APPENDIX A

WEST CORPORATION

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

AMENDED AND RESTATED CHARTER

 

 

 

I.

Purpose

      The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of West Corporation (the “Corporation”) is to oversee the accounting and financial reporting processes of the Corporation and the audits of the financial statements of the Corporation. The Committee’s primary focus will be to assist the Board in fulfilling its oversight responsibilities by reviewing: when appropriate, the financial reports and other financial information of the Corporation; the Corporation’s systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; and the Corporation’s auditing, accounting and financial reporting processes generally. Consistent with this function, the Committee should encourage continuous improvement of, and should foster adherence to, the Corporation’s policies, procedures and practices at all levels. The Committee’s primary duties and responsibilities are to:

 

 

 

 

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Appoint, compensate, retain and oversee the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and review and appraise the audit efforts of the Corporation’s independent accountants;

 

 

 

 

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Establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters;

 

 

 

 

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Engage independent counsel and other advisers, as necessary;

 

 

 

 

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Determine funding of various services provided by accountants or advisers retained by the Committee;

 

 

 

 

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Serve as an independent and objective party to oversee the Corporation’s internal controls and procedures system; and

 

 

 

 

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Provide an open avenue of communication among the independent accountants, financial and senior management and the Board.

      The Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.

 

 

 

II.

Composition

      A. The Committee shall be comprised of three or more members of the Board each of whom must:

 

 

 

      1. be independent, as defined in NASDAQ’s listing requirements and meet the criteria for independence set forth in the Securities and Exchange Act of 1934;

 

 

 

      2. not have participated in the preparation of the financial statements of the Corporation or any current subsidiary of the Corporation at any time during the past three years; and

 

 

 

      3. be able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement.

      In addition, at least one member of the Committee must be an “audit committee financial expert” as defined in the Securities and Exchange Commission (“SEC”) regulations and at least one member must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or an outside consultant.

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B. 

Independence

      Each Committee member shall be an independent director in accordance with regulations of the SEC’s and the NASDAQ’s listing standards, each as applicable and each as may be modified from time to time. An “independent director” means a person other than an officer or employee of the Corporation or its subsidiaries or any other individual having a relationship, which, in the opinion of the Board, would interfere with the exercise of his or her independent judgment in carrying out the responsibilities of a director. A director will not be considered “independent” if, among other things, he or she:

 

 

 

      1. has accepted, directly or indirectly, any consulting, advisory or other compensatory fee from the Corporation or any subsidiary thereof, other than in his or her capacity as a member of the Committee, the Board or any other Board committee;

 

 

 

      2. is an affiliated person of the Corporation or any subsidiary thereof as defined by the SEC or the NASDAQ’s listing standards as may be applicable and as may be modified from time to time;

 

 

 

      3. is, or at any time during the past three years was, employed by the Corporation or by any parent or subsidiary of the Corporation;

 

 

 

      4. accepted or has a Family Member who accepted any payments from the Corporation or any parent or subsidiary of the Corporation in excess of $60,000 during the current or any of the past three fiscal years other than:

 

 

 

 

      (a) compensation for Board or committee service;

 

 

 

      (b) payments arising solely from investments in the Corporation’s securities;

 

 

 

      (c) compensation paid to a Family Member who is a non-executive employee of the Corporation or a parent or subsidiary of the Corporation; or

 

 

 

      (d) benefits under a tax-qualified retirement plan, or non-discretionary compensation;

 

 

 

 

      5. is a Family Member of an individual who is, or at any time during the past three years was, employed by the Corporation or by any parent or subsidiary of the Corporation as an executive officer;

 

 

 

      6. is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Corporation made, or from which the Corporation received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, other than:

 

 

 

 

      (a) payments arising solely from investments in the Corporation’s securities; or

 

 

 

      (b) payments under non-discretionary charitable contribution matching programs;

 

 

 

 

      7. is, or has a Family Member who is, employed as an executive officer of another entity where at any time during the past three years, any of the executive officers of the Corporation serve on the compensation committee of such other entity; or

 

 

 

      8. is, or has a Family Member who is, a current partner of the Corporation’s outside auditor, or was a partner or employee of the Corporation’s outside auditor who worked on the Corporation’s audit at any time during any of the past three years.

