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IN STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

UNIVERSAL AMERICAN CORP,
Plaintiff,

v. CA. No. 
PARTNERS HEALTHCARE SOLUTIONS
HOLDINGS, L.P., GTCR GOLDER
RAUNER II, L.L.C., GTCR PARTNERS IX,
L.P., GTCR FUND L.P., GTCR FUND
LP, GTCR L.P.,
DAVID KATZ, GREGORY SCOTT,
JEROME VACCARO and JOHN




Defendants.

First Amended and SnppIementaI CompIaint

Plaintiff Universal American Corp. (?Universal?), for its Complaint against Defendants
Partners Healthcare Solutions Holdings, L.P. GTCR Golder Rauner II, L.L.C.
GTCR Partners IX, L.P. Partners GTCR Fund L.P. 
Fund GTCR Fund IXJB, L.P. Fund GTCR Co?Invest L.P. 
Co?Invest? and, together with GTCR, GTCR Partners IX, GTCR Fund GTCR Fund 
and GTCR Co-Invest, the Defendants?), David Katz Gregory Scott (?Scott?),
Jerome Vaccaro (?Vaccaro?), and John McDonough (?McDonough,? and together with Scott

and Vaccaro, the Management Defendants?), states as follows:

Summary of the Action
I. This case arises out of the fraudulent sale ofPartners Healthcare Solutions, Inc.
or the ?Company?) by its owners, officers, and management to Universal in March 2012

for more than $220 million. APS is a specialty healthcare company providing care management,
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behavioral health, and disease management services to state Medicaid agencies and private
health plans. Unaware of Defendantsa fraudulent misrepresentations and their concealment of
the true state of business, Universal bought APS from GTCR, a multi?billion dollar
private equity firm with a long history in healthcare. At the time of the acquisition (the
??Ti?ansaction?), each of the GTCR Defendants, the selling entity APSLP, then?GTCR principal
and APS board member David Katz, and the APS senior management team of Greg Scott, Jerry
Vaccaro, and John McDonough (collectively, ??Defendants?) knew that APS habitually skirted
and breached its contractual commitments, ultimately leading its customers (largely state
governments) to cancel their contracts and seek to recoup penalties, fines, and overpayments
from APS. Nonetheless, Defendants fraudulently induced Universal to purchase APS for $222.3
million by lying about performance and otherwise camouflaging the truth about 
grave risks of regulatory and contractual liabilities, its inability to maintain existing customer
contracts and obtain new ones, and many other problems. Within less than two years after the
Transaction closed, value had vanished and Universal was forced to write off virtually the
entire $220 million purchase price. Had Universal known the appalling truth, it never would
have bought APS.

2. This action asserts claims for federal securities and common law fraud, as well as
breach of contract and indemni?cation claims for the millions of dollars Universal has had to
loan so that APS subsidiaries could defend and settle numerous litigations and government
investigations regarding Defendants? illegal conduct prior to the Transaction. Defendants?
intentional misrepresentations and omissions in comiection with their fraudulent sale of APS to
Universal included, among others: contractual representations and warranties that APS did

not have knowledge of facts, circumstances, or events that could reasonably be expected to give

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rise to liability under applicable healthcare laws, including the Federal False Claims Act; 
contractual representations and warranties that APS was not in default of any of its material
contracts; contractual representations and warranties that there had been no material adverse
changes in business; contractual representations and warranties that APS owned
outright a computer software program (the ?Software?) that it described as the ?chassis? of its
business; a budget representing that APS would achieve 2012 earnings before interest, taxes,
depreciation and amortization of $25 .5 million from its existing contracts; and a
budget and other documents asserting that APS would achieve additional 2012 EBITDA of $19.3
million from a pipeline of contracts that had been ?won? or that it was ?highly likely? to win.

3. Immediately after the Defendants received their payments for the deal, the ugly
reality about business began to emerge as .511! of these representations (and many others)
turned out to be patently false and misleading. In the weeks and months that followed the
acquisition, Universal discovered that the Defendants including Katz and his colleagues at
GTCR who controlled the due diligence process had concealed a pattern of corner?cutting,
false statements, and breaches of contract that have led to a series of contract terminations,
government investigations and whistleblower claims charging APS with unlaw?il conduct, ?nes,
penalties and other material problems.

4. Many of the most serious undisclosed problems involve regulatory and healthcare
law compliance concerns. As GTCR (with its long history of healthcare investments), Katz and
the APS Management Defendants (each of whom was a seasoned healthcare professional) well
knew, a clean regulatory record and reputation are critical to the success of healthcare companies
such as APS. But since the closing of the Transaction and extending to the present day, APS has

been buried under an avalanche of complaints about regulatory and compliance problems that

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were created while GTCR, Katz, Scott, Vaccaro and lVchonough owned and ran the company.
All of these issues, which involve conduct that occurred before the Transaction, generally arise
from a common accusation: that APS knowingly did not perform the services it had contracted
to perform and then fraudulently billed its customers for services not rendered. And Defendants
utterly failed to disclose and in fact blatantly lied about such misconduct and other negative
information during the due diligence process that led up to the fraudulent sale to Universal.

5. For example, within two weeks after the Transaction closed, Universal learned
that single largest customer (a Medicaid agency), representing 40 percent of the
Company?s revenues, had previously and in the midst Of?ce sales process told Scott,
Vaccaro, and another APS executive that APS was in default of its contract in multiple ways,
including not providing services promised under its contract, and had threatened to terminate the
contract and seek damages against APS for compliance failures. That customer later levied a $5
million line against the Company, resulting in a $3 million settlement payment that APS made
with consent. But APSLP, under the direction and control of GTCR, wrongfully has
refused to indemnify Universal for this loss even though it arises from conduct that occurred
entirely before the sale to Universal.

6. Since the Transaction closed, APS subsidiaries have also been forced to defend
three separate government investigations or whistleblower lawsuits regarding alleged overbilling
in violation of federal and state healthcare laws, including the False Claims Act.

First, after ptu'chasing APS, Universal learned that Federal and state authorities
had launched investigations into whether APS subsidiaries, prior to the Transaction, had engaged
in fraudulent billing practices under a contract with Customer U. That contract the success of

which Scott, Vaccaro, McDonough and Katz had touted to Universal during the sales process 

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had ended well before Universal acquired APS and had generated approximately $90 million in
revenue and rich pro?ts for the GTCR Defendants. The Department of Justice has alleged that
there was rampant fraud in connection with the Customer contract, including billing for
services that the APS subsidiaries never billing for ineligible members, inflating
membership numbers, and falsifying physician approval of plans of care for Medicaid patients.
The government has asserted damages of tens of millions of dollars, which are potentially
subject to trebling under the False Claims Act. The Department of Justice?s allegation of
rampant fraud implies that senior APS management was directly involved in the alleged
misconduct.

Second, APS subsidiaries have incurred the multimillion dollar cost of defending
and settling a whistleblower complaint raising similar allegations of fraudulent billing practices
in connection with a contract with Customer T. Because those subsidiaries had no funds, those
costs were covered. by loans from Universal, even though all of the alleged misconduct, primarily
overbilling, occurred while GTCR owned and controlled APS. The evidence shows that Scott,
Vaccaro, McDonough and Katz were aware of the conduct giving rise to these claims.

Third, there is yet another pending government investigation regarding the
contract with Customer D, a contract that was touted by Scott, Vaccaro, McDonough and Katz as
one of their most important and pro?table contracts. That contract was expected to run through
December 2015. Instead, Customer put the contract out for rebid in February 2012, after the
Merger Agreement was signed but before the closing of the Transaction. Not only was the
contract later awarded to an APS competitor, but the government is also investigating whether an

APS subsidiary overbilled on that contract.

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7. Compounding its fraud on Universal, APSLP wrongfully has refused to pay for
any of the undisclosed liabilities that arose on Defendants? watch deSpite Universal?s repeated
demands for the indemni?cation mandated by the plain language of the parties" Merger
Agreement, dated as of January 11, 2012 (the ?Merger Agreement?). APS subsidiaries have
already settled and made restitution to several of the aggrieved state customers, but APSLP has
refused to honor its indemni?cation obligations under the Merger Agreement. In the case of
Customer T, APSLP, acting under control, consented to the multi?million dollar
settlement but has refused to pay. The defense costs for these investigations and lawsuit have
already topped $4 million and are continuing to grow. Proper demand for indemnity has been
made for all of these items and APSLP has refused to honor its contractual commitment to pay
for the many serious undisclosed messes that Defendants created while they owned and operated
APS.

8. The risks of healthcare investigations and litigations were hardly the only
concealed problems. GTCR and the other Defendants sold APS to Universal on the basis of their
claim that APS was a pro?table, savvy firm that had the personnel, systems, operations, and
customer relationships to grow its business. In fact, however, within a few months after the
closing, Universal learned that as both APS, including Scott, Vaccaro, and McDonough, and
GTCR, including Katz, well knew and concealed from Universal APS routinely overpromised
and underperformed on its contracts. Consequently, unbeknownst to Universal, many of 
largest customers were terminating their contracts, had cut back on the services that APS would
be providing to them, and were seriously dissatis?ed with APS. In the words of one former APS
of?cer who had worked for Scott, Vaccaro, and McDonough, in selling APS to Universal,

Defendants dressed up a ?pig with every shade of Neiman Marcus lipstick.?

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9. The Defendants not only concealed negative information from Universal, but they
affirmatively lied about it. Signi?cantly, during its due diligence and up through closing,
Universal was given a series ofso?called ?new business pipelines? by Scott, Vaccaro, and
Mconough with the knowledge, participation, and approval of Katz and others at GTCR.
These pipelines, which contained the names of each prOSpective client, the probability of
winning the new contract, and the amount of revenue to be generated in 2012, were a brazen
series of lies concocted by the APS Management Defendants and Katz to defraud Universal.
Even though Universal asked for real, internal pipeline, Defendants withheld it from
Universal because, as McDonough said to Scott and Vaccaro just a month before the Transaction
closed, that would ?open up a hornet?s nest.? Within weeks of the acquisition, purported
pipeline of new business disintegrated. Of more than 30 potential contracts that Scott, Vaccaro,
McDonough, Katz, and GTCR personnel Joshua Earl and John Kos assured Universal were
likely to provide revenue in 20l2, only two in fact generated revenue in that year, in the amount
of $350,000 an unimaginable 98.7% shortfall to the $26 million Defendants touted in the
pipeline they gave to Universal just a month before closing. Notably, a new contract that Scott,
Vaccaro, and McDonough told Universal had already been ?won? by APS was in fact awarded to
a competitor, while still several other liker ?wins? touted by Defendants in their sham pipelines
involved a customer that had previously told APS it did not want to continue doing business with
the Company as a result of poor performance.

10. Similarly, shortly before Universal signed the Merger Agreement, McDonough
gave Universal a 20l2 budget that he had prepared with Scott and Vaccaro (and that Katz and
other GTCR employees had reviewed) claiming that APS would earn $44.8 million in EBITDA.

McDonough assured Universal that APS was on target to hit that pro?t number only two days

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before the merger closed. But within six weeks after closing, Scott, Vaccaro, and McDonough
had slashed their fabricated EBITDA forecast by 40 percent, to $27.1 million; within four
months after closing, the forecast was down 90 percent, at $4.1 million.

11. APSE loss of existing contracts, the disappearance of its new business pipeline,
and crippling investigative and litigation costs have translated into abysmal financial results
Since the Transaction closed. In 2013, Universal wrote down APS assets totaling $189 million 
more than 80 percent of the entire purchase price that Universal had paid for APS less than two
years earlier. To make matters worse, the Company has lost money over this period, and its
operations have generated a negative cash ?ow. As a result, Universal has been forced to dip
into its own pocket to loan APS subsidiaries the funds to defend themselves against the
investigations and litigation concerning activities that when GTCR owned and ran the
Company.

12. Individually and collectively, the telltale signs of fraud are powerful. The
avalanche of bad news about business that did not begin to come to Universal?s attention
until just after the March 2, 2012 closing, the complete evaporation of profits within
months, the many known (but undisclosed) risks of compliance liability associated with 
contract performance, and the sheer number of misrepresentations and omissions in the Merger
Agreement, during the sales process, and prior to the closing of the Transaction constitute
compelling evidence of a calculated fraudulent scheme. In addition to this overwhelming
circumstantial evidence of fraudulent intent, the facts alleged below detail Scott?s, Vaccaroas,
McDonough?s, and Katz?s actual knowledge that their respective representations and omissions

were false.

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13. All of the Defendants are liable to Universal for their own fraud, or for aiding and
abetting other Defendants? fraud, or as control persons. In addition, Defendant APSLP is liable
to Universal for breaches of the covenants, representations, and warranties in the Merger
Agreement, and the GTCR Limited Guarantors are liable for those breaches to the extent APSLP
does not live up to its contractual commitments. This complaint also asserts a claim for
declaratory relief with respect to an audacious claim for still more compensation from Vaccaro,

one of the masterminds of the fraud.

Parties

14. Plaintiff Universal is a corporation organized under the laws of the State of
Delaware, with its principal place of business in White Plains, New York. Universal?s common
stock is publicly traded on the New York Stock Exchange.

15. Defendant GTCR, a Delaware LLC, is a private equity firm with its principal
place of business in Chicago, Illinois. GTCR is general partner of Defendants GTCR Co?lnvest
and GTCR Partners 1X.

16. Defendant GTCR Partners IX is the general partner of Defendants GTCR Fund
and GTCR Fund DOB, and is a limited partnership organized under the laws of the State of
Delaware.

17. Defendants GTCR Fund GTCR Fund D013, and GTCR Co?lnvest
(collectively, the Limited Guarantors?) are limited partnerships organized under the laws
of the State of Delaware. Under the Limited Guaranty provided for by the Merger Agreement,
the GTCR Limited Guarantors guaranteed the indemnification obligations of Defendant APSLP,

as described more fully in paragraphs 170 and 247, below.

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18. At all times relevant to the facts underlying this Amended Complaint, Defendant
David Katz was a Managing Director of Defendant GTCR and co?head of its healthcare group.
Katz was a member of Board of Directors before Universal acquired APS. He was also a
member of the Board of Managers of APSLP. Upon completion of the sale to Universal, which
Katz directed and oversaw in detail, Katz also was appointed as the first GTCR representative to
the Universal board. 0n information and belief, Katz is a resident and citizen of the State of
Illinois. Katz is no longer employed by any GTCR Defendant or any of their affiliates and has
resigned from Universal?s board.

19. Defendant APSLP is a Delaware limited partnership that was formed by the
GTCR Defendants in 2007 to hold APS. Each of the GTCR Limited Guarantors and each of the
APS Management Defendants is a limited partner of APSLP.

20. Non?party APS is a Delaware corporation with its principal place of business in
White Plains, New York.

21. Defendant Gregory Scott was, before the acquisition of APS by Universal, the
Chairman and Chief Executive Officer of APS. Scott also served as Chairman of the Board of
Managers of APSLP. He signed the Merger Agreement on behalf of both APSLP and APS.
After the Transaction, Scott became co?President of Universal. Scott is a resident and citizen of
the State of California. Scott is no longer employed by either Universal or APS.

22. Defendant Jerome Vaccaro was, until June 2013, the President of APS and, until
approximately March 2012, its Chief Operating Of?cer. Vaccaro also served as Vice President
of APSLP. Vaccaro is a resident and citizen of the State of New York. Vaccaro is no longer

employed by either Universal or APS.

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23. Defendant John MeDonough was at all times relevant to this Amended Complaint
the Chief Financial Officer of APS. McDonough also served as Treasurer of APSLP.
McDonough is a resident and citizen of the State of New Jersey. McDonough is no longer

employed by either Universal or APS.

.Furisdietion and Venue

24. This action includes claims arising under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 (the ?Exchange Act?), 15 U.S.C. 78j and 78t(a), Rule
lOb?S promulgated thereunder by the SEC, 17 C.F.R. 240.10b?5, and 28 U.S.C. 2201.

25. This Court has jurisdiction over the subject matter of this action pursuant to 28
U.S.C. 1331 (federal question jurisdiction), 28 U.S.C. 1367(a) (supplemental jurisdiction),
and Section 27 of the Exchange Act.

26. Venue is prOper in this District pursuant to Section 27 of the Exchange Act, 28
U.S.C. ?l39l(b), and the consent to jurisdiction and venue provisions in the Merger Agreement
and related agreements.

27. In connection with the acts alleged in this Complaint, Defendants, directly or
indirectly, used the means and instrumentalities of interstate commerce, including, but not
limited to, the mails, interstate telephone communications, interstate emails, or the facilities of
the New York Stock Exchange, a national securities market.

28. In Section 8.8(a) of the Merger Agreement, APSLP agreed to submit to the
jurisdiction of this Court for any action arising out of or relating to the Merger Agreement.

29. Under Section 16 of the Limited Guaranty provided to Universal at Closing, the
GTCR Limited. Guarantors agreed to submit to the jurisdiction of this Court for any action

arising out of or relating to the Limited Guaranty.

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Backgrennd Facts
The Businesses at? Universat and APS

30. Universal provides healthcare products and programs, including Medicare
Advantage plans. Through its family of healthcare subsidiaries, Universal provides insurance
and health bene?ts primarily to people enrolled in the federal Medicare program, working
together with healthcare professionals to improve the health and well-being of plan members.

31. APS provides specialty healthcare solutions primarily to state Medicaid agencies.
APS offers a broad range of healthcare solutions, including case management and care
coordination, clinical quality and utilization review, and behavioral health services that enable its
customers to improve the quality of care and reduce healthcare costs. APS uses the Software to
provide these services.

32. A significant portion of business involves serving as a contractor to public
entities, primarily state Medicaid agencies. In general, APS enters into these contracts as a result
of competitive bidding processes, in which the state agencies issue requests for proposals
detailing the services they require. APS also contracts with private health plans, often
as a subcontractor when the private health plan contracts with public entities.

33. Non?compliance with customer contract terms has especially serious legal and
regulatory consequences for APS. The federal False Claims Act and its state law counterparts
provide for treble damages if false claims are submitted to a state Medicaid agency. A poor
operations and regulatory track record makes it more difficult to win new contracts and to keep
existing contracts, as does the existence of an ongoing government investigation. Additionally,
many of contracts with state agencies permit the counterparty to terminate the contract at
its convenience, Without cause, effectively permitting state agency counterparties to terminate

contracts whenever they are dissatis?ed with its services. Accordingly, as Defendants all
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understood, maintaining high levels of regulatory compliance, contract performance, and

customer satisfaction are essential to continued business and ?nancial health.

Private Equity Business

34. GTCR is a private equity firm with approximately $7 billion in assets under
management. GTCR invests in portfolio companies in the healthcare, ?nancial services, and
information services industries. According to website, it has invested more than $10
billion in over 200 portfolio companies since it was founded in 1980.

35. On its website, GTCR emphasizes its so?called ?The Leaders StrategyTM ?nding
and partnering with management leaders in core domains to identify, acquire and build market?
leading companies through transformational acquisitions and organic growth.? GTCR is an
active investor that claims to go ?[b]eyond providing capital and financial acumen? and to ?drive
results to help companies grow into industry leaders? by supplying its portfolio companies with
?an elite team of determined professionals? to assist in the management and development of their
businesses.

