APAC CUSTOMER SERVICES, INC

In June 2011, the FASB issued amendments to ASC Topic 220 “Comprehensive Income” related to how entities present total comprehensive income. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company is currently evaluating these amendments and does not expect them to have a material impact on its unaudited condensed consolidated financial statements.

The purchase price totaled $6.4 million, which represents the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date, and consisted of the following: cash of $2.2 million, and contingent consideration of $4.2 million.

A significant portion of the acquisition purchase price includes amounts determined on the achievement of certain contingent financial performance measures. If the Fargo related revenue for the month of August 2011 exceeds $0.3 million the Company will pay contingent consideration equal to $2.2 million multiplied by the percentage difference between actual Fargo related revenue and $0.3 million, however if the actual revenue for August 2011 exceeds $0.6 million the payment will be $2.2 million. Additional contingent consideration is paid to SEI equal to 3.5% of the Fargo related revenue for a period of sixty months after the closing date. In addition, consideration of 1% of certain new revenue generated from activities or services related to the Fargo operations is paid for a period of 24 months for any additional services engaged within sixty months of the closing date.

The identifiable intangible assets of the Company include acquired customer relationships and internally developed software. The acquired customer relationships have a gross carrying value of $33.3 million and $28.5 million as of July 3, 2011 and January 2, 2011, respectively, and accumulated amortization of $28.6 million and $28.5 million as of July 3, 2011 and January 2, 2011, respectively. The internally developed software has a gross carrying value of $1.0 million and $0.7 million as of July 3, 2011 and January 2, 2011, respectively, and accumulated amortization of $0.3 million and $0.2 million as of July 3, 2011 and January 2, 2011, respectively. Total amortization expense related to intangible assets was $0.1 million and $0.3 million for the thirteen weeks ended July 3, 2011 and July 4, 2010, respectively, and $0.1 million and $0.9 million for the twenty-six weeks ended July 3, 2011 and July 4, 2010, respectively.

On July 6, 2011, the Company and One Equity Partners (“One Equity”) the private investment arm of JPMorgan Chase & Co, entered into a definitive merger agreement under which Blackhawk Acquisition Parent, LLC, (“Blackhawk”), an affiliate of One Equity will acquire 100% of the outstanding shares of the Company, through an all-cash transaction with an aggregate equity value of approximately $470 million. The agreement provides for the merger of the Company with Blackhawk Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of Blackhawk. On July 29, 2011, the Company received notice of early termination of the waiting period under the Hart-Scott-Rodino Act of 1976 (as amended). The transaction is expected to close prior to the end of 2011, subject to the satisfaction of customary closing conditions, including, without limitation, approval of the Company’s shareholders.

On or about July 15, 2011, a purported class action complaint was filed against the Company. The Complaint was filed in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois against the Company, all of its directors and One Equity, Blackhawk and Merger Sub. The complaint alleges that the directors breached their fiduciary duties as it relates to the Merger. The complaint also alleges that One Equity, Blackhawk and Merger Sub aided and abetted the directors in breaching their fiduciary duties. The Company believes that the complaint is wholly without merit and intends to vigorously defend this action.

We signed a merger agreement with an affiliate of One Equity on July 6, 2011. The Merger Agreement includes a number of closing conditions which must be met to close the merger, some of which are beyond our control. In addition, One Equity has rights to terminate the Merger Agreement due to certain events, changes or other circumstances. If for any reason, we are unable to obtain the necessary approvals (including, without limitation shareholder approval), meet the required closing conditions or we do not complete the Merger, there could be negative consequences to the Company, including, but not limited to a decline in our stock price.

The impact of the Merger on our business relationships, operating results and business generally is unknown and may negatively impact our business.