STARTEK INC, S-1/A, 1997-03-26

STARTEK INC
S-1/A, 1997-03-26
BUSINESS SERVICES, NEC

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1997

REGISTRATION NO. 333-20633
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 3

TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

STARTEK, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7389 84-1370538
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or Classification Code Number)
organization)
</TABLE>

111 HAVANA STREET, DENVER, COLORADO 80010
(303) 361-6000

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)

MICHAEL W. MORGAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
STARTEK, INC.
111 HAVANA STREET
DENVER, COLORADO 80010
(303) 361-6000

(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
BLAIR L. LOCKWOOD, ESQ. PETER P. WALLACE, ESQ.
KAREN L. BARSCH, ESQ. MORGAN, LEWIS & BOCKIUS LLP
OTTEN, JOHNSON, ROBINSON, NEFF & 801 South Grand Avenue
RAGONETTI, P.C. Suite 2200
950 17th Street, Suite 1600 Los Angeles, California 90017
Denver, Colorado 80202 (213) 612-2500
(303) 825-8400
</TABLE>

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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<PAGE>
SUBJECT TO COMPLETION, DATED , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS

, 1997

3,666,667 SHARES

STARTEK, INC.

COMMON STOCK

Of the 3,666,667 shares of common stock, $.01 par value per share (the
"Common Stock"), offered hereby, 3,000,000 shares are being sold by StarTek,
Inc. ("StarTek" or the "Company") and 666,667 shares are being sold by the
Selling Stockholders named herein. The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders." Prior to this offering, there has been no public market
for the Common Stock. It is currently estimated that the initial public offering
price will be between $14.00 and $16.00 per share. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price. The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "SRT," pending notification of issuance.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
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</TABLE>

(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
SEVERAL UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."

(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $500,000. THE
COMPANY HAS AGREED TO PAY THE EXPENSES OF THE SELLING STOCKHOLDERS, OTHER
THAN UNDERWRITING DISCOUNTS AND COMMISSIONS.

(3) THE SELLING STOCKHOLDERS HAVE GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO
PURCHASE UP TO 550,000 ADDITIONAL SHARES OF COMMON STOCK SOLELY TO COVER
OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE TOTAL
PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS, PROCEEDS TO THE
COMPANY AND PROCEEDS TO THE SELLING STOCKHOLDERS WILL BE $ , $ ,
$ AND $ , RESPECTIVELY. SEE "UNDERWRITING."

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters, subject to
various prior conditions, including their right to reject any order in whole or
in part. It is expected that delivery of share certificates will be made in New
York, New York, on or about April , 1997.

<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE MORGAN STANLEY & CO.
SECURITIES CORPORATION INCORPORATED
</TABLE>
<PAGE>
[StarTek Logo]

Global Integrated Outsourced Solutions

<TABLE>
<S> <C>
Technical Support and Inbound Product
Customer Care
Teleservices Orders Teleservices

[Circle of Arrows]

Value Added
Process Management

Product Distribution Selection and
and Order Fulfillment Management of Suppliers

Management of Product
Assembly and Packaging
</TABLE>

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND COMBINED FINANCIAL STATEMENTS
AND NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO THE OFFERING
RELATED TRANSACTIONS (DEFINED AND DESCRIBED BELOW), (II) GIVES EFFECT TO A
340.8888 FOR ONE STOCK SPLIT OF THE COMMON STOCK TO BE EFFECTED BY A STOCK
DIVIDEND IMMEDIATELY PRIOR TO THE CLOSING OF THIS OFFERING AND (III) ASSUMES AN
INITIAL PUBLIC OFFERING PRICE OF $15.00 PER SHARE OF COMMON STOCK, THE MIDPOINT
OF THE OFFERING PRICE RANGE SET FORTH ON THE COVER OF THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, REFERENCES TO "STARTEK" AND THE "COMPANY" REFER TO STARTEK,
INC. AND ITS WHOLLY-OWNED SUBSIDIARIES, STARPAK, INC. AND STARPAK INTERNATIONAL,
LTD., COLLECTIVELY, OR, FOR PERIODS PRIOR TO JANUARY 1997, REFER TO STARPAK,
INC. AND STARPAK INTERNATIONAL, LTD., COLLECTIVELY. SEE "OFFERING RELATED
TRANSACTIONS."

THE COMPANY

StarTek is a leading international provider of integrated, value-added
outsourced services primarily for Fortune 500 companies in targeted industries.
The Company's integrated outsourced services encompass a wide spectrum of
process management services and customer-initiated ("inbound") teleservices
throughout a product's life cycle, including product order teleservices,
supplier management, product assembly and packaging, product distribution,
product order fulfillment, and customer care and technical support teleservices.
By focusing on these services as its core business, StarTek allows its clients
to focus on their primary businesses, reduce overhead, replace fixed costs with
variable costs and reduce working capital needs.

The Company has continuously expanded its business and facilities to offer
additional services on an outsourced basis in response to the growing needs of
its clients and to capitalize on market opportunities both domestically and
internationally. StarTek operates from its Colorado facilities located in Denver
and Greeley and from a facility located in Hartlepool, England. The Company also
operates through a subcontract relationship in Singapore. For the year ended
December 31, 1996, the Company's revenues increased approximately 72.5% to $71.6
million from $41.5 million for the year ended December 31, 1995. Pro forma net
income increased approximately 144.3% to $3.9 million from $1.6 million during
the same period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

StarTek's goal is to grow profitably by focusing on providing high-quality
integrated, value-added outsourced services. StarTek has a strategic partnership
philosophy, through which the Company assesses each of its client's needs and,
together with the client, develops and implements customized outsourcing
solutions. Management believes that its entrepreneurial culture, long-term
relationships with clients and suppliers, efficient operations, dedication to
quality and use of advanced technology and management techniques provide StarTek
a competitive advantage in attracting and retaining clients that outsource non-
core operations. Three of the Company's top four clients have utilized its
outsourced services for more than five years and the fourth client initiated
services with the Company in April 1996.

StarTek has focused primarily on the computer software, computer hardware,
electronics, telecommunications and other technology-related industries because
of their rapid growth, complex and evolving product offerings and large customer
bases, which require frequent, often sophisticated, customer interaction.
Management believes that there are substantial opportunities to cross-sell
StarTek's wide spectrum of outsourced services to its existing base of
approximately 100 clients, which includes Broderbund Software, Inc., Canon Inc.,
Electronic Arts, Inc., Federal Express Corporation, Hewlett-Packard Company,
Microsoft Corporation, Polaroid Corporation, Sony Electronics, Inc., The 3DO
Company, and Viacom International, Inc. The Company intends to capitalize on the
increasing trend toward outsourcing by focusing on potential clients in
additional targeted industries, including health care, financial services,
transportation services and consumer products, which could benefit from the
Company's expertise in developing and delivering integrated, cost-effective
outsourced services.

2
<PAGE>

STARTEK'S INTEGRATED SERVICES

The Company's interaction with a client's customers may begin with an
inbound call or message via the Internet requesting information or placing an
order for the client's product. A StarTek service representative takes the
order, and if the Company manages the client's inventory, the Company packs and
ships the order. If the Company does not manage the client's inventory, the
Company transmits the customer's request directly to the client. In the event
the Company manages the client's inventory, the Company may receive finished
goods directly from a client or the Company may manage the production process on
an outsourced basis, following product specifications provided by the client. In
the latter case, the Company selects and contracts with the necessary suppliers
and performs all tasks necessary to assemble and package the finished product,
which may be held by the Company pending receipt of customer orders or shipped
in bulk to distributors or retail outlets.

The Company's clients typically provide their customers with telephone
numbers for product questions and technical support. Calls are routed to StarTek
customer care or technical support service representatives who have been trained
to support specific products. A call may also lead to an order for another
product or service offered by the client, in which case the Company takes the
order and the cycle begins again. StarTek's clients may utilize one or more of
the Company's outsourced services.

BUSINESS STRATEGY

StarTek's strategic objective is to increase revenues and earnings by
maintaining and enhancing its position as a leading international provider of
integrated, value-added outsourced services. To reach this objective, the
Company intends to:

PROVIDE INTEGRATED OUTSOURCED SERVICES. StarTek seeks to provide integrated
outsourced services which enable its clients to provide their customers with
high-quality services at lower cost than through a client's own in-house
operations. The Company believes that its ability to tailor operations,
materials and employee resources objectively and to provide integrated
value-added outsourced services on a cost-effective basis will allow the Company
to become an integral part of its clients' businesses.

DEVELOP STRATEGIC PARTNERSHIPS AND LONG-TERM RELATIONSHIPS. StarTek seeks
to develop long-term client relationships, primarily with Fortune 500 companies
in targeted industries. The Company invests significant resources to establish
strategic partnership relationships and to understand each client's processes,
culture, decision parameters and goals, so as to develop and implement
customized solutions. The Company believes that this solution-oriented,
value-added integrated approach to addressing its clients' needs distinguishes
StarTek from its competitors and plays a key role in the Company's ability to
attract and retain clients on a long-term basis.

MAINTAIN LOW-COST POSITION THROUGH MODERN PROCESS MANAGEMENT. StarTek
strives to establish a competitive advantage by frequently redefining its
operational processes to reduce costs and improve quality. StarTek's continuous
improvement philosophy and modern process management techniques enable the
Company to reduce waste and increase efficiency in the following areas: (i)
controlling overproduction; (ii) minimizing waiting time due to inefficient work
sequences; (iii) reducing inessential handling of materials; (iv) eliminating
nonessential movement and processing; (v) implementing fail-safe processes; (vi)
improving inventory management; and (vii) preventing defects.

EMPHASIZE QUALITY. StarTek strives to achieve the highest quality standards
in the industry. To this end, the Company has received ISO 9002 certification,
an international standard for quality assurance and consistency in operating
procedures, for all of its domestic facilities and services, and expects to
receive ISO 9002 certification for its United Kingdom facility in mid-1997.
Certain of the Company's existing clients require evidence of ISO 9002
certification, and the Company anticipates that many potential clients may
require ISO 9002 certification prior to selecting an outsourcing provider.

3
<PAGE>
CAPITALIZE ON SOPHISTICATED TECHNOLOGY. The Company believes it has
established a competitive advantage by capitalizing on sophisticated technology
and proprietary software, including automatic call distributors, inventory
management software, transportation management software, call tracking systems
and telephone-computer integration software. These capabilities enable StarTek
to improve efficiency, serve as a transparent extension of its clients, receive
telephone calls and data directly from its clients' systems, and report detailed
information concerning the status and results of the Company's services and
interaction with clients on a daily basis.

GROWTH STRATEGY

The Company's growth strategy is designed to capitalize on the increasing
demand for outsourced services and improve and expand StarTek's position as an
international provider of integrated, value-added outsourced services. This
strategy includes the following key elements:

INCREASE CAPACITY. Management believes that as a provider of outsourced
services it must be ready to serve its clients in periods of peak demand for its
clients' products or services. Accordingly, the Company intends to continue to
increase product handling and teleservice workstation capacity to meet
anticipated demand for the Company's outsourced services. During 1996, the
Company increased its teleservice workstations by 54.6%, to 558 from 361. In
addition, the Company reengineered and expanded its primary product handling
facility to increase its daily capacity by approximately 200%, to 180,000 units
from 60,000 units for certain types of products.

CROSS-SELL SERVICES TO EXISTING CLIENTS. Management believes there are
substantial opportunities to cross-sell its wide spectrum of outsourced services
to other divisions or operations within its existing clients' organizations.
StarTek capitalizes on its relationships and comprehensive understanding of its
clients' businesses to identify additional divisions and areas where the Company
could provide its services. For example, the Company's two longest current
client relationships, which began in 1987 and 1988 utilizing only one service
each, today utilize substantially all of the Company's outsourced services.
Management further believes that its ability to provide integrated solutions
helps the Company to create strategic partnership relationships and gives the
Company a competitive advantage to be selected as the service provider of
choice.

EXPAND CLIENT BASE. The Company intends to capitalize on its low-cost
position and extensive offering of services to penetrate further the industries
which the Company currently serves and to seek clients in other industries.
Management believes that there are several additional industries, including
health care, financial services, transportation services and consumer products,
which provide significant market opportunities to the Company. To facilitate the
Company's anticipated growth, the Company increased its sales force to 12
full-time professionals as of the date of this offering, from four at the end of
1996.

INCREASE INTERNATIONAL OPERATIONS. The Company currently conducts business
in North America, Europe and Asia. Management believes that many of the trends
leading to the growth of outsourced services in the United States are occurring
in international markets as well. Management also believes that many companies,
including several of its existing multinational clients, are seeking outsourced
services on an international basis. To capitalize on these international
opportunities, the Company intends to expand its international operations.

DEVELOP NEW SERVICES. Management believes that the trend toward outsourcing
and rapid technological advances will result in new products and types of
customer interactions which will create opportunities for the Company to provide
additional outsourced services. StarTek intends to capitalize upon its strategic
long-term relationships to provide new outsourced services to its clients as
opportunities arise.

4
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ACQUIRE COMPLEMENTARY COMPANIES AND EXPAND STRATEGIC ALLIANCES. StarTek
intends to evaluate the acquisition of complementary companies that could extend
its presence into new geographic markets or industries, expand its client base,
add new product or service applications and/or provide operating synergies.
Management believes that there could be many domestic and international
acquisition and strategic alliance opportunities as companies consider selling
their existing in-house operations and as smaller companies seek growth capital
and economies of scale to remain competitive.

The Company is a Delaware corporation with its executive offices at 111
Havana Street, Denver, Colorado 80010, and its telephone number is (303)
361-6000.

THE OFFERING

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<S> <C>
Common Stock Offered:
By the Company.................. 3,000,000 shares
By Selling Stockholders(a)...... 666,667 shares
Total......................... 3,666,667 shares
Common Stock Outstanding after
this Offering(b)................ 14,460,000 shares
Use of Proceeds................... The estimated net proceeds to the Company of $41.4
million from this offering will be used to repay
substantially all outstanding indebtedness of the
Company (including notes payable to the Principal
Stockholders), related prepayment premiums, and for
working capital and other general corporate purposes,
including capital expenditures to increase its capacity
and for possible future acquisitions. See "Use of
Proceeds."
Proposed New York Stock Exchange
Symbol.......................... SRT
</TABLE>

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(a) Assumes no exercise of the over-allotment option to purchase up to 550,000
additional shares granted by the Selling Stockholders to the Underwriters.
See "Principal and Selling Stockholders" and "Underwriting."

(b) Excludes 985,000 shares and 90,000 shares reserved for future issuance under
the Company's Option Plan and Director Option Plan, respectively. See
"Management--Compensation of Directors" and "Management--Stock Option Plan."

5
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SUMMARY COMBINED FINANCIAL DATA

The following summary historical and pro forma combined financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Combined Financial
Statements and notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
YEAR ENDED DECEMBER ------------------------------------------------------------
JUNE 30, 31, PRO FORMA
1992 1992 1993 1994 1995 1996 1996(A)
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.................... $16,791 $11,880 $ 23,044 $ 26,341 $ 41,509 $ 71,584 $71,584
Gross profit................ 3,518 2,101 5,005 4,986 8,279 14,346 14,346
Management fee expense...... -- 400 1,702 612 2,600 6,172 --
Operating profit (loss)..... 1,705 432 (176) (115) 338 410 6,582
Income (loss) before income
taxes..................... 1,618 424 (369) (331) (58) 38 6,210
Net income (loss)........... 1,031 482 (369) (331)(b) (58)(b) (74) 3,894
Net income per share(c)..... $0.33
Shares outstanding(c)....... 11,925

SELECTED OPERATING DATA:
Capital expenditures........ $136 $153 $1,239 $670 $2,105 $1,333 $1,333
Depreciation and
amortization.............. 149 79 456 588 873 1,438 1,438
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-----------------------------------------
ACTUAL PRO FORMA(D) AS ADJUSTED(E)
--------- ------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).............................................. $ 2,896 $ (3,098) $ 35,592
Total assets........................................................... 22,979 24,125 51,419
Total debt............................................................. 6,475 14,594 588
Total stockholders' equity............................................. 7,103 130 41,430
</TABLE>

- ------------------------------

(a) The Company was a C corporation for federal and state income tax purposes
through June 30, 1992. From and after July 1, 1992, the Company has been an
S corporation and, accordingly, has not been subject to federal or state
income taxes. Pro forma net income (i) reflects the elimination of
management fee expense and (ii) includes a provision for federal, state and
foreign income taxes at an effective rate of 37.3%. See "Offering Related
Transactions."

(b) After the elimination of management fee expense of $612 in 1994 and $2,600
in 1995 and including a provision for federal, state and foreign income
taxes, at an effective rate of 37.3% for both years, of $105 for 1994 and
$948 for 1995, pro forma net income was $176 and $1,594 in 1994 and 1995,
respectively.

(d) The pro forma combined balance sheet at December 31, 1996 reflects net
borrowing of $1,146 under a mortgage note executed in January 1997 and, as
notes payable to the Principal Stockholders, amounts relating to accumulated
retained earnings and additional paid-in capital without reflecting any
proceeds from the sale by the Company of 3,000,000 shares of Common Stock.

(e) Gives effect to the sale by the Company of 3,000,000 shares of Common Stock
in this offering and the application of the estimated net proceeds
therefrom, including repayment of indebtedness of the Company. See "Use of
Proceeds" and "Capitalization."

6
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RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING SHARES OF COMMON STOCK.

RELIANCE ON PRINCIPAL CLIENT RELATIONSHIPS

A substantial portion of the Company's revenue is generated from relatively
few clients and the loss of a significant client or clients could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company's two largest clients in 1996 were
Hewlett-Packard Company ("Hewlett Packard") and Microsoft Corporation
("Microsoft"). The Company provides various outsourced services to multiple
divisions of Hewlett Packard, which the Company considers to be separate clients
based upon the fact that each division acts through a relatively autonomous
decision maker. In the aggregate, however, Hewlett Packard's various divisions
accounted for approximately 38.4% of the Company's total revenues during 1996.
The Company began its outsourcing relationship with Hewlett Packard in 1987.
Microsoft, which began its outsourcing relationship with StarTek in April 1996,
accounted for approximately 33.4% of the Company's total revenues during 1996.
There can be no assurance that the Company will be able to retain its
significant clients or that, if it were to lose one or more of its significant
clients, it would be able to replace such clients with clients that generate a
comparable amount of revenues. See "Business--Clients" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

VARIABILITY OF QUARTERLY OPERATING RESULTS

The Company's business has been and is expected to be significantly slower
in the first, second and third quarters of each year due to the timing of its
client's marketing programs and the introduction of new products, which are
typically geared toward the Christmas holiday season. Additionally, the Company
has experienced, and expects to experience in the future, quarterly variations
in revenues as a result of a variety of factors, many of which are outside the
Company's control, including: (i) the timing of new projects; (ii) the
expiration or termination of existing projects; (iii) the timing of increased
expenses incurred to obtain and support new business; (iv) the seasonal pattern
of certain of the businesses served by the Company; and (v) the cyclical nature
of certain clients' businesses. In 1996, the percentages of the Company's
revenues generated from the first through the fourth quarter were 21.3%, 19.7%,
21.6% and 37.4%, respectively. If the Company's revenues are below management's
expectations in any given quarter, StarTek's operating results could be
materially adversely affected for that quarter. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results."

DIFFICULTIES OF MANAGING RAPID GROWTH

The Company has experienced rapid growth over the past several years and
anticipates continued future growth. Continued growth depends on a number of
factors, including the Company's ability to (i) initiate, develop and maintain
new and existing client relationships and expand its marketing operations; (ii)
recruit, motivate and retain qualified management and other personnel; (iii)
rapidly expand the capacity of the Company's existing facilities or identify,
acquire or lease suitable new facilities on acceptable terms, and complete
build-outs of such facilities in a timely and economic fashion; (iv) maintain
the high quality of the services that StarTek provides to its clients; and (v)
maintain relationships with high-quality and reliable suppliers. The Company's
continued rapid growth can be expected to place a significant strain on the
Company's management, operations, employees and resources. There can be no
assurance that the Company will be able to maintain or accelerate its current
growth, effectively manage its expanding operations or achieve planned growth on
a timely or profitable basis. If the Company is unable to manage growth
effectively, its business, results of operations and financial condition could
be materially adversely affected. See "Business--Growth Strategy."

7
<PAGE>
DEPENDENCE ON KEY PERSONNEL

The Company's success to date has depended in large part on the skills and
efforts of A. Emmet Stephenson, Jr., the Company's co-founder and Chairman of
the Board, and of Michael W. Morgan, the Company's co-founder, President and
Chief Executive Officer. Although A. Emmet Stephenson, Jr. and Michael W. Morgan
will beneficially own approximately 24.63% and 7.34% of the Common Stock of the
Company (23.52% and 6.58% if the Underwriters' over-allotment option is fully
exercised) after this offering, neither has entered into an employment agreement
with the Company and there can be no assurance that the Company can retain the
services of these individuals. The loss of either of Messrs. Stephenson or
Morgan, or the Company's inability to hire or retain other qualified officers or
key employees, could have a material adverse effect on the Company's business,
results of operations, growth prospects and financial condition. See
"Management."

DEPENDENCE ON KEY INDUSTRIES AND TREND TOWARD OUTSOURCING

The Company's clients are primarily Fortune 500 companies involved in
technology-related industries. The Company's business and growth is largely
dependent on the continued demand for the Company's services from clients in
these industries and industries targeted by the Company, and current trends in
such industries to outsource their product order teleservices, supplier
management, product assembly and packaging, product distribution, product order
fulfillment, inbound customer care and technical support teleservices and other
outsourced services offered by the Company. A general economic downturn in the
computer industry or in other industries targeted by the Company or a slowdown
or reversal of the trend in any of these industries to outsource services
provided by the Company could have a material adverse effect on the Company's
business, results of operations, growth prospects and financial condition. See
"Business--Clients."

RISKS ASSOCIATED WITH THE COMPANY'S CONTRACTS

Although the Company currently seeks to sign multi-year contracts with its
clients, the Company's contracts generally (i) permit termination upon
relatively short notice by the client; (ii) do not designate the Company as the
client's exclusive outsourced service provider; (iii) do not penalize the client
for early termination; and (iv) hold the Company responsible for products which
fail to meet the clients' specifications. Further, the Company frequently works
on a purchase order basis with no minimum purchase guarantee. Several of the
Company's contracts require the Company to maintain its ISO 9002 certification.
Management believes, however, that maintaining satisfactory relationships with
its clients has a more significant impact on the Company's revenues than the
specific terms of its client contracts. Although several of the Company's
clients have elected not to renew or extend short-term contracts, or have
terminated contracts on relatively short notice to the Company, to date, none of
the foregoing types of contractual provisions has had a material adverse effect
on the Company's business, results of operations or financial condition. See
"Business--Services," "Business--Clients," "Business--Sales and Marketing," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Substantially all of the Company's significant arrangements with its clients
for product order teleservices, supplier management, product assembly and
packaging, product distribution, product order fulfillment and customer care and
technical support teleservices generate revenues based, in large part, on the
number and duration of customer inquiries (subject to certain minimum monthly
payments) and the volume, complexity and type of components involved in the
client's products. Changes in the number or type of components of product units
assembled by the Company may have an effect on the Company's revenues
independent of the number of product units assembled. Consequently, the amount
of revenues generated from any particular client is generally dependent upon
customers' purchase and use of the client's products. There can be no assurance
as to the number of customers who will be attracted to the products of the
Company's clients or that the Company's clients will continue to develop new
products that will require the Company's services. See "Business--Clients" and
"Business--Technology."

8
<PAGE>
RISKS ASSOCIATED WITH RAPIDLY CHANGING TECHNOLOGY

The Company's business is highly dependent on its computer equipment,
telecommunications equipment and software systems. The Company's failure to
maintain sophisticated technological capabilities or to respond effectively to
technological changes could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company's future
success also will be highly dependent upon its ability to enhance existing
services and introduce new services to respond to changing technological
developments. Significant advances or changes in technology, which significantly
reduce or eliminate the need for services provided by the Company, could have a
material adverse effect on the Company's business. For example, significant
development of the Internet as a delivery system for computer software and game
play could adversely impact the demand for the Company's product order
teleservices, product order fulfillment, product assembly and packaging and
product distribution services. There can be no assurance that the Company can
successfully develop and bring to market any new services in a timely manner,
that such services will be commercially successful or that clients' and
competitors' technologies or services will not render the Company's services
noncompetitive or obsolete. See "Business--Technology."

RISKS OF BUSINESS INTERRUPTION

The Company's operations are dependent upon its ability to protect its
facilities, clients' products, confidential customer information, computer
equipment, telecommunications equipment and software systems against damage from
fire, power loss, telecommunications interruption, natural disaster, theft,
unauthorized intrusion, computer viruses and other emergencies, and the ability
of its suppliers to deliver component parts on an expedited basis. While the
Company maintains contingency plans for such events or emergencies and backs up
its computers daily, there can be no assurance that such plans will be
sufficient. In the event the Company experiences a temporary or permanent
interruption or other emergency at one or more of its facilities through
casualty, operating malfunction, employee malfeasance, disruption of supplier
arrangements or otherwise, the Company's business could be materially adversely
affected and the Company may be required to pay contractual damages to its
clients or allow its clients to terminate or renegotiate their contracts with
the Company. While the Company maintains property and business interruption
insurance, such insurance may not adequately compensate the Company for all
losses that it may incur. See "Business--Services."

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION

The Company currently conducts business in Europe and Asia, in addition to
its North American operations. Such international operations accounted for
approximately 16.8% of the Company's revenues in 1996. A component of the
Company's growth strategy is to expand its international operations. There can
be no assurance that the Company will be able to continue or expand its capacity
to market, sell and deliver its services in international markets, or that it
will be able to acquire companies or integrate acquired companies to expand
international operations. In addition, there are certain risks inherent in
conducting international business, including exposure to currency fluctuations,
longer payment cycles, greater difficulties in accounts receivable collection,
difficulties in complying with a variety of foreign laws, unexpected changes in
regulatory requirements, difficulties in staffing and managing foreign
operations, political instability and potentially adverse tax consequences.
There can be no assurance that one or more of such factors will not have a
material adverse effect on the Company's international operations and,
consequently, on the Company's business, results of operations, growth prospects
and financial condition. See "Business--Growth Strategy" and
"Business--Services."

DEPENDENCE ON LABOR FORCE

The Company's success is largely dependent on its ability to recruit, hire,
train and retain qualified employees. The Company's business is labor intensive
and has experienced high personnel turnover. Some

9
<PAGE>
of the Company's operations, particularly its technical support teleservices,
require specially trained employees. A significant increase in the Company's
employee turnover rate could increase the Company's recruiting and training
costs and decrease operating efficiency and productivity. Also, the addition of
significant new clients or the implementation of new large-scale programs may
require the Company to recruit, hire and train qualified personnel at an
accelerated rate. There can be no assurance that the Company will be able to
continue to recruit, hire, train and retain sufficient qualified personnel to
staff adequately for existing business or future growth. In addition, because a
significant portion of the Company's operating costs relate to labor costs, an
increase in wages (including an increase in the mandatory minimum wage by the
federal government), costs of employee benefits, or employment taxes could have
a material adverse effect on the Company's business, results of operations and
financial condition. Further, certain of the Company's facilities are located in
geographic areas with relatively low unemployment rates, thus potentially making
it more difficult and costly to hire qualified personnel. See
"Business--Employees and Training" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR GENERAL WORKING CAPITAL

A substantial portion ($27.3 million) of the net proceeds to the Company
from this offering has been allocated to working capital and other general
corporate purposes. This amount may increase substantially as other anticipated
uses of net proceeds are funded through cash flow or otherwise reduced. The net
proceeds may be utilized at the discretion of the Board of Directors. As a
result, investors may not know in advance how such net proceeds will be utilized
by the Company. See "Use of Proceeds."

CONTROL BY PRINCIPAL STOCKHOLDERS

Prior to this offering, all of the outstanding capital stock of the Company
was owned or controlled by executive officers of the Company and their
affiliates (collectively, the "Principal Stockholders"). Following closing of
this offering, A. Emmet Stephenson, Jr., Chairman of the Board of the Company,
and his family, will beneficially own approximately 67.28% of the Common Stock
of the Company (approximately 64.26% if the Underwriters' over-allotment option
is fully exercised). As a result, Mr. Stephenson and his family will continue to
be able to elect the entire Board of Directors of the Company and to control
substantially all other matters requiring action by the Company's stockholders.
Such voting concentration may have the effect of discouraging, delaying or
preventing a change in control of the Company. See "Principal and Selling
Stockholders."

HIGHLY COMPETITIVE MARKET

The markets in which the Company competes are highly competitive. The
Company expects competition to persist and intensify in the future. The
Company's competitors include small firms offering specific applications,
divisions of large companies, large independent firms and, most significantly,
the in-house operations of the Company's clients or potential clients. A number
of competitors have or may develop financial and other resources greater than
those of the Company. Similarly, there can be no assurance that additional
competitors with greater name recognition and resources than the Company will
not enter the Company's markets. Because the in-house operations of the
Company's existing or potential clients are significant competitors of the
Company, the Company's performance and growth could be negatively impacted if
its existing clients decide to provide in-house services that currently are
outsourced or if potential clients retain or increase their in-house
capabilities. Further, a decision by a major client to consolidate its
outsourced services with a company other than StarTek may have an adverse impact
on the Company, particularly due to the fact that the Company is not the largest
supplier of any of the services currently provided by the Company to any of its
largest clients. In addition, competitive pressures from current or future
competitors could result in significant price erosion, which could have a
material adverse

10
<PAGE>
effect upon the Company's business, results of operations and financial
condition. See "Business--Industry and Competition."

DIFFICULTIES OF COMPLETING AND INTEGRATING ACQUISITIONS AND JOINT VENTURES

One component of the Company's growth strategy is to pursue strategic
acquisitions of companies that have services, products, technologies, industry
specializations or geographic coverage that extend or complement the Company's
existing business. The Company has never made an acquisition and there can be no
assurance that the Company will be able to identify or acquire any such
companies on favorable terms. If an acquisition is completed, there can be no
assurance that such acquisition will enhance the Company's business, results of
operations or financial condition. As part of its growth strategy, the Company
may also pursue opportunities to undertake strategic alliances in the form of
joint ventures. Joint ventures involve many of the same risks as acquisitions,
as well as additional risks associated with possible lack of control of the
joint ventures. See "Use of Proceeds" and "Business--Growth Strategy."

