.375% Senior Notes due 2022 (the Notes);
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiaries shall execute and deliver to the Trustee a supplemental indenture pursuant to which each Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuers Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the Guarantee);
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and
WHEREAS, all things necessary to make this Supplemental Indenture the legal, valid and binding obligation of the Issuer and each Guaranteeing Subsidiary have been done.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:
(1) Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.
(2) Agreement to Guarantee. Each Guaranteeing Subsidiary hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and severally unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that:
(i) the principal of and interest, premium and Additional Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors and each Guaranteeing Subsidiary shall be jointly and severally obligated to pay the same immediately. This is a guarantee of payment and not a guarantee of collection.
(b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.
(c) The following are hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.
(d) This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, the Indenture and this Supplemental Indenture, and each Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors (including each Guaranteeing Subsidiary), or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(f) No Guaranteeing Subsidiary shall be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.
(g) As between each of the Guaranteeing Subsidiaries, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guaranteeing Subsidiary for the purpose of this Guarantee.
(h) Each Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guarantee.
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(i) Pursuant to Section 10.02 of the Indenture, after giving effect to all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 10 of the Indenture, this new Guarantee shall be limited to the maximum amount permissible such that the obligations of each Guaranteeing Subsidiary under this Guarantee will not constitute a fraudulent transfer or conveyance.
(j) This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuers assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes and Guarantee, whether as a voidable preference, fraudulent transfer or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(k) In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(l) This Guarantee shall be a general unsecured senior obligation of each Guaranteeing Subsidiary, ranking pari passu with any other future Senior Indebtedness of each Guaranteeing Subsidiary, if any.
(m) Each payment to be made by a Guaranteeing Subsidiary in respect of this Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
(3) Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.
(4) Merger, Consolidation or Sale of All or Substantially All Assets.
(a) Except as otherwise provided in Section 5.01(c) of the Indenture, no Guaranteeing Subsidiary may consolidate or merge with or into or wind up into (whether or not the Issuer or such Guaranteeing Subsidiary is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:
(i)(A) such Guaranteeing Subsidiary is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guaranteeing Subsidiary) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of such Guaranteeing Subsidiary, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guaranteeing Subsidiary or such Person, as the case may be, being herein called the Successor Person);
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(B) the Successor Person, if other than such Guaranteeing Subsidiary, expressly assumes all the obligations of such Guaranteeing Subsidiary under the Indenture and such Guaranteeing Subsidiarys related Guarantee pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Trustee;
(C) immediately after such transaction, no Default exists; and
(D) the Issuer shall have delivered to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture; or
(ii) the transaction is made in compliance with Sections 4.10(a)(1) and (2) of the Indenture;
(b) Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guaranteeing Subsidiary under the Indenture and such Guaranteeing Subsidiarys Guarantee. Notwithstanding the foregoing, any Guaranteeing Subsidiary may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer.
(5) Releases.
The Guarantee of any Guaranteeing Subsidiary shall be automatically and unconditionally released and discharged, and no further action by such Guaranteeing Subsidiary, the Issuer or the Trustee is required for the release of such Guaranteeing Subsidiarys Guarantee, upon:
(1)(A) any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of such Guaranteeing Subsidiary (including any sale, exchange or transfer), after which such Guaranteeing Subsidiary is no longer a Restricted Subsidiary or all or substantially all the assets of such Guaranteeing Subsidiary which sale, exchange or transfer is made in compliance with Sections 4.10(a)(1) and (2) of the Indenture;
(B) the release or discharge of the guarantee by such Guaranteeing Subsidiary of the Senior Credit Facilities or the guarantee which resulted in the creation of the Guarantee, except a discharge or release by or as a result of payment under such guarantee;
(C) the proper designation of such Guaranteeing Subsidiary as an Unrestricted Subsidiary; or
(D) the Issuer exercising its Legal Defeasance option or Covenant Defeasance option in accordance with Article 8 of the Indenture or the Issuers obligations under the Indenture being discharged in accordance with the terms of the Indenture; and
(2) such Guaranteeing Subsidiary delivering to the Trustee an Officers Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.
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(6) No Recourse Against Others. No director, officer, employee, incorporator or stockholder of any Guaranteeing Subsidiary shall have any liability for any obligations of the Issuer or the Guarantors (including such Guaranteeing Subsidiary) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
(7) Governing Law. THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(8) Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
(9) Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
(10) The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by each Guaranteeing Subsidiary.
(11) Subrogation. Each Guaranteeing Subsidiary shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by each Guaranteeing Subsidiary pursuant to the provisions of Section 2 hereof and Section 10.01 of the Indenture; provided that, if an Event of Default has occurred and is continuing, no Guaranteeing Subsidiary shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under the Indenture or the Notes shall have been paid in full.
(12) Benefits Acknowledged. Each Guaranteeing Subsidiarys Guarantee is subject to the terms and conditions set forth in the Indenture. Each Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.
(13) Successors. All agreements of each Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in Section 2(k) hereof or elsewhere in this Supplemental Indenture. All agreements of the Trustee in this Supplemental Indenture shall bind its successors.
[Signature Pages Follow]
5
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.
RELIANCE INTERMEDIATE, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
RELIANCE HOLDING, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
RELIANCE COMMUNICATIONS, LLC | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
HEALTH ADVOCATE, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
WELLCALL, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
HUMAN MANAGEMENT SERVICES, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
[Signature Page Supplemental Senior Notes Indenture (2022)]
CORPORATE CARE WORKS, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
RX ADVOCATE, INC. | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
[Signature Page Supplemental Senior Notes Indenture (2022)]
SIGNATURE
Pursuant to the requirements of the Act, the trustee, The Bank of New York Mellon Trust Company, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Houston, and State of Texas, on the 7th day of August, 2014.
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS TRUSTEE | ||
By: | /s/ Julie Hoffman-Ramos | |
Name: | Julie Hoffman-Ramos | |
Title: | Vice President |
[Signature Page Supplemental Senior Notes Indenture (2022)]
Acknowledged and Agreed to by:
WEST CORPORATION | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer and Treasurer |
[Signature Page Supplemental Senior Notes Indenture (2022)]
Exhibit 10.3
Name of Grantee: (Grantee)
WEST CORPORATION
Form of Restricted Stock Award Agreement
This Restricted Stock Award Agreement (Agreement) is made as of the Grant Date (as defined below) between Grantee and West Corporation, a Delaware corporation (the Company).
The undersigned Grantee (i) acknowledges receipt of an award (the Award) of restricted stock from the Company under the Companys Amended and Restated 2013 Long-Term Incentive Plan (the Plan), subject to the terms set forth below and in the Plan, a copy of which Plan, as in effect on the date hereof, is attached hereto as Exhibit A; and (ii) agrees with the Company as follows:
1. Effective Date. This Agreement shall take effect as of , which is the date of grant of the Award (the Grant Date).
2. Shares Subject to Award. The Award consists of a total of shares (the Shares) of Common Stock, par value $0.001 per share, of the Company (Stock). The Grantees rights to the Shares are subject to the restrictions described in this Agreement and the Plan (which is incorporated herein by reference with the same effect as if set forth herein in full) in addition to such other restrictions, if any, as may be imposed by law.
3. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Grantee (a) accepts this Agreement by executing it in the space provided below and returns such original execution copy to the Company and (b) if requested by the Company, executes and returns one or more irrevocable stock powers to facilitate the transfer to the Company (or its assignee or nominee) of all or a portion of the Shares subject to the Award if any Shares are forfeited pursuant to Section 4 or if required under applicable laws or regulations. As soon as practicable after the Grantee has executed such documents and returned them to the Company, the Company shall cause to be issued in the Grantees name the total number of Shares subject to the Award.
4. Forfeiture Risk. Except as provided in Section 6, if the Grantees Employment (as defined below) with the Company and its subsidiaries ceases for any reason prior to the expiration of the Restriction Period (as defined below), including by reason of death, then (subject to any contrary provision of this Agreement or any other written agreement between the Company and the Grantee with respect to vesting and termination of Stock granted under the Plan) any and all outstanding unvested Shares acquired by the Grantee hereunder shall be automatically and immediately forfeited. The Grantee hereby (i) appoints the Company as the attorney-in-fact of the Grantee to take such actions as may be necessary or appropriate to effectuate a transfer of the record ownership of any such Shares that are unvested and forfeited hereunder, and (ii) agrees to sign such other powers and take such other actions as the Company may reasonably request to accomplish the transfer or forfeiture of any unvested Shares that are forfeited hereunder.
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5. Custody and Delivery of Shares. The Shares subject to the Award shall be held by the Company or by a custodian in book entry form, with restrictions on the Shares duly noted, until such Award shall have vested, in whole or in part, pursuant to Section 6 hereof, and as soon thereafter as practicable, subject to Section 14.C hereof, the vested Stock shall be delivered to the Grantee as the Grantee shall direct. Alternatively, in the sole discretion of the Company, the Company shall hold a certificate or certificates representing the Shares subject to the Award until such Award shall have vested, in whole or in part, pursuant to Section 6 hereof, and the Company shall as soon thereafter as practicable, subject to Section 14.C hereof, deliver the certificate or certificates for the vested Stock to the Grantee and destroy the stock power or powers relating to the vested Stock, if any, delivered by the Grantee pursuant to Section 3 hereof. If such stock power or powers also relate to unvested Stock, the Company may require, as a condition precedent to delivery of any certificate pursuant to this Section 5, the execution and delivery to the Company of one or more stock powers relating to such unvested Stock.
6. Vesting of Shares. The Shares acquired hereunder shall vest in accordance with the provisions of this Section 6 and applicable provisions of the Plan, as follows: (i) Shares subject to the Award shall vest in one-fourth (1/4) increments on each of the first, second, third and fourth anniversaries of the Grant Date (rounded down to the nearest whole Share on the first anniversary, rounded up to the nearest whole Share on the second anniversary, rounded up or down to the nearest whole Share on the third anniversary (with 0.5 rounded up) and rounded up or down on the fourth anniversary as necessary to provide for the vesting of the balance of the unvested Shares), (ii) following a Change in Control, to the extent any Shares are unvested, 100% of Grantees unvested Shares shall vest on the earlier to occur of (A) the six month anniversary of such Change in Control and (B) a Qualifying Termination (as defined below) of Grantees Employment, provided, in the case of (i) and (ii)(A) above, that Grantees Employment remains continuous through the applicable vesting date, and, in the case of (ii)(B) above, Grantees Employment remains continuous until immediately prior to the Qualifying Termination. The period of time during which any of the Shares subject to the Award shall be unvested shall be referred to herein as the Restriction Period.
7. Non-Competition Provisions. In consideration of the granting of Shares pursuant to this Agreement and the Plan, the Grantee hereby agrees to the following terms and conditions:
A. In order to better protect the goodwill of the Company and to prevent the disclosure of the Companys trade secrets and confidential information and thereby help ensure the long-term success of the business, the Grantee, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of one (1) year following the date of the Grantees termination of Employment with the Company, in connection with the development, advertising, promotion, or sale of any service which is the same as or similar to or competitive with any services of the Company (including both existing services as well as services known to the Grantee, as a consequence of the Grantees Employment with the Company, to be in development):
1. with respect to which the Grantees work has been directly concerned at any time during the one (1) year preceding termination of Employment with the Company; or
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2. with respect to which during that period of time the Grantee, as a consequence of the Grantees job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company.
For purposes of this Section 7, it shall be conclusively presumed that Grantee has knowledge of information that Grantee was directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.
B. The provisions of this Section 7 are not in lieu of, but are in addition to the continuing obligation of the Grantee (which Grantee hereby acknowledges) to not use or disclose the Companys trade secrets and confidential information known to the Grantee until any particular trade secret or confidential information becomes generally known (through no fault of the Grantee), whereupon the restriction on use and disclosure shall cease as of that time. Information regarding services in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented.
C. By acceptance of any Shares granted under this Agreement and the terms of the Plan, the Grantee acknowledges that if Grantee does not comply with Section 7.A or 7.B, the Company will be entitled to injunctive relief to compel such compliance. The Grantee acknowledges that the harm caused to the Company by Grantees breach or anticipated breach of Section 7.A or 7.B is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. The Grantee consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company, be entered on consent and enforced by any court having jurisdiction over the Grantee, without prejudice, to any right either party may have to appeal from the proceedings which resulted in any grant of such relief.
D. If any of the provisions contained in this Section 7 shall for any reason, whether by application of existing law or law which may develop after the Grantees acceptance of an offer of the granting of Shares, be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the Grantee agrees to join the Company in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the maximum extent compatible with then applicable law. If any one or more of the terms, provisions, covenants, or restrictions of this Section 7 shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants and restrictions of this Section 7 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
8. Representations and Warranties of the Grantee. The Grantee represents and warrants that:
A. Authorization. The Grantee has full legal capacity, power, and authority to execute and deliver this Agreement and to perform the Grantees obligations hereunder. This Agreement has been duly executed and delivered by Grantee and is the legal, valid, and binding obligation of Grantee enforceable against Grantee in accordance with the terms hereof.
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B. No Conflicts. The execution, delivery, and performance by the Grantee of this Agreement and the consummation by the Grantee of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Grantee is subject, (ii) violate any order, judgment or decree applicable to the Grantee, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which the Grantee is a party or by which the Grantee is bound.
C. Review, etc. The Grantee has thoroughly reviewed this Agreement in its entirety. The Grantee has had an opportunity to obtain the advice of counsel (other than counsel to the Company or its Affiliates) prior to executing this Agreement, and fully understands all provisions of the Plan and this Agreement.
D. Investment Representation. The Grantee hereby represents and covenants that (a) any Shares acquired upon the vesting of the Award will be acquired for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the Securities Act), unless such acquisition has been registered under the Securities Act and any applicable state securities laws; (b) any subsequent sale of any such Shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Grantee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of vesting of any Shares hereunder or (y) is true and correct as of the date of any sale of any such Share, as applicable. As a further condition precedent to the delivery to the Grantee of any Shares subject to the Award, the Grantee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Companys Board of Directors shall in its sole discretion deem necessary or advisable.
9. Company Representations.
A. Authorization. The Company has full legal capacity, power, and authority to execute and deliver this Agreement and to perform the Companys obligations hereunder. This Agreement has been duly executed and delivered by the Company and is the legal, valid, and binding obligation of the Company enforceable against the Company in accordance with the terms hereof.
B. No Conflicts. The execution, delivery, and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Company is subject, (ii) violate any order, judgment or decree applicable to the Company, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which the Company is a party or by which the Company is bound.
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10. Nontransferability of Award. The Shares subject to the Award and not then vested may not be offered, sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) by the Grantee or be subject to execution, attachment or similar process other than by will, the laws of descent and distribution, pursuant to beneficiary designation procedures approved by the Company or to a trust or entity for the benefit of Grantee and Grantees immediate family for estate planning purposes as approved by the Company. Any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such Shares shall be null and void. The Grantee agrees that in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
11. Legend. The Grantee understands and agrees that the Company shall cause the legend set forth below or a legend substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE COMPANYS AMENDED AND RESTATED 2013 LONG-TERM INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND WEST CORPORATION. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF WEST CORPORATION.
12. Dividends; Voting etc. The Grantee shall be entitled to (i) receive any and all dividends or other distributions paid with respect to those vested Shares of which the Grantee is the record owner on the record date for such dividend or other distribution, and (ii) vote any vested or unvested Shares of which the Grantee is the record owner on the record date for such vote. Notwithstanding Section 3.2(d) of the Plan, any and all dividends or other distributions paid with respect to an unvested Share (the Associated Share) acquired hereunder, including without limitation, regular or extraordinary cash dividends, any distribution of Stock by reason of a stock dividend, stock split or otherwise, or a distribution of other securities with respect to an Associated Share, shall be subject to the restrictions of this Agreement in the same manner and for so long as the Associated Share remains subject to such restrictions, and shall be promptly forfeited if and when the Associated Share is so forfeited. Notwithstanding Section 3.2(d) of the Plan, the Company may require that any cash distribution with respect to unvested Shares be retained by the Company or otherwise made subject to such restrictions as the Company deems appropriate to carry out the intent of the Plan and this Agreement. Any amount maintained by the Company or otherwise made subject to such restrictions shall be paid to the Grantee promptly upon the vesting, if any, of the Associated Shares. References in this Agreement to the Shares shall refer, mutatis mutandis, to any such restricted amounts.
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13. Sale of Vested Shares. The Grantee understands that the sale of any Share, once it has vested, will remain subject to (i) satisfaction of applicable tax withholding requirements, if any, with respect to the vesting or transfer of such Share; (ii) the completion of any administrative steps (for example, but without limitation, the transfer of certificates) that the Company may reasonably impose; and (iii) applicable requirements of federal and state securities laws.
14. Certain Tax Matters. The Grantee expressly acknowledges the following:
A. The Grantee understands that the Grantee is solely responsible for all tax consequences to the Grantee in connection with this Award. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the Award and that the Grantee is not relying on the Company for any tax advice. By accepting this Agreement, the Grantee acknowledges his or her understanding that the Grantee may file with the Internal Revenue Service an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the Code) (a Section 83(b) Election), not later than 30 days after the Grant Date, to include in the Grantees gross income the Fair Market Value (as defined in the Plan) of the unvested Shares subject to the Award as of such date. Before filing a Section 83(b) Election with the Internal Revenue Service, the Grantee shall (i) notify the Company of such election by delivering to the Company a copy of the fully-executed Section 83(b) Election Form attached hereto as Exhibit B, and (ii) pay to the Company an amount sufficient to satisfy any taxes or other amounts required by any governmental authority to be withheld or paid over to such authority with respect to such unvested Shares, or otherwise make arrangements satisfactory to the Company for the payment of such amounts through withholding or otherwise.
