Exchange Offer by Accounting Successor Following Reverse Spin-Off

Universal American Corp. (New UAM) was formed pursuant to a separation agreement dated December 30, 2010, whereby all of the businesses of the predecessor Universal American Corp. (Old UAM) other than its Medicare prescription drug business were transferred to New UAM.  Simultaneously with execution of the the separation agreement, Old UAM entered into an agreement and plan of merger which, among other things, provided for the acquisition of the Medicare prescription drug business by CVS Caremark Corp. for cash consideration of approximately $1.25 billion.  

To accomplish the split-off from Old UAM, New UAM registered common stock valued at $623.7 million and non-voting common stock valued at $31 million on Form S-4 (SEC file no. 333-172691, declared effective on 4/4/11).  The merger agreement and separation agreements are included as Annex A and Annex B, respectively.  Paul, Weiss, Rifkind, Wharton & Garrison served as counsel to Universal American, and Davis Polk & Wardwell advised CVS Caremark.  The Registration Statement presents unaudited combined condensed financial statements that represent a "carve-out" of the historical results of operations, assets, and liabilities attributable to UAM's Medicare prescription drug business.  New UAM is considered as divesting the Medicare Part D Business of Old UAM and is treated as the "accounting successor" to Old UAM for financial reporting purposes in accordance with Accounting Standard Codification (ASC) No. 505-60, Spin-offs and Reverse Spin-offs (ASC 205-2-45). 

When the reverse spin-off was consummated on April 29, Old UAM sold 1.6 million 8.5% Ser. A mandatorily redeemable preferred shares in a private placement for $40 million.  Proceeds from this issuance were used in part to finance the cash consideration to Old UAM shareholders in the sale of the Medicare prescription drug business.  New UAM filed a Form S-4 on July 15 to offer shares in exchange for the Ser. A preferred shares that are substantially identical to the outstanding shares except that they are registered under the 1933 Act and have no transfer restrictions or registration rights (file no. 333-175591).