NO PRIOR PUBLIC MARKET; VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after this offering, or that the market price
of the Common Stock will not decline below the initial public offering price.
The initial public offering price of the Common Stock offered hereby will be
determined by negotiations among the Company, the Selling Stockholders and the
Underwriters based upon several factors and may not be indicative of the market
price at which the Common Stock will trade after this offering. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price.

The market price of the Common Stock may be highly volatile and could be
subject to wide fluctuations in response to quarterly variations in operating
results, the success of the Company in implementing its business and growth
strategies, announcements of new contracts or contract cancellations,
announcements of technological innovations or new products or services by the
Company or its competitors, changes in financial estimates by securities
analysts or other events or factors. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many companies and that have
often been unrelated to the operating performance of such companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.
In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. Any such litigation initiated against the Company could result
in substantial costs and a diversion of management's attention and resources,
which could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Quarterly Results."

SUBSTANTIAL AND IMMEDIATE DILUTION

Investors in this offering will incur immediate dilution of $12.13 per share
in the pro forma net tangible book value per share of Common Stock (based upon
an initial public offering price of $15.00 per share). See "Dilution."

SUBSTANTIAL NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial number of shares of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock. The Company is unable to make any prediction as to
the effect, if any, that future sales of Common Stock or the availability of
Common Stock for sale may have on the market price of the Common Stock
prevailing from time to time.

11
<PAGE>
In addition, any such sale or such perception could make it more difficult for
the Company to sell equity securities or equity-related securities in the future
at a time and price that the Company deems appropriate. Upon closing of this
offering, the Company will have 14,460,000 shares of Common Stock outstanding,
excluding shares of Common Stock issuable upon exercise of options outstanding
under the StarTek, Inc. Stock Option Plan (the "Option Plan") and the StarTek,
Inc. Director Stock Option Plan (the "Director Option Plan"). The Company and
the Selling Stockholders have agreed not to offer, sell, contract to sell or
otherwise dispose of, any shares of Common Stock for a period of 180 days after
the date of this offering without the prior consent of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"). Following expiration of that 180-day
period, substantially all of the shares of Common Stock held by the Selling
Stockholders will be eligible for public sale, subject to compliance with
certain volume limitations prescribed by Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"). See "Shares Eligible for Future Sale"
and "Underwriting."

ANTI-TAKEOVER PROVISIONS

Upon closing of this offering, the Board of Directors will have the
authority to issue up to 15,000,000 shares of preferred stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any vote or action by the stockholders. The
rights of the holders of the Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. The issuance of the preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plan to issue any shares of preferred stock.
Furthermore, certain provisions of the Company's Restated Certificate of
Incorporation, Restated Bylaws and Delaware law could delay or complicate a
merger, tender offer or proxy contest involving the Company. See "Description of
Capital Stock."

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements that can be identified
by the use of forward-looking terminology such as "may," "will," "should,"
"expect," "anticipate," "estimate," or "continue" for the negation thereof or
other variations thereon or comparable terminology. The matters set forth under
"Risk Factors" constitute cautionary statements identifying important factors
with respect to such forward-looking statements, including certain risks and
uncertainties that could cause actual results to differ materially from those in
such forward-looking statements.

12
<PAGE>
OFFERING RELATED TRANSACTIONS

The following transactions will be completed prior to the closing of this
offering (the "Offering Related Transactions").

TERMINATION OF S CORPORATION STATUS

Since July 1, 1992, the Company has been classified as an S corporation
under Subchapter S of the Internal Revenue Code of 1986, as amended (the
"Code"), and comparable state tax laws. As a result, the earnings of the Company
have been taxed for federal and state income tax purposes directly to its
stockholders, rather than to the Company. The S corporation status of the
Company will terminate upon closing of this offering, and, accordingly, from and
after such date, the Company will be directly subject to federal and state
income taxes. Immediately prior to the closing of this offering, the Company
will take certain actions relating to the termination of the S corporation
status of the Company and its subsidiaries, as described below. See "Termination
of Management Fees" and "Notes Payable to Principal Stockholders" below.

TERMINATION OF MANAGEMENT FEES

Historically, the Company has paid certain management fees and bonuses to
the Principal Stockholders, and/or their affiliates, for services rendered to
the Company, in amounts generally equal to the annual earnings of the Company,
in addition to general compensation for services rendered. The Principal
Stockholders have reinvested in the Company an amount equal to approximately 53%
of the management fees and bonuses received, with a substantial portion of the
balance used to pay applicable federal and state income taxes. The Company has
terminated such management fee and bonus arrangements as of December 31, 1996,
and no similar management fees or bonuses will be paid to the Principal
Stockholders or their affiliates after the closing of this offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Management," "Certain Relationships and Related Party
Transactions--Management Fees" and Note 1 to the Combined Financial Statements.

After closing of this offering, an affiliate of A. Emmet Stephenson, Jr.,
will, however, be paid an advisory fee as described in "Certain Relationships
and Related Party Transactions--Management Fees," and Michael W. Morgan will
receive a salary and may be paid bonuses at the discretion of the Compensation
Committee (as defined below).

NOTES PAYABLE TO PRINCIPAL STOCKHOLDERS

Immediately prior to closing this offering, the Company will declare a
dividend in an amount equal to the estimated additional paid-in capital and
retained earnings of the Company as of the closing date, payable to the
Principal Stockholders pursuant to certain promissory notes, which will equal
approximately $7.0 million, plus an adjustment for any additional paid-in
capital and retained earnings after December 31, 1996 through the closing date.
The promissory notes payable to the Principal Stockholders will be paid from net
proceeds to the Company from this offering. From this amount, the Principal
Stockholders will be required to pay applicable federal and state income taxes
on earnings of the Company attributable to the period from January 1, 1997
through closing of this offering, the period in which the Company will continue
to operate as an S corporation. See "Use of Proceeds" and "Certain Relationships
and Related Party Transactions--Notes Payable to Principal Stockholders."

FORMATION OF STARTEK AND HOLDING COMPANY STRUCTURE

The Company was incorporated in Delaware in December 1996. Effective January
1, 1997, stockholders of StarPak, Inc. exchanged all of their outstanding shares
of capital stock for shares of common stock of the Company, and StarPak, Inc.
became a wholly-owned subsidiary of the Company. Effective January 24, 1997,
shareholders of StarPak International, Ltd. contributed all of their outstanding
shares of capital stock to the Company, and StarPak International, Ltd. became a
wholly-owned subsidiary of the Company. Accordingly, the Company became a
holding company for the businesses conducted by StarPak, Inc. and StarPak
International, Ltd.

13
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock by the Company offered hereby, after deducting the estimated
underwriting discounts and commissions and offering expenses payable by the
Company, are estimated to be $41.4 million, assuming an initial public offering
price of $15.00 per share (the midpoint of the offering range set forth on the
cover page of this Prospectus). The Company will not receive any proceeds from
the sale of shares of Common Stock by the Selling Stockholders. See "Principal
and Selling Stockholders."

The Company intends to use approximately $14.0 million of the net proceeds
of this offering to repay substantially all of its outstanding indebtedness,
which includes approximately $5.0 million of bank and mortgage indebtedness,
$2.0 million of capitalized lease obligations and $7.0 million of notes payable
to Principal Stockholders (subject to adjustment as described in "Offering
Related Transactions"). The Company will pay approximately $50,000 of prepayment
premiums in connection with the repayment of such capitalized lease obligations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The balance of the net proceeds
(approximately $27.3 million) will be used for working capital and other general
corporate purposes, including approximately $8.0 million for capital
expenditures to expand and build-out its existing facilities (to increase its
number of teleservice workstations and product handling capacity) and to make
strategic acquisitions of complementary businesses. The Company has not entered
into any agreements, commitments or understandings and is not currently engaged
in any negotiations with respect to any such acquisitions. Pending such uses,
the Company plans to invest the net proceeds to the Company from this offering
in investment grade, interest-bearing securities. See "Risk Factors--Substantial
Portion of Net Proceeds Allocated for General Working Capital," and "Offering
Related Transactions--Notes Payable to Principal Stockholders."

DIVIDEND POLICY

The Company intends to retain all future earnings in order to finance
continued growth and development of its business and does not expect to pay any
cash dividends with respect to its Common Stock in the foreseeable future. The
Company expects that any future credit facility will limit or restrict the
payment of dividends. The payment of any dividends will be at the discretion of
the Company's Board of Directors and will depend upon, among other things, the
availability of funds, future earnings, capital requirements, contractual
restrictions, the general financial condition of the Company and general
business conditions.

14
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1996 on (i) a historical basis, (ii) a pro forma basis to give
effect to the Offering Related Transactions and net borrowings of approximately
$1.1 million under a mortgage note executed in January 1997, and (iii) a pro
forma as adjusted basis to give effect to the sale by the Company of 3,000,000
shares of Common Stock in this offering and the application of the estimated net
proceeds therefrom. The capitalization of the Company should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Use of Proceeds," "Offering Related Transactions,"
and the Combined Financial Statements and notes thereto, included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS.................................................... $ 2,742 $ 3,888 $ 31,182
--------- ----------- -----------
--------- ----------- -----------

DEBT:
Line of credit............................................................. $ 3,500 $ 3,500 --
Capital lease obligations.................................................. 2,421 2,421 388
Notes payable to Principal Stockholders.................................... -- 6,973 --
Other debt................................................................. 554 1,700 200
--------- ----------- -----------
TOTAL DEBT............................................................... 6,475 14,594 588

STOCKHOLDERS' EQUITY:
Preferred stock, undesignated, par value $.01 per share; 15,000,000 shares
authorized, no shares issued and outstanding............................. -- -- --
Common stock, par value $.01 per share; 95,000,000 shares authorized,
11,460,000 shares issued and outstanding, 14,460,000 shares issued and
outstanding, as adjusted(a).............................................. 1 1 31
Additional paid-in capital................................................. 6,148 -- 41,320
Cumulative translation adjustment.......................................... 129 129 129
Retained earnings.......................................................... 1,038 -- (50)
Note receivable--stockholder............................................... (213) -- --
--------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................................... 7,103 130 41,430
--------- ----------- -----------
TOTAL CAPITALIZATION..................................................... $ 13,578 $ 14,724 $ 42,018
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

- ------------------------

(a) Excludes 985,000 shares and 90,000 shares of Common Stock reserved for
issuance under the Option Plan and the Director Option Plan, respectively,
approximately 615,000 shares of which are expected to be subject to options
to be granted on or prior to closing of this offering. See "Management--
Compensation of Directors" and "Management--Stock Option Plan."

15
<PAGE>
DILUTION

As of December 31, 1996, the Company had a pro forma net tangible book value
of $130,000, or $0.01 per share of Common Stock, based upon 11,460,000 shares of
Common Stock outstanding. Pro forma net tangible book value per share is
determined by dividing the pro forma net tangible book value of the Company
(total tangible assets less total liabilities), giving effect to the Offering
Related Transactions on such date, by the number of shares of Common Stock
outstanding as of such date after giving effect to a 340.8888 for one stock
split of the Common Stock. After giving effect to the Offering Related
Transactions, a 340.8888 for one stock split of the Common Stock and the sale by
the Company of the 3,000,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $15.00 per share and
application of the net proceeds therefrom, the Company's pro forma net tangible
book value as of December 31, 1996 would have been $41.4 million, or $2.87 per
share of Common Stock. This represents an immediate increase in pro forma net
tangible book value of $2.86 per share to the Principal Stockholders and an
immediate dilution in net tangible book value of $12.13 per share to new
investors purchasing shares of Common Stock in this offering. The following
table illustrates the per share dilution to the new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $ 15.00
Pro forma net tangible book value per share as of December
31, 1996.................................................... $ .01
Increase in pro forma net tangible book value per share
attributable to new investors............................... 2.86
---------
Pro forma net tangible book value per share after giving
effect to this offering..................................... 2.87
---------
Pro forma net tangible book value dilution per share to new
investors................................................... $ 12.13
---------
---------
</TABLE>

The following table sets forth as of December 31, 1996 the relative
investments of the Principal Stockholders and of the new investors, giving
effect to (i) the sale by the Company of 3,000,000 shares and the sale by the
Selling Stockholders of 666,667 shares of Common Stock being offered hereby, at
an assumed initial public offering price of $15.00 per share, (ii) the 340.8888
for one stock split and (iii) the payment of the Notes Payable to Principal
Stockholders.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------------- --------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Principal Stockholders........................... 10,793,333 74.64% $ 432 0.00% $ 0.00
New investors.................................... 3,666,667 25.36 55,000,005 100.00 15.00
------------ ------ ------------- ------ -----------
Total.......................................... 14,460,000 100.00% $ 55,000,437 100.00%
------------ ------ ------------- ------
------------ ------ ------------- ------
</TABLE>

The information in the foregoing table (i) reflects the 666,667 shares purchased
by the new investors from the Selling Stockholders and (ii) excludes 985,000
shares and 90,000 shares reserved for issuance under the Option Plan and
Director Option Plan, respectively. See "Management--Compensation of Directors"
and "Management--Stock Option Plan."

16
<PAGE>
SELECTED COMBINED FINANCIAL DATA

The following selected combined financial data for the years ended December
31, 1994, 1995 and 1996, and as of December 31, 1995 and 1996 have been derived
from the Combined Financial Statements of the Company, which have been audited
by Ernst & Young LLP, included elsewhere in this Prospectus. The selected
combined financial data for the year ended December 31, 1993 and as of December
31, 1994 have been derived from combined financial statements of the Company,
which have been audited by Ernst & Young LLP. The selected combined financial
data (i) for the year ended June 30, 1992 and the six months ended December 31,
1992 and (ii) as of June 30, 1992, and December 31, 1992 and 1993, is unaudited.
This information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Combined
Financial Statements and notes thereto, included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31,
YEAR ENDED ENDED -----------------------------------------------------------------
JUNE 30, DECEMBER 31, PRO FORMA
1992 1992 1993 1994 1995 1996 1996(A)
----------- ------------- --------- ------------ ------------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Revenues.......................... $ 16,791 $ 11,880 $ 23,044 $ 26,341 $ 41,509 $ 71,584 $ 71,584
Cost of services.................. 13,273 9,779 18,039 21,355 33,230 57,238 57,238
----------- ------------- --------- ------------ ------------ --------- -------
Gross profit...................... 3,518 2,101 5,005 4,986 8,279 14,346 14,346
Selling, general and
administrative expenses......... 1,813 1,269 3,479 4,489 5,341 7,764 7,764
Management fee expense............ -- 400 1,702 612 2,600 6,172 --
Operating profit (loss)........... 1,705 432 (176) (115) 338 410 6,582
Net interest expense and other.... 87 8 193 216 396 372 372
----------- ------------- --------- ------------ ------------ --------- -------
Income (loss) before income
taxes........................... 1,618 424 (369) (331) (58) 38 6,210
Income tax expense (benefit)...... 587 (58) -- -- -- 112 2,316
----------- ------------- --------- ------------ ------------ --------- -------
Net income (loss)................. $ 1,031 $ 482 $ (369) $ (331)(b) $ (58)(b) $ (74) $ 3,894
----------- ------------- --------- ------------ ------------ --------- -------
----------- ------------- --------- ------------ ------------ --------- -------
Net income per share (c).......... $0.33
Shares outstanding (c)............ 11,925

SELECTED OPERATING DATA:
Capital expenditures.............. $136 $153 $1,239 $670 $2,105 $1,333 $1,333
Depreciation and amortization..... 149 79 456 588 873 1,438 1,438
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED(D)
---------------

<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (END OF PERIOD):
Working capital.................... $ 1,058 $ 1,560 $ 943 $ 434 $ 798 $ 2,896 $ 35,592
Total assets....................... 4,032 6,614 7,712 12,352 21,580 22,979 51,419
Total debt......................... 587 732 2,473 3,288 7,294 6,475 588
Total stockholders' equity......... 1,637 2,031 2,624 3,006 3,798 7,103 41,430
</TABLE>

- ------------------------------

(d) Gives effect to (i) notes payable to the Principal Stockholders relating to
accumulated retained earnings and additional paid-in capital of
approximately $7,000, (ii) net borrowings of $1,146 under a mortgage note
executed in January 1997 and (iii) the sale by the Company of 3,000,000
shares of Common Stock in this offering and the application of the estimated
net proceeds therefrom, including repayment of indebtedness of the Company.
See "Use of Proceeds" and "Capitalization."

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Combined
Financial Statements and notes thereto, included elsewhere in this Prospectus.

OVERVIEW

The Company has grown profitably by developing integrated outsourced
services that enable its clients to provide their customers with high-quality
services at lower costs than the clients' own in-house operations. StarTek has
continuously expanded its business and facilities to offer additional services
in response to the growing needs of its clients and to capitalize on market
opportunities both domestically and internationally. From 1993 to 1996, the
Company's revenues grew at a compound annual growth rate of 45.9%. For the year
ended December 31, 1996, the Company's revenues increased approximately 72.5% to
$71.6 million from $41.5 million for the year ended December 31, 1995. Pro forma
net income increased approximately 144.3% to $3.9 million from $1.6 million
during the same period. Management attributes this growth to the successful
implementation of the Company's strategy of developing long-term strategic
relationships with large clients in targeted industries.

StarTek generates its revenues by providing integrated outsourced services
throughout a product's life cycle, including product order teleservices,
supplier management, product assembly and packaging, product distribution,
product order fulfillment, and inbound customer care and technical support
teleservices. The Company generally recognizes revenues as services are
performed under each contract. Substantially all of the Company's significant
arrangements with its clients for its services generate revenues based, in large
part, on the number and duration of customer inquiries (subject to certain
minimum monthly payments) and the volume, complexity and type of components
involved in the handling of the client's products. Changes in the number or type
of components in the product units assembled by the Company may have an effect
on the Company's revenues, independent of the number of product units assembled.

A key element of the Company's ability to grow is the availability of
capacity to respond quickly to the needs of new clients or the increased needs
of existing clients. The Company's 138,000-square-foot facility in Denver,
Colorado, which was initially occupied at the end of 1995, is approximately
one-third utilized and can be expanded to accommodate additional outsourced
services. Management also believes that it can expand significantly the capacity
of its Greeley, Colorado and Hartlepool, England facilities.

The Company's cost of services primarily includes labor, telecommunications,
materials and freight charges that are variable in nature, as well as certain
facilities charges. Competitive vendor rates for materials, printing, compact
disc duplication and packaging costs, together with competitive labor rates
which comprise the majority of the Company's costs, have been and are expected
to continue to be a key component of the Company's expenses. All other expenses,
including expenses attributable to technology support, sales and marketing,
human resource management and other administrative functions that are not
allocable to specific client services, are recorded as selling, general and
administrative ("SG&A") expenses. SG&A expenses tend to be either semi-variable
or fixed in nature.

Since July 1992, the Company has operated as an S corporation and,
accordingly, has not been subject to federal or state income taxes. As an S
corporation, in addition to general compensation for services rendered the
Company has historically paid certain management fees, bonuses and other fees to
the Principal Stockholders and/or their affiliates in amounts generally equal to
the annual earnings of the Company, and all of such amounts are reflected as
management fee expense on its combined statement of operations. Upon receipt of
such management fees and bonuses, the Principal Stockholders historically
contributed approximately 53% of such amounts to the Company to provide the
Company with necessary working capital, with a substantial portion of the
balance used to pay applicable federal and state income taxes. The amounts so
contributed are reflected in additional paid-in-capital on the Company's
combined

18
<PAGE>

balance sheet. The Company has terminated this management fee and bonus
arrangement effective as of December 31, 1996. See Note 1 to the Combined
Financial Statements.

From and after January 1, 1997, all compensation payable to persons who are
now stockholders of the Company (or an affiliate of such stockholder) will be in
the form of salaries, bonuses or advisory fees and all such payments will be
reflected in SG&A expenses on the combined statement of operations. At current
rates, such payments will aggregate $516,000 annually. See
"Management--Executive Compensation," "Offering Related
Transactions--Termination of Management Fees" and Note 1 to the Combined
Financial Statements.

The S corporation status of the Company will terminate upon closing of this
offering and, thereafter, the Company will be subject to federal and state
income taxes. Pro forma net income (i) reflects elimination of management fee
expense and (ii) includes a provision for federal, state and foreign income
taxes at an effective rate of 37.3%.

The Company frequently purchases components of its clients' products as an
integral part of its supplier management services and in advance of providing
its product assembly and packaging services. These components are shown as raw
materials inventory in the Company's balance sheet. At the close of an
accounting period, packaged and assembled products (together with other
associated costs) are reflected as finished goods inventory, pending shipment.
The Company generally has the right to be reimbursed by the client for unused
inventory. Client-owned inventories are not reflected on the Company's combined
balance sheet.

The Company's business is highly seasonal. Certain of the Company's services
related to product assembly and packaging are heavily utilized in the fourth
quarter in preparation for the Christmas holiday season. Accordingly, the
Company's revenues are typically higher in the fourth quarter than in the first,
second and third quarter. In 1996, the percentages of the Company's revenues
generated from the first to the fourth quarter were as follows: 21.3%, 19.7%,
21.6% and 37.4%, respectively.

QUARTERLY RESULTS

The following table sets forth certain unaudited statement of operations
data for the quarters in the years ended December 31, 1995 and 1996. The
unaudited quarterly information has been prepared on the same basis as the
annual information and, in management's opinion, includes all adjustments
necessary to present fairly the information for the quarters presented.

<TABLE>
<CAPTION>
1995 QUARTERS ENDED 1996 QUARTERS ENDED
-------------------------------------------------------- -------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30
------------- ------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)

Revenues................ $ 7,984 $ 6,126 $ 9,683 $ 17,716 $ 15,219 $ 14,108 $ 15,479
Cost of services........ 6,380 4,758 7,536 14,556 12,655 11,121 12,198
SG&A expenses........... 1,226 1,194 1,301 1,620 1,707 1,856 1,756
Management fee expense.. 192 83 682 1,643 199 700 498
------ ------ ------ ----------- ----------- ----------- -----------
Operating profit
(loss)................ 186 91 164 (103) 658 431 1,027

DEC 31
-----------
<S> <C>

Revenues................ $ 26,778
Cost of services........ 21,264
SG&A expenses........... 2,445
Management fee expense.. 4,775
-----------
Operating profit
(loss)................ (1,706)
</TABLE>

19
<PAGE>

The following table sets forth certain unaudited statement of operations
data, expressed as a percentage of revenues.

<TABLE>
<CAPTION>
1995 QUARTERS ENDED 1996 QUARTERS ENDED
---------------------------------------------------------- -------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31 MARCH 31 JUNE 30 SEPT 30
------------- ------------- ------------- ------------- ------------- ------------- -------------

<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services........ 79.9 77.7 77.8 82.2 83.2 78.8 78.8
SG&A expenses........... 15.4 19.5 13.5 9.1 11.2 13.2 11.3
Management fee expense.. 2.4 1.4 7.0 9.3 1.3 5.0 3.2
----- ----- ----- ----- ----- ----- -----
Operating profit
(loss)................ 2.3 1.4 1.7 (0.6) 4.3 3.0 6.7

DEC 31
-------------
<S> <C>
Revenues................ 100.0%
Cost of services........ 79.4
SG&A expenses........... 9.1
Management fee expense.. 17.8
-----
Operating profit
(loss)................ (6.3)
</TABLE>

The following table sets forth certain unaudited pro forma statement of
operations data for the quarters in the year ended December 31, 1996.

<TABLE>
<CAPTION>
1996 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)

Revenues............................................................. $ 15,219 $ 14,108 $ 15,479 $ 26,778
Cost of services..................................................... 12,655 11,121 12,198 21,264
SG&A expenses........................................................ 1,707 1,856 1,756 2,445
Management fee expense............................................... -- -- -- --
----------- ----------- ----------- -----------
Operating profit..................................................... 857 1,131 1,525 3,069
</TABLE>

The following table sets forth certain unaudited pro forma statement of
operations data, expressed as a percentage of revenues.

<TABLE>
<CAPTION>
1996 QUARTERS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPT 30 DEC 31
----------- ----------- ----------- -----------

<S> <C> <C> <C> <C>
Revenues............................................................. 100.0% 100.0% 100.0% 100.0%
Cost of services..................................................... 83.2 78.8 78.8 79.4
SG&A expenses........................................................ 11.2 13.2 11.3 9.1
Management fee expense............................................... -- -- -- --
----------- ----------- ----------- -----------
Operating profit..................................................... 5.6 8.0 9.9 11.5
</TABLE>

The Company has experienced, and expects to experience in the future,
quarterly variations in revenues and earnings as a result of a variety of
factors, many of which are outside the Company's control, including (i) the
seasonal pattern of certain of the businesses served by the Company; (ii) the
timing of new projects; (iii) the expiration or termination of existing
projects; and (iv) the timing of increased expenses incurred to obtain and
support new business. See "Risk Factors--Variability of Quarterly Operating
Results."

For the quarterly periods in 1995 and 1996, revenues fluctuated principally
due to the seasonal pattern of certain of the businesses served by the Company
and the addition of new client programs. Revenues in the first quarter of 1996
as compared to the fourth quarter of 1995 declined principally due to the
seasonal pattern of certain businesses serviced by the Company. Revenues in the
second quarter of 1996 were higher than expected, as compared to prior seasonal
patterns, due to increased activities for a significant new client in that
quarter.

For the quarterly periods in 1995 and 1996, cost of services as a percentage
of revenues fluctuated principally due to the mix of services performed for
clients. Cost of services in the fourth quarter of 1995 was adversely affected
by start-up costs of the Denver facility, which opened at the end of 1995, and
costs incurred in connection with the switch by certain of the Company's clients
to compact discs from 3 1/2 inch floppy disks. Cost of services as a percentage
of revenues was higher in the first and second quarters of

20
<PAGE>
1996, partially as a result of product recall and rework costs incurred on a
certain product assembled, packaged and distributed in Europe from the United
Kingdom facility. The product recall related to certain anomalies detected by
the Company in a portion of finished product assembled, packaged and distributed
from the Company's United Kingdom facility. Upon detection of the anomaly, the
Company initiated the recall and inspected all potentially affected products.
The circumstances necessitating the recall were discovered in March 1996 and the
recall and related reworking of products was completed in October 1996. In
addition, the first quarter of 1996 was adversely affected by start-up costs of
the Denver facility, which opened at the end of 1995.

For the quarterly periods in 1995 and 1996, SG&A expenses as a percentage of
revenues fluctuated principally due to the spreading of fixed and semi-variable
costs over a revenue base that fluctuates quarter to quarter.

Management fee expense fluctuated as a percentage of revenues generally
based on estimated tax requirements of the recipients of the management fees in
the first three quarters of each year and, in the fourth quarter of each year,
was based on cumulative operating profits for the entire year less management
fee expense for the preceding three quarters. Effective December 31, 1996, the
management fee and bonus arrangements previously reflected as management fee
expense were terminated and no further management fees will be payable by the
Company.

Operating profit (loss) and income (loss) before income taxes fluctuated
within the quarterly periods of 1995 and 1996 based primarily on the factors
noted above.

The unaudited pro forma quarterly information for 1996 presents the effects
on operating profit of the elimination of management fee expense paid to
stockholders and their affiliates as these fees were discontinued effective
December 31, 1996 and no further management fees will be payable by the Company.
For the quarterly periods of 1995, pro forma management fee expense would be
zero for each quarter and operating profits for the first, second, third and
fourth quarters of 1995 would be $378,000, $174,000, $846,000 and $1,540,000,
respectively, which represents 4.7%, 2.8%, 8.7% and 8.7% of revenues for the
respective quarterly periods.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain statement
of operations data expressed as a percentage of revenues:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
PRO FORMA
1994 1995 1996 1996
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues.......................................................... 100.0% 100.0% 100.0% 100.0%
Cost of services.................................................. 81.1 80.1 80.0 80.0
----------- ----------- ----------- -----
Gross profit...................................................... 18.9 19.9 20.0 20.0
SG&A expenses..................................................... 17.0 12.8 10.8 10.8
Management fee expense............................................ 2.3 6.3 8.6 0.0
----------- ----------- ----------- -----
Operating profit (loss)........................................... (0.4) 0.8 0.6 9.2
Net interest expense and other.................................... 0.8 1.0 0.5 0.5
----------- ----------- ----------- -----
Income (loss) before income taxes................................. (1.2) (0.2) 0.1 8.7
Income tax expense................................................ -- -- 0.2 3.3
----------- ----------- ----------- -----
Net income (loss)................................................. (1.2) (0.2) (0.1) 5.4
----------- ----------- ----------- -----
----------- ----------- ----------- -----
</TABLE>

21
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES. Revenues increased $30.1 million, or 72.5%, to $71.6 million for
the year ended December 31, 1996 from $41.5 million for the year ended December
31, 1995. New clients accounted for $25.2 million of this increase, primarily
attributable to the addition of a significant new client in April 1996, while
existing clients accounted for the remaining $4.9 million of this increase.
Revenues for 1996 reflect the addition of the Denver facility, which opened at
the end of 1995.

COST OF SERVICES. Cost of services increased $24.0 million, or 72.2%, to
$57.2 million for the year ended December 31, 1996 from $33.2 million for the
year ended December 31, 1995. As a percentage of revenues, cost of services was
relatively unchanged at 80.0% for the year ended December 31, 1996 from 80.1%
for the year ended December 31, 1995.

GROSS PROFIT. As a result of the foregoing factors, gross profit increased
$6.0 million, or 73.3%, to $14.3 million for the year ended December 31, 1996
from $8.3 million for the year ended December 31, 1995. As a percentage of
revenues, gross profit was relatively unchanged at 20.0% for the year ended
December 31, 1996 from 19.9% for the year ended December 31, 1995.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased $2.4
million, or 45.4%, to $7.8 million for the year ended December 31, 1996 from
$5.3 million for the year ended December 31, 1995. As a percentage of revenues,
SG&A expenses decreased to 10.8% for the year ended December 31, 1996 from 12.8%
for the year ended December 31, 1995, reflecting the spreading of fixed and
semi-variable costs over a larger revenue base.

MANAGEMENT FEE EXPENSE. Management fee expense increased $3.6 million, or
137.4%, to $6.2 million for the year ended December 31, 1996 from $2.6 million
for the year ended December 31, 1995. As a percentage of revenues, management
fee expense increased to 8.6% for the year ended December 31, 1996 from 6.3% for
the year ended December 31, 1995. Management fee expense was determined by the
Board of Directors and related primarily to changes in operating profit of the
Company. Effective December 31, 1996, the management fee and bonus arrangements
previously reflected as management fee expense have been terminated and no
further management fees will be payable by the Company.