36. An integral part of business strategy is to install its own personnel on the
boards of its portfolio companies so that they may direct and supervise hand?picked
management leaders. One of Katz?s central responsibilities when he was a GTCR Principal and
Managing Director was to keep close tabs on the portfolio companies for which he was
responsible, including APS, and to steer those companies? strategic, business, and financial
activities so that GTCR could cash out its investment within a few years. As is also typical in
private equity firms, more junior personnel of GTCR were also enmeshed in the management

and operations of APS.

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GTSR Acquires APS

37. GTCR acquired APS for $285 million in 2007. Kata Spearheaded the deal, which
was his first for GTCR, as he joined GTCR shortly before the APS acquisition. APSLP was
formed to hold APS for the bene?t of the GTCR Limited Guarantors or other GTCR af?liates.
Upon information and belief, when the GTCR Defendants acquired APS, they intended to hold
APS for only three to ?ve years and then flip the Company at a pro?t.

38. Consistent with its advertised business strategy, GTCR selected Scott and
Vaccaro as new top executives. In press release publicizing its acquisition of
APS, Katz proclaimed that with Greg [Scott], Jerry [Vaccaro] and the APS
executives is an excellent fit with strategy of backing exceptional management teams.?
For his part, Scott commented that he ??look[ed] forward to . . . working with and that
?nancial expertise, strong experience in healthcare and their commitment to growth
companies in attractive industries will be invaluable to 

39. At all times relevant hereto, GTCR controlled and dominated APS and its board
of directors. The Company?s five?member board was comprised of Defendants Scott and Katz
and non?defendants Joseph Nolan, Douglas Present, and Ruben King?Shaw. All five men were
GTCR appointees. in addition to Scott and Katz (who was a Managing Director of GTCR),
Nolan had been a Principal at GTCR since 1996. Douglas Present was the former Chairman and
CEO of Managed Health Care Associates and, according to website, was one of
?Management Leaders.? GTCR appointed King?Shaw to the board in 

40. Katz was an aggressive, hands?on manager of portfolio companies. And
he was especially so with APS, which was his first investment for GTCR after he joined the firm

in 2006. Katz met formally with his fellow board members at least quarterly to review 

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business and ?nancial results, but he met much more regularly with APS management. From
2007 until GTCR sold APS to Universal, Katz chaired Audit Committee. In 2009, he
began serving on a newly created ?Board Compliance Committee? that oversaw 
compliance program. The following year, Katz began serving on a new Compensation
Committee, which controlled the compensation paid to Scott, Vaccaro, McDonough, and other
APS senior executives.

41. Throughout the period that GTCR owned APS, Katz personally immersed himself
in the Company?s day-to-day operations. Katz was under pressure to prove himself at GTCR,
and he in turn pressed APS management to yield results. Scott, CEO, effectively reported
to Katz. Katz required APS to submit detailed ?nancial packages to GTCR on a basis,
including, among other things, and year-to?date income statements showing actual
and forecasted results; balance sheets; cash flow statements; debt summaries; 
contract?by?contract analyses of revenue, expense, and contribution; and pipeline information.
In addition to receiving formal reporting, Katz exchanged thousands of emails and had regular
telephone conversations with Scott, Vaccaro, McDonough and others at APS regarding virtually
every aspect of day-to-day business. In fact, Scott often complained that Katz was a
micromanager, who often called him to discuss business on nights and weekends.

42. Katz regularly asked for and received information regarding key APS contracts,
including the contract with Customer that is now under investigation, and the Company?s
largest contract, with Customer A. Katz advised Scott and Vaccaro on the pricing and other
aspects of proposals for new contracts. For example, Katz was especially active in 
efforts to expand its contract with Customer A. He reviewed and discussed with Scott the

financial terms of proposal to Customer A. He asked for and received regular updates

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from Scott, McDonough, and others at APS about the preposal process, including timing and
delays. And when signi?cant developments occurred, such as when APS was selected to
participate in further negotiations, he was noti?ed the same day. Similarly, Katz played an
active role when APS was bidding for a state contract with Customer F, including monitoring
information on competing bidders. Scott, Vaccaro, and McDonough regularly updated Katz
about newly awarded contracts, lost or terminated contracts, regulatory issues, and new business
Opportunities, including the associated amounts of current and expected revenues and earnings.

43. In addition to keeping close tabs on existing and prospective customer
base, Katz took a hands-on approach to managing other aspects of business. To give a
few examples: Katz participated in hiring APS managers, outside consultants and other
advisors; Katz oversaw lending arrangements, including, as discussed below, when the
Company defaulted on its loan covenants; Katz arranged for a new equity investment in APS
by King-Shaw, whom GTCR then appointed to the Company?s Board; Katz participated in
government relations and regulatory issues; and Katz scouted potential acquisition targets for
APS.

44. Katz was also actively involved in the Company?s compliance program. When
ChiefCompliance Officer unexpectedly resigned in October 2011 in the midst
of efforts to unload APS on Universal Katz took over the termination process, going
so far as to interview the departing CCO to learn the reasons for his resignation and to review the
state of compliance program. During that interview, Katz, aware of many problems at
APS, bluntly questioned the CC0 as to whether he was considering becoming a whistleblower

against the Company.

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45. While Katz had overall reSponsibility for nearly $300 million investment
in APS, a team of other GTCR employees actively supported Katz?s efforts to build 
business and position it for an eventual sale. Those individuals included Earl, who became a
GTCR Principal in 2012; Kos, who became a GTCR Vice President in 2011; and Patrick Nelli,
then a GTCR associate. In exchange for the substantial management services rendered by Katz

and his team to APS, GTCR charged the Company management fees of $500,000 per year.

Financial Performance Under GTCR

46. APS was a disappointing acquisition for GTCR. The Company was unable to
show consistent growth. When GTCR acquired APS for $285 million in 2007, the Company
earned $26.9 million in EBITDA. APS managed to generate over $40 million in 2008
and 2009, but that ?gure declined in 2010. For 201 1, APS budgeted $332.3 million in revenue
and $35.4 million in EBITDA but ultimately took in only $313.3 million in revenue,
corresponding to $31.7 million in EBITDA.

47. efforts to turn the Company around were not successful. The Company
was losing contracts with existing customers. In fact, on November 30, 201 l, in the midst of the
fraudulent sales process, Katz privately acknowledged in an email to Scott that the ?contract
churn is killing us.? Making matters worse, some of the new contracts that the Company was
able to sign were not pro?table. In early 2011, Scott, Vaccaro, McDonough, and Katz learned
that APS had seriously underestimated the cost of performing a new contract for Customer D,
which was the Company?s third largest contract. As a result, the contract was far less pro?table
than budgeted, losing money the second quarter of 201 1, the
contract was $1.5 million behind budget for that quarter alone, as re?ected in a July 28, 2011

financial report that McDonough presented to Katz, Scott, and the rest of the APS board. Under

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pressure from Katz to turn things around, Scott, Vaccaro, and McDonough, in turn, pressured
local managers to report better numbers. A government agency associated with Customer is
now investigating whether APS unlawfully in?ated its bills as a result of those efforts.

48. Private equity funds such as GTCR commonly hold their investments for a five?
year period. But Katz acknowledged in a June 16, 2011 email to Scott, COpying Nolan, that it
had become apparent that plan to sell APS by 2012, which would be five years after its
initial investment, was ?increasingly aggressive and unrealistic? given inability to
maintain its existing customer base or to show consistent growth. By that time, Katz stated that
GTCR expected that it would have to hold its investment in APS for at least another two to four
years. As a result, Katz and Nolan summoned Scott to a meeting in Chicago to
address their concerns. In his email to Scott, Katz noted that he had ?spent lots of time recently
trying to assess the business and investment outlook for He raised a litany of issues that

33 (C

he wanted to discuss with Scott, including ?pricing strategy, [l]essons learned from recent

9) 66

customer losses, additional avenues for growth,? and ?the right personnel plan.?

49. situation was made even more precarious by its heavy debt burden. In
2011, APS had approximately $150 million of debt on its balance sheet. Beginning in
September 2011, APS was in breach of certain of its loan covenants, a problem that was well
known to Scott, Vaccaro, McDonough (who prepared reports to lenders), Katz,
Nolan, and Kos. Katz repeatedly voiced his concerns about the covenant breaches with Scott

and Nolan. If the banks were to declare a default on loans and foreclose on 

equity interest in APS, GTCR would lose its entire $285 million investment in the Company.

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Mine?eld al? Undisclosed Compliance Risk

50. Not only was APS not performing up to expectations, but its flawed
operations masked a grave risk of massive contractual and regulatory liabilities. Universal was a
government contractor, and therefore compliance was an area of particular concern and focus for
Universal during due diligence. But, as discussed below, APS and GTCR deliberately concealed
known risks of legal and regulatory liabilities from Universal.

51. In general, Medicaid contracts called for it to bill its state customers on a
basis. Each invoice was calculated in accordance with the contract?s speci?cations,
based on metrics such as the number of members in the program during the invoice period, the
categorization of those members, and the actual services delivered to those members.
Maintaining accurate records of these and other contract metrics for the tens or hundreds of
thousands of plan members in each state was essential to proper invoicing.

52. Several government authorities are now investigating, and a whistleblower
lawsuit has alleged, that APS subsidiaries regularly and purposefully overbilled state customers
during the period that GTCR owned and managed APS. To give just two examples:

Customer T. A former employee of an APS subsidiary ?led a gut tam False
Claims Act lawsuit alleging that APS subsidiaries repeatedly overcharged Customer by billing
for improperly enrolled members and contacts, or ?touches,? with members that had not actually
occurred. The suit alleged that the APS subsidiaries, among other things, failed to obtain the
necessary consents to enroll Medicaid members in the program; (ii) enrolled and billed for
services for patients who had never consented and never received services under the contract;
and failed to provide contractually required services. Significantly, Scott, Vaccaro,

McDonouglr, and the entire APS board (including Katz and Nolan) were noti?ed in July

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2010, shortly after the Customer contract ended, that a former employee of an APS subsidiary
had lodged a complaint of ?Medicaid fraud? with the ?Attorney General? of Customer in
January of that year. Moreover, McDonough was aware of another employee raising similar
concerns. These facts, which could reasonably be expected to lead to, and in fact led to, a
whistleblower claim, were never disclosed to Universal.
Customer From 2006 through 2010, a contract with Customer was among

largest public contracts. The federal government has launched an investigation into
I possible overbilling of Customer by APS subsidiaries during the time period of 
management and control.

The government has alleged rampant fraud by the APS subsidiaries,
including billing for critical patient services such as assessments and plans of care that they
never performed; charging for a higher number of members than the contract allowed, and
falsifying physician approval of plans of care. The government has asserted damages of tens of
millions of dollars, which are potentially subject to trebling under the False Claims Act.

(ii) The government?s allegation of rampant fraud implies that senior APS
management was directly involved in the alleged misconduct. Documents produced to the
government in the Customer investigation re?ect that Defendants were well aware of risk that
their conduct later would be called into question. The contract was initially unpro?table and, at
Katz?s direction, Scott, Vaccaro, and McDonough all devoted significant effort to boosting
billings under the contract. Those efforts succeeded; as McDonough wrote to Scott and
Vaccaro on July 23, 2009, APS staff had become ?creative in their approach to identifying new
members.? But employee surveys showed complaints of ?unethical? practices and pressure to

in?ate customer billings, as did employee emails sent to Scott and Vaccaro. Moreover,

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McDonough received a report in August 2008 showing only 20% to 50% compliance with
various contract performance metrics (in other words, non?compliance rates of 50% to He
was further informed in October 2008 that APS was billing for the total number of members
served throughout the month, when the language of the written contract provided for billing
based on the highest number of members served on one day. Knowing that contract with
Customer was critical to ability to sell APS, Katz and Nolan asked for and received
frequent updates on the performance and pro?tability of the Customer contract and, on
information and belief, were fully aware of the steps Scott, Vaccaro, and McDonough had taken
to make that contract a cash cow for APS. These facts, which were never disclosed to Universal,
could also reasonably have been expected to lead to a whistleblower claim or a government

investigation and in fact did.

The Parties Engage in Merger Discussions in the Late Summer and Fall ef 2011

53. In the summer of 2011, Universal?s Chairman, wholly unaware of 
struggles and problems, suggested in a conversation with Scott that a strategic combination of
APS and Universal might make sense. At the time, GTCR had all but abandoned hope ofselling
APS within its initial five?year target, and knew'that it was at risk of losing its entire investment.
The Defendants, led by Katz, immediately seized upon this lifeline and commenced discussions
with Universal.

54. Katz personally directed and at all times controlled the sales process on the
sellers? behalf. Over the course of the Transaction, Katz exchanged approximately 300 emails
directly with Universal?s t0p management and was included on scores of additional group emails
among the parties. Katz coordinated nearly daily with Scott, Vaccaro, and McDonough during

the critical stages of the deal process, exchanging over 700 emails with them and regularly

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speaking on the phone with them. Speci?cally, on June 30, 20} 1, Katz wrote to Scott, copying
Earl, that ?we need to coordinate care?rlly on all of the external communication? regarding
?nances. Cell phone records alone re?ect nearly 100 cell phone calls between Katz and
Scott alone during the sales process. Katz personally negotiated all material terms of the
Transaction, including price, with Universal?s Chairman. He participated in drafting sessions for
the Merger Agreement and other Transaction documents with Universalis counsel. He vetted
presentations and other information provided to Universal, participated in numerous meetings
and calls with Universal, hired advisors for the Transaction, and oversaw due diligence.
At all times during the Transaction, Katz acted on behalf of the GTCR Defendants, APSLP, and
APS, and Scott, Vaccaro, and McDonough acted on behalf of APS and APSLP.

55. As a kick-off to the sales process, Scott, Vaccaro, and McDonough collectively
prepared and delivered a presentation to Universal senior management on August 18, 2011.
Scott discussed what should be in the presentation with Katz and sent a copy of the written
presentation to Katz before it was given to Universal. Katz also sent Scott written directions for
making the presentation to Umversal. Earl attended this meeting and conveyed what
had happened at the meeting to Defendant Katz and, on information and belief, Nolan. This
presentation (the ?August Presentation?) included, among other things:

projected income statements for 2012 through 2016, which forecast $52 million in
EBITDA for 2012;

the annual EBITDA contributions from most signi?cant contracts and the
contracts? maturity dates, including a false assertion that the contract with Customer generated
millions of dollars of EBITDA annually, even though Scott, Vaccaro, McDonough, and Katz

were all aware of that contract?s unpro?tability, as described in paragraph 4-7, above;

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a bogus pipeline (the ?August 18 Pipeline?) of new business supposedly
anticipated in 2012, which was falsely projected to generate $31.7 million in in 2012;

false statements that APS expected to expand its contracts with multiple states,
including Customer and Customer and

a misrepresentation that the Software used to provide services the
?chassis? of its service business was a ?proprietary, web?based and HIPAA compliant
platform.? in the course of their discussions with Universal, Defendants Scott, Vaccaro,
McDonough, and Katz, and others at GTCR were told that this ?chassis? was of interest to
Universal not only as the foundation of existing business, but also because Universal
planned to modify the Software so that it could be used in Universalis other business lines.

56. The August 18 Pipeline purported to be a good faith statement of actual
views of the Company?s prospects for future business. It was, however, intentionally false. in
fact, it bore no relationship to the internal projections prepared by sales managers. 
sales team kept track of new business opportunities by inputting data into a database pro gram
called ?salesforce.com.? Each month, a printout of the salesforce.com report was provided to
senior managers, including Scott, Vaccaro, and McDonough. The reports generated by
salesforce.com included, among other data, entries for the level of con?dence that the contract
would be awarded to APS, expressed as a percentage. The sales representatives, who were in
direct contact with the customers and prospective customers, were required to update the entries
for their new business opportunities on a weekly basis.

57. Defendants Vaccaro and McDonough prepared the August 18 Pipeline (and the
other new business pipelines given to Universal, discussed below) by starting with the

salesforceeom reports. However, instead of using the confidence levels assigned to the

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prospective contracts in those reports, Vaecaro and McDonough, with the knowledge and
approval of Scott, systematically and fraudulently in?ated the probabilities of being awarded
new business and the amount of that business in the pipelines given to Universal, without making
any effort to reconcile their phony numbers with the dramatically different views of the sales
representatives and senior deveIOpment executives. They also altered the revenue figures
for those prospective contracts.

58. Following the August 18 meeting, the parties? discussions continued. On
September 29, 2011, Kos emailed Scott, copying Katz, Earl, and Nelli, a list of the
talking points that GTCR wanted Scott to cover at a meeting with Universal scheduled for the
next day, as well as a ?cheat sheet? setting out the terms of a previous Universal acquisition.

59. On October 7, 2011, Scott, Vacearo, and MeDonough created and delivered a
presentation to the Universal Board of Directors. The presentation (the ?October Presentation?)
included all of the projections and other statements described in paragraph 55, above. In
particular, the presentation projected the same $52 million in EBITDA for 2012 and $31.7
million in EBITDA from new business as had the August Presentation.

60. Scott, Vaccaro, and MeDonough each knew, however, that prospects had
deteriorated since the presentation of the August l8 Pipeline. MeDonough had prepared, and
shared with Scott and Vaccaro, updated slides projecting only $26.5 million in EBITDA from
new business, a decline of $5.2 million (or 17 percent) since the August Presentation six weeks
earlier. These slides were not included in the October Presentation, purportedly because of a
clerical error. But even though Scott, Vaecaro, and McDonough were alerted to the putative
error before making the presentation, they still presented to Universal the incorrect and grossly

overstated numbers and never told Universal of the putative error.

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61. Scott, Vaccaro, and McDonough each had powerful motives to conceal the truth
about business from Universal. in a Universal transaction, they would be able to
exchange their illiquid and worthless APS shares for valuable, publicly traded shares of
Universal, as detailed in paragraph 152, below. They would also increase their personal
compensation by as much as 40 percent, as detailed in paragraph 153, below. The GTCR
Defendants and Katz had an even greater motivation to avoid the loss of their entire investment
in the event of a default, which would have been a serious problem for GTCR and a wipeout for
Katz.

62. Based on the August and October Presentations, Universal expressed its interest
in acquiring APS. Universal and GTCR (acting on behalf of AP SLP) tentatively agreed upon a
purchase price. In late October 2011, Kos of GTCR authorized ?nancial advisor to give
Universal and its advisors access to a data room for due diligence purposes. Universal undertook
a due diligence process in which it engaged a Medicaid consulting ?rm, a ?Big Four? accounting
?rm and two prominent law ?rms to help it examine APS. Little did Universal know that both
APS, including Scott, Vaccaro, and McDonough, and GTCR, including Katz, Nolan, K03, and
Earl, had embarked upon a scheme to conceal the truth about unraveling business ?'om

Universal and its advisors.

Business Continues to Deteriorate

63. After its discussions with Universal had commenced, APS learned of serious
threats to its existing contracts. On November 16, 2011, Defendants Vaccaro and Scott received
a message from a board member of Customer A largest customer, and a governmental
entity who also had been assigned by the Governor of Customer A to oversee Customer A?s

Medicaid operations. The message stated: ?For the last few months we have been discussing

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with your local management several areas of concern pertinent to operations which I
believe you should be aware of.? The APS contract with Customer A generated $130.6 million
in revenue, or 41.7 percent of the Company?s total 2011 revenue of $313.3 million.

64. Vaccaro immediately recognized the gravity of the situation, writing to Scott,
?[t]his is very concerning.? Early on the morning of November 22, 2011, Defendants Scott and
Vaccaro and another APS executive met in New York with the representative of Customer A.

