SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2011

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

12.  SUBSEQUENT EVENTS

On February 2, 2011, certain former employees of StarTek USA, Inc., filed a putative collective action under the Fair Labor Standards Act, alleging that they were owed overtime compensation for alleged work performed before and after regular shifts.  The plaintiffs sought overtime compensation, liquidated damages, and other relief for themselves as well as for all other customer service representatives and technical service representatives located throughout the United States who performed alleged uncompensated overtime and who were employed by us three years before the commencement of the civil action.  At the time that the case was filed, we believed that there was no merit to the case and vigorously defended the suit.  Following conditional class certification, plaintiffs mailed notice to approximately 22,000 potential plaintiffs; however, only 1,759 individuals timely opted-in to the class.  This opt-in rate was substantially lower than the parties anticipated.  Following a second mediation session on October 27, 2011, we agreed to settle the case for $550, including liquidated damages, attorney’s fees, and costs of settlement administration.  As a result of the outcome of this litigation, we recorded $300 of additional litigation reserve ($550 in total) for this matter.

On November 2, 2011, we reached an agreement with UMB Bank to amend our line of credit agreement, whereby the secured line of credit will remain at $7.5 million, however, certain provisions will be amended. The amount available under the line will be subject to adjustment for any proceeds received on a sale of our assets classified as held for sale on our condensed consolidated Balance Sheets but in no event will it fall below $5 million.  In addition, our financial covenant to maintain a minimum tangible net worth will be decreased from at least $83 million to at least $75 million, and our financial covenant to maintain unencumbered liquid assets will be decreased from at least $10 million to at least $6.5 million as measured on the last day of each fiscal quarter.  The definition of our tangible net worth requirement will also be amended to exclude in the calculation any gains or losses associated with a sale of our assets classified as held for sale on our Condensed Consolidated Balance Sheets.  In addition, borrowings will bear interest, at our option at the time of the borrowing, at the thirty, sixty or ninety day LIBOR index, plus 3.75% and the interest rate shall never be less than 4.50% per annum.  This is an increase from the previous agreement which called for borrowings to bear interest, at our option at the time of the borrowing, at the thirty, sixty or ninety day LIBOR index, plus 3.25% and the interest rate was never to be less than 4.00% per annum. We renegotiated this agreement in response to our non-compliance with the tangible net worth financial covenant as of September 30, 2011.  We expect to finalize this amendment in November 2011 and it will be effective through August 1, 2012.