OPERATING PROFIT. As a result of the foregoing factors, operating profit
increased $0.1 million, or 21.3%, to $0.4 million for the year ended December
31, 1996 from $0.3 million for the year ended December 31, 1995. As a percentage
of revenues, operating profit decreased to 0.6% for the year ended December 31,
1996 from 0.8% for the year ended December 31, 1995.

NET INTEREST EXPENSE AND OTHER. Net interest expense and other remained
relatively unchanged at $0.4 million for the year ended December 31, 1996 and
for the year ended December 31, 1995. As a percentage of revenues, net interest
expense and other decreased to 0.5% for the year ended December 31, 1996 from
1.0% for the year ended December 31, 1995, reflecting lower outstanding
borrowings relative to revenues of the Company.

INCOME (LOSS) BEFORE INCOME TAXES. As a result of the foregoing factors,
income before income taxes increased $0.1 million to zero for the year ended
December 31, 1996 from $(0.1) million loss before income taxes for the year
ended December 31, 1995. As a percentage of revenues, income before income taxes
increased to 0.1% for the year ended December 31, 1996 from (0.2)% for the year
ended December 31, 1995.

INCOME TAX EXPENSE. The Company has operated as an S corporation for
federal and state income tax purposes and, accordingly, was not subject to
federal or state income taxes. The Company was, however, subject to certain
foreign income taxes. A provision for foreign income taxes was made in the year
ended December 31, 1996, as prior foreign loss carryovers had been fully
utilized.

22
<PAGE>

NET INCOME (LOSS). Based upon its S corporation status and the factors
discussed above, net loss remained relatively unchanged at $(0.1) million for
the year ended December 31, 1996 and for the year ended December 31, 1995. As a
percentage of revenues, net loss for the year ended December 31, 1996 and for
the year ended December 31, 1995 remained relatively unchanged at 0.1% and 0.2%,
respectively.

PRO FORMA MANAGEMENT FEE EXPENSE, PRO FORMA OPERATING PROFIT, PRO FORMA
INCOME BEFORE INCOME TAXES, PRO FORMA INCOME TAXES AND PRO FORMA NET
INCOME. Pro forma amounts reflect the elimination of management fees and
bonuses paid to stockholders and their affiliates as these fees and bonuses were
discontinued effective December 31, 1996, and provide for related income taxes
at 37.3% of pre-tax income as if the Company were taxed as a C corporation. As a
result of the foregoing factors: (1) pro forma management fee expense is zero
for 1995 and 1996; (2) pro forma operating profit increased $3.6 million, or
124.0%, to $6.6 million for the year ended December 31, 1996 from $2.9 million
for the year ended December 31, 1995; (3) pro forma income before income taxes
increased $3.7 million, or 144.3%, to $6.2 million for the year ended December
31, 1996 from $2.5 million for the year ended December 31, 1995; (4) pro forma
income taxes increased $1.4 million, or 144.3%, to $2.3 million for the year
ended December 31, 1996 from $0.9 million for the year ended December 31, 1995;
and (5) pro forma net income increased $2.3 million, or 144.3%, to $3.9 million
for the year ended December 31, 1996 from $1.6 million for the year ended
December 31, 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUES. Revenues increased $15.2 million, or 57.6%, to $41.5 million in
1995 from $26.3 million in 1994. New clients accounted for $6.1 million of this
increase, while existing clients accounted for the remaining $9.1 million of
this increase.

COST OF SERVICES. Cost of services increased $11.9 million, or 55.6%, to
$33.2 million in 1995 from $21.4 million in 1994. As a percentage of revenues,
cost of services decreased to 80.1% in 1995 from 81.1% in 1994. This change was
primarily due to improvement in profit margins at the United Kingdom facility as
productivity improved, and improvement in product fulfillment profit margins in
domestic operations as improved product fulfillment systems were placed in
service. As a result of technological changes in software distribution, the
foregoing improvements were partially offset by lower profit margins realized
from the switch by certain of the Company's clients to lower-margin compact
discs from higher-margin 3 1/2 inch floppy disks included in such clients' final
products.

GROSS PROFIT. As a result of the foregoing factors, gross profit increased
$3.3 million, or 66.0%, to $8.3 million for the year ended December 31, 1996
from $5.0 for the year ended December 31, 1995. As a percentage of revenues,
gross profit increased to 19.9% in 1995 from 18.9% in 1994.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased $0.9
million, or 19.0%, to $5.3 million in 1995 from $4.5 million in 1994. As a
percentage of revenues, SG&A expenses decreased to 12.8% in 1995 from 17.0% in
1994, reflecting the spreading of fixed and semi-variable costs over a larger
revenue base.

MANAGEMENT FEE EXPENSE. Management fee expense increased $2.0 million, or
324.8%, to $2.6 million in 1995 from $0.6 million in 1994. As a percentage of
revenues, management fee expense increased to 6.3% in 1995 from 2.3% in 1994.
Management fee expense was determined by the Board of Directors of the Company
and related primarily to changes in operating profit of the Company. Effective
December 31, 1996, the management fee and bonus arrangements previously
reflected as management fee expense were terminated and no further management
fees will be payable by the Company.

OPERATING PROFIT (LOSS). As a result of the foregoing factors, operating
profit increased $0.5 million to $0.4 million in 1995 from $(0.1) million in
1994. As a percentage of revenues, operating profit increased to 0.8% in 1995
from (0.4)% in 1994.

23
<PAGE>
NET INTEREST EXPENSE AND OTHER. Net interest expense and other increased
$0.2 million, or 83.3%, to $0.4 million in 1995 from $0.2 million in 1994. As a
percentage of revenues, net interest expense and other increased to 1.0% in 1995
from 0.8% in 1994, reflecting higher outstanding borrowings relative to revenues
of the Company.

LOSS BEFORE INCOME TAXES. As a result of the foregoing factors, loss before
income taxes decreased $0.3, or 82.5%, to $(0.1) million in 1995 from $(0.3)
million in 1994. As a percentage of revenues, loss before income taxes decreased
to (0.2)% in 1995 from (1.2)% in 1994.

NET INCOME (LOSS). Based upon the S corporation status of the Company and
the factors discussed above, net loss decreased $0.2 million, or 82.5%, to $0.1
million in 1995 from $0.3 million in 1994.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has funded its operations and capital expenditures
primarily through cash flow from operations, borrowings under various lines of
credit, capital lease arrangements, short-term borrowings from its stockholders
and their affiliates, and additional capital contributions by its stockholders.
The Company has a $3.5 million revolving line of credit with Norwest Business
Credit, Inc. (the "Bank"), which matures on June 30, 1999. Borrowings under the
line of credit bear interest at the Bank's base rate, plus 1%. At December 31,
1996 and March 7, 1997, $3.5 million of borrowings were outstanding under the
line of credit, accruing interest at 9.25%. Borrowings under the line of credit
have been used primarily for general corporate purposes. Outstanding borrowings
will be repaid in full from net proceeds to the Company from this offering. See
"Use of Proceeds."

The Company has entered into several capital leases with three to five year
terms. At December 31, 1996, the outstanding lease obligations were $2.4
million, accruing interest at rates ranging from 8.7% to 13.0%. At December 31,
1996 and March 7, 1997, available additional borrowings under these arrangements
were $0.8 million. Substantially all of outstanding capital lease obligations
will be repaid in full from net proceeds to the Company from this offering. See
"Use of Proceeds."

In February 1997, the Company ordered telecommunications computer hardware
and software with an aggregate purchase price of $0.8 million. The Company
intends to finance this computer equipment through an operating lease, which
operating lease will become effective upon completion of the installation of the
computer equipment. Installation is scheduled for April 1997.

Net cash provided by operating activities increased to $1.4 million for the
year ended December 31, 1996 from net cash used in operating activities of $1.5
million for 1995. The principal causes of this $2.9 million change were (i) an
increase in depreciation and amortization and (ii) a decrease in accounts
receivable, partially offset by a decrease in accounts payable (net of an
increase in accrued and other liabilities) and an increase in inventories. Net
cash used in operating activities in 1995 was $1.5 million as compared to $0.4
million of net cash provided by operating activities in 1994. The principal
cause of this decrease in net cash flow from operating activities between the
periods was an increase in accounts receivable, partially offset by an increase
in accounts payable.

Net cash used in investing activities was $0.7 million for the year ended
December 31, 1996 as compared to $1.3 million of net cash used in investing
activities for 1995. The principal cause for this decrease related to reduced
purchases of property, plant and equipment in 1996. During 1994 and 1995, the
Company's net cash used in investing activities did not change significantly;
however, the components of investing expenditures varied due to (i) the purchase
of the Denver facility in October 1995, (ii) collections of notes
receivable--affiliates and stockholders in 1995 and (iii) advances made to
stockholders and affiliates in 1994.

Net cash provided by financing activities decreased to $1.4 million for the
year ended December 31, 1996 from $3.2 million for 1995. The principal causes
for this decrease were (i) reduced bank borrowings in

24
<PAGE>

1996 and (ii) payments of notes payable - affiliate and stockholder in 1996,
partially offset by increases in contributed capital. Net cash provided by
financing activities increased to $3.2 million in 1995 from $1.1 million in
1994. The principal causes for this increase were (i) mortgage borrowings
relating to the purchase of the Denver facility in 1995, (ii) an increase in
borrowings from an affiliate in 1995 and (iii) an increase in bank borrowings
and capital lease payments in 1995.

The principal sources of the Company's liquidity have been cash flow from
operations, borrowings under the Company's line of credit, capital lease
financing, borrowings from stockholders and their affiliates, and capital
contributions from stockholders. The Company expects to maintain a $3.5 million
credit facility. The credit facility is expected to contain covenants which
restrict, to a certain extent, dividends, capital expenditures and loans to
affiliates and stockholders, without prior written consent of the lender.
StarTek intends to use a portion of the net proceeds to the Company from this
offering to repay substantially all of its outstanding indebtedness and
capitalized lease obligations, and approximately $8.0 million for capital
expenditures to expand and build-out its existing facilities to provide
additional teleservices, product assembly and inventory management capacity.

The Company believes that cash flow from operations and net proceeds to the
Company from this offering, together with available funds under the line of
credit, will be sufficient to support its operations and capital expenditure and
liquidity requirements for the next 12 months and anticipated operations and
cash expenditures for the foreseeable future. However, long-term capital
requirements depend on many factors, including, but not limited to, the rate at
which the Company expands its business, whether internally or through
acquisitions and strategic alliances. To the extent that the funds generated
from the sources described above are insufficient to fund the Company's
activities in the short or long term, the Company will be required to raise
additional funds through public or private financings. No assurance can be given
that additional financing will be available or that, if available, it will be
available on terms acceptable to the Company.

INFLATION AND GENERAL ECONOMIC CONDITIONS

Although the Company cannot accurately anticipate the effect of inflation on
its operations, the Company does not believe that inflation has had, or is
likely in the foreseeable future to have, a material effect on its results of
operations or financial condition.

25
<PAGE>
BUSINESS

GENERAL

The Company has continuously expanded its business and facilities to offer
additional services on an outsourced basis in response to the growing needs of
its clients and to capitalize on market opportunities, both domestically and
internationally. StarTek operates from its Colorado facilities located in Denver
and Greeley and from a facility located in Hartlepool, England. The Company also
operates through a subcontract relationship in Singapore. For the year ended
December 31, 1996, the Company's revenues increased approximately 72.5% to $71.6
million from $41.5 million for the year ended December 31, 1995. Pro forma net
income increased approximately 144.3% to $3.9 million from $1.6 million during
the same period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

StarTek has focused primarily on the computer software, computer hardware,
electronics, telecommunications and other technology-related industries because
of their rapid growth, complex and evolving product offerings and large customer
bases, which require frequent, often sophisticated, customer interaction.
Management believes that there are substantial opportunities to cross-sell
StarTek's wide spectrum of outsourced services to its existing base of
approximately 100 clients, which includes Broderbund Software, Inc., Canon Inc.,
Electronic Arts, Inc., Federal Express Corporation, Hewlett Packard, Microsoft,
Polaroid Corporation, Sony Electronics, Inc., The 3DO Company, and Viacom
International, Inc. The Company intends to capitalize on the increasing trend
toward outsourcing by focusing on potential clients in additional targeted
industries, including health care, financial services, transportation services
and consumer products, which could benefit from the Company's expertise in
developing and delivering integrated, cost-effective outsourced services.

STARTEK'S INTEGRATED SERVICES

26
<PAGE>
assemble and package the finished product, which may be held by the Company
pending receipt of customer orders or shipped in bulk to distributors or retail
outlets.

BUSINESS STRATEGY

StarTek's strategic objective is to increase revenues and earnings by
maintaining and enhancing its position as a leading international provider of
integrated value-added outsourced services. To reach this objective, the Company
intends to:

PROVIDE INTEGRATED OUTSOURCED SERVICES. StarTek seeks to provide integrated
outsourced services which enable its clients to provide their customers with
high-quality services at lower cost than through a client's own in-house
operations. The Company believes that its ability to tailor operations,
materials and employee resources objectively and to provide integrated,
value-added outsourced services on a cost-effective basis will allow the Company
to become an integral part of its clients' businesses.

CAPITALIZE ON SOPHISTICATED TECHNOLOGY. The Company believes it has
established a competitive advantage by capitalizing on sophisticated technology
and proprietary software, including automatic call distributors, inventory
management software, transportation management software, call tracking systems
and telephone-computer integration software. These capabilities enable StarTek
to improve efficiency, serve as a transparent extension of its clients, receive
telephone calls and data directly from its clients' systems, and report detailed
information concerning the status and results of the Company's services and
interaction with clients on a daily basis.

27
<PAGE>
GROWTH STRATEGY

The Company's growth strategy is designed to capitalize on the increasing
demand for outsourced services and improve and expand StarTek's position as an
international provider of integrated value-added outsourced services. This
strategy includes the following key elements:

INCREASE CAPACITY. Management believes that as a provider of outsourced
services it must be ready to serve its clients in periods of peak demand for its
clients' products or services. Accordingly, the Company intends to continue to
increase product handling and teleservice workstation capacity to meet
anticipated demand for the Company's outsourced services. During 1996, the
Company increased its teleservice workstations by 54.6%, to 558 from 361. In
addition, the Company reengineered and expanded its primary product handling
facility to increase its daily capacity by approximately 200% to 180,000 units
from 60,000 units for certain types of products.

ACQUIRE COMPLEMENTARY COMPANIES AND EXPAND STRATEGIC ALLIANCES. StarTek
intends to evaluate the acquisition of complementary companies that could extend
its presence into new geographic markets or industries, expand its client base,
add new product or service applications and/or provide operating synergies.
Management believes that there could be many domestic and international
acquisition and strategic alliance opportunities as companies consider selling
their existing in-house operations and as smaller companies seek growth capital
and economies of scale to remain competitive.

28
<PAGE>
SERVICES

The Company offers a wide spectrum of outsourced services throughout a
product's life cycle, designed to provide cost-effective and efficient
management of the ancillary operations of its clients. The Company works closely
with its clients to develop, refine and implement efficient and productive
integrated outsourced solutions that link StarTek with such clients and their
customers. The processes that create such solutions generally include the
development of product manufacturing specifications, packaging and distribution
requirements, as well as product-related software programs for telephone,
facsimile, e-mail and Internet interactions involving product order fulfillment,
customer care and technical support. Substantially all of the Company's
teleservice activities are inbound telephone calls, rather than outbound calls.
Specific services that StarTek provides to its clients include the following:

PRODUCT ORDER TELESERVICES. Product order teleservices is generally the
process by which a call from a client's customer is received, identified and
routed to a StarTek service representative. Typically, a customer calls to
request product service information, to place an order for an advertised product
or to obtain assistance regarding a previous order or purchase. The information
and results of the call are then communicated either to StarTek's employees for
order processing and fulfillment or, if StarTek does not manage the client's
inventory, the Company transmits the customer's request directly to the client.
To properly handle these and other teleservices, StarTek utilizes automated call
distributors to identify each inbound call by the number dialed by the customer
and immediately route the call to a StarTek service representative trained for
that product. Product orders also occur as a result of a StarTek service
representative offering products in connection with a customer care or technical
support call. To facilitate product orders, the Company can process credit card
charges and other payment methods in connection with its product order
teleservices.

SUPPLIER MANAGEMENT. Company personnel are responsible for maintaining and
managing multiple supplier relationships. When the Company is selected by a
client to provide product assembly and packaging services, the Company
qualifies, selects, certifies and manages the sourcing and manufacturing of the
various products and related components including, among other things, the
printing of boxes, labels, manuals and other printed materials to be included
with the client's product and the mass duplication of software onto various
media. Such product and related components are then assembled and packaged at
the Company's facilities. The Company monitors the quality of its suppliers
through visits to manufacturing facilities and utilizes just-in-time production
to minimize inventory in the Company's warehouses. Management believes that the
Company's strong, long-term relationships with multiple suppliers allows the
Company to be flexible and responsive to its clients, while minimizing costs and
the Company's dependency on any single supplier.

PRODUCT ASSEMBLY AND PACKAGING. The Company assembles and packages products
in various containers, including folding cartons, set-up boxes, compact disc
jewel cases, digi-packs, binders and slip cases. The Company assembles and
packages products in the United States, the United Kingdom and Singapore and has
a global capacity of approximately 400,000 units per day, which capacity varies
depending on the size and complexity of the product. The Company's assembly
lines have been designed with significant flexibility, enabling the Company to
assemble and package various types of products and rapidly change the type of
product produced. During peak periods of operations, the Company's capacity is
dependent upon (i) the complexity of the product to be assembled; (ii) the
availability of materials from suppliers; (iii) the availability of temporary
personnel to increase capacity; (iv) the number of shifts operated by the
Company; and (v) the ability to activate additional production lines. During
peak periods, the Company has expanded assembly production to approximately four
times the output of slower periods.

PRODUCT DISTRIBUTION. The Company's sophisticated inventory management
systems enable the Company to ship and track products to distribution centers,
to individual stores and to its clients' customers directly. Product orders are
received by the Company via file transfer protocol (FTP), the Internet,

29
<PAGE>
electronic data interchange (EDI) and facsimile, as well as through the
Company's product order teleservices described above.

PRODUCT ORDER FULFILLMENT. StarTek personnel process, pack and ship product
orders and requests for promotional and educational literature, and direct
customers of the Company's clients to product or service sources ("fulfillment")
by telephone, e-mail, facsimile and the Internet, 24 hours per day, seven days
per week. The Company provides same-day shipping of customer orders if the
product is available.

CUSTOMER CARE TELESERVICES. Customer care programs are customized by the
Company to meet its clients' needs. The Company customizes responses to various
customer product inquiries by designing special greetings, marketing messages
and specific queue-time controls. A StarTek service representative receiving a
call can enter customer information into the Company's call-tracking system,
listen to a question, and quickly access a proprietary networked database via
personal computer to locate an answer to a customer's question. A senior quality
control team member is available to provide additional assistance for complex or
unique customer questions. As additional product information becomes available,
the Company promptly integrates such information into its database, thereby
ensuring that answers are based upon the latest product information.

Each customer interaction presents the Company and its clients with an
opportunity to gather valuable customer information, including the customer's
demographic profile and preferences. This information can prompt the StarTek
service representative to make logical, progressive inquiries about the
customer's interest in additional products and services, identify additional
revenue generating and cross-selling opportunities, or resolve other issues
relating to a client's products or services.

TECHNICAL SUPPORT TELESERVICES. StarTek service representatives provide
technical support services by telephone, e-mail, facsimile and the Internet, 24
hours per day, seven days per week. Technical support inquiries are generally
driven by a customer's purchase of a product or by a customer's need for ongoing
technical assistance. Customers of StarTek's clients dial a technical support
number listed in their product manuals and, based on touch-tone responses, are
automatically connected to an appropriate StarTek service representative who is
specially trained in the applicable product. Each StarTek service representative
acts as a transparent extension of its clients when resolving complaints,
diagnosing and resolving product or service problems, or answering technical
questions.

INTERNATIONAL OPERATIONS

StarTek provides its outsourced services on an international basis from the
United Kingdom and Singapore. The Company's facility in the United Kingdom
provides the full range of the Company's outsourced services for clients
throughout Europe, including inbound product order, customer care and technical
support teleservices in five languages. The Company currently provides supplier
management, product assembly and packaging and product distribution for one of
its major clients through a subcontract relationship with a company in
Singapore. This subcontract relationship operates on a purchase order basis.

CLIENTS

StarTek provided services to approximately 100 clients in North America,
Europe and Asia during 1996. StarTek's clients include companies engaged
primarily in the computer software, computer hardware, electronics,
communications and other technology-related industries. Approximately 38.4% and
33.4% of

30
<PAGE>

the Company's revenues in 1996 were attributable to Hewlett Packard and
Microsoft, respectively. Based upon 1996 revenues, StarTek's ten largest
clients, listed alphabetically, were:

<TABLE>
<S> <C>
Broderbund Software, Inc. Microsoft Corporation
Canon Inc. Polaroid Corporation
Electronic Arts, Inc. Sony Electronics, Inc.
Federal Express Corporation The 3DO Company
Hewlett-Packard Company Viacom International, Inc.
</TABLE>

The Company typically enters into a written agreement with each client for
outsourced services or performs services on a purchase order basis. Under
substantially all of the Company's significant arrangements with its clients,
the Company generates revenues based in large part, on the number and duration
of customer inquiries (subject to certain minimum monthly payments) and the
volume, complexity and type of components involved in the clients products.
Although the Company currently seeks to sign multi-year contracts with its
clients, the Company's contracts generally (i) permit termination upon
relatively short notice by the client, (ii) do not designate the Company as the
client's exclusive outsourced service provider and (iii) do not penalize the
client for early termination. To the extent the Company works on a purchase
order basis, the agreement with the client frequently does not provide for
minimum purchase requirements, except in connection with its customer care and
technical support services. See "Risk Factors-- Risks Associated with the
Company's Contracts."

Hewlett Packard began its outsourcing relationship with the Company in 1987.
The Company currently performs the full range of its services for numerous
separate divisions of Hewlett Packard. Services are performed on a purchase
order or project-specific agreement basis, subject to a master purchase
agreement (the "HP Agreement"). The HP Agreement provides that the engagement of
the Company is non-exclusive and does not provide any minimum guarantee by
Hewlett Packard of a specific level of business for the Company. The HP
Agreement has an 18 month term, and is subject to renewal by agreement of the
parties.

Microsoft began its outsourcing relationship with the Company in April 1996.
The Company currently performs supplier management, product manufacturing, and
product distribution services for Microsoft. Services are performed on a
purchase order basis, subject to a supply, manufacturing and services agreement
(the "MS Agreement"). The MS Agreement provides that the engagement of the
Company is non-exclusive and does not guarantee the Company a minimum level of
business from Microsoft. Such agreement renews automatically for one-year
periods, subject to termination, at any time, upon 90 days prior written notice.
The Company has agreed to maintain ISO 9002 certification of its facility in
Greeley, Colorado, and a product manufacturing capacity at such facility of not
less than 400,000 units per week, at a rate of 80,000 units per day. The Company
currently maintains capacity at this facility sufficient to satisfy its
obligations under the MS Agreement and the ongoing product manufacturing,
assembly, packaging and distribution needs of other clients.

SALES AND MARKETING

The Company's marketing objective is to develop long-term relationships with
existing and potential clients to become the preferred worldwide vendor of
outsourced services. StarTek invests significant resources to create a strategic
partnership relationship with its clients to understand their existing
operations, customer service processes, culture, decision parameters and goals.
A StarTek team assesses the client's outsourcing service needs, and, together
with the client, develops and implements customized solutions. Management
believes that, as a result of StarTek's strategic relationship with its clients
and comprehensive understanding of their businesses, the Company can identify
new revenue generating opportunities, customer interaction possibilities and
product service improvements not adequately addressed by the client. The
Company's sales strategy emphasizes multiple contacts with a client to
strengthen its relationship and facilitate the cross-selling of services.

31
<PAGE>

StarTek markets its outsourced services through a variety of methods,
including personal sales calls, client referrals, attendance at trade shows,
advertisements in industry publications, and the cross-selling of services to
existing clients. In order to enhance its marketing efforts, the Company
increased its sales force to 12 full-time professionals as of the date of this
offering, from four at the end of 1996. As part of its marketing efforts, the
Company encourages visits to its facilities, where the Company demonstrates its
services, quality procedures and ability to accommodate additional business.

Management believes a key element to sales growth is the ability to
flexibly, effectively and efficiently expand service capacity to meet client
needs as its clients grow or outsource more of their non-core operations to the
Company. In addition, to attract new clients to StarTek's services, the Company
must have the resources to develop a strategy to meet a new client's outsourcing
goals promptly, as well as the ability to implement operations for such client
quickly and accurately. In order to achieve these goals, the Company currently
maintains a level of excess capacity to expand its operations as necessary to
meet increased client demand.

TECHNOLOGY

The Company employs sophisticated technology and proprietary software that
incorporates digital switching, relational database management systems, call
tracking systems, workforce management systems, object-oriented software modules
and telephone-computer integration. The Company's digital switching technology
enables calls to be routed to the next available teleservice representative with
the appropriate product knowledge, skill and language abilities. Call tracking
and workforce management systems generate and track historical call volumes by
client, enabling the Company to schedule personnel efficiently, anticipate
fluctuations in call volume and provide clients with detailed information
concerning the status and results of the Company's services on a daily basis.
Management believes that the Company's proprietary technology platform provides
the Company with a competitive advantage in maintaining existing clients and
attracting new clients. A portion of the net proceeds of this offering allocated
for working capital and general corporate purposes will be used by the Company
to enhance its existing telecommunications equipment and computer and software
systems. See "Use of Proceeds."

EMPLOYEES AND TRAINING

StarTek's success in recruiting, hiring, and training large numbers of
full-time, skilled employees and obtaining large numbers of hourly employees
during peak periods for product assembly, packaging and distribution services is
critical to the Company's ability to provide high quality outsourced services.
To maintain good employee relations and to minimize turnover, the Company offers
competitive pay, hires primarily full-time employees who are eligible to receive
the full range of employee benefits, and provides employees with clear, visible
career paths. As of February 28, 1997, the Company had 1,051 employees, of which
approximately 75% were full-time. The number of temporary employees varies
significantly during the year due to the seasonal variations of the Company's
business. Management believes that the demographics surrounding its facilities,
and its reputation, stability and compensation plans should allow the Company to
continue to attract and retain qualified employees. The Company considers its
employee relations to be good. See "Risk Factors--Dependence on Labor Force."

In keeping with StarTek's continuous improvement philosophy, the Company is
committed to training all of its employees. StarTek provides formal training for
senior management, supervisors, process managers, quality coordinators, and
teleservice representatives. StarTek also maintains an employee quality program
to backup every employee, including specialized quality coordinators who teach
problem solving, assist with teleservice calls and offer immediate performance
feedback. On a more informal basis, the Company provides on-the-job process
training and tutoring for all process management personnel. Employee teams
gather daily to receive information about products to be produced and techniques
to be utilized, and have an opportunity to ask questions and receive one-on-one
training, as necessary.

32
<PAGE>

The Company's in-house training program for customer care and technical
support teleservicing employees is founded on an in-depth, structured learning
environment that builds technical competence and teaches critical software
skills necessary to provide effective customer care and technical support
teleservices. Each teleservice representative is specially designated and
trained to support a particular product or group of products for a particular
client. A teleservice representative receives training in product knowledge,
call listening and computer skills prior to answering any customer calls
independently. This training time depends on the complexity of the product for
which such representative will provide teleservices. Further, the Company uses
live and taped call reviews and customer feedback surveys to continue to monitor
and enhance its level of customer support services.

INDUSTRY AND COMPETITION

With the goal of focusing on their core businesses, companies are
increasingly turning to outsourced service companies to perform specialized
functions and services. Outsourcing of non-core activities offers a strategic
advantage to companies in a wide range of industries by offering them an
opportunity to reduce operating costs and working capital needs, improve their
reaction to business cycles, manage capacity and improve customer and technical
information gathering and utilization. To realize these advantages, companies
are outsourcing the process of planning, implementing and controlling the
efficient flow of goods, services, teleservices and related information from the
point of origin to the point of consumption. Additionally, rapid technological
changes and rising customer expectations for high-quality goods and services
make it increasingly difficult and expensive for companies to maintain the
necessary personnel and product capabilities in-house to support a product's
life cycle on a cost-effective basis. Companies which focus on providing these
services as their core business, including StarTek, are expected to continue to
benefit from these outsourcing trends.

StarTek competes on the basis of quality, reliability of service, price,
efficiency, speed and flexibility in tailoring services to client needs.
Management believes its comprehensive and integrated services differentiate it
from its non-client competitors who may only be able to provide one or a few of
the outsourced services that StarTek provides. The Company continuously explores
new outsourcing service opportunities, typically in circumstances where clients
are experiencing inefficiencies in non-core areas of their businesses and
management believes it can develop a superior outsourced solution to such
inefficiency on a cost-effective basis. Management believes that it competes
primarily with the in-house teleservice, customer service and logistics
management operations of its current and potential clients. StarTek also
competes with certain companies that provide similar services on an outsourced
basis including, APAC Teleservices, Inc., Kao Corporation, Logistix Corporation,
MATRIXX Marketing Inc., National TechTeam, Inc., Precision Response Corp., SITEL
Corporation, Stream International Inc., Sykes Enterprises Incorporated, TeleTech
Holdings, Inc. and West Teleservices Corporation. In addition, there are
numerous competitors of all sizes that provide product order teleservices and
product fulfillment distribution services.

FACILITIES

StarTek's facilities include a Company-owned 138,000-square-foot building in
Denver, Colorado (which also contains the Company's executive offices), and a
100,000-square-foot Company-owned building and a 10,500-square-foot
Company-owned building, both located in Greeley, Colorado. StarTek performs its
international outsourced services from a leased 53,000-square-foot building in
Hartlepool, County Durham on the northeast coast of England. In Asia, the
Company utilizes a subcontractor that operates from a 25,000-square-foot
facility located in Singapore.

Of the Company's 614 teleservice workstations in the United States as of
February 28, 1997, 249 were located in the Denver building (which has space to
expand to approximately 1,250 workstations) and 365 were located in the Greeley
buildings. The Company's process management services in the United States
primarily operate from the Company's Greeley facilities. The Company's United
Kingdom facility provides space for each of the Company's outsourced services
and the Company's subcontractor in Singapore

33
<PAGE>
provides space for the Company's supplier management, product assembly and
packaging and product distribution services. Management believes that its
existing facilities are adequate for its current operations, but that additional
facility capacity will be required to support continued growth. The Company
intends to use a portion of the net proceeds to the Company from this offering
to expand its existing facilities. See "Use of Proceeds."