65. Vaccaro?s concern was justified. At the November 22 meeting, Customer A
complained that APS was in breach of its contract because, among other things, APS had not
provided on?site mental health services at one?third of the sites that were covered by the contract;
did not have two in-patient facilities in each of the customer?s geographic regions, as required by
the contract; and was not properly handling either member calls or provider payments. The
Customer A contract mandated professional support at every one of its sites. Defendants Scott
and Vaccaro were told that Customer A intended to send APS a notice of de?ciency and impose
a substantial fine.

66. In fact, as Defendant Scott said in an email that he sent to Defendant Vaccaro and
the head of operations for Customer A on November 22, 2011, he understood Customer A
to be threatening ?the loss of our contract.? He followed up by meeting with the Governor of
Customer A on December 1, 2011. As discussed in paragraph 42, above, Katz regularly
communicated with Scott and Vaccaro about crucial contract with Customer A, and, on
information and belief, Katz and Nolan were informed of both of these meetings with Customer
A shortly after each occurred.

67. In October 2011, a private health plan customer, Customer B, infonned Vaccaro

in writing of material de?ciencies in the performance of a contract for services in California.

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Vaccaro met directly with Customer on November 3, 2011 to discuss those breaches. Shortly
thereafter, Customer imposed a Corrective Action Plan on the Company. Scott and Katz also
were well aware of the problem, which had been discussed during the December 5, 2011 meeting
of Audit Committee (attended by Scott and Katz) and at other meetings of senior
management (attended by Scott). Although Customer had previously contemplated that the
California contract, which began in June 201 1, would be expanded to other states and APS had
touted that plan to Universal, APS was noti?ed in October 2011 that Customer would not
partner with APS in one of those states, South Carolina. Subsequently, in or around early
November, APS was informed that Customer would not award any new business to APS until
the Company?s performance improved. This information was included in multiple pipeline
reports that Scott, Vaccaro, and McDonough each received. Likewise, Katz and the rest of the
APS board received documents showing that APS no longer had any prospect of being awarded
the South Carolina contract.

68. Also around this time, APS learned that Customer F, where APS had its second?
largest contract, was likely moving patients then served by Primary Care Case
Management contract into managed care, which would result in a signi?cant loss of
revenue and profits. In a September 20, 2011 management report sent to Scott, Vaccaro, and
McDonough, Senior Vice President for the East Region estimated a ?[p]otential loss of
in revenue? for APS due to Customer F?s move to managed care.

69. Additionally, at a November 2, 2011 board meeting, an APS Senior Vice
President and General Counsel made separate presentations on contract compliance and
regulatory issues. Katz and the rest of board knew from the November 2011 presentation

that APS was non?compliant with many of its contracts, including, among others, contracts with

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Customers Katz and the rest of board also knew that the review
was incomplete, because it directed that further work be done to assess contract
compliance. Katz, Scott, and Nolan attended the meeting in person, and Earl, Kos, and
Nelli attended by telephone.

70. in addition to these threats to its existing contracts, pipeline of new
business was in free fall. On November 15, 201 1, Defendant McDonough prepared another
iteration of the new business pipeline for presentation to Universal at a meeting the following
week. This draft pipeline, which was circulated to Scott and Vaccaro (but not to Universal),
projected only $18.1 million in EBITDA from new business for 2012, a dramatic decline of 43
percent from the $31.7 million that had been shown to Universal in August and October.

71. By this time, APS was also in breach of its loan covenants. On September 30,
2011, APS went into default on its covenants regarding capital expenditures. By October 31,
2011, the Company was also in default of its covenants regarding the ratio of Adjusted Debt to
EBITDA and the ratio of Senior Adjusted Debt to EBITDA. Scott, Vaccaro, and McDonough,
as well as Katz and others at GTCR, were well aware of defaults. in an email exchange
between Scott and Nolan on November 30, 2011, Scott acknowledged the gravity of a
covenant default and its lethal impact on future prospects: probably cannot win

another piece of business if we are in default, so the whole thing will then come crashing down.?

Discussions Between Universal and APS Break Down

72. On November 22, 2011, Universal and APS held a meeting to discuss the
potential acquisition (the ?November Meeting?). Defendants Scott, Vaccaro and McDonough
attended the meeting, as did Defendant Katz and Earl of GTCR. During this meeting, Scott,

Vaccaro and McDonough made another written presentation to Universal, this time with updated

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projections. McDonough had sent multiple versions of the presentation to Katz, Earl, and Kos of
GTCR prior to the meeting. At the November Meeting, Scott, Vaccaro, and McDonough with
the knowledge and participation of Katz and GTCR hid the truth about deteriorating
business from Universal.

73. For instance, Scott, Vaccaro, and McDonough concealed that the new business
pipeline had plummeted from $31.7 million to $18.1 million, as McDonough had concluded just
a few days earlier. Rather, after McDonough, Vaccaro and Scott had huddled over the numbers,
they presented Universal with a new bogus version of the pipeline showing that APS projected
$28.6 million EBITDA from new business and a budget showing that APS projected $46.7
million of total EBITDA in 2012. The sham increase is attributable in large part to three
changes:

adding four new or expanded contracts with Customer B. As discussed above,
APS had previously received written notice of material de?ciencies in its performance of its
contract for Customer and had been told it would not be awarded any new business unless it
?xed those problems. Nonetheless, not only did Katz, Scott, Vaccaro, and McDonough not give
the written notice of de?ciencies to Universal, but the November 22 pipeline given to Universal
projected several million dollars in EBITDA from Customer contracts that were falsely
assigned probabilities of 75% to 90%. As APS predicted internally (but fraudulently concealed
from Universal), none of these contracts was awarded to 

elevating the likelihood of a Dual Eligible contract for Customer to ?greater
than 90%? from ?less than even though Customer had not yet even issued an RFP for
that contract. Moreover, Customer had, unknown to Universal, expressed dissatisfaction with

performance on its existing contract, and the internal salesforcecom documents continued

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to show only a 10 percent chance of winning the Dual Eligible contract. Customer 
never awarded a Dual Eligible contract to and

adding more than $l million of EBITDA for a new contract with Customer and
assessing the probability of being awarded that contract as greater than 90%, even though the bid
had been submitted only the day before, on November 2i, 20ll, and the APS sales
representative was told that while the proposal ?look[ed] good,? the state ?won?t know anything
definite until early next week.? Senior Vice President for Development forwarded this
message to Vaccaro and McDonough, among others, and McDonough forwarded it to Scott.
This contract was not awarded to APS.

74. Nor did Scott, Vaccaro, McDonough, or Katz reveal at the November Meeting
with Universal the bombshell meeting earlier that day among Scott, Vaccaro, and Customer A,
in which APS had been told about substantial breaches in the performance of its contract and the
potential for a ?ne and possible loss of the contract. They maintained their silence even though
they knew that Universal was keenly interested in this important contract. In fact, Universal
speci?cally had asked APS to come to the meeting prepared to address ?provider disputes in
[Customer Ass location] and any reserves,? as Spelled out in aNovember 19, 2011 email from
Universal?s Chief Financial Of?cer to McDonough, which McDonough forwarded to Scott and
Vaccaro. Scott, Vaccaro, and McDonough presented to Universal an estimate for 2012 EBITDA
that included substantial earnings from the contract with Customer A, despite their knowledge
that the contract was at risk and that APS face d, at the very least, a fine that would make a
serious dent in projected profitability.

75. Scott, Vaccaro, and McDonough also tried to hide from Universal what they had

learned about the potential for a significant reduction in contract with Customer F, a state

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agency. But Universal had independently learned about the potential move to managed care in
that state, and confronted Scott, Vaccaro, McDonough, and Katz with this information at the
November 22 meeting. The four individual Defendants, particularly Vaccaro, collectively
downplayed the signi?cance of the move and went so far as to suggest, without any basis for
doing so, that APS would have other opportunities with Customer F, and that the income from
Customer might even increase. The discussion foundered and the meeting ended.

76. Shortly afterwards, Universal told Katz, the key negotiator for the sellers, that it
was no longer willing to acquire APS at the price the parties had been discussing. Universalis
Chairman explained to Katz on November 26, 201 1 that, among other things, Universal was
concerned about the signi?cant effect that a reduction in the contract with Customer would
have on business. In addition to the loss of revenue and income, as a result of this change
APS would be even more heavily dependent on a single large customer, Customer A. Katz
conveyed this information to Scott and Nolan, Earl, and Kos. A few days later, on
November 30, Nolan wrote to Scott that the breakdown in talks with Universal could ?seriously
complicate[]? any efforts to restructure debt and that GTCR was considering taking a
?below cost offer? because ?there can be big unforeseen costs to being in covenant default
especially with guys like lender].? The pressure on GTCR to close a deal with Universal

W38 611011110118.

Cniversal foers tn Acquire APS at a. Lower Price and Defendants Previde Bogus Financial
Prnjeetions to Reel Universal in

77. Desperate to salvage a deal and avoid the complete loss of investment if
the lenders foreclosed, Katz sent an email to Universal?s Chairman seeking to revive the merger
negotiations and suggesting that Universal make a reduced offer. APS and GTCR then gave

Universal more financial information. in particular, on December 12, 20l l, McDonough sent
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Universal (copying Scott and Katz) various ?nancial statements, including estimated 2011
revenue and EBTTDA results and projected revenue and EBITDA for 2012 through 2016 (the
?2012 Projections?). On December 30, 2011, McDonough sent Universal 2012 budget
(the ?2012 Budget?), this time forecasting $44.8 million in total in 2012. McDonough
also sent Universal an updated new business pipeline (the ?December 30 Pipeline?).

78. Scott, Vaccaro, McDonough, and Katz (and his GTCR underlings Kos and Earl)
lacked any reasonable basis to believe that APS could attain the revenue and EBITDA ?gures
projected in the 2012 Budget and the December 30 Pipeline. The chart below shows some of the
enormous and inexplicable discrepancies between the December 30 Pipeline and. the internal

salesforcecom pipeline at that time:

 

 

..  

       

Contract

 

Customer 3 (LA Duals)
Customer 

Customer (Dual Eligibles) -. 
Customer (IN)  9.
Customer (0H) 

Customer 
Customer I 
Customer (VA)   

Customer (THM)  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79. Scott, Vaccaro, McDonough, and Katz knew that they were misrepresenting the

probabilities of winning these opportunities, in particular the multiple opportunities with

 

The Customer opportunity was for two separate contracts; Scott, Vaccaro and
McDonough knew that one of those contracts would not even be put out for bid until
2012.

The Customer contract for South Carolina listed in the December 30 Pipeline did not
even appear on salesforce.com pipeline at the time because Customer already
had said it would not be awarded to APS.

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Customer B. Indeed, internal business development reports described the potential
contract with Customer in South Carolina as ?lost? and the contemporaneous presentations
made to the APS board (including Katz and Nolan) ceased listing it as a prOSpect.
Nonetheless, the December 30 Pipeline given to Universal described that ?lost? prospect in
South Carolina as 75 to 90 percent ?likely? to be awarded to APS. internal documents
also said that no new contracts would be awarded to APS by Customer unless APS fixed the
shortcomings in its performance in California. Yet Scott, Vaccaro, McDonough, and Katz
concealed these facts and internal documents from Universal and instead fraudulently listed four
separate opportunities with Customer on the December 30 Pipeline.

80. Reinforcing the misrepresentation in the December 30 Pipeline, Katz falsely
represented to Universal?s Chairman in a December 26, 2011 e-mail that ?we expect? to
?continue to do business? with Customer after the Transaction.

81. The 2012 Budget that McDonough sent to Universal on December 30 was equally
baseless and misleading. That document assumed that all of existing contracts would
continue through their full term. The budget also re?ected purported expectation that a
contract with Customer covering Seniors and Persons with Disabilities would expand
in 2012 to include 30,000 new rural members. The budget also assumed that APS would win the
rebid of a contract for Population Health Management with Customer G, even though
Scott, Vaccaro, and McDonough knew that was not going to occur because they had been
notified in writing on October 17, 2011 that received no communication/invitation for
?nalist interview.? The fact that Customer had cut APS out of the running for the contract
was hardly a surprise to that customer had recently completed a scathing evaluation in

which it reported to APS that it was ?Very Dissatisfied? the lowest rating with the ?Overall

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Quality? of services. Universal was never informed of these abysmal performance
ratings.

The Defendants Continue to Lie and Conceal Adverse information During Universal?s Dire
Diligenee

82. Universal learned in the course of its due diligence that the Software was subject
to a Software License, Consulting and Maintenance Agreement, dated as of March 31, 2006, by
and between Innovative Resource Group, LLC d/b/a APS Healthcare and the Licensor
(the ?Software License?). This fact was significant because Universal planned to modify the
Software for use in its other businesses, which it could not do unless it owned the Software
outright without restrictions. On December 28, 2011, during a due diligence conference call on
intellectual prOperty issues with Universal?s counsel, an APS in-house lawyer stated that the
software covered by the Software License was only a ?small component? of purportedly
proprietary Software.

83. in December 2011, Universal personnel visited APS facilities in Customer A?s
location as part of their due diligence for the Transaction. Concerned that Universal might
discover that APS was in breach of its contract with Customer A, Defendant Katz wrote to
Defendant Scott, ?the less time there the better.? Although Universal requested an opportunity to
speak with Customer A personnel during that visit, Katz and Scott refused to arrange for a
meeting, claiming that it was inapprOpriate to do so because Universal had not yet signed a
contract. in fact, Katz?s and Scott?s real motivation was fraudulently to conceal Customer A?s
strained relationship with APS, its claim that APS was in breach of its contract, the impending
?ne, and the looming threat to terminate that contract. When Universal, unaware of this threat,
insisted that it would not close the Transaction without Customer A?s approval, Katz and Scott

acknowledged to each other that this would be a tall order; on lanuary 5, 2012, Scott wrote to
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Katz, ?[t]his could literally delay the closing months . . . and 0H kinds ofbad things could

happen.? Katz wrote back to Scott, share your concern.?

Universai Asks for and Receives Assurances About Regniatory Risks

84. Universal was aware that earlier in 2011, IRG had paid $13 million and had
entered into a Corporate Integrity Agreement with the Department of Health and Human
Services in connection with the settlement of allegations that IRG had fraudulently overbilled the
state of Georgia for its services. As a result, Universal?s due diligence paid close attention to
efforts to monitor compliance with its contracts.

85. Universal also was aware of the resignation of CCO in the midst of the
sales process and repeatedly asked ?nancial advisors and APS, including Scott and
McDonough, to meet with Katz regarding his interview of the outgoing CCO. Universal also
asked to interview the outgoing CCO and the Of?ce of Inspector General monitor assigned to the
Corporate Integrity Agreement and a representative of the Independent Review Organization that
APS had hired to perform certain compliance reviews required by the CIA.

86. When advisors and APS refused to schedule any of these interviews,
Universal?s Chairman voiced his concerns to Katz. On December 31, 2011, Katz promised
Universal?s Chairman that get you whatever you need on the compliance front.? A
meeting was arranged at offices for January 4, 2012.

87. At that meeting, Scott and Vaccaro assured Universal?s Chairman and General
Counsel that APS had remedied shortcomings in its compliance programs that had been
identified as part of the Georgia investigation and that APS was now in compliance with all its
contracts and applicable laws. Katz, as well as Earl and Kos, attended the meeting by
telephone. Katz downplayed the departure to Universal?s Chairman and General

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Counsel, and said nothing about his own suspicions that the CC0 might be a whistleblower.
Moreover, Universal was not told of the known compliance risks for Customer A and for the
former contracts with Customers and described in paragraphs 52 and 63?66, above.

88. Throughout the due diligence process, including at the January 4- compliance
meeting, APS, including Scott, Vaccaro, and McDonough, and GTCR, including Katz, further
hid from Universal that APS was plagued by rampant information technology and other
operational problems that jeopardized its ability to perform and accurately bill for services under
its contracts. contracts often had veryndetailed and customized rules for which members
could be billed, when, for what services, and at what rate. Accordingly, maintaining accurate
records was essential to contract compliance and proper invoicing. But ARS was so desperate to
replace lost contracts and prop up its faltering financial results that it overreached in taking on
new contracts with new customers, making empty promises that it could perform as required,
even as it knew that it did not actually have the IT or Operational infrastructure in place to
implement its contractual commitments. As a result, APS was perpetually scrambling to try to
build the customized platforms it had promised to its customers, cutting corners and triaging one
crisis after the next resulting in errors, delays, and rising levels of customer dissatisfaction.

89. By the Fall of 2011, the problem had reached crisis proportions. Reacting to news
that APS allegedly had overbilled Customer G, Senior Vice President for the East Region
railed in a September 23, 2011 email, ?We can no longer bury our head in the sand . . . Selling
new business into this tsunami of constant un?nished and incorrect business will implode.?
Senior Vice President for the West Region responded that she was experiencing the ?same
in the west? and noted that the Customer contract was ?off to a rocky start.? These senior

officers and others at APS repeatedly raised their concerns to Scott, Vaccaro, and McDonough,

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including in reports and at management meetings. For example, an October 17, 20ll
management report highlighted that issues continue to impact the business across the region?
and contained detailed information about those problems. These issues were similarly discussed
with Katz and others at GTCR in their regular communications and board meetings. But Katz,
Scott, Vaccaro, McDonough and others painted a completely different and false picture of
APS, including during the meetings with Universal on August 18, 2011, October 7, 2011, and

November 22, 2011.

The Merger Agreement

90. Based on the false representations and omissions described above, on January 11,
2012, Universal, APSLP and APS entered into the Merger Agreement, pursuant to which APS
was to be merged into a subsidiary of Universal. Scott signed the Merger Agreement on behalf
of both APS and APSLP. The Agreement provided that $80 million of the $227.5 million
purchase price was payable to APSLP in the form of shares of Universal common stock, while
the rest was payable in cash. The Merger Agreement also provided for an additional payment
should 2012 exceed $30 million.

91. As material inducements for Universal to enter into the Merger Agreement, the
Company, by and through Scott, made extensive representations and warranties to Universal in
Article 3 of the Merger Agreement. Among other things, APS and Scott represented and
warranted that:

the Company was not in material breach or default of any of its material contracts,
except as disclosed in the Company Disclosure Letter, and that to its Knowledge, de?ned as the
knowledge of Defendants Scott, Vaccaro and McDonough, and General Counsel Joyce

Tichy, none of its counterparties had ?indicated to the Company or any of its Subsidiaries its

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intent to cancel, terminate or modify . . . in a manner adverse in any material respect to the
Company? any material contract. Merger Agreement 3.17;

more speci?cally, that there was no breach, violation or default of the contract
with Customer A, except as disclosed in Section 3.29 of the Company Disclosure Letter, ?and, to
the Company?s Knowledge, no event has occurred which with notice or lapse of time would
constitute such breach, violation or default,? and that APS had not ?received written notice of
any such breach, violation or default? of the contract with Customer A. Merger Agreement
3.29. This representation was so critical to Universal that Universal insisted that it be subject
to a heightened indemni?cation cap and a lengthened survival period. The Company Disclosure
Letter, in turn, disclosed only that APS was ?discussing the appropriate measure of network
adequacy (for providers with multiple of?ces) with [Customer without mentioning the other
major contract de?ciencies discussed during the November 22, 2011 meeting and without
disclosing that Scott, Vaccaro, and another APS executive had been told at that meeting that APS
would receive a notice of de?ciency and, at a minimum, be assessed a substantial ?ne;

the Company and its-subsidiaries had not violated or incurred any material
liabilities under any healthcare laws (?Healthcare Laws?)? and that to its Knowledge, there were
no facts, circumstances or events that could reasonably be expected to give rise to such liability.
Merger Agreement Like Section 3.29, this important representation was also subject

to a heightened indemni?cation cap and a lengthened survival period; in addition, Universal

 

3 ?Healthcare Laws? is de?ned in Section 3.25(a) of the Merger Agreement as all

federal, state and Puerto Rican fraud and abuse laws, including the Stark Law (42 U.S.C.
?l395nn), the civil False Claims Act (31 U.S.C. ?3729 et seq), Sections 1320a?7a and
1320a?7b of Title 42 of the United States Code; (ii) Medicare (Title of the Social
Security Act); Medicaid (Title XIX of the Social Security Act); (iv) prompt pay laws;
quality, safety and accreditation standards and requirements of all applicable state
laws or regulatory bodies; (vi) licensure laws and regulations; and (vii) any other
applicable health care Legal Requirements.?