B. The award or vesting of the Shares acquired hereunder, and the payment of dividends with respect to such Shares, may give rise to wages subject to withholding.
C. As a condition precedent to the delivery of the Stock upon the vesting of the Award or at such other time as may be required pursuant to this Section 14, the Grantee shall, upon request by the Company, pay to the Company such amount as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the Required Tax Payments) with respect to the Award. If the Grantee shall fail to advance the Required Tax Payments after request by the Company, (i) the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Grantee and/or (ii) the Committee may authorize the withholding of whole vested Shares which would otherwise be delivered to the Grantee having an aggregate Fair Market Value, determined as of the Tax Date (as defined below), equal to the Required Tax Payments.
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D. The Grantee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company, (2) delivery to the Company (either actual delivery or by attestation procedures established by the Company) of previously owned whole shares of vested Stock having an aggregate Fair Market Value, determined as of the date on which such withholding obligation arises (the Tax Date), equal to the Required Tax Payments, (3) authorizing the Company to withhold whole shares of vested Stock which would otherwise be delivered to the Grantee having an aggregate Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) any combination of (1), (2) and (3), or (5) any other method authorized by the Committee in its sole discretion and permitted by the Plan and applicable law. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Share which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Grantee. No certificate representing a Share shall be delivered until the Required Tax Payments have been satisfied in full.
15. Adjustments.
A. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Award shall be equitably adjusted by the Committee. If any adjustment would result in a fractional security being subject to the Award, the Company shall pay the Grantee in connection with the first vesting, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) such fraction (rounded to the nearest hundredth) by (ii) the Fair Market Value of such security on the vesting date as determined by the Committee. The decision of the Committee regarding any such adjustment and the Fair Market Value of any fractional security shall be final, binding and conclusive.
B. In the event of a Change in Control pursuant to which the consideration paid in respect of the outstanding Stock not subject to vesting is solely or partially in the form of cash, then with respect to any Shares which are unvested immediately following the Change in Control (Unvested Shares), the Company shall be obligated to deposit with a federally chartered financial institution as escrow agent (the Escrow Agent), to be held subject to the provisions of the Agreement for the benefit of Grantee and not subject to the credit risk of the Company or its Affiliates, an amount of cash that would have been payable in respect of the Unvested Shares had they been vested immediately prior to the Change in Control (Cash Consideration).
C. In the event of a Change in Control pursuant to which the consideration paid in respect of the outstanding Stock not subject to vesting is solely or partially in the form of non-cash consideration, then, prior to the Change in Control and in accordance with applicable law, the Committee shall establish procedures to afford Grantee a reasonable opportunity to elect to convert all or a portion of the non-cash consideration that would have been payable in respect of any Unvested Shares had they been vested immediately
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prior to the Change in Control (the Non-Cash Consideration) into cash based on the fair market value of the Non-Cash Consideration as of the closing date for the Change in Control (Converted Cash Consideration). The Company shall be obligated to deposit with the Escrow Agent, to be held subject to the provisions of the Agreement for the benefit of Grantee and not subject to the credit risk of the Company or its Affiliates, any Converted Cash Consideration and any Non-Cash Consideration.
D. Any Cash Consideration, Converted Cash Consideration or Non-Cash Consideration (collectively, Consideration) placed in escrow pursuant to Section 15 shall be paid to the Grantee promptly upon the vesting, if any, of the Unvested Shares associated with such Consideration.
E. References in this Agreement to the Shares shall refer, mutatis mutandis, to any such Consideration.
16. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of Shares hereunder, the Stock subject to the Award shall not vest or be delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
17. Award Confers No Rights to Continued Employment. In no event shall the granting of the Award or its acceptance by the Grantee, or any provision of the Agreement or the Plan, give or be deemed to give the Grantee any right to continued Employment by the Company, or any Affiliate of the Company or affect in any manner the right of the Company or any Affiliate of the Company to terminate the Employment of any person at any time.
18. Award Subject to Clawback. The Award and any Shares acquired pursuant to this Award are subject to forfeiture, recovery by the Company or other action pursuant to any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
19. Certain Terminations Prior to a Change in Control. If the Grantees Employment is terminated by the Company or its Affiliate without Cause prior to a Change in Control at the direction or request of any person or group contemplating a Change in Control, and a Change in Control involving such person or group is thereafter consummated within 12 months following such direction or request, then the Grantee shall be entitled to receive the consideration Grantee would have received in connection with the Change in Control had the Shares forfeited as a result of Grantees termination been vested and outstanding as of the Change in Control.
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20. General.
A. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to:
West Corporation
11808 Miracle Hills Drive
Omaha, Nebraska 68154
Attention: General Counsel
and if to the Grantee, to the last known mailing address of the Grantee contained in the records of the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mails or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
B. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.
C. Governing Law. This Agreement, the Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
D. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan, including Section 5.8 relating to a Change in Control, and shall be interpreted in accordance therewith. The Grantee hereby acknowledges receipt of a copy of the Plan.
E. Entire Agreement. This Agreement and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantees interest except by means of a writing signed by the Company and the Grantee.
F. Partial Invalidity. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.
G. Amendment and Waiver. The provisions of this Agreement may be amended or waived only by the written agreement of the Company and the Grantee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
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21. Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.
22. Definitions. The initially capitalized term Grantee shall have the meaning set forth on the first page of this Agreement. Initially capitalized terms not otherwise defined herein shall have the meaning provided in the Plan, and, as used herein, each of the following terms shall have the applicable meaning set forth below:
Cause shall have the meaning set forth in the Employment Agreement; provided that if the Grantee has no employment agreement with such definition, then Cause shall mean the occurrence of any of the following: (i) the Committee, in good faith, determines that the Grantee has engaged, during the performance of his or her duties, in significant objective acts or omissions constituting dishonesty, willful misconduct or gross negligence relating to the business of the Company or (ii) a plea of guilty or nolo contendere by the Grantee, or conviction of the Grantee, for a felony.
Employment means Grantees employment or other service relationship with the Company and its Affiliates. Unless the Committee provides otherwise, a change in the capacity in which the Grantee is employed by or renders services to the Company and/or its Affiliates, whether as an employee, director, consultant or advisor, or a change in the entity by which the Grantee is employed or to which the Grantee rendered services, will not be deemed a termination of Employment so long as the Grantee continues providing services in a capacity and to the Company and/or its Affiliates. If the Grantees relationship is with an Affiliate and that entity ceases to be an Affiliate, the Grantee will be deemed to cease Employment when the entity ceases to be an Affiliate unless the Grantee transfers Employment to the Company or its remaining Affiliates.
Employment Agreement means the employment agreement, if any, between the Grantee and the Company or any of its Affiliates.
Good Reason means, without the Grantees express written consent, the occurrence of any of the following events after a Change in Control:
(i) either (A) a reduction in any material respect in the Grantees position(s), duties or responsibilities with the Company, as in effect during the 90-day period immediately prior to such Change in Control, or (B) an adverse material change in the Grantees reporting responsibilities, titles or offices with the Company as in effect immediately prior to such Change in Control;
(ii) a reduction of 20 percent (20%) or more in the Grantees rate of annual base salary as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
(iii) any requirement of the Company that the Grantee be based more than 50 miles from the facility where the Grantee is based immediately prior to such Change in Control;
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(iv) the failure of the Company to provide the Grantee with target bonus opportunities and employee benefits (excluding equity-based compensation, equity-based benefits and nonqualified deferred compensation) that are substantially comparable in the aggregate to the target bonus opportunities and employee benefits provided to the Grantee by the Company and its Affiliates immediately prior to such Change in Control; or
(v) any material breach of Grantees change in control severance agreement or Employment Agreement, if any;
provided, however, that (x) the Grantee provides written notice to the Company of the occurrence of any of the events set forth in clauses (i) (v) of this definition within 90 days after the Grantee has knowledge of the circumstances constituting such event; (y) the Company fails to correct the circumstances resulting in any of the events set forth in clauses (i) (v) within 30 days after such notice; and (z) the Grantee resigns within six months after the initial existence of such circumstances. For purposes of this Agreement, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company or any of its Affiliates promptly after receipt of notice thereof given by the Grantee shall not constitute Good Reason.
Qualifying Termination means termination of Grantees Employment following a Change in Control for any reason other than:
(i) by the Company or any of its Affiliates for Cause;
(ii) by the Grantee for any reason other than a Good Reason;
(iii) as a result of the Grantees death; or
(iv) by the Company or any of its Affiliates due to the Grantees failure to perform his or her duties with the Company or its Affiliates on a full-time basis for at least 180 consecutive days as a result of the Grantees incapacity due to physical or mental illness.
23. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or by the Company forthwith to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on all parties.
[Remainder of the page intentionally left blank]
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IN WITNESS WHEREOF, each of the Company and the Grantee has executed this Agreement as of the Grant Date.
GRANTEE |
|
[Grantee Name] |
Address: |
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WEST CORPORATION | ||
By: | ||
Name: | ||
Title: |
EXHIBIT A
WEST CORPORATION
AMENDED AND RESTATED 2013 LONG-TERM INCENTIVE PLAN
EXHIBIT B
SAMPLE 83(B) ELECTION
ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY
IN GROSS INCOME IN YEAR OF TRANSFER UNDER CODE SECTION 83(B)
,
Department of the Treasury
Internal Revenue Service
[Office Location]
The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the Code), to include the value of the property described below in gross income in the year of transfer and supplies the following information in accordance with the regulations promulgated thereunder:
1. | Name of Taxpayer: |
Address:
Social Security Number:
Tax Year End:
2. | Property for which the election is made: |
shares of Common Stock, par value $0.001 per share, of West Corporation, a Delaware corporation, granted to the undersigned as restricted stock.
3. | The date on which the property was transferred: . |
The taxable year to which this election relates is calendar year .
4. | The nature of the restrictions to which the property is subject is: |
If the undersigneds employment terminates prior to specified dates, the undersigned will forfeit the property transferred to the undersigned.
5. | Fair market value: |
The fair market value (determined without regard to any restrictions) of the property with respect to which this election is being made was $ per share at the time of transfer for a total fair market value of $ .
6. | Amount paid for property: |
The taxpayer has paid $0 for the property.
7. | Income: |
The amount to include in gross income is .
The undersigned taxpayer will file this election with the Internal Revenue Service office with which taxpayer files his annual income tax return not later than 30 days after the date of transfer of the property. A copy of the election also will be furnished to West Corporation (the person for whom the services were performed). Additionally, the undersigned will include a copy of the election with his income tax return for the taxable year in which the property is transferred. The undersigned is the person performing the services in connection with which the property was transferred.
Dated:
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[Grantee Name] |
Exhibit 10.4
Name of Grantee: (Grantee)
WEST CORPORATION
Form of Restricted Stock Unit Award Agreement
This Restricted Stock Unit Award Agreement (Agreement) is made as of the Grant Date (as defined below) between Grantee and West Corporation, a Delaware corporation (the Company).
The undersigned Grantee (i) acknowledges receipt of a Restricted Stock Unit (RSU) Award (the Award) from the Company under the Companys Amended and Restated 2013 Long-Term Incentive Plan (the Plan), subject to the terms set forth below and in the Plan, a copy of which Plan, as in effect on the date hereof, is attached hereto as Exhibit A; and (ii) agrees with the Company as follows:
1. Effective Date. This Agreement shall take effect as of , 2014, which is the date of grant of the Award (the Grant Date).
2. RSUs Subject to Award. The Award consists of a total of RSUs (the RSUs) each relating to one share of Common Stock, par value $0.001 per share, of the Company (Share). The purchase price for the Award is nil. The Grantees rights to the RSUs are subject to the restrictions described in this Agreement and the Plan (which is incorporated herein by reference with the same effect as if set forth herein in full) in addition to such other restrictions, if any, as may be imposed by law.
3. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Grantee accepts this Agreement by executing it in the space provided below and returns such original execution copy to the Company.
4. Forfeiture Risk. Except as provided in Section 5, if the Grantees Employment (as defined below) with the Company and its subsidiaries ceases for any reason prior to the expiration of the Restriction Period (as defined below), including by reason of death, then (subject to any contrary provision of this Agreement or any other written agreement between the Company and the Grantee with respect to vesting and termination of RSUs granted under the Plan) any and all outstanding unvested RSUs hereunder shall be automatically and immediately forfeited.
5. Vesting of RSUs. The RSUs granted hereunder shall vest in accordance with the provisions of this Section 5 and applicable provisions of the Plan, as follows: (i) the RSUs shall vest in one-fourth (1/4) increments on each of the first, second, third and fourth anniversaries of the Grant Date (rounded down to the nearest whole RSU on the first anniversary, rounded up to the nearest whole RSU on the second anniversary, rounded up or down to the nearest whole RSU on the third anniversary (with 0.5 rounded up) and rounded up or down on the fourth anniversary as necessary to provide for the vesting of the balance of the unvested RSUs), (ii) following a
Change in Control, to the extent any RSUs are unvested, 100% of Grantees unvested RSUs shall vest on the earlier to occur of (A) the six month anniversary of such Change in Control and (B) a Qualifying Termination of Grantees Employment, provided, in the case of (i) and (ii)(A) above, that Grantees Employment remains continuous through the applicable vesting date, and, in the case of (ii)(B) above, Grantees Employment remains continuous until immediately prior to the Qualifying Termination. The period of time during which any of the RSUs subject to the Award shall be unvested shall be referred to herein as the Restriction Period.
6. Delivery of Shares Upon Vesting of RSUs. Subject to Section 13.C hereof, payout of vested RSUs will be effected in the form of the issuance of Shares to the Grantee as soon as administratively feasible following the vesting dates specified above, but in any event no later than thirty (30) days after each such vesting date, provided that, in the event of a vesting following a Change in Control, the payout of the vested RSUs will be effected in the form of the Consideration (as defined in Section 14).
7. Representations and Warranties of the Grantee. The Grantee represents and warrants that:
A. Authorization. The Grantee has full legal capacity, power, and authority to execute and deliver this Agreement and to perform the Grantees obligations hereunder. This Agreement has been duly executed and delivered by Grantee and is the legal, valid, and binding obligation of Grantee enforceable against Grantee in accordance with the terms hereof.
B. No Conflicts. The execution, delivery, and performance by the Grantee of this Agreement and the consummation by the Grantee of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Grantee is subject, (ii) violate any order, judgment or decree applicable to the Grantee, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which the Grantee is a party or by which the Grantee is bound.
C. Review, etc. The Grantee has thoroughly reviewed this Agreement in its entirety. The Grantee has had an opportunity to obtain the advice of counsel (other than counsel to the Company or its Affiliates) prior to executing this Agreement, and fully understands all provisions of the Plan and this Agreement.
D. Investment Representation. The Grantee hereby represents and covenants that (a) any Shares acquired upon the vesting of the Award will be acquired for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the Securities Act), unless such acquisition has been registered under the Securities Act and any applicable state securities laws; (b) any subsequent sale of any such Shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Grantee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct
as of the date of vesting of any RSUs hereunder or (y) is true and correct as of the date of any sale of any such Share, as applicable. As a further condition precedent to the delivery to the Grantee of any Shares subject to the Award, the Grantee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the Shares and, in connection therewith, shall execute any documents which the Companys Board of Directors shall in its sole discretion deem necessary or advisable.
8. Company Representations.
A. Authorization. The Company has full legal capacity, power, and authority to execute and deliver this Agreement and to perform the Companys obligations hereunder. This Agreement has been duly executed and delivered by the Company and is the legal, valid, and binding obligation of the Company enforceable against the Company in accordance with the terms hereof.
B. No Conflicts. The execution, delivery, and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Company is subject, (ii) violate any order, judgment or decree applicable to the Company, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which the Company is a party or by which the Company is bound.
9. Nontransferability of Award. The RSUs subject to the Award may not be offered, sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) by the Grantee or be subject to execution, attachment or similar process other than by will, the laws of descent and distribution, pursuant to beneficiary designation procedures approved by the Company or to a trust or entity for the benefit of Grantee and Grantees immediate family for estate planning purposes as approved by the Company. Any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such RSUs shall be null and void.
10. Legend. The Grantee understands and agrees that the Company shall cause any legends that may be required by the Company or by state or federal securities laws to be placed upon any certificate(s) evidencing ownership of the Shares issued as a result of vesting of RSUs.
11. Dividends; Voting etc. The Grantee shall be entitled to receive any and all dividends or other distributions paid with respect to those Shares issued in payout of vested RSUs of which the Grantee is the record owner on the record date for such dividend or other distribution. Any and all dividends or other distributions paid with respect to the Shares underlying an unvested RSU (Unvested RSU) acquired hereunder, including without limitation, regular or extraordinary cash dividends, any distribution of Shares by reason of a stock dividend, stock split or otherwise, or a distribution of other securities with respect to an Unvested RSU, shall be subject to the restrictions of this Agreement in the same manner and for so long as the Unvested RSU remains subject to such restrictions, and shall be promptly forfeited if and when the Unvested RSU is so forfeited. Any cash distribution with respect to Unvested
RSUs shall be paid to the Grantee promptly, without interest, upon the vesting, if any, of the Unvested RSUs, subject to applicable tax withholding. References in this Agreement to Unvested RSUs shall refer, mutatis mutandis, to any such restricted amounts. Until such time as an RSU is paid out in the form of Shares, the Grantee will not have any voting rights with respect to such Shares.