      C. Cure Periods

 

 

 

      1. If a Committee member ceases to be independent for reasons outside the member’s reasonable control, the member may remain on the Committee until the earlier of the Corporation’s next annual shareholders’ meeting or one year from the occurrence of the event that caused the failure to be independent. The Corporation must provide notice to Nasdaq immediately upon learning of the event or circumstance that caused the non-compliance if the Corporation relies on this provision.

 

 

 

      2. If the number of members on the Committee decreases to less than three due to one vacancy on the Committee, and the cure period in 1 above is not otherwise being relied upon for another member, the

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Corporation will have until the earlier of the Corporation’s next annual shareholders’ meeting or one year from the occurrence of the vacancy to comply with the requirement that there be at least three members on the Committee. The Corporation must provide notice to Nasdaq immediately upon learning of the event or circumstance that caused the non-compliance if the Corporation relies on this provision.

      D. The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair of the Committee is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

 

 

 

III.

Meetings

      The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The presence in person or by telephone of a majority of the Committee’s members shall constitute a quorum for any meeting of the Committee. All actions of the Committee will require the vote of a majority of the members present at a meeting of the Committee at which a quorum is present. As part of its job to foster open communication, the Committee should meet at least annually with the executive management of each reporting segment of the Corporation in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. Each quarter, the Committee or a financial expert of the Committee should meet with a representative of the independent accountants the Committee has retained to review the Corporation’s financials consistent with V.A.3. below.

      The Committee shall maintain and submit to the Board copies of minutes of each meeting of the Committee, and each written consent to action taken without a meeting, reflecting the actions so authorized or taken by the Committee since the preceding meeting of the Board. A copy of the minutes of each meeting shall be placed in the Audit Committee’s record book.

 

 

 

IV.

Charter Amendments

      Any member of the Committee may submit proposed Charter amendments to the Board. The Board shall circulate any proposed charter amendment(s) to members of the Committee immediately upon receipt. By a majority vote, the Board may approve the amendments to the Charter.

 

 

 

V.

Responsibilities, Duties and Authority

      To fulfill its responsibilities and duties the Committee shall, and has the authority to:

      A. Documents/Reports Review

 

 

 

      1. Review, assess the adequacy of and update as needed this Charter periodically, but at least annually, as conditions dictate.

 

 

 

      2. Review the Corporation’s annual audited and quarterly unaudited financial statements and any reports or other financial information when appropriate, including any certification, report, opinion, or review rendered by the independent accountants.

 

 

 

      3. Review with financial management and the independent accountants any periodic filing prior to its filing or prior to the release of earnings. A financial expert of the Committee may represent the entire Committee for purposes of this review.

 

 

 

      4. No less than once per year, meet with the principal executive officer of each reporting segment, along with the Vice President of Accounting responsible for preparing that reporting segment’s periodic financial statements.

      B. Independent Accountants

 

 

 

      1. Make the selection of the independent accountants, considering independence and effectiveness of the independent accountants. On an annual basis, the Committee should review and discuss with the accountants all significant relationships the independent accountants have with the Corporation to assess

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the accountants’ independence, and more frequently, if appropriate, to discuss any disclosed relationships or services that may impact the objectivity and independence of the auditor. The Committee must take, or recommend that the full Board take, appropriate action to oversee the independence of the outside auditor. The Committee should also ensure its receipt from the independent accountants of a formal written statement delineating all relationships between the auditor and the Corporation, consistent with Independence Standards Board Standard 1.

 

 

 

      2. Be responsible for the compensation, retention and oversight of the work of the registered public accounting firm engaged (including resolution of disagreements between management and the independent accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation, and such accounting firm must report directly to the Committee.

 

 

 

      3. Review the performance of the independent accountants and recommend or approve any proposed termination, replacement or other discharge of the independent accountants when circumstances warrant.

 

 

 

      4. Periodically consult with the independent accountants out of the presence of management about internal controls and procedures and the completeness and accuracy of the Corporation’s financial statements.

 

 

 

      5. Review and pre-approve, in accordance with Rule 2-01(c)(7) of Regulation S-X, all audit and permitted non-audit services to be provided by the Corporation’s independent accountants, including, without limitation the proposed fee structure of such proposals.