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insisted that the representation be made as to liabilities since January i, 2006, before GTCR had
even acquired the Company;

since March 23, 2011, the date of prior audited ?nancial statements, except
as disclosed in the Company Disclosure Letter, there had ?not been any fact, event,
circumstance, change, occurrence, effect or condition that has had or would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse Effect.? Merger
Agreement 3.9;4 and

?Section 3.16(a) of the Company Disclosure Letter sets forth a complete and
correct list of the following categories of Intellectual Property Rights that are owned by the
Company and its Subsidiaries: . . . Software.? In Section 3.16(a) of the Company Disclosure
Letter, APS expressly warranted that the Software is ?Owned Software.? Section 3.16(a) of the
Company Disclosure Letter separately lists ?Licensed Software,? thereby representing that
software listed as ?Owned Software? is not licensed.

92. As the Merger Agreement explicitly confirms, Universal reasonably relied upon
the representations and warranties in the Merger Agreement when it executed that agreement.
See Merger Agreement 3.34. Although the broad contours of business and the nature of

its customers were known to Universal, it was impossible for Universal to know the Speci?c

 

4 A Company Material Adverse Effect is defmed in Section 1.1 of the Merger Agreement

as ?any fact, event, circumstance, change, occurrence, effect or condition which,
individually or in the aggregate (taking into account all other such facts, events,
circumstances, changes, occurrences, effects or conditions), has had or would reasonably
be expected to have a material adverse effect on (A) the ?nancial condition, business or
results of operations of the Company and its Subsidiaries, taken as a whole, or (B) the
of the Company to timely consummate the transactions contemplated hereby.?
The definition explicitly provides that ?any fact, event, circumstance, change, occurrence,
effect or condition underlying any failure to meet any . . . projections, forecasts 0r
revenue or earnings predictions [for any period ending on or after the date of this
Agreement] shall be taken into account in determining whether a Company Material
Adverse Effect has occurred or would reasonably be expected to occur.?

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information that APS and Scott, with the assistance of their co?conspirators, including Katz,
Vaccaro, and McDonough, either misrepresented or concealed. Universal relied to its detriment
on the basic business assumption which unfortunately turned out to be unwarranted - that none
of the Defendants was actively concealing information from Universal (such as material
de?ciencies in operational infrastructure) or thwarting Universal?s due diligence by
refusing to give documents or access to customers under false pretenses (such as the internal
pipelines that Scott, Vaccaro, and McDonough concealed from Universal and the refusal by
Scott and Katz to let Universal speak to Customer A).

93. in addition to making these representations and warranties, the Company agreed
to a number of covenants as to the conduct of its business, including information to be provided
to Universal, during the period from lanuary 11, 2012 through the closing. Those covenants
included, among others, that prior to Closing, APS would notify Universal if it
obtained ?Knowledge of any fact, event, circumstance, change, occurrence, effect or condition
that believes would reasonably be expected to cause any of the conditions to Closing set
forth in Section 6.1 or Section 6.2 to be not satis?ed or fulfilled.? Merger Agreement 

94. As conditions to closing, Section 6.2 of the Merger Agreement required that: the
representations and warranties of the Company be true and correct as of the date of closing
(Merger Agreement the Company shall have complied with all of its covenants under
the Merger Agreement (Merger Agreement and there shall have been no ?event,
deveIOpment or occurrence of any condition that has had, or would reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect,? on business

or financial condition (Merger Agreement At closing, APS was obligated to provide ?a

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certi?cate of an of?cer of the Company, dated the Closing Date,? certifying compliance

with each of these conditions. Merger Agreement 

"the Deterioration of Business Between Signing and Cinsing

95. After the Merger Agreement was executed, APSBS customer relationships and
business prospects accelerated their downward spiral. Except as otherwise noted below, none of
these facts was disclosed to Universal as required by the Merger Agreement:

'At a meeting held on or about January 17, 2012, APS employees learned that
Customer had not mandated that physicians and other providers use the Company?s web-based
portal for ?utilization management,? 119., the submission of requests of approval for services.
Scott, Vaccaro, and McDonough were told of this negative development in a January 2012
management report, which noted that Customer H?s failure to require use of the portal ?will
restrict ability to control costs and enact the vision of the contract.? As a result, Scott,
Vaccaro, and McDonough knew that APS would experience a signi?cant shortfall in the net
income that it had projected for the Customer contract in 2012 but failed to inform Universal
of this fact.

One of largest contracts was to provide services for Customer E?s Adult
Day Health Care program. The 2012 budget contemplated that this contract would
contribute over 10 percent of projected 2012 budget of $44.8 million in 
Bene?ciaries of ADHC sued Customer in a settlement announced in November 201 and
approved by the court in January 2012, after the Merger Agreement was signed, many
participants in the program would be moved to managed care pro grams,-and hence would no
longer be served by APS. On or around November 29, 2011, Vaccaro and McDonough were

noti?ed. by APS personnel that the settlement likely would result in a loss of business for APS.

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After the settlement was approved, Vaccaro, McDonough, and Scott were again told about the
adverse impact that this settlement would have on business, including in January and
February 2012 management reports. APS failed to inform Universal of these facts. To the
contrary, McDonough fraudulentiy concealed the impact by falsely telling Universal that the
settlement would give APS an opportunity to expand its programs with Customer E.

On or about ianuary 20, 2012, one or more members of sales team, which
reported up to Vaccaro, were told that a new contract with Customer E?s County Medical
Services Program with projected annual revenue of $4 million, would be reduced in
scope to $2 million. Vaccaro, McDonough, and, on information and belief, Scott and Katz, were
aware of the reduction but failed to inform Universal of this fact or to reduce the 2012 budget
accordingly.

By letter dated February 1, 2012, Customer noti?ed APS that it was
terminating its California contract with APS. On February 15, 2012, Customer sent APS a
post?termination letter, addressed to Defendant Vaccaro, referring to the Company?s ?material
deficiencies? in performance. Customer B?s contract termination was speci?cally discussed in a
February 2012 management report sent to Scott and McDonough. APS informed Universal of
this termination but concealed from Universal the fact that the termination resulted from 
defective performance. APS did not send Universal a COpy of the February 15 letter citing
?material de?ciencies.? To the contrary, Scott, Vaccaro, and McDonough misrepresented
to Universal in multiple meetings, some of which Katz attended, that Customer had terminated
the contract because it did not want to do business with a Universal?owned company.

contractual relationship with Customer had begun in 2005, and was one

of the Company?s longest standing and most successful relationships. The 2012 budget

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McDonough had given to Universal contemplated that a ?ve-year renewal of the contract with
Customer would contribute more than five percent of the budgeted $44.8 million of EBITDA
for 2012. On February 1, 2012, Defendants Vaccaro and McDonough received written notice
that, even though the five?year renewal had previously been awarded to APS, Customer was
nonetheless putting out a new RFP for it. Senior Vice Presidents for Development and
Strategic Initiatives were told that the new RFP had been issued because the newly appointed
director of Customer did not want to hire APS in Eight of the Company?s $13 million payment
to settle the False Claims Act investigation in Georgia illustrating why allegations of False
Claims Act liability are so costly to business. Defendants Scott and Vaccaro knew of
Customer C?s concern about the Georgia settlement. Under these circumstances, it was virtually
certain that Customer would not award the contract to APS. Even though Scott, Vaccaro,
McDonough and, on information and belief, Katz, knew that APS had lost the contract with
Customer C, they failed to inform Universal of that fact or the new RF P, and again fraudulently
failed to reduce the budget.

On or about February 6, 2012, Executive Director for the contract with
Customer learned that one of competitors had been selected for the renewal of the PHM
contract with Customer for a term beginning July 1, 2012 and, accordingly, that the projected
revenue and income for that contract in 2012 budget would have to be reduced. 
Executive Director informed Senior Vice President for Development and other APS
executives that the contract had been lost by email, and this email was forwarded to
McDonough. When he learned that the contract had been lost, McDonough immediately
directed another APS employee to estimate the impact of the loss on budget for 2012.

The estimate of a $500,000 loss of profits was never sent to Universal. Moreover, Vaccaro and,

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on information and belief, the other Defendants, were aware of this loss and the material impact
it would have on 2012 budget but failed to inform Universal of those facts.

On February 13, 2012, Customer noti?ed APS by a letter addressed to Vaccaro
that Customer would put existing contract with Customer out for rebid for the
contract year starting January 1, 2013. McDonough was also informed of the rebid. 
contract with Customer D, its third largest contract, would otherwise have lasted until 2015.
General Counsel did not forward this letter to Universal until February 29, 2012 more
than two weeks after receiving it, and only two days before the scheduled closing of the merger.
Scott, Vaccaro, and McDonough were well aware that APS had run into extensive problems
trying to implement the Customer contract. Yet these facts, which significantly reduced the
chances that APS would be able to win the rebid, were not disclosed to Universal. The contract
with Customer is now the subject of a government investigation into overbilling.

After the Merger Agreement was signed, in mid?January 2012, Scott, Vaccaro,
and McDonough and, on information and belief, Katz and the GTCR Defendants, became aware
that 2012 EBITDA budget had been overstated by $1.5 million as a result of a purported
error in calculating the earnings from largest contract, Customer A. Universal was not
informed of this purported ?error? or its negative impact on 2012 budget.

96. These events, individually and in the aggregate, had a material adverse effect on
business. Scott, Vaccaro, McDonough, Katz and the GTCR Defendants hid almost all of
these events from Universal. For the few events they could not avoid disclosing, Universal was
fed false explanations, such as McDonough?s statement that Customer E?s settlement of the
ADHC litigation would have a positive impact on business, or Scott?s, Vaccaro?s, and

McDonough?s statements that Customer Bis termination of its California contract was due to its

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unwillingness to work with Universal, rather than own serious performance shortcomings.
Had Universal known of these events, it never would have closed the Transaction.

97. Notwithstanding the torrent of undisclosed bad news, APS repeated its rosy
projections for 2012 when it had no reasonable basis to do so. For example, on February 2,
2012, McDonough delivered to Universal the last new business pipeline that Universal would
receive before Closing (the ?February 2 Pipeline?). Since the time of the December 30 Pipeline,
APS had lost the Customer contract in California and could no longer pretend to have any
prospect of winning contracts with Customer in other states. In addition, many states had
postponed the timing for their RFPS, delaying the dates on which APS could begin to see
revenue from those contracts, even if they were awarded to APS after a highly competitive
bidding process. As a result, the 2012 EBITDA projected on the December 30 Pipeline should
have been reduced by at least $8 million, or almost 30%. A change of this magnitude would
have triggered Universal?s light to walk away from the Merger Agreement.

98. Instead of revealing this bad news to Universal, McDonough, Scott, and Vaccaro
camou?aged these known losses of contracts that had previously been in the pipeline by
preparing the February 2 Pipeline, which added eight new contracts that had not appeared on any
previous pipeline, accounting for $4.7 million additional in projected 2012 EBITDA
contribution. As a result of these bogus additions, the 2012 EBITDA projected on the February
2 Pipeline was only $2 million less than the 2012 EBITDA projected on the December 30
Pipeline. Most of the eight newly?added prospects had been known to APS for months, yet
Scott, Vaccaro, and McDonough added them to the February 2 Pipeline even though no
objective event had occurred to make them more probable of being awarded to APS and (ii)

sales force did not view them as likely to be awarded to APS. On February 1, and 2,

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Vaccaro, Scott, and McDonough discussed in internal emails that including these contracts was
?risky,? yet they chose to lie to Universal anyway. Only one of these eight new contracts was
ever executed, resulting in 2012 EBITDA of $250,000.

99. The following chart shows some of the new irreconcilable differences between
the February 2 Pipeline, given to Universal one month before the merger closed, and the intemal

salesforcecom ?gures, which were not given to Universal:

 

I Probability

were?!

 

    

Contract

     

 

 
  
   

Customer (Dual Eligibles)

Customer (Dual Eligibles)
Customer (Dual Eligibles) . 
Customer 0 (Dual Eligiblesf 
Customer (Dual Eligibles) 
Customer     

 

 

 

    

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 

100. in addition, the fraudulent February 2 Pipeline showed the same level of 2012
EBITDA contribution from the contract with Customer as McDonough had provided to
Universal in the December 30 Pipeline, even though the EBITDA contribution projection could
no longer be valid after the January 17, 2012 meeting in which APS learned that Customer 
would not mandate use of web portal. McDonough?s cost projections, created in
consultation with Scott and Vaccaro, had assumed that physicians would use the web portal, but
without the mandate, APS was forced to incur significant additional costs.

101. Notably, Scott, Vaccaro and McDonough continued to conceal the Company?s
real salesforce.com pipeline from Universal. in an email exchange on February 1, 2012, after

Universal?s Chairman had asked for a ?pipeline report,? McDonough told Vaccaro that he did

 

5 The Customer 0 Dual Eligibles contract listed in the February 2 Pipeline did not even

appear 011 salesforcecom pipeline at the time.

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not want to send Universal a salesforce.com printout because that would ?bring up more
questions? and ?open up a hornet?s nest. The salesforce.com report, which would have
exposed Scott, Vaccaro, McDonough and Katz?s lies, was never sent to Universal.

102. As intended, and as discussed below in paragraphs 162?164, Universal relied on
Scott, Vaccaro, McDonough and Katz?s false representations that business and its
relationships with existing and prospective customers were robust and unimpaired in deciding to
close the merger.

103. The misrepresentations continued when, on or about February 14, 2012,
Defendant McDonough spoke with Universal?s Chief Financial Of?cer to discuss January
2012 results. On that call, McDonough reaf?rmed 2012 Budget forecast. This
af?rmation implied that APS would see income from the Customer contract, which was then
subject to rebidding, and would receive all projected income from the Customer contract for
the rest of the year, and concealed the $1.5 million supposed error in the budget for the contract
with Customer A. McDonough also assured Universal?s Chief Financial Of?cer that 
2012 results would recover from a 14 percent shortfall ($293,000) in January 2012
I

104. On or about February 29, 2012, Universalas Chief Financial Of?cer spoke again
with Defendant McDonough for a pre?closing update on ?nancial condition. During this
call, McDonough again fraudulently reaf?rmed bogus 2012 Budget forecast of $44.8
million EBITDA.

105. Defendant McDonough?s con?rmations of the 2012 Budget were false, as he,
Scott, Vaccaro and Katz well knew. The undisclosed material adverse effects regarding

Customers A, B, C, E, and alone would be expected to reduce forecast of 2012

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by over $11 million, or 25 percent; this ?gure does not even account for the substantial
?ne that Customer A was threatening to impose.

106. The closing date for the merger was March 2, 2012 (the ?Closing Date?). On that
date, Defendant Scott, acting on behalf of APS and for the bene?t of all Defendants, executed
and ?led a Certi?cate of Merger merging APS Merger Sub, Inc. with and into APS with the
Secretary of State of the State of Delaware. Each of the Defendants knew or had reason to know
that the Certi?cate of Merger would be ?ied in the State of Delaware. The ?ling of the
Certi?cate of Merger in Delaware was a direct and foreseeable result of the Defendants? scheme
to defraud Universal.

107. On March 2, 2012, APS delivered the Of?cer?s Certi?cate required by Section
of the Merger Agreement to Universal. Defendant Scott signed the Of?cer?s Certi?cate
expressly certifying on behalf of APS that all of the representations and warranties in Section 3
ofthe Merger Agreement were true, including, among other things, that there had been no
material adverse changes in business since January 11, 2012, and that it was not in breach
of the contract with Customer A or its other material contracts. Scott was also acting as
agent in signing the Of?cer?s Certi?cate, since he was President and CEO
and was performing an act that was a condition of Universal?s obligation to close the transaction.
The 0f?cer?s Certi?cate failed to disclose any of the facts described in paragraphs 95405,
above. All of these representations were false.

108. On March 2, 2012, Universal paid $147.8 million in cash, which was used to
retire debt, and approximately 6.2 million shares of Universal stock, then worth $76.7 million.

The total purchase price, after post?closing working capital adjustments, was $222.3 million.

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Pnst?Sinsing Reveiatinns nt? Aetnai Business Conduct

109. Immediately after the closing, Universal began to learn about the sad state of
customer relationships and business that Scott, Vaccaro, McDonough, Katz and others
had previously known about but had hidden from Universal. Among other things:

By a letter dated March 16, 2012, Customer A formally noti?ed local
subsidiary Subsidiary that it was in default of its contract and demanded $1.88
million in penalties, precisely as Scott and Vaccaro had been told four months earlier. When this
letter arrived, the head of operations for Customer A confessed to Universal that it had
been ?expected.? By letters dated May 18, 2012 and June 22, 2012, Customer A increased its
demand to a $5 million fine. On December 21, 2012, the dispute was settled, with the
knowledge and consent of GTCR, and APS Subsidiary A paid $3 million to Customer A.
Additional expenses have been incurred to bring APS Subsidiary A into compliance with its
obligations under the contract with Customer A.

The number of persons in care in the ADHC program of Customer 
plummeted from 37,000 to less than 1,400. As a result, that contract fell 82 percent short of its
projected EBIT DA contribution to the 2012 Budget, a shortfall of several million dollars,
re?ecting the decline that Vaccaro, McDonough, and, on information and belief, Scott had.
expected as a result of the ADHC settlement.

Customer did not expand membership in its SPD program. As a result, that
contract fell 83 percent short of its projected EBITDA contribution to the 2012 Budget, another
seven?figure shortfall.

As Vaccaro, Scott, and McDonough knew but did not disclose, Customer 
refused to mandate that healthcare providers use web?based portal for Utilization

Management contract. As a result, that contractis 2012 EBITDA contribution was actually
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negative, falling nearly $2 million short of its projected contribution to 2012 EBITDA
budget.

Con?rming what Scott, Vaccaro, and McDonough had anticipated prior to
Closing, in May 2012, APS was formally informed that the Customer contract had been
awarded to one of its competitors. The loss of the Customer contract ultimately accounted for
another signi?cant shortfall to the 2012 Budget.

 Audits of APS contracts with Customer I and a contract with Customer for the
management of persons with Severe Mental Illness disclosed de?ciencies in the
performance of those two contracts.

in the year after the merger, APS failed to win all but two of the thirty contracts it
had listed on pipelines given to Universal; those two contracts generated a mere $350,000 of
EBITDA in 2012 out of $26 million predicted in the final pipeline given to Universal, a shortfall
of nearly 99%.