INTELLECTUAL PROPERTY

The Company owns the servicemarks "StarTek" and "StarPak," and intends to
file for federal registration of these servicemarks prior to closing this
offering. Due to the common use of identical or phonetically similar
servicemarks by other companies in different businesses, there can be no
assurance that the United States Patent and Trademark Office will grant the
Company registration of its servicemarks, or that such servicemarks will not be
challenged by other users. The Company does not believe that it owns or utilizes
any other servicemarks that are material to its business. The Company's
operations, however, frequently incorporate proprietary and confidential
information. In accordance with industry practice, the Company relies upon a
combination of contract provisions and trade secret laws to protect the
proprietary technology it uses and to deter misappropriation of its proprietary
rights and trade secrets.

LEGAL PROCEEDINGS

The Company has been involved from time to time in litigation arising in the
normal course of business, none of which is expected by management to have a
material adverse effect on the business, financial condition or results of
operations of the Company.

34
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- -------------------------------------------------
<S> <C> <C>
A. Emmet Stephenson, Jr..... 51 Chairman of the Board and Director
Michael W. Morgan........... 36 President, Chief Executive Officer and Director
E. Preston Sumner, Jr....... 44 Executive Vice President and Chief Operating
Officer
Dennis M. Swenson........... 61 Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
Thomas O. Ryder............. 52 Director
Ed Zschau................... 57 Director
</TABLE>

A. EMMET STEPHENSON, JR. co-founded the Company in 1987 and has served as
Chairman of the Board of the Company since its formation. Mr. Stephenson has
also served as President of Stephenson and Company, a private investment firm in
Denver, Colorado, for more than five years. Mr. Stephenson is a director of
Danaher Corporation and serves on the Advisory Boards of First Berkshire Fund
and Capital Resource Partners, L.P.

MICHAEL W. MORGAN co-founded the Company in 1987 and has held managerial
positions in companies providing outsourced services since 1984. Mr. Morgan has
served as President and Chief Executive Officer of the Company since May 1990
and has served as a Director of the Company since January 1997.

E. PRESTON SUMNER, JR. co-founded the Company in 1987, served as
Vice-Chairman of the Board from inception of the Company through December 1994
and rejoined the Company in February 1997 as Executive Vice President and Chief
Operating Officer. Mr. Sumner was also a managing director of Stephenson
Merchant Banking, a private investment firm in Denver, Colorado from 1986
through December 1994. From January 1995 through February 1997, Mr. Sumner was a
director and Vice President--Corporate Development of Merrick & Company, an
engineering and architectural firm, and will continue to serve as a director and
non-executive chairman of the board of such company.

DENNIS M. SWENSON has served as Chief Financial Officer of the Company since
October 1995 and as Executive Vice President since October 1996. From October
1991 to September 1995, Mr. Swenson was an independent financial consultant. Mr.
Swenson was a partner of Ernst & Young LLP from 1973 until 1991.

THOMAS O. RYDER has served as a Director of the Company since January 1997.
He has been President of Travel Related Services International for American
Express TRS Company, Inc. since October 1995. Mr. Ryder has also been Chairman
of the Board of American Express Publishing Corporation since December 1991.
From February 1992 through October 1995, he served as President of American
Express Establishment Services Worldwide. From January 1988 through February
1992, Mr. Ryder served as President of Direct Marketing Group, which included
American Express Merchandise Services, American Express Publishing Corporation
and Epsilon Data Management Corporation. He is a director of Club Mediterranee.

ED ZSCHAU has served as a Director of the Company since January 1997. He has
been a Senior Lecturer of Business Administration at Harvard University since
February 1996. From April 1993 to July 1995, Mr. Zschau was General Manager,
Storage System Division at IBM Corporation. From July 1988 to April 1993, he was
Chairman and Chief Executive Officer of Censtor Corp., a company that researches
and develops magnetic recording components for disk drives. Mr. Zschau is a
director of Indentix, Inc., GenRad, Inc. and Censtor Corp.

The executive officers of the Company serve at the discretion of its Board
of Directors. Directors of the Company hold office until the next annual meeting
of the Company's stockholders and until their

35
<PAGE>

successors have been duly elected and qualified, or until their earlier
resignation, removal from office or death.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors established a compensation committee and an audit
committee of its Board of Directors in January 1997.

COMPENSATION COMMITTEE. The Compensation Committee, which consists of
Messrs. Stephenson, Ryder and Zschau, will determine the compensation to be paid
to all executive officers of the Company. The current executive officer salaries
were set by the Board of Directors prior to establishment of the Compensation
Committee.

AUDIT COMMITTEE. The Audit Committee, which is comprised of Messrs. Ryder
and Zschau, the Company's two independent directors, will be responsible to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans and results of the
audit engagement, approve professional services provided by the independent
public accountants, review independence of the independent public accountants,
consider the range of audit and non-audit fees and review the adequacy of the
Company's internal accounting controls and financial management practices.

COMPENSATION OF DIRECTORS

StarTek does not pay its directors any cash compensation for their services
as directors. Directors will be reimbursed for expenses incurred in connection
with meetings of the Board of Directors or committees thereof.

The Company has adopted the Director Option Plan, which provides for an
automatic initial grant and an annual grant to each director who is not an
employee or officer of the Company (a "non-employee director") of options to
acquire shares of Common Stock. A total of 90,000 shares of Common Stock have
been reserved for issuance pursuant to options granted under the Director Option
Plan. All options granted under the Director Option Plan will be non-qualified
options that are not intended to qualify under Section 422 of the Code.

The Director Option Plan provides that each non-employee director will
receive (i) options to acquire 10,000 shares of Common Stock upon the later of
the closing of an initial public offering of Common Stock or such director's
initial election to the Board of Directors and (ii) options to acquire 3,000
shares of Common Stock on the date of each annual meeting of stockholders
thereafter at which such director is reelected. The exercise price of each
option granted under the Director Option Plan will equal the fair market value
of the Common Stock on the date of grant. Options granted under the Director
Option Plan will (a) vest immediately and (b) expire on the earliest to occur of
the tenth anniversary of the date of grant, one year following the director's
death or immediately upon the director's termination of membership on the Board
of Directors for "cause" (as defined in the Director Option Plan).

The Company has granted Thomas O. Ryder and Ed Zschau options to acquire
10,000 shares of Common Stock each, at an exercise price per share equal to the
initial public offering price, pursuant to the terms of the Director Option
Plan. The options are fully vested and exercisable upon closing of this
offering.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year ended December 31, 1996, the Company did not have a
Compensation Committee of its Board of Directors, or other board committee
performing equivalent functions. Decisions concerning the compensation of
executive officers were made by the Board of Directors of each of the operating

36
<PAGE>
subsidiaries of the Company. Except for A. Emmet Stephenson, Jr., there are no
officers or employees of the Company who participated in deliberations
concerning such compensation matters.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following table sets forth certain
information concerning the compensation paid by the Company to the President and
Chief Executive Officer. No other executive officer of the Company earned or was
paid compensation of more than $100,000 for the year ended December 31, 1996.
See "Certain Relationships and Related Party Transactions." The Company does not
have a pension plan or a long-term incentive plan, has not issued any restricted
stock awards and did not grant any stock options during its most recent fiscal
year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
1996 ANNUAL COMPENSATION
----------------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Michael W. Morgan.............................................. $ 271,059(a) $ 666,893(b)
President and Chief Executive Officer
</TABLE>

- ------------------------

(a) Mr. Morgan's base salary is and following this offering will continue to be
$271,059, subject to modification by the Compensation Committee.

(b) Includes $643,754 of bonus, which bonus arrangement was terminated effective
December 31, 1996. Of the $643,754, Mr. Morgan recontributed $337,971 to the
Company as additional capital. Substantially all of the balance was used by
Mr. Morgan to pay applicable federal and state income taxes on such bonus.
See "Offering Related Transactions--Termination of S Corporation Status" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Historically, the Company has paid an annual management fee of approximately
$200,000 to A. Emmet Stephenson, Jr., Inc., which is wholly-owned by A. Emmet
Stephenson, Jr., Chairman of the Board of the Company, for services rendered by
Mr. Stephenson to the Company, and $70,000 annually to Stephenson Properties as
rental for certain Company facilities. This management fee and rental
arrangement was terminated effective as of December 31, 1996. See "Certain
Relationships and Related Party Transactions--Management Fees" and "--Real
Property." Effective as of January 1, 1997, the Company will pay an annual
advisory fee of $245,000 to A. Emmet Stephenson, Jr., Inc.

Effective as of February 18, 1997, the Company will pay E. Preston Sumner,
Jr., Executive Vice President and Chief Operating Officer of the Company, an
annual base salary of $150,000.

Effective as of January 1, 1997, the Company will pay Dennis M. Swenson,
Executive Vice President and Chief Financial Officer of the Company, an annual
base salary of $126,000.

STOCK OPTION PLAN

The Company has adopted the StarTek, Inc. Stock Option Plan (the "Option
Plan"), which authorizes the issuance of up to 985,000 shares of Common Stock
through the grant of (i) incentive stock options ("ISOs") within the meaning of
Section 422 of the Code, (ii) stock options that are not intended to qualify
under Section 422 of the Code ("NSOs" and together with ISOs, "Options"), and
(iii) stock appreciation rights ("SARs"). Directors (other than non-employee
directors), officers, employees, consultants and independent contractors of the
Company or any subsidiary of the Company, as selected from time to time by the
committee administering the Option Plan, will be eligible to participate in the
Option Plan.

The Option Plan provides that it is to be administered by a committee
comprised of two or more non-employee directors appointed by the Board of
Directors (the "Committee"). Subject to certain limitations,

37
<PAGE>
the Committee has complete discretion to determine which eligible individuals
are to receive awards under the Option Plan, the form and vesting schedule of
awards, the number of shares subject to each award and the exercise price, the
manner of payment and expiration date applicable to each award. The Board of
Directors has appointed Thomas O. Ryder and Ed Zschau as members of the
Committee.

Set forth below is a summary of the terms of the Option Plan that will be
applicable to each of the various types of awards covered thereby.

OPTIONS. All options will expire on the date that is the earliest of three
months after the holder's termination of employment with the Company (other than
termination for cause), six months after the holder's death and 10 years after
the date of grant. Options will be subject to forfeiture upon termination of
employment for "cause." The exercise price per share of an ISO will be
determined by the Committee at the time of grant, but in no event may be less
than the fair market value of the Common Stock on the date of grant.
Notwithstanding the foregoing, if an ISO is granted to a participant who owns
more than 10% of the voting power of all classes of stock of the Company, the
exercise price will be at least 110% of the fair market value of the Common
Stock on the date of grant and the exercise period will not exceed five years
from the date of grant. The exercise price per share of an NSO will be
determined by the Committee in its sole discretion.

STOCK APPRECIATION RIGHTS. SARs may be issued only in connection with an
NSO (a "Tandem SAR"), in which case the Tandem SAR terminates simultaneously
upon the expiration of the related NSO. A Tandem SAR will be exercisable only if
the fair market value of a share of Common Stock exceeds the exercise price of
the related NSO.

The Committee has granted to Messrs. Morgan, Sumner and Swenson, ISOs to
purchase 100,000 shares, 100,000 shares and 70,000 shares of Common Stock,
respectively, at an exercise price equal to the initial public offering price.
The Committee presently expects to grant to other employees of the Company, on
or prior to closing of this offering, ISOs to purchase approximately 325,000
shares of Common Stock, at an exercise price per share equal to the initial
public offering price. The foregoing Options will have a term of ten years and,
except as otherwise determined by the Committee, will vest 20% per year for a
five-year period commencing on the first anniversary of closing this offering.

38
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

MANAGEMENT FEES

For the years ended December 31, 1994, 1995 and 1996, the Company paid
management fees of $737,235, $2,526,122 and $5,728,381, respectively
(approximately $200,000 of which has been included in
SG&A expenses for financial statement purposes for each of the relevant years),
to A. Emmet Stephenson, Jr., Inc., which is wholly-owned by A. Emmet Stephenson,
Jr., Chairman of the Board of the Company and a Principal Stockholder. Mr.
Stephenson and Toni E. Stephenson, his spouse and a Principal Stockholder, made
capital contributions to the Company equal to approximately 53% of such
management fees, with a substantial portion of the remainder being used to pay
applicable federal and state income taxes on such fees. The Company has
terminated the management fee arrangement effective as of December 31, 1996.
Effective January 1, 1997, the Company will pay an annual advisory fee of
$245,000 to A. Emmet Stephenson, Jr., Inc.

REAL PROPERTY

The Company leased office space at 100 Garfield Street, Denver, Colorado,
from Stephenson Properties, a partnership (the "Lessor") in which A. Emmet
Stephenson, Jr., the Company's Chairman of the Board and a Principal
Stockholder, is general partner, and Toni E. Stephenson, a Principal
Stockholder, is a limited partner. The total annual lease payments for 1994,
1995 and 1996 made to the Lessor by the Company were $70,000 each year (which
has been included in SG&A expenses for financial statement purposes for each of
the relevant years). This office lease was terminated effective December 31,
1996.

LOANS

In 1994, StarPak, Inc. loaned an aggregate amount of $663,494 to its
stockholders, with interest at 8.5% per annum. These notes were refinanced
annually and repaid by the stockholders in full on November 22, 1996. After
receipt of such loan proceeds in 1994, the stockholders of StarPak, Inc. loaned
$663,494 to StarPak International, Ltd., with interest at 8.5% per annum, for
working capital purposes. These notes were refinanced annually and repaid by
StarPak International, Ltd. on November 22, 1996.

On December 31, 1994, StarPak, Inc. loaned $77,779 to Michael W. Morgan,
President and Chief Executive Officer of the Company, payable on demand without
interest. The loan was repaid in full in August 1995.

On December 31, 1994, the Company loaned $667,800 to A. Emmet Stephenson,
Jr., Inc., which is wholly-owned by Mr. Stephenson. The loan was repaid in full
in August 1995.

In 1994, StarPak International, Ltd. borrowed $75,000 from Mr. and Mrs.
Stephenson for working capital purposes, with interest at 12% per annum. The
loan was refinanced annually until November 22, 1996, when the loan was repaid
in full.

On December 29, 1995, the Company borrowed approximately $1.1 million from
General Communications, Inc., a corporation owned by A. Emmet Stephenson, Jr.,
the Company's Chairman of the Board and a Principal Stockholder, and Toni E.
Stephenson, a Principal Stockholder, for working capital purposes. The loan
accrued interest equal to the Company's line of credit rate (10% at December 31,
1995) and matured on January 31, 1997. The Company repaid the loan in full in
April 1996.

On January 9, 1996, the Company borrowed $90,000 from Michael W. Morgan, the
Company's President and Chief Executive Officer and a Principal Stockholder, for
working capital purposes. The loan accrued interest equal to the Company's line
of credit rate (10% at December 31, 1995) and matured in April 1996. The loan
and all accrued interest was repaid at such time.

During 1995, Michael W. Morgan, President and Chief Executive Officer of the
Company, exercised certain options to acquire shares of common stock of StarPak,
Inc. and delivered his promissory note in

39
<PAGE>
payment of the exercise price, bearing interest at 4.63%, payable in
installments during 1999. The note was repaid in full in January 1997.

NOTES PAYABLE TO PRINCIPAL STOCKHOLDERS

FUTURE TRANSACTIONS

The Company has implemented a policy requiring that any material transaction
between the Company and its officers, directors or an affiliated party is
subject to approval by a majority of the directors not interested in such
transaction, who must determine that the terms of any such transaction are no
less favorable to the Company than can be obtained from an unaffiliated third
party.

40
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus, and
as adjusted to reflect the sale of the shares of Common Stock being offered
hereby, by (i) each stockholder who is known by the Company to beneficially own
more than 5% of the currently outstanding shares of Common Stock; (ii) each of
the Company's Directors and executive officers; (iii) all Directors and
executive officers of the Company as a group; and (iv) the Selling Stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR NUMBER OF OWNED AFTER
TO THE OFFERING SHARES THE OFFERING(A)
NAME AND ADDRESS OF ----------------------- BEING --------------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED(A) NUMBER PERCENT
- --------------------------------------------------- ---------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
A. Emmet Stephenson, Jr. (b)(c).................... 3,761,708 32.82% 195,461 3,566,247 24.63%
Michael W. Morgan (b)(d)........................... 1,195,838 10.44 133,333 1,062,505 7.34
E. Preston Sumner, Jr. (b)(e)...................... -- * -- -- *
Dennis M. Swenson (b)(f)........................... -- * -- -- *
Toni E. Stephenson (b)(g).......................... 3,761,708 32.82 195,461 3,566,247 24.63
FASSET Trust (b)................................... 1,370,373 11.96 71,206 1,299,167 8.97
MASSET Trust (b)................................... 1,370,373 11.96 71,206 1,299,167 8.97
Pamela S. Oliver (b)(h)............................ 2,740,746 23.92 -- 2,598,333 17.34
Thomas O. Ryder (j)................................ -- * -- 10,000(i) *
Ed Zschau (k)...................................... -- * -- 10,000(i) *
All directors and executive officers
as a group (6 persons)........................... 4,957,546 43.26% 328,794 4,648,752 32.10%
</TABLE>

- ------------------------

* Less than one percent.

(a) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is fully exercised, A. Emmet Stephenson,
Jr., Michael W. Morgan, Toni E. Stephenson, FASSET Trust and MASSET Trust
(the "Selling Stockholders") will sell up to 550,000 additional shares, pro
rata based upon the number of shares of Common Stock being offered hereby by
the Selling Stockholders.

(b) The address of each person, trust or trustee is c/o the Company, 111 Havana
Street, Denver, Colorado 80010.

(c) Mr. Stephenson is the Chairman of the Board of the Company. See
"Management." Mr. Stephenson is the husband of Toni E. Stephenson. Mrs.
Stephenson disclaims beneficial ownership of shares owned by Mr. Stephenson.

(d) Does not include 100,000 shares of Common Stock issuable upon the exercise
of stock options granted to Mr. Morgan. See "Management--Stock Option Plan."
Mr. Morgan is President and Chief Executive Officer of the Company. See
"Management."

(e) Does not include 100,000 shares of Common Stock issuable upon the exercise
of stock options granted to Mr. Sumner. See "Management--Stock Option Plan."
Mr. Sumner is Executive Vice President and Chief Operating Officer of the
Company. See "Management."

(f) Does not include 70,000 shares of Common Stock issuable upon the exercise of
stock options granted to Mr. Swenson. See "Management--Stock Option Plan."
Mr. Swenson is Executive Vice President and Chief Financial Officer of the
Company. See "Management."

(g) Mrs. Stephenson is the wife of A. Emmet Stephenson, Jr. Mr. Stephenson
disclaims beneficial ownership of shares owned by Mrs. Stephenson. From the
inception of StarPak, Inc. and StarPak International, Ltd. until January 23,
1997, Mrs. Stephenson was a director of each such company, and will continue
to act as a vice president of such companies, without compensation.

41
<PAGE>
(h) Represents shares owned by the FASSET Trust and MASSET Trust. Mrs. Oliver is
the sole trustee of each of the trusts and has sole voting power and
investment power with respect to the Common Stock held by the trusts. Mrs.
Oliver is Mr. Stephenson's sister. From the inception of StarPak, Inc. and
StarPak International, Ltd. until January 23, 1997, Mrs. Oliver was a
director of each such company, and will continue to act as a vice president
of such companies, without compensation.

(i) Includes 10,000 shares of Common Stock issuable upon the exercise of stock
options granted to Messrs. Ryder and Zschau. See "Management--Compensation
of Directors."

(j) Mr. Ryder's business address is 200 Vesey Street, New York, New York 10285.

(k) Mr. Zschau's business address is Harvard Business School, Baker Library 371,
Boston, Massachusetts 02163.

42
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, the Company will have 14,460,000 shares
of Common Stock outstanding. All of the shares offered hereby will be freely
tradeable without restriction or registration under the Securities Act, except
for any shares purchased by an "affiliate" of the Company (in general, a person
who has a control relationship with the Company), which will be subject to the
limitations of Rule 144 promulgated under the Securities Act. All of the
remaining 10,793,333 outstanding shares of Common Stock (or 10,243,333 shares if
the Underwriters' over-allotment option is fully exercised) are deemed to be
"restricted securities" as that term is defined in Rule 144. Beginning 180 days
after the date of this Prospectus, upon the expiration of lock-up agreements
with DLJ (described below), 10,621,230 of these restricted shares (10,171,230
shares if the Underwriters' over-allotment option is fully exercised) will be
available for sale subject to compliance with Rule 144 volume and other
requirements. The remaining 172,103 shares of restricted securities (62,103
shares if the Underwriters' over-allotment option is fully exercised) will be
eligible for sale beginning January 21, 1998, subject to compliance with Rule
144 volume and other requirements.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
within the meaning of Rule 144 ("Restricted Shares") for at least one year,
including the holding period of any prior owner except an affiliate, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of (i) one percent of the then outstanding shares of Common
Stock (approximately 144,600 shares after giving effect to this offering) or
(ii) the average weekly trading volume of the Common Stock on the NYSE during
the four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain "manner of sale"
provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who has beneficially owned shares
for at least two years (including any period of ownership of preceding
nonaffiliated owners), would be entitled to sell such shares under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.

The Selling Stockholders and the Company have agreed with DLJ that until 180
days after the date of this Prospectus they will not, directly or indirectly,
offer, sell, contract to sell, grant any option to purchase or otherwise dispose
of any Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or in any manner transfer all or a portion of the
economic consequences associated with the ownership of the Common Stock, or
cause a registration statement covering any shares of Common Stock to be filed,
without the prior written consent of DLJ, subject to certain limited exceptions,
including grants of options pursuant to, and issuance of shares of Common Stock
upon exercise of options under, the Option Plan and the Director Option Plan.
See "Risk Factors--Substantial Number of Shares Eligible for Future Sale."

Prior to this offering, there has been no public market for the Common
Stock. The Company can make no predictions as to the effect, if any, that public
sales of shares of Common Stock or the availability of shares for sale will have
on the market price from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market or the perception that such
sales could occur, could adversely affect the prevailing market prices of the
Common Stock and could impair the Company's future ability to raise capital
through an offering of its equity securities.

43
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 95,000,000 shares of
Common Stock, and 15,000,000 shares of Preferred Stock, $.01 par value
("Preferred Stock"), which may be issued in one or more series. As of the date
of this Prospectus, the Company's issued and outstanding Common Stock is held by
five holders of record. Immediately following the completion of this offering,
an aggregate of 14,460,000 shares of Common Stock will be issued and
outstanding, and no shares of Preferred Stock will be issued or outstanding.

The following description of the Company's capital stock is a summary of the
material terms of such stock. It does not purport to be complete and is subject
in all respects to applicable Delaware law and to the provisions of the
Company's Restated Certificate of Incorporation and Restated Bylaws, copies of
which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.

COMMON STOCK

The Board of Directors of the Company in its sole discretion may issue
shares of Common Stock from the authorized and unissued shares of Common Stock.
Holders of Common Stock are entitled to one vote per share on all matters to be
voted upon by the stockholders, including the election of directors. The
Company's Restated Certificate of Incorporation does not provide for cumulative
voting in the election of directors.

Holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. The Company does not anticipate paying any cash dividends in
the foreseeable future. See "Dividend Policy." In the event of liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably in all assets remaining after payment of liabilities and after
satisfaction of the liquidation preference of any outstanding Preferred Stock.

Holders of Common Stock have no preemptive, conversion or redemption rights
and are not subject to further assessments by the Company. Upon consummation of
this offering, all of the then outstanding shares of Common Stock will be
validly issued, fully paid and nonassessable.

PREFERRED STOCK

The Company's Board of Directors is authorized to issue from time to time,
without stockholder authorization, in one or more designated series, any or all
of the authorized but unissued shares of Preferred Stock with such dividend,
redemption, conversion and exchange provisions as may be provided for the
particular series. Any series of Preferred Stock may possess voting, dividend,
liquidation and redemption rights superior to those of the Common Stock. The
rights of the holders of Common Stock will be subject to and may be adversely
affected by the rights of the holders of any Preferred Stock that may be issued
in the future. Issuance of a new series of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could make it more difficult for a third party to acquire,
or discourage a third party from acquiring, the outstanding voting stock of the
Company, and make removal of the present Board of Directors more difficult. The
Company has no present plans to issue any shares of Preferred Stock. See "Risk
Factors--Anti-Takeover Provisions."

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law ("DGCL"). In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date such person became an interested stockholder unless (i) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder

44
<PAGE>
became an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and directors
of the corporation and shares held by certain employee stock ownership plans) or
(iii) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of at least two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Restated Certificate of Incorporation and Restated Bylaws
provide that, to the fullest extent permitted by the DGCL, a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director. Under the DGCL, liability of
a director may not be limited (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) in respect of certain unlawful dividend payments or stock redemptions or
repurchases and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of the provisions of the Company's
Restated Certificate of Incorporation and Restated Bylaws is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior), except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
nonmonetary relief such as an injunction or rescission in the event of a breach
of a director's duty of loyalty. In addition, the Company's Restated Certificate
of Incorporation and Restated Bylaws provide that the Company shall indemnify
its directors and officers, against losses incurred by any such person by reason
of the fact that such person was acting in such capacity.

CERTAIN ANTI-TAKEOVER EFFECTS

The provisions of the Restated Certificate of Incorporation and the Restated
Bylaws of the Company summarized above may be deemed to have anti-takeover
effects and may delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider to be in such stockholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders. See "Risk Factors--Anti-Takeover
Provisions."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is UMB Bank, N.A.,
Kansas City, Missouri.

45
<PAGE>
UNDERWRITING

Subject to certain terms and conditions contained in an underwriting
agreement (the "Underwriting Agreement"), the Underwriters named below for whom
DLJ and Morgan Stanley & Co. Incorporated are serving as representatives (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set forth
opposite their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........................................
Morgan Stanley & Co. Incorporated..........................................................

----------
Total.................................................................................... 3,666,667
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of Common Stock are purchased by the Underwriters pursuant to the
Underwriting Agreement, all of the shares of Common Stock (other than the shares
of Common Stock covered by the Underwriters' over-allotment option described
below) must be so purchased.

Prior to this offering, there has been no established trading market for the
Common Stock. The initial price to the public for the Common Stock offered
hereby will be determined by negotiation between the Company and the
Representatives. The factors to be considered in determining the initial price
to the public include the history of and the prospects for the industry in which
the Company competes, the performance and ability of the Company's management,
the past and present operations of the Company, the historical results of
operations of the Company, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of this offering and the
recent market prices of securities of generally comparable companies. The
estimated initial public offering price range set forth on the cover page of
this Prospectus is subject to change as a result of market conditions and other
factors.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the price
to the public set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price less a concession not
to exceed $ per share. The Underwriters may allow, and such dealers may
reallow, discounts not in excess of $ per share to any other Underwriter
and certain other dealers. After this offering, the offering price and other
selling terms may be changed by the Underwriters.

The Selling Stockholders have granted to the Underwriters an option to
purchase up to an aggregate of 550,000 additional shares of Common Stock, pro
rata based on the number of shares of Common Stock being offered hereby by the
Selling Stockholders, at the initial public offering price less underwriting
discounts and commissions, solely to cover over-allotments. Such option may be
exercised in whole or in part from time to time during the 30-day period after
the date of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase from the Selling Stockholders on a pro rata basis a
number of option shares proportionate to such Underwriter's initial commitment
as indicated in the preceding table.

46
<PAGE>
The Underwriters have reserved up to 5% of the shares of Common Stock
offered hereby for sale at the initial public offering price to certain
employees, consultants and other persons associated with the Company. The number
of shares of Common Stock available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares. Any reserved
shares not so purchased will be offered by the Underwriters to the general
public on the same basis as the other shares offered hereby. This program will
be administered by DLJ.

The Company and the Selling Stockholders have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or
in any manner transfer all or a portion of the economic consequences associated
with the ownership of such Common Stock, or to cause a registration statement
covering any shares of Common Stock to be filed, for 180 days after the date of
this Prospectus without the prior written consent of DLJ, subject to certain
limited exceptions, and provided that the Company may grant options pursuant to,
and issue shares of Common Stock upon the exercise of options under the Option
Plan and the Director Option Plan. See "Shares Eligible for Future Sale."

The Representatives have informed the Company that they do not expect to
make sales to accounts over which they exercise discretionary authority in
excess of % of the number of shares of Common Stock offered hereby.

The Common Stock has been approved for listing on the New York Stock
Exchange ("NYSE") under the symbol "SRT," pending notification of issuance. In
order to meet the requirements for listing on the NYSE, the Underwriters have
undertaken to sell lots of 100 or more shares of Common Stock to a minimum of
2,000 beneficial holders.

47
<PAGE>
LEGAL MATTERS

The validity of the shares of the Common Stock offered hereby will be passed
upon for the Company by Otten, Johnson, Robinson, Neff & Ragonetti, P.C.,
Denver, Colorado. Certain legal matters will be passed upon for the Underwriters
by Morgan, Lewis & Bockius LLP, Los Angeles, California.

EXPERTS

The combined financial statements of StarTek, Inc. at December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and the Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement"), of which this Prospectus forms a part, covering the Common Stock to
be sold pursuant to this offering. As permitted by the rules and regulations of
the Commission, this Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. Such additional
information, exhibits and undertakings can be inspected at and obtained from the
Commission at prescribed rates at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at certain regional offices of the Commission located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 13th Floor, 7 World Trade Center, New York, New York, 10048.
The Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. In addition, the Company intends
to file an application to list the Common Stock on the NYSE, and following such
filing, the reports and other information concerning the Company may be
inspected at the offices of such exchange. For additional information with
respect to the Company, the Common Stock and related matters and documents,
reference is made to the Registration Statement. Statements contained herein
concerning any such document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference.

The Company intends to furnish its stockholders with annual reports, which
will include audited consolidated and combined financial statements prepared in
accordance with accounting principles generally accepted in the United States
and a report of its independent public accountants with respect to the
examination of such financial statements. In addition, the Company will make
available to or furnish its stockholders with such other interim reports as the
Company deems appropriate or as may be required by law.

48
<PAGE>
STARTEK, INC.