 

 

 

      6. Review with the independent accountants for the Corporation information that the independent accountants are required to report to the Committee under the Sarbanes-Oxley Act of 2002 including:

 

 

 

 

      (a) all critical accounting policies and practices to be used;

 

 

 

      (b) all alternative treatments within Generally Accepted Accounting Principles (“GAAP”) for policies and practices related to material items that have been discussed with management of the Corporation, including the ramifications of using the alternative treatments and the treatment preferred by the independent accountants; and

 

 

 

      (c) other material written communications between the independent accountants and management such as any management letter or schedule of unadjusted differences.

 

 

 

 

      7. Ensure that the lead (or concurring) audit partner serves in that capacity with respect to the Corporation for no more than five consecutive years. Ensure that any partner other than the lead or concurring partner serves no more than seven years at the partner level.

      C. Financial Reporting Processes

 

 

 

      1. Oversee the accounting and financial reporting processes of the Corporation and the audits of the financial statements of the Corporation.

 

 

 

      2. In consultation with the independent accountants, review the integrity of the Corporation’s financial reporting processes, both internal and external.

 

 

 

      3. Consider and assess the independent accountants’ judgments about the quality and appropriateness of the Corporation’s accounting principles as applied in its financial reporting.

 

 

 

      4. Consider and approve, if appropriate, changes to the Corporation’s auditing and accounting principles and practices as suggested by the independent accountants and management.

 

 

 

      5. Review with management and the independent accountants any matters required to be discussed by Statement on Auditing Standards No. 61, as amended, related to the conduct of the audit.

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      D. Process Improvement

 

 

 

      1. Establish regular and separate systems of reporting to the Committee by each of management and independent accountants regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.

 

 

 

      2. Following completion of the annual audit, review separately with each of management and the independent accountants any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

 

 

 

      3. Review any significant disagreement among management and the independent accountants in connection with the preparation of the financial statements.

 

 

 

      4. Review with the independent accountants and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.)

      E. Complaints

 

 

 

      1. Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters.

 

 

 

      2. Establish procedures for the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.

      F. Ethical and Legal Compliance

 

 

 

      1. Review and update periodically the Corporation’s Code of Ethical Conduct and ensure that management has established a system to enforce this Code.

 

 

 

      2. Review management’s monitoring of the Corporation’s compliance with its Code of Ethical Conduct and ensure that management has the proper review system in place to ensure that Corporation’s financial statements, reports and other financial information disseminated to governmental organizations, and the public satisfy legal requirements.

 

 

 

      3. Review, with the Corporation’s counsel, legal compliance matters including corporate securities trading policies.

 

 

 

      4. Review, with the Corporation’s counsel, any legal matter that could have a significant impact on the Corporation’s financial statements.

 

 

 

      5. Perform any other activities consistent with this Charter, the Corporation’s By-laws and governing law, as the Committee or the Board deems necessary or appropriate.

 

 

 

      6. Approve all related party transactions entered into by the Corporation with any of the Corporation’s directors or executive officers.

      G. Engage Advisors

 

 

 

      1. Engage independent counsel and other advisers, as the Committee deems necessary to carry out its duties.

 

 

 

      2. Annually, the Chief Financial Officer of the Corporation will submit recommendations to the Committee regarding the selection of independent accountants, audit fees and additional services to be requested, but the Committee shall not be bound to follow such recommendations.

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      H. Funding

 

 

 

      1. Determine the appropriate funding needed by the Committee for payment of:

 

 

 

 

      (a) Compensation to any registered public accounting firm engaged for the purposes of preparing or issuing an audit report or performing other audit, review or attest services for the Corporation;

 

 

 

      (b) Compensation to any independent counsel and other advisers employed by the Committee as it deems necessary to carry out its duties; and

 

 

 

      (c) Ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

      I. Other

 

 

 

      1. Review, evaluate and reassess the performance of the Committee annually and discuss such annual performance evaluation with the Board.

 

 

 

      2. Do every other act incidental to, arising out of or in connection with, the authority granted to the Committee hereby or the carrying out of the Committee’s duties and responsibilities hereunder.

VI.     Limitation of Committee’s Role

      While the Committee has the authority, powers, and responsibilities set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Corporation’s financial statements and disclosures are complete and accurate and are in accordance with GAAP and applicable legal, accounting, and other requirements. These are the responsibilities of the Corporation’s management and the independent accountants.

February 2004