APS failed to deliver on its representations that it could take over behavioral
health services for Universal?s Medicare Advantage business, something that Scott and Vaccaro,
with Katz?s knowledge and approval, had touted as one of the selling points for a potential
merger, including at the August and October Presentations. For that to occur, APS needed to
have a provider network that was compatible with Universalas own. But even though APS did
not have such a network, Scott and Vaccaro promised Universal that the implementation would
be completed by January 1, 2012. The implementation date was pushed to April 1, 2012, then to
May 1, 2012, then to January 1, 2013, a full year after the initial date by which Universal had
told Vaccaro it was critical that the service be Operational. In short, Scott and Vaccaro lied about

operational capacity.

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110. The combined effect of these and other events was catastrophic. By April l0,
2012 less than six weeks after Defendant McDonough?s reaf?rmation of the 2012 budget of
$44.8 million EBITDA Scott, Vaccaro, and McDonough slashed their forecast to only $27.1
million for the year, a decline of 4-0 percent. In discussing these disastrous results,
Scott wrote to Kata that it was ?[m]ore of the same? and that ?if it can go wrong it has gone
wrong for the last 30 days (three years)? Of course, virtually none of what had ?gone wrong?
for the last three years had been disclosed to Universal.

111. By July 13, 2012, just four months after the closing, Scott, Vaccaro, and
McDonough informed Universal that they were forecasting only $4.l million EBITDA for the
year, a calamitous decline of more than 90 percent. it was only after making unplanned
corporate expense reductions that APS was able to salvage a scant $8 million in
2012. Universal had imtially allocated $164.8 million of purchase price to goodwill; as of
year-end 2013 less than two years after purchasing APS Universal had written off that entire
$164.8 million in goodwill. Universal also wrote down an additional $16.1 million in intangibles
and $8.5 million in fixed assets associated with its acquisition of APS.

112. The onslaught of revelations in the weeks and months after Universal acquired
APS was no accident; as detailed above, Scott, Vaccaro, McDonough, Katz, and others knew of
these material adverse facts at the time the Merger Agreement was executed on January 11 and at
the time it was consummated on March 2 and withheld their knowledge from Universal so that
Defendants could secure the bene?t of the more than $220 million that Universal paid to obtain
APS, as well as lucrative compensation packages for Scott, Vaccaro, and McDonough.

113. In addition to the implosion of business and business prOSpects, APS has

paid or been asked to pay penalties or restitution on multiple customer contracts, has been served

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with whistleblower claims and been made the subject of separate government investigations
regarding its compliance with Healthcare Laws with respect to its contracts with Customer D,
Customer and Customer U. These claims and inquiries concern both contracts that were in
force at the time of the merger and former contracts that had been in effect after 2006. Of
course, none of the risks associated with these contracts was disclosed to Universal. Because
APS is operating with a negative cash flow, Universal has been forced to loan APS subsidiaries
the money to defend themselves in the investigations and lawsuit, which concern liability for
alleged overbilling that happened on watch. contractual obligation to
indemnify such defense costs, the settlement of the whistleblower lawsuit, and any potential
resolution of the government investigations is clear, yet APSLP, at direction, has
steadfastly refused to pay a penny for these matters, even though it insists on being permitted to
participate in defending them.

1 14. in particular, on June 28, 20l2, and other APS subsidiaries were served with
a gut tam complaint alleging violations of the False Claims Act brought by a fomier APS
employee. As noted, the lawsuit alleged that the APS subsidiaries fraudulently overbilled
Customer the contract with Customer ended in 20l0, so all of the alleged wrongful conduct
took place before Universal acquired APS. As discussed in paragraph 52(a), above, Scott,
Vaccaro, McDonough, and Katz failed to disclose known facts regarding the potential for legal
and regulatory liability involving Customer T. The APS subsidiaries have spent more than $1.8
million in counsel, consultant, and expert fees defending the litigation and an additional $3
million to settle the lawsuit; because these APS subsidiaries did not have the funds to make these
payments themselves, those payments were made from the proceeds of loans from Universal.

Notwithstanding its obligations under the Merger Agreement, APSLP has refused to indemnify

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Universal for its considerable defense costs or for the settlement that APSLP has consented to
and acknowledged in writing is reasonable.

115. In September 2013, IRG and. other APS subsidiaries were served with a subpoena
issued by the Of?ce of the Inspector General of the Department of Health and Human Services
regarding their billing practices under a contract with Customer U. The contract with Customer
ended in 2010, and had been described to Universal during the sales process as one of 
biggest success stories. All of the allegedly unlawful billing practices now under scrutiny took
place before Universal acquired APS. As discussed in paragraph 52(b)(ii), above, Scott,
Vaccaro, McDonough, and Katz failed to disclose known facts regarding the potential for legal
and regulatory liability involving Customer U. Universal has loaned more than $2.3 million so
that the APS subsidiaries could pay for the counsel, consultant, and expert fees incurred
defending the investigation. APSLP has refused to abide by its indemni?cation obligations with
respect to this matter, too.

116. In August 2013, Universal became aware ofa wrongful termination lawsuit in
which a former APS employee alleged that she had been instructed to overbill Customer D.
Universal also learned that a government agency requested documents from, and deposed, a
former APS employee regarding allegedly illegal billing practices with respect to the Customer
contract. On June 10, 2014, the agency served a Civil Investigative Demand seeking
documents directly from IRG relating to possible violations of the state?s False Claims Act.

I Scott, Vaccaro, McDonough, and Katz were aware of potential billing issues involving Customer
D, but failed to disclose them to Universal. IRG has already incurred several hundred thousand
dollars in counsel fees defending this investigation, fees that can be paid only by virtue of loans

from Universal. APSLP has refused indemni?cation for this investigation as well.

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117. representations about the technical backbone of its business turned out to
be false, as well. Several months after the merger closed, APS began to deve10p plans for a new
version of the Software. In the course of this deveIOpment, Universal was told that the software
subject to the Software License was not, in fact, a ?small component? of the Software, as the
APS in-house lawyer had represented on December 28, 2011. Rather, Universal has learned that
the Software License provides the ?nucleus? of the Software and covers at least 50 percent of its
code, as Scott, McDonough, and others at APS knew from their review of correspondence
relating to a dispute with the licensor. APS personnel have estimated that it would cost
Universal additional millions of dollars to design the Software without reliance on the code that

is subject to the Software License.

Defendants1 Perpetuatinn of the Fraud

118. In the ?rst quarter of 2013, Universal began an investigation to determine whether
the Defendants had committed fraud in connection with Universal?s purchase of APS. In the
course of conducting its investigation, Universal?s counsel interviewed Scott, Vaccaro and
McDonough, each of whom continued to lie and conceal his role in the fraud. For example,
during a February 15, 2013 interview regarding various problems with customers and
contracts, Vacc-aro falsely claimed that he had nothing to do with inflated pipeline
projections and feigned ignorance as to how the probabilities that went into those projections
were determined. In fact, Vaccaro had been intimately familiar with the design of internal
pipelines, had received copies of them every month and had participated in creating and
determining the contents of the sham pipelines that were fed to Universal.

119. Still unaware of the totality of Defendants? fraud, Universal permitted Scott and

McDonough to resign from the Company with respective effective dates of March 1, 2013 and

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March 29, 2013. Vaccaro continued to represent to Universal that his client relationships could
result in signi?cant new business for APS that he had been promising would materialize.
Universal, still hoping to realize some value from its investment in APS, agreed to give him
another chance to do so. Accordingly, on April 25, 2013, Universal and Vaccaro executed an
amendment to Vaccaro?s existing employment agreement with APS, dated January 11, 2012 (the
?Vaccaro Employment Agreement?), whereby he agreed to continue to work at APS for an
additional 60 days, through June 28, 2013, and to assist with the orderly transition of his duties to
new management in return for a potential additional payout in connection with a prospective new
customer contract.

120. The terms of that agreement were memorialized in an amendment to the Vaccaro
Employment Agreement dated April 25, 2013 (the ?Vaccaro Separation Agreement?). The
Vaccaro Separation Agreement provides that Vaccaro would receive a severance payment only if
he ?remain[ed] continuously employed by [Universal] through the Termination Date? of June 28,
2013, without being tenninat'ed for ?Cause? and ?pe1'for1n[ed] [his] duties in a reasonably
satisfactory manner, including without limitation, planning for the orderly transition of his
duties.?

121. Vaccaro continued to collect an APS paycheck through June 28, 2013. He did
not, however, perform his duties in a reasonably satisfactory manner. He was regularly absent
from the office in the weeks leading up to his termination, failed to keep Universal informed
about material developments, failed to perform the responsibilities of a senior manager, and
failed to plan for the orderly transition of his duties. Nor did he provide Universal with the
prOper release required by the Vaccaro Separation Agreement. Accordingly, he did not receive

any severance payment upon tennination of his employment.

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Defendants? Material Misrepresentatiuns and Dmissieus

122. As summarized below, APS, APSLP, Scott, Vaccaro, McDonough, Katz and the
GTCR Defendants made many material misrepresentations to Universal before execution of the
Merger Agreement, in the Merger Agreement itself, and afterwards, omitted to disclose material
facts necessary to prevent other representations from being misleading, and affirmatively
concealed adverse facts concerning the true state of business. Where a contractual
provision imposed an obligation on APS to disclose certain facts in the Company Disclosure
Letter, the failure to disclose those facts was both a material omission and a material
misrepresentation that such facts did not exist.

123. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
Customer A (collectively, the ?Customer A Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in
3.17 and 3.29, as described in paragraphs 9l(a) and 91(b), that APS was not in material
breach or default of its contract with its largest customer, Customer that to the Company?s
Knowledge, Customer A had not indicated an intent to cancel, terminate, or modify its contract;
and that to the Company?s Knowledge, no event had occurred which with notice or lapse of time
would constitute a breach, violation, or default of the contract. Scott, APS, and APSLP further
misrepresented in 3.9 of the Merger Agreement and Company Disclosure Letter that no
Material Adverse Effect had occurred, and omitted any reference to several of the
de?ciencies discussed during Defendants Scott and Vaccaro?s meeting with Customer A on
November 22, 2011, in which Customer A stated its intent to send APS a de?ciency letter and
impose a fine. The Company Disclosure Letter also misleadingly stated that APS was

?discussing the appropriate measure of network adequacy (for providers with multiple offices),?
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when in fact Customer A had complained about many more and far more serious breaches of the
contract.

As described in paragraphs 63?66, 74, and 109(a), above, the Customer A
Violations were materially false and misleading and made with scienter because Scott, Vaccaro,
and McDonough, as well as Katz and Nolan, knew that Customer A had stated clearly at the
November 22 meeting between Customer A, Scott, Vaccaro, and another APS executive that
APS was in breach of numerous contract provisions. The statement that APS was ?discussing
the appropriate measure of network adequacy (for providers with multiple offices)? with
Customer A was deliberately misleading given Customer A?s clear statements that APS was in
breach of its contract with Customer A, that Customer A would impose a large fme, and that
very contract was threatened. These misrepresentations and omissions were material, and
disclosure of the meeting with Customer A was necessary to make other disclosures not
misleading, because, among other things, Universal had asked McDonough who forwarded
that request to Scott and Vaccaro for them to be prepared to talk about any problems with
respect to the Customer A contract at the November 22 meeting among APS, GTCR, and
Universal. However, as Katz directed in furtherance of the Defendants? fraud, a concerted effort
was undertaken to restrict Universal?s ability to learn the actual facts regarding Customer A.

124. Scott, Vaccaro, McDonough, ABS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
Customer (the ?Customer Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3.17,
as described in paragraph 91(a), that APS was in compliance with its material contract with

Customer and in 3.9, as described in paragraph 9l(d), that no MAE had occurred, and

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omitted any reference to certain of the material breaches and de?ciencies identi?ed by

Customer in its Corrective Action Plan for APS (the ?Customer De?ciencies?). The Merger
Agreement and Company Disclosure Letter misrepresented that no such conditions existed and
omitted to disclose the Customer De?ciencies.

As described in paragraphs in 67 and 79, above, the Customer Violations were
materially false and misleading and made with scienter because Scott, Vaccaro, and. McDonough
knew that Customer had provided written notice of numerous breaches by APS and was so
dissatis?ed with APS that Customer explicitly told APS that it would not be given any new
business until the many problems with the existing program were ?xed. APS had an obligation
to provide this information under the Merger Agreement. Instead of disclosing the Customer 
De?ciencies, Scott, Vaccaro, and McDonough, on behalf of APS and APSLP, fed Universal the
false story that APS was going to get additional business from Customer B.

125 . Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
the Company?s compliance with Health Care Laws (?the Healthcare Laws Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3.25,
as described in paragraph 91(c), that to the Company?s Knowledge, there were no facts,
circumstances or events that could reasonably be expected to give rise to liability under any
Healthcare Laws.

As described in paragraphs 52, 85?87, and 113?116, above, the Healthcare Laws
Violations were materially false and misleading and made with scienter because Scott, Vaccaro,
and McDonough were aware of facts and circumstances at the heart of a whistleblower lawsuit

and two pending government investigations concerning Healthcare Law issues regarding

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Customers T, U, and D. in addition, as described in paragraphs 88?89, above, Scott, Vaccaro,
and McDonough knew that APS had widespread ET and operational deficiencies that could give
rise to other similar Healthcare Law matters. None of these facts and circumstances was
disclosed in the Merger Agreement or Company Disclosure Letter.

126. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
Customer (the ?Customer Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3.9,
as described in paragraph 91(d), that no MAE had occurred and did not disclose the adverse
effect of Customer D?s interpretation of its contract with APS, including requirements for
member ?touches,? which eviscerated the pro?tability of that contract (the ?Customer 
Shortfall?).

As described in paragraph 47, above, the Customer Violations were materially
false and misleading and made with scienter because Scott, Vaccaro, McDonough, Katz, Nolan,
Earl, and Kos knew of the Customer Shortfall, which, both individually and together with the
other events alleged herein, had a Material Adverse Effect on business.

127. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
Customer E?s ADHC program (the ?Customer ADHC Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3.9,
as described in paragraph 91(d), above, that no MAE had occuired and did not disclose the
adverse effect of the settlement Customer had reached with private plaintiffs regarding its

ADI-1C program (the ?Customer Settlement?).

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As described in paragraph 95(b), above, the Customer ADHC Violations were
materially false and misleading and made with scienter because McDonough and Vaccaro were
told by other APS personnel on or around November 29, 201 1 that APS was likely to lose
business as a result of the settlement. APS had an obligation to provide this information under
the Merger Agreement, but instead misrepresented in the Merger Agreement and Company
Disclosure Letter that no such conditions existed.

128. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
Customer 1 (the ?Customer 1 Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3.17,
as described in paragraph 91 that APS was not in material breach or default of its contract
with Customer I (the ?Customer 1 Breach?).

The Customer I Violations were materially false and misleading and made with
'scienter because there were, in fact, numerous deficiencies in performance under the
Customer 1 contract, as later found by an external audit, shared with Customer 1. APS had an
obligation to disclose these deficiencies under the Merger Agreement. As described in
paragraphs 88-89, above, Scott, Vaccaro, and McDonough knew that APS had widespread IT
and operational de?ciencies and therefore knew of or recklessly disregarded the Customer I
Breach. For example, Scott, Vaccaro, and McDonough received a management report dated
October 17, 2011 notifying them of ?[Customer 1] [Software] issues unresolved to the point of

contract risk? and that the ?client [had] threatened contract sanction.?

60.

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129. Scott, Vaccaro, McDonough, APS, and APSLP- made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
Customer E?s contract {the ?Customer Violations?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3 .17,
as described in paragraph 91 that APS was not in material breach or default of its 
contract with Customer (the ?Customer Breach?).

The Customer SMI Violations were materially false and misleading and made
with scienter because there were, in fact, material de?ciencies in performance under the
SMI contract with Customer E, as later found by an external audit that Universal shared with
Customer E. APS had an obligation to disclose these de?ciencies under the Merger Agreement.
As described in paragraphs 88?89, above, Scott, Vaccaro, and McDonough knew that APS had
widespread IT and operational de?ciencies and therefore knew of or recklessly disregarded the
Customer Breach. For example, Vaccaro and McDonough received a copy of a 
memo prepared by Executive Director for Customer detailing the Company?s
widespread IT de?ciencies in Customer E?s location. The Executive Director?s memo
highlighted, among other things, that the Software?s ?requirements do not meet the current
business needs,? that there was a ?[l]ack of dedicated 1T project support? to ?x the problems;
and that ?with every layer we peel back, there seems to be another bad spot that needs to be
resolved.? As a result of the Customer SMI Breach, APS refunded money to Customer after
the Universal merger.

130. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to

Customer (the ?Customer Violations?):

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The Merger Agreement and Company Disclosure Letter misrepresented in 3.17,
as described in paragraph 91(a), that APS was not in material breach or default of its Disease
Management and Case Management contract with Customer (the ?Customer Breach?).

The Customer Violations were materially false and misleading and made with
scienter because there were, in. fact, material de?ciencies in performance under its
contract with Customer S, as uncovered by an internal audit performed by APS after the merger
closed. As a result of the audit, Universal discovered that IRG had erroneously billed Customer
for services not rendered and voluntarily returned more than $500,000. APS had an obligation
to disclose these material deficiencies under the Merger Agreement. As described in paragraphs
88?89, above, Scott, Vaccaro, and McDonough knew that APS had widespread IT and
Operational de?ciencies and therefore knew of or recklessly disregarded the Customer Breach.
For example, Scott, Vaccaro, and McDonough received a management report identifying as
a ?Challenge? that the Company faced with respect to the Customer contract and highlighting
that eligibility [was] not consistent with [the Softwarel.? Determining member
eligibility is essential to accurate billing. As a result of the Customer Breach, APS refunded
money to Customer post?merger.

131. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Merger Agreement and Company Disclosure Letter as to
the Software (the ?Software Misrepresentation?):

The Merger Agreement and Company Disclosure Letter misrepresented in 3.16,
as described in paragraph 91(e), that APS owned the Software that formed the core of its

business.

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As described in paragraphs 2, 55(e), 82, and 117, above, the Software
Misrepresentation was materially false and misleading and made with scienter because over half
of the code in the Software is subject to the Software License.

132. Scott, Vaccaro, McDonough, APS, and APSLP made the following material
misrepresentations and omissions in the Company Disclosure Letter (the ?Compliance
Violations?):

Section 3.17(b) of the Company Disclosure Letter, which was incorporated by
reference into Merger Agreement 3.17, as described in paragraph 91(a), misrepresented that
APS was not in breach of any of its Company Material Contracts, except as disclosed in a
December 5, 2011 presentation to board, and that the breaches disclosed in that
presentation were not material.

The Compliance Violations were materially false and misleading and made with
scienter because, as discussed above in paragraphs 122-124 and 127430, APS, through Scott,
Vaccaro, McDonough, Katz, and others, knew of, 01' at a minimum recklessly disregarded,
breaches of contracts with Customers A, B, i, E, and and the compliance program issues
described above.

133. Scott, Vaccaro, McDonough, APS, and APSLP made additional material
misrepresentations and omissions in the Officer?s Certificate signed by Defendant Scott and
delivered to Universal at Closing on March 2, 2012 pursuant to the Merger Agreement.
Specifically, Scott certified on behalf of APS and APSLP that the Company?s representations
and warranties were true and correct as of the date of the Closing. See Merger Agreement 
This representation was materially false and misleading for the following

reasons:

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The Officer?s Certi?cate failed to disclose the ongoing Customer A Violations.
The failure to disclose these facts was materially false and misleading and made with scienter for
the reasons stated in paragraph l23, above.