12. Sale of Shares from Vested RSUs. The Grantee understands that the sale of any Share issued in payout of a vested RSU will remain subject to (i) satisfaction of applicable tax withholding requirements, if any, with respect to the vesting of the associated RSU or transfer of such Share; (ii) the completion of any administrative steps (for example, but without limitation, the transfer of certificates) that the Company may reasonably impose; and (iii) applicable requirements of federal and state securities laws.
13. Certain Tax Matters. The Grantee expressly acknowledges the following:
A. The Grantee understands that the Grantee is solely responsible for all Taxation in connection with this Award. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the Award and that the Grantee is not relying on the Company for any tax advice.
B. The vesting of the RSUs acquired hereunder, and the payment of dividends with respect to such RSUs, may give rise to employment income subject to Taxation.
C. As a condition precedent to the delivery of the Shares issued in payout of a vested RSU or at such other time as may be required pursuant to this Section 13, if and to the extent that on the vesting of the Award (whether wholly or partially) or the issuance of Shares in respect thereof, the Company or any Affiliate or any other person (the Accountable Person) is or will be required by law to pay or account for any Taxation in relation to the Award, the Grantee shall, upon request by the Company, pay to the Company or relevant Accountable Person an amount notified to the Grantee by the Company or his employer sufficient, in the opinion of the Company or other relevant Accountable Person, to indemnify the Company or other relevant Accountable Person in full against the amount of Taxation (including for the avoidance of doubt employers secondary Class 1 National Insurance contributions) to be so paid or accounted for (the Required Tax Payments) with respect to the Award. If the Grantee shall fail to advance the Required Tax Payments after request by the Company, (i) the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Grantee and/or (ii) the Committee may authorize the withholding of whole vested Shares which would otherwise be delivered to the Grantee having an aggregate Fair Market Value, determined as of the Tax Date (as defined below), equal to the Required Tax Payments.
D. The Grantee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company or other relevant Accountable Person, (2) authorizing the Company to withhold from issuance in payout of a vested RSU whole Shares which would otherwise be delivered to the Grantee having an aggregate Fair Market Value, determined as of the Tax Date, equal to the
Required Tax Payments, (3) any combination of (1) and (2), or (4) any other method authorized by the Committee in its sole discretion and permitted by the Plan and applicable law. Shares to be withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Share which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Grantee. No certificate representing a Share shall be delivered until the Required Tax Payments have been satisfied in full.
14. Adjustments.
A. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Shares other than a regular cash dividend, the number and class of RSUs subject to the Award shall be equitably adjusted by the Committee. If any adjustment would result in a fractional RSU being subject to the Award, the Company shall pay the Grantee in connection with the first vesting, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) such fraction (rounded to the nearest hundredth) by (ii) the Fair Market Value of the Share represented by that RSU on the vesting date as determined by the Committee. The decision of the Committee regarding any such adjustment and the Fair Market Value of any fractional RSU shall be final, binding and conclusive.
B. In the event of a Change in Control pursuant to which the consideration paid in respect of the outstanding Shares not subject to vesting is solely or partially in the form of cash, then with respect to any RSUs which are unvested immediately following the Change in Control (Unvested RSUs), the Company shall be obligated to deposit with a federally chartered financial institution as escrow agent (the Escrow Agent), to be held subject to the provisions of the Agreement for the benefit of Grantee and not subject to the credit risk of the Company or its Affiliates, an amount of cash that would have been payable in respect of the Shares issuable on account of the Unvested RSUs had they been vested immediately prior to the Change in Control (Cash Consideration).
C. In the event of a Change in Control pursuant to which the consideration paid in respect of the outstanding Shares not subject to vesting is solely or partially in the form of non-cash consideration, then, prior to the Change in Control and in accordance with applicable law, the Committee shall establish procedures to afford Grantee a reasonable opportunity to elect to convert all or a portion of the non-cash consideration that would have been payable in respect of the Shares issuable on account of the Unvested RSUs had they been vested immediately prior to the Change in Control (the Non-Cash Consideration) into cash based on the fair market value of the Non-Cash Consideration as of the closing date for the Change in Control (Converted Cash Consideration). The Company shall be obligated to deposit with the Escrow Agent, to be held subject to the provisions of the Agreement for the benefit of Grantee and not subject to the credit risk of the Company or its Affiliates, any Converted Cash Consideration and any Non-Cash Consideration.
D. Any Cash Consideration, Converted Cash Consideration or Non-Cash Consideration (collectively, Consideration) placed in escrow pursuant to Section 14 shall be paid to the Grantee promptly upon the vesting, if any, of the Unvested RSUs associated with such Consideration.
E. In the event of a Change in Control, the Committee will make any adjustments to the Award as may be required so that Grantee will not recognize employment income on account of the Change in Control which results in Grantee incurring Required Tax Payments in excess of the amount of Consideration the Grantee is entitled to receive at the time such Required Tax Payments are required to be paid.
F. References in this Agreement to the RSUs shall refer, mutatis mutandis, to any such Consideration.
15. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting of RSUs or delivery of Shares hereunder, the RSUs subject to the Award shall not vest nor Shares be delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
16. Award Confers No Rights to Continued Employment. In no event shall the granting of the Award or its acceptance by the Grantee, or any provision of the Agreement or the Plan, give or be deemed to give the Grantee any right to continued Employment by the Company, or any Affiliate of the Company or affect in any manner the right of the Company or any Affiliate of the Company to terminate the Employment of any person at any time. The rights and obligations of any individual under the terms of his or her Employment with the Company or any Affiliate will not be affected by his or her participation in the Plan or any right which he or she may have to participate in it and the Plan does not form part of any contract of employment between that individual and the Company or any Affiliate. If the office or employment of the Grantee is terminated for any reason whatsoever (and whether lawfully or otherwise), the Grantee will not be entitled to claim any compensation for or in respect of any consequent diminution or extinction of his or her rights or benefits (actual or prospective) under any Award then held by him or her or otherwise in connection with the Plan.
17. Award Subject to Clawback. The Award and any Shares acquired pursuant to this Award are subject to forfeiture, recovery by the Company or other action pursuant to any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
18. Certain Terminations Prior to a Change in Control. If the Grantees Employment is terminated by the Company or its Affiliate without Cause prior to a Change in Control at the direction or request of any person or group contemplating a Change in Control, and a Change in Control involving such person or group is thereafter consummated within 12 months following such direction or request, then the Grantee shall be entitled to receive the consideration Grantee would have received in connection with the Change in Control had the RSUs forfeited as a result of Grantees termination been vested and outstanding as of the Change in Control.
19. General
A. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to:
West Corporation
11808 Miracle Hills Drive
Omaha, Nebraska 68154
Attention: General Counsel
and if to the Grantee, to the last known mailing address of the Grantee contained in the records of the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mails or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
B. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.
C. Governing Law. This Agreement, the Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws, except that the provisions relating to employment of the Grantee and the Required Tax Payments shall be governed by the laws of .
D. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan, including Section 5.8 relating to a Change in Control, and shall be interpreted in accordance therewith. The Grantee hereby acknowledges receipt of a copy of the Plan.
E. Entire Agreement. This Agreement and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantees interest except by means of a writing signed by the Company and the Grantee.
F. Partial Invalidity. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.
G. Amendment and Waiver. The provisions of this Agreement may be amended or waived only by the written agreement of the Company and the Grantee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
H. Data Protection. The Grantee consents to the holding and processing of personal data provided by the Grantee to the Company or any Subsidiary, trustee or third party service provider, for all purposes relating to the operation of the Plan. These include, but are not limited to (a) administering and maintaining Grantee and Plan records; (b) providing information to [taxing authority], the Company or any Subsidiary, the trustee of any employee benefit trust, registrars, brokers or administrators of the Plan; (c) providing information to future purchasers of the Company or the Subsidiary or business in which the Grantee works; and (d) transferring information about the Grantee to a country or territory outside that may not provide the same statutory protection for the information as .
20. Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.
21. Definitions. The initially capitalized term Grantee shall have the meaning set forth on the first page of this Agreement. Initially capitalized terms not otherwise defined herein shall have the meaning provided in the Plan, and, as used herein, the following term shall have the meaning set forth below:
Cause shall mean the occurrence of any of the following: (i) the Committee, in good faith, determines that the Grantee has engaged, during the performance of his or her duties, in significant objective acts or omissions constituting dishonesty, willful misconduct or gross negligence relating to the business of the Company or (ii) a plea of guilty or nolo contendere by the Grantee, or conviction of the Grantee, for a felony.
Employment means Grantees employment or other service relationship with the Company and its Affiliates. Unless the Committee provides otherwise, a change in the capacity in which the Grantee is employed by or renders services to the Company and/or its Affiliates, whether as an employee, director, consultant or advisor, or a change in the entity by which the Grantee is employed or to which the Grantee rendered services, will not be deemed a termination of Employment so long as the Grantee continues providing services in a capacity and to the Company and/or its Affiliates. If the Grantees relationship is with an Affiliate and that entity ceases to be an Affiliate, the Grantee will be deemed to cease Employment when the entity ceases to be an Affiliate unless the Grantee transfers Employment to the Company or its remaining Affiliates.
Employment Agreement means the Employment Agreement, if any, between the Grantee and the Company or any of its Affiliates.
Good Reason means, without the Grantees express written consent, the occurrence of any of the following events after a Change in Control:
(i) either (A) a reduction in any material respect in the Grantees position(s), duties or responsibilities with the Company, as in effect during the 90-day period immediately prior to such Change in Control, or (B) an adverse material change in the Grantees reporting responsibilities, titles or offices with the Company as in effect immediately prior to such Change in Control;
(ii) a reduction of 20 percent (20%) or more in the Grantees rate of annual base salary as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
(iii) any requirement of the Company that the Grantee be based more than 50 miles from the facility where the Grantee is based immediately prior to such Change in Control;
(iv) the failure of the Company to provide the Grantee with target bonus opportunities and employee benefits (excluding equity-based compensation, equity-based benefits and nonqualified deferred compensation) that are substantially comparable in the aggregate to the target bonus opportunities and employee benefits provided to the Grantee by the Company and its Affiliates immediately prior to such Change in Control; or
(v) any material breach of Grantees Change in Control Severance Agreement or Employment Agreement, if any;
provided, however, that (x) the Grantee provides written notice to the Company of the occurrence of any of the events set forth in clauses (i) (v) of this definition within 90 days after the Grantee has knowledge of the circumstances constituting such event; (y) the Company fails to correct the circumstances resulting in any of the events set forth in clauses (i) (v) within 30 days after such notice; and (z) the Grantee resigns within six months after the initial existence of such circumstances. For purposes of this Agreement, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company or any of its Affiliates promptly after receipt of notice thereof given by the Grantee shall not constitute Good Reason.
Qualifying Termination means termination of Grantees Employment following a Change in Control for any reason other than:
(i) by the Company or any of its Affiliates for Cause;
(ii) by the Grantee for any reason other than a Good Reason;
(iii) as a result of the Grantees death; or
(iv) by the Company or any of its Affiliates due to the Grantees failure to perform his or her duties with the Company or its Affiliates on a full-time basis for at least 180 consecutive days as a result of the Grantees incapacity due to physical or mental illness.
Taxation means all forms of taxation, contribution and withholding, including income tax under the Pay As You Earn System, National Insurance contributions (including, for the avoidance of doubt, both employees and employers National Insurance contributions) and other similar contributions required to be made or accounted for in connection with an Award by the Company or any Affiliate or any other person to a taxation authority (being any statutory or governmental authority or body involved in the collection or administration of Taxation) in respect of or on behalf of the Grantee.
22. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or by the Company forthwith to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on all parties.
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IN WITNESS WHEREOF, each of the Company and the Grantee has executed this Agreement as of the Grant Date
GRANTEE |
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Address: |
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WEST CORPORATION | ||
By: | ||
Name: | ||
Title: |
EXHIBIT A
WEST CORPORATION
AMENDED AND RESTATED 2013 LONG-TERM INCENTIVE PLAN
Exhibit 10.5
Name of Grantee: (Grantee)
WEST CORPORATION
Form of Performance-Based Restricted Stock Award Agreement
This Performance-Based Restricted Stock Award Agreement (Agreement) is made as of the Grant Date (as defined below) between Grantee and West Corporation, a Delaware corporation (the Company).
The undersigned Grantee (i) acknowledges receipt of an award (the Award) of performance-based restricted stock from the Company under the Companys Amended and Restated 2013 Long-Term Incentive Plan (the Plan), subject to the terms set forth below and in the Plan, a copy of which Plan, as in effect on the date hereof, is attached hereto as Exhibit A; and (ii) agrees with the Company as follows:
1. Effective Date. This Agreement shall take effect as of , which is the date of grant of the Award (the Grant Date).
2. Shares Subject to Award. The Award consists of a total of shares (the Shares) of Common Stock, par value $0.001 per share, of the Company (Stock). The Grantees rights to the Shares are subject to the restrictions described in this Agreement and the Plan (which is incorporated herein by reference with the same effect as if set forth herein in full) in addition to such other restrictions, if any, as may be imposed by law.
3. Award Subject to Acceptance of Agreement. The Award shall be null and void unless the Grantee (a) accepts this Agreement by executing it in the space provided below and returns such original execution copy to the Company and (b) if requested by the Company, executes and returns one or more irrevocable stock powers to facilitate the transfer to the Company (or its assignee or nominee) of all or a portion of the Shares subject to the Award if any Shares are forfeited pursuant to Sections 4 or 5 or if required under applicable laws or regulations. As soon as practicable after the Grantee has executed such documents and returned them to the Company, the Company shall cause to be issued in the Grantees name the total number of Shares subject to the Award. The Grantee hereby (i) appoints the Company as the attorney-in-fact of the Grantee to take such actions as may be necessary or appropriate to effectuate a transfer of the record ownership of any such Shares that are unvested and forfeited hereunder, and (ii) agrees to sign such other powers and take such other actions as the Company may reasonably request to accomplish the transfer or forfeiture of any unvested Shares that are forfeited hereunder.
4. Performance-Based Vesting Conditions.
A. General. Subject to (i) the Participants continuous Employment (as defined herein) through the end of the applicable Performance Period and (ii) the certification by the Committee of the Companys performance, and except as otherwise provided in Section 5, the Grantee shall become vested in the percentage of the Shares determined in
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accordance with the schedule set forth below, based on the Companys TSR (as defined below) performance as compared to the TSR performance of the Russell 2000 Comparator Group (as defined below) over the applicable Performance Period, as follows:
(I) up to one-third of the Shares subject to this Award may vest based on the Companys TSR performance from Grant Date through (the 2-Year Performance Period);
(II) to the extent such Shares remain unvested after the completion of the 2-Year Performance Period, the remaining unvested Shares subject to this Award may vest based on the Companys TSR performance from the Grant Date through (the 3-Year Performance Period);
(III) to the extent such Shares remain unvested after the completion of the 3-Year Performance Period, the remaining unvested Shares subject to this Award may vest based on the Companys TSR performance from the Grant Date through (the 4-Year Performance Period); and
(IV) pursuant to and subject to the terms of Section 5, in the event of certain termination of Employment events, based on the Companys TSR performance from the Grant Date through the date of the applicable termination of Employment event (the Termination Performance Period and, together with the 2-Year Performance Period, the 3-Year Performance Period and the 4-Year Performance Period, the Performance Periods).
Performance Level* |
Company TSR Percentile Rank vs. Russell 2000 Comparator Group** |
Aggregate Percentage of Shares Vested*** | ||
At or below Threshold |
At or below the 30th percentile |
0% | ||
Target |
52.5 percentile | 50% | ||
Maximum |
75th percentile and above | 100% |
* | Between performance levels, the vesting percentage shall be determined using straight-line interpolation, with the vested Shares rounded down to the nearest whole Share. |
** | If the Companys TSR for the 2-Year Performance Period is negative but exceeds the 30th percentile of the Russell 2000 Comparator Group, then the number of Shares eligible for vesting shall be capped at 25,000. If the Companys TSR for the 3-Year Performance Period or 4-Year Performance Period is negative but exceeds the 30th percentile of the Russell 2000 Comparator Group, then the number of Shares eligible for vesting in either Performance Period shall be capped at [50% of number of Shares awarded]. |
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*** | Vesting of the Shares shall be determined on an aggregate basis, with Shares vesting in completed Performance Periods included in the calculation of vested Shares for the current Performance Period. |
B. Effect of a Change in Control. In the event of a Change in Control (as defined in the Plan) prior to the end of the 4-Year Performance Period, to the extent any Shares are unvested, the Shares shall vest 100% on the earliest to occur of: (i) [end of the 3-Year Performance Period ] or, in the case of a Change in Control following the end of the 3-Year Performance Period, [end of the 4-Year Performance Period ]; (ii) the six month anniversary of the Change in Control; and (iii) a Qualifying Termination (as defined below) , provided, in the case of (i) and (ii) above, that Grantees Employment remains continuous through the applicable vesting date, and, in the case of (iii) above, Grantees Employment remains continuous until immediately prior to the Qualifying Termination.
C. Committee Certification. Promptly following the end of the applicable Performance Period, the Committee shall determine the number of Shares which are to vest as of the end of such Performance Period in accordance with the terms of this Agreement.