INDEX TO COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------

<S> <C>
Report of Independent Auditors............................................................................. F-2

Combined Balance Sheets as of December 31, 1995 and 1996................................................... F-3

Combined Statements of Operations for the years ended December 31, 1994, 1995 and 1996..................... F-4

Combined Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996........... F-5

Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996..................... F-6

Notes to Combined Financial Statements..................................................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
StarTek, Inc.

We have audited the accompanying combined balance sheets of StarPak, Inc.
and StarPak International, Ltd. as of December 31, 1995 and 1996, and the
related combined statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of StarPak, Inc. and
StarPak International, Ltd. at December 31, 1995 and 1996, and the combined
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

ERNST & YOUNG LLP

Denver, Colorado
February 18, 1997

F-2
<PAGE>
STARTEK, INC.
(NOTE 1)
COMBINED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- DECEMBER 31,
1995 1996 1996(NOTE 2)
------------ ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents............................................ $ 451,456 $ 2,742,313 $2,742,313
Trade accounts receivable, less allowance for doubtful accounts of
$197,747 and $311,172 in 1995 and 1996, respectively............... 13,261,904 11,030,948 11,030,948
Inventories (Note 3)................................................. 1,357,843 2,535,091 2,535,091
Prepaid expenses..................................................... 225,162 140,132 140,132
Notes receivable--stockholders (Note 13)............................... 663,494 -- --
------------ ------------ ------------
Total current assets................................................... 15,959,859 16,448,484 16,448,484
Property, plant and equipment, net (Note 4)............................ 5,614,670 6,527,238 6,527,238
Other assets........................................................... 5,627 3,000 3,000
------------ ------------ ------------
Total assets........................................................... $ 21,580,156 $ 22,978,722 $22,978,722
------------ ------------ ------------
------------ ------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit (Note 5).............................................. $ 3,450,708 $ 3,500,000 $3,500,000
Accounts payable..................................................... 9,705,673 6,961,675 6,961,675
Accrued liabilities................................................ 551,588 1,584,347 1,584,347
Current portion of capital lease obligations......................... 547,595 917,244 917,244
Current portion of long-term debt.................................... 7,059 5,673 5,673
Notes payable--stockholders (Note 13)................................ 738,494 -- --
Other................................................................ 161,049 583,813 583,813
Notes payable to Principal Stockholders (Note 14).................... -- -- 6,973,300
------------ ------------ ------------
Total current liabilities.............................................. 15,162,166 13,552,752 20,526,052
Capital lease obligations, less current portion (Note 6)............... 1,084,575 1,503,702 1,503,702
Long-term debt, less current portion (Note 7).......................... 353,787 548,175 548,175
Note payable--affiliate (Note 13)...................................... 1,111,844 -- --
Other.................................................................. 69,885 271,305 271,305
Commitments (Note 6)
Stockholders' equity (Notes 9 and 10)
Common stock........................................................... 432 432 432
Additional paid-in capital............................................. 2,907,826 6,148,196 --
Cumulative translation adjustment...................................... (9,922) 129,056 129,056
Retained earnings...................................................... 1,112,897 1,038,438 --
Note receivable--stockholder for the exercise of stock options (Note
10).................................................................. (213,334) (213,334) --
------------ ------------ ------------
Total stockholders' equity............................................. 3,797,899 7,102,788 129,488
------------ ------------ ------------
Total liabilities and stockholders' equity............................. $ 21,580,156 $ 22,978,722 $22,978,722
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying Notes.

F-3
<PAGE>
STARTEK, INC.
(NOTE 1)
COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PRO FORMA
------------------------------------------- DECEMBER 31,
1994 1995 1996 1996 (NOTE 2)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Revenues............................................ $ 26,340,985 $ 41,509,363 $ 71,583,861 $ 71,583,861
Cost of services.................................... 21,354,828 33,230,050 57,238,261 57,238,261
------------- ------------- ------------- -------------
Gross profit........................................ 4,986,157 8,279,313 14,345,600 14,345,600
Selling, general and administrative expenses........ 4,489,529 5,341,384 7,763,900 7,763,900
Management fee expense (Note 2)..................... 612,440 2,599,612 6,172,135 --
------------- ------------- ------------- -------------
Operating profit (loss)............................. (115,812) 338,317 409,565 6,581,700
Net interest expense and other (Note 8)............. 215,541 396,255 372,134 372,134
------------- ------------- ------------- -------------
Income (loss) before income taxes................... (331,353) (57,938) 37,431 6,209,566
Income tax expense (Note 2)......................... -- -- 111,890 2,316,168
------------- ------------- ------------- -------------
Net income (loss)................................... $ (331,353) $ (57,938) $ (74,459) $ 3,893,398
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Pro forma net income per share (Note 2)............. $ 0.33
Shares outstanding (Note 2)......................... 11,924,887
</TABLE>

See accompanying Notes.

F-4
<PAGE>
STARTEK, INC.
(NOTE 1)
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL NOTE CUMULATIVE TOTAL
PAID-IN RETAINED RECEIVABLE-- TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDER ADJUSTMENT EQUITY
--------- ----------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994............. 35,612 $ 355 $ 1,123,419 $ 1,502,188 $ -- $ (2,121) $2,623,841
Issuance of stock for cash......... 6,925 70 726,816 -- -- -- 726,886
Translation loss................... -- -- -- -- -- (12,928) (12,928)
Net loss........................... -- -- -- (331,353) -- -- (331,353)
--------- ----- ----------- ----------- ------------ ----------- ------------
Balance, December 31, 1994........... 42,537 425 1,850,235 1,170,835 -- (15,049) 3,006,446
Issuance of stock for cash......... 820 8 89,195 -- -- -- 89,203
Issuance of stock for options
exercised........................ 1,728 17 231,147 -- -- -- 231,164
Note receivable--stockholder....... -- -- -- -- (213,334) -- (213,334)
Repurchase of stock................ (1,885) (18) (129,724) -- -- -- (129,742)
Contributed capital................ -- -- 866,973 -- -- -- 866,973
Translation gain................... -- -- -- -- -- 5,127 5,127
Net loss........................... -- -- -- (57,938) -- -- (57,938)
--------- ----- ----------- ----------- ------------ ----------- ------------
Balance, December 31, 1995........... 43,200 432 2,907,826 1,112,897 (213,334) (9,922) 3,797,899
Contributed capital................ -- -- 3,240,370 -- -- -- 3,240,370
Translation gain................... -- -- -- -- -- 138,978 138,978
Net loss........................... -- -- -- (74,459) -- -- (74,459)
--------- ----- ----------- ----------- ------------ ----------- ------------
Balance, December 31, 1996........... 43,200 $ 432 $ 6,148,196 $ 1,038,438 $ (213,334) $ 129,056 $7,102,788
--------- ----- ----------- ----------- ------------ ----------- ------------
--------- ----- ----------- ----------- ------------ ----------- ------------
</TABLE>

See accompanying Notes.

F-5
<PAGE>
STARTEK, INC.
(NOTE 1)

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................. $ (331,353) $ (57,938) $ (74,459)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization...................................... 588,222 873,246 1,437,843
Changes in operating assets and liabilities:
Accounts receivable.............................................. (3,332,112) (6,225,471) 2,230,956
Inventories...................................................... 14,759 (471,348) (1,177,248)
Prepaid expenses................................................. 24,024 (81,699) 85,030
Other assets..................................................... (8,314) 6,855 2,627
Accounts payable................................................. 3,172,354 4,147,286 (2,743,998)
Accrued and other liabilities.................................... 270,611 283,519 1,656,943
------------- ------------- -------------
Net cash provided by (used in) operating activities.................. 398,191 (1,525,550) 1,417,694
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment, net...................... (670,218) (2,104,525) (1,333,316)
Collections (advances) on notes receivable--stockholders............. (97,049) 110,381 663,494
Collections (advances) on notes receivable--affiliate................ (587,133) 667,800 --
------------- ------------- -------------
Net cash used in investing activities................................ (1,354,400) (1,326,344) (669,822)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from line of credit borrowings.......................... 1,209,052 1,451,656 49,292
Principal payments on borrowings..................................... (364,282) (1,654) (6,998)
Proceeds from borrowings and capital lease obligations............... -- 362,500 819,025
Principal payments on capital lease obligations...................... (395,412) (589,624) (847,344)
Principal payments on notes payable--stockholders.................... -- -- (738,494)
Proceeds from (principal payments on) note payable--
affiliate.......................................................... (100,000) 1,111,844 (1,111,844)
Issuance of common stock............................................. 726,886 107,033 --
Contributed capital.................................................. -- 866,973 3,240,370
Repurchase of common stock........................................... -- (129,742) --
------------- ------------- -------------
Net cash provided by financing activities............................ 1,076,244 3,178,986 1,404,007
Effect of exchange rate changes on cash.............................. (12,928) 5,127 138,978
------------- ------------- -------------
Net increase in cash and cash equivalents............................ 107,107 332,219 2,290,857
Cash and cash equivalents at beginning of year....................... 12,130 119,237 451,456
------------- ------------- -------------
Cash and cash equivalents at end of year............................. $ 119,237 $ 451,456 $ 2,742,313
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest............................................... $ 212,981 $ 365,880 $ 535,107
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Equipment acquired or refinanced under capital leases................ $ 65,153 $ 1,671,504 $ 1,017,095
Note received in exchange for the purchase of common stock from
options exercised.................................................. -- $ 213,334 --
</TABLE>

See accompanying Notes.

F-6
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying combined financial statements of StarTek, Inc. (the
"Company" or "StarTek") include the accounts of StarPak, Inc. and StarPak
International, Ltd. The Company was incorporated in Delaware on December 30,
1996. Prior to the formation of StarTek, StarPak, Inc. and StarPak
International, Ltd. (whose stockholder groups were substantially identical)
conducted business as affiliates under common control. Effective January 1,
1997, the stockholders of StarPak, Inc. exchanged all of the outstanding shares
of capital stock of StarPak, Inc. for shares of common stock of the Company, and
StarPak, Inc. became a wholly-owned subsidiary of the Company. Effective January
24, 1997, the shareholders of StarPak International, Ltd. contributed all of its
outstanding shares of capital stock to the Company, and StarPak International,
Ltd. became a wholly-owned subsidiary of the Company. Because the shareholder
groups of StarPak, Inc. and StarPak International, Ltd. were substantially
identical and the relative holdings of the individual stockholders in StarTek
were not altered as a result of the contributions, the formation of StarTek has
been treated as a combination of entities under common control and accounted for
as if it were a pooling of interests. References to the Company and StarTek
include these combined entities.

BUSINESS OPERATIONS

The Company is an international provider of integrated outsourced services
primarily for Fortune 500 companies in targeted industries. The Company offers a
wide spectrum of services throughout a product's life cycle, including product
order teleservices, supplier management, product assembly and packaging, product
distribution, product fulfillment, customer care and technical support
teleservices. The Company has operations in North America, Europe and Asia.

PRINCIPLES OF COMBINATION

The combined financial statements include the accounts of StarPak, Inc. and
StarPak International, Ltd. All significant intercompany transactions have been
eliminated.

FOREIGN CURRENCY TRANSLATION

Translation gains and losses are accumulated as a separate component of
stockholders' equity. Translation gains and losses were not material for any
period presented. Foreign currency transaction gains and losses are included in
determining net income. Such gains and losses were not material for any period
presented.

NEW ACCOUNTING STANDARDS

In March 1995, FAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, was issued, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. FAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company adopted FAS No. 121 in the first quarter of 1996.
The effect of adoption was not material.

F-7
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles 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

Revenues are recognized as services are performed under each client
contract, which services may include product order teleservices, supplier
management, product assembly and packaging, product distribution, product order
fulfillment, and customer care and technical support teleservices.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist of cash and cash equivalents, accounts
receivable and payable, notes receivable, debt and capital lease obligations.
The carrying values of cash and accounts receivable and payable approximate fair
value. Management believes the difference between the fair values and carrying
values of the notes receivable, debt and capital lease obligations would not be
materially different since interest rates approximate market rates for material
items.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out basis) or
market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Additions, improvements
and major renewals are capitalized. Maintenance, repairs and minor renewals are
expensed as incurred. Costs related to the internal development of software are
expensed as incurred.

Depreciation and amortization of equipment acquired under capital leases are
computed using the straight-line method based on the following estimated useful
lives:

<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE
--------------------

<S> <C>
Buildings............................................................... 30 years

Equipment, and equipment acquired under capital leases.................. 3 to 5 years

Furniture and fixtures.................................................. 7 years
</TABLE>

F-8
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES

Effective July 1, 1992, StarPak, Inc. elected Subchapter S status for income
tax purposes, and StarPak International, Ltd. has maintained Subchapter S status
since inception. As such, the income and expenses of the Company are reportable
on the tax returns of the stockholders, and no provision has been made for
federal and state income taxes. The Company is subject to foreign income taxes
on certain of its operations. A provision for foreign income taxes was made for
the year ended December 31, 1996, as loss carryovers relating to foreign
operations had been fully utilized.

MANAGEMENT FEE EXPENSE

Historically, certain S corporation stockholders and an affiliate have been
paid certain management fees, bonuses and other fees in connection with services
rendered to the Company, which have not been included in selling, general and
administrative expense, in addition to general compensation for services
rendered. Such management fees are reflected as management fee expense in 1994,
1995 and 1996 as set forth below. Effective December 31, 1996, these management
fees, bonuses and other fees were discontinued.

All compensation payable to persons who are now stockholders of the Company
(or an affiliate of such stockholder) will be in the form of advisory fees,
salaries and bonuses (which at current rates will aggregate approximately
$516,000 annually) and will be included in selling, general and administrative
expenses. Such advisory fees and salaries, together with payments under the
operating lease described in Note 6, are reflected as selling, general and
administrative expense in 1994, 1995 and 1996 as set forth below.

<TABLE>
<CAPTION>
1994 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Selling general and administrative expense............ $ 660,973 $ 560,002 $ 564,198
Management fee expense................................ $ 612,440 $ 2,599,612 $ 6,172,135
</TABLE>

2. PRO FORMA INFORMATION (UNAUDITED) (SEE NOTE 14)

PRO FORMA COMBINED STATEMENT OF OPERATIONS

The pro forma combined statement of operations for the year ended December
31, 1996 presents the effect on the historical combined financial statements of
the elimination of management fee expense paid to stockholders and their
affiliates as these fees will be discontinued upon the completion of the
Company's initial public offering and to provide related income taxes as if the
Company were taxed as a C corporation.

PRO FORMA COMBINED BALANCE SHEET

The pro forma combined balance sheet at December 31, 1996 reflects, as notes
payable to the Principal Stockholders, amounts relating to accumulated retained
earnings and additional paid-in capital without reflecting any proceeds from the
proposed public offering.

INCOME TAXES

Upon closing of the proposed public offering, the Company's S corporation
status will terminate. The pro forma combined statement of operations reflects a
provision for federal, state and foreign income

F-9
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. PRO FORMA INFORMATION (UNAUDITED) (SEE NOTE 14) (CONTINUED)
taxes at an effective rate of 37.3%. A provision for foreign income taxes was
made for the year ended December 31, 1996 in the historical combined statement
of operations, as foreign loss carryovers had been fully utilized. Foreign
income taxes will be credited fully against United States income taxes.

PRO FORMA NET INCOME PER COMMON SHARE

Pro forma net income per common share is based on the number of shares of
StarTek common stock to be outstanding after contribution of all StarPak, Inc.
and StarPak International, Ltd. shares, after giving effect to a 340.8888 for
one stock split of the common stock of StarTek, Inc. In addition, the
calculation includes 464,887 shares deemed to be outstanding, representing the
number of shares (at an assumed initial public offering price of $15.00 per
share) sufficient to fund payment of the Notes Payable to Principal
Stockholders.

3. INVENTORIES

Total inventories consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Raw materials..................................................... $ 1,281,363 $ 2,326,942
Finished goods.................................................... 76,480 208,149
------------ ------------
$ 1,357,843 $ 2,535,091
------------ ------------
------------ ------------
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
------------ -------------
<S> <C> <C>
Land............................................................. $ 374,234 $ 374,234
Buildings........................................................ 1,553,028 1,553,028
Equipment........................................................ 5,026,605 7,340,059
Furniture and fixtures........................................... 890,371 927,328
------------ -------------
7,844,238 10,194,649
Less accumulated depreciation and amortization................... (2,229,568) (3,667,411)
------------ -------------
Property, plant and equipment, net............................... $ 5,614,670 $ 6,527,238
------------ -------------
------------ -------------
</TABLE>

F-10
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. LINE OF CREDIT

At December 31, 1995 and 1996, the Company had a revolving line of credit
agreement with a bank whereby the bank agreed to loan the Company up to
$3,600,000 and $4,500,000, respectively. Interest was payable monthly and
accrued at the bank's base rate plus 1.5% at December 31, 1995 (10%) and at the
bank's base rate plus 1% at December 31, 1996 (9.25%), payable monthly. This
revolving line of credit will reduce to $3,500,000 on March 8, 1997 and mature
on June 30, 1999. At December 31, 1995 and 1996, the Company had drawn
$3,450,708 and $3,500,000, respectively, against this line.

Under the revolving line of credit agreement the Company has pledged as
security all of its equipment, inventories and receivables. The Company must
also maintain certain financial ratios, and is subject to certain restrictions
on the payment of dividends, capital expenditures and loans to affiliates and
stockholders.

6. LEASES

The Company had an operating lease for office space with a partnership in
which major stockholders of the Company are the general partner and a limited
partner. Payments under the lease for the years ended December 31, 1994, 1995
and 1996 were $70,000 each year. The lease was cancelled effective December 31,
1996.

The Company's property held under capital leases consists of the following,
which is included in property, plant and equipment:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
------------ -------------
<S> <C> <C>
Equipment........................................................ $ 3,014,273 $ 4,650,393
Less accumulated amortization.................................... (998,286) (1,930,257)
------------ -------------
$ 2,015,987 $ 2,720,136
------------ -------------
------------ -------------
</TABLE>

Amortization of leased assets is included in depreciation and amortization
expense.

As of December 31, 1996, future minimum rental commitments, by year and in
the aggregate, for the capital and operating leases are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
- -------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
1997................................................................ $ 1,101,782 $ 126,828
1998................................................................ 941,393 42,708
1999................................................................ 492,275 --
2000................................................................ 186,155 --
2001................................................................ 52,895 --
------------ ----------
Total minimum lease payments........................................ 2,774,500 $ 169,536
Amounts representing interest....................................... (353,554)
------------
Present value of net minimum lease payments......................... $ 2,420,946
------------
------------
</TABLE>

Rental expense, including equipment rentals, for 1994, 1995 and 1996 was
$229,925, $294,714 and $382,480, respectively.

F-11
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

7. LONG-TERM DEBT

During 1995, the Company purchased land and an existing building for
approximately $1,500,000. The purchase was financed through the Company's
revolving line of credit and a mortgage loan in the amount of $362,500. In
January 1997, the outstanding balance of $353,848 was refinanced from proceeds
of a $1,500,000 mortgage loan on the same property. The loan bears interest at
the bank's base rate plus 2% (10.25% at January 20, 1997). The loan is payable
in monthly installments of $15,625 plus accrued interest until the earlier of
June 30, 1999 or the date of termination of the revolving line of credit, when
the remaining principal balance is due.

In December 1996, the Company received a $200,000 economic development loan
which bears interest at 6% per annum and is collateralized by certain equipment.
Interest payments are due quarterly and, beginning January 1, 1999 and
continuing through January 1, 2001, principal payments of $30,000 are due
semi-annually. A final principal payment of $50,000 is due on July 1, 2001.

Future scheduled annual principal payments of long-term debt as of December
31, 1996 (including the effects of the above-described loan refinanced by the
Company in January 1997) are as follows:

8. NET INTEREST EXPENSE AND OTHER

Net interest expense and other consists of the following items:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Interest expense....................................... $ (239,068) $ (445,849) $ (443,764)
Interest income........................................ 12,782 2,595 18,288
Other income and expense............................... 10,745 46,999 53,342
----------- ----------- -----------
Total.................................................. $ (215,541) $ (396,255) $ (372,134)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

F-12
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

9. STOCKHOLDERS' EQUITY

The combined common stock and additional paid-in capital on a
company-by-company basis as of December 31, 1995 and 1996 were as follows:

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL
----------- ------------
<S> <C> <C>
DECEMBER 31, 1995
StarPak, Inc.--5,000,000 shares, $.01 par value, authorized; 33,618 shares
outstanding.................................................................. $ 336 $ 2,703,497
StarPak International, Ltd.--5,000,000 shares, $.01 par value, authorized;
9,582 shares outstanding..................................................... 96 204,329
----- ------------
$ 432 $ 2,907,826
----- ------------
----- ------------
DECEMBER 31, 1996
StarPak, Inc.--5,000,000 shares, $.01 par value, authorized; 33,618 shares
outstanding.................................................................. $ 336 $ 5,638,771
StarPak International, Ltd.--5,000,000 shares, $.01 par value, authorized;
9,582 shares outstanding..................................................... 96 509,425
----- ------------
$ 432 $ 6,148,196
----- ------------
----- ------------
</TABLE>

10. STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion No. 25
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25") and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FAS Statement No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense has been
recognized.

Effective July 24, 1987, the stockholders of StarPak, Inc. approved a Stock
Option Plan ("Plan") which provided for the grant of stock options, stock
appreciation rights ("SARs") and supplemental bonuses to key employees. The
stock options were intended to qualify as "incentive stock options" as defined
in Section 422A of the Internal Revenue Code unless specifically designated
as"nonstatutory stock options."

The options granted could be exercised for a period of not more than ten
years and one month from the date of grant, or any shorter period as determined
by StarPak, Inc.'s Board of Directors. The option price of any incentive stock
option would be equal to or exceed the fair market value per share on the date
of grant, or 110% of the fair market value per share in the case of a 10% or
greater stockholder. Options generally vested ratably over a five-year period
from the date of grant. Unexercised vested options remained exercisable for
three calendar months from the date of termination of employment.

This Plan was terminated effective January 24, 1997.

On February 13, 1997, the Company's Board of Directors approved the StarTek,
Inc. Stock Option Plan ("Option Plan") and, on January 27, 1997, the Director
Stock Option Plan ("Director Option Plan").

F-13
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

10. STOCK OPTIONS (CONTINUED)
The Option Plan was established to provide stock options, SARs and incentive
stock options (cumulatively referred to as "Options") to key employees,
directors (other than non-employee directors), consultants, and other
independent contractors. The plan provides for Options to be granted for a
maximum of 985,000 shares of common stock, which are to be awarded by
determination of a committee of non-employee directors. Unless otherwise
determined by the committee, all Options granted under the Option Plan vest 20%
annually beginning on the first anniversary of the Option's grant date and
expire at the earlier of (i) ten years (or five years for participants owning
greater than 10% of the voting stock) from the option's grant date, (ii) three
months after the termination of employment of the participant as outlined by the
plan, or (iii) the date six months after the participant's death.

The Director Option Plan was established to provide stock options to
non-employee directors who are elected prior to the option's grant date and
serve continuously from the commencement of their term. The plan provides for
stock options to be granted for a maximum of 90,000 shares of common stock.
Participants are automatically granted options to acquire 10,000 shares of
common stock upon the later of their election as a director or the closing of
the initial public offering of the Company's common stock (see Note 14).
Additionally, each participant will be automatically granted options to acquire
3,000 shares of common stock on the date of each annual meeting of stockholders
thereafter at which such director is reelected. All options granted under the
Director Option Plan are fully vested upon grant and expire at the earlier of
(i) the date of the participant's membership on the board is terminated for
cause, (ii) ten years from the option grant date, or (iii) the date one year
after the director's death.

A summary of the Company's stock option activity, and related information
for the years ended December 31 follows:

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Outstanding-beginning of year........................................ 1,728 1,728 --
Granted.............................................................. -- -- --
Exercised............................................................ -- 1,728 --
Canceled............................................................. -- -- --
--------- --------- ---------
Outstanding at end of year........................................... 1,728 -- --
--------- --------- ---------
--------- --------- ---------
Exercisable at end of year........................................... 472 -- --
--------- --------- ---------
--------- --------- ---------
</TABLE>

Exercise prices for options outstanding as of December 31, 1994 and
exercised during 1995 ranged from $21 to $320 and had a weighted average price
of $134. Options for 6,597 shares of common stock were available for grant at
the beginning and end of the years 1994, 1995, and 1996.

During 1995, StarPak, Inc.'s Board of Directors accelerated the vesting on
all outstanding options to allow the holders to exercise any granted option.
Subsequently, all outstanding options were exercised. In aggregate, the option
holders paid $17,830 in cash and delivered a note of $213,334 bearing interest
at 4.63% to StarPak, Inc. in exchange for shares of common stock. This note is
secured by 896 shares of StarPak, Inc. common stock. On January 22, 1997, the
note and all accrued interest thereon was repaid in full.

F-14
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

11. GEOGRAPHIC AREA INFORMATION

To date, the Company operates in North America, Europe and Asia. The
Company's operations in Asia were not material and have been combined with North
America in the following table. Prior to fiscal 1995, the Company operated
primarily in North America.

Information regarding geographical areas is as follows:

<TABLE>
<CAPTION>
NORTH AMERICA EUROPE ELIMINATIONS TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Revenues................................... $ 37,376,167 $ 4,133,196 -- $ 41,509,363
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Operating profit........................... $ 173,678 $ 164,639 -- $ 338,317
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Identifiable assets........................ $ 19,355,906 $ 3,090,170 $ (865,920) $ 21,580,156
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
YEAR ENDED DECEMBER 31, 1995
Revenues................................... $ 59,562,623 $ 12,021,238 -- $ 71,583,861
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Operating profit........................... $ 376,841 $ 32,724 -- $ 409,565
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Identifiable assets........................ $ 21,235,666 $ 3,459,106 $ (1,716,050) $ 22,978,722
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

12. SIGNIFICANT CLIENTS

Two clients accounted for 39.6% and 15.9% of revenues for the year ended
December 31, 1994. Two clients accounted for 46.3% and 10.9% of revenues for the
year ended December 31, 1995. Two clients accounted for 38.4% and 33.4% of
revenues for the year ended December 31, 1996.

The loss of one or more of its significant clients could have a material
adverse effect on the Company's business, operating results or financial
condition. To limit the Company's credit risk, management performs ongoing
credit evaluations of its clients and maintains allowances for potentially
uncollectible accounts. Although the Company is directly impacted by economic
conditions in which its clients operate, management does not believe significant
credit risk exists at December 31, 1996.

F-15
<PAGE>
STARTEK, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

13. RELATED PARTY TRANSACTIONS

The Company had the following notes receivable and payable from related
parties for the noted periods:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
------------ ------------
<S> <C> <C>
Notes receivable from stockholders bearing interest of 8.5% and refinanced
annually to be due at the end of the following fiscal year. These notes
were repaid by the stockholders on November 22, 1996...................... $ 663,494 --
Notes payable to stockholders bearing interest of 8.5% and refinanced
annually to be due at the end of the following fiscal year. These notes
were repaid by the Company on November 22, 1996........................... $ 663,494 --
Notes payable to stockholders bearing interest at 12% and refinanced
annually to be due at the end of the following fiscal year. These notes
were repaid by the Company on November 22, 1996........................... $ 75,000 --
Note payable to affiliate bearing interest equal to the Company's line of
credit rate and due on January 31, 1997................................... $ 1,111,844 --
</TABLE>

14. PLANNED EVENTS SUBSEQUENT TO DECEMBER 31, 1996

The Company is contemplating an initial public offering of its common stock.

Immediately prior to closing the offering, the Company will declare a
340.8888 for one stock split to be effected by a stock dividend, and declare a
dividend in an amount equal to the estimated additional paid-in capital and
retained earnings of the Company as of the closing date, payable to the
principal stockholders (the "Principal Stockholders") pursuant to certain
promissory notes, which will equal approximately $7.0 million, plus an
adjustment for any additional paid-in capital and retained earnings after
December 31, 1996 through the closing date. The promissory notes payable to the
Principal Stockholders will be paid from net proceeds of the offering to the
Company.

Upon closing of the offering, the S corporation status of the Company will
be terminated and the Company will be taxed as a C corporation thereafter. Upon
termination of the Company's S corporation status, the Company will be required
to record a one-time credit to earnings to record a net deferred tax asset. If
this credit were recorded at December 31, 1996, the amount would have been
approximately $172,000, relating to temporary differences primarily resulting
from accrued expense and depreciation. Additionally, the management fee, bonus
and other fee arrangements as described in Note 2 have been terminated effective
December 31, 1996.

F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFERING OR SOLICITATION

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.............................. 2
Risk Factors.................................... 7
Offering Related Transactions................... 13
Use of Proceeds................................. 14
Dividend Policy................................. 14
Capitalization.................................. 15
Dilution........................................ 16
Selected Combined Financial Data................ 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 18
Business........................................ 26
Management...................................... 35
Certain Relationships and Related Party
Transactions.................................. 39
Principal and Selling Stockholders.............. 41
Shares Eligible for Future Sale................. 43
Description of Capital Stock.................... 44
Underwriting.................................... 46
Legal Matters................................... 48
Experts......................................... 48
Additional Information.......................... 48
Index to Combined Financial Statements.......... F-1
</TABLE>

------------------------

UNTIL , 1997 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

3,666,667 SHARES

[LOGO AND ART]

------------------------

COMMON STOCK

---------------------

PROSPECTUS

---------------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MORGAN STANLEY & CO.

INCORPORATED

, 1997

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Estimated expenses (other than the underwriting discounts and commissions)
payable in connection with the issuance and distribution of the securities to be
registered hereunder are as follows:

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 20,445
NASD filing fee................................................... 6,947
NYSE listing fee.................................................. 118,000
Printing and engraving expenses................................... 45,000
Legal fees and expenses........................................... 140,000
Accounting fees and expenses...................................... 150,000
Blue Sky fees and expenses (including legal fees)................. 10,000
Transfer agent and registrar fees and expenses.................... 7,000
Miscellaneous..................................................... 2,608
---------
Total......................................................... $ 500,000
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Restated Certificate of Incorporation and Restated Bylaws
provide that to the fullest extent permitted by the DGCL, a director of the
Company shall not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director. Under the DGCL, liability of
a director may not be limited (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law;
(iii) in respect of certain unlawful dividend payments or stock redemptions or
repurchases; and (iv) for any transaction from which the director derives an
improper personal benefit. The effect of the provisions of the Company's
Restated Certificate of Incorporation and Restated Bylaws is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for breach of the fiduciary duty of care as a director (including breaches
resulting from negligent or grossly negligent behavior), except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
nonmonetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care. In addition, the Company's Restated Certificate of
Incorporation and Restated Bylaws provide that the Company shall indemnify its
directors and officers, against losses incurred by any such person by reason of
the fact that such person was acting in such capacity.