The Officer?s Certificate failed to disclose the ongoing Customer De?ciencies
and the fact that Customer B?s post?termination letter on or about February 15, 2012 confirmed
that such de?ciencies were material, as described in paragraph 95(d) above. The failure to
disclose these facts was materially false and misleading and made with scienter for the reasons
stated in paragraph 124, above.

The Officer?s Certi?cate failed to disclose the ongoing Healthcare Laws
Violations. The failure to disclose these facts was materially false and misleading and made with
scienter for the reasons stated in paragraph 125, above.

The Officer?s Certi?cate failed to disclose the Customer Shortfall. The failure
to disclose this fact was materially false and misleading and made with scienter for the reasons
stated in paragraph 126, above.

The Officer?s Certi?cate failed to disclose the expected adverse effect of the
Customer Settlement, which had been approved by the court in January 2012 after the Merger
Agreement had been signed. The failure to disclose this fact was materially false and misleading
and made with scienter for the reasons stated in paragraph 127, above.

The Of?cer?s Certi?cate failed to disclose the ongoing Customer I Breach. The
failure to disclose this fact was materially false and misleading and made with scienter for the

reasons stated in paragraph 128, above.

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The Of?cer?s Certi?cate failed to disclose the ongoing Customer Breach.
The failure to disclose this fact was materially false and misleading and made with scienter for
the reasons stated in paragraph 129, above.

The Of?cer?s Certi?cate failed to disclose the ongoing Customer Breach. The
failure to disclose this fact was materially false and misleading and made with scienter for the
reasons stated in paragraph 130, above.

The Of?cer?s Certi?cate failed to disclose the ongoing Software
Misrepresentation. The failure to disclose this fact was materially false and misleading and
made with scienter for the reasons stated in paragraph 131, above.

The Of?cer?s Certi?cate failed to disclose the ongoing Compliance Violations.
The failure to disclose these facts was materially false and misleading and made with scienter for
the reasons stated in paragraph 132, above.

134. Scott, Vaccaro, McDonough, APS, and APSLP also made material
misrepresentations and omissions in the Of?cer?s Certi?cate regarding the absence of any
MAEs. Speci?cally, the Of?cer?s Certi?cate represented that no ?event, development or
occurrence of any condition? had occurred between the signing of the Merger Agreement and the
Closing of the Transaction ?that has had, or would reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.? Merger Agreement It further
certi?ed that APS had complied with its obligation to notify Universal if APS
obtained ?Knowledge of any fact, event, circumstance, change, occurrence, effect or condition
that believes would reasonably be expected to cause [the MAE condition to Closing] . . .
to be not satis?ed or fulfilled.? Merger Agreement These

representations were materially false and misleading for the following reasons:

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The Of?cer?s Certi?cate failed to disclose that on or about January 20, 2012, APS
was informed that Customer would cut the revenue for its CMSP contract in half from $4.1
million to $2 million (the Reduction?). As described in paragraph 95 (0), above, the
failure to disclose this material loss of expected revenue was made with scienter because
Vaccaro and McDonough, among others at APS, were speci?cally aware of it prior to the
Closing.

The Of?cer?s Certi?cate failed to disclose that APS had learned in a meeting with
Customer during the week of January 17, 2012 that the implementation of its contract with
Customer was not proceeding according to expectations or the RFP (the ?Customer 
Implementation Problems?) and that as a result the Company would experience a signi?cant
shortfall relative to the earnings for the Customer contract that it had projected in its budget
for 2012 (the ?Customer Shortfall?). The 2012 budget?s projection of the cost of performing
the Customer Utilization Management contract was based on an assumption that Customer 
had mandated that providers use web portal, which was false (the ?False Customer 
Portal Assumption?). As described in paragraph 95 above, the failure to disclose these
material problems with this new contract was made with scienter because Scott, Vaccaro, and
McDonough knew of such problems before the Closing.

The Of?cer?s Certi?cate failed to disclose that on or about February 6, 2012, APS
learned that one of its competitors had been selected for the renewal of contract with
Customer for a term beginning July 1, 2012 (the ?Customer Temiination?), and that,
because that contract had been included in 2012 Budget, this event would cause APS to

experience another shortfall to its 2012 Budget. As described in paragraph 95 above, the

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failure to disclose this material customer loss was made with scienter because Vaccaro and
McDonough, among others at APS, knew of the customer loss before the Closing.

The Officer?s Certi?cate failed to disclose that the 2012 Budget was no longer
accurate because it assumed income throughout the year from the Customer contract that had
been set for rebid (the ?Customer Rebid?) even though the rebid was made under
circumstances that ensured APS would not win it. As described in paragraph 95(e), above, the
failure to disclose the imminent loss of this longstanding customer was made with scienter
because Scott and Vaccaro knew, before the Closing, of the rebid and of Customer C?s concerns
over continuing to do business with APS in light of the $13 million payment made to Georgia to
resolve an investigation into violations of the False Claims Act.

The Officerls Certi?cate failed to disclose that the Company had overstated the
2012 Budget by $1.5 million (the ?Customer A Budget Error?). As described in paragraph
95(h), above, the failure to disclose this material difference was made with scienter because
Scott, Vaccaro, and McDonough knew of the putative ?error? before the Closing.

135. The Of?cer?s Certi?cate failed to disclose that the foregoing matters in
paragraphs 133 and 134, above, individually and collectively, could have a material adverse
effect on the Company?s business, and affirmatively misrepresented the absence of a material
adverse effect.

136. With Katz?s approval, Scott, Vaccaro, and McDonough, on behalf of APS and
APSLP, made material misrepresentations and omissions in their August Presentation, as
described in paragraphs 55?57, above, including the following:

The pipeline intentionally overstated the revenues and probabilities shown in

own internal records for many of the listed contracts, and was not a good-faith assessment

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of the likelihood of speci?c contracts? ability to generate 2012 EBTTDA contributions, as
described in paragraphs 55(c), 56-57, and 109(g) above. Scott, Vaccaro, and McDonough
deliberately omitted and concealed internal records from Universal to create a false
picture of business prOSpects and, as McDonough explained, to ?avoid open[ing] up a
hornet?s nest.?

The pipeline was intentionally overstated because it contemplated several new
contracts with Customer B, while Scott, Vaccaro, McDonough, and Katz knew that 
existing contract with Customer in California was in serious trouble.

The presentation intentionally misrepresented that the contract with Customer 
provided APS with millions of dollars in annual EBITDA. This was materially false and
misleading because Scott, Vaccaro, McDonough, and Katz knew that APS had seriously
underestimated the cost of performing its contract for Customer D, and of the resulting
Customer Shortfall, as described in paragraph 47, above.

137. With Katz?s approval, Scott, Vaccaro, and McDonough, on behalf of APS and
APSLP, made material misrepresentations and omissions in their October Presentation, as
described in paragraph 59, above, including the following:

The pipeline intentionally concealed Scott, Vaccaro, and McDonough?s actual
view that APS would see at least $5.2 million less in EBITDA in 2012 from its new business
pipeline than had been projected in the August Presentation, as described in paragraph 60, above.

The pipeline intentionally overstated the revenues and probabilities shown in
own internal records for many of the listed contracts, and was not a good?faith assessment
of the likelihood of speci?c contracts? ability to generate 2012 EB contribution, as

described in paragraphs 55(c), 56?5 7, and 109(g) above. Scott, Vaccaro, and McDonough

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deliberately omitted and concealed internal records from Universal to create a false
picture of business prospects and, as McDonough explained, to ?avoid open[ing} up a
homet?s nest.?

The pipeline was intentionally overstated because Customer was dissatis?ed
with performance on its existing contract and had already told APS that it would not
partner with APS in South Carolina, as described in paragraph 67, above.

The October Presentation also intentionally misrepresented that the Customer 
contract provided APS with several million dollars in annual This representation was
materially false and misleading because of the Customer I) Shortfall, as described in paragraph
47,above.

138. With Katz?s knowledge and approval, Scott, Vaccaro, and McDonough, on behalf
of APS and APSLP, made material misrepresentations and omissions at the November Meeting,
as described in paragraphs 72~75, above, including the following:

They omitted any disclosure of Scott?s and Vaccaro?s meeting with Customer A
or the Customer A Violations, as described in paragraphs 63-66, 74, and 109(a), above. Their
silence on this critical issue at the November Meeting was part of a larger campaign, coordinated
with Katz, to conceal Customer A?s discontent, including blocking Universal from meeting with
Customer A.

The pipeline provided to Universal at the November Meeting intentionally
overstated the revenues and probabilities shown in own internal records for many of the
listed contracts, and was not a good-faith assessment of the likelihood of specific contracts?
ability to generate 2012 contribution, as descrihed in paragraphs 56-57, 70, and 73

above. Scott, Vaccaro, and McDonough deliberately omitted and concealed internal

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records from Universal to create a false picture of business prospects and, as McDonough
explained, to ?avoid open[ing] up a hornet?s nest.?

The pipeline was intentionally overstated because it contemplated several new
contracts with Customer B, while APS knew that Customer was dissatisfied with 
performance on its existing California contract, that Customer had declined to partner with
APS in South Carolina, and that Customer would not award any more contracts to APS until
APS had remedied its de?cient performance in California, as described in paragraphs 67 and


The pipeline was intentionally overstated because it elevated the likelihood of a
Dual Eligible contract for Customer to ?greater than 90%? from ?less than even though
Customer had not yet even issued an RFP for that contract, Customer had expressed
dissatisfaction with performance on its existing contract, and the internal salesforce.com

contract, as described in paragraph 73(b), above.

The pipeline was intentionally overstated because it stated that a contract with
Customer was ?Highly Likely? to be awarded to APS when APS had not received any
response to its bid, which had been submitted just one day earlier, as described in paragraph


After being confronted with Customer F?s decision to move to managed care,
which they did not disclose to Universal, Scott, Vaccaro, McDonough, and Katz asseited without
any basis that APS would see increased revenues from Customer F, as described in paragraph 75,

above.

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139. Defendant McDonough, on behalf of APS and APSLP, misrepresented to
Universal on December 13, 201 1, that the Customer Settlement had only upside potential for
APS. This was materially false and misleading and made with scienter because, as McDonough
had been told, APS employees anticipated that the Customer Settlement would decrease 
income, as described in paragraph 95(b), above.

140. On December 26, 2011, Defendant Katz, on behalf of the GTCR Defendants,
APS, and APSLP, misrepresented to Universal?s Chairman that GTCR and APS expected that
APS would retain its business with Customer after the Transaction, as described in paragraph
80, above. This was materially false and misleading and made with scienter because Katz knew
or recklessly disregarded that Customer was severely dissatis?ed with performance,
had imposed a Corrective Action Plan, and would not agree to any further contracts until the
existing program was ?xed.

141. On December 28, 201 1, an APS in-house lawyer, acting on behalf of APS,
misrepresented to Universal?s counsel that the software covered by the Software License was
only a ?small component? of purportedly proprietary Software. This was materially false
and misleading and made with scienter because APS knew or recklessly disregarded that the
Software License in fact provides the ?nucleus? of the Software and covers at least 50 percent of
its code.

142. Scott, Vaccaro, and McDonough, on behalf of APS and made material
misrepresentations and omissions in the December 30 Pipeline, as described in paragraphs 77?80,
above, including the following:

The December 30 Pipeline intentionally overstated the revenues and probabilities

shown in own internal records for many of the listed contracts, and was not a good?faith

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assessment of the likelihood of Specific contracts? ability to generate 2012 EBITDA contribution,
as described in paragraphs 56?57 and 78?79, above. Scott, Vaccaro, and McDonough
deliberately omitted and concealed internal records from Universal to create a false
picture of business prospects and, as McDonough explained, to ?avoid open[ing] up a
homet?s nest.?

The December 30 Pipeline was intentionally overstated because it contemplated
several new contracts with Customer B, while APS knew that Customer was dissatisfied with
performance on its existing California contract, that Customer had declined to partner
with APS in South Carolina, and that Customer would not award any more contracts to APS
until APS had remedied its de?cient perfonnance in California, as described in paragraphs 67,
78, and 79, above.

143. Scott, Vaccaro, and McDonough, on behalf of APS and APSLP, made material
misrepresentations and omissions in the 2012 Budget, as described in paragraph 77, above,
including the following:

The 2012 Budget failed accurater to reflect the adverse effect of the Customer 
Settlement on the revenue and from the ADHC contract with Customer E, as described
in paragraph 95(b) above.

The 2012 Budget assumed that APS would retain the PHM contract with
Customer G, notwithstanding that Scott, Vaccaro, and McDonough had already been informed
that APS was not a finalist for the rebid on that contract, as described in paragraph 81, above.

The 2012 Budget incorporated the intentionally overstated December 30 Pipeline

misrepresenting that APS would achieve $19.3 million from new business.

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144. On December 3 l, 201 l, Katz, on behalf of the GTCR Defendants, APLSP, and
APS, misrepresented to Universal?s Chairman that get you whatever you need on the
compliance front.? This misrepresentation was materially false and misleading and made with
scienter because Katz had no intention of providing accurate and complete disclosures in
response to Universal?s compliance requests. For example, Universal?s Chairman specifically
asked Katz to share the details of Katz?s interview with outgoing CCO. Instead of
providing a full and accurate account of the interview, Katz deliberately concealed his own
concerns about the reasons for the abrupt departure and failed to disclose that he
suspected the CC0 might become a whistleblower. Katz further concealed his own knowledge
of potential legal and regulatory liabilities, as discussed above in paragraphs 85?87.

145. On or about January 4-, 2012, Defendants Scott and Vaccaro, on behalf of APS
and APSLP, misrepresented to Universal that APS had remedied the shortcomings in its
compliance programs identi?ed in connection with the Georgia False Claims Act settlement and
that APS was in compliance with its contracts and all applicable laws. Defendant Katz
participated in this meeting by telephone and had a duty to correct these misrepresentations.
Indeed, he had personally reassured Universal?s Chairman days before that Umversal would get
all of the compliance information it needed. These material misrepresentations and omissions
were knowingly false because Scott, Vaccaro, and Katz were aware of speci?c facts and
circumstances that could give rise to potential legal and regulatory liability, as described in
paragraphs 52 and 85?88, above.

146. Scott, Vaccaro, and McDonough, on behalf of APS and APSLP, made material
misrepresentations and omissions in the February 2 Pipeline, as described in paragraphs 97-402,

above, including the following:

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The February 2 Pipeline intentionally overstated the revenues and probabilities
shown in own internal records for many of the listed contracts, and was not a good?faith
assessment of the likelihood of speci?c contracts? ability to generate 2012 contribution,
as described in paragraphs 56?57 and 97?102, above. Scott, Vaccaro, and McDonough
deliberately omitted and concealed internal records from Universal to create a false
picture of business prospects and, as McDonough explained, to ?avoid ope11[ing] up a
hornet? nest.?

Scott, Vaccaro, and McDonough intentionally failed to disclose adverse
deveIOpments that were known to them or reflected in the salesforce.com pipelines that they had
received. For instance, the salesforce.com pipeline in early February 2012 shows that on or
about January 20, 2012, APS was informed that the revenue for the CMSP contract with
Customer would be cut in half, as described in paragraph 95(0), above, but the pipeline they
provided to Universal still re?ected the old (and higher) revenue figure.

Scott, Vaccaro, and McDonough inflated the February 2 Pipeline by adding
several new prospective contracts without justification, to cover up the fact that the projected
EBITDA from new business would otherwise have dropped dramatically because of the loss of
existing and prospective contracts with Customer B, as described in paragraphs 97?98,
above.

147. In two separate phone calls on or around February 14, 2012 and February 29,
2012, Defendant McDonough, on behalf of APS and APSLP, made the following material

misrepresentations and omissions among others:

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Defendant McDonough reaffirmed all of the false and misleading statements and
omissions in the 2012 Budget, and knowingly failed to disclose the changes in circumstances
described in paragraph 95, above, that rendered prior statements inaccurate.

Defendant McDonough knowingly omitted and concealed the Customer Rebid,
as described in paragraphs 95(e) and 134(d), above.

(0) Defendant McDonough knowingly omitted and concealed the Customer 
implementation Problems, the Customer Shortfall, and the False Customer Portal
Assumption, as discussed in paragraphs 95(a) and 134(b), above.

Defendant McDonough knowingly omitted and concealed the Customer 
Termination and the Customer Budget Shortfall, as discussed in paragraph 95(f) and 134(c),
above.

Defendant McDonough knowingly omitted and concealed that the 2012 Budget
contained a $1.5 million overstatement of earnings from Customer A, despite the fact that such
disclosure was required to make the previous disclosure of the budget not misleading, as
discussed in paragraph 95(h), above.

148. Defendants Scott, Vaccaro, and McDonough knowingly misrepresented to
Universal that Customer had terminated its contract with APS because it did not want to do
business with a Universal-owned company when, in fact, Customer had terminated the
contract because of ?material deficiencies? in performance, as described in paragraph
95(d), above.

149. Scott, Vaccaro, and McDonough had an obligation to disclose the Customer 

Rebid because they had represented to Universal in the August Presentation, the October

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Presentation and the 2012 Budget that APS had won the Customer contract. Their failures to

correct these statements constitute a material omission.

Defendants? Material Misrepresentations and Dmissions Were Made with Seienter

150. As described above, each of foregoing misrepresentations and omissions were
made knowingly and intentionally. In the alternative, the misrepresentations and omissions were
made with reckless indifference as to their truth or falsity because Scott, Vaccaro, McDonough,
and Katz disregarded known problems with business and operations and failed to obtain
sufficient information about the Company?s operations to prepare an accurate 2012 Budget, new
business pipelines, or an accurate description of the Company?s ongoing business.

151. As described below, all of the Defendants also had the motive and opportunity to
defraud Umversal.

152. As a result of the sale of APS to Universal, Scott, Vaccaro, and McDonough
exchanged their illiquid shares of APS for va1uab1e and 1iquid Universal stock, receiving the
following consideration:

Scott received a total of 175,370 shares of Universal stock, valued at more than $2
million on the Closing Date. He also obtained 319,800 stock options.

Vaccaro received a total of 56,983 shares of Universal stock, valued at more than
$654,000 on the Closing Date. He also obtained 196,800 stock Options.

(0) McDonough received a total of 24,148 shares of Universal stock, valued at more
than $277,000 on the Closing Date. He also obtained 83,400 stock options.

153. Scott, Vaccaro, and McDonough each also signed new Employment Agreements

that provided for significant increases in their annual compensation:

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Scott?s base salary increased from $3 75,000 to $530,000 per year, an increase of
41 percent.

Vaccaroas base salary increased from $335,000 to $475,000 per year, an increase
of 42 percent.

McDonougb?s base salary increased from $285,000 to $350,000 per year, an
increase of 23 percent.

154. The GTCR Defendants had the motive and opportunity to defraud Universal
because they were at risk of losing their entire investment in APS if the Company were to default
on its debt. Under the terms of Company?s loans, which Katz, Nolan, Earl, Kos, and Nelli
renegotiated at the same time as they were trying to sell APS to Universal, APS would have
again gone into default of its loan covenants if 2012 EBITDA dropped below $29 million.
Given the material adverse effects that occuired in the fall of 2011 and the first two months of
2012, such a decline was a near certainty.