5. Termination of Employment.
A. Termination by Reason of Death, Voluntary Termination by Grantee for Good Reason, or by the Company other than for Cause. Subject to the remainder of this Agreement (including, without limitation, Section 4.B), if (i) the Grantees Employment ceases by reason of death, is voluntarily terminated by the Grantee with Good Reason, or is terminated by the Company other than for Cause, in each case, on or following the one-year anniversary of the Grant Date and prior to the earlier of (y) the expiration of the 4-Year Performance Period and (z) a Change in Control, then the Performance Period shall end as of the termination date, and the Grantee shall be entitled to prorated vesting of the Award. Such prorated vesting shall be determined by multiplying the Shares to be vested in accordance with the schedule set forth in Section 4.A, based on the Companys TSR performance as compared to the TSR performance of the Russell 2000 Comparator Group over the Termination Performance Period by a fraction, the numerator of which shall equal the number of days of Grantees Employment with the Company during the 3-Year Performance Period and the denominator of which shall equal the number of days in the 3-Year Performance Period; provided, however, if such termination of Employment occurs following the completion of the 3-Year Performance Period but prior to the end of the 4-Year Performance Period, then Grantee shall be entitled to vesting determined by multiplying the Shares to be vested in accordance with the schedule set forth in Section 4.A, based on the Companys TSR performance as compared to the TSR performance of the Russell 2000 Comparator Group over the Termination Performance Period multiplied by 100%. Any Shares subject to this Award that have not vested prior to termination of Employment and do not vest in accordance with this Section 5 or Section 4.B (subject to any other written agreement between the Company and the Grantee with respect to vesting and termination of Stock granted under the Plan) shall be automatically and immediately forfeited upon such termination of Employment.
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B. Termination by the Company other than due to Death, Good Reason or Without Cause. If the Grantees Employment ceases for any reason other than the reasons specified in Section 5.A (including, without limitation, termination of Employment for any reason prior to the one year anniversary of the Grant Date) then (subject to any contrary provision of this Agreement (including, without limitation, Section 4.B) or any other written agreement between the Company and the Grantee with respect to vesting and termination of Stock granted under the Plan) any and all outstanding unvested Shares acquired by the Grantee hereunder shall be automatically and immediately forfeited.
6. Custody and Delivery of Shares. The Shares subject to the Award shall be held by the Company or by a custodian in book entry form, with restrictions on the Shares duly noted, until such Award shall have vested, in whole or in part, pursuant to Sections 4 or 5 hereof, and as soon thereafter as practicable, subject to Section 14.C hereof, the vested Shares shall be delivered to the Grantee as the Grantee shall direct. Alternatively, in the sole discretion of the Company, the Company shall hold a certificate or certificates representing the Shares subject to the Award until such Award shall have vested, in whole or in part, pursuant to Sections 4 or 5 hereof, and the Company shall as soon thereafter as practicable, subject to Section 14.C hereof, deliver the certificate or certificates for the vested Shares to the Grantee and destroy the stock power or powers relating to the vested Shares, if any, delivered by the Grantee pursuant to Section 3 hereof. If such stock power or powers also relate to unvested Shares, the Company may require, as a condition precedent to delivery of any certificate pursuant to this Section 6, the execution and delivery to the Company of one or more stock powers relating to such unvested Shares.
7. Restrictive Covenants. In consideration of the granting of Shares pursuant to this Agreement and the Plan, the Grantee hereby agrees to the following terms and conditions:
A. In order to better protect the goodwill of the Company and to prevent the disclosure of the Companys trade secrets and confidential information and thereby help ensure the long-term success of the business, the Grantee, without prior written consent of the Company, will not engage in any activity or provide any services, whether as a director, manager, supervisor, employee, adviser, consultant or otherwise, for a period of one (1) year following the date of the Grantees termination of Employment with the Company, in connection with the development, advertising, promotion, or sale of any service which is the same as or similar to or competitive with any services of the Company (including both existing services as well as services known to the Grantee, as a consequence of the Grantees Employment with the Company, to be in development):
i. | with respect to which the Grantees work has been directly concerned at any time during the one (1) year preceding termination of Employment with the Company; or |
ii. | with respect to which during that period of time the Grantee, as a consequence of the Grantees job performance and duties, acquired knowledge of trade secrets or other confidential information of the Company. |
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For purposes of this Section 7, it shall be conclusively presumed that Grantee has knowledge of information that Grantee was directly exposed to through actual receipt or review of memos or documents containing such information, or through actual attendance at meetings at which such information was discussed or disclosed.
B. The provisions of this Section 7 are not in lieu of, but are in addition to the continuing obligation of the Grantee (which Grantee hereby acknowledges) to not use or disclose the Companys trade secrets and confidential information known to the Grantee until any particular trade secret or confidential information becomes generally known (through no fault of the Grantee), whereupon the restriction on use and disclosure shall cease as of that time. Information regarding services in development, in test marketing or being marketed or promoted in a discrete geographic region, which information the Company is considering for broader use, shall not be deemed generally known until such broader use is actually commercially implemented.
C. By acceptance of any Shares granted under this Agreement and the terms of the Plan, the Grantee acknowledges that if Grantee does not comply with Section 7.A or 7.B, the Company will be entitled to injunctive relief to compel such compliance. The Grantee acknowledges that the harm caused to the Company by Grantees breach or anticipated breach of Section 7.A or 7.B is by its nature irreparable because, among other things, it is not readily susceptible of proof as to the monetary harm that would ensue. The Grantee consents that any interim or final equitable relief entered by a court of competent jurisdiction shall, at the request of the Company, be entered on consent and enforced by any court having jurisdiction over the Grantee, without prejudice, to any right either party may have to appeal from the proceedings which resulted in any grant of such relief.
D. If any of the provisions contained in this Section 7 shall for any reason, whether by application of existing law or law which may develop after the Grantees acceptance of an offer of the granting of Shares, be determined by a court of competent jurisdiction to be overly broad as to scope of activity, duration, or territory, the Grantee agrees to join the Company in requesting such court to construe such provision by limiting or reducing it so as to be enforceable to the maximum extent compatible with then applicable law. If any one or more of the terms, provisions, covenants, or restrictions of this Section 7 shall be determined by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants and restrictions of this Section 7 shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
8. Representations and Warranties of the Grantee. The Grantee represents and warrants that:
A. Authorization. The Grantee has full legal capacity, power, and authority to execute and deliver this Agreement and to perform the Grantees obligations hereunder. This Agreement has been duly executed and delivered by Grantee and is the legal, valid, and binding obligation of Grantee enforceable against Grantee in accordance with the terms hereof.
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B. No Conflicts. The execution, delivery, and performance by the Grantee of this Agreement and the consummation by the Grantee of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Grantee is subject, (ii) violate any order, judgment or decree applicable to the Grantee, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which the Grantee is a party or by which the Grantee is bound.
C. Review, etc. The Grantee has thoroughly reviewed this Agreement in its entirety. The Grantee has had an opportunity to obtain the advice of counsel (other than counsel to the Company or its Affiliates) prior to executing this Agreement, and fully understands all provisions of the Plan and this Agreement.
D. Investment Representation. The Grantee hereby represents and covenants that (a) any Shares acquired upon the vesting of the Award will be acquired for investment and not with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (the Securities Act), unless such acquisition has been registered under the Securities Act and any applicable state securities laws; (b) any subsequent sale of any such Shares shall be made either pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and such state securities laws; and (c) if requested by the Company, the Grantee shall submit a written statement, in form satisfactory to the Company, to the effect that such representation (x) is true and correct as of the date of vesting of any Shares hereunder or (y) is true and correct as of the date of any sale of any such Share, as applicable. As a further condition precedent to the delivery to the Grantee of any Shares subject to the Award, the Grantee shall comply with all regulations and requirements of any regulatory authority having control of or supervision over the issuance or delivery of the shares and, in connection therewith, shall execute any documents which the Companys Board of Directors shall in its sole discretion deem necessary or advisable.
9. Company Representations.
A. Authorization. The Company has full legal capacity, power, and authority to execute and deliver this Agreement and to perform the Companys obligations hereunder. This Agreement has been duly executed and delivered by the Company and is the legal, valid, and binding obligation of the Company enforceable against the Company in accordance with the terms hereof.
B. No Conflicts. The execution, delivery, and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby will not, with or without the giving of notice or lapse of time, or both (i) violate any provision of law, statute, rule or regulation to which the Company is subject, (ii) violate any order, judgment or decree applicable to the Company, or (iii) conflict with, or result in a breach of default under, any term or condition of any agreement or other instrument to which the Company is a party or by which the Company is bound.
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10. Nontransferability of Award. The Shares subject to the Award and not then vested may not be offered, sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) by the Grantee or be subject to execution, attachment or similar process other than by will, the laws of descent and distribution, pursuant to beneficiary designation procedures approved by the Company or to a trust or entity for the benefit of Grantee and Grantees immediate family for estate planning purposes as approved by the Company. Any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of such Shares shall be null and void. The Grantee agrees that in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate stop transfer instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
11. Legend. The Grantee understands and agrees that the Company shall cause the legend set forth below or a legend substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE COMPANYS AMENDED AND RESTATED 2013 LONG-TERM INCENTIVE PLAN AND A PERFORMANCE-BASED RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND WEST CORPORATION. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE OFFICES OF WEST CORPORATION.
12. Dividends; Voting etc. The Grantee shall be entitled to (i) receive any and all dividends or other distributions paid with respect to those vested Shares of which the Grantee is the record owner on the record date for such dividend or other distribution, and (ii) vote any vested or unvested Shares of which the Grantee is the record owner on the record date for such vote. Pursuant to Section 3.2(d) of the Plan, any and all dividends or other distributions paid with respect to an unvested Share (the Associated Share) acquired hereunder, including without limitation, regular or extraordinary cash dividends, any distribution of Stock by reason of a stock dividend, stock split or otherwise, or a distribution of other securities with respect to an Associated Share, shall be subject to the restrictions of this Agreement in the same manner and for so long as the Associated Share remains subject to such restrictions, and shall be promptly forfeited if and when the Associated Share is so forfeited. Any amount maintained by the Company or otherwise made subject to such restrictions shall be paid to the Grantee promptly upon the vesting, if any, of the Associated Shares. References in this Agreement to the Shares shall refer, mutatis mutandis, to any such restricted amounts.
13. Sale of Vested Shares. The Grantee understands that the sale of any Share, once it has vested, will remain subject to (i) the completion of any administrative steps (for example, but without limitation, the transfer of certificates) that the Company may reasonably impose; and (ii) applicable requirements of federal and state securities laws.
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14. Certain Tax Matters. The Grantee expressly acknowledges the following:
A. The Grantee understands that the Grantee is solely responsible for all tax consequences to the Grantee in connection with this Award. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the Award and that the Grantee is not relying on the Company for any tax advice. By accepting this Agreement, the Grantee acknowledges his or her understanding that the Grantee may file with the Internal Revenue Service an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the Code) (a Section 83(b) Election), not later than 30 days after the Grant Date, to include in the Grantees gross income the Fair Market Value (as defined in the Plan) of the unvested Shares subject to the Award as of such date. Before filing a Section 83(b) Election with the Internal Revenue Service, the Grantee shall (i) notify the Company of such election by delivering to the Company a copy of the fully-executed Section 83(b) Election Form attached hereto as Exhibit B, and (ii) pay to the Company an amount sufficient to satisfy any taxes or other amounts required by any governmental authority to be withheld or paid over to such authority with respect to such unvested Shares, or otherwise make arrangements satisfactory to the Company for the payment of such amounts through withholding or otherwise.
B. The award or vesting of the Shares acquired hereunder, and the payment of dividends with respect to such Shares, may give rise to wages subject to withholding.
C. As a condition precedent to the delivery of the Stock upon the vesting of the Award or at such other time as may be required pursuant to this Section 14, the Grantee shall, upon request by the Company, pay to the Company such amount as the Company may be required, under all applicable federal, state, local or other laws or regulations, to withhold and pay over as income or other withholding taxes (the Required Tax Payments) with respect to the Award. If the Grantee shall fail to advance the Required Tax Payments after request by the Company, (i) the Company may, in its discretion, deduct any Required Tax Payments from any amount then or thereafter payable by the Company to the Grantee and/or (ii) the Committee may authorize the withholding of whole vested Shares which would otherwise be delivered to the Grantee having an aggregate Fair Market Value, determined as of the Tax Date (as defined below), equal to the Required Tax Payments.
D. The Grantee may elect to satisfy his or her obligation to advance the Required Tax Payments by any of the following means: (1) a cash payment to the Company, (2) delivery to the Company (either actual delivery or by attestation procedures established by the Company) of previously owned whole shares of vested Stock having an aggregate Fair Market Value, determined as of the date on which such withholding obligation arises (the Tax Date), equal to the Required Tax Payments, (3) authorizing the Company to withhold whole vested Shares which would otherwise be delivered to the Grantee having an aggregate Fair Market Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) any combination of (1), (2) and (3), or (5) any other method
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authorized by the Committee in its sole discretion and permitted by the Plan and applicable law. Shares of Stock to be delivered or withheld may not have a Fair Market Value in excess of the minimum amount of the Required Tax Payments. Any fraction of a Share which would be required to satisfy any such obligation shall be disregarded and the remaining amount due shall be paid in cash by the Grantee. No certificate representing a Share shall be delivered until the Required Tax Payments have been satisfied in full.
15. Adjustments.
A. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Stock other than a regular cash dividend, the number and class of securities subject to the Award shall be equitably adjusted by the Committee. If any adjustment would result in a fractional security being subject to the Award, the Company shall pay the Grantee in connection with the first vesting, in whole or in part, occurring after such adjustment, an amount in cash determined by multiplying (i) such fraction (rounded to the nearest hundredth) by (ii) the Fair Market Value of such security on the vesting date as determined by the Committee. The decision of the Committee regarding any such adjustment and the Fair Market Value of any fractional security shall be final, binding and conclusive.
B. In the event of a Change in Control pursuant to which the consideration paid in respect of the outstanding Stock not subject to vesting is solely or partially in the form of cash, then with respect to any Shares which are unvested immediately following the Change in Control (Unvested Shares), the Company shall be obligated to deposit with a federally chartered financial institution as escrow agent (the Escrow Agent), to be held subject to the provisions of the Agreement for the benefit of Grantee and not subject to the credit risk of the Company or its Affiliates, an amount of cash that would have been payable in respect of the Unvested Shares had they been vested immediately prior to the Change in Control (Cash Consideration).
C. In the event of a Change in Control pursuant to which the consideration paid in respect of the outstanding Stock not subject to vesting is solely or partially in the form of non-cash consideration, then, prior to the Change in Control and in accordance with applicable law, the Committee shall establish procedures to afford Grantee a reasonable opportunity to elect to convert all or a portion of the non-cash consideration that would have been payable in respect of any Unvested Shares had they been vested immediately prior to the Change in Control (the Non-Cash Consideration) into cash based on the fair market value of the Non-Cash Consideration as of the closing date for the Change in Control (Converted Cash Consideration). The Company shall be obligated to deposit with the Escrow Agent, to be held subject to the provisions of the Agreement for the benefit of Grantee and not subject to the credit risk of the Company or its Affiliates, any Converted Cash Consideration and any Non-Cash Consideration.
D. Any Cash Consideration, Converted Cash Consideration or Non-Cash Consideration (collectively, Consideration) placed in escrow pursuant to Section 15 shall be paid to the Grantee promptly upon the vesting, if any, of the Unvested Shares associated with such Consideration.
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E. References in this Agreement to the Shares shall refer, mutatis mutandis, to any such Consideration.
16. Compliance with Applicable Law. The Award is subject to the condition that if the listing, registration or qualification of the Shares subject to the Award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the vesting or delivery of Shares hereunder, the Shares subject to the Award shall not vest or be delivered, in whole or in part, unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company agrees to use reasonable efforts to effect or obtain any such listing, registration, qualification, consent, approval or other action.
17. Award Confers No Rights to Continued Employment. In no event shall the granting of the Award or its acceptance by the Grantee, or any provision of the Agreement or the Plan, give or be deemed to give the Grantee any right to continued Employment by the Company, or any Affiliate of the Company or affect in any manner the right of the Company or any Affiliate of the Company to terminate the Employment of any person at any time.
18. Award Subject to Clawback. The Award and any Shares acquired pursuant to this Award are subject to forfeiture, recovery by the Company or other action pursuant to any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
19. Certain Terminations Prior to a Change in Control. If the Grantees Employment is terminated by the Company or its Affiliate without Cause prior to a Change in Control at the direction or request of any person or group contemplating a Change in Control, and a Change in Control involving such person or group is thereafter consummated within 12 months following such direction or request, then the Grantee shall be entitled to receive the consideration Grantee would have received in connection with the Change in Control had the Shares forfeited as a result of Grantees termination been vested and outstanding as of the Change in Control.
20. General.
A. Notices. All notices, requests or other communications provided for in this Agreement shall be made, if to the Company, to:
West Corporation
11808 Miracle Hills Drive
Omaha, Nebraska 68154
Attention: General Counsel
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and if to the Grantee, to the last known mailing address of the Grantee contained in the records of the Company. All notices, requests or other communications provided for in this Agreement shall be made in writing either (a) by personal delivery, (b) by facsimile or electronic mail with confirmation of receipt, (c) by mailing in the United States mails or (d) by express courier service. The notice, request or other communication shall be deemed to be received upon personal delivery, upon confirmation of receipt of facsimile or electronic mail transmission or upon receipt by the party entitled thereto if by United States mail or express courier service; provided, however, that if a notice, request or other communication sent to the Company is not received during regular business hours, it shall be deemed to be received on the next succeeding business day of the Company.
B. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.