The Form of Underwriting Agreement filed as Exhibit 1.1 to the Registration
Statement provides for indemnification by the Underwriters of the Company and
its directors and officers for certain liabilities arising under the Securities
Act or otherwise.

Prior to closing this offering, the Company may obtain an annually renewable
directors' and officers' insurance policy insuring directors and officers of the
Company against claims made against them in their individual capacities in an
amount of up to $5,000,000 in the aggregate (with certain restrictions) in
conjunction with their duties as directors and officers of the Company; however,
the Company is not obligated to obtain any such insurance coverage.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Described below is information regarding all unregistered securities that
have been issued by the Company during the past three years. The number of
shares of Common Stock set forth in this Item 15 have not been adjusted to give
effect to the 340.8888 for one stock split of the Company's Common Stock to be
effected by a stock dividend immediately prior to and subject to closing this
offering.

On January 1, 1997, the Company issued 33,618 shares of Common Stock to the
Principal Stockholders in exchange for the assignment to the Company by the
Principal Stockholders of all of the issued and outstanding shares of common
stock of StarPak, Inc., in reliance upon Section 4(2) of the Securities Act as a
transaction not involving any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ----------
<C> <S>
*1.1 Form of Underwriting Agreement

*1.2 Form of Lock-up Agreement

*3.1 Restated Certificate of Incorporation of the Company

*3.2 Restated Bylaws of the Company

*4.1 Specimen Common Stock certificate

*5.1 Opinion and Consent of Otten, Johnson, Robinson, Neff & Ragonetti, P.C.

*10.1 StarTek, Inc. Stock Option Plan

*10.2 Form of Stock Option Agreement

*10.3 Form of StarTek, Inc. Director Stock Option Plan

*10.4 Lease by and between East Mercia Developments Limited and StarPak International, Ltd. and StarPak,
Inc.

*10.5 Promissory Note of StarPak, Inc. dated December 29, 1995 in the principal amount of $1,111,844.17
payable to the order of General Communications, Inc.

***10.6 HP Purchase Agreement dated September 1, 1995 by and between Hewlett-Packard Company, StarPak, Inc.
and StarPak International Ltd.

***10.7 Mircosoft Supply, Manufacturing and Services Agreement dated March 28, 1996 by and between Microsoft
Corporation and StarPak, Inc.

*21.1 List of Subsidiaries of the Company

**23.1 Consent of Ernst & Young LLP

*23.2 Consent of Otten, Johnson, Robinson, Neff & Ragonetti, P.C. (included in Exhibit 5.1)

*24.1 Power of Attorney (contained on page II-4)

*27.1 Financial Data Schedule
</TABLE>

- ------------------------

* Previously filed.

** Revised and refiled herewith.

*** Certain portions of the Exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Commission.

(b) Combined Financial Statement Schedules

II-2
<PAGE>
All financial statement schedules are omitted because of the absence of
conditions under which they are required.

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado, on this 26th day of March, 1997.

STARTEK, INC.

By: /s/ A. EMMET STEPHENSON, JR.
-----------------------------------------
A. Emmet Stephenson, Jr.
CHAIRMAN OF THE BOARD

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ A. EMMET STEPHENSON, JR.
- ------------------------------ Chairman of the Board and March 26, 1997
A. Emmet Stephenson, Jr. Director

Director, President and
/s/ MICHAEL W. MORGAN Chief
- ------------------------------ Executive Officer March 26, 1997
Michael W. Morgan (Principal Executive
Officer)

Executive Vice President
and Chief Financial
/s/ DENNIS M. SWENSON Officer (Principal
- ------------------------------ Financial Officer and March 26, 1997
Dennis M. Swenson Principal Accounting
Officer)

/s/ ED ZSCHAU*
- ------------------------------ Director March 26, 1997
Ed Zschau

/s/ THOMAS O. RYDER*
- ------------------------------ Director March 26, 1997
Thomas O. Ryder

*By: /s/ A. EMMET STEPHENSON,
JR.
-------------------------
A. Emmet Stephenson, Jr.
ATTORNEY-IN-FACT

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- ---------

<C> <S>
***10.6 HP Purchase Agreement dated September 1, 1995 by and between Hewlett-Packard Company, Starpak, Inc.
and Starpak International Ltd.

***10.7 Microsoft Supply, Manufacturing and Services Agreement dated March 28, 1996 by and between Microsoft
Corporation and Starpak, Inc.

23.1 Consent of Ernst & Young LLP
</TABLE>

- ------------------------

*** Certain portions of the Exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Commission.

II-5

<PAGE>

[ * ] Omitted pursuant to a request for
confidential treatment filed separately
with the Commission.

HP PURCHASE AGREEMENT NO. 195-464

This HP Purchase Agreement ("Agreement") is entered into by Hewlett-Packard
Company ("HP"), a California corporation, and the Seller named on the last
page hereof ("Seller"), on the following terms and conditions.

1. RECITALS

1.1 Seller offers such services as the fulfillment of customer requests
for promotional items and component parts. In the process of
supplying such services Seller may perform services such as disk
duplication, receipt of telephone, facsimile, and mail orders from HP
customers, shipping of products, entering customer information into a
database, database management, and collection of monies on behalf of
HP.

1.2 HP desires Seller to supply these services to HP for the purpose of
fulfilling customer requests from certain promotional programs
sponsored by HP and certain offers made by HP for components parts.

2. DEFINITIONS

2.1 Customers - End-users who have requested Products from Seller.

2.2 Order Date - Date on which a customer order is initially received but
payment has not been verified.

2.3 Processing Date - Date on which payment has been verified and order is
released for shipment.

2.4 Ship Date - Date on which Product was picked up by freight carrier.

2.5 Processed Orders - Purchase orders that have been received and
shipped.

2.6 Unpaid Purchase Orders - Purchase orders from government or
educational institutions which were initiated by a Purchase Order,
shipped, but which have not yet been paid.

2.7 Closed Purchase Orders - Purchase orders against which Seller has
received payment in full or which have not been paid and have aged
more than 150 days from the Ship Date.

2.8 Blanket Production Purchase Orders - Purchase orders which remain open
for a specified period of time and specify a maximum number of units
and/or dollar amount, allowing Seller to invoice expenses per the fees
established in Program Documents as they occur. Purchase orders will
reference this Agreement by number.

2.9 Fulfillment - The process of receiving customer orders, verifying
payment and proof of purchase when required, entering information to a
database, kitting material when required, and shipping Product.

2.10 Products - Material described in Program Documents.

2.11 Program Documents - Documents describing a specific program on behalf
of a specific HP location.

2.12 HP Program Manager - HP employee specified in Program Documents as
responsible for management of a specified Program on behalf of HP.

2.13 HP Customer Assistance Organization - Organization or individual
specified in Program Documents who will be responsible for resolution
of customer issues not resolvable by Seller.

3. PURCHASE OF PRODUCTS OR SERVICES

3.1 Except as otherwise provided in the attached exhibits and in Article 4
below, HP shall purchase and Seller shall sell Products or services
specified in Program Documents issued pursuant to this Agreement.

3.2 This Agreement shall enable all locations, divisions, and subsidiaries
of HP to purchase Products or services on the terms and conditions
provided herein from Seller. Accordingly, this Agreement shall be
binding on all locations, divisions, and subsidiaries of both HP and
Seller.

3.3 This Agreement shall be administered, on behalf of HP, by HP's
Operations Procurement Department ("HPOP").

Page 1 of 10

<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

4. This Agreement shall be effective for the period (the "Term") specified in
the attached exhibits. At the expiration of the Term, this Agreement shall
automatically expire unless earlier terminated as provided herein.

5. PRICE AND INVOICING

5.1 [ * ]

5.2 Payment for Products and Services by HP shall be [ * ], after receipt
by HP of an appropriate invoice from Seller ("Invoice").

5.3 HP may deduct from Seller's outstanding invoices any monies owed to HP
by Seller as a result of transactions under this Agreement.

6. FINANCIAL RESPONSIBILITIES

6.1 CREDIT CARD ORDERING

(a) Seller will verify credit through the financial institution
specified in Program Documents issued pursuant to this Agreement.
Upon verification, Seller will fill out a debit form provided by
the financial institution and imprint HP's logo and merchant
number (assigned to the specific HP location by the financial
institution) on the form.

(b) Upon completion of the debit form, Seller will release the order
for processing.

(c) Credit cards not verified must not be fulfilled. Upon
notification of denial, Seller will mail the letter identified in
Program Documents, on HP stationery, to the customer indicating
the verification problem. Seller will report to the HP location
on a weekly basis customer name, address and work telephone
number for non-verified credit card orders.

6.2 MONEY ORDER, CERTIFIED CHECK AND CHECK ORDERS

(a) Seller will receive orders for fulfillment via the mail. Seller
will confirm and record at least the following information: Type
of order (mail, facsimile, or telephone), Product description and
size, customer name and address, serial number and shipping
information, work telephone number, quantity, list price, sales
tax, amount received.

(b) All remittances must be made payable to Hewlett-Packard Company
in U.S. funds only. Orders must include all applicable state
sales taxes. Purchase orders will only be accepted from
government and educational institutions.

(c) If payee is not HP, if list price is wrong, or if sales tax has
been omitted, Seller will return payment to the customer along
with a form letter provided by the HP location, printed on HP
stationery, indicating the reason the order was not processed.

(d) Upon verification that correct funds have been received, Seller
will release the order for processing.

6.3 GOVERNMENT OR EDUCATIONAL INSTITUTION PURCHASE ORDER PROCESS

(a) For Government and Educational Institutions Fulfillment, Seller
will ship Product upon receipt of a Purchase Order in the same
fashion as other orders received by mail.

(b) Seller will separately identify Purchase Order shipments from
other shipments on all reports and invoices sent to HP.

(c) Invoices for these orders should be printed at the end of each
business day along with the invoices for all other orders.
Orders flagged as Purchase Orders must generate invoices that
show the following information:

(1) The total amount due, including sales tax (amount paid
should be zero).

Page 2 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

(2) Payment is due [ * ] from date of invoice.

(3) Payment should be made out to Hewlett-Packard Company.

(4) Payment should be sent to the HP Post Office Box identified
in Program Documents issued pursuant to this Agreement.

(d) If the customers are exempt from sales tax, Seller will record
their tax-exempt I.D. number and exclude sales tax from the total
due on the invoice.

(e) Seller will make every reasonable effort to collect unpaid
Purchase Orders on HP's behalf. The letters identified in
program Documents issued pursuant to this Agreement will be
mailed on stationery supplied by HP after 30 days, 60 days, and
90 days from the Ship Date.

(f) Seller will report to HP on a weekly basis all Purchase Order
payments deposited in HP's account. These payments must be
separately identifiable from all other payments.

(g) Seller will provide reports on a weekly basis which:

(1) Identify all Purchase Orders which currently are unpaid, and

(2) Classify unpaid Purchase Orders according to number of days
from date of Product shipment (categories are: 30, 60, 90
and 120 days from Ship Date).

(h) Seller will provide a weekly reconciliation of the current total
amount of unpaid Purchase Orders. The reconciliation must show
the beginning balance, all additions to and subtractions from the
balance, and the ending balance.

(i) For each Purchase Order received, Seller will keep a permanent
record containing:

(1) The original Purchase Order,
(2) Copies of all collection letters sent,
(3) Copies of any correspondence received from the Customers,
(4) Copies of the check received against the Purchase Order.
Should a single check be applied against multiple Purchase
Orders, Seller must include a copy of the check and a
schedule showing all Purchase Orders it was applied against.

(j) Seller will report separately to the HP location any unpaid
Purchase Order which becomes a Closed Purchase Order because no
payment has been received and more than 150 days have elapsed
from the Ship Date. Seller will also provide copies of the
entire permanent record for each unpaid Purchase Order which
becomes a Closed Purchase Order because of non-payment.

(k) Seller will provide archival storage of the complete Closed
Purchase Order record, but has no further responsibilities for
collecting these funds on behalf of HP.

(l) Seller will report receipts against Closed Purchase Orders
separately from all other payments.

6.4 FUNDS DEPOSITING PROCESS

(a) For credit card orders, Seller will verify credit through the
financial institution.

(b) Upon verification, Seller will fill out a Debit Form provided by
the financial institution and imprint HP's logo and merchant
number on the form. The form will have all the information
necessary for the financial institution to deposit funds into the
HP location's account. For check receipts, Seller will verify
payee and dollar amount before processing order. Inaccurate or
incomplete checks will be returned to the customer by Seller
without order fulfillment, as more particularly described in
paragraph 6.2(c).

(c) Seller will keep all credit card forms and checks in a locked,
restricted access safe until the financial institution arranges
for pick-up.

Page 3 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

(d) Daily, or as otherwise specified by the HP Program Manager, an
armored car with bonded drivers will stop at Seller to pick up
the HP location's checks and credit card receipts. Seller will
ready funds for deposit as required by the financial institution.
The car will take these funds to the financial institution for
deposit into the HP location's account.

7. SHIPMENT AND DELIVERY

7.1 Seller will ship orders to customers within [ * ] of receipt of
payment, excluding weekends and holidays.

7.2 Shipments will be by "best way", as specified in Program Documents
issued pursuant to this Agreement.

7.3 Non-U.S. recipients will be responsible for any duty. Seller will be
the exporter of record for customs purposes.

7.4 If Seller receives requests from customers for reshipment of Product
not received, Seller will contact the specific HP Program Manager for
authorization to reship.

7.5 Fulfillment for customers who request air shipments will be shipped
with freight charges collect except as otherwise provided in the
Program Documents.

7.6 Customers may call who insist on shipment via next day air, not at
customer expense. These calls will be handled in the following
manner:

(a) Request is due to Seller error: Seller will reship to correct
the problem using next day air at no additional charge to HP for
fulfillment or shipping.

(b) Request is not due to Seller error:

(1) If Product is in route via surface, Seller will offer to
transfer customer to a designated HP contact, who may be
able to assist customer immediately. If customer refuses
this offer, Seller will record customer's name and telephone
number, and provide this information to the HP Program
Manager. It is HP's responsibility to contact the customer
and communicate fulfillment and shipping instructions to
Seller.

(2) If no Product is in transit, Seller will offer to ship
Product via mail in addition to following the transfer
process described in (1) above.

7.7 Seller agrees to handle referrals and problems by either:

(a) Referring calls to the HP customer assistance organization, or

(b) Providing the customer information which allows the customer to
follow up by contacting HP.

Specific referral and escalation procedures will be established by HP
locations in individual Program Documents.

7.8 Seller shall furnish to HPOP Quarterly Status Reports of the
cumulative dollar volume of Products or services provided. Such
reports shall be submitted on a form supplied by HPOP in accordance
with the reporting schedule in the attached exhibits.

8. WARRANTY

8.1 Seller warrants that the data reported in accordance with this
Agreement will be accurate and include all expenses related to
shipment of Products or provisions of Services.

8.2 Seller is only authorized to act for HP as set forth in this Agreement
and Program Documents, and warrants that Seller will assume all
responsibility for commitments or actions by Seller not authorized
therein.

Page 4 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

8.3 Seller warrants that communications and conduct in performance of this
Agreement will be of such a nature as to project a professional and
positive image of HP.

8.4 Seller warrants that all HP telephone lines and Post Office boxes
described in this Agreement are to be used exclusively for the purpose
of conducting HP business.

8.5 Seller warrants that Seller does not have a merchant plate in Seller
name for the purpose of processing credit card orders, and that all
merchant plates in Seller's possession are the property of third
parties only.

8.6 Upon completion of a specific Program, Seller will provide the HP
location with copies of all archived records associated with such
Program that have not been previously submitted.

8.7 If, at the end of a specific Program, Seller is holding unique
Inventory and can document that the material procured was not in
excess of the quantities specified on the Blanket Production Purchase
Order, then HP will issue a Purchase Order to Seller for such unique
inventory.

8.8 HP warrants that HP has obtained all licensing rights required for
Seller to duplicate and ship software included in upgrade kits.

9. NONCOMPLYING PRODUCTS

9.1 Should HP become aware of substandard Product, HP will notify Seller
immediately and, if required by Seller, forward such defective Product
to Seller. Seller will credit HP for the purchase price of any such
defective Product identified. Seller will not be responsible for
errors on material which was printed in compliance with blue lines or
other original documentation provided or approved by HP. Seller will
credit HP for Product returned only to the extent that Seller
verification indicates the Product is defective.

9.2 Upon HP's request, Seller will promptly furnish a Corrective Action
Report on any Noncomplying Product.

10. HP PROPERTY

10.1 All materials, including without limitation designs or other property,
furnished to Seller by HP or paid for by HP in connection with this
Agreement (collectively "HP Property") shall:

(a) Be clearly marked or tagged as the property of HP;
(b) Be and remain personal property and not become a fixture to real
property;
(c) Be used only in filling Releases from HP;
(d) Be kept free of liens and encumbrances; and
(e) Be kept separate from other materials, tools or property of
Seller or held by Seller.

10.2 Seller shall bear all risk of loss or damage to HP Property until it
is returned to HP. Upon HP's request or upon the termination of this
Agreement, Seller shall deliver all HP Property to HP in good
condition, normal wear and tear excepted, without cost to HP. Seller
waives any legal or equitable rights it may have to withhold HP
Property.

10.3 All database information collected on behalf of HP or provided by HP
shall be the property of HP, shall be considered confidential
information of HP, and shall be used by Seller only as authorized in
this Agreement. Seller shall protect this information by using the
same degree of care, but no less than a reasonable degree of care, to
prevent the unauthorized use, dissemination or publication of the
confidential information as Seller uses to protect its own
confidential information of a like nature.

10.4 Without limiting the generality of Articles 10.1 through 10.3 above,
HP may file informational or protective financing statements to
confirm HP's title to HP Property. Such statements may be filed at
any time by HP without Seller's consent or signature; if Seller's
signature is required on the documents filed, HP may record a copy of
this Agreement.

11. INSURANCE

Page 5 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

11.1 LIABILITY INSURANCE

(a) During the term and at all times that Seller performs for HP,
Seller shall maintain in full force and effect, at Seller's own
expense, insurance coverage to include Comprehensive General
Liability or Commercial General Liability with limits of
liability and coverages as indicated below:

(1) Premises and Operations;
(2) Products and Completed Operations;
(3) Contractual Liability;
(4) Broad Form Property Damage (including Completed Operations);
(5) Personal Injury Liability.

Comprehensive General Liability policy limits shall be not less
than a combined Single Limited for Bodily Injury, Property
Damage, and Personal Injury Liability of $1,000,000 per
occurrence and $1,000,000 aggregate.

Commercial General Liability (Occurrence) policy limits shall be
not less than $1,000,000 per occurrence (combined single limit
for bodily injury and property damage), $1,000,000 for Personal
Injury, $1,000,000 aggregate for Products Completed Operations,
and $2,000,000 General Aggregate.

Except with respect to Products and Completed Operations
coverage, the aggregate limits shall apply separately to Seller's
work under this agreement.

Such policies shall name HP, its Officers, directors, and
employees as Additional Insureds and shall stipulate that the
insurance afforded Additional Insureds shall apply as primary
insurance and that no other insurance carried by any of them
shall be called upon to contribute to a loss covered thereunder.

(b) Certificates of Insurance evidencing the required coverages and
limits shall be furnished to HP and shall provide that there will
be no cancellation or reduction of coverage without thirty (30)
days prior written notice to HP. Seller's continuing of business
without such insurance for more than 10 days shall be considered
a material breach of this Agreement.

11.2 FIDELITY/CRIME INSURANCE. Fidelity/Crime Insurance, including
employee dishonestly, robbery both within and outside Seller's
premises and depositors forgery, (and electronics funds transfer if
necessary) with a minimum limit of $1,000,000 shall remain in full
force during the term of the Agreement.

A Certificate of Insurance shall be provided evidencing that the
Seller's insurance will cover losses associated with the performance
of duties for HP and shall respond to HP's interests as they may
apply. The certificate should also name HP as additional insured.

12. GOVERNMENTAL COMPLIANCE

12.1 Seller shall comply with all federal, state, and local, and foreign
laws, rules and regulations applicable to its obligations under this
Agreement or to Products supplied hereunder.

12.2 Without limiting the generality of section 12.1 above, Seller shall
comply with all equal employment opportunity and non-discrimination
requirements prescribed by Presidential Executive Orders.

13. AUDIT AND REPORT REQUIREMENTS

13.1 Seller shall keep complete written records of activities undertaken
and documents received pursuant to this Agreement. Seller will
perform daily backup of the information pursuant to this Agreement,
stored on Seller's computer system. Seller will store one copy of
backed up computer information offsite. Upon one week notice to
Seller during the term of this Agreement, HP shall be entitled to
inspect and audit the records and processes of Seller with respect to
this Agreement.

13.2 Seller will, on an as requested basis, provide the HP locations with
reports itemizing all activities over a specified period. Itemization
will separate customer orders and include all customer information
such as: type of order, Product description, Product size, customer
name and address, serial number,

Page 6 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

shipping information, work telephone number, quantity, list price,
sales tax, amount received. The information listed below must be
included, and the reports must include the identified cross-checks to
HP's deposits and Seller invoices. Orders must be separately
identifiable by order type (cash, credit card or Purchase Order).
Individual Product orders must be separately identifiable.

(a) Orders processed: Order date, Processing Date and Ship Date.

(b) Unit shipments: Quantity, sales tax, shipping and handling
charges and total charges will be separate. Total units shipped
must equal units billed by Seller against the Blanket Production
Purchase Order and units billed on Seller's fulfillment invoice.

(c) Payments received: Cash, Credit Card, and Purchase order
payments. The dollar amount of the payments received must equal
the total amount of funds deposited into the HP location bank
account at the financial institution and must equal shipments.

(d) Summary of sales tax collected for Products by state, with
Purchase Orders separately identifiable.

(e) Listing of tax-exempt customers and their tax-exempt
identification numbers.

13.3 Seller will, on a weekly basis, provide Seller's General Accounting
Manager with an itemized summary of all activities by Product.

13.4 Seller will, monthly, quarterly, and at the end of the program,
furnish the HP Program Manager with a printed report containing all
data recorded for each order. Seller will make available on request a
floppy disk containing the same data for specified periods.

13.5 Seller will, on a monthly basis, provide the HP Program Manager an
inventory reconciliation of Product.

13.6 Seller will, if requested, archive for the purpose of account
reconciliation the information itemized in Program Documents.

13.7 There will be no extra charge for these reporting services.

13.8 Seller's Shipping Department will forward the yellow copy of the
customer invoice directly to the HP contact specified in Program
Documents on a weekly basis.

13.9 Fulfillment process

(a) Seller will record the following information at the time of
fulfillment:

(1) Name (6) Specifics of Product Requested
(2) Title (7) Date Requested/Received
(3) Company (8) Serial number
(4) Address (including Zip) (9) Date and method shipped
(5) Phone

(b) If request received is not legible or clear, Seller will escalate
problem to a designated HP contact for clarification. HP will
take action to complete information and communicate instructions
for fulfillment to Seller.

14. Seller shall not, subject to the provisions of this Article 14, be liable
for any delay in performance under this Agreement caused by an act of God
or any other cause beyond Seller's control and without Seller's fault or
negligence (collectively "delaying cause"). Seller shall, in the event of
a delaying cause, immediately give notice to HP of the delaying cause.

15. DEFAULT

Page 7 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

15.1 If Seller breaches any provision of this Agreement, HP may, by notice
to Seller and except as otherwise prohibited by the United States
bankruptcy laws, terminate the whole or any part of this Agreement or
any Release unless Seller:

(a) Gives HP notice, within three days after receipt of HP's notice,
of its intent to cure the breach; and

(b) Cures the breach within five days after receipt of HP's notice.

15.2 For purposes of Article 15.1 above, the term "breach" shall include
without limitation any:

(a) Proceeding, whether voluntary or involuntary, in bankruptcy or
insolvency by or against Seller;

(b) Appointment, with or without Seller's consent, of a receiver or
an assignee for the benefit of creditors;

(d) Failure by Seller to make a delivery of Products or perform
Services in accordance with the requirements of this Agreement or
any Release;

(e) Failure to provide HP, upon request, with reasonable assurances
of future performance;

(f) Sale of database information collected on behalf of HP or
provided by HP, or mixing of data with that of other Seller
customers; or

(g) Other failure to comply with the provisions of this Agreement.

15.3 The rights and remedies granted to HP pursuant to this Article are in
addition to, and shall not be deemed to limit or affect, any other
rights or remedies available to HP at law or in equity.

16. RIGHTS AND OBLIGATIONS UPON TERMINATION

16.1 Upon termination of this Agreement, Seller shall be obligated to
fulfill any orders or transactions received by Seller prior to such
termination and orders or transactions received by Seller for four (4)
months thereafter. HP will make available prompt lines of
communication and adequate supplies of Product to ensure that Seller
can fulfill its obligations.

16.2 Upon termination of this Agreement, HP shall immediately begin work to
find an alternate provider to fulfill orders or transactions, or work
to change the redemption location designated on communications, or
stop communications being sent to program participants.

16.3 Upon termination of the Agreement due to bankruptcy, insolvency or
change of ownership or default by Seller, Seller will use its best
efforts to assist HP in locating a means by which HP programs can
continue to operate. This includes, but is not limited to, Seller
forwarding HP's telephone number to an adequate answering service
where the calls can be directed to an appropriate source and the
forwarding of any mail sent to Post Office Boxes rented on behalf of
HP programs to an address designated by HP.

16.4 Upon termination of this Agreement, each party shall forthwith return
to the other party all documents, paper stock, materials and any other
proprietary information held by each pursuant to this Agreement. Each
party shall assist the other in effecting an orderly termination of
the business affairs contemplated hereunder.

17. NOTICES

17.1 Any notice given pursuant to this Agreement shall be in writing and
shall be deemed received as of seventy-two hours after posting by U.S.
mail, registered or certified, return receipt requested.

Page 8 of 10
<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

17.2 Any notice relating to the shipment of Products or to invoices shall
be sent to the HP Location originating the Program Document, and any
other notice concerning this Agreement shall be sent to HPOP. The
address for HPOP is specified on the signature page of this Agreement.

17.3 Any notice sent to Seller pursuant to this Agreement shall be sent to
the address specified on the signature page of this Agreement.

18. CONFIDENTIAL INFORMATION

18.1 Seller shall not disclose to any person or entity, other than those
employees of Seller who have a need to know, any confidential
information of HP, whether written or oral, which Seller may obtain
from HP or otherwise discover in the performance of this Agreement.
As used in this Article 18, the term "confidential information" shall
include, without limitation:

(a) All information or data concerning or related to HP's Products
(including the discovery, invention, research, improvement,
development, manufacture, or sale of HP Products) or business
operations (including sales costs, profits, pricing methods,
forecasts, organization, employee lists, and processes);

(b) All HP Property of a confidential nature.

18.2 Without limiting the generality of Article 18 above, Seller shall
maintain all confidential information in strict confidence. Seller
shall take all reasonable steps to ensure that no unauthorized person
or entity has access to confidential information, and that all
authorized persons having access to confidential information refrain
from any unauthorized disclosure.

18.3 The provisions of this Article 18 shall not apply to any information

(a) Is rightfully known to Seller prior to disclosure by HP;
(b) Is rightfully obtained by Seller from any third party;
(c) Is or becomes available to the public without restrictions; or
(d) Is disclosed by Seller with the prior written approval of HP.

18.4 Seller shall not disclose to any third party, without the consent of
HP, the existence of terms of this Agreement.

19. PRECEDENCE

19.1 This Agreement takes precedence over Seller's additional or different
terms and conditions, to which objection is hereby made by HP.
Acceptance by Seller of a contract to supply the Products is limited
to the provisions of this Agreement.

19.2 This Agreement comprises the entire understanding between the parties
and supersedes any previous communications, representations, or
Agreements, whether oral or written. No modification of this
Agreement shall be valid or binding on either party unless in writing
and signed by an authorized representative of each party.

19.3 In the event of any conflict between the provisions of this Agreement
and any Program Document, this Agreement shall control.

20. MISCELLANEOUS

20.1 Neither party shall delegate or assign any rights under this Agreement
to any third party unless the other party to this Agreement consents
to such delegation or assignment in writing. Any attempted delegation
or assignment without the consent shall be void.

20.2 The waiver of any term, condition, or provision of this Agreement by
HP or Seller must be in writing. No such waiver shall be construed as
a waiver of any other term, condition, or provision except as provided
in writing, nor as a waiver of any subsequent breach of the same term,
condition, or provision.

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<PAGE>
HP PURCHASE AGREEMENT NO. 195-464

20.3 This Agreement shall be interpreted and governed in all respects by
the laws of the State of California. Seller and HP hereby consent to
the jurisdiction and venue of the California courts.

20.4 If either HP or Seller employs attorneys to enforce any rights arising
out of or relating to this Agreement, the prevailing party shall,
after appeal rights area exhausted, be entitled to recover costs and
reasonable attorney's fees.

20.5 All references in this Agreement to "days" shall, unless otherwise
specified herein, mean calendar days.

20.6 Stenographic, typographical, or clerical errors are subject to
correction.

20.7 The parties agree that to the extent any provisions or portion of the
Agreement shall be held to be unreasonable, unlawful or unenforceable,
then any such provision or portion shall be modified to the extent
necessary to allow any such provision or portion to be legally
enforceable to the fullest extent permitted by applicable law and that
any court of competent jurisdiction shall, and the parties authorize
such court to, enforce any such provision or portion or to modify any
such provision or portion such that any such provision or portion
shall be enforced by such court to the fullest extent permitted by
applicable law.

21. EXHIBITS

21.1 All exhibits attached to this Agreement shall be deemed a part of this
Agreement and incorporated herein by reference. The term "Agreement"
includes the exhibits listed in this Article 21.

21.2 Terms which are defined in this Agreement and used in any exhibit
shall have the same meaning in the exhibit as in this Agreement. In
the event of any conflict between any exhibit and this Agreement, this
Agreement shall control.