155. Instead of losing their entire investment by reason of a default and subsequent
foreclosure on their equity interest in APS, the GTCR Defendants were the beneficiaries of the
5222.3 million pru'chase price, including approximately $77 million in Universal common stock,
which in turn provided substantial bene?ts not only to the GTCR Defendants? investors but also
to the GTCR Defendants and their af?liates, including Katz, who stood to gain personally from
the sale of APS to Universal. The GTCR Defendants have also received nearly $16 million in
dividends on their Universal stock since the closing.

156. Pursuant to a letter agreement entered as part of the merger, Defendant Katz was
designated by GTCR Fund to serve as a member of Universal?s Board of Directors. In

connection with his election to the Universal Board, Katz received valuable compensation, as

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well as the prestige of serving as a director of a publicly traded company. In particular, Katz
received a total of $172,000 in fees, stock awards, and options awards during 2012 in connection
with his membership in Universal?s Board ot?Directors. Katz directed Universal to pay these
bene?ts directly to him personally, rather than instructing Universal to pay them to a GTCR

affiliate, as GTCR policy required.

The Roie of Kate and the GTCR Eet'endarats in the Fraud
157. Katz had ultimate authority over and culpably participated in the fraud committed
by APSLP, APS, Scott, Vaccaro, MC-Donough and others because, among other things:

Katz was regularly apprised of business, prospects and compliance efforts

 

at board meetings, in management reports submitted by APS, and in thousands of
emails and regular telephone calls he had with Scott, Vaccaro and McDonough. As a result, he
knew the true condition of failing business, including its IT and operational challenges,
yet he concealed that information from Universal;

Katz reviewed and approved drafts of the false presentations made to Universal;

(0) Katz attended virtually all of the meetings with presentations made to Universal,
including without limitation the meetings on August 18, 2011, November 22, 2011 and January
4, 2012;

Katz dealt directly with lenders, knew that they were nervous about the
Company?s future and knew that another loan covenant default would spell the death of APS and
the loss of investment;

Katz directed and controlled the due diligence process and led nearly all of the

due diligence calls and meetings with Universal regarding the Transaction;

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Katz led and was directly involved in every aspect of the negotiation of the
Merger Agreement and its representations and warranties, including negotiating the material
terms directly with Universal?s Chairman and hiring advisors for the Transaction; and

As reflected in his emails regarding Customer A, the loss of APS contracts, the
litany of things ?gone wrong? over a multi?year period and other matters described in paragraphs
47, 48, 83, and 110, above, as well as his false characterization of business and
compliance efforts, Katz actively and directly participated in the fraudulent misrepresentations
and concealments that were intended to and did deceive Universal;

Katz- personally misrepresented and concealed material facts regarding Customer
A, Customer B, the critical issue of compliance with customer contracts and Healthcare
Laws, and a litany of things ?gone wrong? over a multi?year period as described in paragraphs
80, 83?88, and 110, above.

158. The GTCR Defendants culpably participated in the fraud committed by APSLP,
APS, Scott, Vaccaro, McDonough and others because, among other things:

Katz, Nolan, and Earl were regularly apprised of business, prospects and
compliance efforts at board meetings, in management reports submitted by APS, and in
thousands of emails and regular telephone calls they had with Scott, Vaccaro and McDonough,
and therefore knew the true condition of failing business;

Katz, and other GTCR personnel, including Nolan, Earl, and Kos, reviewed and
approved drafts of the false presentations made to Universal that they knew were false and

misleading or were reckless in not knowing were false or misleading;

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Katz and Earl attended virtually all of the meetings with presentations made to
Universal, including without limitation the meetings on August 18, 20l1, November 22, 2011
and lanuary 4, 2012;

Katz, Nolan, Earl, Kos, and Nelli dealt directly with lenders, knew that
they were nervous about the Company?s future and knew that another loan covenant default
would Spell the death of APS and the loss of their investment;

Katz, Earl, K05, and Nelli directed and controlled the due diligence process and
led or participated in nearly all of the due diligence calls and meetings with Universal regarding
the Transaction and approved the use of false presentations during the calls and meetings; and

Katz, Earl, Kos, and Nelli were directly involved in every aspect of the
negotiation of the Merger Agreement and its representations and warranties.

159. The GTCR Defendants? conscious participation in the fraud is evidenced by their
knowledge of misrepresentations to Universal in written and oral presentations and in the Merger
Agreement. For example:

As members of the APS board, Defendant Katz and Nolan received reports that
the Customer contract was losing money, but reviewed and approved the August and October
Presentations to Universal that claimed the contract generated millions of dollars of EBITDA per
year.

Katz and Nolan had also received a written report to Audit Committee
disclosing that a former APS employee had lodged a complaint with the ?Attomey General? of
Customer regarding alleged ?Medicaid fraud.?

Katz and Nolan also sought and received detailed information about APsis

contracts with Customer U, which they viewed as key to ability to sell the Company.

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As discussed above, the Customer D, Customer T, and Customer contracts later became the
subjects of federal investigations and lawsuits.

Katz further concealed materials facts regarding his interview of resigning
CCO, including Katz?s own suSpicions that the CC0 would be a whistleblower.

Katz and Nolan also received reports to the APS board showing that a potential
contract with Customer in South Carolina was no longer a prospect, but reviewed and
approved new business pipelines given to Universal showing that APS had a 75 to 90 percent
chance of being awarded that contract.

As described in paragraph 66, above, Defendant Katz and Nolan concealed from
Universal the threat that Customer A would fine APS and possibly terminate the Customer A
contract. In fact, because of concerns about the Customer A contract, Kata directed that
Universal?s due diligence of Customer A be circumscribed as far as possible (?the less time there
the better?) and rejected Universal?s requests to meet directly with Customer A, as described in
paragraph 83, above.

160. The GTCR Defendants also stood to gain substantial compensation in the merger,
including valuable and publicly traded Universal shares (which they had reason to expect, based
011 Universal?s historical practices and cash flow projections, would yield and did yield 
substantial dividends), as well as the right to designate a representative to serve on the Universal
Board of Directors. Defendant Katz was the direct beneficiary of that designation, which
brought with it stock awards, options awards and director fees. On information and belief, Katz
was also compensated at GTCR based on the investments he directed, such as APS. By contrast,
if the GTCR Defendants had not sold APS to Universal, they would have lost their entire

investment, and Katz would have personally suffered financially.

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161. Katz and the GTCR Defendants knew that the undisclosed material adverse
effects that occurred before the merger closed necessarily would have caused 2012
to fall below $29 million, resulting in a breach of its loan covenants, and a default on
its $150 million of debt. The actual results were far worse only $8 million of EBITDA. When
GTCR fraudulently unloaded APS on Universal, it knowingly and intentionally dodged a bullet.
Katz and the GTCR Defendants aided and abetted the fraud perpetrated by Scott, Vaccaro,
McDonough, APS, and AP SLP with full knowledge of the grave harm they would cause

Universal and with reckless indifference to the rights of Universal.

Universal Reasunably Relied on the Misrepresentations and Umissiuns

162. Universal reasonably relied on the contractual representations and omissions
detailed above in the Merger Agreement, the Company Disclosure Letter explicitly
incorporated by reference into the Merger Agreement, and the Officer?s Certi?cate delivered
by Scott pursuant to the Merger Agreement. As Section 3 of the Merger Agreement makes plain,
Universal explicitly bargained for the representations in that section. Pursuant to Section 6.2 of
the Merger Agreement, moreover, the accuracy of those representations was a condition to
Universalis obligation to close the Transaction. Likewise, pursuant to Section 6.2 of the Merger
Agreement, the absence of any MAEs between signing and closing was a condition to
Universal?s obligation to close the Transaction. Accordingly, the contractual representations
were an essential part of the bargain that Universal negotiated and an essential part of the
consideration for which Universal paid nearly a quarter of a billion dollars.

163. Universal also reasonably relied on the extra?contractual misrepresentations and

omissions detailed above.

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Universal relied upon all extra?contractual misrepresentations and omissions
occurring before execution of the Merger Agreement by continuing to devote resources and
energy to a possible APS transaction, including the time of senior Universal executives and the
expense of engaging professionals to perform due diligence upon APS and to negotiate the
Merger Agreement and related documents. These misrepresentations and omissions include the
August and October Presentations, the presentation and oral statements at the November
Meeting, the 2012 Budget, the December 30 Pipeline (as well as the pipelines given to Universal
in August, October and November), McDonough?s oral misrepresentation that the Customer 
Settlement had only upside potential for APS, Scott and Vaccaro?s oral representations that APS
had no material compliance risk following the $13 million Georgia settlement, and Katz?s
misstatements and omissions regarding compliance. Universal also reasonably relied on each of
these misrepresentations and associated omissions because they reinforced the representations in
the Merger Agreement, Company Disclosure Letter, and Officer?s Certi?cate that APS was a
healthy company with good relationships with its customers, that it was in compliance with its
contracts and applicable laws, and that there were no MAES affecting its business.

Universal relied upon all extra?contractual misrepresentations and omissions
made after execution of the Merger Agreement when it agreed to consummate the acquisition of
APS. Had it known the truth, Universal would have exercised its right to terminate the Merger
Agreement on the ground of MAEs. These misrepresentations and omissions include the
February 2 Pipeline, McDonough?s oral reconfirmations of the 2012 Budget in February 2012,
Scott?s oral misrepresentation that Customer had terminated its contract with APS because it
did not want to do business with Universal, and the omission by Scott, Vaccaro and McDonough

to disclose the Customer Rebid. Universal also reasonably relied on each of these material

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misrepresentations and associated omissions because they reinforced the representations in the
Merger Agreement, Company Disclosure Letter and Officer?s Certi?cate that APS was a healthy
company with good relationships with its customers, that it was in compliance with its contracts
and applicable laws, and that there were no MAES affecting its business.

164. Throughout the sales process, Universal reasonably relied on the commercially
reasonable expectation that Scott, Vaccaro, McDonough, Katz, and others at APS and GTCR
were not actively impeding Universal?s due diligence 01' deliberately concealing the true state of
business. For instance, Universal reasonably expected to receive good faith projections
that were grounded in fact. What it got instead were knowingly phony budgets and pipelines
designed to give Universal a false and misleading picture of business and prospects. AS
discussed above, Scott, Vaccan and McDonough prevented Universal from seeing real
internal pipeline, out of fear it would ?open up a hornet?s nest.? Similarly, Katz and Scott
conspired to prevent Universal from learning the truth about Customer A?s dissatisfaction and
threat of termination by not only failing to make required disclosures but refusing to arrange for
a meeting between Universal and Customer A under false pretenses. Katz also revealed his goal
of pulling the wool over Universalis eyes by telling Scott (with respect to Universal?s onsite due
diligence of the Customer A contract) that ?the less time there, the better? and by concealing

material facts on the critical issue of compliance.

Misrepresentations and (Emissions Caused Significant Losses to Universai

165. Universal would not have purchased APS if it had known the truth about the
numerous material misrepresentations and omissions described above.
166. Defendants? misrepresentations, omissions and breaches of the Merger

Agreement have caused Universal to suffer actual losses, including without limitation:

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the $222.3 million purchase price paid for 

expenses incurred in the acquisition of APS, including over $4 million in
professional fees;

undisclosed liabilities, penalties, performance guarantees and ?nes;

expenses incurred to bring APS into compliance with customer contracts;

attorneys" fees, expenses and settlement costs for lawsuits and investigations,
including without limitation the Customer litigation and the ongoing Customer and
Customer investigations that collectively have cost more than $7.5 million;

expenses for developing new software that would not have been incurred if APS
owned the Software as represented; and

cash dividends of nearly $16 million paid to GTCR on the Universal shares issued
in the Transaction.

167. Scott, Vaccaro, McDonough, APS, APSLP, Katz, and the GTCR Defendants
perpetrated their fraud with full knowledge of the grave harm they would cause Universal and
with reckless indifference to the rights of Universal. This outrageous, deceptive conduct
constitutes aggravated and gross fraud. The conduct of all Defendants justi?es an award of
punitive damages to punish their willful deception, to deter similar misconduct by them and by
others in the ?iture, and to assure that GTCR does not treat liability for fraud claims as a mere

cost of doing business.

indemnification Under the Merger Agreement and the Limited Guaranty

168. In Section 8.2 of the Merger Agreement, APSLP agreed to indemnify Universal
for breaches of the representations, warranties, and covenants in the Merger Agreement.

Pursuant to Section 8.2 of the Merger Agreement and under Delaware law, Universal is also

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entitled to recover its attorneys? fees and other costs of enforcing its indemni?cation rights under
the Merger Agreement.

169. Each of the misrepresentations and omissions identi?ed in paragraphs 123?135,
above, also constitutes a breach of the representations, warranties and covenants in the Merger
Agreement.

170. The parties recognized that APSLP would hold only limited assets after its shares
of APS had passed to Universal as palt of the Transaction. Therefore, induce Parent to
enter into the Merger Agreement,? the Merger Agreement and associated Limited Guaranty
provide that the GTCR Limited Guarantors ?absolutely, unconditionally and irrevocably
guarantee?? indemni?cation obligations to Universal. Limited Guaranty ii 1.

171. in Section of the Merger Agreement, AP SLP also agreed to indemnify
Universal for any Excess Performance Guarantee Amounts, which the Merger Agreement
elsewhere de?ned as 50 percent of the amount by which APS paid performance guarantees
above the amount previously accrued or reserved. Universal agreed to pay $195,000 in excess of
the amount previously accrued or reserved with respect to a performance guarantee assessed by
Customer T.

172. On March 1, 2013, Universal delivered a demand for indemni?cation on APSLP,
alleging breaches of various representations, warranties and covenants set forth in the Merger
Agreement, thereby triggering its right to indemni?cation under the Merger Agreement and the
Limited Guaranty.

173. On August 22, 2013, September 19, 2013, and April 24, 2014, Universal

delivered supplemental demands for indemni?cation on AP SLP, identifying additional breaches

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it had discovered. On June 13, 2014, Universal served a supplemental demand for
indemni?cation identifying additional damages it had incurred.
?aunt I Securities Fraud under Section l?tb) of the Exchange Act
{Against Scott, Vaccare, McBeneuglr and 

174. Universal repeats each and every allegation contained above as if set forth fully
herein.

175. As set forth above, Scott, Vaccaro, McDonough and APSLP made a number of
material misstatements and omissions of material fact to Universal?s of?cers and agents in the
course of negotiating and signing the Merger Agreement and related documents.

Scott, APSLP, and non-party APS made material misrepresentations and
omissions in the Merger Agreement, Company Disclosure Letter, and Of?cer?s Certi?cate, as
described in paragraphs 123?135, above.

Scott, on behalf of APSLP and non?party APS, made additional material
misrepresentations and omissions, as described in paragraphs 136?138, 142?143, 145?146, and
148?149, above.

Vaccaro, on behalf of APSLP and non?party APS, made additional material I
misrepresentations and omissions, as described in paragraphs 136-138, 142?143, 145-146, and
148?149, above.

McDonough, on behalf of APSLP and non?party APS, made additional material
misrepresentations and omissions, as described in paragraphs 136?139, 142?143, 146~l49, above.

176. These material misstatements and omissions of material fact were made in
connection with the sale of Universal securities, which are publicly traded on a national

securities exchange.

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177. Scott, Vaccaro, McDonough, APSLP, and non?party APS made these material
misrepresentations and omissions with scienter, as described in paragraphs 123?156, above.

178. These material misrepresentations were conveyed by means of the mails and
interstate telecommunications networks.

179. As described in paragraphs 162-164, above, Universal acquired APS in reliance
on material representations and omissions made in the course of negotiations and set forth in the
Merger Agreement. Universal?s reliance was reasonable because the misstatements by Scott,
Vaccaro, McDonough, APSLP, and non?party APS concerned material ?nancial and operational
information about APS that Scott, Vaccaro, and McDonough, as senior of?cers, were in a
position to know and had a duty to know and to which Universal did not have independent
access. Indeed, Scott, Vaccaro and McDonough purposefully concealed material adverse
information from Universal, including material negative developments they learned both before
the Merger Agreement was signed and after it was signed and before closing. Absent these
misrepresentations and omissions by Scott, Vaccaro, and McDonough, acting on behalf of
APSLP and non?party AP S, and others acting on their behalf, Universal would not have acquired
APS.

180. These misstatements are not subject to the Safe?Harbor for Forward Looking
Statements provision of the Exchange Act, 15 U.S.C. because the misstatements
concerned both known facts and future predictions that Scott, Vaccaro, McDonough, APSLP,
and non?party APS knew were baseless and material, and were not accoinpanied by meaningful
cautionary language.

181. As a direct and proximate result of these fraudulent misrepresentations, Universal

sustained actual damages well in excess of $200 million.

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Grunt 11 ?cntrot Persen Liability under Section 28(a} of the Exchange Act
(Scott, Vaeearo, McDoneagh, and APSLP)

182. Universal repeats each and every allegation contained above as if set forth fully
herein.

183. Non?party APS committed a primary violation of Section 10(b) of the Exchange
Act with respect to the material misrepresentations and omissions in the Merger Agreement, the
Company Disclosure Letter, and the Of?cer?s Certi?cate, as set forth in paragraphs ?23435,
above, and made further misrepresentations as set forth in paragraph 141, above.

184. Scott, Vaccaro, McDonough, and APSLP acted as controlling persons of APS
within the meaning of Section 20(a) of the Exchange Act.

By reason of their positions as the senior officers of APS, Scott, Vaccaro, and
McDonough had the power and authority to cause APS to engage in the wrongful conduct
alleged herein and culpably participated in such conduct.

By reason of its ownership of APS, APSLP had the power and authority to cause
APS to engage in the wrongful conduct alleged herein and, through its agents Scott, Vaccaro,
and McDonough, culpany participated in such conduct.

185. Pursuant to Section 20(a), Scott, Vaccaro, McDonough, and APSLP are liable for
non-party material misstatements and omissions as control persons of APS.

186. As a direct and proximate result of the conduct of Scott, Vaccaro, McDonough

and APSLP, Universal sustained actual damages well in excess of $200 million.

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Central Persnn Liability tinder Section Elita) of the Exchange Act
(Against Kata and the GTCR Defendants}

187. Universal repeats each and every allegation contained above as if set forth fully
herein.

188. A majority of the members of the APS Board of Directors were employed by or
agents of one or more of GTCR, GTCR Partners IX, or the GTCR Limited Guarantors, and all
were selected and appointed by a GTCR entity.

189. GTCR was general partner of GTCR Conlnvest and GTCR Partners lX.

190. GTCR Partners IX was general partner of GTCR Fund and GTCR Fund


191. APSLP held APS for the bene?t of the GTCR Limited Guarantors.

192. Defendants Katz, GTCR, GTCR Partners IX, and the GTCR Limited Guarantors
were regularly informed by APS regarding business, and Defendants Katz, GTCR, GTCR
Partners IX, and the GTCR Limited Guarantors directed activities.

193. The GTCR Defendants, by and through Defendant Katz, Nolan, Earl, Kos, and
other individuals, were heavily involved in the negotiations over the Transaction, controlled the
terms of the due diligence and the deal, and reviewed drafts of the false presentations to
Universal and approved them, as described in paragraphs 54, 55, 58, 72, 76?77, 80, 83, 85-8 8,
and 157?159, above.

194. Katz was a rnicrornanager of APS and the other portfolio companies for which he
was responsible. Katz was also on Board and Chair of Audit Committee, which
also served as Compliance Committee. He regularly met, spoke, and corresponded with
Scott, Vaccaro, and McDonough about the business condition its speci?c contracts,
strategy, ?nances, and personnel matters as described in paragraphs 40?44 and 48, above.