C. Governing Law. This Agreement, the Award and all determinations made and actions taken pursuant hereto and thereto, to the extent not governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
D. Agreement Subject to the Plan. This Agreement is subject to the provisions of the Plan, including Section 5.8 relating to a Change in Control, and shall be interpreted in accordance therewith. The Grantee hereby acknowledges receipt of a copy of the Plan.
E. Entire Agreement. This Agreement and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantees interest except by means of a writing signed by the Company and the Grantee.
F. Partial Invalidity. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof and this Agreement shall be construed in all respects as if such invalid or unenforceable provision was omitted.
G. Amendment and Waiver. The provisions of this Agreement may be amended or waived only by the written agreement of the Company and the Grantee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.
21. Counterparts. This Agreement may be executed in two counterparts each of which shall be deemed an original and both of which together shall constitute one and the same instrument.
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22. Definitions. The initially capitalized term Grantee shall have the meaning set forth on the first page of this Agreement. Initially capitalized terms not otherwise defined herein shall have the meaning provided in the Plan, and, as used herein, each of the following terms shall have the applicable meaning set forth below:
Beginning Stock Value means the average of the closing transaction prices of a share of common stock of a company, as reported on the principal national stock exchange on which such common stock is traded, for the 20-day period immediately preceding the Grant Date.
Cause shall have the meaning set forth in the Employment Agreement; provided that if the Grantee has no employment agreement with such definition, then Cause shall mean the occurrence of any of the following: (i) the Committee, in good faith, determines that the Grantee has engaged, during the performance of his or her duties, in significant objective acts or omissions constituting dishonesty, willful misconduct or gross negligence relating to the business of the Company or (ii) a plea of guilty or nolo contendere by the Grantee, or conviction of the Grantee, for a felony.
Employment shall mean the Grantees employment with the Company [any specified employment condition]. For purposes of this Agreement, employment shall not include [any specified exclusions].
Employment Agreement means the employment agreement, if any, between the Grantee and the Company or any of its Affiliates.
Ending Stock Value means the average of the closing transaction prices of a share of common stock of a company, as reported on the principal national stock exchange on which such common stock is traded, for the 20-day period ending on the last day of the Performance Period.
Good Reason means, without the Grantees express written consent, the occurrence of any of the following events after a Change in Control:
(i) either (A) a reduction in any material respect in the Grantees position(s), duties or responsibilities with the Company, as in effect during the 90-day period immediately prior to such Change in Control, or (B) an adverse material change in the Grantees reporting responsibilities, titles or offices with the Company as in effect immediately prior to such Change in Control;
(ii) a reduction of 20 percent (20%) or more in the Grantees rate of annual base salary as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
(iii) any requirement of the Company that the Grantee be based more than 50 miles from the facility where the Grantee is based immediately prior to such Change in Control;
(iv) the failure of the Company to provide the Grantee with target bonus opportunities and employee benefits (excluding equity-based compensation, equity-based benefits and nonqualified deferred compensation) that are substantially comparable in the aggregate to the target bonus opportunities and employee benefits provided to the Grantee by the Company and its Affiliates immediately prior to such Change in Control; or
(v) any material breach of Grantees change in control severance agreement or Employment Agreement, if any;
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provided, however, that (x) the Grantee provides written notice to the Company of the occurrence of any of the events set forth in clauses (i) (v) of this definition within 90 days after the Grantee has knowledge of the circumstances constituting such event; (y) the Company fails to correct the circumstances resulting in any of the events set forth in clauses (i) (v) within 30 days after such notice; and (z) the Grantee resigns within six months after the initial existence of such circumstances. For purposes of this Agreement, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company or any of its Affiliates promptly after receipt of notice thereof given by the Grantee shall not constitute Good Reason.
Qualifying Termination means termination of Grantees Employment following a Change in Control for any reason other than:
(i) by the Company or any of its Affiliates for Cause;
(ii) by the Grantee for any reason other than a Good Reason; or
(iii) by the Company or any of its Affiliates due to the Grantees failure to perform his or her duties with the Company or its Affiliates on a full-time basis for at least 180 consecutive days as a result of the Grantees incapacity due to physical or mental illness.
Russell 2000 Comparator Group means the companies that are included in the Russell 2000 Index (including the Company) on both the first day and the last day of the applicable Performance Period.
TSR means a companys cumulative total shareholder return as measured by dividing (i) the sum of the cumulative amount of dividends for the applicable Performance Period, assuming dividend reinvestment, and the difference between the Beginning Stock Value and the Ending Stock Value of the applicable Performance Period, by (ii) the Beginning Stock Value.
23. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or by the Company forthwith to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on all parties.
[Remainder of the page intentionally left blank]
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IN WITNESS WHEREOF, each of the Company and the Grantee has executed this Agreement as of the Grant Date.
GRANTEE |
|
Address: |
WEST CORPORATION | ||
By: |
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Name: | ||
Title: |
EXHIBIT A
WEST CORPORATION
AMENDED AND RESTATED 2013 LONG-TERM INCENTIVE PLAN
EXHIBIT B
SAMPLE 83(B) ELECTION
ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY
IN GROSS INCOME IN YEAR OF TRANSFER UNDER CODE SECTION 83(B)
,
Department of the Treasury
Internal Revenue Service
[Office Location]
The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the Code), to include the value of the property described below in gross income in the year of transfer and supplies the following information in accordance with the regulations promulgated thereunder:
1. | Name of Taxpayer: |
Address:
Social Security Number:
Tax Year End:
2. | Property for which the election is made: |
shares of Common Stock, par value $0.001 per share, of West Corporation, a Delaware corporation, granted to the undersigned as restricted stock.
3. | The date on which the property was transferred: |
The taxable year to which this election relates is calendar year
4. | The nature of the restrictions to which the property is subject is: |
If the undersigneds employment terminates prior to specified dates or performance measures are not met, the undersigned will forfeit the property transferred to the undersigned.
5. | Fair market value: |
The fair market value (determined without regard to any restrictions) of the property with respect to which this election is being made was $ per share at the time of transfer for a total fair market value of $ .
6. | Amount paid for property: |
The taxpayer has paid $0 for the property.
7. | Income: |
The amount to include in gross income is .
The undersigned taxpayer will file this election with the Internal Revenue Service office with which taxpayer files his annual income tax return not later than 30 days after the date of transfer of the property. A copy of the election also will be furnished to West Corporation (the person for whom the services were performed). Additionally, the undersigned will include a copy of the election with his income tax return for the taxable year in which the property is transferred. The undersigned is the person performing the services in connection with which the property was transferred.
Dated: |
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[Grantee Name] |
Exhibit 10.6
FORM OF CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this Agreement) is entered into as of the day of , by and between West Corporation, a Delaware corporation (the Company), and [First Name] [Middle Initial] [Last Name] (the Executive) and shall be effective as of . In the event that prior to , 2013, the Company has not completed an initial public offering, this Agreement shall terminate without becoming effective and shall have no force and effect.
W I T N E S S E T H
WHEREAS, the Executive currently serves as a key employee of the Company or one of its Affiliates and his or her services and knowledge are valuable to the Company in connection with the management of one or more of the Companys principal operating facilities, divisions, departments or subsidiaries;
WHEREAS, the Committee (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure the Executives continued services and to ensure the Executives continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1) of the Company, without concern as to whether the Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage the Executives full attention and dedication to the Company, and in order to further such interests the Committee has authorized the Company to enter into this Agreement; and
WHEREAS, this Agreement will operate in addition to the existing Employment Agreement (as defined in Section 1) between the Executive and the Company (or one of its Affiliates), except that the Executive will not be entitled to both the severance or consulting compensation payable under such Employment Agreement and the severance benefits provided under this Agreement, but in any event, will continue to be subject to all of the covenants set forth in the Employment Agreement, including those relating to confidentiality, noncompetition and developments.
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth below:
(a) Affiliate means, with respect to any specified Person, (i) any other Person which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise), and (ii) with respect to any natural Person, any member of the immediate family of such natural Person.
(b) Affiliated Fund means with respect to any Investors, each corporation, trust, limited liability company, general or limited partnership or other entity under common control with that Investor (including any such entity with the same general partner or principal investment advisor as that Investor or with a general partner or principal investment advisor that is an Affiliate of the general partner or principal investment advisor of that Investor).
(c) Board means the Board of Directors of the Company.
(d) Cause shall have the meaning set forth in the Employment Agreement; provided that if the Executive has no employment agreement with such definition, then Cause shall mean the occurrence of any of the following: (i) the Committee, in good faith, determines that the Executive has engaged, during the performance of his or her duties, in significant objective acts or omissions constituting dishonesty, willful misconduct or gross negligence relating to the business of the Company or (ii) a plea of guilty or nolo contendere by the Executive, or conviction of the Executive, for a felony.
(e) Change in Control means the occurrence of any of the following:
(1) a sale, lease or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole;
(2) any consolidation or merger of the Company with or into any other corporation or other person, or any other corporate reorganization or transaction (including the acquisition of capital stock of the Company), whether or not the Company is a party thereto, in which the stockholders of the Company immediately prior to such consolidation, merger, reorganization or transaction, own capital stock and either:
(i) represent directly, or indirectly through one or more entities, less than fifty percent (50%) of the economic interests in or voting power of the Company or other surviving entity immediately after such consolidation, merger, reorganization or transaction, or
(ii) do not directly, or indirectly through one or more entities, have the power to elect a majority of the entire board of directors of the Company or other surviving entity immediately after such consolidation, merger, reorganization or transaction; or
(3) any stock sale or other transaction or series of related transactions, whether or not the Company is a party thereto, after giving effect to which in excess of fifty percent (50%) of the Companys voting power is owned directly, or indirectly though one or more entities, by any person and its affiliates or associates (as such terms are defined in the rules adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), other than the Investors and their respective Affiliated Funds;
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but excluding, in any case referred to in clause (2) or (3) of this definition the Initial Public Offering or any bona fide primary or secondary public offering following the occurrence of the Initial Public Offering.
(f) Code means the Internal Revenue Code of 1986, as amended, including any regulations adopted thereunder.
(g) Committee means the Compensation Committee of the Board.
(h) Date of Termination means the date on which the Executive separates from service, within the meaning of Section 409A of the Code.
(i) Employment Agreement means the Employment Agreement, if any, between the Executive and the Company.
(j) Good Reason means, without the Executives express written consent, the occurrence of any of the following events after a Change in Control:
(1) either (i) a reduction in any material respect in the Executives position(s), duties or responsibilities with the Company, as in effect during the 90-day period immediately prior to such Change in Control, or (ii) an adverse material change in the Executives reporting responsibilities, titles or offices with the Company as in effect immediately prior to the such Change in Control;
(2) a reduction of 20 percent (20%) or more in the Executives rate of annual base salary as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
(3) any requirement of the Company that the Executive be based more than 50 miles from the facility where the Executive is based immediately prior to such Change in Control;
(4) the failure of the Company to provide the Executive with target bonus opportunities and employee benefits (excluding equity-based compensation, equity-based benefits and nonqualified deferred compensation) that are substantially comparable in the aggregate to the target bonus opportunities and employee benefits provided to the Executive by the Company and its Affiliates immediately prior to such Change in Control; or
(5) the failure of the Company to obtain the assumption agreement from any successor as contemplated in Section 10(b) or any other material breach of this Agreement or the Employment Agreement;
provided, however, that (x) the Executive provides written notice to the Company of the occurrence of any of the events set forth in clauses (1) (5) of this definition within 90 days after the Executive has knowledge of the circumstances constituting such event; (y) the Company fails to correct the circumstances resulting in any of the events set forth in clauses (1) (5) within 30 days after such notice; and (z) the Executive resigns within seven months after the initial
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existence of such circumstances. For purposes of this Agreement, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company or any of its Affiliates promptly after receipt of notice thereof given by the Executive shall not constitute Good Reason.
(k) Initial Public Offering means the initial public offering of the Company registered on Form S-1 (or any successor form under the Securities Act of 1933, as amended).
(l) Investors means the Other Investors, Quadrangle Investors and THL Investors.
(m) Nonqualifying Termination means a termination of the Executives employment:
(1) by the Company or any of its Affiliates for Cause;
(2) by the Executive for any reason other than a Good Reason;
(3) as a result of the Executives death; or
(4) by the Company or any of its Affiliates due to the Executives failure to perform his or her duties with the Company or its Affiliates on a full-time basis for at least 180 consecutive days as a result of the Executives incapacity due to physical or mental illness.
(n) Other Investors means SONJ Private Opportunities Fund, L.P. and its Affiliates.
(o) Person means any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.
(p) Quadrangle Investors means Quadrangle Capital Partners II LP, Quadrangle Capital Partners II-A LP, Quadrangle Select Partners II LP, and their respective Affiliates.
(q) Termination Period means the period of time beginning with a Change in Control and ending on the earlier to occur of:
(1) two years following such Change in Control; and
(2) the Executives death.
(r) THL Investors means Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P., Thomas H. Lee Parallel (DT) Fund VI, L.P., THL Equity Fund VI Investors (West), L.P., THL Coinvestment Partners, L.P., Putnam Investments Holdings, LLC, Putnam Investments Employees Securities Company III LLC, THL Fund VI Bridge Corp., THL Parallel Fund VI Bridge Corp., THL DT Fund VI Bridge Corp. and their respective Affiliates.
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2. Obligations of the Executive. The Executive agrees that in the event any person or group attempts a Change in Control, the Executive shall not voluntarily leave the employ of the Company or its Affiliates without Good Reason:
(a) until such attempted Change in Control terminates; or
(b) if a Change in Control shall occur, until 90 days following such Change in Control.
For purposes of this Section 2, Good Reason shall be determined as if a Change in Control had occurred when such attempted Change in Control became known to the Board.
3. Payments upon Termination of Employment.
(a) If, during the Termination Period, the employment of the Executive shall terminate, other than by reason of a Nonqualifying Termination, then the Executive shall be entitled to the following payments and benefits:
(1) The Company shall pay to the Executive (or the Executives beneficiary or estate) within 30 days after the Date of Termination (except as otherwise provided for in Section 14), as compensation for services rendered to the Company and its Affiliates:
(i) a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 4) equal to the sum of (x) the Executives base salary from the Company and its Affiliates through the Date of Termination, to the extent not theretofore paid, (y) the Executives annual bonus under the Companys or its Affiliates annual bonus plan earned with respect to the fiscal year immediately prior to the fiscal year in which the Date of Termination occurs, to the extent not theretofore paid and (z) an amount equal to the Executives target annual bonus (without regard to any amounts that would otherwise be deferred) immediately prior to the Change in Control (or if higher, the Executives target annual bonus in respect of the fiscal year in which the Date of Termination occurs), multiplied (in the case of clause (z) only) by a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is 365 or 366, as applicable; plus
(ii) a lump sum cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 4) equal to the sum of [one (1)] [two (2)] [three (3)] times the Executives highest annual base salary from the Company and its Affiliates (without regard to any amounts that would otherwise be deferred) in effect during the 12-month period prior to the Date of Termination and [one (1)] [two (2)] [three (3)] times the Executives target annual bonus (without regard to any amounts that would otherwise be deferred) immediately prior to the Date of Termination (or, if higher, the average of the annual bonuses earned by the Executive in respect of the three fiscal years of the Company (or
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such portion thereof during which the Executive performed services for the Company if the Executive shall have been employed by the Company for less than such three fiscal year period) immediately preceding the fiscal year in which the Change in Control occurs).
(iii) In the event that the aggregate cash severance and consulting compensation payable under the Employment Agreement would exceed the amounts payable to the Executive pursuant to this Section 3(a)(1), then the Executive shall be entitled to the cash severance and consulting compensation payable under the Employment Agreement in lieu of the amounts payable pursuant to this Section 3(a)(1). Subject to Sections 3(d) and 14 of this Agreement, such amounts shall be paid by the Company to the Executive within 30 days after the Date of Termination.
(2) For a period of [one] [two] [three] years commencing on the Date of Termination, the Company and its Affiliates shall, to the extent permitted under the applicable plans, continue to keep in full force and effect all medical, accident, disability and life insurance benefits with respect to the Executive and the Executives dependents with substantially the same level of coverage, upon substantially the same terms and otherwise to the same extent as such benefits shall have been in effect immediately prior to the Change in Control or, if more favorable to the Executive, as provided generally with respect to other peer employees of the Company and its Affiliates, and the Company and the Executive shall share the costs of the continuation of such benefit coverage in the same proportion as such costs were shared immediately prior to the Change in Control. To the extent the Company is unable to provide such benefit coverage for reasons other than cost, the Company shall reimburse the Executive for the amount necessary for the Executive to acquire comparable benefit coverage, reduced by the portion of the applicable premiums otherwise payable by the Executive, with such reimbursement to be made not later than 90 days after the date on which the Executive submits to the Company all required documentation evidencing the reimbursable expense, but in no event later than the end of the calendar year following the calendar year in which the expense was incurred. After the expiration of such [one] [two] [three]-year period, the Executive shall be entitled to continue the Executives medical coverage under applicable law (COBRA), at Executives expense.
(3) Each long-term incentive award granted to the Executive, including without limitation each option, restricted stock, restricted stock unit and other equity-based award, shall become fully vested, and to the extent any such award is subject to the attainment of specified performance measures, such performance measures shall be deemed satisfied at the target level.
(4) For a period of [twelve] [six] months commencing on the Date of Termination, the Executive shall receive outplacement assistance services from an outplacement agency selected by the Executive and the Company shall pay all costs of such services; provided that such costs shall not exceed $15,000 in the aggregate.