21.3 The following exhibit(s) are hereby made a part of this Agreement:

EXHIBIT I - HP Purchase Agreement Summary

APPROVED AND AGREED TO, EFFECTIVE: September 1, 1995

STARPAK INC./STARPAK INTERNATIONAL HEWLETT-PACKARD COMPANY

BY: /s/ Michael Morgan BY: /s/ Lon Curtis
------------------------------- --------------------------------
Michael Morgan Lon Curtis

TITLE: President/CEO TITLE: CIS Controller
------------------------------- --------------------------------

DATE: 12/4/95 DATE: 11/27/95
------------------------------- --------------------------------

Street Address for HPOP: Mailing Address HPOP:

3000 Hanover Street P.O. Box 10301
Building 20DD Building 20DD
Palo Alto, CA 94304 Palo Alto, CA 94303-0890
Facsimile #: (415) 852-8117

Page 10 of 10
<PAGE>
EXHIBIT I - HP PURCHASE AGREEMENT SUMMARY
(EFFECTIVE September 1, 1995)

AGREEMENT NO: 195-464 TERM: 09/01/95 - 02/28/97
SUPPLIER: Starpak, Inc. PAGE 1 OF 1
- --------------------------------------------------------------------------------
SUPPLIER INFORMATION HP INFORMATION

SAN FRANCISCO BAY AREA CONTACT: HP AGREEMENT ADMINISTRATOR:
Starpak Hewlett-Packard Company
237 22nd Street 3000 Hanover Street, Bldg. 20DD
Greeley, CO 80631 Palo Alto, CA 94304

Attention: Ruth Jenkins Attention: Cathy Diehl
Product and Customer Support Manager Procurement Specialist

Telephone: (303) 352-6800 Telephone: (415) 857-7432
Facsimile: (303) 356-0578 Facsimile: (415) 852-8117

----------------------------------------
HEADQUARTER CONTACT(S): PRODUCT(S)
Same Telephone, Sales: (303) 353-7650

SELLER REQUIRES A RETURN
AUTHORIZATION: As specified in Program
Documents

- --------------------------------------------------------------------------------
CONTRACT PARTICULARS

PRIOR AGREEMENT NO: N/A INTERNATIONAL PARTICIPATION ALLOWED: No
SUPPLIER NO: 13243/14329 UNION INFORMATION: N/A
FINAL SHIP DATE: As specified
in Program Documents PLANT SHUTDOWN: N/A

PAYMENT TERMS: [ * ]
ESTIMATED ANNUAL VOLUME: [ * ]

PRODUCT/SERVICE MINIMUM SHIPMENT RULES FOB POINT(S) LEAD TIME
--------------- ---------------------- ------------ ---------
Marketing Program As specified in Program Greeley, CO As specified in
Fulfillment Documents 80631 Program Documents -
2 Weeks Maximum

NOTE: REFERENCE HP AGREEMENT NUMBER ON ALL PURCHASE ORDERS.
- --------------------------------------------------------------------------------
SPECIAL CONTRACT NOTES

HP STATUS REPORT SCHEDULE: REPORT # PERIOD END REPORT DUE

1 11/30/95 12/21/95
2 02/28/96 03/21/96
3 05/31/96 06/21/96
4 08/31/96 09/21/96
5 11/30/96 12/21/96
6 02/28/97 03/21/96

EXHIBITS: EXHIBIT I - HP Purchase Agreement Summary

<PAGE>

AMENDMENT TO
HP PURCHASE AGREEMENT

HP AGREEMENT AMENDMENT SELLER: Starpak, Inc./Starpak International
NO: 195-464 No: 1 PRODUCT: Marketing - Fulfillment Programs

THIS AMENDMENT TO THE ABOVE REFERENCED HP PURCHASE AGREEMENT IS EXECUTED BY
AND BETWEEN THE SELLER NAMED BELOW AND HEWLETT-PACKARD COMPANY:

- --------------------------------------------------------------------------------
Revise the expiration of the Agreement from February 28, 1997 to September
30, 1997 and the final ship date from February 28, 1997 to September 30,
1997. Any reference in the Agreement to the expiration date shall mean
September 30, 1997 and the final ship date shall mean September 30, 1997.

- --------------------------------------------------------------------------------
APPROVED AND AGREED TO, EFFECTIVE: MARCH 1, 1997

STARPAK INC./STARPAK INTERNATIONAL HEWLETT-PACKARD

BY: /s/ Michael Morgan BY: /s/ Lonen C. Curtis
------------------------------- ------------------------------------

TYPED NAME: Michael Morgan TYPED NAME: Lonen C. Curtis

TITLE: President/CEO TITLE: CIS Controller

<PAGE>

[*] Omitted pursuant to a request for confidential treatment
filed separately with the Commission.

MICROSOFT SUPPLY, MANUFACTURING, AND SERVICES
AGREEMENT

This Microsoft Supply, Manufacturing, and Services Agreement
("Agreement") is made and entered into this 28th day of March, 1996
("Effective Date"), by and between Microsoft Corporation ("MS"), a
Washington, USA corporation, and Starpak, Inc. ("Starpak"), a Colorado
corporation.

RECITALS

WHEREAS, MS is a developer, publisher and distributor of various consumer
software products;

WHEREAS, Starpak is a manufacturer and supplier of software product
components; and

WHEREAS, MS and Starpak desire that Starpak serve as one of the eligible
manufacturers and suppliers to MS of Product Components, assemble certain MS
Products, and otherwise provide services as detailed in the Statement of Work.

Now, Therefore, in consideration of the covenants and conditions set forth
below, the adequacy of which is agreed to and hereby acknowledged, the
parties agree as follows:

AGREEMENT

1. DEFINITIONS. The following terms, whenever initially capitalized, shall
have the following meanings for the purposes of this Agreement:

(a) "MANUFACTURING" shall mean the manufacture and supply of Product
Components and assembly of Products as described in the Statement of Work.

(b) "PRODUCT(S)" shall mean such MS product(s), including Product
Components, MS software, including any associated documentation and/or
packaging, that MS may request Starpak to Manufacture pursuant to this
Agreement, by the issuance of a purchase order.

(c) "STATEMENT OF WORK" shall mean the attached Exhibit A, including any
modifications made thereto pursuant to Section 13.

(d) "FACILITY" shall mean the manufacturing facility operated and owned or
leased by Starpak and located at Greeley, Colorado.

(e) "BOM" shall mean the bill of materials document provided by MS to
Starpak, which bill of materials identifies all materials comprising a given
Product, including but not limited to the associated Product Components
included in such Product. BOMs may be modified from time to time by MS at
its sole discretion.

(f) "PRODUCT COMPONENTS" shall mean the Product CD ROMs, Jewel Case
Component, Disk Set Component, and Assembled Box Component.

(g) "PRODUCT CD ROMS" shall mean the Product CD ROM media either supplied
by MS or produced or procured by Starpak, but shall not include any MS
software contained on the CD ROMs.

(h) "ASSEMBLED BOX COMPONENT" shall mean fully assembled retail packaging,
including without limitation retail [ * ] and all manuals and other
documentation that is to be included with the Product, but excluding the
Product CD ROMs, Jewel Case Component, and Disk Set Component.

<PAGE>

(i) "JEWEL CASE COMPONENT" shall mean the fully assembled jewel case
including all documentation and other printed material, such as the front and
back liners but excluding the Product CD ROMs, to be included as an insert in
the jewel case.

(j) "DISK SET COMPONENT" shall mean the fully assembled disk set including
polyvinyl disk baggies and duplicated disks either supplied by MS and those
produced or procured by Starpak, but excluding any MS software contained on
the disk media.

(k) "SHIPPING LOCATION" shall mean the entity to whom MS authorizes
Starpak to ship Products that are Manufactured pursuant to this Agreement.

(l) "MS DELIVERABLES" shall mean and include all MS proprietary material,
including without limitation BOMs, MS specifications, workmanship standards,
code material (including source code), and documentation of any kind or
description and in any form including compact disk, other disks or diskettes,
tape, text or any electronic or other medium supplied by MS or at its
direction for the Manufacture of Products under this Agreement.

(m) "INTELLECTUAL PROPERTY" shall mean any and all trademarks, copyrights,
patents and other proprietary rights comprising or encompassing a given
Product. The term includes the Intellectual Property in all MS Deliverables.

(n) "INVENTORY" includes finished Product units, work-in-process, Product
Components or raw materials pertaining to the Agreement that contains MS
software, trademarks, copyrighted material, logos or other proprietary
material.

(o) "PRICE" OR "PRICES" as used in this Agreement means the amounts to be
paid by MS to Starpak for the manufacture and supply of Product Components
and assembly of Products to be performed by Starpak pursuant to this
Agreement. Prices are set forth on Exhibit B and Exhibit C and are subject
to revision as provided therein.

2. MANUFACTURING AND SERVICES.

(a) GENERAL. Starpak hereby agrees to Manufacture Products, including
without limitation to manufacture and supply Product Components and/or to
assemble Products, at the Facility and pursuant to the terms and conditions
set forth herein, including without limitation in the Statement of Work.
Starpak shall not conduct Manufacturing at any location other than the
Facility without MS's prior written approval, such approval not to be
unreasonably withheld.

(b) INVENTORY. All of the Product Components and final Product Inventory
shall be held exclusively for assembly and distribution to Shipping Locations
as authorized by MS and for no other purpose, use or disposition, except as
may be directed by MS. Starpak shall cause the Inventory to be free and
clear of any and all liens, encumbrances and other claims of its creditors.

(c) MINIMUM PRODUCTION CAPACITY. Except as provided in the Statement of
Work, Starpak covenants and agrees to maintain at all times during the term
of this Agreement the capacity to Manufacture at the Facility a minimum of
400,000 finished Product units per week (defined as 12:01 AM Saturday through
12:00 PM Friday), at a rate of 80,000 units per day. MS may modify a
specific weekly build forecast with [ * ] notice by the issuance of a
Purchase Order pursuant to Exhibit B, or as the parties may otherwise agree.

(d) CUSTOMER SERVICE REQUIREMENT. Starpak agrees to conduct Manufacturing
in accordance with the reporting/communication requirements identified in the
Statement of Work.

-2-
<PAGE>

(e) NON-EXCLUSIVITY. This Agreement is not an exclusive agreement. While
it is MS' intent for Starpak to be their primary provider of finished Product
for [ * ], at all times MS shall have the right to appoint
third parties to perform Manufacturing services for MS.

(f) NON-CONFORMING PRODUCT. Starpak shall promptly replace and deliver,
within two weeks from notification, at no charge to MS or its customers, any
non-conforming Product if any shipment of Product, or any portion of it, to
any Shipping Location fails to meet the quality standards specified in the
Statement of Work. In the event MS determines that a Product recall is
necessary due to a breach of Starpak's warranties hereunder, or due to a
manufacturing defect, Starpak shall cooperate with MS in all respects to
conduct such recall at Starpak's expense; provided that if Starpak has given
prior notice of the possible defect and recommended against shipment and the
Product is nonetheless shipped at MS's direction, or if the recall is
necessary because of a MS error, the recall on account of that defect shall
be at MS's expense, but Starpak shall still cooperate with it, and in such a
case, MS shall reimburse Starpak for the costs of producing and distributing
the replacement Products.

(g)
[ * ]
[ * ]
[ * ]
[ * ]

3. PRICE AND PAYMENT.

(a) GENERAL. MS agrees that Starpak shall be compensated for the
manufacture and supply of Product Components and assembly of Products
provided hereunder pursuant to the Price and Payment terms and conditions set
forth in Exhibit B and Exhibit C attached hereto. All payments made by MS to
Starpak shall be in United States Dollars.

(b) QUANTITY. The quantity of Product to be used in calculating MS's
obligation to pay Starpak with regard to any particular Purchase Order shall
be the lesser of (1) the number of Product units received at the Shipping
Location in response to such Purchase Order, or (2) the quantity indicated on
the original Purchase Order.

(c) TAXES. In the event income taxes are required to be withheld by MS on
payments to Starpak required hereunder, MS may deduct such income taxes from
the amounts owed and pay them to the appropriate taxing authority. MS shall
in turn promptly secure and deliver to Starpak an official receipt for any
income taxes withheld. MS agrees to pay all applicable value added, sales
and use taxes levied on it by a duly constituted and authorized taxing
authority on the Manufacturing. To the extent required by any such taxing
authority, Starpak may collect such taxes, if any, from MS, and, in such
case, shall remit to MS official tax receipts indicating that such taxes have
been collected by Starpak. Starpak agrees to take such steps as are
requested by MS to minimize such taxes in accordance with all relevant laws
and to cooperate with and assist MS, in challenging the validity of any taxes
applicable to the Manufacturing and collected from MS by Starpak or otherwise
paid by MS. Except where expressly agreed to, in writing, by MS pursuant to
Exhibit B and Exhibit C, MS shall not pay any taxes other than those
described above, including, without limitation (a) taxes on or with respect
to or measured by any net or gross income or receipts of Starpak, (b) any
franchise taxes, taxes on doing business, gross receipts taxes or capital
stock taxes (including any minimum taxes and taxes measured by any item of
tax preference), (c) any taxes imposed or assessed for work performed after
the date upon which this Agreement is terminated, (d) taxes based upon or
imposed with reference to Starpak's real and personal property ownership,
and/or (e) any taxes similar to or in the nature of those taxes described in
(a), (b), (c), or (d) above.

4. LICENSE GRANT.

(a) GENERAL. In order to allow Starpak to perform under the terms of this
Agreement, MS grants Starpak the following non-exclusive, non-transferable,
personal, limited license rights to the Intellectual Property for each
Product:

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<PAGE>

(1) to procure, reproduce and/or Manufacture the Product Components,
for sale to Microsoft, based upon the applicable BOM(s) and forecasts
delivered by MS pursuant to the Statement of Work and to sublicense such
rights to third party suppliers in accordance with the requirements set forth
in Section 5 below;

(2) to reproduce any MS software and documentation specified in the
BOM(s) as necessary to build the finished Product;

(3) to assemble the Product Components into finished Product in
accordance with the written instructions and BOM(s) delivered by MS; and

(4) to distribute the finished Product to Shipping Locations, only as
may be designated and specified by MS from time to time via the issuance of a
Purchase Order, in accordance with the Statement of Work.

(b) LICENSE RESTRICTIONS. Starpak shall not (i) in any way modify any
Product or Intellectual Property without obtaining, in advance, the express
written permission of MS; (ii) reproduce, manufacture, or distribute any
Product or Intellectual Property except as may be designated and specified by
MS, pursuant to the terms of this Agreement; or (iii) reverse engineer,
decompile, or disassemble any Product or Intellectual Property.
Notwithstanding the foregoing, Starpak may physically disassemble those
Product Components that do not consist of software or hardware solely for the
purpose improving Product assembly and/or quality. MS or its suppliers shall
at all times own the Product software and all Intellectual Property,
including all copies thereof that Starpak is authorized to make under this
Agreement. All rights not expressly granted herein, without limitation, are
reserved by, and shall exclusively inure to the benefit of, MS.

5. SUBCONTRACTING.

(a) TO THIRD PARTIES. Starpak shall not subcontract any of its rights or
obligations under this Agreement except as follows:

(1) OTHER THIRD PARTIES. Except as otherwise provided in the
Statement of Work, Starpak may purchase Product Components from and
sublicense the applicable rights granted hereunder to third parties that (i)
are included on MS's current Approved Supplier List as described in the
Statement of Work; or (ii) have been pre-approved by MS as Starpak suppliers
pursuant to the Statement of Work and, upon request by MS, agree in writing
to undertake the same obligations and/or abide by the same restrictions to
which Starpak is subject under Sections 4(b), 5(b), 6(a)(5), 8(a), 8(b) 9(b),
11(a), 11(b) and 11(c) of this Agreement, as well as any relevant quality
provisions or manufacturing restrictions contained in the Statement of Work;
provided, however, that as to subcontracting relationships existing prior to
execution of this Agreement, Starpak shall use its best efforts, upon request
by MS, to obtain the subcontractor's written agreement to be bound thereby.
Starpak may also subcontract portions of the Manufacturing as agreed to by
the parties pursuant to the Statement of Work. The responsibility and
liability of Starpak under this Agreement is not diminished on account of any
subcontract; it shall be fully responsible for the subcontractor's
performance and work.

(2) RIGHTS PASS THROUGH. It is the intention of this Section that
Starpak be able to subcontract to third parties provided it fully maintains
quality standards and protects MS's property rights in MS's Intellectual
Property and MS Deliverables. Starpak shall make MS, therefore, a third
party beneficiary of any subcontracting agreement entered into by Starpak
pursuant to this Section 5.

-4-
<PAGE>

(b) EXPORT RESTRICTIONS. Starpak hereby agrees that in subcontracting
portions of the Manufacturing to third parties pursuant to Section 5(a)
above, Starpak shall not directly or indirectly export or transmit (i) any
Product Component, Product and/or technical data or (ii) any product (or any
part thereof), process, or service that is the direct product of a Product,
to (a) any countries that are subject to U.S. export restrictions (including
as of the Effective Date, but not limited to, Cuba, the Federal Republic of
Yugoslavia (Serbia, Montenegro, UN Protected Areas, and areas of the Republic
of Bosnia & Herzegovina under the control of Bosnian Serb forces), Iran,
Iraq, Libya, North Korea, and Syria); (b) any end-user whom they know or have
reason to know will utilize them in the design, development or production of
nuclear, chemical or biological weapons; or (c) any other country to which
such export or transmission is restricted by the export control laws and
regulations of the United States, and any amendments thereof, without prior
written consent, if required, of the Bureau of Export Administration of the
U.S. Department of Commerce, or such other governmental entity as may have
jurisdiction over such export or transactions.

6. REPRESENTATIONS & WARRANTIES.

(a) BY STARPAK. Starpak represents and warrants to MS as follows:

(1) Starpak has full and exclusive right and power to enter into and
perform according to the terms of this Agreement;

(2) the Manufacturing, including any portion done by any
subcontractor as contemplated in Section 5, will strictly comply with all
applicable laws, as well as with the terms and conditions of this Agreement,
including without limitation the Statement of Work;

(3) Starpak has and will have, at all times relevant to this
Agreement, sufficient proprietary rights to conduct the Manufacturing
pursuant to this Agreement, and none of the Manufacturing processes will
infringe MS' or any third party's proprietary rights;

(4) Starpak will, at all times relevant to this Agreement, keep any
and all license agreements with third parties relevant to the Manufacturing
in force and in good standing; and

(5) the Products (including the raw materials, reproduction quality,
and finished Product quality) will satisfy the quality workmanship standards
set forth herein.

(b) BY MS. MS hereby represents and warrants to Starpak as follows:

(1) MS has the full and exclusive right and power to enter into and
perform according to the terms of this Agreement;

(2) MS has and will have, at all relevant times, sufficient rights in
the Products to grant Starpak the rights granted in this Agreement;

(3) that at all times relevant to this Agreement, MS will keep any
and all license agreements with third parties relevant to the reproduction,
manufacture, and/or distribution of the Products in force and in good
standing; and

(4) that any and all software provided by MS to Starpak for
incorporation into the Products will be exportable into any countries where
MS requests it be delivered.

(c) DISCLAIMER OF WARRANTY. THE WARRANTIES SET FORTH IN SECTIONS 6(a)
AND 6(b) ABOVE ARE THE ONLY WARRANTIES MADE BY THE PARTIES AND ARE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, OR STATUTORY, INCLUDING BUT NOT
LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE PRODUCTS.

-5-
<PAGE>

7. INDEMNIFICATION.

(a) OBLIGATION TO INDEMNIFY. The parties agree to indemnify, defend, and
hold each other and their successors, officers, directors, agents and
employees harmless from any and all causes of action, claims, demands,
liabilities, penalties, suits, costs, or expenses (including reasonable
attorneys' fees and costs) and damages, of any kind or nature, arising out of
or in connection with any claim (i) that, if true, would constitute a breach
of their obligations, warranties, or representations contained in this
Agreement; or (ii) for personal injury, death, or property damage to the
extent that such claim is based upon the strict liability, negligence, gross
negligence, intentional act, or other fault of the indemnifying party or its
employees.

(b) INDEMNIFICATION PROCESS.

(1) If any cause of action, claim, or demand shall be brought against
any party (the "Claimant") in respect to which indemnity is being sought from
another party (the "Indemnifying Party") pursuant to the provisions of this
Section 7 ("Claim"), the Claimant shall promptly notify the Indemnifying
Party of the Claim in writing, specifying the nature of the Claim and the
total monetary amount sought, if known, or other such relief as is sought
therein.

(2) The Claimant shall have the right, in its sole discretion, to do
one or more of the following: (i) permit the Indemnifying Party to assume the
defense of the Claim; or (ii) defend such Claim itself using counsel of its
own choice, with the attorneys fees and costs associated with that defense to
be paid by the Indemnifying Party pursuant to its indemnity and defense
obligations as set forth in paragraph 7(b)(1) above.

(3) In the event the Claimant elects to defend a Claim itself, the
Indemnifying Party shall cooperate with the Claimant at the Indemnifying
Party's expense and in all reasonable respects in connection with that
defense.

(4) In the event that the Claimant elects to have the Indemnifying
Party assume the defense of a Claim, the Claimant shall (i) have the right to
approve the Indemnifying Party's choice of counsel, which approval shall not
unreasonably be withheld; (ii) cooperate with the Indemnifying Party, at the
Indemnifying Party's expense, in all reasonable respects in connection with
that defense; and (iii) have the right to employ separate counsel of its own
choosing, at its own expense, to monitor and participate in the defense to
the extent that counsel deems appropriate, in which event the Indemnifying
Party agrees to cooperate in keeping such counsel fully informed and involved
in the proceedings. Nothing in this paragraph shall in any way limit the
Indemnifying Party's obligations of indemnification and defense as set forth
in this Section 7.

(5) The Indemnifying Party shall reimburse Claimant upon demand for
any payments made or loss suffered by it at any time after the date hereof
arising out of or in any way connected with a Claim, regardless of whether
that amount is based upon the judgment of any court of competent jurisdiction
or is made pursuant to a bona fide compromise or settlement of a Claim. No
final compromise or settlement of a Claim shall be entered into by the
Claimant without the Indemnifying Party's written consent, which consent
shall not be unreasonably withheld.

-6-

<PAGE>

8. CONFIDENTIALITY.

(a) GENERAL. Each party expressly undertakes to retain in confidence the
terms of this Agreement and the Agreement itself, along with all information
and know-how transmitted to or otherwise received by each party that the
disclosing party has identified as being proprietary and/or Confidential or
that, by the nature of the circumstances surrounding the disclosure, ought in
good faith to be treated as proprietary and/or confidential (collectively,
"Confidential Information"), and will make no use of such Confidential
Information except under the terms and during the existence of this
Agreement. Notwithstanding the foregoing, any party may disclose the terms
of this Agreement to its outside legal and financial advisors with whom such
party has a confidential relationship and who are obligated to retain such
information in confidence, in the ordinary course of business. In addition,
no party shall have an obligation to maintain the confidentiality of
information that (i) it received rightfully from an unaffiliated third party
prior to its receipt from the disclosing party; (ii) the disclosing party has
disclosed to an unaffiliated third party without any obligation to maintain
such information in confidence; or (iii) is independently developed by the
obligated party. Further, each party may disclose Confidential Information
as required by governmental or judicial order, provided such party gives the
disclosing party prompt written notice prior to such disclosure, and complies
with any protective order (or equivalent) imposed on such disclosure, and
provides the disclosing party the option of either seeking a protective order
or having its Confidential Information be subject to the same protective
orders as may apply to information of the party subject to the governmental
or judicial order. No party shall disclose, disseminate or distribute any
other party's Confidential Information to any third party without the other's
prior written permission. Each party's obligation under this Section 8 shall
extend to the earlier of such time as the information protected hereby is in
the public domain through no fault of the obligated party or five (5) years
following termination or expiration of this Agreement. Each party shall take
all reasonable steps to ensure that their employees comply with this Section 8.

(b) FACILITY TOURS. MS acknowledges that customers and potential
customers of Starpak may tour the Facility. MS agrees that any casual
viewing during such a tour of the Manufacturing of Products that MS has
already commercially released does not violate Section 8(a) above.
[ * ]
[ * ]

9. WORKERS' COMPENSATION AND RISK OF LOSS.

(a) WORKERS' COMPENSATION. Starpak shall at all times comply fully with
all applicable workers' compensation, occupational disease, and occupational
health and safety laws, statutes, and regulations. Such workers'
compensation and occupational disease requirements shall include coverage for
all employees of Starpak suffering bodily injury (including death) by
accident or disease, which arises out of or in connection with the
performance of this Agreement by Starpak. Satisfaction of these requirements
shall include, but shall not be limited to:

(1) full participation in any required governmental occupational
injury and/or disease insurance program, to the extent participation in such
program is mandatory in any jurisdiction, and

(2) purchase of workers' compensation and occupational disease
insurance providing benefits to employees in full compliance with all
applicable laws, statutes, and regulations (but only to the extent such
coverage is not provided under a mandatory government program as in (1)
above), or

(3) maintenance of a legally permitted and governmentally approved
program of self insurance for workers' compensation and occupational disease.

Except to the extent prohibited by law, Starpaks' program(s) for compliance
with workers' compensation and occupational disease laws, statutes, and
regulations in (1), (2), or (3) above shall provide for a full waiver of
rights of subrogation against MS, its subsidiaries, officers, and employees.

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<PAGE>

(b) RISK OF LOSS. Starpak shall assume risk of loss or damage to
materials and goods which are the subject of this Agreement, including but
not limited to Product Components, the associated raw materials, and finished
goods. Starpak's risk for incoming materials and components shall commence
either at the time of shipment from a supplier location or upon delivery of
the materials or components to Starpak's facility, depending on the risk of
loss terms contained in the supply agreement. Starpak's responsibility for
risk of loss shall continue through manufacture, assembly, storage, and, when
Starpak selects the delivery method, shipment of finished goods. Where MS
selects the delivery method for finished goods, Starpak's responsibility for
risk of loss or damage shall terminate upon shipment of the finished goods,
although Starpak shall remain responsible for adequately packing the finished
goods and shipping them pursuant to MS's directions. When Starpak selects
the delivery method, loss or damage with regard to a shipment of finished
goods shall be determined when the variance between the quantity actually
delivered to the Shipping Location and the quantity loaded onto a delivery
truck for shipment, as reflected on the bill of lading, exceeds [ * ] of the
quantity loaded onto the delivery truck. In the event of:

(1) damage to any of the materials or goods for which Starpak assumes
risk of loss, Starpak or its insurers agree, except as expressly provided in
this Section 9(b), to indemnify MS, by its direct payment or through
insurance provided at its expense, for [ * ] of MS' published estimated retail
price for Products and the current replacement cost for other property; and

(2) notwithstanding Section 9(b)(1) above, damage or loss to any
finished goods for which Starpak assumes risk of loss where such damage or
loss arises out of Starpak's negligence, gross negligence, or willful
misconduct, Starpak or its insurers agree to indemnify MS, by its direct
payment or through insurance provided at its expense, for the full amount of
MS' published estimated retail price for the relevant Products.

(c) INSURANCE. To assure adequate resources to respond to losses and
damage for which Starpak is responsible under Section 9(b), Starpak shall
maintain an "All Risk" property damage insurance policy covering such loss
and damage. Such policy shall be written with an insurer and on policy form
reasonably acceptable to MS and shall provide limits adequate to cover the
total value of products and property at risk. Starpak shall cause its
insurer to endorse the policy as follows:

(1) MS to be additional insured and direct loss payee to the extent
of MS' interest in products or other property,

(2) coverage provided by the policy shall be primary to and not
contributory with coverage maintained by MS,

(3) rights of subrogation against MS are to be waived,

(4) such policy may not be canceled or materially altered to the
detriment of MS without [ * ] days advance notice to MS.

Upon request, Starpak shall provide MS with a current certificate of
insurance and certified copies of policy endorsements evidencing compliance
with the requirements set forth in this section.

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<PAGE>

10. TERM AND TERMINATION.

(a) TERM. The initial term of this Agreement shall begin on the Effective
Date and shall expire on June 30, 1998 ("Initial Term"). At the end of the
Initial Term and at the end of each Renewal Term, this Agreement shall
automatically renew for an additional period of one (1) year each (the
"Renewal Term"), provided, however, that not less than ninety (90) days prior
to the expiration of the Initial Term or of the then-current Renewal Term,
the parties shall have mutually agreed in good faith to any adjustment in the
rates payable by MS to Starpak for the Manufacturing (as described in Section
3). Any adjustments agreed upon by the parties to the rates payable shall
be effective as of the first day of each Renewal Term. If the parties are
not able to agree upon such adjustments in accordance with the foregoing
provision, this Agreement shall automatically expire at the end of the
Initial Term or the then-current Renewal Term.

(b) TERMINATION. MS may terminate this Agreement: (i) immediately upon
notice if Starpak fails to strictly comply with Section 4 or Section 8 of
this Agreement, or (ii) without cause with ninety (90) days notice in
writing. Starpak may terminate this agreement without cause with ninety days
notice in writing. The rights and remedies provided herein to the parties
shall not be exclusive and are in addition to any other rights and remedies
provided by law. In the event a non-defaulting party in its discretion
elects not to terminate this Agreement, such election shall not be a waiver
of any claims of that party for a default(s). Further, the non-defaulting
party may elect to leave this Agreement in full force and effect and to
institute legal action against the defaulting party for specific performance
and/or damages suffered by such party as a result of the default(s).

(c) OBLIGATIONS UPON TERMINATION/EXPIRATION OF THIS AGREEMENT. Within
[ * ] days after termination or expiration of this Agreement, Starpak
shall do all of the following:

(i) deliver to MS any finished Product built against a
MS Purchase Order, but not yet delivered, at the
prices set forth herein. Starpak shall destroy all
other finished Product and shall, upon request of MS,
issue a letter certifying that such destruction has
taken place.

(ii) Starpak shall, at MS' request, either deliver to
MS or destroy any other unused Inventory (excluding
finished Product), as designated by MS. MS' payment
obligation for such unused Inventory shall be in
accordance with the Price terms of this Agreement.

(iii) Starpak shall, at MS' request, provide MS the
opportunity to purchase any other Product Components
owned by Starpak (excluding unused Inventory) at the
prices set forth herein.

(iv) Starpak immediately shall deliver to MS any MS
Deliverables not covered by the foregoing. Starpak
shall not retain any copy or original of any MS
Deliverable in any way whatsoever.

Starpak shall work with MS to terminate the Manufacturing in an orderly
manner in the event of the termination of this Agreement. Use of
Intellectual Property in any manner by Starpak after expiration or
termination of this Agreement for any reason, whether or not incorporated in
Inventory, shall be deemed to be in violation of MS's Intellectual Property
rights and shall entitle MS to have all remedies provided by law or equity
(including injunctive relief); provided, however, this does not preclude
Starpak from continuing to use MS Products properly acquired outside of this
Agreement in accordance with the applicable license.