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195. As a result, the GTCR Defendants and Katz were controlling persons of APS and
APSLP within the meaning of Section 20(a) of the Exchange Act. The GTCR Defendants and
Katz were able to and did control the content of statements made by APS and APSLP, by and
through Scott, Vaccaro, McDonough, and others, to Universal.

l96. As more fully described above, the GTCR Defendants and Katz were aware that
APS misrepresented and omitted material information about its ?nancial and operational
viability, and the GTCR Defendants and Katz actively and substantially participated in, and
encouraged, those material misstatements and omissions, as described in paragraphs 55, 66, 67,
69, 74, 78450, 83, 75?88, 110, and 157-161, above. In fact, Katz directed the concealment from
Universal of the truth about the contract with Customer A and other customers and about the
pipelines, budget and other material facts.

197. Although it is not named as a Defendant herein, APS, through its officers and
agents, including Scott, Vaccaro and McDonough, knowingly violated Section 10(b) of the
Exchange Act by its material misstatements and omissions, as alleged in Count I of this
Amended Complaint, and in paragraph l41, above.

l98. Universal relied on the material misrepresentations and omissions by Scott,
Vaccaro, McDonough, and Katz acting on behalf of APS and APSLP, in deciding to acquire
APS. The GTCR Defendants and Katz are responsible for material misstatements and
omissions as control persons of APS.

199. As a direct and proximate result of the GTCR Defendants and Katzis conduct,

Universal sustained actual damages well in excess of $200 million.

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Caant EV Fraud: Cantraetnal Misstatements
{Against Scott, Vaeeara, McDanangh and 

200. Universal repeats each and every allegation contained above as if set forth fully
herein.

201. Scott, Vaccaro, McDonough, APSLP, and non?party APS made material
misrepresentations and omissions in the Merger Agreement, Company Disclosure Letter, and
Of?cer?s Certi?cate, as described in paragraphs 123?135, above.

202. Scott, Vaccaro, McDonough, APSLP, and non?party APS knew that the
representations contained in the Merger Agreement, Company Disclosure Letter, and Officer?s
Certi?cate were false or were misleading half?truths, as described in paragraphs 123-135, above.

203. Scott, Vaccaro, McDonough, APSLP, and non-party APS fraudulently concealed
the truth about APS from Universal, both within the Merger Agreement, Company Disclosure
Letter and Of?cer?s Certi?cate and in the course of the parties? negotiations.

204. Scott, Vaccaro, McDonough, APSLP, and non-party APS intended for Umversal
to rely and Universal in fact reasonably relied on the misrepresentations and omissions regarding
APS in deciding whether or not to acquire APS and in deciding the appropriate consideration to
pay for APS, including compensation that flowed to Scott, Vaccaro and McDonough,

205. As a direct and proximate result of the fraudulent representations and omissions,
Universai sustained damages well in excess of $200 million.

Cannt Aiding and Abetting Fraud: Cantraetnai Statements
(Against Vaeeara arid MeDanangh)

206. Universai repeats each and every allegation contained above as if set forth fully

herein.

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207. As described above, Scott, APSLP, and non?party APS committed fraud against
Universal by making numerous material misrepresentations and omissions in the Merger
Agreement, Company Disclosure Letter, and the Officer?s Certi?cate.

208., Vaccaro and McDonough knew that Scott, APSLP, and non?party APS were
committing fraud against Universal and fraudulently concealing the truth from Universal.

209. Vaccaro and McDonough provided substantial assistance to Scott, APSLP, and
non?party APS by, among other things, making false statements to Universal and by failing to
correct statements made to Universal that they knew were false. Given that Scott, AP SLP, and
non-party APS represented in the Merger Agreement, Company Disclosure Letter, and Officer?s
Certi?cate that neither Vaccaro nor McDonough had knowledge of a certain fact or event,
Vaccaro and McDonough each either failed to convey their knowledge to Scott, while knowing
that Scott would misrepresent that knowledge to Universal, or knew that Scott was making
misrepresentations to Universal concerning Vaccaro?s and McDonough?s own knowledge.

210. As a direct and proximate result of the fraudulent representations and omissions,

Universal sustained damages well in excess of $200 million.

Count Vi Aiding and Abetting Fraud: Contractual Statements
(Against Katz and the GTCR Defendants)

211. Universal repeats each and every allegation contained above as if set forth fully
herein.

212. As described in further detail above, Scott, Vaccaro, McDonough, APSLP, and
non?party APS committed fraud against Universal by making numerous material
misrepresentations and omissions in the Merger Agreement, Company Disclosure Letter, and

Officer?s Certificate.

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213. The GTCR Defendants and Katz knew that Scott, Vaccaro, McDonough, APSLP,
and non?party APS were committing fraud against Universal and fraudulently concealing the
truth from Universal.

214. The GTCR Defendants and Katz provided substantial assistance to Scott,
Vaccaro, McDonough, APSLP, and non?party APS by, among other things, making false
statements to Universal and by failing to correct statements made to Universal that the GTCR
Defendants and Katz knew were false, as described in paragraph 15 7?161, above.

215. As a direct and proximate result of the fraudulent representations and omissions,

Universal sustained damages well in excess of $200 million.

Count Fraud: Extra-euutraetual Statements and Gmissiaus
(Against Scott, Vaccaro, McDonough, Kata: and 

216. Universal repeats each and every allegation contained above as if set forth fully
herein.

217. As described in paragraphs 136?140 and 142?149, above, Scott, Vaccaro,
McDonough, Katz, and APSLP made material misrepresentations and omissions during the
merger negotiations and in the period between signing and closing involving deliberate acts of
concealment.

218. Scott, Vaccaro, McDonough, Katz, and APSLP fraudulently concealed the truth
about APS from Universal by, among other things, withholding and concealing internal
salesforcecom pipeline reports; concealing the truth about the problems with its contracts,
including with Customer A and Customer keeping Universal from doing direct due diligence
with Customer failing to disclose MAEs that the Merger Agreement required them to disclose

at or in advance of the Closing; and concealing known compliance risks, including but not

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limited to, the contract with Customer U, which is now the subject of a federal government
investigation regarding Defendants? alleged rampant fraud.

219. Scott, Vaccaro, McDonough, Katz, and APSLP intended for Universal to rely and
Universal in fact reasonably relied on the material misrepresentations and omissions regarding
APS in committing resources to the exploration of an acquisition of APS, in deciding whether or
not to acquire APS, in deciding the appropriate consideration to pay for APS, including
compensation that flowed to Scott, Vaccaro, McDonough, and Katz, and in deciding whether to
close the Transaction.

220. As a direct and proximate result of the fraudulent representations and omissions,

Universal sustained damages well in excess of $200 million.

Ununt V111 Fraud: Aiding and Abetting Extra-contractual Statements and Gmissions
(Against Scott, Vaeearo MeBonough, Kate, and APSLP)

221. Universal repeats each and every allegation contained above as if set forth fully
herein.

222. As described in paragraphs 136?139 and 142?149, above, Scott, Vaccaro,
McDonough, Katz and APSLP each made material misrepresentations and omissions during the
merger negotiations and in the period between signing and closing involving deliberate acts of
concealment.

223. Each of Scott, Vaccaro, McDonough, Katz and APSLP knew that the others were
committing fraud against Universal and fraudulently concealing the truth from Universal.

224. Each of Scott, Vaccaro, McDonough, Katz and APSLP provided substantial
assistance to the others in carrying out the fraud, including by collectively preparing the budgets

and pipelines discussed above, by making false statements about APS to Universal, by failing to

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correct statements by the others that they each knew were false and intended to conceal the truth,
and by actively concealing negative facts from Universal, all as detailed above.
225. As a direct and proximate result of the fraudulent representations and omissions,

Universal sustained damages well in excess of $200 million.

Count EX Aidiug and Abettiug Fraud: Extra?contractual Statements and ?missious
{Against Kate and the GTCR Befeudauts)

226. Universal repeats each and every allegation contained above as if set forth fully
herein.

227. As described in paragraphs 136?139, 142?143, and 145?149, above, Scott,
Vaccaro, McDonough, and APSLP made material misrepresentations and omissions during the
merger negotiations and in. the period between signing and closing involving deliberate acts of
concealment.

228. The GTCR Defendants and Katz knew that Scott, Vaccaro, McDonough, and
APSLP were committing fraud against Universal and fraudulently concealing the truth from
Universal.

229. The GTCR Defendants and Katz provided substantial assistance to Scott,
Vaccaro, McDonough, and APSLP by, among other things, reviewing and/or approving the
budgets and pipelines discussed above, by making false statements to Universal, by failing to
correct statements made to Universal that the GTCR Defendants and Katz knew were false, and
by actively concealing the actual facts regarding the problems with Customer A?s contract,
including fraudulently stopping Universal from doing direct due diligence of Customer A.

230. As a direct and proximate result of the fraudulent representations and omissions,

Universal sustained damages well in excess of $200 million.

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Count - Fraud in the inducement
(Against Scott, Vaccare, Me?uuoug?r, Katz, and APSLP)

231. Universal repeats each and every allegation contained above as if set forth fully
herein.

232. As described in paragraphs 123?149, above, Scott, Vaccaro, McDonough, Katz,
and AP SLP made numerous contractual and extra?contractual material misrepresentations and
omissions to Universal.

233. Scott, Vaccaro, McDonough, Katz, and APSLP knew that their respective
statements were false or were misleading half?truths.

234. Scott, Vaccaro, McDonough, Katz, and APSLP fraudulently concealed the truth
about APS from Universal, within the Merger Agreement and in the course of the parties?
negotiations, as described above.

235. Scott, Vaccaro, McDonough, Katz, and APSLP intended for Universal to rely on
the material misrepresentations and omissions regarding APS in deciding whether or not to
acquire APS and Universal did in fact reasonably rely on those material misrepresentations and
omissions.

236. As a direct and proximate result of the fraudulent representations and omissions,
Universal was fraudulently induced to enter into the Merger Agreement and to close the
Transaction. Universal would not have acquired APS if it had known the truth. Universal is
entitled to rescission or rescissory damages as a result of having been fraudulently induced to

enter into the Transaction.

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?ouut XE Aiding and Ahettiug Fraud in the ludueemeut
(Against Kate and the GTCR Defendants)

237. Universal repeats each and every allegation contained above as if set forth fully
herein.

238. As described in further detail above, Scott, Vaccaro, McDonough, APSLP, and
non?party APS committed fraud in the inducement against Universal by making numerous
material misrepresentations in the Merger Agreement, Company Disclosure Letter and Of?cer?s
Certificate and/or during the merger negotiations.

239. The GTCR Defendants and Katz knew that Scott, Vaccaro, McDonough, APSLP,
and non?party APS were committing fraud in the inducement against Universal.

240. The GTCR Defendants and Katz provided substantial assistance to Scott,
Vaccaro, McDonough, APSLP, and non-party APS by, among other things, making false
statements to Universal, by failing to correct and concealing the truth about statements made to
Universal that the GTCR Defendants and Katz knew were false, and by limiting and misleading
Universal in the due diligence process led by Katz.

241. As a direct and proximate result of the fraudulent representations and omissions,
Universal was fraudulently induced to enter into the Merger Agreement and to close the
Transaction. Universal would not have acquired APS if it had known the truth. Universal is
entitled to rescission or rescissory damages as a result of having been fraudulently induced to

enter into the Transaction.

Sount XE Breach of Sontraet
(Against APSLP and the GTCR Limited Guarantors)
242. Universal repeats each and every allegation contained above as if set forth fully
herein.

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243. Subject to and in the alternative to the fraud in the inducement claims above, the
Merger Agreement and related documents including the Limited Guaranty and the Company
Disclosure Letter constitute a valid, binding, and enforceable contract by and among Universal
and APSLP and the GTCR Limited Guarantors.

244. As described in paragraphs 122?129, APSLP breached the representations and
warranties set forth in Sections 3.9, 3.16, 3.17, 3.25, and 3.29 ofthe Merger Agreement. For
purposes of this Count X11, each of these representations and warranties are read as if all
qualifications as to materiality were deleted therefrom. Merger Agreement 

245. in addition to the above~described breaches of the representations and warranties
set forth in Sections 3.9, 3.16, 3.17, 3.25 and 3.29 of the Merger Agreement, the foregoing
conduct also breached the covenants set forth in Sections and 5.2(h) of the
Merger Agreement.

246. APSLP has breached its obligations to Universal under Section 8.2(a) of the
Merger Agreement by failing to indemnify Universal for losses it has incurred arising out of the
above?described breaches of the representations and warranties set forth in Sections 3.9, 3.16,
3.17, 3.25 and 3.29 of the Merger Agreement, and in the certi?cate delivered pursuant to Section
of the Merger Agreement, as well as for losses Universal has incurred arising out of the
breach of the covenants made in Sections and 5.2(h) 0f the Merger
Agreement.

247. The GTCR Limited Guarantors are conditionally liable for the above-discussed
breaches of contract to the extent APSLP does not have suf?cient assets to satisfy its

indemnification obligations under the Merger Agreement.

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248. Additionally, APSLP is liable to Universal for the Excess Performance Guarantee
Amount identi?ed in its March 1, 2013 demand for indemnification.

249. In the aggregate, the facts alleged above had, or would reasonably be expected to
have, a Company Material Adverse Effect, constituting a breach of the representations and
warranties made in Section 3 .9 of the Merger Agreement and in the Officer?s Certificate
delivered pursuant to Section of the Merger Agreement.

250. Universal has complied in all material reSpects with its obligations under the
terms of the Merger Agreement.

25 1. As a direct and proximate cause of APSLP and the GTCR Limited Guarantors?
breaches of the Merger Agreement, Universal has sustained substantial damages.

252. Pursuant to Section 8.2 of the Merger Agreement and under Delaware law,
Universal is also entitled to recover its attorneys? fees and other costs of enforcing its

indemnification rights under the Merger Agreement.

Cennt XHE tn Commit Fraud:
(Against All Defendants)

253. Universal repeats each and every allegation contained above as if set forth fully
herein.

254. As alleged above, the Defendants are liable for fraud and fraud in the inducement.

255. The Defendants purposefully conspired and combined with one another for the
unlawful purpose of defrauding Universal.

256. Universal has suffered substantial damage as a result of Defendants? fraud and

unlawful conspiracy to commit fraud.

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Count llnjiust Enrichment and Trust
(Against All Defendants)

257. Universal repeats each and every allegation contained above as if set forth fully
herein.

258. The Defendants obtained Universal shares through the fraudulent and deceptive
acts described above.

259. Since the Defendants obtained the Universal shares by fraud, Universal has issued
dividends to record owners of its common stock.

260. Because the Defendants obtained their Universal shares and dividend payments
through fraudulent, unfair, and unconscionable conduct, they have been unjustly enriched at
Universal?s expense.

26l. Imposition of the constructive trust is necessary to prevent Defendants from
unfairly profiting as a result of their fraudulent acts.

262. This Court should impose a constructive trust in favor of Universal on the
Universal shares obtained by each of the Defendants, and upon all proceeds derived therefrom,
including dividend payments received by the Defendants as owners or bene?cial owners of

Universal shares.

Count XV - Declaratory Judgment
(Against Vaeeare)

263. Universal repeats each and every allegation contained above as if set forth fully
herein.
264. On May 9, 2014, Vaccaro filed a complaint in the Delaware Court of Chancery

asserting claims for breach of the Vaccaro Employment Agreement and Vaccaro Separation

lOl

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Agreement, fraud, and reformation (the ?Vaccaro Complaint?). See Complaint, Vaccaro v. APS
Healthcare Bethesda, inc, CA. No. 

265. The Vaccaro Complaint seeks $475,000 and other bene?ts purportedly due to
Vaccaro under the Vaccaro Separation Agreement. The Vaccaro Complaint also asserts claims
of reformation and unilateral mistake, on the theory that the written terms of the Vaccaro
Separation Agreement incorrectly captured the parties? agreement.

266. On July 26, 2014, Universal filed a motion to dismiss the Vaccaro Complaint,
asserting, among other things, that the case should be stayed or dismissed because this litigation
constitutes a prior-?led action addressing the same nucleus of operative facts.

267. An actual controversy exists between Universal and Vaccaro as to the legal effect
of the Vaccaro Separation Agreement. The parties dispute, among other things:

Whether the Vaccaro Employment Agreement, which was entered into in
connection with the Merger Agreement and was conditioned upon the closing of the APS
acquisition, was fraudulently induced.

Whether Vaccaro performed his duties ?in a reasonably satisfactory marmer? from
April 25, 2013 through June 28, 2013, as required by the Vaccaro Separation Agreement.

(0) Whether Vaccaro has satisfied all conditions precedent to receipt of a severance
payment, including the execution of a general release, as required by the Vaccaro Separation
Agreement.

Whether the Vaccaro Separation Agreement accurately sets forth the terms of the
parties? agreement regarding Vaccaro?s rights to severance and other post-termination benefits.

Whether Vaccaro is entitled to any payment or other benefit under the Vaccaro

Separation Agreement.

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268. A declaratory judgment from this Court would conclusively de?ne and clarify the

parties? respective rights and obligations under the Vaccaro Separation Agreement and the

Vaccaro Employment Agreement.

269. A declaratory judgment from this Court would also serve the practical purpose of

resolving the parties? dispute regarding Vaccaro?s legal right to severance and moot Vaccaro?s

resort to piecemeal litigation before the Delaware Court of Chancery.

WHEREFORE, Universal prays for relief and judgment, as follows:

a.

10845625v.1

awarding all damages, including rescissory damages, expectation
damages, and compensatory damages, and other remedies set forth in the
Exchange Act, in favor of Universal in an amount to be proven at trial,
including interest thereon;

imposing a constructive trust upon the Universal shares obtained by the
Defendants as a consequence of the Merger Agreement, and upon all
dividends paid or payable with respect to those shares;

rescinding the Merger Agreement and related agreements entered with the
Defendants in the Transaction;

in the alternative, awarding rescissory damages because Universal was
fraudulently induced to enter the Transaction but rescission would be
impractical at this point in time;

indemnifying Universal for all losses resulting from any breach of the
Merger Agreement;

awarding punitive damages in an amount to be determined at trial;
awarding attomeys? fees and costs;

declaring that Vaccaro is not entitled to any payment or other benefit
under the Vaccaro Separation Agreement or the Vaccaro Employment
Agreement; and

awarding such other and further relief as the Court may deem just and
proper.

Case Document 39

OfCounseI:

Andrew I. Levander

Linda C. Goldstein

Paul C. Kingsbery

Dechert LLP

1095 Avenue of the Americas
New York, New York 10036
212-698-3500
andrew.1evander@dechert.com
linda.goldstein@dechert.corn
paul.kingsbery@dechert.corn

Stuart T. Steinberg

Elisa T. Wiygul

Dechert LLP

2929 Arch Street

Philadelphia, 19104
215-994-4000
stuart.steinberg@dechert.com
e1isa.wdygul@dechert.com

Dated: September 22, 2014

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Filed 09/22/14 Page 104 of 104 PageID 811

/S/Bfake Rohrbacher

Blake Rohrbaoher 4750)
Kelly E. Faman 4395)
Katharine C. Lester 5629)
Richards, Layton Finger, PA.
920 North King Street
Wilmington, DE 19801
(302) 651?7700
rohrbacher@rlf.com
farnan@rlf.com
lester@rlf.corn

Attorneys for Hair/stiff Universal American
Corp.

104