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(5) Except as otherwise provided for in Section 3(a)(1), any amounts paid or benefits provided pursuant to this Section 3(a) shall be paid in lieu of any other amount of severance or consulting compensation that would otherwise be received by the Executive upon termination of employment of the Executive under any severance plan, policy or arrangement of the Company or its Affiliates, including any severance or consulting compensation payable under the Employment Agreement.
To be eligible for any payments under this Section 3(a), the Executive must execute and deliver to the Company, within 21 days after the Executives Date of Termination, a final and complete release in a form that is reasonably acceptable to and approved by the Company (and not revoke such release).
(b) If, during the Termination Period, the employment of the Executive shall terminate by reason of a Nonqualifying Termination, or if for any other reason the Executive is not entitled to the payments and benefits set forth in Section 3(a), then the rights of the Executive to severance or consulting compensation shall be determined pursuant to the terms of the Employment Agreement.
(c) If the Executives employment is terminated by the Company without Cause prior to a Change in Control at the direction or request of any person or group contemplating a Change in Control, and a Change in Control involving such person or group is thereafter consummated within 12 months following such direction or request, then for purposes of this Agreement the employment of the Executive shall be deemed to have been terminated as of the first day of the Termination Period and the Executive shall be entitled to the benefits set forth in Section 3(a); provided that such benefits shall be reduced and offset by any severance or consulting benefits received by the Executive prior to the consummation of such Change in Control pursuant to the Employment Agreement or otherwise; and provided further that the Executive executes a release as contemplated by Section 3(a). Any amounts payable pursuant to this Section 3(c) shall be paid within 30 days following the Change in Control, except as otherwise provided for in Section 14.
(d) Notwithstanding any other provision in this Agreement, if the Executive shall be entitled to any amounts payable pursuant to Section 3(a) or Section 3(c) in respect of a Change in Control which does not constitute a change in control event within the meaning of Treasury Regulation §1.409A-3(i)(5), and such Executive is a party to an Employment Agreement that, but for this Agreement, would provide for the payment of severance benefits at a time or in a form that is different than the time and form of payment under this Agreement, then to the extent necessary to comply with Section 409A of the Code and subject to Section 14 of this Agreement, the amounts payable pursuant to Section 3(a) or Section 3(c) shall be payable at the same time and in the same form as provided under such Employment Agreement. For the avoidance of doubt, nothing in this Section 3(d) is intended to reduce the aggregate amount payable to the Executive pursuant to Section 3(a) or 3(c) of this Agreement.
4. Withholding Taxes. The Company or its Affiliates may withhold from all payments due to the Executive (or his or her beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company or its Affiliates is required to withhold therefrom.
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5. Reduction in Benefits. If at any time or from time to time, the Executive shall determine that any payment or other benefit to the Executive pursuant to this Agreement (Potential Parachute Payment) is or will become subject to the excise tax imposed by Section 4999 of the Code or any similar tax payable under any United States federal, state, local, foreign or other law (Excise Taxes), then the Executive may make a written election, delivered to the Company, to reduce the Potential Parachute Payments to the largest amount that could be payable without causing any Potential Parachute Payment to be (i) subject to any Excise Tax or (ii) nondeductible by the Company by reason of Section 280G of the Code (or any successor provision). Any such reductions shall be applied first to reduce the amount of the lump sum payment pursuant to Section 3(a)(1)(ii), and if further reductions are necessary, such reductions shall be applied on a prorated basis to all other Potential Parachute Payments that would be subject to an Excise Tax.
6. Reimbursement of Expenses. If any contest or dispute shall arise under this Agreement involving termination of the Executives employment with the Company or its Affiliates or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse the Executive, on a current basis, for all legal fees and expenses, if any, incurred by the Executive in connection with such contest or dispute, together with interest thereon at a rate equal to the prime rate, as published in The Wall Street Journal from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives the Executives statement for such fees and expenses (to the extent paid by the Executive) through the date of payment thereof; provided, however, that in the event the resolution of any such contest or dispute includes a finding that the Executives claims in such contest or dispute were without merit, the Executive shall be required to reimburse the Company, over a period of 12 months from the date of such resolution, for all sums advanced to the Executive pursuant to this Section 6, including interest.
7. Operative Event. Notwithstanding any provision herein to the contrary, except as set forth in Section 3(c), no amounts shall be payable hereunder unless and until a Change in Control is consummated at a time when the Executive is employed by the Company.
8. Termination of Agreement.
(a) This Agreement shall be effective on the date hereof and shall terminate upon the earliest to occur of (i) except as provided in Section 3(c), termination of the Executives employment by the Company or its Affiliates prior to a Change in Control, (ii) termination of the Executives employment pursuant to a Nonqualifying Termination and (iii) the expiration of the Termination Period with respect to the first Change in Control to occur after the date of this Agreement.
(b) The Company shall have the right prior to a Change in Control, in its sole discretion, pursuant to action by the Committee, to approve the termination of this Agreement, which termination shall not become effective until the date fixed by the Committee for such termination, which date shall be at least 120 days after notice thereof is given by the Company to the Executive in accordance with Section 11; provided, however, that no such action shall be taken by the Committee during any period of time when the Committee has knowledge that any person has taken steps reasonably calculated to effect a Change in Control until, in the opinion of the Committee, such person has abandoned or terminated its efforts to effect a Change in Control.
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9. Scope of Agreement. Nothing in this Agreement shall be deemed to entitle the Executive to continued employment with the Company or its Affiliates and, if the Executives employment with the Company or its Affiliates shall terminate at a time other than the Termination Period, then, except as specifically provided herein, the Executive shall have no further rights under this Agreement.
10. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any merger or consolidation of the Company whereby the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred, and all references herein to actions or omissions of the Company following such merger, consolidation or transfer of assets shall be deemed references to actions or omissions of such surviving or resulting corporation or transferee.
(b) The Company agrees that concurrently with any merger or consolidation in which the Company is not the surviving or resulting corporation or any transfer of all or substantially all of the assets of the Company, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to the Executive (or his or her beneficiary or estate), all of the obligations of the Company hereunder. Failure of the Company to obtain such assumption prior to or concurrently with the effectiveness of any such merger, consolidation or transfer of assets shall be a breach of this Agreement and (i) if such merger, consolidation or transfer is a change in control event, within the meaning of Section 409A of the Code, or (ii) the Executive terminates employment for Good Reason, the Executive shall be entitled to compensation and other benefits from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executives employment were terminated following a Change in Control other than by reason of a Nonqualifying Termination. For purposes of implementing the foregoing, the date on which any such merger, consolidation or transfer becomes effective shall be deemed the Date of Termination.
(c) This Agreement shall inure to the benefit of and be enforceable by the Executives personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amounts would be payable to the Executive hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by the Executive to receive such amounts or, if no person is so appointed, to the Executives estate.
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11. Notices.
(a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed:
(1) if to the Executive, to the home address of the Executive maintained in the Companys business records, and if to the Company, to West Corporation, 11808 Miracle Hills Drive, Omaha, Nebraska 68154, Attention: Executive Vice President and General Counsel, with a copies to the Secretary and the Chairman of the Compensation Committee of the Board, or
(2) to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(b) A written notice of the Executives Date of Termination by the Company or the Executive, as the case may be, to the other, shall (1) indicate the specific termination provision in this Agreement relied upon, (2) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated and (3) specify the termination date (which date shall be not less than 15 days after the giving of such notice). The failure by the Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executives or the Companys rights hereunder.
12. Full Settlement; Resolution of Disputes.
(a) The Companys obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.
(b) If there shall be any dispute between the Company and the Executive in the event of any termination of the Executives employment, then, unless and until there is a final, nonappealable judgment by a court or arbitral tribunal of competent jurisdiction or a written agreement signed by both parties addressing such dispute, in each case declaring that such termination was for Cause, that the termination of employment by the Executive was without Good Reason, or that the Company is not otherwise obligated to pay any amount to the Executive and his or her dependents or other beneficiaries, as the case may be, under Section 3(a), the Company shall pay all amounts to an escrow account until there is a final nonappealable judgment by a court or arbitral tribunal of competent jurisdiction, or a written
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agreement signed by both parties addressing such dispute, as the case may be, that resolves whether the Company would be required to pay such amounts pursuant to Sections 3(a) as though such termination were by the Company without Cause or by the Executive with Good Reason, in which case such amounts would be released from escrow to the Executive, or not, in which case such amounts would be released from escrow to the Company.
13. Employment with Affiliates. Employment with the Company for purposes of this Agreement shall include employment with any Affiliate of the Company.
14. Section 409A. This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent. In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (409A Penalties), the Company and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. Notwithstanding any other provision in this Agreement, if Executive is a specified employee, as defined in Section 409A of the Code, as of the Date of Termination, then to the extent any amount payable under this Agreement (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon Executives separation from service, within the meaning of Section 409A of the Code, and (iii) under the terms of this Agreement would be payable prior to the six-month anniversary of Executives Date of Termination, such payment shall be delayed until the earlier to occur of (a) the six-month anniversary of the Date of Termination or (b) the date of Executives death. Any reimbursement or advancement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to Executive within 30 days following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense. Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year. The right to any reimbursement or in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.
15. Governing Law; Validity. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Nebraska without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which other provisions shall remain in full force and effect.
16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument.
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17. Miscellaneous. No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by the Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Except as otherwise expressly set forth in this Agreement, the rights and obligations of, and the benefits payable to, the Executive, or his or her estate or beneficiaries pursuant to this Agreement are in addition to any rights and obligations of, and benefits payable to, the Executive, or his or her estate or beneficiaries under any other employee benefit plan, employment agreement or compensation program of the Company or any of its Affiliates, including the Employment Agreement. Without limiting the scope of the foregoing, the Executive shall be subject to all covenants set forth in the Employment Agreement, including those relating to confidentiality, noncompetition and developments, and such covenants shall be fully enforceable pursuant to the terms of the Employment Agreement, regardless of whether the Executive is entitled to the benefits set forth herein or in the Employment Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and the Executive has executed this Agreement as of the day and year first above written.
WEST CORPORATION | ||
By: |
Name: Title: |
|
Name: [First Name] [Middle Initial] [Last Name] |
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Exhibit 10.7
WEST CORPORATION
EXECUTIVE RETIREMENT SAVINGS PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2015
WEST CORPORATION
EXECUTIVE RETIREMENT SAVINGS PLAN
CONTENTS |
Page | |||||
PREAMBLE |
1 | |||||
ARTICLE I |
DEFINITIONS |
1 | ||||
ARTICLE II |
PARTICIPATION IN THE PLAN |
3 | ||||
ARTICLE III |
DEFERRAL ACCOUNTS |
4 | ||||
ARTICLE IV |
APPROVED INVESTMENT FUNDS |
5 | ||||
ARTICLE V |
DISTRIBUTION OF ACCOUNT |
6 | ||||
ARTICLE VI |
NON-ASSIGNABILITY |
8 | ||||
ARTICLE VII |
VESTING |
8 | ||||
ARTICLE VIII |
AMENDMENT OR TERMINATION OF THE PLAN |
9 | ||||
ARTICLE IX |
PLAN ADMINISTRATION |
10 | ||||
ARTICLE X |
MISCELLANEOUS |
13 |
WEST CORPORATION
EXECUTIVE RETIREMENT SAVINGS PLAN
PREAMBLE
West Corporation (the Company) established the West Corporation Executive Retirement Savings Plan (the Original Plan), effective as of January 1, 2000, as an unfunded retirement plan for a select group of management or highly compensated employees. The Original Plan was thereafter amended and restated in its entirety (the First 409A Restatement), effective as of January 1, 2005, to comply with section 409A of the Code and the proposed regulations and other guidance issued thereunder. The First 409A Restatement, as amended, was thereafter restated in its entirety (the Second 409A Restatement), effective as of January 1, 2008, to comply with final regulation issued under section 409A of the Code. The Company now desires to amend and restate the Second 409A Restatement in its entirety as hereinafter set forth (the Plan), effective as of January 1, 2015, to increase the maximum deferral amount and to reflect certain other changes.
The purpose of the Plan is to permit eligible participants of the Company to accumulate additional retirement and savings income on a deferred basis.
ARTICLE I
DEFINITIONS
As used in this Plan, the following capitalized words and phrases have the meanings indicated, unless the context requires a different meaning:
1.1 | Account means the Deferral Account, Matching Account and other sub-account(s) maintained on behalf of each Participant to reflect his interest under the Plan. A separate sub-account shall be maintained for contributions attributable to Plan Years ending on or before December 31, 2004, which were fully vested as of such date and therefore are exempt from section 409A of the Code (herein referred to as a Participants Grandfathered Account). Effective for Plan Years commencing on and after January 1, 2015, separate sub-accounts shall also be maintained on a Plan Year-by-Plan Year basis so that a Participant may make a separate distribution election pursuant to Section 5.3, with respect to his or her contributions for each such Plan Year. |
Notwithstanding the foregoing, if a Participants Grandfathered Account is materially modified within the meaning of Treasury Regulation § 1.409A-6(a)(4) or the corresponding provisions in future guidance issued by the Department of the Treasury and the Internal Revenue Service, then such account will be subject to section 409A of the Code and treated for purposes of this Plan in the same manner as contributions attributable to periods on or after the date of such material modification.
1.2 | Allocation Date means each business day during a Plan Year with respect to which securities are traded on an established securities market. |
1.3 | Approved Investment Fund means one or more of the measurement investment funds designated by the Committee for purposes of crediting or debiting hypothetical investment gains and losses to the Accounts of Participants. |
1.4 | Beneficiary means the person or persons designated by a Participant, or otherwise entitled, to receive any amount credited to his Account that remains undistributed at his death. |
1.5 | Code means the Internal Revenue Code of 1986, as amended from time to time. |
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1.6 | Committee means the committee appointed in accordance with Section 9.1 to administer the Plan. |
1.7 | Company means West Corporation or any successor thereto. Unless the context requires a different meaning, each reference to Company shall also mean any affiliated employer of West Corporation that participates in the Plan with respect to such affiliates employees. |
1.8 | Compensation means the aggregate compensation earned by a Participant by the Company for a Plan Year, including salary, overtime pay, commissions, bonuses and all other items that constitute wages within the meaning of section 3401(a) of the Code or are required to be reported under sections 6041(d), 6051(a)(3) or 6052 of the Code (i.e., W-2 compensation); excluding, however, all of the following items (even if includible in gross income): reimbursements or other expense allowances, cash and non-cash fringe benefits, moving expenses, welfare benefits, and stock options and all other forms of equity compensation. Compensation also includes salary deferral contributions under this Plan and any elective deferrals under cash-or-deferred arrangements or cafeteria plans that are not includable in gross income by reason of section 125 or 402(g)(3) of the Code but does not include any other amounts contributed pursuant to, or received under, this Plan or any other plan of deferred compensation. Compensation shall not include any amount included in the taxable income of a Participant in any given year as a result of its distribution pursuant to Article V of this Agreement. |
1.9 | Deferral Account means the sub-account established on behalf a Participant to reflect the amount of contributions that he elects to defer under the Plan pursuant to Section 3.1. |
1.10 | Deferral Election Agreement means an agreement between a Participant and the Company under which the Participant agrees to defer a portion of his Compensation that is earned and payable for services performed during a Plan Year. |
1.11 | Eligible Employee means an employee of the Company who is a member of a select group of management or highly compensated employees and who is designated by the Company for participation in the Plan. |
1.12 | Grandfathered Account (see Section 1.1) |
1.13 | Matching Account means the sub-account established on behalf of a Participant to reflect the amount of Company matching contributions made on his behalf pursuant to Section 3.2. |
1.14 | Participant means any Eligible Employee who satisfies the conditions for participation in the Plan set forth in Section 2.1. |
1.15 | Plan means the West Corporation Executive Retirement Savings Plan, as set forth herein and as from time to time amended. |
1.16 | Plan Year means the accounting year of the Plan, which ends on December 31. |
1.17 | Separation from Service means the complete termination of the employment relationship with the Company and all corporations or entities or organizations with which the Company would be considered a single employer pursuant to subsections (b) and (c) of section 414 of the Code determined in conformance with section 409A of the Code and Treasury Regulation §1.409A-1(h) or the corresponding provisions in future guidance issued by the Department of the Treasury and the Internal Revenue Service. For this purpose, an individuals employment relationship is treated as continuing intact while the individual is on military leave, sick leave or other bona fide leave of absence if the period of any such leave does not exceed six (6) months, or if longer, so long as the individual retains the right to reemployment under an applicable statute or by contract. |
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1.18 | Trust or Trust Fund means any trust established to hold amounts set aside by the Company in accordance with Section 3.6. |
1.19 | Trustee means the person(s) serving as trustee of the Trust Fund. |
1.20 | Rules of Construction |
(a) | Governing law. The construction and operation of this Plan are governed by the laws of the State of Nebraska. |
(b) | Headings. The headings of Articles, Sections and Subsections are for reference only and are not to be utilized in construing the Plan. |
(c) | Gender. Unless clearly inappropriate, all pronouns of whatever gender refer indifferently to persons or objects of any gender. |
(d) | Singular and plural. Unless clearly inappropriate, singular items refer also to the plural Company and vice versa. |
(e) | Severability. If any provision of this Plan is held illegal or invalid for any reason, the remaining provisions are to remain in full force and effect and to be construed and enforced in accordance with the purposes of the Plan as if the illegal or invalid provision did not exist. |
ARTICLE II
PARTICIPATION IN THE PLAN
2.1 | Eligibility |
Participation in the Plan shall be limited to employees of the Company who (i) qualify for inclusion in a select group of management or highly compensated employees within the meaning of sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA and (ii) are designated by the Company as being eligible to participate. If the Company determines that a Participant no longer qualifies as being a member of a select group of management or highly compensated employees, then the compensation deferral elections made by such individual in accordance with the provisions of the Plan will continue for the remainder of the Plan Year. However, no additional amounts shall be deferred and credited to the Account of such individual under the Plan for any future Plan Year until such time as the individual is again determined to be eligible to participate in the Plan and makes a new election under the provisions of the Plan; except that all prior amounts credited to the Account of such individual shall continue to be adjusted for earnings or losses pursuant to the other provisions of the Plan until fully distributed. The Company also retains the right to direct the immediate payment of all amounts credited to a Participants Grandfathered Account upon the Companys determination that such Participant is no longer eligible for the Plan.