(d) SURVIVAL. Sections 6, 7, 8, 10 and 11 shall survive termination or
expiration of this Agreement.

11. RECORD KEEPING & REVIEW REQUIREMENTS.

(a) RECORD KEEPING REQUIREMENTS. During the term of this Agreement,
Starpak agrees to keep all usual and proper production and shipment records
and books of account and all usual and proper entries relating to Starpak's
performance of this Agreement for a minimum period of [ * ] from the
date they are created. Such records, books of account, and entries shall be
kept in accordance with generally accepted accounting principles.

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<PAGE>

(b) DOCUMENTATION. During the term of this agreement, Starpak agrees to
provide MS with any and all information that MS has determined necessary for
tax compliance and statutory reporting purposes. Unless MS indicates
otherwise, Starpak shall provide such information in an electronic format, at
an agreed upon quarterly deadline. MS shall specify the data requirements
and make every reasonable effort to assist Starpak in designing the report
format. All information should be based on the MS fiscal year-to-date basis
(beginning on July 1).

(1) RELEVANT RECORDS. Upon reasonable notice, MS may cause a review
of all of Starpak's books and records relevant to this agreement, including
without limitation copies of shipping and production records to support
invoices and copies of third party invoices to support price adjustments (as
may be mutually agreed upon) based on changes in the cost of third party
materials and services (e.g., paper, media, ink, packaging materials, postage
and freight).

(2) REVIEW PROCESS. Any record review conducted pursuant to this
Section 11 (b) shall be made at Starpak's office or such other reasonable
location as MS may request. In no event shall a record review be conducted
more than once quarterly, unless the immediately preceding record review
disclosed a material discrepancy. Notwithstanding the foregoing, in the
event MS has a good faith belief that one or more statements issued by
Starpak is inaccurate, incomplete, or incorrect, MS may cause a record review
to be conducted at any time. If accounting discrepancies in statements
issued by Starpak are disclosed as a result of a record review, Starpak
agrees to implement and or require outside contractors to implement
agreed-upon corrective action. Any such record review shall be paid for by
MS unless Material discrepancies are disclosed. "Material" shall mean the
[ *
] for which Starpak has assumed risk of loss under Section
9(b)(2) that are shipped by Starpak to Shipping Locations as reported by
Starpak to MS within the audit period. If Material discrepancies are
disclosed, Starpak agrees to pay MS for the costs associated with the record
review. Nothing herein shall preclude MS from exercising any other rights or
remedies it has under law or other provisions of this Agreement.

(d) FACILITY INSPECTIONS. MS may cause an inspection to be made, with at
least [ * ] prior notice, of the Facility to verify that Starpak
is providing Manufacturing in compliance with the terms of this Agreement.
Any inspection conducted pursuant to this Section 11(c) shall be conducted
during regular business hours at the Facility. Starpak agrees to provide
MS's designated inspection team access to relevant records and the Facility.
Starpak may designate a representative to accompany the inspector or
inspectors, and it may reasonably restrict access from specific areas
containing confidential information of Starpak or its other customers. If
material discrepancies from the provisions of this Agreement are disclosed,
including without limitation Material discrepancies as defined in Section
11(b), Starpak agrees to implement agreed-upon corrective action. If
Material discrepancies are disclosed, Starpak agrees to pay MS for the costs
associated with the facility inspection. Nothing herein shall preclude MS
from exercising any other rights or remedies it has under law or other
provisions of this Agreement.

(e) UNACCOUNTED PRODUCT. Starpak shall be liable for any Unaccounted
Product discrepancies pursuant to Section 9(b) above.

(f) CONFIDENTIALITY. Notwithstanding the foregoing, Starpak may edit
their books and records to protect confidential information of Starpak that
is unrelated to the subject of a MS record review, or to protect confidential
information of the customers of Starpak.

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<PAGE>

12. NOTICES/PRINCIPAL CONTACTS.

All notices, authorizations, and requests in connection with this
Agreement shall be deemed given on the day they are sent by air express
courier, charges prepaid; and addressed as follows:

STARPAK: Attn.: MICHAEL MORGAN
------------------------------
237 22ND ST.
------------------------------
GREELEY, CO 80631
------------------------------

Telephone: 970-346-5303
------------------------------
Fax: 970-353-7652
------------------------------

With a Copy to: Attn.: BRENT COX
------------------------------
237 22ND ST.
------------------------------
GREELEY, CO 80631
------------------------------

Telephone: 970-346-5314
------------------------------
Fax: 970-356-0578
------------------------------

MS: Attn.:
------------------------------
------------------------------
------------------------------

Telephone:
------------------------------
Fax:
------------------------------
With a Copy to: Attn.: J.Kevin Cahill or his named
successor Law & Corporate Affairs
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399

Telephone: 206-882-8080
------------------------------
Fax: 206-936-7409
------------------------------

or such other person or address as each party, respectively, so designates by
written notice to the other parties.

13. ENTIRE AGREEMENT/MODIFICATIONS.

(a) ENTIRE AGREEMENT. This Agreement, including all exhibits hereto,
constitute the entire agreement between Starpak and MS with regard to the
subject matter hereof and supercedes all prior and contemporaneous
communications.

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<PAGE>

(b) STATEMENT OF WORK. The Statement of Work may be modified as follows:
each modification must be approved by MS and Starpak, and such approval must
be documented with a confirming e-mail or other written communication between
these two parties. In addition, MS shall prepare on a [ * ] basis an
updated version of the Statement of Work incorporating all modifications made
since the prior update and clearly setting forth the "Date of Revision" on
the front page. MS shall circulate each such update to Starpak. The most
current revised version of the Statement of Work that has been circulated in
this manner to the parties, together with subsequent modifications documented
pursuant to this Section 13(b) shall constitute the Statement of Work for the
purposes of this Agreement. Starpak shall maintain and make available to MS
upon request copies of all of its documentation regarding modifications to
the Statement of Work. For purposes of this Agreement, references to
Statement of Work includes any agreed modification even if prior to the
quarterly incorporation of such changes.

(c) OTHER. Except as provided in this Section 13, the provisions of this
Agreement may be modified only by written instrument signed by MS and Starpak.

14. GENERAL.

(a) PROHIBITION AGAINST ASSIGNMENT. Starpak may not assign its rights or
obligations under this Agreement (by actual assignment or by operation of
law, including without limitation through a merger, consolidation, exchange
of shares, or sale or other disposition of assets, including disposition on
dissolution), without the prior written consent of MS, which consent shall
not be unreasonably withheld.

(b) CONTROLLING LAW. This Agreement shall be construed and controlled by
the laws of the State of Washington, and Starpak consents to jurisdiction and
venue in the state and federal courts sitting in the State of Washington.
Process may be served on any party in the manner set forth in Section 12 for
the delivery of notices or by such other method as is authorized by
applicable law or court rule.

(c) NO PARTNERSHIP/JOINT VENTURE/AGENCY/FRANCHISE. This Agreement shall
not be construed as creating a partnership, joint venture or agency
relationship or as granting a franchise.

(d) SEVERABILITY. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be illegal, invalid or unenforceable, the
remaining provisions shall remain in full force and effect.

(e) ATTORNEYS' FEES. If any party employs attorneys to enforce any
rights arising out of or relating to Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs and other expenses.

(f) WAIVER. No waiver of any breach of any provision of this Agreement
shall constitute a waiver of any prior, concurrent or subsequent breach of
the same or any other provisions hereof, and no waiver shall be effective
unless made in writing and signed by an authorized representative of the
waiving party.

(g) SECTION HEADINGS. The Section headings used in this Agreement are
intended for convenience only and shall not be deemed to supersede or modify
any provisions.

(h) GOVERNMENTAL APPROVALS. Each party shall, at its own expense, obtain
and arrange for the maintenance in full force and effect of any and all
governmental approvals, consents, licenses, authorizations, declarations,
filings, and registrations as may be necessary or advisable for the
performance of all of the terms and conditions of this Agreement.

(i) FORCE MAJEURE. Except as expressly provided herein, no delay,
failure, or default in performance of any obligation of any party hereunder
shall constitute a breach of this Agreement to the extent caused by force
majeure. In the event of a force majeure that makes continued performance by
any party under this Agreement unfeasible, all parties shall have a right to
terminate upon [ * ] written notice.

-12-
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above. All signed copies of this Agreement shall be deemed
originals.

MICROSOFT CORPORATION STARPAK, INC.

By /s/ Robert Devenuti By /s/ Michael Morgan
--------------------------------- -----------------------------
Robert Devenuti Michael Morgan
- ------------------------------------ ----------------------------------
(Print Name) (Print Name)

VP Operations President/CEO
- ------------------------------------ ----------------------------------
Title Title

8/14/96 August 19, 1996
- ------------------------------------ ----------------------------------
Date Date

-13-

<PAGE>

EXHIBIT A
STATEMENT OF WORK

A-1
<PAGE>

EXHIBIT A
STATEMENT OF WORK

1 GENERAL

1.1 PURPOSE AND REQUIREMENT SCOPE
This document describes the requirements that Starpak must meet
as a supplier, manufacturer and service provider to MS. The
general requirements under this Agreement are:

1.1.1 Source and procure raw materials in accordance with MS
specifications.

1.1.2 Build Product Components in accordance with MS
specifications in the quantities ordered by MS
pursuant to a Purchase Order.

1.1.3 Assemble finished package Product in accordance with
MS Specifications in the quantities ordered by MS
pursuant to a Purchase Order, and deliver finished
Product to [ * ] or
other Shipping Location specified by MS on or before the
required delivery date.

1.1.4 Provide information regarding production and delivery
as required.

1.2 MEETINGS AND REVIEWS
Starpak will meet with designated MS team members at the Facility
on a [ * ] basis through 12/96 and AT LEAST [ * ] thereafter.
These meetings will include a [ * ] contractor performance
review, pricing reviews, Continuous Improvement Projects, Process
Improvement Projects, Management Status Reviews, Cost Reduction
Initiatives and other operational areas and issues.

2 SCOPE OF BUSINESS

2.1 It is MS' intent for Starpak to be it's primary supplier of finished
Product for [ * ] [ * ], but at all times MS
shall have the right to appoint third parties to perform
Manufacturing for MS.

2.2 Notwithstanding Section 2 of the Agreement, Starpak is not
obligated to maintain the 400,000 unit/week capacity beyond [ * ]
weeks from the current build period when the [ * ] week rolling
forecast described in Section 3 below shows no production
requirements for the last [ * ] weeks of the forecast.

3 FORECASTS

3.1 [ * ] WEEK ROLLING FORECAST
MS will provide a [ * ] week rolling forecast for all Products
anticipated to be built by Starpak. The primary purpose of this
forecast is for Starpak to use it for planning and procuring raw
materials. MS may change the forecast up to the issuance of a P.O.
pursuant to Exhibits B and C of the Agreement (i.e. [ * ]
days before planned production) with no penalty or responsibility
for any raw materials, Product Components, or Product
acquired/built to such forecast.
<PAGE>

3.2 FOLLOWING THE ISSUANCE OF A P.O.
Once MS has issued a P.O., MS may change the build requirements
corresponding to that P.O., but raw materials procured by Starpak
to fullfill such P.O. that are left unused will be the
responsibility of MS, and Starpak may charge MS for the storage of
any such unused raw materials remaining in Starpak's warehouse
[ * ] days after fullfillment of the P.O. MS will reimburse
Starpak for the cost of such unused raw materials if they remain
unused.

4 PURCHASE ORDER PROCEDURES

4.1 During the term of this Agreement, MS will issue [ * ] Purchase
Orders (P.O. s) for Product Components and/or finished Products to
Starpak on each [ * ]. Each P.O. so issued shall
require delivery of the Products so ordered within [ * ] of
the P.O. date. The Purchase Order will indicate, but may not be
limited to: the SKU, quantity, price, required delivery date and
Shipping Location for all planned production during that particular
week. MS will prioritize the Products on the P.O. so Starpak will
be able to build more urgent requirements first, where possible or
MS may designate actual build and delivery dates for specific
Products. The Purchase Order will officially authorize Starpak to
manufacture Product Components, assemble finished Product and ship
Products.

5 DELIVERY TO SHIPPING LOCATION

5.1 When Product is shipped to the [ *
] [ *
], Starpak will directly coordinate all deliveries of
finished goods with that location as described below Shipments to
other MS designated Shipping Location(s) may also require similar
delivery coordination.

5.1.1 When the [ * ]
is the Shipping Location, Starpak must obtain a delivery
appointment and provide an Advanced Shipment Notification
by fax or EDI to [ * ] showing SKU, quantity, PO
number, carrier, Pro number and delivery date before the
shipment is tendered to a carrier. Receiving discrepancies
will be reported by [ * ] to Starpak within [ * ]
of receipt.

5.2 The specified mode of transportation to Shipping Location will be
[ * ] [ * ] If Starpak finds that service superior to the
specified mode of transportation is required to meet its delivery
commitments to MS, and the need for that service is through no
fault of MS, Starpak will pay for the incremental cost of such
services. Starpak will attempt to make delivery of Product where
MS has designated the build and ship date using the specified
mode of transportation. If this is not possible, Starpak
will obtain approval from MS to use more costly modes of
transportation to meet delivery requirements.

5.3 Starpak may select its own carrier, upon approval of MS, [ * ]
[ * ]
Otherwise a MS designated carrier must be used. In any case,
freight will be paid by MS through [ * ]
[ * ]
[ * ]
[ * ]

Microsoft RFP Section 2 2

<PAGE>

6 BASIC PROCUREMENT

6.1 Starpak will be responsible for procuring almost all raw materials
for manufacturing and assembly. [ *
]

6.2 Raw materials procured from suppliers on the MS Approved Supplier
List meet MS specifications. Raw materials that Starpak wishes to
procure from other sources are subject to audit at Starpak's
facility for adherence to the MS Quality Workmanship Standards.

7 SUBCONTRACTING AND ALTERNATIVE SITES

7.1 SUBCONTRACTING TO OTHER COMPANIES
Any or all of Starpak's production may be sub-contracted to others,
as long as the subcontractors used are approved in writing by MS
(as set forth in Section 5(a)(1) of the Agreement) and conform to
MS specifications for production of finished packaged Product.

7.2 ALTERNATIVE ASSEMBLY/DUPLICATION SITES
Starpak shall notify MS in writing and receive MS documented
approval before using any additional Starpak sites or subcontract
manufacturing facilities, other than the Facility.

8 PRINTING

8.1 PRINT AND/OR PROCURE TO FORECAST
Starpak must be capable of providing printed materials per MS
provided specifications, and in quantities to meet MS's finished
goods production requirements.

8.2 PRINT SPECIFICATIONS
Printed materials must meet the quality standards and
specifications identified in MS Print Specifications and in the MS
Quality Workmanship Standards (Attachment 1).

8.3 RECEIPT OF ARTWORK FOR PRINTING
[ *
] Print sources must have the technical ability
to quickly and efficiently make changes to printed material when
so directed and authorized by MS.

8.4 REGISTRATION/LICENSE CARD PRINTING
Starpak shall print or have printed product part numbers, product
ID numbers or other MS identified information on registration
cards.

8.5 CD COMPONENT PRINTING
Starpak shall have the capability to print or shall approve a
source of supply of printed components included in CD-ROMs. These
components shall consistently meet or exceed the quality
requirements of MS CD ROM Workmanship Standards and Specifications
(Attachments 1).

9 DISK DUPLICATION

9.1 Duplicated disks may be supplied by MS or produced or procured by
Starpak, as set forth in the [ * ] P.O.

Microsoft RFP Section 2 3
<PAGE>

9.2 DISK DUPLICATION CAPABILITIES
Starpak or Starpak's duplication source (all duplication sources
must be selected in compliance with Section 5 of the Agreement)
must be capable of duplicating diskettes in accordance with the
requirements identified in the MS Performance Standards for a 3.5
Duplicated Disk (Attachment 6). Starpak or Starpak's duplication
source duplication equipment must have the ability to control all
aspects of the quality of the duplication process including image
integrity, bit placement, window margin, and RPM of the drive
spindle.

9.3 DISK DUPLICATION QUALITY CONTROL
Starpak or Starpak's duplication source must have an audit process
in place consisting of a data interchange or second spindle
verification as well as second image verification process (see
Attachment 6). [ * ] shall be used to ensure
that the proper image is being duplicated. Starpak or Starpak's
duplication source developed [ * ]
[ * ]

9.4 DISK DUPLICATION PROCESSES

Starpak or Starpak's duplication source must have:

9.4.1 A preventive maintenance program or backup
sourcing program in place capable of preventing
disk duplicating delays for finished goods
production.

9.4.2 A formal training program in place for all
duplication operators and support personnel.

9.4.3 A staff technically capable of supporting all
of MS's duplication requirements within the weekly
production variability range.

9.4.4 A write and verify process for all duplicated
product.

9.4.5 The capability to utilize MS [ * ] and
other tools when necessary.

9.5 VIRUS PREVENTION
To ensure that every possible avenue to prevent MS deliverable
product from being infected with a computer virus, Starpak shall
implement the following:

[

]

[
*

]

Microsoft RFP Section 2 4

<PAGE>

[

]
[

]

[

]
[

]

9.6 DISKETTE QUALITY
Starpak or Starpak's duplication source must perform quality checks
on duplicated disks. Diskettes shall be duplicated and verified in
accordance with the Performance Characteristics for a 3.5
Duplicated Disk, the MS Global Disk Standard and Minimum Testing of
Duplication [ * ] Disks (Attachments 3, 6 and 8).

9.7 CUSTOMER MASTER DISK HANDLING
Starpak or Starpak's duplication source must have the capability of
receiving software master images [ * ] Starpak or
Starpak's duplication source shall ensure proper handling, storage,
retrieval and control of the master disk(s) provided or created to
ensure the integrity of the software images.

9.8 DISK COPY PROTECTION AND [ * ]
Starpak or Starpak's duplication source disk duplication process
must be capable of supporting disk copy protection and
[ * ]

9.9 DISK LABELING AND COLLATION

9.9.1 LABEL IMAGES
MS will provide all label [ *
]

9.9.2 LABEL PRINTERS
Starpak or Starpak's duplication source shall
print [

]

9.9.3 LABELERS
Starpak or Starpak's duplication source labeling
equipment and/or procedures shall be capable of
consistently meeting or exceeding MS's label
placement specification as described in the MS
Workmanship Standards (Attachments 1).

Microsoft RFP Section 2 5

<PAGE>

9.9.4 COLLATION
Starpak or Starpak's duplication source shall have
sufficient and appropriate process equipment to
seal collated disk sets into polyvinyl bags. A
drop height of no more than 18" during the
bagging process will be used to eliminate possible
damage to disks during impact.

10 CD REPLICATION

CDs may be supplied by MS or will be produced or procured by
Starpak, as set forth on the [ * ] P.O. Starpak or Starpak's CD
source shall have documented processes and appropriate equipment to
effectively produce CD-ROMs and associated CD components which
consistently meet or exceed the requirements of the MS Quality
Workmanship Standards and the MS Global CD-ROM Specification
(Attachments 1 and 7). [ * ] Starpak will
assemble finished CD product in jewel cases with backliners,
booklets, frontliners, shrinkfilm and other component parts
[ * ]. Starpak agrees to perform all
required maintenance on the equipment at its own cost. Starpak
shall have a [ * ] to hold CD-ROMs and
material until it can be rendered unusable or recycled. When
Starpak produces or procures CDs, the following apply:

10.1 CD-ROM PRODUCTION PROCESSES
Starpak or Starpak's approved CD source (which shall be selected
in compliance with Section 5 of the Agreement) shall have
documented processes for the following:

10.1.1 A preventative maintenance program or backup
sourcing program in place capable of preventing
delays for finished goods production.

10.1.2 A formal training program in place for all CD
operations (Premastering, Mastering, Replication)
and support personnel.

10.1.3 A staff technically capable of supporting all
of MS's CD requirements within the [ * ]
production variability range.

10.2 CD HANDLING OF CD-ROM MASTERS
Starpak or Starpak's approved CD source shall have documented
procedures in place which ensure proper handling, storage and
retrieval of MS supplied CD master files.

10.3 CD ANTI-PIRACY AND [ * ]
Starpak or Starpak's approved CD source shall be
capable of supporting Anti-Piracy initiatives and
[ * ] applicable to CD-ROMs.

10.4 CD-ROM QUALITY CONTROL
Starpak shall have a documented verification process in place to
ensure the integrity of the replicated CD-ROM matches the original
supplied by MS. In addition, Starpak or Starpak's approved CD
source of supply shall have documented and implemented processes to
[ * ] which ensure compliance
to MS Global CD-ROM Specification (Attachment 10).

10.5 CD LABEL SCREEN PRINTING
Starpak's, or Starpak's supplier, should have a process to receive
CD label images [ * ]. Process must be established to
ensure the correct label image is applied to the correct CD title.
Processes must prevent any CD's used in the setup of the print
processes [ * ]

Microsoft RFP Section 2 6
<PAGE>

[

]

11 PRODUCTION

11.1 ASSEMBLY CAPABILITY
Starpak will establish and maintain an assembly process capable of
producing sufficient quantities of Product that meet MS's Purchase
Order requirements, or minimum capacity committment, whichever is
lower. The MS quality standards as stated in the MS Quality
Workmanship Standards must be met (Attachment 1).

11.2 [ * ]
Starpak shall have the proper equipment to make [
* ] for retail products and shippers in
accordance with MS specifications which meet or exceed MS
Workmanship Standards (see Attachment 1).

11.3 SHRINK-WRAPPING
Starpak shall be capable of shrink-wrapping all sizes of Products,
including CDs, in accordance with MS Workmanship Standards
(Attachment 1).

11.4 ASSEMBLY QUALITY
Starpak shall perform in-process and final verifications of
assembled Products to ensure compliance to the MS requirements and
specifications ( Attachment 1). The standards included in Minimum
Quality Inspection Standards for Assembled Product, Attachment 7
will be used.

12 DISTRIBUTION AND STORAGE

12.1 PALLET LOADING
Starpak shall adhere to the MS pallet configuration specifications
when stacking product (Attachment 2).

12.2 FINISHED GOODS DISTRIBUTION PROCEDURES
Starpak shall have proper handling procedures for finished goods to
prevent loss or damage between assembly and shipment. Starpak will
properly load finished goods for transport to prevent damage in
transit.

12.3 BILLS OF LADING
Starpak shall prepare a BOL and/or any other applicable
documentation for all MS shipments.

12.4 STORAGE AND INVENTORY OF MS SUPPLIED COMPONENTS
Starpak will store MS supplied components at [ * ]
Starpak will be responsible for inventory recordkeeping and monthly
cycle counting and reporting of MS owned components. Starpak will
[ * ] MS for [ * ] of MS owned inventory while in its
control [ * ].

Microsoft RFP Section 2 7
<PAGE>

13 REPORTING/COMMUNICATION REQUIREMENTS

[

]

14 QUALITY

14.1 ISO CERTIFICATION
Starpak shall remain ISO 9002 certified during the
period of this Agreement.

14.2 QUALITY RECORDS
Starpak shall maintain records of inspection, repairs,
reworks and tests for the term of this agreement.
Records shall be made available to MS upon request.

14.3 AUDITS AND CORRECTIVE ACTIONS
Pursuant to Section 11 of the Agreement, MS personnel
shall have access to the Facility to audit and evaluate
processes, systems and products. Starpak shall provide
timely response to MS initiated corrective actions
resulting from customer complaints, product defects or
MS audits.

[

]
14.5 RISK MANAGEMENT
Starpak will agree to participate in a risk management
program to ensure production availability.

14.6 [ * ]
Starpak will have a [ * ]
[
*
]

15 CONFIGURATION MANAGEMENT

15.1 BOMS AND CADS
Starpak will use MS supplied Bill of Materials and CADs
as a reference to ensure proper assembly of Product as
specified in MS Workmanship Standards. (Attachment 1).
[
*

] MS will insure the receipt transaction is made
against the correct P.O.

Microsoft RFP Section 2 8
<PAGE>

15.2 CHANGES TO BOMS AND CADS
All changes to the configuration of Products will be
managed through the MS Configuration group. Starpak
may make no changes to product configuration or content
without written authorization from MS, however, Starpak
is encouraged to suggest changes that [ * ]
processes or the Product. Any discrepancies between MS's
BOM, CAD or Kit and Starpak's BOM shall be resolved prior
to each build.

15.3 [ * ] RECORD RETENTION

Starpak shall maintain records [ * ] used to
assemble Product for the term of the Agreement Records
will be made available to MS upon request.

16 INFORMATION TECHNOLOGY

16.1 INFRASTRUCTURE REQUIREMENTS
The Facility shall have an infrastructure capable of
supporting a variety of data communications required to
Manufacture Product. This includes facsimile and the
ability to connect to MS's external network. External
network connections will be used to transfer
information about Product builds.

16.2 TECHNICAL PERSONNEL
Starpak shall have in-house or readily available
technical support at the Facility. These Starpak
personnel will work with MS personnel to ensure that
the site is properly set up to communicate with MS. MS
will work with Starpak to establish competency with any
non commercially available MS-specific software that
may be used in the operation. Starpak will be
responsible for on-going training of replacement or
additional personnel used to support the operation.

16.3 DATA EXCHANGES
Data exchanges will be required throughout the term of
this Agreement. Exchanges will occur primarily through
[ * ] and may
include, but are not be limited to, [ * ],
[ * ] and routine
information required to manufacture Product. [

*
]

16.4 MS may wish to employ any or all of the following
system alternatives:

- [ * ]
- [ * ]
- [ * ]
- [ * ]

[

]
Microsoft RFP Section 2 9
<PAGE>

17 RISK MANAGEMENT

17.1 PIRACY
No unauthorized duplication or replication of product
will be permitted. The discovery of any such
unauthorized duplication or replication of our products
will result in liability to MS at a specified royalty
rate for each product involved and may result in the
immediate termination of the Agreement.

17.2 BUSINESS LOSS
Loss of contractor capability as a result of fire,
natural hazard, or questionable business practices
should be minimized.

18 ATTACHED DOCUMENTATION

The following MS documents, which may be modified from MS
from time to time, are hereby incorporated as part of this
Statement of Work and Starpak hereby acknowledges receipt
thereof.

TITLE ATTACHMENT NUMBER
----------------------------------------------------------------------
MS Quality Workmanship Documents: 1
- [ * ] & Package Labels - Workmanship Standards
(#00100)
- Corrugate Materials Workmanship Standards(#00111)
- Disk Bags -- Workmanship Standards (#00108)
- Disk Labels -- Workmanship Standards (#00107)
- Glossary Workmanship Standards (#00124)
- Manuals -- Workmanship Standards (#00104)
- Manufacturing/Receiving Workmanship Standards (#00109)
- Production -- Workmanship Standards (#00114)
- Quality Quick Reference Guide (#00113)
- Retail Cartons -- Workmanship Standards (#00110)
- Single Sheet/Folded Items (#00105)
- CD-ROM Booklet, Back Liner, Front Liner, Leaflet and
Sleeve Workmanship (#CD Comp)
- CD-ROM Jewelcase Workmanship Standards (#CD Jewel)
- CD-ROM Label Art Workmanship Standards (#CD Label)
- CD Key Label Specification

Pallet Configuration (#00122) 2
Minimum Testing of Duplication [ * ] Disks (#00120) 3
Minimum Requirements for Virus Protection (#00119) 4
First Article Inspection Requirements (#00106) 5
Performance Characteristics for a 3.5 Duplicated Disk 6
MS Global CD-ROM Specification (#CD Spec) 7
MS Global Disk Standard (#00126) 8

Microsoft RFP Section 2 10

<PAGE>

EXHIBIT B
PRICE AND PAYMENT TERMS FOR PRODUCT COMPONENTS

1. During the term of this Agreement, MS will issue [ * ] Purchase
Orders (P.O.'s) for Product Components to Starpak on [ * ]
Each P.O. so issued shall require delivery of the Product Components within
[ * ] of the P.O. date. If assembly services are also ordered (see
Exhibit C) as part of the P.O., each P.O. so issued shall require delivery of
the Product Components so ordered as part of the finished Products within
[ * ] of the P.O. date. Starpak will build and ship to the
Shipping Location. All receipts to the P.O. entered by the Shipping Location
by close of business [ * ] will be paid [ * ]
which will result in the issuance of a check within [ * ]
to the Shipping Location.

2. For each P.O. issued under this Agreement for Product Components, MS
agrees to pay Starpak a per Product Component price (e.g., per each Jewel
Case Component ordered) to be calculated as follows:

[
Per Product Component Price =
*
]
---------------------------------
[ * ]

[ * ]

DEFINITIONS:

[ * ] [

]

[ * ] [

]

[ * ] [

]
B-1
<PAGE>

[ * ]

[

]

[

]
[
*
]

[

*
]

3. Starpak may be required to produce Product Components for new MS
Product SKUs at any time during the term of this Agreement. Pricing for any
such Product Components will be determined by using the formula set forth in
Section 2 above. Starpak agrees to make all reasonable effort to provide MS
with Product Component pricing for new MS Product SKUs within [ * ]
of receiving the MS Product SKU specification and BOM information from MS.

4. From time to time BOM changes occur that may add or delete components
from the MS Product SKU. These additions or deletions to the MS Product
[ * ] shall be reflected accordingly in the material and labor
[ * ].

B-2
<PAGE>

EXHIBIT C
PRICE AND PAYMENT TERMS FOR ASSEMBLY SERVICES

1. If assembly services are ordered as part of the P.O., each P.O. so
issued shall require delivery of the finished Products within [ * ]
of the P.O. date. Starpak will build and ship according to the Shipping
Location. All receipts to the P.O. entered by the Shipping Location by close
of business [ * ] will be paid via the [ * ] which will
result in the issuance of a check within [ * ] to the
Shipping Location.

2. For the assembly of the Product CD ROMs, Disk Set Component, Jewel
Case Component, and the Assembled Box Component into a finished Product
including shrink-wrap, MS agrees to pay Starpak for materials and labor on a
[ * ] to be calculated as follows:

[

]

3. For materials and labor incurred to prepare the products for shipping,
MS agrees to pay Starpak the following [ * ]
as part of its freight costs, as applicable:

[

]

C-1

<PAGE>

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
"Selected Combined Financial Data" and to the use of our report dated
February 18, 1997, in Amendment No. 3 to the Registration Statement (Form S-1
No. 333-20633) and related Prospectus of StarTek, Inc. for the registration of
4,216,667 shares of its common stock.

ERNST & YOUNG LLP

Denver, Colorado
March 26, 1997