ARTICLE III. EFFECT OF THE MERGER
3.1 Effect on Shares, United Options and Merger Sub Capital Stock. As at the Effective Time, by virtue of the Merger and without any action on the part of Parent, United, Merger Sub, or the United Stockholders: Each Share of United Common Stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, shall be cancelled and extinguished and converted automatically into the right to receive an amount of cash equal to the quotient obtained by dividing (i) the sum of (A) the Merger Consideration, less the Aggregate Preferred Stockholder Payment, and (B) the Aggregate Option Exercise Price by (ii) the sum of (A) Aggregate Common Shares and (B) the total number of United Options (which quotient is the “United Stockholder Per Share Payment”). Set forth on Schedule 3.1(a) are the names of each holder of United Common Stock and the number of Shares owned by each.
(b) Each outstanding (as of immediately prior to the Effective Time) United Option held by the United Optionholders set forth on Schedule 3.1(b) shall be terminated and cancelled and converted into the right to receive:
(i) for each United Option with an exercise price of Two Cents ($0.02), an amount equal to the United Stockholder Per Share Payment, less Two Cents ($0.02);
(ii) for each United Option with an exercise price of Four Cents ($0.04), an amount equal to the United Stockholder Per Share Payment, less Four Cents ($0.04); and
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(iii) for each United Option with an exercise price of Eleven Cents ($0.11), an amount equal to the United Stockholder Per Share Payment, less Eleven Cents ($0.11).
(c) Each Share of United Preferred Stock, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, totaling 167,000 Shares of Series B United Preferred Stock, shall be cancelled and extinguished and converted automatically into the right to receive that portion of the Merger Consideration, payable in cash (without interest), at $1.85 per share. Set forth on Schedule 3.1(c) is the name of each holder of United Preferred Stock and the number of Shares owned by each.
(d) Each share of United Common Stock or United Preferred Stock held in the treasury of United, or owned by any of the Parties other than the United Stockholders, in each case immediately prior to the Effective Time, shall be canceled without any conversion thereof and no consideration shall be paid with respect thereto.
(e) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and non-assessable share of common stock, par value $0.001 per share, of the Surviving Corporation with the same rights, powers and privileges as each share so converted, and shall thereupon constitute the only outstanding shares of capital stock of the Surviving Corporation.
.3 Capitalization of United. The entire authorized capital stock of United consists of 15,000,000 shares. United is authorized to issue 12,000,000 shares of common stock having a par value of $0.001 per share (“United Common Stock”), of which 7,100,889 shares are issued and outstanding. United is authorized to issue 3,000,000 shares of preferred stock having a par value of $.001 per share (“United Preferred Stock”), of which 167,000 shares of Series B preferred stock are issued and outstanding. No other series of preferred stock is issued and outstanding. All of United’s issued and outstanding shares of common stock and Series B preferred stock have been duly authorized, are validly issued, fully paid and non-assessable, and are held of record by the stockholders listed on Exhibit 2. The United Options consist of options to purchase 3,269,111 shares of United Common Stock under The United Strategies 2001 Stock Option Plans, held by the United Optionholders listed on Exhibit 3. There are no: (a) United stock option plans than The United Strategies 2001 Stock Option Plans; (b) other options to purchase United Common Stock than those held by the United Optionholders listed on Exhibit 3; (c) option plans under which any Person may purchase United Preferred Stock; and (d) options to purchase United Preferred Stock. To the knowledge of United, no United Optionholder would refuse to execute the United Option Letters or refuse to deliver the United Option Letters to the Escrow Agent, or refuse to accept that portion of the Aggregate Common Stockholder Payment payable to such United Optionholder. United believes, in good faith, that each United Optionholder will execute and deliver the United Option Letter, and accept that portion of the Aggregate Common Stockholder Payment payable to such United Optionholder. Other than this Agreement, and those options to purchase United common stock listed on Exhibit 3 there are no outstanding or authorized options, warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights, registration rights or other agreements or commitments to which United is a party or which are binding upon United providing for the issuance, disposition or acquisition of any of its capital stock, nor any outstanding or authorized stock appreciation, phantom stock or similar rights with respect to United.