2.2 | Commencement of Participation |
Eligible Employees may elect to participate in the Plan, in the manner designated by and acceptable to the Company, effective as of the first day of each Plan Year. Notwithstanding the foregoing, in the case of the first Plan Year in which an individual becomes eligible to participate in the Plan, such
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individual may make an initial deferral election within 30 days after the date he or she becomes eligible to participate in the Plan (as defined in Treasury Regulation §1.409A-1(c) or the corresponding provision in subsequent guidance issued by the Department of the Treasury to include any other plan that would be considered together with this Plan as the same plan), with respect to Compensation paid for services to be performed subsequent to the election.
ARTICLE III
DEFERRAL ACCOUNTS
3.1 | Deferral Election |
Each Plan Year, a Participant may execute a Deferral Election Agreement under which he may irrevocably elect to defer a percentage of his Compensation, subject to any minimum or maximum amount specified by the Committee. A Deferral Election Agreement shall be entered into prior to the commencement of the Plan Year with respect to which such agreement relates and prior to the performance of services by a Participant for such Plan Year; provided, however, in the case of the first Plan Year in which a Participant becomes eligible to participate in the Plan, such election may be made with respect to services performed subsequent to the Participants election within 30 days after the date the Participant first becomes eligible to participate in the Plan. All elections for a given Plan Year shall be written in a form supplied by the Company and shall be subject to any terms and conditions specified by the Company in its discretion, including but not limited to any limitation on the amount of contributions that may be deferred under the Plan.
3.2 | Company Credits |
For each Plan Year, the Company in its discretion may make a matching contribution to a Participants Account under this Plan. Any such Company matching contributions shall be subject to any conditions or maximum dollar amounts specified by the Company and need not be uniform among all Participants.
3.3 | Account Reflecting Deferred Compensation |
The Company shall establish and maintain a separate Account for each Participant which shall reflect the amount of such Participants total contributions under this Plan and all credits or charges under Section 3.4 from time to time. All amounts credited or charged to a Participants Account hereunder shall be in a manner and form determined within the sole discretion of the Company.
3.4 | Credits or Charges |
(a) | Annual Earnings or Losses |
As of each Allocation Date during a Plan Year, a Participants Account shall be credited or debited with earnings or losses approximately equal to the earnings, gain or loss on the Approved Investment Funds indicated as preferred by a Participant for the Plan Year or for the portion of such Plan Year in which the Account is deemed to be invested.
(b) | Balance of Account |
As of each Allocation Date, the amount credited to a Participants Account shall be the amount credited to his Account as of the immediately preceding Allocation Date, plus the Participants contribution credits since the immediately preceding Allocation Date, minus any amount that is paid to or on behalf of a Participant pursuant to this Plan subsequent to the immediately preceding Allocation Date, plus or minus any hypothetical investment gains or losses determined pursuant to Section 3.4(a) above.
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3.5 | Investment, Management and Use |
The Company shall have sole control and discretion over the investment, management and use of all amounts credited to a Participants Account until such amounts are distributed pursuant to Article V. Notwithstanding any other provision of this Plan or any notice, statement, summary or other communication provided to a Participant that may be interpreted to the contrary, the Approved Investment Funds are to be used for measurement purposes only, and a Participants election of any such fund, the determination of credits and debits to his Account based on such funds, the Companys actual ownership of such funds, and any authority granted by the Company to a Participant to change the investment of the Companys assets, if any, may not be considered or construed in any manner as an actual investment of the Account in any such fund or to constitute a funding of this Plan.
3.6 | Credits to Trust Fund |
The Company may establish a Trust Fund and make credits to it corresponding to any or all amounts credited under this Article III.
3.7 | Status of the Trust Fund |
Notwithstanding any other provision of this Plan, any assets of the Trust Fund shall remain the property of the Company and shall be subject to the claims of its creditors in accordance with the terms of the Trust. No Participant (or Beneficiary) has any priority claim on Trust assets, if any, or any security interest or other right in or to them superior to the rights of general creditors of the Company.
ARTICLE IV
APPROVED INVESTMENT FUNDS
4.1 | Preference |
Each Participant may from time to time indicate to the Company or its designee, in manner designated by the Committee, a preference that monies in his Account be invested by the Company in one or more Approved Investment Funds. In the absence of any such preference election by a Participant, such Participants Account shall be deemed to have been invested in the Approved Investment Fund designated by the Committee which is designed to preserve principal and to provide a reasonable rate of return consistent with the need for liquidity. The Company shall not be obligated to follow a Participants expressed preference and may follow the procedure in Section 4.4(b).
4.2 | Identity of Funds |
The Committee in its sole discretion shall designate the Approved Investment Funds to be used under the Plan and the Committee may from time to time discontinue, substitute or add one or more such Funds.
4.3 | Switch of Funds |
Subject to any limitations established by the Committee, a Participant may indicate to the Company or its designee, in a manner designated by the Committee, that he prefers to switch all or a portion of monies in his Account from one Approved Investment Fund to another. Any switch to a different Approved Investment Fund in accordance with this Section 4.3 shall take effect as of a date determined by the Committee.
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4.4 | Investment in Other Funds |
(a) | Participant |
A Participant may not indicate a preference that monies in his Account be invested by the Company in any fund other than one or more Approved Investment Funds.
(b) | Company |
Notwithstanding the provisions of Sections 4.1 and 4.2, the Company shall have the discretion to invest the monies in an Account in any investment it may choose and shall not have a duty to notify a Participant of the identity of such investment. Thereafter, the credits or charges to an Account shall be determined using earnings, gains or losses equivalent to the hypothetical rate of earnings, gains or losses which such Account would have experienced had the Account been invested in the Approved Investment Fund preferred by the Participant (or the default fund designated by the Committee in the absence of an election), based on the Participants most current investment preference in accordance with Section 4.1.
ARTICLE V
DISTRIBUTION OF ACCOUNT
5.1 | Time of Distribution |
(a) | Participant Election |
Payment of a Participants Account shall be made or commence within 60 days following the date the Participant incurs a Separation from Service (or, with respect to a Participants Grandfathered Account, the earlier of the date the Participant incurs a Separation from Service, or the date specified by the Participant on an election form executed prior to January 1, 2005).
(b) | Delay for Key Employees |
Notwithstanding the foregoing or any other provision of this Plan to the contrary, in the case of a Participant who is a specified employee within the meaning of Code section 409A (determined as of the date of his or her Separation from Service), payment of such Participants Account (other than his Grandfathered Account) due to Separation from Service shall not be made before the date which is six (6) months after the date of such Separation from Service or, if earlier, the date of death of such Participant. Any distribution delayed pursuant to the immediately preceding sentence that is to be paid in a lump sum shall be paid to the Participant within 60 days after, the date which is six (6) months after the date of Separation from Service or, if earlier, the date of death of the Participant. If a Participants Account is to be paid in installments, any installment payment to which such Participant would otherwise be entitled during the first six (6) months following such Participants Separation from Service shall be accumulated and paid on the first day of the seventh month following such Separation from Service.
For purposes of the foregoing, any Participant who meets the definition of a key employee under Code section 416(i)(1)(A)(i), (ii) or (iii) during the 12-month period ending on December 31 of each year shall be treated as a specified employee for the 12-month period commencing on the following April 1.
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5.2 | Amount Distributed |
The amount distributed to a Participant pursuant to this Article V shall be determined as of the most recent Allocation Date preceding the date of distribution.
5.3 | Form of Distribution |
(a) | Participant Election |
At the time a Participant first enrolls in the Plan, such Participant shall make an election to receive payment of the total amount of his Account in one of the following forms:
(i) | A single lump sum payment; or |
(ii) | Sixty (60) substantially equal monthly installments. |
Effective for Plan Years commencing on and after January 1, 2015, a Participant shall be permitted to make a separate election prior to the start of each Plan Year with respect to his or her contributions for such Plan Year.
A Participants election under this Section 5.3(a) shall be made on a form supplied by the Company and shall be irrevocable. If a Participant fails to elect a form of distribution, payment shall be made in the form of a single lump sum payment.
5.4 | Distribution Upon Death |
If a Participant dies before commencing the payment of his Account, the unpaid Account balance shall be paid to a Participants designated Beneficiary. Payment to such designated Beneficiary shall made within 60 days after the Participants death. Distribution shall be made in a lump sum distribution to the designated Beneficiary. If a valid Beneficiary does not exist, then a lump sum distribution payment shall be made to the Participants estate.
If a Participant dies before receiving the total amount of his Account, but has commenced payments, the remaining balance of the Participants Account shall be paid in a single lump sum to the Participants designated Beneficiary. If a valid Beneficiary does not exist, then a lump sum distribution payment shall be made to the Participants estate.
5.5 | Designation of Beneficiary |
A Participant shall designate a Beneficiary on a form to be supplied by the Company. The Beneficiary designation may be changed by the Participant at any time, but any such change shall not be effective until the Beneficiary designation form completed by the Participant is delivered to and received by the Company. In the event that the Company receives more than one Beneficiary designation form from the Participant, the form bearing the most recent date shall be controlling. In the event there is no valid Beneficiary designation of the Participant in existence at the time of the Participants death, then the Participants Beneficiary shall be the Participants estate.
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ARTICLE VI
NON-ASSIGNABILITY
6.1 | Non-Assignability |
Neither a Participant nor any Beneficiary of a Participant shall have any right to commute, sell, assign, pledge, transfer or otherwise convey the right to receive his Account until his Account is actually distributed to a Participant or his Beneficiary. The portion of the Account which has not been distributed shall not be subject to attachment, garnishment or execution for the payment of any debts, judgments, alimony or separate maintenance and shall not be transferable by operation of law in the event of bankruptcy or insolvency of a Participant or a Participants Beneficiary.
Notwithstanding the foregoing, the Committee will comply with a domestic relations order issued in connection with a divorce of a Participant to the extent the Committee determines that such order would satisfy the requirements of a qualified domestic relations order within the meaning of Section 414(p) of the Code if the Plan were a qualified plan under Section 401(a) of the Code.
ARTICLE VII
VESTING
7.1 | Vesting |
Each Participant shall be fully (100%) vested in his Deferral Account at all times. Each Participant shall be vested in his Matching Account in accordance with the following schedule:
For Plan Years Ending On or Before December 31, 2006
Years of Vesting Service |
Vested Percentage |
|||
1 |
0 | % | ||
2 |
25 | % | ||
3 |
50 | % | ||
4 |
75 | % | ||
5 or more |
100 | % |
For Plan Years Commencing On or After January 1, 2007*
Years of Vesting Service |
Vested Percentage |
|||
1 |
0 | % | ||
2 |
0 | % | ||
3 |
100 | % |
* | In no event will a Participants vested percentage be less than his vested percentage as of December 31, 2006. |
A Participants years of vesting service shall be equal to his years of vesting service credited under the Companys 401(k) savings plan. Notwithstanding the foregoing, each Participant shall be fully (100%) vested in his entire Account upon (i) termination of employment on or after attaining age 65; (ii) termination of employment due to permanent disability as defined under the Companys 401(k) savings plan; or (iii) upon a change of control of the Company provided he is employed by the Company at the time of such change of control. A change of control means (a) any reorganization, merger or consolidation to which the Company is a party and as a result of which the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately
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thereafter, own more than fifty percent (50%) of the combined voting power of the shares entitled to vote in the election of the directors of the surviving corporation; or (b) the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company or a sale of all or substantially all of the assets of the Company.
ARTICLE VIII
AMENDMENT OR TERMINATION OF THE PLAN
8.1 | Companys Right to Amend Plan |
The Company, by action of its Board of Directors or authorized committee, may, at any time and from time to time, amend, in whole or in part, any of the provisions of this Plan or may terminate it as a whole or with respect to any Participant or group of Participants (subject to the restrictions under Section 8.2 with respect to the non-Grandfathered Accounts of Participants). Any such amendment is binding upon all Participants and their Beneficiaries, the Trustee, the Committee and all other parties in interest.
8.2 | Distribution of Plan Benefits Upon Termination |
Upon the full termination of the Plan, the Committee shall direct the distribution of the benefits of the Plan to Participants in a manner that is consistent with and satisfies the provisions of Article V; except that payment of the non-Grandfathered Accounts of Participants shall be restricted as follows:
(a) | In the event of a complete liquidation and dissolution of the Company, the Company shall terminate the Plan within twelve (12) months of the liquidation and dissolution of the Company, or with the approval of a bankruptcy court, and the value of the benefits payable under the Plan to the Participants shall be determined as of that date and shall be distributed to the Participants or their Beneficiaries; provided, however, that the benefits payable under the Plan are included in the gross income of the Participants or their Beneficiaries in the latest of: (i) the calendar year in which the Plan termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable. |
(b) | The Company may, at its sole and absolute discretion, terminate the Plan, provided that, subject to Section 8.2(c) below: (i) the termination does not occur proximate to a downturn in the financial health of the Company, (ii) all arrangements sponsored by the Company that would be aggregated with the Plan pursuant to Treasury Regulation §1.409A-1(c) or the corresponding provision in future guidance issued by the Department of the Treasury if the same Participant participated in all of the arrangements are terminated; (iii) no payments other than the payments that would be payable under the terms of the arrangements if the termination had not occurred are made within twelve (12) months of the termination of the arrangements; (iv) all payments are made within twenty-four (24) months of the termination of the arrangements; and (v) the Company does not adopt a new arrangement that would be aggregated with any terminated arrangement under Treasury Regulation §1.409A-1 (c) or the corresponding provision in future guidance issued by the Department of the Treasury if the same Participant participated in both arrangements, at any time within three (3) years following the date of termination of the arrangement. |
(c) | Notwithstanding Section 8.2(b) above, the Company may, at its sole and absolute discretion, terminate the Plan pursuant to irrevocable action taken by the Company within the 30 days preceding or the 12 months following a change in control event (as defined in Treasury |
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Regulation §1.409A-3(i)(5)), provided that: (i) all agreements, methods, programs, and other arrangements sponsored by the Company immediately after the time of the change in control event with respect to which deferrals of compensation are treated as having been deferred under a single plan under §1.409A-1(c)(2) are terminated and liquidated with respect to each Participant that experienced the change in control event, and (ii) all such Participants are required to receive all amounts of compensation deferred under the terminated agreements, methods, programs, and other arrangements within 12 months of the date the Company irrevocably takes all necessary action to terminate and liquidate the agreements, methods, programs, and other arrangements. |
8.3 | When Amendments Take Effect |
A resolution amending or terminating the Plan becomes effective as of the date specified therein.
8.4 | Restriction on Retroactive Amendments |
No amendment may be made that retroactively deprives a Participant of any benefit accrued before the date of the amendment.
ARTICLE IX
PLAN ADMINISTRATION
9.1 | The Administrative Committee |
The Plan shall be administered by a Committee consisting of the Companys Vice-President, Corporate Compensation and Benefits; Chief Financial Officer; Vice President, Controller; and such other persons designated by the Companys Board of Directors or Chief Executive Officer to serve on the Committee. The Company may remove any member of the Committee at any time, with or without cause, and may fill any vacancy. If a vacancy occurs, the remaining member or members of the Committee have full authority to act. The Company is responsible for transmitting to the Trustee the names and authorized signatures of the members of the Committee and, as changes take place in membership, the names and signatures of new members. Any member of the Committee may resign by delivering his written resignation to the Company, the Trustee and the Committee. Any such resignation becomes effective upon its receipt by the Company or on such other date as is agreed to by the Company and the resigning member. The Committee may adopt such rules and appoint such subcommittees as it deems desirable for the conduct of its affairs and the administration of the Plan.
9.2 | Powers of the Committee |
In carrying out its duties with respect to the general administration of the Plan, the Committee has, in addition to any other powers conferred by the Plan or by law, the following powers:
(a) | to determine all questions relating to eligibility to participate in the Plan; |
(b) | to compute and certify to the Trustee or other appropriate party the amount and kind of distributions payable to Participants and their Beneficiaries; |
(c) | to maintain all records necessary for the administration of the Plan that are not maintained by the Company, recordkeeper or any Trustee; |
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(d) | to interpret the provisions of the Plan and to make and publish such rules for the administration of the Plan as are not inconsistent with the terms thereof; |
(e) | to establish and modify the method of accounting for the Plan or any Trust; |
(f) | to employ counsel, accountants and other consultants to aid in exercising its powers and carrying out its duties hereunder; and |
(g) | to perform any other acts necessary and proper for the administration of the Plan, except those that are to be performed by the recordkeeper or Trustee, if any. |
9.3 | Indemnification |
(a) | Indemnification of Members of the Committee by the Company |
The Company agrees to indemnify and hold harmless each member of the Committee against any and all expenses and liabilities arising out of his action or failure to act in such capacity, excepting only expenses and liabilities arising out of his own willful misconduct or gross negligence. This right of indemnification is in addition to any other rights to which any member of the Committee may be entitled.
(b) | Liabilities for Which Members of the Committee are Indemnified |
Liabilities and expenses against which a member of the Committee is indemnified hereunder include, without limitation, the amount of any settlement or judgment, costs, counsel fees and related charges reasonably incurred in connection with a claim asserted or a proceeding brought against him or the settlement thereof.
(c) | Companys Right to Settle Claims |
The Company may, at its own expense, settle any claim asserted or proceeding brought against any member of the Committee when such settlement appears to be in the best interests of the Company.
9.4 | Claims Procedure |
A Participant or Beneficiary or other person who feels he is being denied any benefit or right provided under the Plan (hereinafter referred to as Claimant) may file a written claim with the Committee or its delegate setting forth his claim. Any such claim shall be signed by the Claimant and shall be considered filed on the date the claim is received by the Company or prescribed addressee. The claim must be addressed as prescribed by the Company. If a Participant shall fail to file a request for review in accordance with the procedures described herein, such Participant shall have no right to review and shall have no right to bring action in any court and the denial of the claim shall become final and binding on all persons for all purposes.
(a) | Committee Action |
The Committee or its delegate shall, within ninety (90) days after its receipt of such claim make its determination. However, in the event that special circumstances require an extension of time for processing the claim, the Committee or its delegate shall provide such Claimant with its determination not later than one hundred and eighty (180) days after receipt of the Claimants
11
claim, but, in such event, the Committee or its delegate shall furnish the Claimant, within ninety (90) days after its receipt of such claim, written notification of the extension explaining the circumstances requiring such extension and the date that it is anticipated that such written statement will be furnished.
In the event the claim is denied, the Committee or its delegate shall provide such Claimant a written statement of the Adverse Benefit Determination, as defined in Subsection (d) below. The notice of Adverse Benefit Determination shall be delivered or mailed to the Claimant by certified or registered mail to his last known address, which statement shall contain the following:
(1) | the reason or reasons for Adverse Benefit Determination; |
(2) | a reference to the provisions of the Plan upon which the Adverse Benefit Determination is based; |
(3) | a description of any additional material or information that is necessary for the Claimant to perfect the claim; |
(4) | an explanation of why that material or information is necessary; and |
(5) | an explanation of the review procedure provided below, including applicable time limits and a notice of a Claimants rights to bring a legal action under ERISA after an Adverse Benefit Determination on appeal. |
(b) | Procedures for Appealing an Adverse Benefit Determination |
Within 60 days after receipt of a notice of an Adverse Benefit Determination as provided above, if the Claimant disagrees with the Adverse Benefit Determination, the Claimant, or his authorized representative, may request, in writing, that the Committee or its delegate review his claim and may request to appear before the Committee or its delegate for such review. If the Claimant does not request a review of the Adverse Benefit Determination within such 60 day period, he shall be barred and estopped from appealing the Committees or its delegates Adverse Benefit Determination. The appeal shall be filed with the Committee or prescribed addressee at the address prescribed by the Company, and it shall be considered filed on the date it is received by the prescribed addressee. In deciding any appeal, the Committee or its delegate shall act in its capacity as a named fiduciary.
The Claimant shall have the rights to:
(1) | submit written comments, documents, records and other information relating to the claim for benefits; |
(2) | request, free of charge, reasonable access to, and copies of all documents, records and other information relevant to his claim for benefits. For this purpose, a document, record, or other information is treated as relevant to the Claimants claim if it: (a) was submitted, considered, or granted in the course of making the benefit determination, regardless of whether such document, record or other information was relied on in making the benefit determination; or (b) demonstrates compliance with the administrative processes and safeguards required in making the benefit determination; and a review that takes into account comments, documents, records, and other information submitted by the Claimant relating to the claim, regardless of whether such information was submitted or considered in the initial benefit determination. |
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(c) | Response on Appeal |
Within 60 days after receipt by the Committee or its delegate of a written application for review of a Claimants claim, the Committee or its delegate shall notify the Claimant of its decision by delivery or by certified or registered mail to his last known address; provided, however, in the event that special circumstances require an extension of time for processing such application, the Committee or its delegate shall so notify the Claimant of its decision not later than 120 days after receipt of such application.
In the event the Committees or its delegates decision on appeal is adverse to the Claimant, the Committee or its delegate shall issue a written notice of an Adverse Benefit Determination on Appeal that will contain all of the following information, in a manner calculated to be understood by the Claimant:
(1) | the specific reason(s) for the Adverse Benefit Determination on Appeal; |
(2) | reference to specific plan provisions on which the benefit determination is based; |
(3) | a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the Claimants claim for benefits; and a statement describing any voluntary appeal procedures offered by the Plan and the Claimants right to obtain the information about such procedures, as well as a statement of the Claimants right to bring an action under ERISA section 502(a). |
(d) | Definition |
As used herein, the term Adverse Benefit Determination shall mean a determination that results in any of the following: the denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of the Claimants eligibility to participate in the Plan.
9.5 | Expenses |
The members of the Committee serve without compensation for services as such. All expenses of the Committee are paid by the Company.
9.6 | Conclusiveness of Action |
Any action on matters within the discretion of the Committee will be conclusive, final and binding upon all Participants and upon all persons claiming any rights under the Plan, including Beneficiaries.
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ARTICLE X
MISCELLANEOUS
10.1 | Plan Not a Contract of Employment |
The adoption and maintenance of the Plan does not constitute a contract between the Company and any Participant or to be a consideration for the employment of any person. Nothing herein contained gives any Participant the right to be retained in the employ of the Company or derogates from the right of the Company to discharge any Participant at any time without regard to the effect of such discharge upon his rights as a Participant in the Plan.
10.2 | No Rights Under Plan Except as Set Forth Herein |
Nothing in this Plan, express or implied, is intended, or shall be construed, to confer upon or give to any person, firm, association, or corporation, other than the parties hereto and their successors in interest, any right, remedy, or claim under or by reason of this Plan or any covenant, condition, or stipulation hereof, and all covenants, conditions and stipulations in this Plan, by or on behalf of any party, are for the sole and exclusive benefit of the parties hereto.
10.3 | Rules |
The Company shall have full and complete discretionary authority to construe and interpret provisions of the Plan. The Company may adopt such rules as it deems necessary, desirable or appropriate. All rules and decisions shall be uniformly applied to all Participants in similar circumstances.
10.4 | Other Benefit Plans |
Deferred compensation under this Plan shall not be deemed to be compensation for purposes of determining a Participants benefit or credit under any plan of the Company qualified under Code section 401(a), or any life insurance plan or disability plan established or maintained by the Company except to the extent specifically provided in such other plan.
10.5 | Withholding of Taxes |
To the extent required by applicable law, the Company shall withhold from Compensation or charge against the Participants Account his share of FICA and other applicable taxes attributable to his or her benefits under this Plan. The Company shall also cause taxes to be withheld from an Account distributed hereunder as required by law.
10.6 | Severability |
If any provision of this Agreement is determined to be invalid or illegal, the remaining provisions shall be effective and shall be interpreted as if the invalid or illegal provision did not exist, unless the illegal or invalid provision is of such materiality that its omission defeats the purposes of the parties in entering into this Agreement.
10.7 | Distribution in the Event of Taxation |
If, for any reason, all or any portion of a Participants benefit under this Plan becomes taxable to the Participant pursuant to section 409A of the Code, or is subject to FICA taxes under Sections 3101, 3121(a) or 3121(v)(2) of the Code or withholding taxes under Section 3401 of the Code or other applicable law, then the Company shall distribute to the Participant immediately available funds in an amount equal to the taxes due but not greater than the then balance of the Participants Account. Acceleration of benefits shall also be allowed at any time the Plan fails to meet the requirements of section 409A of the Code and the regulations issued thereunder as permitted under the final regulations issued by the Department of the Treasury and the Internal Revenue Service. However, the payment
14
made based upon the acceleration for the failure to meet the requirements of section 409A of the Code and the regulations issued thereunder may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of section 409A of the Code and the regulations issued thereunder.
10.8 | Compliance with Section 409 of the Code |
The Plan shall be interpreted and construed in accordance with section 409A of the Code and the Treasury regulations and other interpretative guidance issued thereunder.
*********
15
IN WITNESS WHEREOF, West Corporation has caused these presents to be executed by its duly authorized officer this 30th day of October, 2014, but effective as of January 1, 2015.
WEST CORPORATION | ||
By: | /s/ Paul M. Mendlik | |
Title: Chief Financial Officer |
16
Exhibit 10.8
AMENDMENT NUMBER ONE
TO THE
WEST CORPORATION 2013 EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, West Corporation, a Delaware corporation (the Company), maintains the West Corporation Employee Stock Purchase Plan, as amended and restated effective as of September 10, 2013 (the Plan);
WHEREAS, pursuant to Section 19 of the Plan, the Board of Directors of the Company has the authority to amend the Plan; and
WHEREAS, the Board has authorized an amendment of the Plan to allow Plan participants to make separate payroll deductions that apply to specified components of their compensation.
NOW, THEREFORE, BE IT RESOLVED, that the Plan hereby is amended, effective as of October 30, 2014, as follows:
Section 6.1 is hereby amended to add the following sentence following the first sentence of such section:
The Committee may establish procedures, in its sole discretion, which shall apply on a uniform basis to all Participants to the extent required by Section 423 of the Code, to permit Participants to make separate payroll deduction elections that shall apply to specified components of their Compensation.
***
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized agent as of October 30, 2014.
WEST CORPORATION | ||||
By: | /s/ Paul M. Mendlik | |||
Name: | Paul M. Mendlik | |||
Title: | Chief Financial Officer |
2
Exhibit 15.1
November 6, 2014
The Board of Directors and Stockholders of
West Corporation and subsidiaries
Omaha, Nebraska
We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of West Corporation and subsidiaries for the periods ended September 30, 2014, and 2013, as indicated in our report dated November 6, 2014; because we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, is incorporated by reference in Registration Statement No. 333-187452 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
Exhibit 31.01
CERTIFICATION
I, Thomas B. Barker, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of West Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: November 6, 2014 | /s/ Thomas B. Barker | |||||
Thomas B. Barker | ||||||
Chief Executive Officer |
Exhibit 31.02
CERTIFICATION
I, Paul M. Mendlik, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of West Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: November 6, 2014 | /s/ Paul M. Mendlik | |||||
Paul M. Mendlik | ||||||
Chief Financial Officer and Treasurer |
Exhibit 32.01
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of West Corporation (the Company) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Thomas B. Barker, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Thomas B. Barker |
Thomas B. Barker |
Chief Executive Officer |
November 6, 2014 |
Exhibit 32.02
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of West Corporation (the Company) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Paul M. Mendlik, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Paul M. Mendlik |
Paul M. Mendlik |
Chief Financial Officer and Treasurer |
November 6, 2014
Acquisitions - Additional Information (Detail) (USD $)
|
3 Months Ended | 9 Months Ended | 0 Months Ended | 6 Months Ended | 9 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | 9 Months Ended | 0 Months Ended | 1 Months Ended | 9 Months Ended | 9 Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2014
|
Sep. 30, 2013
|
Sep. 30, 2014
|
Sep. 30, 2013
|
Dec. 31, 2013
|
Dec. 31, 2012
|
Apr. 21, 2014
SchoolMessenger [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
Technology [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
Trade Names (Finite-Lived) [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
Noncompetition Agreements [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
Customer Relationships [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
Minimum [Member]
|
Sep. 30, 2014
SchoolMessenger [Member]
Maximum [Member]
|
Jun. 13, 2014
Health Advocate [Member]
|
Sep. 30, 2014
Health Advocate [Member]
|
Sep. 30, 2014
Health Advocate [Member]
|
Sep. 30, 2014
Health Advocate [Member]
Technology [Member]
|
Sep. 30, 2014
Health Advocate [Member]
Trade Names (Finite-Lived) [Member]
|
Sep. 30, 2014
Health Advocate [Member]
Noncompetition Agreements [Member]
|
Sep. 30, 2014
Health Advocate [Member]
Customer Relationships [Member]
|
Sep. 30, 2014
Health Advocate [Member]
Minimum [Member]
Clients
|
Sep. 30, 2014
Health Advocate [Member]
Maximum [Member]
|
Sep. 02, 2014
911 Enable [Member]
|
Sep. 30, 2014
911 Enable [Member]
|
Sep. 30, 2014
911 Enable [Member]
|
Sep. 30, 2014
911 Enable [Member]
Technology [Member]
|
Sep. 30, 2014
911 Enable [Member]
Trade Names (Finite-Lived) [Member]
|
Sep. 30, 2014
911 Enable [Member]
Noncompetition Agreements [Member]
|
Sep. 30, 2014
911 Enable [Member]
Customer Relationships [Member]
|
Sep. 30, 2014
911 Enable [Member]
Minimum [Member]
|
Sep. 30, 2014
911 Enable [Member]
Maximum [Member]
|
|
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||
Date of acquisition | Apr. 21, 2014 | Jun. 13, 2014 | Sep. 02, 2014 | ||||||||||||||||||||||||||||||
Purchase price of acquisition | $ 385,457,000 | $ 13,000 | $ 77,400,000 | $ 265,900,000 | $ 42,200,000 | ||||||||||||||||||||||||||||
Preliminary purchase price allocation, goodwill recorded | 2,044,928,000 | 2,044,928,000 | 1,823,921,000 | 1,816,851,000 | 52,513,000 | 161,964,000 | 20,198,000 | ||||||||||||||||||||||||||
Preliminary purchase price allocation, intangible assets recorded | 40,145,000 | 150,190,000 | 21,685,000 | ||||||||||||||||||||||||||||||
Finite-lived intangible assets | 8,800,000 | 1,700,000 | 1,300,000 | 28,300,000 | 36,400,000 | 30,100,000 | 2,800,000 | 80,900,000 | 4,900,000 | 1,400,000 | 200,000 | 15,200,000 | |||||||||||||||||||||
Useful lives | 3 years | 20 years | 4 years | 20 years | 3 years | 10 years | |||||||||||||||||||||||||||
Number client relationships | 10,000 | ||||||||||||||||||||||||||||||||
Estimated number of Americans served by entity | 40,000,000 | ||||||||||||||||||||||||||||||||
Revenue attributable to acquired entity | 11,800,000 | 26,500,000 | 800,000 | ||||||||||||||||||||||||||||||
Total acquisition costs expensed | $ 1,500,000 | $ 200,000 | $ 3,200,000 | $ 900,000 |
Fair Value Disclosures - Additional Information (Detail) (USD $)
|
Sep. 30, 2014
|
Dec. 31, 2013
|
Sep. 30, 2014
Senior Notes [Member]
|
Dec. 31, 2013
Senior Notes [Member]
|
Sep. 30, 2014
8.625% Senior Note [Member]
|
Dec. 31, 2013
8.625% Senior Note [Member]
|
Sep. 30, 2014
Senior Secured Term Loan Facilities [Member]
|
Dec. 31, 2013
Senior Secured Term Loan Facilities [Member]
|
Sep. 30, 2014
Senior Notes, due 2018 [Member]
|
Jul. 01, 2014
Senior Notes, due 2018 [Member]
|
Sep. 30, 2014
Senior Notes, due 2019 [Member]
|
Jul. 01, 2014
Senior Notes, due 2019 [Member]
|
---|---|---|---|---|---|---|---|---|---|---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||||
Long-term debt, fair value | $ 1,394,100,000 | $ 701,200,000 | $ 542,500,000 | $ 2,118,500,000 | $ 2,385,000,000 | |||||||
Long term debt | $ 3,758,802,000 | $ 3,525,347,000 | $ 1,450,000,000 | $ 650,000,000 | $ 500,000,000 | $ 2,124,600,000 | $ 2,375,300,000 | $ 229,200,000 | $ 270,800,000 | $ 200,000,000 | ||
Interest rate | 8.625% | 5.375% | 8.625% | 7.875% | 7.875% |
Long-Term Obligations - Summary of Long-Term Obligations (Detail) (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2014
|
Dec. 31, 2013
|
---|---|---|
Debt Instrument [Line Items] | ||
Long term debt | $ 3,758,802 | $ 3,525,347 |
Less: current maturities | (3,121) | (11,877) |
Long-term obligations | 3,755,681 | 3,513,470 |
Long term debt | 3,758,802 | 3,525,347 |
Senior Secured Term Loan Facility, due 2016 [Member]
|
||
Debt Instrument [Line Items] | ||
Long term debt | 311,317 | 312,097 |
Long term debt | 311,317 | 312,097 |
Senior Secured Term Loan Facility, due 2018 [Member]
|
||
Debt Instrument [Line Items] | ||
Long term debt | 1,813,250 | 2,063,250 |
Long term debt | 1,813,250 | 2,063,250 |
Accounts Receivable Securitization, due 2018 [Member]
|
||
Debt Instrument [Line Items] | ||
Long term debt | 184,235 | |
Long term debt | 184,235 | |
Senior Notes, paid in 2014 [Member]
|
||
Debt Instrument [Line Items] | ||
Long term debt | 500,000 | |
Long term debt | 500,000 | |
Senior Notes, due 2019 [Member]
|
||
Debt Instrument [Line Items] | ||
Long term debt | 450,000 | 650,000 |
Long term debt | 450,000 | 650,000 |
Senior Notes Due 2022 [Member]
|
||
Debt Instrument [Line Items] | ||
Long term debt | 1,000,000 | |
Long term debt | $ 1,000,000 |
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